An effective method to improve your credit score is to have an open unsecured mastercard or visa. This card should carry a monthly balance of about 10% of your credit limit.
If you have an available credit line of $2,000 then you want to keep your monthly balance at $200. This will show the credit bureaus two positive things:
1. You use credit.
2. Your ratio of available credit to debt is good.
This second factor is very important to the credit bureaus when calculating your score. This is a way you can show that you do have available unused credit.
Your score will increase just by showing the credit bureaus that you have credit that is not being used. You will receive the most benefit if this is an unsecured revolving line of credit.
Another tip is if your credit is low and you have a friend or relative with a good credit score. Then ask this friend or relative to add you as an authorized user to their credit card account.
This is called piggyback credit. There have been policy changes to discredit authorized users from receiving the benefits on the credit report.
However it is expected to take up to 8 years before this policy change will take effect. Thus you can still receive benefit from being added as an authorized user.
You will have all the information from this credit card account report on your credit too. If the account goes delinquent it can hurt your score, just like it can help your score. So choose your friend or relative carefully.
It is very easy to be added as an authorized user. The account holder calls the credit card issuer and says they want to add you as an authorized user. It can all be done over the phone.
The credit card issuer then sends a copy of the credit card to your home with your name on it. I suggest returning this copy of the credit card to the account holder.
All the details on the account will then be reported on your credit and the account holders' credit. This is an opportunity for your credit to reflect on time payments and available credit.
It is in the works to discount this method as a way to build credit. However right now it works and it's very cheap and easy.
