5 Steps to Credit Success: Part 1

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Why the 5 Steps?

These 5 steps are important because they will teach you not only to calculate your credit score, but to actually control it. You can always refer back to these steps in order to keep your credit profile fresh and accurate.

Remember, addressing just one area may provide improvement, but it will only be for a short period of time. Learn each of these 5 steps and you will find your credit profile improving and gaining strength and soon, over a period of time, you will see a major improvement as well as long term stability.

The order of the steps is important as well, since each step builds on the previous one. You will more than likely find that some of the steps will not hold as much weight for you as others, but this is expected. If you find difficulty in completing any of the 5 steps, just contact us. We are always happy to help!

Let’s get into The 5 Steps to Credit Success

Step 1: Evaluate

The first step is to review the information that is reporting on your credit profile. You need to look for any errors in the list of negative entries. There are 15 potential areas of reporting errors.  So check everything: opening and closing dates, balances, limits, account type, etc. Any mistake carries with it the opportunity for correction or removal of that entry.  As you read across the three bureaus’ description of that entry, do they differ from one another?  If so, they can’t all be right; so a correction or deletion is in order.

Next, look for entries that you do not recognize.  Is there an account that you never opened?  Is there an address where you have never resided?  Look for anything that may indicate you are a victim of identity theft.

Now look for positive entries.  Do you have at least 3 trade lines?  If not, go to step 2.  Only after the trade lines are established (which could take several months), should you begin working on the deletions.

Step 2: Establish Trade Lines

Your second step to credit success is to establish credit. This step is important early in the process so that the new credit will have a chance to report multiple payments while you complete the other steps.

To establish credit begin by buying something on time. Avoid buying a high priced item, such as a car, to establish credit with.  Instead, purchase goods that cost under $1,000.  This might include a needed appliance, jewelry, auto repair or even dental work.  Companies that provide these types of service and products usually have loan applications that just about anyone can apply for.  This is a win-win situation.  You get the product or service that you need, the company is paid immediately and you now have the opportunity to establish credit.

This will be a high interest loan in most cases, however, many of these types of offers carry with them a 6 month interest free policy.  So pay it off after 6 months but try not to carry it longer than a year.  One of our clients needed tires, so went to a local tire retailer, filled out their loan application and was immediately qualified for $1500 credit line (with that company). She now has the needed tires, a much desired trade line as well as a $500 credit line still available if more tire-related work is necessary.

You may also want to apply for a secured credit card.  This a credit card where you ‘secure’ the card with cash.  You give the bank $300-500; they give you a credit line on a credit card worth the dollar amount you secured it with. Use the card only for purchases that you need to make anyway, such as groceries or gas for your car.  Make certain the card is paid in full each and every month and on time. When it is time to move up to an unsecured card, your initial ‘secure’ money will be returned to you.

Many jewelry stores operate like this too.  Your patronage with them will sometimes result in a line of credit with that store. Check your local area for a store that offers to build credit. You can also use our web site for this purpose. You will find a tab named “Give Yourself Credit”, click on that tab.  You will find an offer from an on-line jewelry club (you can also apply for secured credit cards here as well).

The on-line jewelry club works like this:  You pay $99 to become a member.  Then you find a piece of jewelry on their web site that you like and agree to pay half of the cost at time of order (which can be as inexpensive as $100). You pay the balance over time.  You are not obligated to purchase anything again.  How do you win with this?  For your $200 investment, (membership fee and a one hundred dollar item), they give you a $5,000.00 line of credit and report it to all 3 bureaus!

There! Now you have three trade lines.  Get ready for steps 3-5 next week in Part 2 of 5 Steps to Credit Success, where we discuss the final steps to realizing your financing goals!