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Credit Repair – Getting More Positive Into Your Credit Report


Posted on August 20, 2010

 

When you are working to repair your credit, you need to counteract the negative impact of poor credit with more positive information. If you are recovering from a personal financial setback that has caused credit problems or if you have yet to establish a credit history for yourself, you need to pump some positive into your financial situation.

While repairing credit is not an overnight task, you can improve your credit score by large margins over a period of time if you practice consistency and follow through in your repair efforts.

Here are some ways you can incorporate positive marks into your credit score:

Apply for Secured Credit

A secured credit card works essentially like a pre-paid account. You contribute a specific amount of money to the account and the total is considered to be your credit limit. The bonus for secured credit cards is that the card companies still report this information to the credit reporting bureaus and in doing so, the information reflected is positive because the account always shows as being paid on time, even though you technically do not make monthly payments. A secured card is a great way to boost lagging scores and an effective way to establish a credit history when you are just starting out. One note of caution: be careful to only open a reasonable number of accounts or risk a credit score drop due to excessive credit inquiries and debt-to-income ratio limitations.

Clean Up What You Have

By ordering a copy of your credit reports from the three consumer credit reporting agencies (Experian, TransUnion, and Equifax), you can review your credit file and see where inaccuracies can be corrected and disputes made when erroneous information is being reported. By cleaning up mistakes and checking for fraudulent credit usage, a consumer can jump up a significant amount of points on their credit scores.

Diversify Your Credit Report

Lenders want to see a mix of credit on your report. There are many types of credit a consumer can have including revolving credit accounts such as with credit cards and installment accounts like small personal loans. You may consider approaching your bank or local credit union and request a small loan. Be sure to pay the loan on time, each and every month to boost your score and history report.

Don’t Max Your Balances

While you may pay on time without fail, if you have too much going on at once it can hurt your credit. Keep your balances on credit cards in check and never go over more than 30% of your credit limits. Maxing out all your credit accounts will produce negative results because of the debt-to-income ratio lenders consider. You want to show that you have plenty of income and your debts are not consuming all your cash every month.

Go Automatic

One of the chief factors in a good credit score is the account history of on-time payments. By meeting your financial obligations without fail each month, you are proving your creditworthiness to lenders. To help ensure you never miss a thing, technology makes it possible for you to automate your payments to creditors and reduce the risk of forgetting to pay a bill. By setting up automated payment schedules, you are also reducing the occurrence of having to pay late fees and penalties on your accounts.

There are plenty of ways to get back on track with your credit history and current score. By working to put more positives back onto your credit report, even the most damaging data can be eliminated and the lowest credit scores boosted for your overall financial improvement.

Get a Co-Signer

Ask a family member or friend to co-sign a credit card or a small loan with you. The person who co-signs with you needs to have good credit so the application will get approved. Realize that this person will have joint responsibility on the credit card account so whatever you do with this credit card will affect their credit and vice versa. So, if you go the joint application route, you need to trust the other person and they should trust you.

You don’t have to leave the account open forever, just long enough for you to rebuild your credit to the point that you can qualify for a credit card on your own. If you use your credit card responsibly and make your payments on time every month, it should only take 12 to 18 months to qualify for your own credit card.

Get a Secured Credit Card

A secured credit card is a type of credit card that requires you to make a deposit against the credit limit. These credit cards generally approve applicants regardless of their credit histories, though there are annual fees and usually higher interest rates to pay with secured credit cards. Consider it one of the costs associated with improving your credit score.

When you get a secured credit card, make sure you get some from a credit card issuer that reports to the three major credit bureaus. If your payments aren’t getting reported to the credit bureaus, then the credit card isn’t doing anything to help your credit score and the card is worthless.

Cards to Stay Away From

There are some very bad, dare we say terrible, credit cards out there that are marketed to people who have bad credit. These credit cards are extremely predatory and should be avoided at all costs. These subprime credit cards have high initial fees, high annual fees, and high interest rates. That is to say, these credit cards are extremely expensive. For example, one credit card starts out with a $300 credit limit, but charges a $75 upfront processing fee. Then, there is a $75 annual fee every year that’s added to your account whether you charge something or not. The interest rate for this particular credit card is a ridiculously high 60%. This type of credit card is a no-no.

Before you sign up for any credit card, read the credit card disclosures and find out the pricing. If the costs of that particular credit card are too high, keep looking. There are plenty of credit cards out there that don’t cost an arm and a leg.

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