In the previous article of this series I talked about how important it is to get copies of your credit report from each of the major credit reporting bureaus. I explained the various sections of your credit report and how to read it. The FICO score was discussed and why it's the only score you need to worry about. If you haven't already procured copies of your credit reports and FICO scores from each bureau, look at my previous article to find out the best place to get these. It will be hard to start repairing your credit without these things.
There are two rules of thought in fixing your credit. Start building new credit and getting rid of the negative items. I will break these down and I will give some ideas for both.
One of the easiest ways to add new credit is applying for a secured credit card. Everyone is eligible for this card and it's a great way to start building new credit. If you are like the rest of us (yes me included) who's credit has gotten hammered in the last couple of years, this may be your only choice. A secured card is different from a normal credit card in that you will have to deposit money into the account and pay a small application fee. The key to making these cards work will be to make sure they report to the major credit bureaus. This way you can start making purchases on the card and begin making monthly on time payments.
This leads me to the next subject which is keeping the proper debt to credit ratio on your revolving credit. To explain further, if you have a credit card with a $3000.00 credit limit and you owe $1500.00 on this card, your debt to credit ratio would be 50%. Believe it or not, maintaining a small balance on your credit cards will improve your credit score, where paying the card off each month can have a negative affect on your score. The reason for that is the way your score is calculated. Lenders want to see that you can make monthly payments and hold a balance on your credit cards. It's how they make money, and it's built into the credit score algorithm to look for this. Keeping a 25 to 35% debt to credit ratio will begin driving your score up.
Removing negative items from your credit report is a more complicated subject. Enter the Fair Credit Reporting Act to your rescue. This law was passed to help the consumers. The FCRA says that the consumer can dispute negative items found on their credit card deemed to be inaccurate. Presented in the correct fashion to the credit bureau will prompt an investigation from the credit bureau to look into this inaccuracy. The credit bureau has 30 days to investigate the matter and if it can't be resolved than the negative item will be removed from your report. This is one of many techniques used to remove items from your report, so use it correctly.
We have briefly covered some of the techniques used to build new credit and remove the items that are having a negative impact on your credit score. Please visit my website for more detailed information, articles and forms to get started towards raising your credit score. Good luck!
William Lingle is the owner/operator of Clever Credit Repair - and author of the free e-book "40 Credit Repair Secrets". Please visit my site for a unique approach to learning credit repair. We will arm you with the best quality information, articles and resources to repair your own credit as good or better than any professional service can offer. Please check my review of the best secured credit cards for building new credit.
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