How to hack your credit rating
Among the healthy habits you can take during an adult life, the importance of keeping track of your credit rating, knowing and understanding it can not be underestimated – especially if you are considering a major purchase or investment, such as than buying a house or a vehicle. If your credit rating is low, it is imperative to step in to improve it. Certainly, it will not improve overnight. The change in spending habits that this improvement requires will require sustained effort and commitment on your part. By spending the necessary time and financial maturity, however, you will succeed in making yourself a good risk.
Once you have committed to improving your rating, there are some tips you can follow to give you an edge.
Become an authorized user
If you do not succeed in getting a credit card, maybe because you are young, or you have a low credit rating, or even if you have no credit history at all, you still have the credit card. option to become an authorized user on the credit card account of a loved one whom you trust and, most importantly, who trusts you. In this way, you can start building a credit history on your behalf. Once you are better established, you can use it to open your own credit card and increase your rating faster.
Becoming an authorized user on a credit card is therefore an interesting trick, but it is important to note that this one carries some risks, too. Here are some facts that will be helpful in deciding if this approach is for you:
- Your credit rating will always be less affected by purchases / payments made with an authorized card than with a card on which you are the primary cardholder.
- It can be difficult to find someone who will trust you enough to put a portion of their financial future in your hands. For this reason, it is important that you choose someone with whom you have an open, honest and communicative relationship, as this will more easily prevent misunderstandings.
- The primary owner will be responsible for all transactions made by the authorized user. That is, the financial choices of the authorized user will have an effect on the primary holder – whether for good or for bad.
- It is therefore clear that a principal who adds his / her child as a licensed user for the purpose of starting to build credit for the child may have a negative impact on his or her child’s credit rating if the card is not responsible from the start.
Your payment history is one of the most important factors (if not the most important) when it comes time to calculate your credit score. This includes, if you try to ” hack ” your credit rating (ie, optimize or “hack”), it is absolutely imperative to make your entire payments, before the due date without fail, every month.
Making frequent payments is an important tip that we should all practice – not for those who are looking for a quick improvement in their credit score, but for all those who are looking after their financial health. But it’s not just a payment history that will help improve or maintain a credit rating; experts in this area agree – it is just as important to use a small proportion of the credit available to us. Frequent and full payments have a role to play here, too – they will help control the balance of your accounts. In this way you will build your payment history while keeping a high proportion of available credit – one stone, two hits!
There are some who make a payment to their credit cards as a result of each purchase – they actually keep a zero balance! That said, it is not necessary to go to this extreme, but you must make at least one full payment per month, to pay your statement balance – and this before your due date!
Opening new accounts
Opening new accounts can serve you the same way that the frequent payments mentioned above can do: that is, by increasing your available credit, you will use a smaller amount and give you a boost. to your credit rating. By keeping one or two accounts open but untouched, you will have the freedom to use your main card as you see fit without worrying about a high balance.
That said, it is important to take advantage of this trick to keep your expenses at the same level. There is no point in increasing your available credit if you are only going to end up with a second source of debt.
Please note that an application for a credit card will require a credit check. These can have a negative impact on your credit rating. It is therefore important to limit the applications because you do not want to ruin all your good work by multiplying the surveys.
Declaration of lost cards
It is possible to grow your credit history by declaring your lost card. This tip should not be your first choice, but many have used it successfully. It will not work in every case because every financial institution manages their lost cards differently, but here’s how it works:
- You declare your lost card
- Your financial institution will close your credit card account and open a new one
- It will transfer your payment and purchase history to the new account
- The new account will be added to your credit file
You will now have two accounts reported to your file with the same history. In this way you will have increased the age of your credit report. Depending on your existing history, this may not be the best option for you, but as the age of your file plays an important role in calculating your rating, some are able to take advantage of it.
In one way or another, if you are looking to accelerate the pace at which you build your credit, these tips will be valuable tools for achieving your financial goals.