Repair Bad Credit

Repair Bad Credit - How to repair bad credit

Do you want to repair bad credit? If the answer is yes, then the information here is exactly what you need.

Originally developed by Fair Isaac Corporation, credit score is represented by a number between 300 and 850. The median American average credit score is 725. Credit scores of 600 and below represent "bad" credit. 720 and above is considered to be good credit. Credit scores in excess of 750 are considered to be excellent. To repair bad credit you need to raise your credit score to 720 or more.

While Fair Isaac Inc. will not reveal the exact algorithm used to calculate a credit score, the company has provided some details that give us insight on how to repair bad credit. The makeup and weighting of each component in a credit score is as follows: punctuality of previous payment history - 35%, the ratio of current debt to current available credit - 30%, length of credit accounts and credit history - 15%, types of credit accounts used - 10%, recent requests of credit history and recently obtained credit - 10%.

The first step to repairing bad credit is to actually find out what your credit report says, as well as the information in your credit report (both good and bad) that is used to determine your credit score. While some sites will charge you up to $50 for this information, there is one site that will provide it for free. Click here to get a FREE Credit Score and Credit Report.

Repair Bad Credit

Once you have your credit score and credit report information, you'll need to make changes. However, improvement takes time. Don't expect to go from bad credit of 550 to good credit of 720 in a couple of weeks. If you've made multiple late payments in the past, one payment on time isn't going to overcome all the previous bad credit history. However, the more you implement the following steps, the more your credit score will improve over time. You'll eventually repair your bad credit and be left with a good credit report.

Here are 10 steps to repair bad credit. Remember to bookmark this page so you can refer back to it often to check your progress as well as use all the helpful resources on our various resource pages. For the most recent credit score information and advice, join our free newsletter.

10 Steps to Repair Bad Credit

1. Pay your bills on time.
The largest component of your credit score is your payment history. As such, the most important step to repair bad credit is to pay your bills on time.

2. Have the credit reporting agencies remove incorrect information.
Obviously, if there is incorrect information in your credit report that is helping your credit score, don't ask the credit reporting agency to remove it. However, very rarely is incorrect information beneficial to you. Periodically check your credit report
to verify accuracy of content (click here to get a FREE Credit Report and Credit Score.) If there is incorrect information
that is giving you bad credit, contact the credit reporting agency and have it removed. If you are not successful at removing the negative items, you may want to hire a specialist. Let a Law Firm Remove your Negative Items from your Credit Report. The lawyers at Lexington Law specialize in doing just that.

3. Don't apply for credit too often.
Multiple credit inquiries in a short period of time will lower your credit score, as will new credit. Remember this point
when you are out shopping and the department store clerk offers a $10.00 discount for applying for a new store credit card.
The discount seems tempting, and you may want the new card, but don't do this too often as it will lower your credit score.
Try to keep your new credit inquiries to 3 to 4 times per year. If you've been a real search hound looking for new credit in the past, and have constantly applied for every credit offer that you found, this will help repair your credit.

4. Keep your credit card balances low.
Keeping all of your credit card balances below the 50% threshold of available credit will help repair your credit score. Keeping
all of those balances below the 25% threshold will repair your credit even more. If you have an upcoming large
loan request, financing a new home purchase for instance, please see the next step for a quick solution to this problem.
You should take action at least 60 days in advance of the loan request to allow time for the information to get reported.
Don't try to repair your bad credit 3 or 4 days before you apply for a big loan, as this will not allow time for results.

Repairing Bad Credit

5. Ask for an increase in your available credit lines.
One of the determining factors used to compute your credit score is the ratio of outstanding credit to available credit.
The lower this ratio is, the more it will help repair your credit score. For this reason, you should ask the providers
of your current credit cards to raise your credit limit on each card. Be careful, however, to only ask those companies that
will grant your request without running a new credit report on you. Many credit card companies will automatically grant a
request to increase your credit limit every 6 months provided there were no late payments in the preceding 6 month period.
Remember, though, frequent credit inquiries will lower your credit score, so ask first if a request for a higher credit limit will
require a new credit check.

6. Establish long-term accounts.
Roughly 10% of the factors that are used to determine your credit score relate to the length of time you've had your
accounts. It is quite common for people to hop from credit card company to credit card company constantly seeking to
take advantage of a low introductory interest rate. Again, this makes sense from a financial point of view, but it can
lead to a lower credit score. To repair your credit, your accounts should be open and active for a longer period of time. Multiple new accounts lower your score, whereas a stable number of credit accounts that have been used for years upon years will significantly repair your credit score.

7. Pay more than the minimum monthly payments.
If you are just making the minimum payments on your credit accounts, how likely is it that you have the financial capacity to
increase your debt load with a new loan? Alternatively, if you are making more than the minimum payments, isn't
that de facto evidence that there are extra funds in your budget? One of the surest signs that a borrower has
reached the limit of her debt load capacity is a pattern of merely paying the absolute minimum due. Double up on your
payments to repair your credit.

8. Don't have any credit cards maxed out.
One item that will really hurt your credit score is using all of your available credit. If you want a good credit score, you
simply must not use all of the available credit on any of your credit cards. Even worse
than reaching your credit limit on any card is actually going over your limit. Not only will you likely incur overlimit
fees, you will really lower your credit score significantly. Keep those balances low to repair your credit.

9. Have a balanced mix of different credit types.
While this step is not going to be responsible for huge repairs in your credit score, it will help it nonetheless.
If you have 10 credit accounts on your credit report, it is better to have several different types of credit such as a
home mortgage, an auto loan, and a few department store cards and a VISA and MasterCard. You would score
higher with this balanced mix of credit types than if all 10 accounts were credit accounts at various department
stores. Having several consumer finance company credit accounts will negatively effect your credit score.

10. Borrow great credit from a relative.
You may be wondering how it is possible to borrow credit from another person. This is easy to do and is especially
useful to young adults who have yet to establish credit (although anyone can benefit from this technique regardless
of age). If you have a relative or close friend with excellent credit history, have them add you to one of their credit
card accounts. Ideally, they should add you to an account that they have used for years, has a high credit limit, low
or no balance, and has a perfect payment history with not one late payment. When you are added on this account,
the payment history of this account is also recorded on your credit report because you share the account. Presto!
You now have a great credit reference on your account. This is perfectly legal and can be used to immediately repair
your credit score.

Please visit our Home Page for more information on getting an even higher credit score.

Have a low credit score? Looking for a bad credit loan?

Here is the contact information for the 3 credit reporting agencies:

Equifax: 1-800-525-6285, www.equifax.com, P.O Box 740241, Atlanta, GA 30374-0241

Experian: 1-888-EXPERIAN (397-3742), www.experian.com, P.O Box 9532, Allen, TX 75013

TransUnion: 1-800-680-7289, www.transunion.com, Fraud Victim Assistance Division, P.O Box 6790, Fullerton, CA 92834-6790

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