May 28th, 2008
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The truth is that there really are no secrets about building better credit. Most consolidation or debt management agencies simply try to get lenders to write-down debt which still leaves marks on your credit score. Credit card piggybacking is no longer counted in your FICO score or other credit scores. But, that can also be refreshing news. If you spend less time focusing on the small ways to sneak away with a better score, you can spend more time on the most simple and effective ways to get to that three digit number you want so badly.
It’s not impossible to see as much as a 100 point increase in your score if you’re diligent. Consider it like a role-playing game. Your goal is to level up, reach a new credit tier, and reduce your excess baggage. In 25 days last month, by clearing up some of my credit reports of false claims or inaccurate information, I raised my score almost 50 points.
1) Your Credit Score and Reason Codes
Consumer credit scores are not the same as lender credit scores. Consumer credit scores pulled online are considered educational and are different from those used by lenders. You can go online to sites like MyFico.com and pull the more accurate credit scores used by the majority of lenders. In most cases, there is a cost for these scores (I recommend using the 30-day trial banner at the bottom of this post since you can cancel at no charge before 30 days).
Be aware that your credit scores are pulled when you apply for a loan. Ask the loan officer for your credit scores and the reason codes that go with them. The reason codes provide valuable information by which you can identify problems affecting your credit score. They are your road map to improving your credit. Mortgage lenders are required to give you a copy of your credit scores and usually the reason codes that go with them. It is much more informative if you can get your actual reason codes from the lender.
2) “Time is of the Essence” – Think “Golden Accounts” and Good Lenders
A Golden Account is any account you have that remains open for many years (ten or more) and can drive credit scores to higher levels. Once such accounts are identified, leave them open and periodically use them. If you can, establish multiple golden accounts in your credit profile. They will add substantial value to your credit scores for months and years to come. You want to create “Depth”.
Depth is created by how long our accounts have been open. Depth with our accounts determines how high our credit scores can go. Review your credit file and identify how long your accounts have been open. Higher scores will be realized when most of your accounts have been open for at least four years.
3) New Accounts Hurt – At Least At First
Once you have an established credit profile, avoid opening new accounts at every opportunity. Opening multiple accounts within a 12-month period can be extremely detrimental to credit scores. We should pay particular attention to the number of loans we have opened in the last year. Any new loan adds risk and lower credit scores. Space them out to avoid sudden declines in your scores.
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