Credit Repair and the Secret to Rebuilding Your Credit

Credit Repair Everything Counts

Credit repair is not complicated. Your credit scores reflect the content of your credit report, both the positive as well as the negative. Many people in credit repair programs are so focused on the negative that they neglect the positive. No matter how effective you are at cleaning up derogatory information on your credit report, unless you take the time to build new positive credit your credit repair effort will languish.

Credit Repair Logic

The logic is easy. Your credit scores are intended to reflect the amount of risk a lender will face when lending you money. In the credit repair process you should think of your credit score as an impartial witness of your life, judging your ability and willingness to meet your obligations. The best way to impress this impartial witness is to offer proof of your willingness each and every month.

Revolving Credit Rules

The most powerful way you can offer proof of your credit worthiness and influence your credit repair progress quickly is with the proper use of revolving credit. If you don’t have any open credit cards, now is the time to open them. If your credit is currently too weak to get regular unsecured credit cards, just get secured cards. It’s easy and will do the trick.

Credit Repair and Secured Credit Cards

Secured credit cards are every bit as helpful for your credit repair as regular unsecured cards. It does not matter if the limit on these new cards is miniscule. Your credit scores will get the same benefit from a little secured card as it will from a high limit unsecured card, as long as you manage it in the right way.

Credit Card Management

Credit card management for score optimization is not difficult, but unless you know what to do mistakes are likely, and your credit repair project may even suffer when it could have easily succeeded. Timely payments are essential of course, but the real trick to credit repair success is to understand the relationship between your balance and the limit on the card.

Your Scores Are In Your Hands

The impact of your credit cards on your credit repair will depend almost entirely on your balances. This is always the case, but is even more important during the first year after a card is open. There are five ratios that will trigger score changes; 20, 40, 60, 80, and 100 percent usage. Sixty percent usage of a card will have a neutral effect, the two tiers below will increase your scores, and the two tiers above will reduce your scores. Don’t underestimate the impact; maxing out a new card can knock 150 points from your scores.

Credit Repair with the Right Credit

There are a few other important factors to consider when rebuilding credit. Not all credit cards are equal. Store cards are of little value for your credit repair. For undisclosed reasons, the geniuses behind the credit scoring formula have downgraded the benefit that accrues from store cards, and amplified the harm that can result from having them. Likely reasons include the fact that store cards are easier to get, usually have higher interest rates, and consequently may be an indicator of poor judgment on the part of the consumer. Hey, I’m just reporting the news! Do yourself a favor and stick with MasterCard, Visa, Amex, and Discover.

Your Credit is Alive

When it comes to credit repair there is no good substitute for new revolving debt. A new auto loan is helpful, but will not have the impact that a credit card will have. Credit cards are emphasized because they are open-ended and alive; each month they report they can reflect something new about your financial life. If you keep your balance low and make your payments on time it will tell the credit scoring model that you are living conservatively and within your means. If you max out a card it is interpreted as a warning of budgetary strain and potential default.

You are Not Alone

Credit repair is not a difficult process, but it requires a bit of know-how and even a dash of finesse. If you take your time to plan the credit repair process you will succeed and see your efforts rewarded beyond your expectations. And always remember that help is available. If you are in doubt pick up the phone and call a credit repair professional. You are not alone!

Tags: Credit, Finance