Original article by Thomas McKee, Edited by Robert Weinberg
Many people believe that opening up secured credit cards are the smartest, quickest and most effective method to add positive accounts to their credit report.
They most definitely are not!
We’ll discuss Secured Credit Cards and their possible benefits and “pitfalls” in another article. Right now let’s focus on three legal, effective and intelligent methods to increase a person’s credit score for those who have few if any “active credit lines”.
This list is not intended to be all inclusive by any means, simply a few methods you can use to re-establish credit more quickly.
1. CD Method: Go to a small bank or Credit Union and open up a Certificate of Deposit for $1,000 and ask to take out a personal loan for $500. Let them know you are trying to rebuild your credit. These institutions are paying you a small fraction (1-3%) on the CD yet charging you double digit interest on the loan! They have your money for the term of the CD so it is no risk to them.
Take the loan money (don’t spend it!) and pay back the loan within 30-60 days. The bank or Credit Union is not making much interest if you pay off the loan quickly.
Bank loans are highly rated so you’ve just added a positive and paid-off trade line!
2. Bank loan with a Co-Signer: Ask a family member if they will co-sign a small personal loan to help rebuild your credit. Most family members with good credit will do this as the loan can be small—say $500 as in the above example. It’s not as if they are co-signing a long term auto loan which could put them at considerable risk!
Again, pay off the loan over a short period of time and Bingo, you’ve just added another positive line of credit!
Note: you can use either of the above methods at multiple banks to increase your credit score more quickly!
3. Become an Authorized User: This method is also known as “Piggy-backing”. It has been around for quite some time and the “Big Three” Credit Reporting Agencies (Experian, Equifax and TransUnion) don’t like it a bit! In fact they are trying to lobby against this practice as this letter is written. Unfortunately it may be awhile, if ever, before they can do anything about it! The reason is that credit card companies generate more revenue when their card holders add family & employees to new accounts.
Simply ask your spouse or a close relative whether you can be added to their credit card account. They can simply phone the company and ask if they can add you to their card. The companies know, or at least believe, that you will make charges on the account and that spells more revenue for them!
Credit Reporting Agencies don’t like this as they believe it is an “artificial” way for people with bad credit to increase their credit score without having to pay an “actual” bill or debt.
Through this method you gain all of the benefits of someone else’s payment history!
Note: Ensure the credit card you are adding yourself to has a small balance, a good payment history and the person has had the card for at least 12 months.
There you go. Three very quick methods to add positive accounts to someone’s credit report that will very rapidly increase their credit score!
Credit Education is essential in today’s economy!
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Conversely, if you have a high credit score--
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