Fast FICO Recovery
In “The Credit Card Cure“, Ryan Rockwood details 7 Credit Repair Habits that you should develop, not simply to recover quickly after credit score hassles, but develop as on-going best practices for managing your credit score.
Credit Repair Habit #2 – Increase Available Credit
FICO calculations favor those who have more credit available than they need. This indicates that you are not “on the edge” and likely to default on payments. CR Habit #2 has two parts – 1) pay-down you balances and 2) consistently apply for higher credit limits.
For years I have advised that clients pay down their account balances to no more than 30% of available credit. That is, if you have a $2,000 credit limit at Sears, use no more than $600 of it. However, experts tell me that, for best results in this credit environment, it is best to keep balances below 8%. On the $2,000 Sears card that’s a whopping $160.
There is a “gotcha” here. You can never be sure of the day during the month when your creditor will report to the bureaus. Most often, it is at the same time that your monthly statement is calculated and printed. But, not always. In fact, if you pay careful attention to your credit report and bills over a period of time, You will see that the reporting date changes from month-to-month.
So, if you charge $900 at Sears this month and pay it down to below $160 when you get your statement, you will be reported as having a $900 balance – not what you want. The only way to handle this effectively is to simply never use more than $160 on such an account.
The second part of this CR Habit is to consistently apply for higher credit limits with your existing accounts. I emphasize existing accounts because whether/not it is advisable to open new accounts to expand your available credit is separate question addressed in a later CR Habit.
Your creditors want to extend additional credit to you. That’s what they are in business to do. So, even though you may have had a rough spot in your financial and credit life, you can begin at once to take the actions they require to raise your credit limits.
Contact each of your credit card and installment loan accounts and ask them to raise your credit limit. You might be surprised that they just do it! You will find that, in general they all have the similar requirements: frequency of use, dollar value of use, no missed payments, and a certain FICO score. But, you need to know specifics for each creditor…how long, what frequency of use, what dollar amount of use (and how is it calculated) and what FICO score.
Capture all that data for all your creditors and it will be clear to you where you have near-term opportunity to increase your credit limit and where you will have long-term opportunity. You will not make fast progress on this BP. Some of your creditors will require 6 months or more of certain credit performance before they will increase your limit. But, some will do so easily. These are the ones to keep in touch with routinely to check on your progress. Jump through the hoops they set out for you. And, when you’ve met the requirements ask for the increase and push hard for it.
Related posts:
- Fast FICO Recovery In The Credit Card Cure, Ryan recommends7 Best Practices to...
- Credit Card Debt Settlement and Credit Score Pain Members of the Credit Card Cure Co-op often ask (entry...
- How to read your credit report In The Credit Card Cure Ryan Rockwood details a four-step...
- Prepare before you stop paying your credit cards Part of the C4 System for Credit Card Debt Settlement...
- December 29th Loan Mod Class: FICO 911 Call the doctor, my FICO needs emergency surgery Prefer reading...