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Credit Repair Drill

Credit Repair Drill

Putting your credit pieces back together

Improve Your Credit Score

Steps to Increase your Credit Score

Now that you know how your score is calculated, you can begin making changes to your current credit situation. Just remember, when it comes to buying that new car, securing a mortgage and credit cards, the higher your score, the lower the interest rate you're going to pay.

So the time and effort it takes to improve your credit score could save you hundreds of thousands of dollars over the course of your lifetime.

There are no shortcuts or secrets to Credit Repair. Rebuilding credit it takes time but considering the outrageous cost of bad credit, here are a few steps you can take on your own to improve your credit score.

Pay your bills on time every month

Sounds simple, but this is the biggest thing you can do to keep your score high and one of the best ways to build good credit or rehabilitate your credit profile, because it shows creditors that you are financially responsible.

It's important to pay your bills on time, even if money is tight. "On time" means the payment gets to the company by the day the bill is due. Once a payment is 30 days past due, creditors and lenders can report your account to the credit bureaus and this in turn can bring your FICO score down, sometimes as much as 75 points. Remember late payments can stay on your credit report for as long as 7 years.

Get caught up

If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your credit score. Delinquent payments and collections have a major negative impact on a FICO score. Do whatever is necessary to make sure your bills are paid on time.

Here are some ideas for avoiding late payments

Mark your calendar and mail your bills a few days before they're due.
Consider setting up automatic monthly payments and pay your bills automatically out of your checking account every month. Electric, gas, telephone, and insurance companies often encourage their customers to pay their bills this way. If you use automatic payments, make sure you keep track of them in your checkbook.
If you plan on going on vacation, make a plan for keeping your bills up to date. For example, schedule automatic payments from your bank account, ask a friend to pick up your mail and send you your bills so you can pay them while you are gone. You can also call your creditors before you leave town and arrange to pay your bills ahead of time.

Taking these steps will improve your credit over time. In general, creditors look for a two-year history of paying bills consistently on time to help establish good credit.

Keep your balances low relative to your credit limit

Pay off credit cards every month if you can. Do not max-out or get too close to your credit limit. Using too much of your available credit, you can hurt your credit score. Credit scores consider how close you are to being "maxed out" on credit cards. Experts advise staying within 30 percent of your available credit. For example, if you have a $1,000 spending limit on your credit card, try to keep the amount you owe below $300.

Here are some suggestions to help you pay off your Credit Cards

A high outstanding balance will affect your credit score. If paying off your credit cards every month is a difficult to do, then cut up the card so you can't use it. Or put the card away until you pay it off your balance.

Remind yourself that credit cards are loans. Before you pull out your credit card, ask yourself, Would I really take out a loan to buy this?

Charge less than the maximum amount available on your credit card. Even if you make the payments on time, creditors may still think that you are in too much debt.

Don't apply for too much credit in a short time

Only apply for the credit you need. The amount of your unused credit is an important factor in calculating your score. Your score may also drop every time you authorize a lender to run your credit, which is called a credit inquiry. Every time you apply for credit, it appears on your credit report and creditors may be concerned that you are using too much credit. This includes getting a new card so you can transfer balances, or opening a new store card account so you can get a discount. Avoid applying for credit cards just for fun, or to get a free gift or a discount on a purchase.

At the same time, don't close unused credit cards. Lenders like to see that you have been managing credit for a long time. Also closing an account does not make it disappear from your report.

Other steps you can take

Understanding Credit Check your credit scores and reports from each bureau (TransUnion, Experian and Equifax) and fix errors right away. By law, you're entitled to one free annual credit report from the three nationwide credit reporting companies annually at annualcreditreport.com.

Make sure the information in your credit report is correct. If it's not, file a dispute with the credit reporting company and directly with the company that was the source of the information. Here are ways to dispute it.

Removing negative items on your credit reports has the biggest impact on your FICO score. Generally, negative items stay on your reports for 7 years but you can utilize credit repair tactics to speed that process in most cases.


Understanding Credit
DIY Credit Repair
Negative Items

Related Content

How to order a free credit report Dealing with Credit Bureaus
How to repair bad credit yourself Profile of a Perfect Credit
How to Improve your credit score Credit & Marriage
How to dispute negative credit Know your legal rights

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How can I get a credit history if no one will approve my credit application. Here is how!

How long does negative information stay on your credit report?

Bankruptcy 10 years

Foreclosure 7 years

Lawsuits and judgments 7 years or longer

Tip of the day!

Whenever you apply for credit or a loan, by signing the application form, you are giving the creditor permission to order your credit report from a credit-reporting agency.