If your scores are below 760, you may not be getting the best rates for loans or insurance -- so doing some credit repair can save you money. So youve had a few problems getting the bills paid lately, and youre wondering what you can do to repair the damage to your credit. Youve got plenty of company. Tens of millions of people in the United States have credit blemishes severe enough (and FICO credit scores under 620) to make obtaining loans and credit cards with reasonable terms difficult. Or maybe your credit is OK, but youd like to make it better. After all, the better your credit, the less you pay in interest and, typically, for insurance. To improve your credit scores, its important to know where you stand now. You can get free credit reports once a year, but you typically have to pay to see your FICO scores. (You can get other credit scores for free at sites like Credit Karma, but these arent typically the scores lenders use.) You can buy two of your three FICO scores for $19.95 each at myFICO. (One of the three credit bureaus, Experian, no longer sells FICO scores to consumers, although it still sells them to lenders.) If your scores are above 760, youre probably already getting the best rates. If theyre anywhere below that mark, though, they could stand some improvement. So here are the nine steps you can take to speedy credit repair: 1. Get a credit card if you dont have one Dont fall for the myth that you have to carry a balance to have good scores. You dont, and you shouldnt. But having and using a credit card or two can really build your scores. If you cant qualify for a regular credit card, consider a secured credit card, where the issuing bank gives you a credit line equal to the deposit you make. Look for a card that reports to all three credit bureaus. 2. Add an installment loan to the mix Youll get the fastest improvement in your scores if you show youre responsible with both major kinds of credit: revolving (credit cards) and installment (personal loans, auto, mortgages and student loans). If you dont already have an installment loan on your credit reports, consider adding a small personal loan that you can pay back over time. Again, youll want the loan to be reported to all three bureaus, and youll probably get the best deal from a community bank or credit union. 3. Pay down your credit cards Paying off your installment loans (mortgage, auto, student, etc.) can help your scores but typically not as dramatically as paying down -- or paying off -- revolving accounts such as credit cards. Lenders like to see a big gap between the amount of credit youre using and your available credit limits. Getting your balances below 30% of the credit limit on each card can really help; getting balances below 10% is even better. Though most debt gurus recommend paying off the highest-rate card first, a better strategy here is to pay down the cards that are closest to their limits. 4. Use your cards lightly Racking up big balances can hurt your scores, regardless of whether you pay your bills in full each month. Whats typically reported to the credit bureaus, and thus calculated into your scores, are the balances reported on your last statements. You often can increase your scores by limiting your charges to 30% or less of a cards limit; 10% is even better. If youre having trouble keeping track, you can set up email or text alerts with your credit card companies to let you know when youre approaching a limit youve set. If you regularly use more than half your limit on a card, consider using other cards to ease the load or try making a payment before the statement closing date to reduce the balance thats reported to the bureaus. Just be sure to make a second payment between the closing date and the due date, so you dont get reported as late. Continued: Check your limits Single page
Posted on: Mon, 07 Apr 2014 12:00:48 +0000