How to Quickly Improve Your Credit Score by Adding a Positive Payment History to Your Credit Report

Most consumers know that negative items on a credit report can be disputed with the three major credit bureaus. Often times, this process can lead to a significant improvement in the credit score by removing the derogatory elements that were lowering the score.

However, to achieve excellent credit, it is not enough to eliminate negative entries. Why? Because the lack of a positive payment history is also an obstacle to having good credit. You must show a record of payments on time to increase your credit score.

In this article, I’ll describe two simple techniques to quickly ADD good credit entries to your file.

THE TECHNICAL CO-SIGNATOR

All it takes to add years of great credit is the love and trust of a friend or family member with good credit.

Credit card companies are always willing to have their best customers add additional cards for family members. By adding your name to one or more of your accounts, you will actually have a new credit card issued in your name. The “trick” is that you will be the co-signer on the account, which means that you will be responsible if you don’t make the payments.

Of course, you never want to risk the credit rating of a friend or family member, so simply ask them to use their own address when applying for the additional card. That way, the card will be mailed to you, and even if it has your name on it, the card will remain in your possession. They can even cut it if they want.

The simple beauty of this approach is that the new card will appear on your credit report and will typically show the original card opening date (not just the additional card application date), as well as the full credit history. of that letter! It’s like adding years of good credit to your file with the stroke of a pen.

THE BOOKLET SAVINGS LOAN TECHNIQUE

The “Passbook Lending Technique” is a great way to add a positive payment history to your credit file. It will also give you a great credit reference to use in most types of financial applications. This technique requires some cash, at least $ 500 to $ 1,000. However, this amount will be kept in a savings account as collateral for the loan, and the total out-of-pocket cost to complete this technique must be well below $ 50.

Here’s the Book Savings Loan Technique in detail, so you can see exactly how it all works.

STEP 1: find a small bank that meets your requirements

I recommend that you work with smaller community banks and not with the major chains. Smaller banks are more likely to have the exact type of account you will need to open, and they are more likely to work with you and be flexible. Savings and loan institutions and credit unions can also be used, provided they meet the requirements. The product you want is called a “Passbook Savings Account”, which is basically a simple savings account. And the type of loan you will get is a “Passbook Savings Loan.” This is the easiest type of loan to obtain because it is fully secured with your own cash. Most banks are only willing to lend you 85% of the amount you have on deposit, so there is always some reserve money in the account.

Your destination bank will be suitable for this method if it meets the following three requirements:

A. The bank must have a Passbook savings account product NO MONTHLY FEE for balances of $ 500 to $ 1,000.

B. Must be able to borrow up to 85% of your balance in a 12-month loan schedule. This is generally called a Passbook Savings Loan.

C. CRITICAL: The bank MUST report activity on this account to all three major credit reporting agencies (Experian, TransUnion, and Equifax).

If the bank product does not meet these requirements, DO NOT use that bank. There are thousands of small banking institutions across the country, so it should be fairly easy for you to find a suitable one in your local area.

STEP 2: Open a Passbook savings account

Go to the bank of your choice and open a Passbook savings account for $ 1,000 or less, depending on what you have to work with. Take your Passbook home and wait a week or so, because you don’t want it to look like you opened the account just for the purpose of borrowing.

STEP 3: Get a savings loan with a savings book

Go back to the bank and ask to see a loan officer. Take your best possible look, be courteous, and explain that you want a Passbook Savings Loan for $ 850 (or 85% of the amount you actually deposited).

When you take out your loan, your savings account freezes. However, each time you make a payment, you unfreeze an amount equal to your payment, minus a few dollars for interest. Be sure to request that the loan term be at least one year, with minimum monthly payments. Don’t get a simple one-year loan with no payments. This will not benefit you at all, because you are trying to establish a payment history.

This type of loan will not be turned down, regardless of your past credit history, and in most cases, it will not even be checked. If you have bad credit, be sure to tell your loan officer before you take your credit history. Tell the bank representative that you are trying to rebuild your credit and that a good credit rating is very important to you now.

STEP 4 – Make your payments

Assuming an interest rate cost of 6%, your monthly loan payments of $ 850 will be $ 73.16. (Remember, this is a secured loan, so the interest rate must be quite low.) Because you have “borrowed” $ 850 in cash, you will use that money to maintain your loan payments. Make sure you make your payments well in advance of the due dates. Always pay EARLY to be sure of establishing a good payment history.

STEP 5 – Pay off the loan ahead of time

After six months, pay off the loan early. At this point, you will have approximately $ 980 left of your original $ 1,000 deposit, some of it as available cash and some remaining in your savings account. You will have paid a whopping $ 20.31 in interest (assuming the rate was 6% for the secured loan). I’m sure you’ll agree that $ 20 is a small price to pay for adding six months of good payment history to your credit report.

STEP 6: make sure the loan appears on your credit report

Once you’ve paid off the loan, get fresh copies of your credit reports to verify that your loan payment history is showing correctly. Since you selected a bank that reports regularly to the big three credit bureaus, everything should appear correctly. But mistakes do happen. If the loan is not reported correctly, ask the bank directly to correct the omission or ask the credit bureau in writing to add the credit reference to your report.

The passbook savings loan technique is a simplified version of the more complicated “Three Bank Technique.” Basically, the concept is to use the funds from the guaranteed loan from one bank to open another account at a second bank and then repeat the process for a third bank. The math is much more complicated, but the principle is the same, with the added benefit of having three simultaneous loans that add a positive payment history to your credit report. This approach costs a little more in interest expense and involves a lot more work, but it can really speed up your positive credit history.