| Bad Credit Repair Tips |
| By Credit Federal |
Published
07/7/2007
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Credit Report
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Self help bad credit repair tips
Life is much easier when you can purchase something you need or want, even when you don't cash on hand. It's also nice not having to pay more just because you are considered a high risk by loan lenders and card issuers. You want the best service at the lowest interest rate. So how do you obtain such perks?
Here are tips for bad credit repair of your FICO score:
*Don't splurge; especially at the wrong times. The bigger your total balance as a percent of your total credit limit across all your credit cards, the lower your score will be. Most credit repair advisers agree that it's best to pay off credit card balances in full each month. But don't forget the delay factor. If; for example, you want to improve your score to increase your chance of loan approval, it can take several weeks or even a few months until your credit card balance payoff is reported to the credit bureaus. To improve your score, don't charge anything for at least 60 days before applying for a loan. That way all payments you've made to date will likely be reflected in your credit score by the time a lender requests it.
If you can't pay off your total balance in full each month, keep it under 30% of your total credit limit.
*Make credit payments on time. Late payments for loans and credit cards can severely lower your credit score. When you're 30 days past due and your balance is still unpaid, your credit score could take a 60 point drop. That could result in a much higher interest rate on loans you take out, and even an increase in the interest rate of your current loans and/or credit cards, as well as being rejected on new credit applications. Past late payments you have since paid off will have less and less of an impage on your credit score as time goes on. Past late payments that have since been resolved might result in a loss of 15-20 points.
To boost your credit score, pay bills on time and in full; or at the very least, the minimum due. Set up automatic online bill payments so you'll never be late, and/or use CreditFederal's bill payment reminder software.
*Get multiple good credit references. Your credit score won't be as high as it could be if you have just one credit account. Lenders like to see several active credit accounts, to further assure them you can responsibly manage multiple lines of debt; especially revolving debt such as credit cards, as well as installment debt such as a car loan or a mortgage.
To boost your score: Consider opening another credit card account, or taking out a personal loan or a car loan.
*Maintain long track records. Old credit accounts can give you more points than new accounts. Lenders prefer borrowers who have responsibly managed accounts for years, and award more points for creditworthiness than for a new account with a track record of only a few months of perfect management. Credit accounts less than six months could actually hurt your score. Lenders also shy from people who are on a credit splurge and are applying for numerous new accounts or loans within a short period of time. Each time you apply for new credit, your score could take a small, temporary loss. But that's not the case if a broker is shopping around on your behalf to get you the best loan. In such case, if they approach multiple lenders who all pull your credit report, that will only count as one inquiry so long as they all do so within a two-week window.
To boost your score, avoid applying on your own for a lot of loans and credit cards within a short time frame.
*Keep approved credit. This tip is often argued amongst advisors. Some think it's best to close unused accounts, as lenders may view those open lines of credit as potential debt, and a potential risk. But here, we will give the reason for keeping unused accounts open... Although it's tempting to close a credit card account when you balance transfer to a lower rate card, such action could lower your score. That's because your total balance stayed the same, but then your credit limit is reduced after closing the unused account.
If; for example, you had two credit cards, each with $4,000 of debt and a total credit limit each of $10,000, and you transferred both of those balances (total of $8,000) to a new card with a $10,000 limit, you'll have a total credit line of $22,000.00 if you keep all three cards active. If you close the two cards that you had transferred the balances from, your line of credit will be lowered to $2,000.00.
To boost your score, keep unused revolving credit accounts open after transferring debt.
*Fix credit report errors. Even if you pay all bills on time, make good income and have strong credit references, your credit report may say otherwise. Get a copy of your report, review and fix credit report errrors you may have. You don't want your credit score lowered due to someone else bad payment history. Another thing to look for and consider, is how well your spouse has been using credit in your name and paying bills for you.
To improve credit score ratings, order a free credit report once a year from each of the three major credit bureaus, and make sure they're accurate.
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