Simple Credit Repair

You might be one of the millions of people with poor credit who don’t even know it because you won’t check your score or never knew it existed. Even if you have a score of 700 — about average — your credit history could use a little work. Websites often tout secrets and tricks to boost your score, but the dominant FICO scoring system relies on two main categories to rate you as a risk. Like losing weight, improving your credit score takes months and years, so you have to dedicate yourself to paying bills on time and keep down debt if you want a healthy score.

Run your credit reports for free at AnnualCreditReport.com and no where else. Other websites try to trick you into purchasing a report or giving up your credit card information, even the credit bureau websites. Review every bit of information on your reports. The credit bureaus often list wrong balances and payments dates. You may even find judgments and bankruptcies that belong to someone else. Dispute these if you feel they are listed in error. The bureaus usually have an option to dispute an item right next to a derogatory listing.

Paying Bills on Time makes up 35 percent of your credit score. Payment history is even more important than your actual debt load, because credit scores rate your willingness to repay debt, not your ability. Look at the history on each of your accounts. If you see even one missed payment you need to take action to start paying every bill on time every month. Use automatic bill pay with your bank or automatic payments to your credit/debit card with the merchant’s website. If you cannot afford bills every month, start cutting out luxuries like fast food, high-end clothing and maybe even downgrading your home or apartment.

Your debt load makes up 30 percent of your score. Ideally, you want no debt on your credit history, although you need to use your credit cards every month as long as you can pay them off. This can be a small charge, such as a phone bill. Also, do not max or use more than 1/3rd of any credit limit. The FICO formula penalizes you for using a significant portion of your credit limit, regardless of the balance or limit on the card. For example, a $5,000 balance on a card with a $50,000 limit looks much better than a $500 balance on a card with a $1,000 limit.

Because two these categories make up 65 percent of your score, you can see why there are no credit repair secrets. You can boost your score a little bit optimizing certain categories, like having a a few credit cards and an installment loan like a mortgage, but nothing replaces paying bills on time and eliminating debt. Some factors are somewhat beyond your control. For instance, length of credit history depends mostly on the age of your oldest account, so you can only open an account immediately and wait for years to build this category.

Avoid credit repair companies like the plague. Many companies will sell you a seasoned trade-line for a hefty fee, but this could be useless. The typical set up works like this: You pay the credit repair company thousands of dollars and they add you as an authorized user. Authorized have no control over a credit card, but can build credit. The new FICO formula weeds out authorized accounts and some lenders filter out authorized accounts on their computer software when they run your report.

ScoreTruth.com: Credit Score Statistical Data
http://www.scoretruth.com/basics/statistical.php

Fair Isaac Corporation: What’s in your FICO® score
http://www.myfico.com/crediteducation/whatsinyourscore.aspx

Federal Trade Commission: Credit Repair: How to Help Yourself
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm