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Repair Credit

Posted by: Staff Writer | May 22,2008

 How to Go About Repairing Your Credit

Credit repair is all the rage.  It seems you can’t turn around without seeing another credit repair opportunity – even if it’s just an advertisement stapled to a telephone pole.  In an age when people are facing increased difficulty, it’s important to sift through good credit repair opportunities from those credit repair schemes that will do nothing to repair a damaged credit rating.  Here we’ll look at all the ins and outs of damaged credit and what you can do to repair it.   

What Leads to a Damaged Credit Rating?

First, what leads to a bad credit rating?  Most people are aware that defaulting on bills lead to a bad credit rating.  However, this is not the only factor that affects a credit rating.  Credit longevity is as important as credit responsibility: i.e. someone who has a short credit history can have as bad a rating as someone who has defaulted on payments.  This is why it’s important for people to start establishing a credit rating early.  The easiest way to do this is with a credit card.    

In addition, all bills can affect a credit rating – not just loans such as credit cards and mortgage payments.  Utility bills, insurance, phone bills, and other sorts of payments can also have a damaging affect on a credit rating if you pay late.  Other issues, such as applying for too many loans in a short period can also affect a credit rating.  How might it look if you applied for ten credit cards in six months?  It suggests that you are financially unstable, so your credit rating will reflect it. 

How to Repair Credit

When you break it down there’s one major way to repair a credit rating: time.  Any service offering an overnight fix to your credit rating is not being upfront about what it can accomplish.  It can take years of repair a damaged credit rating.  Here are the main ways to repair credit.  

1.    Don’t cancel out old credit cards.  As mentioned, a long credit history is important, so if you cancel out an older credit card, you’ll be erasing that history from your record.
2.    Keep credit card balances below 40%.  If you’re balance is a large percentage of your credit limit, this paints you as a credit liability, so you want to keep your credit balance as low as possible.  
3.    As mentioned don’t attempt to open up a lot of accounts in a short period.  You want to keep credit checks at a minimum.  For example, if you’re buying a car and need financing, you should only submit an application with one lender or dealership.  If several dealerships run a credit check, this will affect your rating.  
4.    It should probably go without saying, but pay those bills on time.
5.    To add to #4, performed a detailed daily, weekly, and monthly budget, cutting out any unneeded expenses.  This extra money could be put towards your credit card balance, helping out the percentage mentioned in #2.  
6.    Open up a new credit card account.  This may appear contrary to logic, as it could enhance your credit difficulties.  However, opening up  new credit card account and paying it full every month (which is key) can help your credit rating.  In addition, the percentage of your credit balance to credit limit takes into account your overall limit, not just the limit on one card.  So eleveating your overall limit with a new card can help decrease the percentage that you currently owe.  
7.    Check your credit report thoroughly to see if there are any items listed on the report that are not attributed to you – such as credit opened in your name by an identity thieft or just a clerical error on the part of the credit bureau, perhaps listing a credit inquiry for someone with your same name.  Dispute these innacurate listings and have them removed from your report.  
8.    Finally, while credit cards are the easiest loan to secure, larger loans, such as a mortgage, can have a bigger and better effect on your rating – though if your credit rating is in the tank, you’ll be stuck with a higher interest rate.  

Keep in mind that some problems on your credit report can take seven years to clear up, so there are no quick solutions – despite what some schemes my advertise.  With repairing credit, slow and steady wins the race.  What this means is that if you have damaged credit, it’s important to start the credit repair process as soon as possible. 

Credit Repair Schemes

One bit of advice: the more exclamation points an advertisment has, the less it should be trusted.  Ads will say, “Erase Your Credit Rating Overnight!!!!”  This is clearly not true and normally associated with a credit repair scam.  Here are the warning signs of a repair scam:

1.    The service asks for a fee upfront.  
2.    Establishes a new credit report through an Employee Identification Number, rather than your personal Social Security Number.  This is illegimiate and illegal.  
3.    Attempts to dispute all the information on your credit report, even if it is legitimate.  

What it comes down to is if you have defaulted on bills in the past, you cannot magically erase these problems.  While there certainly can be items on your credit report that are either fraudulent or inaccurate, you cannot erase your own delinquencies.  The main way to cleear up your credit rating is to be responsible from this point forward. 

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