Caleb Brown: Hi ! I am Caleb Brown and I am the member of the Financial Planning Association. I am here to discuss how to repair your credit. Right now, I am going to talk about the steps to improve your credit.
No matter where you go or what you do, there is likely to be a score associated with the activity. It's true in sports, it's true in the academics and it's true with regard to your credit. There is a score associated with your debt and debt paying history. In most walks of life, you know what you need to do to improve your score. But that's not necessarily the case when it comes to improving your credit score. It is called your FICO score. FICO is the Fair Isaac Corporation. Knowing how your credit score is calculated and then figuring out how to improve that credit score is a bit of a mystery.
In the case of the former, there are plenty of resources that address how your credit score is calculated. In short 35% of your score is based on your payment history, 30%on the amounts owed, 15% on the length of the credit history, 10% on the type of credit used and 10% on new credit, the number of accounts you have recently opened. Now that you are familiar with your credit report you can start working to improve it. Once a creditor reports negative information to a credit bureau, it remains in your file for seven years. However, negative information becomes less damaging over time. To improve your credit take the following steps. Pay your bills on time. Remember if you let a payment slide you will incur a late fee or a penalty charge. Pay off high interest loans first. By paying off these obligations, you free up cash that can go to other bills. Some financial experts suggest paying off cards with the lowest balances first, so you can feel you are making progress. You will probably save more money paying off the debt with the highest interest rate, but having a sense of accomplishment may help you stick to your plan.
Pay off credit cards monthly. Commit to paying off your credit card balance in full every month. Apply only a few credit cards you absolutely need. It's easy to run up debt when you have a lot of credit available. Use your credit card to establish good credit. By paying on time and by paying down the debt, you will show creditors that you are credit worthy.
com recommends the following ways to improve your FICO score. Pay down your credit card debt to zero, and your score can go up by as much as twenty points in sixty days. Get a copy of your credit report and look for errors. This may include payments that appear as late but you can prove that you have paid on time. Accounts that aren't yours and old debts that shouldn't be on your report any more. Such as negative debts that should be taken off your report after seven years and bankruptcies that should be removed after ten years.
Maintaining a multiple credit cards may help you in some circumstances. It is better to have four cards at 28% to 30% capacity than to have one card that's maxed out. When using credit most charges should be repaid within three months of the purchase. Be sure you know the cost of credit including the credit card's annual fees, the interest rate you will pay and any charges for overdue payments or going over your credit limit. One common myth is that you only have one credit score, so you have to check with one of the major credit bureaus to find out what that number is. Actually, you have three credit scores and they can vary widely. That's why it's important, if you are applying for a loan to check with that perspective lender to see which agency's score they use before you apply.
Another common myth is that checking your own credit will lower your score. According to myfico.
com this won't affect your score as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide the credit reports to consumers.
Those are the steps you need to take to improve your credit. Now let's talk about getting out of the debt.