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So your credit is not the greatest in the world, is it? You sometimes look with envy on your friends or family members who have had credit for a very long time and have scores in the 700s or even…could it be??…the 800s?? These people are credit heavyweights. They could go out tomorrow and get themselves a platinum card with virtually no limits (maybe they already have one) and you have to watch with envy every time they whip it out to pay for lunch or that nice dress they’d been wanting. how did they do it? More importantly how can you do it?
It’s Not All About High Income
If you know people with great credit, they may or may not make a lot of money. Believe it or not, having a lot of income does not guarantee good credit. There are plenty of people out there who make a lot of money and have terrible credit due to simple money mismanagement. Having a great income certainly helps - don’t get me wrong, but it’s not everything in the world. Many people with incomes of less than even $40,000/year have stellar credit as well. They just manage very well what little credit their income allows them to have and you can do the same.
Step 1: Take Care of the Credit You Do Have
Paying down the debt you have now is the first step toward becoming a credit heavyweight. Set a goal for yourself - a reasonable one - to have all of your current credit obligations paid off as soon as possible. This includes all personal loans, credit cards, and accounts in collection that you may have open right now. Take them one at a time (starting with a collections account) and begin to give them as much extra money every month as you can spare until they are paid off. Then move to the next account until they are all zeroed out. This first step by itself will do wonders for your credit.
Step 2: Rotate your Credit Cards
If you have followed step one and paid down a bunch of credit cards that were delinquent at some point and reporting negatively on your credit score, now is the time to close most if not all of those accounts. Having lots of credit cards with high limits on them counts against your credit, even if you aren’t using them. The goal here is to start small with just one or two cards that you pay off fully every month and - more importantly - faithfully every month. This has the dual advantage of saving you from having to pay any interest at all on your cards and after just a few months, your credit score will begin to reflect your improved credit habits as ones being worthy of a better credit score.
Toss in a Few Small Loans
Once you have a good handle on your credit cards and have been faithfully paying them off on time every time for months, a very quick way to boost your credit score is to take out a small personal loan from a bank. With your steady income and recent history of paying off your debts regularly you should have no trouble getting them. Now when you get this small loan (and keep it small, size really doesn’t matter), pay it back as quickly as possible (not too quick…keep it at least six months), and shut down the account. That will count for mass points on your credit score and that bank will become best friends with you forever.
The three steps outlined above can turn a five-something credit score into a seven-something in less than a year if you are diligent in following the steps in order and staying on top of things. Pay off your current bad debts as quickly as possible. Focus on taking great care of a couple of credit cards, and then toss in a small loan to quickly pay off. Doing these things is all it takes to show potential creditors in the future that you are very serious about your credit score and taking care of your financial obligations. You’ll be a credit heavyweight in no time.
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