HOW TO REPAIR YOUR CREDIT SCORE

If your credit needs help like millions of americans there are some steps you can take to get on the right track to repairing it.  I hope you will find these tips useful. 

1. PAY ALL OF YOUR PAST DUE ACCOUNTS

I can hear you saying this is obvious, but understand that credit scoring software severely penalizes you for having accounts with a past due balances. By making sure all of your accounts are current, and paying the amount that shows as being past due on the credit report can increase your credit score by a significant amount.

2. “GET RID” OF YOUR LATE PAYMENT HISTORY

Start contacting all of your creditors that have reported late payments on your credit and request a good faith adjustment.  This actually removes the record of late payments reported on your account. Be persistent but kind and polite, if they refuse to remove the late payments at first, remind them that you have been a good customer that would deeply appreciate their help. Call several times if you need to and ask for supervisors…persistence and politeness pay off in this scenario.

3. REQUEST TO HAVE YORU CREDIT LIMITS INCREASED

This one blows many people away.  Contrary to popular belief, having low credit limits on a credit card can actually hurt your credit score. Having low available credit limits affects your “actual debt to available credit ratio”. For example, if you owe a total card debt of $10,000 and your total credit available is $20,000, you are only using 50% of your total credit available. But if you have card debt of $10,000 and your total credit available is $15,000, you change your ratio to 66% of your available credit being used. The lower the percentage of debt to available credit the better, as it shows you are able to handle having credit available without running it up to the max.  I have used this myself and I can tell you that it makes sense and works.  Many that have credit cards with high limits want to use them.  Discipline yourself to not abuse these cards and use them for your benefit.

4. BECOME AN “AUTHORIZED USER” ON SOMEONE ELSE’S CARD

If you have a short and limited credit history, you can ask someone to add you to their credit card account as a joint account holder or as an “authorized user”.   When added, the primary account holder’s credit card will appear on your credit report. Credit scoring software will treat the added account as though it is your account and you will benefit from the low balance and the long payment history for that account. It is important to remember that being an authorized user is helpful for your credit score only if (1) the person is carrying debt below 10% of the credit limit on that card and (2) has had good payment history on the card for seven years or longer…and the longer the history, the better. Being an authorized user is potentially detrimental to your credit score if the person giving you the card either maxes out the credit or pays late, since this would report on your credit report too, so be careful who allows you to become an “authorized user”.

5. MAKE SURE NOT TO CLOSE YOUR OLD CREDIT CARDS, KEEP THEM ACTIVE

As much as 15% of your credit score is determined by the age of the credit file. Therefore, even if your old credit cards have horrible interest rates, closing those cards will decrease the average length of time you’ve had credit…as well as increase your “debt to available credit ratio” as discussed in point 3. Use the old card at least once every six months to avoid the account rating to change to “Inactive” which would not help you at all. By keeping the card active by simply pumping gas or purchasing groceries every few months, then paying the balance down you are helping your crdit score. An inactive account is ignored by Fair Isaac’s credit scoring software, so you will not get the benefit of the positive payment history and low balance that card may have had in the past.

6. WHEN USING CREDIT CARDS

When purchasing an item that comes with an interum “same as cash” offer, make sure that your credit line is open for a higher amount than the cost of the item.  If your new account is opened for the exact cost of your purchase, the credit reporting agency reads this as a new account opened and then immediately taken to the maximum credit limit.  For example if an item costs $1,000.00, you should request that your credit line be opened with a high credit limit of $2,000.00   Again, what you are doing here is increasing the amount of available credit you have available.

7. CHECK YOUR CREDT PERIODICALLY

You service your care regulary and due annual maintenance on your home as well.  It is imperative that you “checkup” on your credit as well.  The reason for this is that the world is not perfect.  There are errors made by credit reporting agencies because a combination of humans and machines cannot be perfect.  There is an easy way to check your credit through a reliable and safe site called Annual Credit Report. This company reports from the 3 major reporting agencies of Experian, Equifax and Trans Union.  Work with this agencies to correct any errors on your report.  Again, be dilegent but kind.

8. MAKE SURE YOU SEND EVERYTHING REGISTERED OR CERTIFIED MAIL

When you report errors in your credit report to any of the agencies make sure you comunicate via registered or certified mail.  By doing this you have a record of what took place and who you spoke to.  Employees change at large companies all the time. Also, what one person told you may not be what another one tells you.  Keeping records allows you to refer to them if an issue ever arises.

*Your credit rating stays with you all the time and can dictate what you can and cannot do in your financial world.  No matter what has happened to you in the past there are ways you can turn your credit around and headed in the right direction.  Make sure and contact your financial adviser or mortgage lender for any additional questions you may have.