In the never ending quest for a higher credit score, we look for every possible edge to help our clients achieve their goal. Many consumers that apply with us don’t actually need credit repair. These individuals merely need to bolster and improve the positive credit in their file.
Mortgages, car loans and credit cards are the most common types of credit we have reporting to the credit reporting agencies. Having a solid mix of one mortgage, car loan and 3 credit cards is what we consider an ideal credit profile.
If you have been through an economic event like Bankruptcy, job loss, divorce or medical event, you may have trouble getting approved for any credit at all. Without positive credit reporting on your report, there is very little chance for you to have a high credit score. So where do you start?
The most common type of new credit for those that have poor or challenged credit report are secured credit cards. Secured credit cards can help you increase your score over time. By depositing your funds into a lender’s account, you can borrow and pay yourself back as needed. The bank holds your funds, takes your payments and reports your activity to the credit reporting agencies.
The challenges with secured cards are three-fold. First: they can be costly. Each new account must be prefunded with you own money. Next: new accounts can take as much as 6 months to impact your scores. They have to season and have a pay history that can be graded. Last: secured card limits are only as high as the amount you put in.
The amount of credit you have available versus what you owe plays a large role in your overall score. So secured cards, by design, will most likely prolong your score increase. This leads to what is potentially the best tool for rebuilding your credit score; authorized user accounts.
Being added as an authorized user is a relatively simple and safe process. All you need is a family member with a well seasoned, timely paid credit card with a low balance. They can call their credit card company and have you added to their account as an authorized user. You will not have access to this account, but the account will post to all three credit reporting agencies as if it were your own.
This can be an almost instant boost to your credit profile and significantly help you raise your credit score. That said, I must warn you that this can have an equally negative impact if the person that added you has credit problems of their own and make late payments or max out their account!
My suggestion to those that are trying to build a positive credit file is as follows:
1. Open a secured card and keep the balance around 10-15 dollars every month. Consider it as an investment and don’t make large purchases. No gown or gadget is worth negating the potential benefit.
2. Have yourself added as an authorized user. Ensure the balances are kept as low as possible and paid on time.
3. Monitor your credit scores for increases through a reputable service.
That’s correct. It can be easy as 1-2-3 if you properly manage everything. Remember this; building a high credit score is very much like exercise. If you are in shape, it can be easy to maintain and go the next level. If you are starting from the bottom, slow and steady wins the race. Think of fad diets when you consider quick fixes. A personal trainer or credit repair company can help, but it is you that has to make a lasting change and do the pushups!