Dos and Don'ts of Credit Repair
Repairing your credit can be easy, but it definitely won't be a quick fix. The best part is that you can do it yourself!
The problem with your credit is that it compiles years and years of credit history, good and bad, to compute your credit score. But no matter how good or how bad your past has been, your credit can always improve. Here are a few tips:
-DON'T MISS ANY MORE PAYMENTS
This is the biggest no-brainer, but it's importance cannot possibly be stressed enough. A single missed payment on a small credit card might not be too big of a deal, but that missed payment will sit on your credit report for at least seven years. Make more than one or two missed payments, and it will really start hurting your credit score.
-DON'T OPEN OR CLOSE A LOT OF TRADELINES
Tradelines is a fancy word for credit accounts. If you a lot of accounts at once, it will ding your credit. If you close a lot of accounts at once, it will ding your credit. One of the ways credit score is calculated is by your credit history and how long you've kept some of your credit open.
-DON'T LOOK AT YOUR CREDIT OFTEN
Don't let anyone look at your credit. By alowing creditors to "pull" your credit, you are reducing your credit score. It assumes that by letting creditors pull your credit, you are applying for more credit. If you're curious about your credit and want to know it for yourself, you are allowed one free report each year.
-QUIT USING YOUR CREDIT CARDS
Many people use their credit cards too much and pile up too much debt. That, however, is terrible for your credit. The three main credit bureaus (Equifax, Experian, and TransUnion) use what is called "revolving usage." This tells how much you are using of your revolving credit available. Revolving credit is credit cards, department store credit cards, lines of credit, etc. Ideally, you don't want to be above 33% usage, so if you're above that, stop using your credit cards!
-TAKE OUT A SHORT-TERM INSTALLMENT LOAN
An installment loan is a loan that has a set payment every month. A good example is a mortgage or auto loan. For example, you might be paying $400 per month for 48 months on an auto loan. These loans look good on your credit score and can easily be set up for automatic payment, making it almost impossible to miss a payment!
-AVOID CREDIT COUNSELING SERVICES
You might save a few bucks up front with credit counseling, but it will cost you much more down the road. Credit counseling services will negotiate with your creditors to reduce your debt. Unfortunately, your credit report will read that as your inability to live up to your end of a credit contract. If you use someone else's money but can't pay it back, you're viewed as a bad credit risk. And trust me, the credit counseling WILL show up on your credit report.
