Credit Repair Do’s and Don’ts
by: Francis Achebe
Credit Repair Tactics That Will Not Increase Your Credit Score
Fixing your credit and increasing your credit score takes patience and a clear understanding of the strategies that really make a difference. One goes along with the other, fix all the dings on your credit report and your credit score will go up. It’s like peas and carrots, tea and honey, bread and butter, you can’t have one without the other. Having said that, you need to understand what financial moves will help and what ones won’t when you are laying out your credit repair plans. Sorry to disappoint, but, there is no quick fix when it comes to fixing your credit despite what you hear from some of those fly-by-night credit repair companies. The key to increasing your credit score is a good payment history along with some time and a healthy mix of credit types. Here are some bogus beliefs that WILL NOT help you build better credit. Take a minute and get your credit report so you know what you are up against.
Closing Old Accounts Will Boost Your Score
Closing old accounts typically won’t help your score and could possibly dent it. The result can shorten your credit history and leave you with a smaller amount of available credit. The length of credit history shows how seasoned a borrower you are, so the more positive experience you have, the better. Having more available credit helps to keep your utilization rate low. The utilization rate is how much available credit a borrower uses; the lower the percentage, the better.
Opening Numerous of Accounts Will Increase Your Score
Wrong! Some consumers believe opening many accounts will be proof that they can handle credit. Actually, it has the opposite effect. A lender will wonder why in the world this person needs all of this credit and will interpret this as a sign of a high risk borrower. What the lender will see is a boatload of “hard” inquiries on your credit report which will negatively affect your credit score.
Paying Off Delinquencies Will Restore Your Credit
Well yes, but not as much as you might think. Even if you pay off the delinquencies, the late payment, charge-off, or collection account will still be shown on this account albeit with a zero balance. The trick to this is to have the creditor or collection agency agree to REMOVE the delinquency in exchange for you paying off the account.
Paying Before the Due Date Helps Your Credit Score
Paying a credit card balance in full 10 days or one day ahead of the due date will not help your credit score. However, if you pay off the balance before the “statement closing date”, your report will post a zero balance for that account which in turn will help your utilization rate, or how much credit you are using.
All Delinquencies Are the Same
If you find yourself in the precarious position of only having enough money at the end of the month to pay on a few debts, make sure you choose the ones to pay wisely. Having a 30- or 60-day late payment on a mortgage or auto loan dings your credit score more than say a late payment on a credit card. Of course, any late payments are bad, but if you are in between a rock and hard place, pay your mortgage and car loan on time if you can.
I Need to Get Rid of ALL Negatives from My Report
In a perfect world, this would be a great thing to accomplish but sometimes there are a few negatives that just will not come off. Rest assured, having a few older dings will not crash your credit score, if, you have some good credit building techniques going on with your newer accounts. Older accounts have less “weight” than newer accounts so keeping the newer ones current is very important to increasing your credit score.
Building better credit and increasing your credit score can be cloaked in mystery and myth, but keeping some simple rules of thumb in mind will keep you on the right path. Don’t think fixing your credit is going to happen overnight because it won’t and don’t believe anyone who tells you otherwise. Be consistent with a good payment history, diversify your accounts and keep your balances low. Follow these simple rules and your credit score will increase and your credit history will improve. OK, these are the myths. What about MISTAKES people make with credit repair?