Many renters have a goal of achieving the American dream, upgrading their space, or creating stability in their lives. One way to begin accomplishing these goals is to improve your credit score – a healthy score will allow you to make those big purchases or begin to truly save. Here is an approximate credit score scale to know where you fall under:
-
Very Poor: 300-579
-
Poor: 580-619
-
Fair: 620-679
-
Good: 680-719
-
Excellent: 720-850
CreditReport.com
Create a to-do list and knock these out one at a time to improve your credit score. You can figure out your score on free sites such as Credit Karma, Quizzle, and Credit Sesame. This is called a “soft pull,” which does not affect the number of inquiries a lender would see. A “hard pull,” which is often performed when you apply for credit cards, open a cell phone account, purchase a car, or apply for housing WILL affect your credit score.
-
Review your credit history – Make sure that all the information is related to you. Identity theft can occur and it is important that this is not the cause of your credit problem.
-
Pay your bills on time – Give yourself reminders to pay your bills or set up automatic payments. Keeping a good payment history over time will significantly improve your credit history, because it counts as 35% of your credit score.
-
Pay off credit card debt – Reducing the amount of debt you owe will be very helpful, but depending on the amount of debt – a financial advisor may be able to help you set up a custom payment plan.
-
Remove collection tradelines – Here are three common ways to approach this:
-
Pay for delete: Send a letter to the collection agency that you will pay the amount in full in exchange for the deletion of the tradeline. Most often, collection accounts are not removed just because they are paid. Pay for delete does not happen very often, but this is ideal.
-
Pay in full or settle: If you pay it in full, you pay the total and it will be marked “paid in full.” Settling is an agreement to pay a percentage and have the account closed. The difference is how it is reported on your credit report. It will not affect your credit score, but may affect the way creditors look at your credibility when they see “paid in full” or “settled in full.”
-
Goodwill letter: When you send a goodwill letter, you’re asking for forgiveness based on the situation you were in at the time of the missed payment. This may be due to being hospitalized, money hardships, deployment, or other situations. The goal of the letter is the get the tradeline deleted. This is normally sent after you have paid the collection agency.
-
It is important to note that whether a tradeline is marked “satisfied” or not, it will still have the same negative affect on your credit score.
Tip: If you’re applying for a major loan and shopping for the best rates at different lenders, try to keep them all within a short period. This will associate these multiple pulls to one potential purchase.
Keep in mind that it will take time to improve your credit score, and things like filing bankruptcy will stay on your record for 10 years.
For more tips, visit ForRent.com/Blog.
