Credit Repair Information
Sometimes in life financial calamities happen. Bankruptcy, credit counseling, late bills, garnished wages, one or all of these things have left your credit profile in turmoil. Years of hard work and good payment history is gone like it never happened. In the world today, your financial profile is the one of the key factors used to determine if you are eligible for credit cards, loans, car leases and purchases, home rentals and much more. And when "life" strikes and your credit is effected, it can feel like there's no way out.
Where do you go from here? With hard work and smart choices your credit can be repaired. Many of the solutions are self-evident; pay all bills on time and so on. But there are also ways of expediting the process. Here we will offer a few suggestions that may assist you in identifying some possibilities.
Understand Your Report
To repair your standing you will first need to understand your credit report and what goes into your score. There are five factors that affect it.
Making up 35% this is a HUGE factor. It includes payments that were made late, the number of accounts with late payments and negative legal actions like bankruptcy. Paying all bills on time by their due date is essential, not just for avoiding penalties, but in keeping it off your report in the first place.
Making up 30% of your score, this includes the type of accounts, account balances, totals owed and the ratio of debt to available credit.
Credit History Length:
Making up 15% of your score this looks at the age of your oldest and youngest accounts, the average of all accounts and how often you use individual accounts.
Making up 10% of your score is where you have credit and how you got it. Certain types like secured debt (lauto and mortgage loans) is considered a better form than unsecured debt (credit cards).
Making up 10% of your score is new credit. Lots of applications can negatively affect your score.
Repairing your score begins with checking your credit report. You can request a free copy and check it thoroughly for errors. Reports will contain data that is used to calculate your score. Be sure to check and make sure there are no incorrect late payments, and that the amount owed on each open account is accurate. If anything is inaccurate you can dispute the items with the credit bureau.
Bring Past-Due Accounts Current
One of the most important aspects is your payment history. If your bad score is due to past or missed payments, the only way to fix it is to be consistent in making future payments, and to bring your payment history current.
You can do this by calling your creditors and asking for a payment plan. This will help get your payments back on track and will let the creditors know you are trying to bring your account current.
One step in repairing your credit is to get new credit. Your options may be limited, but there are a few different ways to do this.
One is a credit builder loan. This loan is short term and can be used to help reestablish credit. These loans are sometimes offered by banks and credit unions and are for a small amount. Instead of getting cash, the total is put into an interest bearing account. You are given the money as well as the interest earned AFTER the loan is paid off.
Another option is a secured credit card. With this option you put a cash deposit up front to open an account. These cards tend to have a higher interest rate and fees compared to traditional credit cards.
Ask to be an authorized user on someone else's account. This could be a parent, spouse or another individual. This route allows you to have a card with your name on it, which means the original card holders account history is transplanted into your report. This helps bump up and repair your score IF they have made timely payments and kept their balance low.
Best Practices For Maintenance
Once you have worked hard to repair your standing you will want to take appropriate steps to make sure it stays good. This can be done in a few different ways.
Keep Balances Low:
Balances on all outstanding cards should be kept low. High outstanding debt will negatively affect your score.
Pay Off Debt:
Pay debt down on cards. Don't move debt around to pay off one card. Instead work diligently to pay off the debt that you have.
Keep Accounts Open:
Once a card has been paid off, keep it open. Closing accounts will often times lower your score. By having open accounts with no debt you are showing that you can manage available credit cards responsibly. If you are afraid of reusing the cards, cut them up.
Put Bills on Auto Pay:
Once you have become current on all your bills, be sure you don't fall behind again by setting up bills on auto pay. This keeps payments on track and ensures that you will not miss a payment. If you do not want auto pay at least set up payment reminders through the companies you owe. These reminders can come via text or email.
Repairing your credit is not an easy task. It takes hard work and diligence. Once it's repaired it can be quickly undone. You have to practice good financial habits like making payments on time, staying within your budget, and avoiding lots of new debt. These habits must be consistent and regular. They will help ensure that your score consistently moves up and not back down.