Improve Your Credit Score


Blemished credit can be very costly and can result in higher interest rates on mortgage loans, auto loans, credit cards, and insurance premiums.

By taking the following steps to improve your credit score, you could save hundreds, even thousands of dollars over the term of a loan.

Here are five simple steps to raise your credit score significantly in forty-five days.

  1. Pay past due accounts
  2. Get rid of late payments
  3. Have credit limits increased
  4. Become an authorized user
  5. Do not close old accounts

Let’s take a look at each.

Pay all accounts that show a past due balance on your credit report.

Past due accounts do not necessarily mean 30 days late, past due accounts can be 1 day late and show as past due on a credit report.  This can severely hurt a credit score. Pay all past due accounts as quickly as possible to increase the credit score.

However, past due accounts do not include judgments and collections. It is best not to pay judgments or collections when applying for a mortgage. Wait until the close of escrow, if possible, and pay them at closing. Paying judgments or collections could create a negative impact on the credit score as the “recent activity” date will update if the account is paid and the collection will appear to be more recent than it may have been which will cause a negative impact with the credit score.

Have late payments removed by contacting creditors.

If your first attempt is not successful, try again and work your way up the ladder to a manager. Be persistent, as each time you call a new representative will answer the phone.

If you are successful and the creditor agrees to remove the late payment, be sure to request a letter. The letter needs to be on the company letterhead of the creditor, needs to be signed by an employee and the letter must document your name, address, account number, and the specific late payment or late payments that should be removed.

Additionally, be sure to obtain the name of the representative that you spoke with as well as a contact number and extension, just in case you do not receive the letter and need to follow-up.

Increasing your credit limits can increase your credit score.

Every six months or so call each creditor and request that each increase your credit limit. Be sure to request that the increase be made based on your great credit history. If the creditor insists that a credit report must be pulled, think twice before you agree as this will count as an inquiry and will have a negative impact on your credit report.

Become an authorized user on a relative or friend’s credit account.

But, if they agree, be sure to confirm that the account has been paid on time and the current balance to limit ratio is below 10%. If the account has late payments or has a high balance to ratio limit, it will create a negative impact on your credit report.

Be sure to tell your relative or friend that there is no risk as the credit card is mailed to the account holder and you cannot use the card unless they provide you with it.

Do not close old accounts, regardless of what you’ve heard.

Keep accounts open and use accounts that have become inactive periodically. However, if you charge on the account be sure and pay the balance in full as soon as the bill arrives. Purchasing a tank of gas and paying it off will activate inactive accounts and report them current and in good standing. Closing accounts can actually lower your credit score, especially if the account has a long credit history.

To achieve a high credit score be sure and do the following:

  • Borrow money when you do not need it or when you do need money creditors may not give it to you.
  • Keep the balance to limit ratio low; do not max out credit cards. If you have to use credit cards, be sure to spread it over several accounts.
  • For a quick boost to your credit score, when a creditor removes a late payment and provides a letter, request a credit rescore.  For a fee, in just a few days, your credit score will increase and this could help you obtain a better interest rate.
  • Never payoff a judgment or collection when applying for a mortgage loan. Try to negotiate that the account will be paid in escrow.
  • Increasing a credit score by just 10 points will save you $100,000 in interest on a $500,000 mortgage over the 30-year term.
  • Overall, it pays to invest the time to clear up the blemishes on your credit report.

If all of this sounds confusing—ALCOVA will gladly help you determine a game plan to rebuild your credit in order to qualify for a home loan.  Depending upon your credit situation it may take time and discipline, but we are here to help.