2million - My Journey to Financial Freedom

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Monday, October 31, 2005

Action Plan to Improve Credit Score

I have recently realized that my credit score is lower than I anticipated as a result of taking advantage of the 0% balance transfer offers. I am under the impression that as long as I keep my score at or above the 710-720 range then I should be in good shape. Anything above this doesn't get you much so I felt I was using my credit score flexibility to take advantage of the 0% balance transfer offers to earn extra cash.

Since my score was estimated at 687, I realized I need to take some steps to shore up my score to get it back in my target range. The 1st thing I did was google for suggestions on improving my credit score:
-five ways to improve credit score - this article gave me a better idea of the composition of the credit score (never had to worry about it till now)
-tips for boosting credit score - this article confirmed my impression that 710-720 was a good target range and highlights the impact if I wanted to purchase another home in the near future. I also liked the credit score simulator - it was right on the money for me.

So based on this I know I can improve a couple things to get me that extra 20 points or so that will put be back into my minimum target range. The easy thing to do would be to just pay off the 0% balance transfers, but then I am losing out on all that free money - I am too much of a tight wad to do that. I'm looking for the minimum damage to the free money while getting my credit score back where it should be.

So the obvious things are:
-pay off my outstanding balances on the 0% balance transfer offers
-bump up my credit limit on the cards to reduce the % of limit borrowed
-pay down balances to reduce the % of limit borrowed
-close new credit cards to raise my average age of credit
-stop applying for anything that results in a credit inquiry

I have decided that the best things would be to:
-pay off 2/4 balance transfers that are expiring soon anyway
-request credit limit increases on remaining 2 balance transfers (as long as no credit inquiry is involved)
-pay down the remaining 2 balance transfer to < 75% of limit borrowed


Based on this I have devised a specific action plan:
-request credit limit increase from BofA card
-consolidate my 2 Citi cards
-pay of GM card balance transfer
-immediate pay down the HSBC credit card to below 75% limit
-pay off HSBC credit card in the next 2 weeks
Then it looks like the next steps would be to reduce the percent borrowed to below 75% on both the Citi and BofA cards - I would not prefer to do this as I will lose out on some of the free money I was banking on, but I think its critical to get my credit score back up to the 710-720 range.

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