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 all three major credit reporting agencies. Often, this process can lead to a significant improvement in your credit score by removing the derogatory items that were lowering your score.

However, to achieve excellent credit, it is not enough to simply remove negative entries. Why? Because the lack of a positive payment history is also an obstacle to having good credit. You must demonstrate a record of paying 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 FIRM

All it takes to add years of excellent 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 cause a new credit card to be issued in your name. The “catch” is that they will be the co-signers on the account, which means they are responsible if you don’t make the payments.

Of course, you never want to risk a friend or family member’s credit rating, so simply ask them to use their own address on the additional card application. That way, the card will be mailed to them, and even if it has your name on it, the card will stay 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 date the original card was opened (not just the date you applied for the additional card), as well as all of your credit history. of that card! It’s like adding years of good credit to your file with the stroke of a pen.

THE TECHNIQUE OF SAVINGS LOAN WITH PASSBOOK

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

Here is the Passbook 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 the big chains. Smaller banks are more likely to have the exact type of account you’ll need to open, and they’re more likely to work with you and be flexible. Savings and Credit Institutions and Credit Unions can also be used, as long as 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 take out 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 with NO MONTHLY FEE on balances of $500 to $1,000.

B. You must be able to borrow up to 85% of your balance on a 12-month loan program. This is usually called a Passbook Savings Loan.

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

If the banking product does not meet these requirements, then 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 solely for the purpose of taking out the loan.

STEP 3 – Get a Book Savings Loan

Go back to the bank and ask to see a loan officer. Look your best, be polite, 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 is frozen. However, each time you make a payment, you unfreeze an amount equal to your payment, minus a few dollars in interest. Be sure to ask for a loan term of 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.

You won’t be turned down for this type of loan regardless of your past credit history, and in most cases, it won’t even be checked. If you have bad credit, be sure to tell your loan officer before he or she looks at your credit history. Tell the bank representative that you are trying to rebuild your credit and that a good credit score is very important to you now.

STEP 4 – Make your payments

Assuming a cost interest rate of 6%, your monthly loan payments of $850 will be $73.16. (Remember, this is a secured loan, so the interest rate should be fairly low.) Since you have “borrowed” $850 in cash, you will use that money to maintain 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 early

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 cash on hand 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 shows up on your credit report

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

The Passbook Savings Loan Technique is a simplified version of the more complicated “Three Banks Technique”. Basically, the concept is to use the funds from one bank’s secured loan 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 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 boost your positive credit history.