Credit repair involves rebuilding your FICO score. You may need to repair your credit from a bankruptcy or foreclosure, which can stay on your credit report for up to 10 years. You may need to repair a credit history riddled with late payments. Regardless of your situation, credit repair can take time and effort.
Talk to your Creditors
If you are still a customer of your credit-card company, the first step in credit repair might be to talk to creditors. While creditors usually will not remove a record of debt settlement or default, they may be willing to remove late payments from your record if you have been paying on time recently. This can help your payment history, which makes up 35 percent of your score. Creditors may also be willing to raise your credit line if you are being responsible with debt now. If they are willing to do this without checking your credit, based on your relationship with them as a customer, it can improve your credit score by lowering your debt-to-credit ratio (the ratio that looks at how much of your available credit you actually use). Your debt-to-credit ratio makes up 30 percent of your score. If you are not comfortable talking to your creditors, or your creditors won't work with you, you may wish to get help from a not-for-profit (503 certified) credit-counseling agency. Make sure any credit counselor you work with is accredited by the National Association of Credit Counselors and/or another third-party accrediting body, and make sure you understand any fees the credit counselors will charge you. Credit counseling agencies, when responsible and legitimate companies, have experience negotiating with creditors and may be able to help you remove negative information from your credit report. However, be wary of any company that promises to remove negative information, as there are no guarantees.
Start Using Credit Responsibly
If you do not have a credit card due to your bad credit, obtain one. You may have to obtain a secured credit card, which means that you pay money upfront to "secure" the debt. Obtain only one new credit card: Opening too many cards can result in too many requests to see your credit report (inquiries), which makes up 10 percent of your score. If you already have a credit card, begin to use it. Make small purchases, and pay the balance in full at the end of each month. This can help you build a record of on-time payments, which makes up 35 percent of your score. You do not need to carry a balance to build credit--in fact, it is better not to carry a balance so your debt-to-credit ratio will be low.
Other Tips
If you are still carrying debt, pay it down or pay it off. This will help your debt-to-credit ratio. If you have paid off all your debt and are now using credit responsibly, the best thing you can do is wait. Over time, your credit score will improve with continued responsible behavior. Check your credit information periodically at Free Annual Credit Reports (it is free to pull one credit report each year from each of the three major credit bureaus), and check your credit score for free at Credit Karma daily to monitor improvements in your score. Make sure you do not start incurring new debt and using credit irresponsibly. Set and stick to a budget, and build an emergency fund so you can avoid using credit cards for emergencies. Finally, if you have a friend or family member with good credit, you may want to ask them to allow you to be an authorized signer on one of their accounts. This means that they add your name to a credit card they have. No credit check is performed on you, but the card shows up on your credit report. It can help increase the age of your accounts if an old account is added to your report. The average age of credit accounts makes up 15 percent of your score. It can also help improve your payment history if the new account has a history of on-time payments. Finally, if the new card has a low balance with a high credit line, this can affect your overall debt-to-credit ratio.
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