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10 Easy Ways To Rebuild Your Credit
By admin | September 15, 2007
If you have had some bad financial luck, you might be looking for ways to rebuild your credit. No one likes being in debt, nor carrying the burden that banks will not lend them money. Not only does it make doing the things you want in life a lot harder but it can also cause a great deal of stress and lower your self-esteem.
Luckily there are some easy things you can do to help you rebuild your credit report.
Correct Any Mistakes
Sometimes there can be a mistake on your credit report, such as a payment that was mistakenly labeled as being late even though it wasn’t, that are really throwing off your rating. You need to get this straightened out as quick as possible because this tiny factor could really be hurting you. Do this sooner than later because sometimes it can take 30 days to three months to get corrected.
Ensure Your Bills Are Paid On Time
Never let carelessness cause you a bad credit score. Something as simple as ensuring your bills are paid on time can have a huge effect on your rating. If you have a hard time remembering to do so, as much as possible have a direct payment system set up with your bank account and your bill.
Cut Back On Your Credit Card Usage
One of the biggest things that will be looked at is your FICO score, which is how much money you currently own on your credit cards in relation to the total limit you have. Trying to keep your balances below 25% of your credit limit is the best way to put yourself in a healthy position in terms of your credit score.
Don’t Bother With Moving Debt Around
Rather than spending so much time moving your debt around and figuring out where it’s best placed, work on simply paying it off. The key factor is the ratio of your total credit car balance to your credit limit; it really does not make a large difference which credit card the debt is on.
If you move all your debt to one card, that simply means you increase that ratio, which does not improve your situation.
Keep Your Credit Card Accounts Active When You Want A Loan
It’s generally not a good idea to go closing credit card accounts you hold when you are hoping to take out a loan in the upcoming future. If you do so you will raise your balance-to-limit ratio by closing unused accounts, thus serving to make your overall credit look worse.
Secondly, try not to open any new accounts either as this could lower your score as well. This new account will serve to lower the average age of your accounts, which is a part of how your FICO score is determined.
Pay Down Maxed Out Credit Cards First
When you are working on paying off your cards, try and pay off the ones that are maxed out before working on the others. You will better improve your score if you can get that one cleared off and then move on to working on cards with a lower debt load on them.
Give It Six Months
To really see a noticeable improvement in your score (by as much as 50 points), it will usually take around six months at minimum. During these six months you want to ensure you are paying all your bills on time and aggressively working towards lowering the debt load on your biggest balance first.
Don’t Open Credit Cards You Don’t Need
Some individuals think it’s smart to have more credit cards, even if they don’t need them. This is rarely the case however and usually it will work against you. While it’s a good idea to have a few cards and always be sure you manage them effectively - taking this point too far and opening random accounts is not a smart move.
Make Shopping For A Loan A Focused Event
When you’re starting to shop for a loan, do it in a timely matter. Your FICO score will decipher between a single search for a loan and a search for multiple loans over a longer period of time. This will be based in part on the length of time in which you were putting in requests so when you want a loan, make a concentrated effort to get it and if you don’t, give it more time and work on improving your score.
Live Within Your Means
Obviously the simplest piece of advice is to understand what it means to live in a way you can afford. If you are constantly putting purchases on credit cards without certainty you will be able to pay for them, you are only setting yourself up for problems.
Better yet, treat your credit card like a debit card and pay it off as soon as you get home if you can. That is a sure fire way to keep yourself out of trouble.
So next time you’re denied credit, consider these factors and which may be applicable to you.
Topics: credit cards |
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