How To Repair The Damage To Your Credit Score

More than 43 million people in the United States have credit imperfections that are critical enough to make it very difficult for them to easily obtain loans and credit cards with reasonable terms.

Maybe your credit is good but you want a better credit score. The better your credit score, the less you pay in interest and insurance premiums.

To improve your credit scores, you need to know where you stand right now. You can get free credit reports once a year, but you typically have to pay to see your FICO scores.  You can buy two of your three FICO scores from various websites for a small fee. Experian no longer sells FICO scores to consumers, but still sells them to lenders.  You can contact your OwnerWiz representative for more information on where you can obtain your updated credit information.

If your credit score is below the 700’s, they could use some improvement. If your scores are above 750, you're probably already receiving the best rates.

Below are nine steps you should take to quickly repair your credit score:

1. Get a credit card – If you don’t already have one. Having and using a credit card or two can really build your credit scores. Don't fall for the myth that you have to carry a balance to have good credit scores. You don't, and you shouldn't.

Consider a secured credit card if you can't qualify for a regular credit card. With a secured credit card the issuing bank gives you a credit line equal to the deposit you make. It’s important to look for a card that reports to all three credit bureaus.

2. Add an installment loan - If you don't already have an installment loan on your credit reports, consider adding a small personal loan that you can pay back over time. Again, you'll want the loan to be reported to all three bureaus, and you'll get the best deal from a community bank or credit union.

You'll improve your scores faster if you show that you're responsible with both major types of credit: revolving (credit cards) & installment (personal loans, automotive, home mortgage and student loans).

3. Pay down on your credit cards balances - Paying down, or paying off revolving accounts such as credit cards can help your scores dramatically. Unfortunately, paying off your installment loans such as home mortgage, automotive, student loans, etc. don’t’ help improve credit scores as quickly.

Getting your credit card balances below 30% of the credit limit on each card can really help; getting balances below 10% is even better. The majority of lenders like to see a large gap between the amount of credit you're using and your available credit limits.

4. Sparingly use your credit cards - What's typically reported to the credit bureaus, and thus calculated into your scores, are the balances reported on your last statements. Large balances can hurt your credit scores, regardless of whether you pay your bills in full each month. Consider using other cards to ease the load if you regularly use more than half your limit on any given credit card, or try making a payment before the statement closing date. This will reduce the balance that's being reported to the bureaus. It’s important to make sure to make that second payment between the closing date and the due date, so you don't get reported as late.

5. Always check and monitor your credit limits – Your credit scores may be artificially reduced if your lender is showing a lower credit limit than you've actually got. Most credit card issuers will quickly update this information if you ask.

If your credit card issuer makes it a policy not to report consumers' limits, as is sometimes the case with "no preset spending limit" cards, the bureaus may use your highest balance as a proxy for your credit limit.

If you have a charge card that must be paid in full every month, rather than the kind on which you carry a balance, you probably don't have to worry, because charge cards typically aren't included in the credit utilization portion of the FICO formula.

If, however, the card is categorized on your credit reports not as a charge card but as a revolving credit card, and either a credit limit or high balance is reported to the bureaus, your balances on the card could be a problem.

6. Use the older credit card - The older your credit history, the better, but if you have stop using your oldest cards, the issuers may decide to close the accounts or stop updating them to the credit bureaus. The accounts may still appear, but they won't be given as much clout in the credit-scoring formula as your active credit card accounts

So you might want to charge a recurring bill to one of those little-used accounts, of course, paying off the balance in full.

7. Been a good customer, get some goodwill - A lender might agree to simply erase that one late payment from your credit history If you've been a good customer. It can't hurt to ask. In most cases you have to make the request in writing. Your chances for a "goodwill adjustment" improve the better your record is with the company.

A longer-term solution for more-troubled accounts is to ask that the account be "re-aged." If the account is still open, most lenders might erase previous delinquencies if you make a series of 12 or more on-time payments.

8. Old negatives need to be disputed - The older and smaller a collection account, the more likely the collection agency won't bother to verify it when the credit bureau investigates your dispute. Some consumers also have had luck disputing old items with a lender that has merged with another company, which can leave lender records a real mess.

9. Attack significant credit report errors - Credit scores are calculated based on the information listed in your credit reports, so certain errors on your credit report can dramatically cost you. However, not everything that's reported can affect your credit scores.

Below is a list of items that are worth putting forward the effort of correcting with the bureaus:

·         Late payments, charge-offs, collections, or other negative items that aren't yours

·         Credit limits reported as lower than they actually are

·         Accounts listed as "settled," "paid derogatory," "paid charge-off", anything other than "current", or "paid as agreed" if you paid on time and in full

·         Accounts listed as unpaid that were part of a bankruptcy

·         Any negative items that are seven years or older, 10 in the case of bankruptcy, that should have automatically been taken off your reports. Keep in mind that sometimes scores actually go down when bad items fall off your reports

Below is a list of the items that you typically shouldn't worry about affecting your reports:

·         Various misspellings of your name - If the misspelled name or incorrect address is because of identity theft or because your file has been mixed up with someone else's, that should be obvious when you look at your accounts.

·         Outdated or incorrect address information

·         An old employer listed as current

·         Accounts you closed listed as being open

·         Accounts you closed that don't say "closed by consumer"

Closing an account will not help your scores and it might lower your score. If your intention is to boost your scores, leave these accounts alone. Once an account has been closed, it doesn't make any difference to the scoring formula if you or the lender is responsible for closing the account.

Here are four common credit mistakes to beware of when you're trying to improve your credit scores:

Requesting that a creditor lower your credit limits - This reduces the very important gap between your balances and your available credit that will effectively hurt your scores. In the event that a lender request that you to close an account or get a limit lowered as a condition for getting a loan, you should do it, but don't do it without being requested.

Making a late payment - The irony here is that a late or missed payment will hurt good scores more than bad scores, dropping 700-plus scores by 100 points or more. If you already have several negative items on your credit reports, one more isn’t going to have a big impact, but it's still something you want to avoid if you're trying to improve your scores.

Consolidating your accounts - Applying for any type of new accounts will put a hit on your scores. Transferring balances from a high-limit card to a lower-limit one or concentrating all or most of your credit-card balances onto a single credit card will also put a hit on your scores. It is always better to have smaller balances on several credit cards than having a large balance on a single credit card.

Applying for new credit when already have enough –Just because you can doesn’t mean you should.  However, applying for and getting an installment loan can help your scores if you don't already have an installment account or if you're in the process of recovering from a bankruptcy.