Raising Credit scores is very important in determining whether or not you get a home mortgage loan or not, or what interest rate you get for a car loan. It is easy to knock your credit score down with a few late payments or an account or two that go into collection status. What is far more difficult is to improve your credit scores once they have tumbled.
Immediate Steps To Take To Improve Your Scores
1. One of the key parts of getting your credit scores to rebound is what is actually written on your credit report. Fixing your credit report with credit restoration or credit repair is one way to remove inaccurate or negative items from your credit report. This process takes some time, so if you plan on going down this very powerful step to improving your credit scores give yourself at least 3 months if not longer to make a serious dent in having your scores go up. You can either work on your credit report yourself, or you can hire a professional company to do so. Read more on do it yourself credit repair.
2. Along the lines of credit repair comes negotiating with your creditors to have them remove derogatory items on your report if you completely pay them off in a lump sum, or when you complete paying off a payment plan that they agree to with you. If you can get negative items removed for paying off delinquent accounts now you will be doing yourself a favor in the long run. You will not have the delinquent accounts killing your credit score and you will not have to go back later on to have them removed then.
Past 2 Years Of Credit History Most Important
3. This is probably one of the biggest things you can do in terms of improving your credit scores if you have delinquent, past due, charged off, collection accounts. You want to make sure that you only work on those accounts that went bad within the past two years. For example, if you have a collection account that is older two years and you want to pay it off along with some collection accounts that are newer than two years, work on the newer ones first.
Recent credit history, any credit history with the past 24 months, has a big effect on your credit scores. If you happen to contact and work out a payment plan with an older account you run the risk of the creditor indicating on your account recent activity which if its associated with a derogatory account will definitely lower your credit scores. Bottom line here: correct the newer accounts first.
Payoff Credit Cards But Don’t Close Them Out
4. One booster to your credit scores is the age of your credit history or credit accounts. The older the credit accounts and history the higher your scores can be. While it is great that you are paying off debt on your credit cards make sure you keep these older accounts open.
5. We are afraid to even mention this one: make your payments on time. Get your past due accounts caught up as soon as possible. If you have to, borrower some money from a family member or friend to get caught up, then pay them back when you are on your feet again. If you have to, pick one account to get caught up on first. Make your minimum payments with all of your accounts, but pick one that you can pay off fairly quick. By paying this one off quickly your cash flow should improve and you can start making bigger payments on another account.
6. Speaking of credit accounts, you want to keep open approximately 3-5 credit cards. You also want to make sure that you have activity on these accounts at least every 6 months. If you use any of these accounts less than this your creditor might mark on your account inactive account which will not help your credit scores.
Increase Credit Limit From Card Balance – Lower Balance From Limit
7. The next big tip to improving your credit scores is to make sure your debt to credit limit ratio is less than 50% on your credit cards. This ratio compares the total amount of credit limits on your cards added together to the total balances you have added together on those same cards. For example: if you owe $7,500 and your credit limit is $10,000 then your ratio is 75%.
The threshold number to keep your ratio under is 50%. Obviously you can lower this ratio if you pay off some of your debt. Another thing to consider is to contact your credit card companies to see if they will extend your credit limits. You will have to be in good standing with them for them to consider doing this. If they do extend it, this will lower your ratio.
8. Last but not least, re-age your credit accounts if you can. See our article on Re-Aging A Credit Account.
If you follow some of these tips you are sure to see your credit scores rebound. If you do not have credit and want to establish credit GetPreQualified.com has some tips on establishing credit.