If you want to increase your credit score from 580 to 650, you’ll need a different strategy than if you want to go from 670 to 725.
Also keep in mind that while removing negative items from your report will usually increase your score, it’s a basic concept at best. In this article, we’ll discuss “inside secrets” known by very few that will help you get your credit score where you want it.
Your Debt-to-Credit Ratio
For years I’ve been hearing the same thing from people who listen to credit card services: “I pay off my balance on my business credit card every month, so I have excellent credit,” or “My personal credit card has no balance – I’m in great shape.” These mistaken beliefs immediately change when you know the facts.
Your debt-to-credit ratio compares your amount of debt to total available credit extended to you (through revolving accounts only). For example, let’s say you have $10,000 in total unsecured revolving credit accounts with a debt of $2,500. Your debt-to-credit ratio is 25 percent.
Lenders make money through interest, not annual fees, so a key element of the credit scoring model is based on your maintaining balances and paying over time. This shows lenders your true long-term credit-worthiness. If you pay off your card every month, the best credit repair services in the world will not help you, because this is not how you build good credit.
Over the years we’ve discovered the best way to build credit-worthiness and repair bad credit is to carry the proper debt-to-credit ratio. It boosts your score much more quickly than paying off your cards each month. I have argued this fact with the Better Business Bureau, and they still disagree, despite my having sent them proof from Fair Isaac, the organization that invented the credit scoring software used by credit bureaus.
So how do you use debt-to-credit ratio to lower your credit score? If you have $10,000 in unsecured revolving accounts with a debt of $8,500, how do you bring your score down without selling everything you own? The answer is amazingly simple.
Sub-prime Merchandise Cards – the cards that actually work for you
Sub-prime merchandise cards are the most cost-effective and powerful tools to increase your credit limit and decrease your debt-to-credit ratio. Like with “traditional” credit cards, these versatile cards report to one or more of the major credit bureaus each month.
A sub-prime merchandise card account is simply a line of credit that allows you to buy merchandise from a specific vendor, usually the company that sold you the card. In most cases, you’ll purchase the merchandise through a catalog or online mall.
Virtually anyone can be approved for $5,000 to $10,000 in credit attached to a sub-prime card with NO credit check and NO cosigner. The difference between a sub-prime account and a typical credit account is that the card is good only for merchandise through the issuing company’s website or catalogs, and the consumer is required to pay a deposit on whatever they purchase. After the deposit is paid, the remaining balance is financed on the card.
Maybe you’re thinking it sounds like a scam. If so, you’re missing the point. Big time.
Four Instant Benefits
With a legitimate sub-prime merchandise card, your credit line WILL be reported to one or more of the major credit bureaus. This means if you get a $7,500 card and you finance $500, on your credit report it will look like any other credit card and will do four extremely important things for you.
1. It will immediately increase your current high credit limit by $7,500, because it “looks” like any other unsecured revolving account.
2. It will immediately improve your debt-to-credit ratio.
3. By carrying a small outstanding balance, it will positively impact your credit report by building credit and showing potential lenders your credit-worthiness.
4. With a good payment history, you’re virtually guaranteed to receive “legitimate” pre-approved credit offers in the future.
This technique can’t be beat for both cost and effectiveness. The key is knowing which cards report to the credit bureau and offer a zero-percent interest rate.
In the world of credit repair services, a lot of companies promise to help but can end up costing you more than their help is worth. With a sub-prime merchandise card, you’re in control of restoring your credit-worthiness.
You can improve your debt-to-credit ratio and increase your credit limit, starting today. Look for the best credit cards to help you raise your credit score and get back on the right track.
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