Personal experience. How I broke my credit rating and for the year restored it
I will tell you a story. In the far-distant universe on the planet there lived a certain boy Andrew (it was me, how did you like it?). Lived-not tormented, having a credit history of 720 points. Not bad enough. And then one day Andryusha wanted to buy one big thing. Bought. But with big things comes a big responsibility. Do you agree? Well, I also agree. With great responsibility come and big expenses, which, of course, at that time this boy could not afford. So we had to borrow money wherever possible. He started off easy: he opened credit cards and used them until the limit was reached, says Andrey Boychuk in an article for Immigrant porada.
What is the essence of the story? In 6 months, I destroyed my credit history: from 720 I dropped to 620 points. Well, what happened happened. I read some books, looked up information on the Internet, consulted with qualified people, and began experimenting with my finances to raise my credit rating. There was an interesting result. For almost a year I raised my credit rating higher than it was before. I now have about 755.
Therefore, I want to share with you the secrets of how I did it and what rules I followed. But this applies only to those who have credit cards or other loans.
If you do not have a credit card and you do not know what it is credit score and what to eat with it, read the article “How can a beginner achieve credit score 750 or more?“. Or if you have credit cards, but you don’t owe anything on them, then I can say that you are just great! Keep it up! If you, like me, want to improve your credit rating, here are my tips.
1. Pay the credit card on time
Never be late with paying a loan or credit card. Is there a difference between when you pay the minimum payment on a credit card and a large amount? From my own experience I can say that there is no difference. But I may be wrong. The only difference is that you will pay longer and pay more interest.
2. Pay other bills also on time
Credit cards and loans are most likely not the only bills you have to pay every month. Phone bills, electricity, gas, cable TV - pay on time too. Why? Some companies transfer your information to credit bureaus, and your credit history is determined from the same information. Not all companies do this, but it's best not to risk it.
3. Do not open new credit cards.
If you only have 1 or 2 credit cards, you don't need any more. Well, if you have 5, please stop there and don't open any more. Credit cards are free money that you have to pay for.
4. Do not close credit cards
If you already have 5 credit cards, you don't need to close them. Unless you have some special reason for that. 5 cards means 5 cards. If you use them correctly, everything is great. And if you don't know how to use it, just put it in your drawer or, as I read in one book, freeze the card in ice.
5. Try to pay all credit cards.
Getting a balance of $ 0 on all your cards is the fastest way to increase your credit score. For example, if you have a credit rating of 620 and credit card debt of $ 5, and you pay the full amount at once or per month, your rating rises by at least 50 points or more.
If you cannot quickly pay all credit cards up to $ 0, then I recommend this method:
1) Pay the minimum amount per month on all cards.
2) Pay a little more than the minimum for one card (depending on your situation). Which card to start paying first? I recommend the one with the least balance. Let's call this credit card "Kotigoshek".
3) Pay it until you pay it all. A small victory will motivate you to go further.
4) Now take the entire amount that you paid on a monthly basis to the "Kotigoshek" card and add to the minimum payment on the next card with the lowest balance.
5) The idea is that with each paid card you will be more likely to pay, because your next payments will be more.
6. Automatic payments
This is a treasure of mine that I found when I had a bad credit rating. Credit history is a mathematical algorithm. There is no secret person who sits down and gives you an estimate of how you pay your debts. The algorithm gives an estimate based on how you pay.
And that's what I noticed. After I set up an automatic payment on all my cards, on that very day, at that very hour, my credit history began to unrealistically step up. I wondered why.
Think logically. If someone borrowed $ 12 from you thousands and said that he would pay 15 numbers on $ 100 every month for the next 10 years. Every month this person would pay you this amount and through 10 years he paid the debt. What do you say about this person? He is responsible and kept his word. And if in the same situation a person pays you something 12, then 19, then 21 numbers, and all the time there are some excuses? You say: yes him. So I once again lent him money!
So the algorithm works like our logic. If you pay the same amount on the same day, then your behavior is logical and predictable. Therefore, my recommendation to anyone who cannot pay credit cards up to $ 0 at a time:
a) install through your bank account the minimum automatic payment on all credit cards. Preferably 5-7 days before the end date.
b) if you have any additional money, you can make additional payments. But most importantly, do not change the automatic payments.
It takes time to build a good credit history. Personally, it took me about a year to rebuild and rebuild my history.
About the Author: Andrey Boichuk - founder Immigrant porada (iporada.com) - platforms for Ukrainian immigrants in the United States. Cheerful husband beautiful wife and father of a joyful daughter.
This blog is translated from the Ukrainian language. The original article can be found on the website. "Immigrant Porada" (Ukrainian online advice platform for immigrants in the United States).
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