Repair Your Credit and Improve Your FICO Credit Score

Repairing bad credit does not happen overnight  It takes time and effort and there is no quick way to improve your credit score.  There are a number of routes you can take in improving your credit, and beware that quick fix efforts are most likely to backfires and be wary of any advice that claims to improve your credit quickly.  The best route to take to rebuild your credit is to manage it responsibly over time.  Before your credit score will improve, you need to repair your credit history.

3 Important Steps You Can Take Right Now

  1. Check your credit report-   Request a free copy of your credit report and check it for any errors.  The data contained in your credit report is what is used to calculate your score so if there are an errors you want to be sure to resolve such discrepancies   Be sure to check that there are no late payments listed incorrectly for any of your accounts and the amounts owed for all open accounts is correct.  In the event you do find any errors, dispute them with the credit bureau and reporting agency.
  2. Setup Payment Reminders-  One of the most effective ways to improving your credit score is making your credit payments on time.  Some banks will offer payment reminders through online banking which will send you an email or text message to remind you that a payment is due.  You can also register for automatic payments through your credit and loan providers so that the payments are automatically deducted from your bank account.  However, this only will make the minimum payment on your credit cards and does not help you develop necessary money management skills.  But, if you know you are likely to forget to pay on-time  this may be a option to consider.
  3. Reduce the amount of debt you owe-  This can be difficult to actually implement but reducing the amount you owe will have benefits beyond simply improving your credit score.  This will be a satisfying achievement and give you a sense of relief.  The first step in reducing your debt is to stop using your credit cards.  Use your credit report to outline how much you owe on each account and what interest rate they are charging you and calculate your total debt.  Establish a payment plan that puts the majority of your available budget in debt payments, paying off the highest interest cards first while maintaining minimum payments on all other accounts.

Fixing Your Credit Score & Maintaining Good Credit

Payment History Tips
Your payment history contributes 35% of your credit score calculation so changes made in this category will have the greatest effect on score improvement.    However, this is difficult to do because past problems like missed or late payments are not easily repaired.

  • Pay your bills on time.  Delinquent payments, even if they are only late by a few days, and collections can have a massive negative impact on your FICO score.
  •  If you have missed payments, get current and stay current.  The longer you pay your bills on time after being late, the more your FICO score will rise.  Credit problems that are older have a less significant effect on your score, so don’t be discouraged, your past negative credit history will not count toward your score forever.  The impact of past credit problems fades as time passes and when recent payments are made on-time, your good performance pattern will show on your credit report.  Good FICO scores weigh any past detrimental credit problems against the current positive information that demonstrates that you are now managing your credit well.
  • Be aware that paying off a collection account will not remove it from your credit report.  Even if you pay off your collection agencies, it will still remain on your credit report for seven years.
  • If you have having financial difficulties, contact your creditors or a legitimate credit counselor.  This steep won’t have an immediate effect on rebuilding your credit score but if you can learn to manage your credit and pay on time, your score will gradually increase over time.  Seeking assistance from a credit counseling service will not hurt your FICO score.

Amounts Owed Tips
The amounts owed category contributes to 30% of your credit score calculation and is easier to repair than your payment history as long as you exert financial discipline and understand the following:

  • Keep balances low on credit cards and all other “revolving credit”.  Any high outstanding debt can negatively impact your credit score.
  • Pay off debt as opposed to moving it around.  The most effective way to improve your credit score in the amount owed category is to pay down your revolving (credit cards) debt.   Actually, by moving your credit around and owing the same amount but having fewer open accounts may even lower your score.
  • Don’t close unused credit cards as a short-term strategy to raise your score.
  • Don’t open a number of new credit cards that you do not need, solely to increase your available credit.  This strategy will likely backfire and result in an even lower credit score than before.

Length of Credit History Tips

  • If you have been managing credit for a short period of time, do not open several new accounts too quickly.  New accounts will lower your average account rate, which has a larger effect on your score if you don’t have a lot of other credit history.   Additionally, rapid credit account buildup can look risky if you are a new credit user.

New Credit Tips

  • Do your rate shopping for a given loan within a focused period of time.   FICO scores can distinguish between a search for a single loan and searches for many new credit lines,  partially by the length of time that inquiries occur.
  • Re-establish your credit history if you have had problems.  To re-establish your credit history to repair poor credit performance in the past, you can open new accounts.  Be sure to open accounts responsibly and pay them off on time to raise your credit score long-term.
  • It’s okay to request and check your own credit report.  Requesting your credit report and keeping current and accurate knowledge of your credit score won’t have a detrimental effect on your score as long as you order your credit report directly from the credit reporting agency or through an organization that is authorized to provide consumers with credit reports.

Types of Credit Use Tips

  • Apply for and open new accounts only as needed.  Do not open excessive accounts just in order to achieve a better credit mix.  This strategy is unlikely to raise your credit score.
  • Have credit cards but manage them responsibly.  Generally, credit cards and installment loans will rebuild your credit score if you ensure your payments are made on time.  Someone with no credit cards is typically higher risk than someone who has managed their credit cards responsibly.
  • Closing an account will not make it disappear.  A closed account will show on your credit report and may be taken into account when calculating your score.  Simply closing an account does not make it go away.
Improving your credit score has more to do with fixing errors in your credit history if they exist, and then maintaining a consistent credit history of good credit behavior and on-time payments.  Raising your credit score after you have received negative marks on your credit or building credit for the first time takes patience and discipline.  Fixing bad credit is not something that can be done overnight or in a quick-fix.  Building good credit involves proving financial responsibility and demonstrating that any poor marks on your credit report are in the past and you are now capable of managing your credit.


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