Credit Tips

Credit Tips

     Repairing your credit can seem like a complicated process but it doesn’t have to be.  Follow the steps below to improve your credit. For a free credit report you may go to www.annualcreditreport.com

Revolving Accounts (Credit Cards)

These types of accounts make up a large percentage of the credit score.

  • Number of Accounts - It is a good idea to have at least 2 revolving accounts but not more than 5. If you have trouble opening a revolving account some banks will allow you to open a secured credit card. With this credit card you deposit some money with the bank and they will lend it back to you while reporting on your credit. If you open up new revolving accounts, it generally takes 3-6 months before the fico score will consider them.
  • Balances – The balance itself is not considered by the credit score but the usage compared to the limit is. If your balance goes over the limit, that itself can reduce your score by 20 points. The lower the balance the higher the credit score will be.
  • Paying off collections – This can boost the credit score if it is done properly. Make sure to only pay collections that are recent. Paying off old collections could lower the credit score. When paying off a collection simply showing it as “Paid” on the credit report will not generally increase the credit score. Sometimes you can negotiate with the collection company to have the collection removed if you pay it. Often times the collection company might resist this at first but once they realize this is their only option, they’ll usually work with you.

Collections

When working on collections you need to be very careful. Paying off some of them can result in a lower score.

  • Number of Accounts - It is a good idea to have at least 2 revolving accounts but not more than 5. If you have trouble opening a revolving account some banks will allow you to open a secured credit card. With this credit card you deposit some money with the bank and they will lend it back to you while reporting on your credit. If you open up new revolving accounts, it generally takes 3-6 months before the fico score will consider them.
  • When was collection filed? – Timing is everything on a collection. If the collection was filed over 5 years ago it won’t have much of an effect on the credit score. However, sometimes collection companies will try to file it as if it is a new collection. If that has happened, you’ll need to dispute the collection with the credit bureaus.

If you see any information on your credit report that is incorrect you may need to dispute it. If you have a copy of your credit report from annualcreditreport.com, you can dispute items on that website


Disputing Accounts

Inquiries / New Accounts

Credit inquiries can have an effect on the credit score. The more times your credit is pulled, the more your score could go down. Try to limit the inquiries while you are working on your credit. Also avoid opening new accounts unless you do not have a sufficient number of revolving accounts.