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Monday, 27 August 2012

Credit Score Increase In 48 Hours

By Trevor Weir


At some time in your life you will walk into a bank and apply for a loan or mortgage of some kind. If you live in the western world, the bank will invariably check a central credit agency in order to validate your ability to make payments on the loan that you are applying for. Your banker will tell you to relax, this is painless, as he/she reviews your credit score from the central agency. This will be the time when that critical purchase of a home or new car will cause you to silently say, Darn, I wish I knew how to increase my credit score. We have all been there and done that - some of us more times than we can count.

So, the question is, Can the credit card score be improved and most people would answer simply pay your bills on time and there should be nothing to worry about. Everyone it seems has an opinion on this. Some said that constantly asking the credit agency to respond to specified issues in your report within a period of time specified by law could or might result in the credit agency making a mistake and the issue in question being cleared - largely based on a technicality. Enough people mentioned this tactic, so it appears that as unorthodox as this method may seem, there may be some validity in some jurisdictions.

Invariably however, what appears to be missing from nearly all the responses was an understanding of not of how credit works because most of us can figure that one out, but the understanding of the thinking/reasoning behind higher credit scores and what loan institutions are really looking for. So, myth number 1. Loan institutions love people who pay off their bills on time every month. Really? If this were the case, how would a loan institution make any money? ha ha Loan institutions love people who maintain a balance that they can get charged interest on. And that's the truth.

Ok, myth-ism number 2. Banks and Loan Sharks love people who borrow as much as possible. Really? If this were the case, people who couldn't repay loans would get huge amounts of credit and constantly end up in repayment problems. Do I hear echoes of a well known mortgage problem in here? So perhaps this isn't 100% of the answer either.

Let's cut to the chase. Banks and your, ahem, local mafia lender ( ohh are these two interchangeable ? ) love clients who pay more than the interest each month but not enough to seriously subtract from the actual principal amount. These are cherished suckers and enough of these on a banks balance sheets makes for a very healthy bank. These customers also have the ongoing income to keep their total loan amounts very much under the total allowed credit range. It is this loan to credit that more strongly influences whether a credit rating will be closer to 670 or 800. Lets look at an example, 35,000 in credit and 14,000 already used.

The key phrase here being "ongoing ability " and "debt ratio". Ongoing ability is why some older retired persons with otherwise good credit may sometimes have difficulty refinancing longer term loans. They are looked at as not having jobs per se and therefore while their credit may be good the ongoing ability (income) aspect might be perceived as being weak.

So from what we have seen here, the best Candidate is not just someone who has no defaults on their credit rating, such a person may get to 650 on the credit score but may not be able to get a credit score of 800 or more. It is expected that most people who have been working on improving their credit scores will have few defaults though not many. So the key issue for those looking to increase their credit scores from 600 to 800 leans more towards something else.

That something else is the debt ratio. The key issue for getting credit card ratings above 6-700 is the debt/credit ratio.

Who then are the loan arrangers really searching for? That would be the gentle person with a credit to debt ratio which is not only low, meaning they have room to increase it, but someone who also has shown the long term ability to handle an ongoing balance. Come to the site and view the Credit Score Video then make a few quick changes to fix your score. Is 48 hours too long?




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