Personal experience: how I collapsed my credit rating and restored it in a year

I'll tell you one story. In a far, far away Universe, there lived a certain boy Andryusha on the planet (that's me, you guessed it). He lived without grieve having a credit history of 720 points. Good enough. And then one fine day Andryusha wanted to buy a big thing. Bought. But with great things comes great responsibility. Do you agree? Well, I also agree. With great responsibility comes great expenses, which, of course, at that time this boy could not afford. So I had to borrow money wherever possible. He started off easy: he opened credit cards and used them until the limit was exhausted, says Andrey Boychuk in an article for Immigrant porada.

What is the essence of history? In 6 months I destroyed my credit history: from 720 I dropped to 620 points. Well, it happened and happened. I read some books, surfed the internet, consulted qualified people, and started experimenting with my finances to improve my credit score. An interesting result came out. In almost a year, I raised my credit score higher than it was before. Now I 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 on time too

Credit cards and loans likely aren't the only bills you have to pay every month. Bills for telephone, electricity, gas, cable TV - also pay on time. Why? Some companies submit your information to credit bureaus, and this information is used to determine your credit history. Not all companies do this, but it's better 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. And if you have 5 of them, 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 it. 5 cards means 5 cards. If you use them correctly, everything is great. And if you don’t know how to use it, then 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 to the point where you have a $0 balance on all your cards is the fastest way to raise your credit score. For example, if you have a credit score of 620 and $5 thousand in credit card debt, and you pay off the entire amount at one time or in a month, your score will rise 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 per card (depending on your situation). Which card should I start paying first? I recommend the one with the smallest balance. Let's call this credit card "Cat Pea".

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 monthly on the “Kotipea” card and add it 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 my treasure that I found when I had a bad credit rating. Credit history is a mathematical algorithm. There is no secret person who sits and gives you an assessment of how you are paying your debts. The algorithm makes an estimate based on how you pay.

So, when I set up automatic payment on all my cards, on the same day, at that very hour, my credit history began to step up unrealistically. I wondered why.

Think logically. Let's say someone borrowed $12 from you and promised to pay $15 every month on the 100th for the next 10 years. Every month this person would pay you this amount and in 10 years he would pay off the debt. What can you say about this person? He is responsible and kept his word. And if in the same situation a person pays you on the 12th, then on the 19th, then on the 21st, and even finds some excuse all the time? You say: yes, he is. So I could lend him money again!

So the algorithm works like our logic. If you pay the same amount on the same day, then your behavior is logical and predictable. So my recommendation to anyone who can't pay credit cards up to $0 at a time is:

a) set up a minimum automatic payout on all credit cards through your bank account - preferably 5-7 days before the end date.

b) if you have some extra money, you can make additional payments; Most importantly, do not change 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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