The Big Credit Repair Mistake
One of the big mistakes people make as they begin a credit repair program is to neglect the credit rebuilding part of the credit repair process. Removing derogatory information, as important as it is, will only get you halfway to your goal. If you clean up your credit without opening new accounts your credit scores may go nowhere; in fact, your credit scores may fall leaving you no better off than you were before.
It’s About the Score
People neglect to rebuild their credit for many reasons. Some people are under the impression they would be better off waiting until the derogatory information has be removed from their credit report before applying for new credit. This makes sense in a way. Unfortunately, the all-important FICO credit-scoring model will not cooperate with this logic.
Don’t Be Left Out
In most cases the dispute process will result in the deletion of some of your tradeline history. This reshaping of your credit profile will be beneficial in the long run, but if you have limited credit the removal of any information can leave the FICO scoring model with a lack of useable data. And as a result your credit score will fall.
Credit Repair Common Sense
FICO is an acronym for Fair Isaac and Company, the creator of the credit scoring model that generates the scores lenders use in making lending decisions. Fair Isaac does not make the exact formula public, but there is so much common sense involved that if you take time to consider the purpose of the FICO score, you will understand how your activities are interpreted and extrapolated into this powerful number.
Big Brother is Watching You
Think of Fair Isaac as an impartial observer of your financial activities who is perpetually judging your ability to repay your debt. Fair Isaac looks at everything you are doing today and have done in the past. Fortunately for anyone in a credit repair program, recent activity is more important than past history. Every day is a new opportunity to prove your willingness and ability to repay your debt. And if you really want your credit score to improve you should become proactive about managing your credit starting right now.
The Magic of Secured Cards
Secured cards provide the perfect solution for anyone with little or no open credit. Unlike regular credit cards, you don’t have to worry about your application being denied. Some people in a credit repair program may have acceptable credit scores and be able to get a regular non-secured credit card, but if you are not in that category secured credit cards are the perfect credit repair tool.
An Easy Path
A secured credit card will require a small savings deposit with the lending institution. Typically, you will be offered a line of credit equal to the amount of your deposit. In most cases once you have successfully managed your account for a period of time the saving deposit will be released and your card converted into a regular unsecured account. Most secured cards require a minimum deposit of either two hundred and three hundred dollars.
The Power is In Your Hands
You must manage your secured cards very carefully. Remember that you are communicating your financial responsibility with every purchase and payment decision you make. Making your payments on time is critical, but even more important is the way you manage your balance. These new cards are very powerful; a wrong decision can make your credit scores plummet even as you meticulously make your payments right on time.
Solid Credit Repair Gold
If you run your balance up to the limit you will communicate several things to Fair Isaac, and none of them are good. New credit is untested credit. Credit adds stress to your monthly budget, and without a track record Fair Isaac has no choice but to place you in a high-risk category, which means a lower score. But there is another side to this situation, and here is where you will strike solid credit repair gold. If you send the right message you will be quickly rewarded with higher scores.
Keeping Your Balance
The current FICO scoring model recognizes six different balance levels relative to your high credit limit, and you will be rewarded, or punished, accordingly. The balance-to-limit ratios recognized are 20, 40, 60, 80, 100, and finally - the deadly over 100% category. If you are in a credit repair program and eager to optimize your credit scores you should keep your balance below 20% of your high credit limit. You will be thrilled with the results.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
Related Articles
Credit Repair Awesome Benefits
By: Jim Kemish | 20/06/2007 | Credit
Unless you can afford to pay cash for everything, your credit report will have a profound impact on the quality of your life. Credit repair expert Jim Kemish discusses the connection between your credit and your life and offers some valuable tips on making sure that your credit is working as hard for you as possible.
Florida Mortgage Broker Discusses the Value of Patience
By: Jim Kemish | 15/03/2007 | Mortgage
Do you plan to buy a new home soon? Have you been thinking of refinancing your current mortgage? Here are some thoughts from a leading mortgage expert that could save you thousands of dollars.
Credit Repair Made Easy
By: Jim Kemish | 02/04/2007 | Credit
Are you intimidated by the thought of reviewing and repairing your credit? The process does not have to be hard. Credit repair expert Jim Kemish describes a simple and effective strategy of organizing your efforts to produce optimal results.
Credit Repair: your Credit Report and your Life
By: Jim Kemish | 14/05/2007 | Credit
You may not think much about your credit from day to day. But there is probably not a moment of your life that the content of your credit report does not have an effect on everything that you do. Credit repair expert and President of Sky Blue Credit Repair Services, Jim Kemish discusses your credit report and the astonishing impact that it can have on your life.
Credit Repair: Collection Solutions
By: Jim Kemish | 31/08/2007 | Credit
Getting contacted by a collector is never a good thing. But there are laws that govern the behavior of collectors, and there are steps you can take to control the situation. Credit repair expert Jim Kemish discusses the rights and remedies that anyone facing a collector should know.
Credit Repair: How to Stop a Collector
By: Jim Kemish | 19/11/2007 | Credit
Have you been contacted by a collector? Credit repair expert Jim Kemish discusses some of the powerful legal rights you have under the Fair Debt Collection Practices Act to stop collectors and gain control of the situation.
Credit Repair: a Fresh Start
By: Jim Kemish | 29/02/2008 | Credit
Have you been through some challenging times? Are you ready for a fresh start? Credit repair expert Jim Kemish discusses some steps you can take to improve your credit, and insure that it remains as good as possible in the years to come.
Credit Repair Adventures: a True Story
By: Jim Kemish | 20/06/2008 | Credit
Bob and Sue are real people. They are smart and resourceful, but several years ago they made some bad choices. Soon their credit was a mess. So they started their credit repair journey. Here are a few of their credit repair adventures that might shine some light on your own path. Good luck!
Got a Question? Ask.
Ask the community a question about this article:
Frequently Asked Questions
Preapproval
By: Lynne | 21-07-2008
I am a contractural loan processor. Currently I have no clients but my daughter and her friend want to be pre-qualified for a mortgage. Any suggestions as to who I can give the referral to?
Too Much Debt
By: Bubba | 21-07-2008
If God is omnipotent, can he create a mountain of debt that he himself can't pay off?
Confederate moneys value
By: Jim | 21-07-2008
A relitive left me 2 $10.00 bills 1864 confederate they are in plastic and graded by a company PMG they are graded 63 choice uncirculated and they have consecutive serial numbers. Can you tell me there value if any.
Fixed Rate Deals?
By: tlaidlaw | 21-07-2008
How do I get as good a deal when I come out of my fixed period?
Mortgage
By: tina | 21-07-2008
what to do? I purchased my home in 06 for $744M and have an interest only mortgage for $500M. Given the collapse on the real estate market, the FMV of the home is unknown. I have tried to refinance and even though have a FI CO score of 780, I do not qualify for a mortgage. The interest only mortgage is not due until 5/11. Even though the mortgage is interest only, I do make principal payments. Should I wait until the loan matures, with the hope that the housing market would be better?
What is the proper investment ratio (stocks, bonds ...
By: Tip | 21-07-2008
What is the proper investment ratio (stocks, bonds, cash, etc) for a 72 year old retiree that wants to earn but protect the assets in a $1.5 million portfolio?
Q&A Powered by:
Latest Credit Articles
Get Student Credit Cards for Extra College Expenses
By: Devora Witts | 23/07/2008
There have been lately offers for students that feature specially designed credit card packaged for college students. These credit cards offer a combination of financing, flexibility, security and control so student can feel comfortable about managing their finances and at the same time obtaining the benefits that credit cards provide.
100% Equity Financing for Home Improvements
By: Devora Witts | 23/07/2008
It is possible to obtain financing up to 100% of your property’s market value with your mortgage balance and a home equity loan for home improvements combined. With this money you can start that long postponed home improvement project and turn your home into your dreamed home within a short period of time.
Credit Repair: How to Handle a Collector
By: Jim Kemish | 23/07/2008
If you are contacted by a collector you should know your rights. A nationally recognized consumer advocate and credit repair expert offers some useful advice about dealing with collectors, and coming out ahead.
Pick a Credit Card, Any Credit Card
By: Andy Adams | 23/07/2008
Getting a credit card in the midst of a credit crunch may seem possible but there are still many different cards with differnet offers so which one should you pick?
6 Steps to Minimize Your Credit Card Debts and Maximize Its Rewards
By: Ashley Jane Summers | 23/07/2008
All of us can get excited with the promise to earn more or get rewarded from our credit card spending. Credit cards with reward programs are definitely great but every reward credit card holder must also be aware of how to avoid its dangers and how to use it to their advantage.
True, if you don’t use your reward credit card wisely, you can get easily stuck in credit card debts. Nevertheless, there are ways to minimize the risks and maximize your rewards. Let’s talk about these steps one by one.
Credit Cards Combat Rising Petrol Prices
By: Christian Ward | 23/07/2008
The cost of fuel has spiralled this year, but you can help offset this by taking out the right type of cashback credit card.
How To Get A 0 APR Credit Card
By: Gordon Goodfellow | 23/07/2008
If you have ever wondered how to get a 0 APR credit card? There are lots of ways, but some are better than others. This article examines what you should be looking out for as well as some things to avoid.
Check, Monitor, & Maintain Your Credit Score
By: Thomas Boston | 22/07/2008
Checking and maintaining your credit score is one of the most important financial actions you can take as a consumer. This article goes over the importance of these actions.
More from Jim Kemish
Credit Repair: How to Handle a Collector
By: Jim Kemish | 23/07/2008 | Credit
If you are contacted by a collector you should know your rights. A nationally recognized consumer advocate and credit repair expert offers some useful advice about dealing with collectors, and coming out ahead.
Credit Repair: How to Raise Your Credit Score
By: Jim Kemish | 15/07/2008 | Credit
The word is out. Unless you are independently wealthy and can pay cash for everything, your credit score will determine the cost of every dollar you borrow, and consequently, the quality of your life. A nationally recognized credit repair explains how to raise your credit score. It’s easier than you may think!
Credit Repair: Your Future Starts Now
By: Jim Kemish | 11/07/2008 | Credit
You can achieve anything you wish. Success is a matter of focus and determination. Would you like to have perfect credit? A nationally recognized credit repair expert offers some powerful tips on achieving all of your credit goals – starting right now.
Credit Repair, Your Budget, and Your Life
By: Jim Kemish | 30/06/2008 | Personal Finance
Effective credit repair involves a systematic effort to clean up and reconfigure the content of your credit report. There is some work involved, and you want the results to last. A nationally recognized credit repair expert offers some tips on developing a personal budget that will carry your credit repair effort to the next level and bring all of your goals to life.
Time for a Credit Repair Tune Up!
By: Jim Kemish | 24/06/2008 | Credit
Your credit score will determine the interest rate you pay on every dollar you borrow, from your car loan to your mortgage. Every point makes a difference! A nationally recognized credit repair expert explains how to give your credit score the tune up it needs.
Credit Repair Adventures: a True Story
By: Jim Kemish | 20/06/2008 | Credit
Bob and Sue are real people. They are smart and resourceful, but several years ago they made some bad choices. Soon their credit was a mess. So they started their credit repair journey. Here are a few of their credit repair adventures that might shine some light on your own path. Good luck!
How to Win the Credit Repair Game
By: Jim Kemish | 16/06/2008 | Credit
The credit bureaus are not the enemy. And the folks that created the FICO credit score model are not out to get you. In fact, if you take time to learn the rules you will find out how fun the game can be. Here are a few moves that will boost your credit scores and put you right where you belong, in control.
A Step-by-step Guide to Credit Repair
By: Jim Kemish | 11/06/2008 | Credit
Are you concerned about your credit? A nationally recognized credit repair expert offers a step-by-step guide to getting started with your credit repair effort, and valuable advice on avoiding some common and costly mistakes.
Finance 
