How to Repair Credit and Improve FICO Scores

May 28, 2015

How to Repair Credit and Improve FICO Scores

While others may claim that they have the quick fix to repair and improve credit scores, then think again. Credit scores are built over time and there is no quick fix to it, otherwise it would backfire and what is worse – it could mean for you to wait longer than expected.

Repairing credit and improving FICO score is important especially when you plan to invest or purchase a property in the near future. Here are some tips on how rebuild your credit to get approved for a mortgage and perhaps, get a better deal.

1. Check your credit report – as discussed from previous article, requesting for a credit report can be done annually. It is best to obtain your credit report so that you dispute any discrepancies such as no late payments listed incorrectly on your accounts and the amounts owed for each open accounts are correct. However, if there are any discrepancies, no need to fret because you can file a dispute with the credit bureau.

2. Setup Payment Reminders – with our busy lives, we seldom forget our payment due date but making payments for credit on time is one of the biggest contributing factors to your credit score. You can setup automatic direct debit to your account so that you can never miss any payments. Some banks also offer payment reminders through email or text messages so you can also setup that you can get reminders that your payment is due on the said date.

3. Reduce your Debt Amount – Reducing the amount of debt you owe is one great contributing factor and achievement that you can do to your credit score. The first thing that you need to do is to stop using your credit cards. You can create a payment plan wherein you make most of your budget to pay for accounts towards the highest interest cards first and maintaining minimum payments to your other accounts.

Payment history contributes greatly on how your FICO score is calculated. You can be able to amend and repair your payment history through the following:

· Pay your bills on time - even a few days late, delinquent payments and collections can have a major negative impact to your FICO scores

· If you have missed payments, get current and stay current

· Paying off a collection will stay on your report for seven years

· Seek help from legitimate credit counselor if you are having trouble making ends meet, while this may not rebuild your credit score immediately but taking the first few steps to manage your finances and pay your credit on time will help to increase your credit over time.

· Keep a low balance on credit cards and other revolving credit as high outstanding debt can affect your credit score

· Closing unused credit cards as a short-term strategy will not make any effect on increasing your credit score

· Don’t open a number of credit cards that you don’t need to use, instead increase your available credit

Other tips:

Apply for and open new credit accounts only as needed – if you feel that opening a new credit account would make your credit score have a bit of a mix, then you are thinking wrong. It probably won’t raise your credit score.

Have credit cards – just manage them responsibly – If you do not have a credit card will tend to become a higher risk with credit. You can have credit cards and other loans such as installment loans as this will help to rebuild your credit score, just that you would have to know how to manage them responsibly by paying on time and avoiding collection, etc.

Closing the account won’t make your credit score go away – Closing an account won’t mean that the credit bureau won’t list on your record. It will show up on your credit report, instead of closing, it is best to manage and work on rebuilding your credit score for that account.

While this is easier said than done, rebuilding your credit score helps you to manage your finances as well as provide you with the convenience when you think that the time has come to invest in a property.

Source: http://www.myfico.com/crediteducation/improveyourscore.aspx