Bad Credit Repair: Tips You Should Know
The information in your credit reports at the three major credit reporting bureaus is too important to just ignore and hope for the best. You can contact the three major credit bureaus at the website annualcreditreport.com for a free copy from each of the three major credit bureaus one time per year. If you request only one of the three reports every four months then you can monitor your credit history for free.
You can dispute outdated or incorrect information in your credit report. That much should be common knowledge to every adult consumer by now. But this article will introduce you to some little-known techniques that you can use to fix some of your credit related problems and boost your credit score.
Tip #1: The address you use when applying for credit makes a difference. If you don’t use your regular street address, but instead provide a mail box number, UPS store, or similar outfit on your credit application, it is less likely you’ll be approved. That address comes up in the credit bureau systems as not being a real address.
Tip #2: It’s not enough to just remove negative information from your credit report; you must add positive accounts in order to improve your credit rating. One fast way to add a positive account is by using your savings account as collateral for a loan from your bank. Make it a small loan and when the loan gets funded put the cash in your checking account and set up an automatic bill pay so there is no chance of being late with a payment.
Tip #3: Being self-employed hurts your credit. If you are a sole proprietor, it is to your advantage to become incorporated. Lenders like stability, and employment with a company (even if it’s your own), looks better to them than someone who is self-employed. There are tax implications in doing this so better check with a good tax guy first.
Tip #4: Even if you have a good credit rating, your credit rating can still take a hit if your debt load gets too high, maybe as little as 50% of available credit. If at all possible you want to get your ratio of debt to reported available credit down to 30% or less. If you don’t have the cash to pay it down then try to raise the credit limits (available credit) on your existing accounts. The credit bureaus average across all accounts so success with even one account will help more than doing nothing at all.
Tip #5: It is better to carry a balance on credit card and installment accounts, even though you’ll be paying interest on them every month than it is to pay off the accounts and bring the balance to zero. Keep a 10% to 30% debt to credit ratio on all your accounts if possible. That demonstrates to potential new lenders that you are a solid, financial risk who can handle credit.
Tip #6: Avoid free credit report services that are popping up on the net and advertise on TV. Most free services will give you the first 30 days free, and then nail you with a hefty monitoring fee. Those TV ads have to paid for. You can get a free copy of your credit report once a year from an organization set up by the credit bureaus themselves.
Tip #7: Just one payment that goes more than 30 days overdue can ruin all your hard work. If you’ve worked hard to clean up your credit report, don’t blow it by missing another payment date. Just one “late-pay” may have a huge impact on your credit rating. As much as 100 points on your credit score for one late payment on even a small amount.
In tight credit times like these, good credit is more important than ever. The median credit score is 723 and that should be your absolute minimum goal. You can take charge of your financial affairs, and reap the rewards of lower interest rates, and even lower insurance premiums. And if you arm yourself with the right information, you can do it all yourself!
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