Repairing Your Credit

Wether you are just starting out on your own or have been managing your finances for years, it is becoming increasingly important to have good or even great credit in order to secure a loan with good terms. You may have seen or heard advertisements from companies promising to "fix any credit problems", however, whatever these companies can do for your credit, you can do yourself, for free.

The first step in repairing your credit is to obtain your annual free credit report from each of the major credit bureaus: Experian, TransUnion, and Equifax. You can accomplish this by visiting the following website: http://www.free-annual-credit-report.org.

Once you have access to your credit reports, verify that all of the information is correct. Pay very close attention. If you find any errors, contact the credit bureau with the error you found and any necessary paperwork substantiating your claim. The bureau will investigate the claim and correct the inaccurate information. Make sure you check your credit report after a short time to make sure the error has been corrected.

Good payment history is likely the most important part of maintaining a good credit score. Even if you have past missed or late payments, do not let that discourage you. Keep current with your future payments, because the older the negative information is, the less it will impact your credit rating.

Your fico score is what most institutions look at to determine your interest rate for loans and your credit-worthiness. This score is based on several factors, including: Payment History - 35% Amounts Owed - 30% Length of Credit History - 15% New Credit - 10% Types of Credit Used - 10%

The next thing you need to be aware of is what outstanding debts you have. If you have any debts that are in collections and showing up on your credit report, pay those off. If you haven't enough money to completey pay them off, take whatever amount you can afford and begin paying down your debt. Pay off high interest debt first.
There isn't much about your length of credit history that you can do. You can, however, establish your credit if your credit report is void of any transactions. You may need to begin with a secured loan or use collateral to acquire a small loan from your banking institution. Pay this off quickly and you will be on your way to increasing your credit rating.

Here is a very good tip, if you have credit cards and are considering cutting them up, beware. Keep your oldest line of credit open, but only carry 10% of the total available credit. If your credit limit is $2000.00, then only charge the amount up to $200.00.

Be leary of department store credit cards. They usually have a very small limit and will cause your debt to credit ratio to be out of synch. This will reflect negatively on your credit score.

A mix of different types of credit can help your fico score. Credit cards, installment loans, and fixed payment loans can improve your score. However, this is ONLY true if you manage your credit RESPONSIBLY.

To sum up the best way to repair your credit report, review the following list: 1. Always make your payments on time. 2. Keep your debt to a minimum. 3. Check your credit report every 3 to 6 months, for inaccuracies and dispute them in writing, if necessary. 4. Keep your oldest line of credit open with a 10% or less balance. 5. Pay off any outstanding or negatively reported debt as swiftly as possible. 6. If no credit is your problem, look at acquiring a secured loan and pay it off on time. This will help to establish a good credit history.