Even if your score isn't "excellent" or even "good," don't worry. There are plenty of good investment plans for you. But as your credit score goes up, so will the number of investment plans that you can choose from. That's why you need to work on raising your credit score. If you have more ways to invest, you will be able to reach your financial goals faster and even go beyond them.
HOW TO GET A BETTER SCORE
You can improve your FICO score by doing the following:
- Don't have too much revolving credit available. Now, don't get the wrong idea: having credit available is good, but having too much credit available makes you look risky to potential lenders, which lowers your score.
- Don't let the amount you owe on your credit cards go over 50% of the total limit. If you have to, put your high balances on different cards if you want to avoid that 50 percent number.
- Avoid excessive inquiries. There are two kinds of questions: hard ones and soft ones. A hard inquiry is when a possible lender checks your credit report to see if they want to lend you money. These are the kinds of questions you should not ask. Even though you can't completely avoid inquiries, you should be picky about who you let pull your scores because each inquiry brings down your score. A soft inquiry is when you or, say, an insurance company pulls your credit report, not because they want to lend you money, but to see how well you have paid your bills in the past. Your score won't go down because of these questions.
- Make sure it will last. Don't make and close too many accounts. Choose carefully which accounts you want to open and keep open for a long time.
- Pay more than the minimum on your credit cards. Minimum payments usually mean that you are having a hard time making your payments, which makes you a higher risk.
ESTABLISH GOOD CREDIT
If you have never had a credit card before, apply for and get three different ones. Use these cards to buy groceries, gas, and everything else you need. This isn't a chance for you to waste money and go into debt. Instead, it's a chance for you to pay off these lines of credit every month, which will help you build a credit history.
Go to a local bank or credit union and tell them you want to get a secured loan so you can start building your credit. You'll get a loan from the bank, usually for $1,000, which will be put into an account in your name. The bank will take enough money from your account each month to pay off the loan. The benefits you'll get from building a good credit history will be much greater than the small amount of interest you'll have to pay. Do this at several banks to get the result you want faster.
After you've done steps 1 and 2, check your credit report in three to six months to make sure these accounts are on there and you have a score. Once you do that, you'll be on your way to building good credit.
REPAIRING POOR CREDIT
Do whatever it takes to settle any bills you haven't paid, and ALWAYS pay on time. This may require you to cut costs wherever you can at first, but you can be sure that your early sacrifices will pay off in the end.
Don't use the help of credit counsellors who talk to your creditors about lowering your balances and interest rates. Even more than a bankruptcy, these services are often looked down upon by possible lenders. There are real ways to fix your credit, but if they involve negotiating with your creditors, you should be careful.
Even if you've been through bankruptcy, foreclosure, etc., if you follow these steps and show that you're now a good credit risk, your score will go up pretty quickly.
RULES TO LIVE BY FOR CREDIT
Don't buy bad things on credit. Bad debt purchases are any purchases for things that don't last long or aren't important.
Pay back what you owe on time and in full.
Check your credit report every month. For a small annual fee, you can sign up for a service like Privacy Guard that gives you unlimited access to your reports.
Dispute any wrong or bad things that are written about you on your credit report. Also, keep an eye out for accounts in your history that you have never opened but that may be there by mistake.
