In today’s suddenly frugal minded society, the importance of a good credit rating is greater than ever. Whereas, in the past, one could get a car, a home, or an extra credit card even with fair or below average credit, Americans today are finding it nearly impossible to buy those life changing items without good or better credit. So, when you ask yourself “how to repair my credit rating”, it’s important that you get good answers – ones that will help you improve your quality of life.

Easy Ways to Boost Your Score

If you have not yet, the first thing you should do is visit the three major bureaus and view your reports. It is federal law that all three bureaus provide a free report to you once a year. And don’t fall for the companies that try to lure you into a monthly membership. The government ensures you get these scores for free annually – take advantage of it.

Once you’ve accessed your report, you will be able to see what kinds of things are holding your score down. Some things that you may not have considered can have a substantial impact on your overall score.

For example, if you have multiple cards with low credit limits, this is seen as a liability because you are not being trusted to maintain higher levels of potential credit. Other things that will lower your score include:

* High Average Balance – If your total balance is too high a percentage of available funds, you will be punished with a lower score.
* Delinquent Payments – Any company can report you if you deliver a payment more than 30 days late. These reports can last on your history for seven years, hurting your score the entire time.
* Too Many Inquiries – When I started working to repair my rating, I found that recent inquiries on my report hurt my score. Applying for too many cards or accounts can be seen as overextending your spending ability.
* Too Much Money – You need to have some credit, but too much can hurt you as well. It’s important to not let your credit come too close to your total income, even if you have paid it all off. Too much available funds can make you a greater risk for repayment.

If you are sincere about repairing your credit, it’s important that you start by addressing the issues above and by checking your report annually (or more often, if you’re willing to pay for a monthly subscription service). Knowledge and careful planning will go a long way toward ensuring your credit remains high for years to come.

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How do I get a good credit score?

The question of how to get a good FICO score is hard to answer these days as banking and mortgage regulations have changed dramatically in light of the current economy. Until recently, any score over 700 was considered to be excellent. These days, however, regulations have tightened. Now, anything over a 750 is considered to be top notch credit. Because of the ever changing economy, this number is subject to change again in the future.

What factors affect my credit score?

A person’s FICO score is based upon many factors including their payment history, current available credit and how much they owe at the current time. A person’s payment history and amount they owe makes up about 65% of the score, so those two items are extremely important in the calculation of the FICO score. Also, the payment history portion alone makes up about 35% of the total score. If you are trying to improve your score, you need to keep that in mind so you know where to focus your energies.

What can I do to improve my numbers?

Thirty percent of the FICO credit score is made up of how much a person owes. Lenders do not like to see that someone is using up all of their available credit. In other words, if you have a $5,000 credit limit and you have charged all of that amount, it does not look good. It would be better if you had that credit limit and only owed $500, for instance. A lender wants to see that you are not someone who charges up big limits that they cannot pay. Therefore, by not using all of your available credit, it shows that you have some restraint. If you have overspent, try to reduce the balance as soon as you can.

There are many other ways to improve your credit rating and you do NOT need to pay a credit specialist to do this for you.

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Successful credit repair involves a broad approach to cleaning up your credit report and restructuring your credit. Everything matters. But some aspects of credit repair are more potent than others. Among all of the techniques you can use to boost your scores, the proper management of credit cards is the most powerful. Proper use of your credit cards can easily yield a 100 point improvement in your scores. Put these powerful techniques to work today.

Getting New Cards

If you do not have credit cards, now is the time to get them. If you want your credit repair results to really shine you cannot overlook the power of properly managed plastic. If you have had credit issues in the past you may be concerned about being approved. If you are unable to get approved for regular credit cards try secured cards. Secured credit cards are the ideal credit repair tool. If you have no open credit cards right now, two new secured cards will be adequate to get your scores moving up!

The Right Cards

Not all credit cards will benefit your credit repair effort equally. In fact, some credit cards can hinder your progress and may even be harmful. Department store credit cards and consumer credit cards, such as gas cards, are of no value for your credit repair and should be avoided. For score building purposes you should stick with mainstream cards like MasterCard and Visa. Small limits are fine! The key to success is keeping the right balances.

The Right Balances

The credit scoring model used by most lenders is called the FICO model. FICO places a significant amount of weight on the relationship between your account balance, as reported to the credit bureaus, and your limit. For credit repair success it is imperative that you keep your balances low. The FICO model recognizes card limit capacity utilization in 20 percent increments. If you run your balance over 80 of your limit your scores will tumble. But use less than 20 percent of the cards capacity and you will be richly rewarded with higher scores.

The Right Timing

Managing your credit card balances for credit repair success is an art. In theory there is no harm in using your cards to their limit as long as you manage to reduce the balance before the date that the creditor reports the card balance to the credit bureaus. This is not as easy as it seems. Many people pay their balances in full when they receive their monthly bill, only to be shocked to see that their credit report shows that their cards are maxed out. It is unlikely that the billing cycle and the creditors schedule for reporting to the credit bureaus will coincide. For credit repair purposes you may want to reduce your balances and keep them low.

Putting it All Together

Would you like to give your credit scores a powerful boost? Now is the time. Employ these credit repair techniques to harness the power of your credit cards. If you do not have any open credit card accounts, open two new accounts today. If you do cannot get regular cards, get a couple of secured cards. Stick with MasterCard and Visa, and avoid store cards and consumer accounts. And keep those balances low if you want your credit repair effort to pay off. You can do it!

Copyright © 2009 James W. Kemish. All Content. All Rights Reserved.

About the Author:

Jim Kemish is the president and founder of Sky Blue Credit Repair, a leading credit repair service. Sky Blue Credit has been dedicated to providing intelligent customized credit solutions since 1989. Jim is a graduate of New York University and holds a degree in economics.

All this is possible with the use of credit scores.

Banks, financial institutions, landlords, and even your employer rely on your credit score to make decisions about financing, tenancy, and employment every day.

Credit scores came into wide use in the 1980s as computer costs dropped and their use exploded in business. Prior to this, lending decisions were based on human judgment which was both unpredictable and unreliable, in addition to being slow.

During this period, there was growing Congressional action arising from discrimination in housing that put pressure on institutions to remove the ambiguity and bias from the rating system. Legislation was passed in 1971 (FCRA) and again in 1977 (FDCPA) which forced Credit Rating Agencies (CRAs) to revise their rating procedures.

Initially a standard point system was developed that weighed various items on the credit report. This approach reduced human bias and sped the evaluation process. Eventually the point system was replaced by statistical modeling of thousands of reports covering numerous variables that focus on consumer payment histories. Considered a much better predictor of consumer credit behavior, all banks and financial institutions now rely on it. The obvious advantages are: more accurate predictor; extremely fast; highly objective; and very efficient.

Fair Isaac Company led the way with the first statistical model that quickly became the standard in the industry, called FICO. This was the industry’s answer to Congressional legislation outlawing discrimination in the rating process.

How does it work?

Credit scores rely on Risk Factors. If you are placed in a high risk category, then your score will be relative to others in the same category. If you have a limited credit history, then you will be compared to others with similar credit histories.

Entries to your credit report are grouped into Score Factors which are used to calculate your score. A partial list of items that factored in are: number of loan and credit card accounts; total debt to income; payment history including late payments, foreclosures, bankruptcies, employment status, etc.. When declined credit, the bank must mention the specific score factors that resulted in the decision

Credit scores range from 300 to 850. The higher the score, the better your credit rating. There are three major credit bureaus (or reporting agencies): Equifax, Experian, and TransUnion. Since each has its own version of the FICO model, you literally have three credit scores. Typically, the banks will take the two highest or two lowest scores (depending on bank policy) into account when evaluating loan applications.

Any score above 720 to 750 is considered excellent, and anything above that is just providing a cushion.

A general guideline for scoring from your credit report is a follows:

• 35% from payment history. If you have any late payments, collections, charge offs, foreclosures, short-sales, bankruptcies, judgments, liens, etc., this will reduce your score. These are called negative entries to you credit report.

• 30% is based on utilization, or how your debt is distributed. For example, it is better to have several accounts with low balances than one or two accounts that are maxed out. A simple utilization formula is: Current debt / Credit limit. The lower that ratio, the better. Try to stay below 10%. For example, if your credit limit on your credit card is $20 thousand, and your current debt outstanding on the card is $5 thousand, then your ratio is 25% (5 / 20) which is too high. Either raise your credit limit, or reduce your debt.

• 15% from Established History. That is, the older your active accounts, the better. When first establishing credit, it would be helpful if you could be added as an Authorized User on another persons established account (generally done within the family, such as parents). This will enable you to acquire accounts that have been active for awhile, thus boosting your score.

• 10% Inquiries. The more inquiries regarding your credit report and score, the lower your score becomes. Therefore, try to keep the number of authorized inquiries to a minimum

• 10% Mix of Credit. Here it is good to use different forms of credit: revolving credit, installment loans, mortgage, auto, etc. Try to keep an equal balance amongst the differing forms of credit.

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Credit card companies in order to attract new customers offer introductory interest free periods for the new card customers. It is very important to know as well as understand what will be the interest rates that the card company will charge after the interest free period ends. If the interest rates are high then you will have much worst deal than you might have intended.

Check out for the period of 0% introductory APR offer. It should be at least 6 months so that you don’t need to transfer your balance too often. Care is to be taken at the time of application so that every single word in fine print is to be read with proper understanding. There are many companies with 0% into APR credit card that have a catch in their terms and conditions. They may allow 0% APR balance transfer but if you make a purchase using that credit card the interest rates charged are too high at times up to 25%. A balance transfer will save you money in long run but making new purchases on this card will prove to be very expensive.

Many credit companies offer convenience checks along with 0% intro APR credit cards. But make sure that this convenience check facility is included in 0% intro APR offer otherwise you will end paying high rate of interest. To make best use of 0% intro APR offer make sure to pay back the balance amount before the interest-free period comes to an end. For any doubt that arises in your mind make sure to call the concerned credit company to have clarification. Also don’t forget to ask for the name of the representative of the company to whom you have talked and keep a record of time with date along with name of representative.

The number of applications for credit card applications will affect your credit rating. If you make too many applications in a short time irrespective of whether your applications are approved or rejected your credit rating will come down. As you make an application each time the credit company will ask for your credit history, too many inquiries about your credit history have a negative impact on your credit rating.

Source

It is important to understand that you credit scores are ever changing. Therefore you can actively make a difference. Whether positive or negative items are reported to the credit bureaus is entirely up to you.
Begin by reviewing you reports for inaccuracies. You have the legal right to dispute any item that you know is incorrect. The credit bureaus must investigate your claims and they will be corrected or removed if they can’t be proved. Depending on how many items are removed this can have a very positive effect on your credit ratings.

Adding new positive items is essential. Paying your bills on time is the single most important step you can take. This amounts for 35% of your score. Creditors report monthly, so by taking this action you will begin adding positive items quickly. Do not abuse credit cards. Try to pay them down. Get out of the cycle of overusing your cards.

Your credit score can be changed for the better if you take action. A credit repair company will be able to help you with the disputes and they will save you a lot of time. However you choose to rebuild your credit you must start living more responsibly today.

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Far too often people speak of their credit score as if they have been marked. It’s as if they feel the credit bureaus just assign them a low number to make things difficult. This is anything but true. The credit reporting agencies simply look at the information that has been reported and calculate a score using their methods. They are not biased nor do they hold any kind of vendetta against you personally.

So above all else you need to begin reporting positive information. Add items that can’t help but bring up your score. Promptly paying your bills, paying down credit cards, and paying off debts early as possible will all bring your score up. Your creditors are required to report your information accurately, they must report the good and the bad. Once again you are in control of what gets reported.

While on the topic of creditors reporting accurately it must be said that they do make mistakes. You are doing yourself a huge favor by obtaining your credit reports each year. You can do this for free at www.annualcreditreport.com. Take the time to look there at these reports carefully and identify any errors. Dispute them and have them remove or corrected. Depending on the amount of errors you may see a significant credit score increase just from this.

If you are in need of Credit Repair for any reason, take the first step and Click Here!