Know your credit score, and take steps to raise the number
Knowing your credit score is the most basic fundamental of credit repair. But it’s even more important to know what affects your credit score. And even more important than that is knowing what you can do to improve your credit score.
Your credit score is free
Thanks to financial reform, doing something about your credit score is easier than ever. Free credit report services are advertised all over the Internet. Until now, those free credit reports didn’t include your credit score. You had to pay extra for that. But part of the recently passed financial reform bill ensures that you can get a free credit report that includes your credit score once per year.
Why is your credit score so low?
When it comes to credit repair, most people don’t know how they affect their credit score. For instance, Wallet Pop reports that many people assume if they pay their bills on time, their credit score is good. The truth is, even if you always pay on time, when your credit cards are maxed out, your score is lower than it should be. When credit bureaus see borrowing to the limit, they see risky behavior. To improve your credit score, tackling excess credit card debt is your first priority.
Credit repair: pay off credit cards first
To raise your credit score, pay off credit card debt first. There are two basic types of debt. Installment debt is secured by collateral, like a car loan. Revolving debt is your credit card balances. For some people, credit card debt revolves forever, which is not good for the credit score. Since credit card balances are unsecured, credit report companies like FICO say they’re more risky than installment loans. So paying off your credit cards will do more to raise your credit score than paying off your car.
Pay off collection agencies last
Unfortunately, if you’ve been taken to collections, your credit score is already hurt. Paying the collection agency won’t change the numbers. Bankrate.com reports that by the time your debt goes to collection, your creditor has already written you off. Although paying the collection agency will end the harassment, the payment won’t erase the delinquency from your credit report. Bear in mind that a surprise call from the collection agency can result from missed payments on everything from utility bills to library fines. The key to protecting your credit score is to avoid collection in the first place.
No thanks to charge cards
To keep your credit score from dropping, keep refusing that charge card every department store tries to sell you. This is because opening and closing credit accounts can lower your credit score. Wallet Pop said FICO credit bureau research has found that opening any type of credit account is automatically seen as more credit risk. If you do get that charge card and pay it off in full, your credit score will rebound in a few months, but it won’t rise above the level it was before you bought that new outfit.
Don’t cancel your credit cards
Sometimes when it comes to credit repair, it looks like the deck is stacked against you. Especially when canceling credit cards can lower your credit score. When you cancel a card, the line of credit it carries goes away. With less credit available, your credit score goes down. Instead of canceling, just zero the credit card out and throw it in your dresser drawer. New credit card rules prohibit credit card companies from canceling cards you don’t use–which used to hurt your credit score–so you don’t have to worry about that anymore.
Use installment loans wisely
Taking out an installment loan for credit repair is risky, but it can work to pay off credit card debt with personal discipline. If you have a bunch of maxed out credit cards, the new installment loan won’t negatively impact your credit score as much as those debts. For this strategy to lower your credit score, you have to make yourself pay off the credit card debt with the installment loan, and throw the credit cards in the drawer until the installment loan is paid off.
Get professional credit repair help
Speak to a professional today and take proactive steps to repair your credit. For a FREE credit consultation, call 1-877-563-2076.