How Do I Repair My Credit Rating?

The secret to bad credit rating repair.

If, like many of us, you have run into a few problems keeping up with your credit payments and have now amassed a few black marks on your credit report and hurt your credit score, then you will need to take some action to repair your credit rating.

Before doing anything else though it is important to understand just how your FICO credit score is calculated because, if you are aware of the elements which go into compiling your score, you will then know where to focus your efforts. So, if you haven't already done so, take a moment to read our page on understanding your credit report score and then come back here.

Time is a great healer and this is certainly true when it comes to your credit record. In simple terms, items on your credit report are time limited and any item which is older than 7 years will be removed from your record. This is important because it is going to take time to repair your credit record and, while there are some things which you are able to repair quite quickly, most people will find that it is going to take a year or more to get their credit score back up to an acceptable level. This means that if you have an item on your record which has already been there for say 6 years you can simply forget about it because, by the time your corrective efforts are beginning to take effect, this item will have been removed from your record.

Having said this, repairing your credit rating means doing two things. First, you need to make sure that any action you take in the future is going to have a positive effect on your record and second, you need to look at the existing items on your record and see what action if any you can take to improve the effect which they are having on your score.

More than one third of your credit score is derived from your payment history and so this means that you will need to take steps to ensure that any future payments are met on time as late payment will drive your score down. If you already have bills which are overdue then these need to be brought up to date as soon as possible. Talk to your lenders and negotiate with them to get your payments back into order as quickly as you can and, at the same time, negotiate with them to get the best possible annotation to your credit record. This is a slightly complex area which is worthy of detailed consideration and so has been covered in a separate article entitled "How To Repair Your Credit Report History".

The second most important element of your credit score is derived from the amount of money you owe. One of the most important things you can do here to help your score is to keep any debt which you have on credit cards down to a minimum. People these days tend to have several credit cards and run their balances up to the maximum and this will hurt your credit score. People also tend to juggle their debt simply shifting it from one account to another and this again does not help. The only answer here is to pay down your debt and allow yourself some breathing space on any revolving credit accounts such as credit cards.

Another important point when it comes to the total amount you owe is not to open new accounts if you do not need them and not to close accounts which have a zero balance and which you no longer use. Zero balance accounts can actually help your credit score.

Together your payment history and the amount of money you owe account for more than two thirds of your credit score and so they are both areas on which you need to concentrate your attention. The remaining areas of your credit score made up from the length of your credit history, the forms of credit you have and any new credit agreements are less important but are areas which you should not neglect.

Here are a few things to consider as far as these areas are concerned when it comes to establishing a good credit score:

1. Think carefully about opening new accounts and resist the temptation to do so unless the account is really necessary. Opening too many accounts too quickly, especially if you have only a short credit history, could ring alarm bells and raise questions about whether or not you will be able to manage so much credit.



2. Do not initiate credit enquiries unless you need to do so. Your record will show applications for credit and too many enquiries coming in too quickly will again raise alarm bells and questions about why you are trying to raise multiple lines of credit in such a short space of time. One note here is that the credit scoring system will recognize when you are trying to purchase a specific item. For example, if you are shopping for a mortgage it would not be unusual for you to approach several different lenders. Where this is the case, as long as your requests are all within a reasonable timeframe, it will not hurt your credit score and the scoring agency will recognize the fact that you are simply looking for the best deal for your house purchase.



3. A normal borrowing mix will help your credit score (as long as your loans are managed correctly) and this means a mixture of mortgage, installment and revolving credit loans, such as credit cards. This is not something which you can adjust quickly but, in the longer term, look to spread your borrowing and do not stick to one single source of credit such as credit cards.

The one thing which you should not do if you wish to repair your credit rating is to simply put everything onto one side and let time solve the problem for you as this will inevitably make matters worse in the short and medium terms. If you have got yourself into a mess then you are going to have to accept that it will take some hard work and time to get out of it. However, if you adopt a positive attitude and reduce your level of debt in the right way there is a great deal you can do to improve your credit score - often fairly quickly and quite dramatically!

Recommended books from

The Road to 850: Proven Strategies for Increasing Your Credit Score
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Customer Review: I believe this is a good book for individuals who know nothing about credit. It really didn't tell me much that I didn't already know.

It is well-written and the writer is trustworthy and knows his stuff. I would recommend it for anyone who wants to and needs to learn about credit and how to increase scores.

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BestCredit: How to Win the Credit Game, 2nd Edition
by Dana Neal
Amazon Price: $19.80
Customer Review: With the help of this book I was able to raise my credit score from the mid 400's to the mid 600's in less than a year and become a new homeowner. I felt that the least I could do was write a review to share with you how empowering this book is if you have the drive and determination it takes to apply the principles. Buy it today!! Good luck!!!
 

Credit Repair Kit For Dummies
by Steve Bucci
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Customer Review: Unfortunatly I never received this book. Never received a confirmation number to track it. Overall very disappointed.
 

Credit Repair
by Robin Leonard J.D., John Lamb Attorney
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Customer Review: Much of this information is common knowledge, but it is good to have in book form. This clarifies how and what to do very nicely.

My biggest problem is that I felt it could have been explained much simpler. This book is approximately twice as long as I think it needed to be. The information is correct and useful for the most part, j...
 

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