You may have heard the rumor about bad credit. The rumor is that bad credit is hard to repair. That’s not true. It’s actually easy to repair bad credit. It doesn’t take years, but some months to achieve a higher score. The following is information on how to repair credit. Some credit repair companies provide free credit repair services.
Review Your Three Credit Reports
The first step in repairing your credit is to obtain your credit reports. You have three of them. Each may have different information on them regarding your credit history. TransUnion, Eperian and Equifax are the credit bureaus that keep track of your credit history.
Dispute the Negative Marks on Your Credit Reports
Negative reports are things like late payments, accounts in collections and judgments. These are things that will lower your credit score. You can use a website that keeps track of your credit history to dispute your negative marks. If you don’t want to sign up for those services, you can dispute the negative marks via the three credit bureaus.
Your credit score relies heavily on the ratio of you available to credit to the amount of credit used. For example, you have 1,500 of credit when all of your credit cards are added together. However, you only have a total of 100 in available credit spread across those cards. This will negatively impact your score.
Work on Your Credit Utilization Factor
To increase your score, you need to use 30 percent or less of your total credit. One way to do this is to pay down your current credit balances. If you can’t afford to pay down your balances, increase them! This means you add to your credit limit on one or two credit cards. This works particularly well with secured credit cards. For example, if you have a $2,000 credit limit on a credit card and you increase the limit by a $1,000, you instantly improve your credit ratio.
Obtain a New Line of Credit
Maybe you don’t have a credit card. The step in repairing your credit is to open a new line of credit. The easiest option is a secured credit card. A secured credit card requires you to pay a deposit to obtain the card. The deposit is usually the amount of your credit limit.
You may be required to pay a fee to open the account. However, most of the credit card companies report your payments to all three credit bureaus. This will help you repay your credit score.
Pay Your Bills on Time
One late payment can decrease your credit score. Thus, it’s important to do everything you can to always pay each bill before or when it’s due. This will keep your credit score increasing. It’s understandable that you may not have the money to pay all your bills in any particular month.
If this does occur, choose the right bills to pay. For example, your credit card provider and mortgage lender will report all late payments to each credit bureau. However, your cell phone provider and utility company typically won’t.
You may not know this, but the age of your accounts is factored into your credit score. The longer you have a credit card or any type of account, the more responsible you are in having credit. That’s why it is important to keep all your credit cards and other lines of credit open if you don’t use them. When you close an “old” credit card, it decreases your credit score for a short time.
Make Sure You Keep Your Old Credit Cards
Poor Credit Repair is Possible
Repairing your poor credit history is possible. In fact, repairing your credit doesn’t take years or decades. It can take a few months. You just have to know what to do. Remember, credit repair is critical to saving money on interests and fees on different types of credit such as credit cards, loans and insurance. In addition, repairing your credit gives you the option to obtain more credit and use it wisely.
So, if you currently have accounts that are past due, but not charged-off, pay them quickly. You never want to see the term “charge-off” on your credit history. It means that you have missed payments for 180 days or more. This means contacting the creditor. Most are willing to waive some late penalties and fees. They may be willing to “re-age” your account. To “re-age” an account means that your account looks current instead of delinquent.
With a little hard work and persistence, you'll have good credit in no time.