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 reporting agencies. Often this process can lead to a significant credit score improvement by removing derogatory items that were lowering the score.

However, to achieve excellent credit, it is not enough to simply eliminate negative entries. Because? Because the lack of a positive payment history is also an obstacle to having good credit. You must demonstrate a record of on-time payments 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 SIGNATURE

All it takes to add years of excellent credit history 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 extra cards for family members. Adding your name to one or more of your accounts 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 liable if you don’t make 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 add-on card application. That way, the card will be mailed to them, and even though 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 show up on your credit report and will typically show the original card opening date (not just the additional card application date) as well as your entire credit history. of that card! It’s like adding years of good credit to your file with the stroke of a pen.

THE SAVINGS LOAN TECHNIQUE WITH NOTEBOOK

The “Passbook Savings Loan Technique” is a great way to add a positive payment history to your credit file. It will also give you 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 under $50.

Here’s 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 are more likely to work with you and be flexible. Savings and Credit institutions and Credit Unions can also be used, provided they meet the requirements. The product you want is called “Passbook Savings Account” which is basically a simple savings account. And the type of loan you will take out is a “Savings Loan with Passbook”. 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 in a 12-month loan program. This is generally called a Passbook Savings Loan.

C. CRITICAL: The bank MUST report activity on this account 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 just for the purpose of taking out the loan.

STEP 3 – Get a Passbook Savings Loan

Go back to the bank and ask to see a loan officer. Look your best, be courteous, and explain that you want to get an $850 Passbook Savings Loan (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, less 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 previous credit history, and in most cases it won’t even be verified. 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 re-establish your credit and that good credit is very important to you now.

STEP 4 – Make your payments

Assuming an interest rate cost of 6%, your monthly payments on the $850 loan 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 keep up the loan payments. Be sure to make your payments well in advance of the due dates. Always pay EARLY to be safe in 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 of your original $1,000 deposit left, some 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 fresh copies of your credit reports to verify that the loan’s payment history is showing up correctly. Since you’ve selected a bank that regularly reports to the big three credit bureaus, everything should appear correctly. But mistakes 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 Lending Technique is a simplified version of the more complicated “Three Banks Technique.” Basically, the concept is to use the funds from a 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 concurrent 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 boost your positive credit history.