Credit Repair - Raise Your Score

by : Paul Johnson

Trying to figure out how to raise your credit score can be mind boggling and frustrating. Having too much credit can negatively impact your credit score, but on the other hand, not using enough credit can also cause you to have a lower score.

So, how in the world are we supposed to show the mortgage company that we are a good risk to purchase that beautiful dream home?

In order to figure out how to get our credit scores up, we have to take a look at some of the main factors the credit repositories consider when determining our credit score.

The 5 types of credit information are: length of credit history, new credit, types of accounts, payment history, and total debt.

Let's take a closer look at each one of these factors. Then we can each apply them to our personal credit situation to come up with ideas to raise our credit score.

First, let's look at length of credit history. Your credit history is calculated by the length of time an account has been open, what type of account it is, and how actively that account has been used.

Basically, the longer your credit history is, the easier it will be to predict your future credit behavior. So, your score will be higher with older accounts.

Next is new credit. Every account you have will be listed on your report along with the type of account it is.

Also, shown on your report is a list of credit you've applied for (regardless of whether it was extended). These are called credit inquiries.

Applying for too much credit in a short amount of time can lower your credit score because it looks like you are frantic for cash. This makes you look like a higher risk for financial mismanagement.

But, if you're already showing late payments or other delinquencies, it is good to open a couple of new accounts and pay them as agreed because your recent credit history will begin to weigh heavier than the older history.

The types of accounts you have are also considered. It is good to have a variety of accounts because this shows you have experience handling the different types of accounts.

Secured debt, like mortgages and automobiles usually reflect more positively.

The next factor is payment history. This is very important. The way you've paid your bills in the past will be considered in your credit score as they try to predict the way you'll pay your bills in the future.

If you're already behind with slow payments, start correcting this now by paying everything you owe on time.

Again, recent behavior can be more important than past behavior. The more recent the delinquency, the more negative impact it will have on your score.

Remember, a late payment will only show when it is 30 days late or more. The later it is, the more impact it has on your score.

The number of delinquent accounts is also considered. For example, if you have one account with delinquencies, it will not impact your score as much as if you had multiple accounts showing delinquencies.

Lastly, let's look at how total debt is considered. The more debt you have, the lower your score will be. If your account balances are close to their limits, the score will be even more negatively impacted.

So, now that we know this, how can we use it to improve our score? The most significant thing we can do is to pay our bills on time and lower our overall debt.

Pay off any collection accounts as soon as you can. They will still show on your report, but showing as paid, will improve your score.

Ignoring collections and thinking they will fall off of your report in 7 years is a common mistake. These accounts are often sold to other debt collectors. As soon as a new collector becomes involved, a new update will be placed on your report, starting the clock all over again!

When establishing new credit, go slowly! Opening too much at once will look like you're heading for financial disaster.