Your credit score is based on five categories: your repayment history/lateness, the total amount of your debt, the length of your credit history, the type of credit, such as secured (mortgage) or unsecured (credit cards) and how frequently you borrow. The last two categories aren't as crucial in the weighting of importance, so being late on one payment far outweighs having a brief credit history. Luckily, there are many things you can do to improve a poor credit score. The bad news is that it might take a bit of restraint and a lot of patience.
The most common way people get poor credit scores is to miss a credit payment or to pay late. At the time you may think, "Who cares if it's just a few days late? They're still getting their money." However, once that lateness or missed payment is reported, a credit score can drop as much as 100 - 150 points and will take 24 months to be fully restored.
To remedy the situation, be sure you bring all your credit accounts current, paying off late payments and always paying at least the minimum monthly fee, rather than waiting to pay it all at once. For many people, paying automatically through debit or setting a monthly cell phone reminder a week in advance are the best ways to ensure bills get paid on time.
To manage your credit score and credit card debt, you'll need a plan. Create a chart showing the total balances and minimum monthly payments for all your accounts. Some people pay off the smallest balances in full first to feel like they're gaining ground. Yet it may be more reasonable to pay off the highest interest rate cards first.
Get into the habit of paying much more than the minimum monthly payments; otherwise, it could take you 10-30 years to pay off your balances! Also try to avoid making new purchases until your old accumulated debt is paid off. Be aware that getting close to your credit limit will also weigh against you, so you should try to keep your usage at 30% of your total limit, or less. Following these tips will put a damaged credit score back on the road to recovery.
As you may have imagined, companies aren't always diligent about ensuring that credit score adjustments are reported or applied. Many times, consumers are surprised that certain items still appear on their credit report as unresolved! In fact, a 2004 Federal Reserve bulletin stated that 29% of 300,000 credit reports contained accounts with balances more than three months out-of-date.
Some creditors don't even report that you make your payments on-time either. If you're preparing for something big, then Experian spokesman Donald Girard advises that you "make the payments several months ahead of time" to allow your "history to stabilize before it is reviewed." He adds that "unusual activity, such as large out-of-cycle payments, is a change in behavior that can be an indicator of risk, even though it is basically a positive action." Keeping your credit balances low at all times is another key maneuver to improve your credit scores, he says.
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Frequently Asked Questions
What are the most important elements of a credit ...
By: Highlandspring | 23-09-2008
What are the most important elements of a credit score? I assume that the biggest factor are the payment history on things such as loans and mortgages and salary?
Can having bad credit affect whether i can get a new job?
By: HarrisF | 29-08-2008
can having bad credit affect whether i can get a new job?
Settlement Offers-Does this help or hurt your credit score????
By: Nettie | 26-08-2008
Lita...I have heard that it is not wise to accept a settlement offer from a creditor. I have been told that even though the creditor accepts a smaller amount from a consumer and agrees to settle the account as paid in full, it is still damaging to your credit and will show up on your report as a write off and not a settle account. Is this true?
Thanks
Nettie
Higher number
By: its me | 24-08-2008
My credit report states that i should obtain a revovilng line of credit t help my score. what would be the best way of obtain that. my credit score is low but not very low.
Unsecured Credit Card Debt
By: TM | 22-08-2008
I live in Oklahoma. My question is about unsecured credit card debt.Can the credit card companies put a lien on my home for non-payment of the debt? I have a Homestead Exemption filed.Also, can my wages be garnished for these unsecured debts? Thanks, TM
Domesticating a Default Judgment in FL and Car Lien from Creditor
By: Sharonzzzzz | 03-08-2008
I have a default judgemnt and the attorney for the creditor (Cach LLC) said he is going to domesticate the default judgment in Florida and then put a lien on our house and cars. The default judgment is in my name only (not my husbands). First...can you domesticate a default in Florida? I've heard you can't. Second...can they put a lien on my husbands car? The title says both our names with OR (not AND). They are both paid off in full. Third...if they do put a lien on the cars, can they then come and get them or do they have to wait until we try to sell them. Thank you.
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