Fastest way to fix your credit

by Tom Tousignant

in Mortgages, Wealth Building

If you want to boost your credit score fast – there is one best way.  Credit scores are a prediction of how likely is someone to default on an obligation.  So, if you do anything that is similar to what people did in the past prior to defaulting, it increases your risk of default and lowers your score.

To always keep a great credit score, don’t do anything that others have done prior to defaulting.  So think about that for a second – if I was going to be 90 days late on an account, what would I do 120-180 days prior to that?

I would have my credit report pulled to try and get more credit.  Then the new accounts would show up on my credit report.   I would max out my existing credit card accounts.  Lastly, I would start missing payments.

I can have my credit report pulled for any reason, I can open new accounts for any reason, and, if I was careless, could even have a late payment once in a great while and still not be in trouble.

If I max out my credit cards, however, I am either in financial trouble or I am using 0% cash advance credit card to put some money in the bank.  The Credit scoring model(www.myfico.com), however, assumes I am in trouble. 

Knowing this, there is only one way to increase your score fast – and you don’t have to pay someone to fix your score.  Keep all your credit cards at a 30% or less ratio of the amount owed versus the maximum limit.  If you have a maxed out credit card, and then pay the card down to 30% or less of the limit, you will bring your score up dramatically in 30 days or less.

The credit scoring model looks at all your cards’ limits and balances.  So, keep the total amount you could borrow high (Don’t close old accounts) and keep the amount owed low overall and on each card.

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