Tactics to Improve Credit Ratings (6)
To increase credit, an American can piggyback on a parent's account, get a spouse to so-sign a credit card, open credit-friendly checking accounts, swap bad debt for good debt, and strategically time credit inquiries. More information on these tactics can be found in the attached spreadsheet.
- For a Gen Z individual on his or her way to college, it is advised that they piggyback off of their parent's credit account as the Credit Card Act of 2009 makes it difficult for them to get one on their own. Plus, piggybacking builds a credit score by building credit history. This is short-term as piggybacking gives the individual instant access to good credit and a long credit history.
- Even though a spouse's credit score doesn't usually affect the credit score of the other spouse, a spouse with a good credit score can help the spouse with a bad credit score by becoming a co-signer. This is long-term as it's a continuous process to get to the best results, even with the co-sign of the spouse with the good credit.
- Opening overdraft protection on a checking account will open a new line of credit which can improve credit, but the person will have to make sure that the bank they do business with does not do a hard inquiry before doing so. This is long-term because the ideal situation would be where there is no impact on credit when the account is open, and the person can get the added benefit of an extra credit line and good utilization ratio for as long as they use the checking account wisely.
- Credit card debt (bad debt) can be swapped with good debt (mortgages, personal loans), which could improve credit in as little as 60 days or sooner. This is short-term because of the quick amount of time where bad debt can be turned around with this swap.
- A person must be familiar with billing periods so they can be strategic in the times that hard inquiries are done. This is short-term because an inquiry is done, which can harm credit in the short term, but can ultimately help in the short term too because of the good balance that is reported to the credit bureaus.