When Should I Sell Items To Improve My Credit Score?

When Should I Sell Items To Improve My Credit Score?

Selling personal items to improve your credit will only help if this gives you more ability to pay down debt under the key 30 percent credit utilization immediately or to make your current and future payments on time.

You are losing significant points from your credit score for every credit card on which you maintain a balance over 30 percent, even if you pay this down every month. 

This would be a good point to sell some things to pay down debt, as this category of credit utilization counts for 30 percent of your entire score. Getting your credit utilization to less than 10 percent will help improve your score even further. 

Remember that the credit scoring models consider not just your average credit utilization score, but also on each individual revolving credit card account as well.

If you are having trouble making all of your credit card payments on time each month, this is costing you dearly in the 35 percent category of timely payment history. You could either pay off several of your balances with money from items sold or at least have money in the bank that you use only for paying your credit card bills. 

Late payments reported on your credit report can damage your credit score by as much as from 90 to 110 points, so make it a point to always be on time (or at least not 30 days late, which is the point when most creditors start reporting late payments to the big thee bureaus). 

How to Best Handle Debts and Loans

The best way to handle debt and loans is to always pay them on time and not let them grow to more than 30 percent of your available total credit. Not only does this help you with keeping the minimum payments manageable, but it also gives you the crucial points in the credit utilization category. 

Your debt to income ratio also should be at 30 percent or less so that it does not become hard to service your debts and loans. 

Obviously if you can afford it, the best thing that you can do for your credit score and financial health is to pay off your debt (and loans) in full every month. At the least you can attempt to make larger than minimum monthly payments every month. 

Try making a double minimum payment every month to reduce your debt and loans significantly faster. 

Remember to apply larger payments to debt with higher interest rates first, as this will reduce the total amount of interest that is assessed and applied to your accounts in the future substantially.

3 Quick and Easy Approaches To Increase Your Credit Score
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3 Quick and Easy Approaches to Increase Your Credit Score

How to Instantly Gain 20 to 30 Points to Your Score

There are two things that you can do to easily and relatively quickly improve your credit score. By making all of your bill payments on time, the credit bureaus will be alerted that you are timely with your monthly payments.

This most important category contributes 35 percent of your entire credit score. It needs only a few months for your accounts to all show as timely paid. 

Another way to quickly gain 20 to 30 points is to pay your credit card bills down to less than 30 percent of your available credit. By reducing your credit utilization on all accounts to under this figure, you will immediately gain from 20 to 30 points to your score (or more). If you are able to pay the balances down to 10 percent or less, then you will gain still more points almost immediately. 

The fastest way to gain major points to your credit score is to reduce those high balances on all cards so that credit utilization is low. 

Handling a Dispute On Your Credit Report

You need to regularly check all three of your major credit bureau reports from Equifax, Experian, and TransUnion. It is quite possible that incorrect information on one or more of your reports could be harming your total credit score. Disputing inaccurate or incomplete items with them is easy. 

You simply log on to their “file a dispute” pages on their websites at:

Here you will be able to open a dispute by providing them with all of the pertinent information on your claim. Be advised that the credit bureaus require up to 30 days to process, research, and correct false information from when you file your dispute. Removing mistakes from your credit report can add significant points back to your score, particularly if the mistakes involve inaccurate late payments or other derogatory information. 

Asking for A Lower Interest Rate

If you are carrying monthly balances on your credit cards, you will be able to pay them down faster if you are able to secure a lower interest rate. You can sometimes get these by calling the credit card issuers directly. Tell them you are preparing to pay down your balance, and you would like to ask for a lower interest rate to help you with the process. 

They may be more likely to approve your request if you are willing to make a significant token payment while you are on the phone with them. 

What You Should Know About Credit Purchase, Limits & Repay
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What You Should Know About Your Credit Purchases And Limits

Your Credit Card Purchases Do Matter

It matters significantly how much you rack up each month in credit card spending. Even if you pay it off by the due date, your creditor will report your balance for the month to the three credit reporting bureaus. 

This will worsen your credit utilization ratio, incorporating a critical 30 percent of your credit score. 

If you must make routine large purchases with your credit cards, try paying an extra payment ahead of the due date each month to keep the balances low and manageable looking to the credit scoring algorithms. 

The Truth About Credit Card Limits

The truth about credit limits is that your creditors never intended for you to use your entire credit card limit. Think of these amounts as a test of your responsibility and self control. The scoring algorithms want to observe how well you can handle this tantalizing credit line. They like to see you use less than 30 percent of your available credit (and even better less than 10 percent). 

Certainly this is a guideline and not a hard and fast rule. One thing is certain with this critical component of your credit scoring model: the lower your total credit utilization proves to be, the better your score will be. 

Under the Vantage Scoring model (and per Experian), exceeding the 30 percent credit utilization level will cost you significantly in points. Remember that those consumers who possess a FICO score of 800 are only using an average of seven percent of their total available credit.

The Best Strategies to Repay Your Debt

The best credit card balances to pay down first are those with the highest interest rates. By reducing the monthly balance that you carry, it will lower the amount of interest that is tacked on to your balance every month. This will save you interest expense (real money over time) and reduce the amount of time you need to pay off your overall bills.

You may find yourself in a position of too much debt and not have a clue as to how to efficiently pay it down. According to Business Insider, there are give good strategies that you can use effectively to help you escape from too much debt. 

This starts with asking your creditor for a lower interest rate. If you have paid your bills on time for years, they may just agree. 

A lower interest rate will decrease the additional charges that are being added to your account balance each month. If you combine your request for a lower interest rate with an offer to make a larger lump sum payment on the balance while talking with them, it might convince them to help you.

Secondly, you should also try to make double your minimum monthly due payment. This will dramatically reduce your balance and the length of time you need to pay it down. Third, experts recommend that you go after the most expensive interest rate debt first. Anything that you can pay over the monthly minimums due will always help reduce interest costs and time frame to repay your balances. 

Avoid making only minimum payments as much as you possibly can.

You have two other options to reduce interest rates on high credit card balances. You could try to open a balance transfer card and move the balance over to a zero percent promotional offer. You might also apply at a bank or online for a personal loan and pay down the highest interest rate balances on your credit cards. Using these strategies can cut your repayment time frames down on high APR debt by as much as half. 

Additional Credit Card Considerations

Joint accounts are only as good as the least disciplined person on the account. Whether or not your joint account holder makes minimum payments or pays off their charges, you will ultimately also be responsible for these in any event. Your credit score will be impacted by their not making timely payments, so be very careful of the person you open a joint account with on a credit card. 

Remember that there is no such a thing as a joint credit score, only two credit scores that are equally impacted by the decisions that the joint account holders make. 

You want to be extremely careful about closing existing accounts. This hurts you in the credit age category (counting for 15 percent) as it reduces your average credit card account age. It will also generally increase your credit utilization ratio. If it jumps this number to over 30 percent, you will lose significant points in this second most important scoring category (that counts for 30 percent). 

In general, you should only close an account if the annual fees are so high that you can not justify keeping it open. It is a better idea to call and discuss your concerns with the creditor. 

They may be wiling to waive the annual fees for a year to keep you as a customer, in particular if you are regularly using the card or carrying a balance on it.

If you can manage to qualify for a no annual fee credit card, this is always a great benefit. It allows you to use the creditor’s money every month for the length of the grace period (20 to 25) days at no cost to you. If you do not carry a balance each month, then the cost of the credit to you is effectively zero. 

The trade off to a no annual fee credit card is often that they will not usually offer a rewards program. 

For many people this is an unacceptable trade off. These credit cards rewards and points programs have turned out to be more popular than ever before. If you use them to attain the maximum cash back or travel rewards possible, it can easily exceed the annual fee for having the card and its lucrative rewards program.

Some of these cards like the Chase Sapphire Rewards give you even $700 in free travel if you harness the opening charging bonus to its fullest extent.

Striving for Excellent Credit - Attain An Over 700 Credit Score

Striving for Excellent Credit – Attain An Over 700 Credit Score

According to The Motley Fool and FICO, around 23 percent of American consumers today possess a credit score of 800 or higher (out of a total 850 maximum possible points). This should encourage you to reach for a credit score of at least 700, something you can easily hope to achieve. 

The bad news is that FICO jealously guards the particulars of its formula (though it reveals the five categories and their percentage components). This makes it impossible to tell you precisely what you need for perfect credit scores. 

We do know the credit choices that the consumers in the highest credit ranges make though. These actions include the following:

  • Average revolving credit lines are around 12 years old – with their first revolving credit card account opened up over 25 years ago. Length of credit history counts for 15 percent of total score with FICO.
  • They have not experienced hard inquiries on their credit report in nine months.
  • An impressive 95 percent of these high credit consumers (over 800 score) suffer from no delinquent credit accounts on their personal credit report.
  • Their typically 10 active revolving credit accounts combined contain an average carried balance of $1,446.
  • This under $1,450 in carried debt consumes a mere four percent of the high credit score consumers’ available credit limit. The average 800 plus score holders do not apply over 10 percent of any of their revolving credit accounts.

Such behaviour will help you score well over 700 personally. If you combine all of these credit characteristics in your lifestyle effectively, then you may even top 800 points.

Three Factors That Influence the Timeframe to Improve Your Credit Score

The time frame to improve your credit score is based on your ability to improve in the three highest counting credit score categories. According to FICO, these are your timely payment history (for 35 percent), your credit utilization ratio (for 30 percent), and your length of credit history (for 15 percent). 

Your payment history is the most important category. 

It takes up to six months to demonstrate a timely payment history that is up to date with the big three credit reporting bureaus of Experian, Equifax, and TransUnion.

Credit Utilization is a quicker time component. This is updated every month. In theory, if you paid down your balances in June to less than 30 percent, then by July or at the latest August your credit report and score would reflect the lower credit utilization ratio and give you the increased points in this second most important category.

Length of credit history takes time to build up. In this category they are looking at your oldest account as well as the average age of all your revolving accounts. By not opening new credit cards, you can help your established credit to age faster. You can always open new credit, but if you do this then try not to make too many applications at one time. 

These hurt you in two ways. More new accounts water down your length of credit history category. They also create multiple hard inquiries on your report, hurting your new credit component (comprising 10 percent of your score). 

The Top 10 Strategies to Build a Good Credit Score
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The Top 10 Strategies to Build an Excellent Credit Score

There are some strategies to building up good credit that you should follow to maximize your efforts. We look at the top ten of these next.

1. Borrow Only What You Can Afford to Pay For

Remember that credit cards are not intended to help you finance things you can not afford. The most optimal way to build up solid credit is to only charge what you can comfortably afford. This will show potential creditors and lenders that you are a responsible user of credit and debt. It will also make it easier to obtain additionally needed credit in the future. 

Avoiding excessive debt is critical. Your credit score is really a reflection of your success with only borrowing what you can readily repay.

2. Remember to Use a Small Part of Your Total Available Credit

Credit algorithms consider maxing out your credit cards to be the height of irresponsibility. Lenders are well aware that those who borrow to their maximum limits struggle to repay what they have originally borrowed.

Exceeding 30 percent of your available credit, even if you pay it off on the due date every month, will cost you points in the critical credit utilization category comprising 30 percent of your score.

3. Start with a Single Credit Card

It can be a mistake to gather an assortment of credit cards in your first few years of having credit. The more you possess, the greater the temptation is to run them up and fall behind on payments and balances. By starting with only a single credit card, you will gain more points in the new credit category (that makes up 10 percent of your score) as you will not suffer too many hard inquiries on your credit report. 

Too many new cards also reduce your average credit age, which makes up another 15 percent of your score.

4. Pay Off Your Full Credit Card Balance Every Month

In the theme of only charging what you can actually afford, pay off your entire credit card balance each month. This gives you major points in the 35 percent most important category of payment history and the 30 percent category for credit card utilization. Lenders and creditors love to see this, and your credit score reflects that bias. 

Two-thirds of your credit score is based on this kind of responsible use of your credit!

5. Make Sure All of Your Payments Are on Time

Any bill that you do not pay on time has a habit of finding its way on to your credit report. Pay all of them on time and you will not become delinquent or even worse sent out to collections by a third party. Building a good credit score is a function of avoiding these negative accounts. 

It can cost you 100 points from your credit score for every debt collection account that you have!

6. Balances Should Only be Carried the Smart Way

It is not always bad to carry a credit card balance if you do it smartly. Pay a larger amount than the minimum monthly payment to get these down as fast as possible. 

Be sure to never be late with your credit card balances. 

If you do carry debt, make sure it is less than the 30 percent magic number that the credit bureaus want to see (so you get full credit in the 30 percent credit utilization category).

7. Let Your Accounts Age

Longer time with credit is considered better for your personal score. Always keep oldest accounts open, as they boost your average credit age and build your credit profile up quickest. Closed accounts do not drop immediately off of your profile, but will fall off after two years generally. Credit age accounts for 15 percent of your score.

8. Try for a Mix of Credit Types to Improve Your Score

Rather than having two credit cards, try to get a second card as a charge card from a store or AMEX. Having variety in your credit like loans and charge cards adds to your credit mix category of 10 percent.

9. Do Not Apply for Too Many Credit Cards or Loans at Once

Your score has a 10 percent component for new credit inquiries. You can get full points in this category by not applying for too many credit cards or loans within a six month period. Spread out your credit requests and avoid those hard inquiries on your credit report as much as possible. These should be easy points to get.

10. Do Not be Afraid to Ask a Co-Signer to Help You Build Credit

If you are having trouble getting approved for good credit card offers or loans, get a co-signer. You then get the benefit of building your credit with timely payments off of their established credit history. This is a fast way to improve your credit score if you do not overextend this credit and you make the payments on time faithfully.