Four Ways To Repair Your Credit

To repair credit history, there are many things you can do to show you're a worthy, reformed borrower. First, you must understand the basic premise of the unsecured credit card and personal loan world. These wealthy lenders are offering money to you based on the condition that you can make reasonable payments in a timely fashion. The only way a lender knows what kind of a client you'd be is based on your FICO score, which is reported by the Experian, Equifax and TransUnion credit bureaus.

The worst thing you can do is miss a payment or make a late payment, experts say. Even if you've always been reliable, a missed or late payment shows a reversal and the potential to get into bad credit debt. If you were previously a good client and make one honest mistake, then your creditor will usually remove the notation from your report if you pay as soon as you realize, apologize and kindly ask them to repair your credit file.

Secondly, you should begin paying down your debts to repair credit history. Although it certainly helps, it doesn't have as much impact as paying montly bills on time. Begin by figuring out how much disposable income you'll have toward paying down your debt by subtracting your fixed monthly expenses from your income. Pay your mortgage and utilities in full. Then pay all your minimum monthly payments on your credit cards. Make sure to thro all spare cash to the highest interest rate card. Once you've paid down that debt, use all your spare cash to pay off the next highest interest rate. Very soon you will see significant reduction in your credit card debt.

The third way to repair credit history is to start a fresh history of good credit. Credit repair company experts say that a healthy credit portfolio includes both the unsecured credit card and secured loans, like an auto, home equity, mortgage or student loan. On average, most people have two or three credit cards they regularly use. Your balance should never be more than 30% of the maximum credit offered and should be paid on-time and in-full each month.

It's true that past mistakes remain on your record for seven years. The good news is that the past 48 months carry the most weight. If you do things right and keep up with all your payments, within a year you'll see large improvements. Some people take out self-financed loans by taking $1,000 out of their savings and repaying themselves each month, while the bank reports all these timely payments as good credit history to the bureaus.

One last way to repair credit is to avoid some of the common pitfalls that land people in financial hot water. For example, never co-sign for someone! If he or she defaults on that loan, you'll be held personally responsible for their actions and may have to pay the full amount! Also, do not close out credit card accounts. Closing accounts will decrease the amount of available credit you have.

Don't apply for a bunch of new credit cards at once because your report will show multiple "inquiries," which signals you're getting low on your unsecured credit card capital and desperately need more cash. Lastly, don't charge more than 25% of your available credit limit. Statistically, people who tend to max out their credit cards often file for bankruptcy.