As a financial professional dealing with primarily high net worth individual, families, and small business owners, I am continually surprised by how many wealthy people have credit issues.
Most often they didn't know they have a low or middling credit score until they try to purchase real estate. In this case, your mortgage broker can be your best friend, often acting as a guide to give you steps to improve your credit score by up to 75 points in only 30 days!
Pay all bills on time, every month. No exceptions.
Pay off your credit cards in full every month.
Eliminate any late payments on your credit report. Take time to dispute them with the lender or credit bureau. Often a company will offer a one time forgiveness for a late payment and notify the credit bureaus on your behalf. This can be the difference between good and excellent credit.
"Rule of 15" - If you cannot pay your balances in full every month, then keep no more than 15% of of the available credit on your card as a balance at the end of every cycle (IE: $10,0000 Limit = 15 Max Balance
"Rule of 3" - Keep only 3 credit cards, that could be Visa, MasterCard and Amex. Extra cards with $0 balances can actually hurt, not help, which is contrary to popular belief. Close out your extra cards with zero balances that you have not used in 6 months and have no plans to use over the next 6 months.
Try to avoid financing through a store such as Lowes or Best Buy. These stores are great and I love shopping at them, but often you will be open a line of credit and maxing it out immediately if you are doing a large home improvement project or buying the top of line MacBook Pro or Home Theatre. The interest rates are high and you get suckered in to paying these balance over time, hence going over the "rule of 15%".
Avoid having too many accounts with balances and a high ratio to limit of available credit on revolving accounts; refers to the "Rule of 3" and "Rule of 15"
Avoid "hard" credit inquiries - this should not be a problem if you are not constantly applying for new cards, financing other purchases, etc
Most states allow for 1 free credit report per year. Check to make sure you are on track, and if you have a hard inquiry made, get a copy of the report by the lender.
Credit Karma App - Free app gives you personalized tips on how to improve your credit in a report card form. It will also update monthly so you can see trends in your credit. The app uses a "soft" inquiry which isn't detrimental to your credit score and gives you an estimate of your TransUnion credit score
Refer to the chart of "Credit Score Factors" to see how much each tip facts in to an improvement in your credit score.
Have you had success in increasing your credit score in a short amount of time? Share your tips below!
This post originally appeared on LinkedIn and was reposted with permission from the author.
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As a CERTIFIED FINANCIAL PLANNER (CFP®), Julian Morris has served the needs of individuals, families and business owners seeking comprehensive financial solutions and personalized asset management strategies since 2004. Prior to founding Concierge Wealth Management, Julian held the titles of Franchise Owner and Senior Financial Advisor at American Express Financial Advisors (Now Ameriprise Financial). Visit their website to learn more about Concierge Wealth Management or connect professionally with Julian on LinkedIn.