Simple Credit Improvement Techniques

Few consumers understand that changing the date their credit card bill is due each month could save them hundreds of thousands of dollars.  Yeah, you read that correctly…hundreds of thousands!

Case Study

A client recently attempted to refinance their home loan only to be given the dreadful news that their credit scores were not good enough to qualify. When they contacted my firm, Precision Credit Group, they were confused by their low score and desperate for answers.  They had a flawless credit report with perfect payment history.  Never a late payment, no bankruptcy, no collections.  So you ask, “Why then was their mortgage FICO score only 678?”  Great question.  740 is commonly the score threshold for the “premium” rate offering.  They were 62 points shy and ticked off.  Rightfully so.  Rather than being eligible for a rate of 3.75% they were now staring at 4.5%, almost a full point difference.  Oh, and the added kicker – They were unable to drop their PMI (Mortgage Insurance) of $365 per month with their current 678 score.

Result

When you total up the $115 monthly difference in the ‘Principle and Interest’ payment with the $365 PMI you arrive at $480.00 per month.  Ok, $480.00 a month is a lot of money but wait until you see what happens when you multiply that out over 30 years.  $480/month equates to $5760.00 per year.  Yikes.  Now, take that and multiply it by 30 years and you come up with – Are you sitting down?  $172,800.00!!!  As previously mentioned…hundreds of thousands.

Don’t worry, there is a happy ending to this story.  So why the 678 score?  Well, first off, they had a credit card they were using regularly for living expenses and paying off in full every month.  Good and responsible usage, right?  In theory, yes, but wait…

Debt Lessons

Here is the lesson of this article.  ANYONE that uses a credit card can benefit from it.  Creditors, such as; credit card companies, government agencies, credit unions, student loan servicers, lending institutions, etc., report data in a “batch”, one time monthly.  For instance, if I have a Capital One credit card along with several million other consumers, our information gets sent to Experian, Equifax, and Transunion at the same time.  This information would include our credit limit, balance, whether we paid on time, etc.  Let’s say that date in which all data gets sent to the bureaus happens to be the 18th of the month.  Following me so far?  Good.  Your credit card bill due date is established based on when you opened that credit card.  Still with me?  Great!

Now, remember, my client used their card extremely responsibly, running the balance up to near their $3,000 limit and then religiously paying that full balance on or before their due date. The problem?  Their bill was due on the 20th of each month and that is when their payment gets posted.  Unfortunately, the credit bureaus received notice of their $2,931 balance on the 18th, 2 days prior to payment being received. Important side note:  Ideally, you want to keep your credit balance below 30% of the limit.  For instance, a balance below $300 on a card with a limit of $1,000 would be ideal.  $2,931 balance on a $3,000 limit card is well over the ideal ratio of utilization.

So what is the solution?

I can not stress the importance of taking a few minutes and picking up the phone to take care of this.  Regardless of whether you are looking to purchase a home.  Bank use credit to determine insurance premiums, employment eligibility, careers requiring a surety bond, auto loan interest and on and on.

Call the toll-free number on the back of your card.  Do it NOW.  When they pick up, ask, “I am aware that you may not be able to assist with my request but could you please connect me with someone who could tell me when you report my balance and payment history to Experian, Equifax, and Transunion?”  With this information, request the following, “Please change my due date to the “Xth” of every month” (2 days prior to date you found out they report).

Our client made this simple 5-minute phone call and their score went from 678 to 742.  Not to be redundant but, I mean come on, $172,800.00 savings! Bingo.  Mortgage lender got a commission check for $3,672.00 on this loan too! BOOM.

I personally implemented this trick and my score went from 734 to 791.

Good luck and remember to be relentless in the pursuit of your dreams!  Think BIG.