This post will be the first one of a series on how to improve your credit score. As a banker, I have the opportunity to look at several credit bureaus. In fact, I see more than a thousand a year. After several years, I had noticed some trends as of to what could influence your credit score and what not. You will probably notice that this article is basic in term of credit if you are already well aware of how credit report works. I did it on purpose in order to have everybody on the same pace for the following posts about this topic. Most people do not know that it’s their responsibility to check what lies in their credit bureau. It may seem to be nonsense, but you are fully responsible to validate the information in every credit report you may have.
Order your credit bureau
The very first step to improve your credit score is to order your credit bureau. I previously wrote a post about how to order your credit report. In addition to what you can find on this post, I would say that it worth paying to have a complete report along with a FICO/Beacon Score. I prefer Transunion credit reporting agency in regards to credit bureau. They produce complete and reliable reports on your credit behaviours. However, it would be important to ask your banker which company they use when you apply for new credit. You will then be able to look at what your bank uses to establish your credit worthiness.
Soft Hit, Hard Hit
We often hear that checking your credit score or to pull out a full report will hurt your scoring. Nothing can’t be further from the truth. The last part of your credit bureau shows all the hits you had on your credit bureau. A hit is a request by any institution to look at your personal information. There are two categories of hits.
Soft hits include when you check your credit report through a credit reporting agency, when an insurance company requests your Beacon Score in order to make a better offer (Beacon Scores are now related to a risk grid, Iâ€™ll get back to this topic another time) or when your financial institution is renewing one of your product (withdrawal limit on debit cards, credit cards renewals, lines of credit renewals, etc.). Theses hits show on your credit bureau but they do not influence your credit scoring.
All other hits are considered to be hard hits (when you apply for car financing, a new credit card or shopping for a mortgage). A hard it will affect your Beacon Score by 1 to 5 points. Unfortunately, I was not able to find precise information in regards to the variance. However the following situations are considered to count as 1 single hard hit: if you make several requests for the same type of financing (such as shopping for a mortgage through different institution) or multiple request through the same financial institution (if you open a line of credit for example, you will have a hit for the application, another for the creation of the debit card and a third one for the withdrawal limits). You must keep in mind that the hits must be done in a span of about 10 days. If you take two months to shop for a mortgage rate, you will have more than one hard hit on your credit bureau.
Omission and errors
One of the easiest ways of improving your credit score is to verify if you have any mistakes made in your credit bureau. Be very cautious about financing program for furniture or electronic, reporting on student loans and special offer on credit cards. These are the worst for mistakes. Once you are done with a debt and you want to close the account, make sure to request to your financial institution a letter confirming that your account is in good order and will be close. You will save a lot of time with credit reporting agency if you need to repair your credit bureau.
If you are looking for more information on how to read your credit bureau, I previously wrote two posts about how to order your credit bureau and how to read your credit bureau. I will continue this series on how to improve your credit score in the following weeks. Please feel free to add any comments or ask any questions in regards to this topic. Iâ€™ll take good notes of them and make further research to get the best answer possible.
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