• Rapid Rescore
• Experian Boost
• Lower DTC
• Debt Validation Letter
• Secured Credit Card

If your credit score is not where you want it to be, like most people you have probably wondered about the quickest and most effective ways to improve it. Here are 5 things that have worked for my past clients when I was working in financial consulting.

1. Rapid Rescore

Rapid rescoring is when a lender pays to have certain credit bureaus (such as Experian, Equifax, or Transunion) to rescore your credit earlier than they normally refresh credit reports for consumers. Credit bureaus often report fresh credit data around the 22nd-24th of each month, but if a mortgage lender notices that you could potentially improve your score in a significant way, say by paying off a few credit cards or by disputing or correctly some incorrect items, they will potentially pay those bureaus to update your report before the regularly scheduled time. This can be a great way to get approved for a loan or to improve your loan pricing (since credit score is often a big factor in how a loan is priced).

2. Experian Boost

Experian offers a service to consumers where they additional monthly payment liabilities onto your report, usually to show an on time payment history. Things like water, gas, electric, and cell phone bills are often added to the report.

3. Lower Your Debt To Credit Ratio (DTC)

Your “Debt To Credit” ratio is the ratio between how much credit you have left on a certain open credit line (such as a credit card) and how much you have “used up”. Think of an empty one gallon jug. If the jug is filled halfway, then it is at 50% utilization. For example, if you have a credit card with a $1,000 limit on it, and you currently hold a $500 balance, your debt to credit ratio (DTC) is 50%. Now, what does this have to do with your credit score? Good question!

Approximately 30% of your credit score is based off of your “utilization” (aka – your DTC, or debt to credit ratio). When your DTC ratio goes above 30% (i.e. – the jug is more than 30% filled) this can negatively impact your score since lenders might view you as having too much debt and not paying it down fast enough. So the trick is to pay down your unsecured credit lines to below 30%.

One option is called the “snowball method”. Pay down your smallest credit card (to less than 30% utilization) and then use that savings to pay down the next smallest card – and so on until all cards are at a less than 30% utilization. This is very likely to improve your score faster than just making minimum payments and keeping high balances.

4. Debt Validation Letter

If you have any third party collections accounts on your credit they are likely negatively impacting your score. This is because each month, when the collector reports your apparent delinquency to the 3 credit bureaus, those companies then report yet another late payment on your report (furthering the score decline). This can then make it even harder to improve your score since it is being “dinged” every month by that creditor.

Fortunately, there is a lesser known tool for getting those collections items removed from your report. It’s called a Debt Validation Letter (aka – a Dispute Letter – search Google for templates). Essentially, a Debt Validation/Dispute Letter is a letter that you send to any 3rd party collector who is attempting to collect a debt from you, and for which you are disputing that debt (NOTE: collectors can also send this letter to you, asking you to confirm or deny your owing of the debt). If a collector sends you this letter, you must respond to it within 30 days of receiving it in order to be able to attempt to invalidate the debt.

Generally though, from the perspective of you (the one who allegedly owes the debt) the intention is to send the collector a letter which disputes the validity of the debt while simultaneously challenging the collector to produce the original documentation of the debt (showing that you actually owe it). Make sure to include all relevant information in the letter before sending it (full name, address, account number, debt amount, etc). In many cases (if not most cases) 3rd party collectors will not able to produce these documents, meaning they will not be able to demonstrate you actually owe the debt. If this is the case, the collector has 90 days to stop reporting it to any credit agencies. It would then be removed from your report(s) and you are well on your way to having a better score.

5. Secured Credit Card

If, for one reason or another, you don’t happen to have a credit card, or if you are not able to get one from traditional banks (through typical means), a secured credit card might help you build credit. Many banks offers them and they are typically easier to get than regular credit cards. This type of card is backed by cash deposits made by you to the issuing bank who gave you the card. The deposit acts as collateral which provides the card issuer with security in the event that you are not able to make the payments. Many people who are just starting to build credit (or rebuilding credit) might benefit from a secured card. However, always make sure to use credit responsibly by keeping your balances below 30% utilization.

Note: I am not a CPA, attorney, or credit professional. The above are for information purposes only. Each person’s situation is unique. Please consult one of those types of professionals before making any decisions regarding legal, credit, or tax matters.