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 «Как новичку добиться credit score 750 or more?«. Или если у вас есть кредитные карточки, но вы по ним ничего не должны, то могу сказать, что вы — просто молодец! Так держать! Если же вы, как и я, хотите улучшить свой кредитный рейтинг, то вот мои советы.
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
Кредитные карты и кредиты — это, скорее всего, не единственные счета, которые вы должны оплачивать каждый месяц. Счета за телефон, свет, газ, кабельное телевидение — тоже оплачивайте вовремя. Почему? Некоторые компании передают вашу информацию в кредитные бюро, а по этой же информации определяется кредитная история. Не все компании делают это, но лучше не рисковать.
3. Do not open new credit cards.
Если у вас есть только 1 или 2 кредитные карточки, вам их больше не надо. А если у вас их 5, пожалуйста, остановитесь на этом и не открывайте больше. Кредитки — это бесплатные деньги, за которые надо платить.
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.
Добиться того, что у вас на всех карточках будет баланс $0, — это самый быстрый способ поднять кредитный показатель. Например, если у вас кредитный рейтинг 620 и долг на кредитках $5 тысяч, а вы за раз или за месяц выплачиваете всю сумму, ваш рейтинг поднимается минимум на 50 баллов и больше.
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) За одну карточку платите чуть больше, чем минимум (в зависимости от вашей ситуации). Какую именно карточку начать платить первой? Я рекомендую ту, которая имеет наименьший баланс. Назовем эту кредитную карточку «Котигорошек».
3) Pay it until you pay it all. A small victory will motivate you to go further.
4) Теперь возьмите всю сумму, которую вы платили ежемесячно на карту «Котигорошек» и добавьте к минимальному платежу по следующей карточке с наименьшим балансом.
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
Это мое сокровище, которое я нашел, когда имел плохой кредитный рейтинг. Кредитная история — это математический алгоритм. Нет никакого секретного человека, который сидит и дает вам оценку, как вы оплачиваете свои долги. Алгоритм дает оценку делая вывод из того, как вы платите.
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:
а) установите через свой банковский счет минимальную автоматическую выплату на все кредитные карточки — желательно за 5-7 дней до конечной даты.
б) если у вас есть какие-то дополнительные деньги, то можете делать дополнительные выплаты; самое главное — не изменяйте автоматические выплаты.
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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