credit repair

Why Is Credit History Important?

If you are new to credit accounts, you might not understand their connection with seeking future loans (house, car, etc.) and why credit repair may sometimes be necessary.  Upon entering into a credit relationship with a lender, you assume the responsibility of repaying credit debt in the contractual, monthly installments set up.  Late or missed payments result in late fees and negative reports on your credit report history, bringing down your overall credit score.  Conversely, if you make your pay-back payments timely, you are rewarded with positive factors that contribute to a higher credit score.

“A credit score tells lenders about your creditworthiness (how likely you are to pay back a loan based on your credit history). It is calculated using the information in your credit reports. FICO® Scores are the standard for credit scores—used by 90% of top lenders,” FICO said.

Credit scores determine your ability to borrow money in the future so they are not to be taken lightly.  They are the main tool a lender uses to decide if they feel they can lend you money. Low credit scores or negative reports make you a risky candidate for loans. This can result in loan applications being denied or you being assessed a higher interest rate with your loan and fees.

Negative information on your credit report stays there for 7-10 years, allow lenders to have a broader range to evaluate your credit history.  This may seem unfair if you are a potential borrower suffering from a poor credit history, but it protects lenders from lending money that is never repaid.

While you can’t change past credit mistakes, credit repair requires that you demonstrate good credit management moving forward by making timely payments in the scheduled minimum amount. Efforts towards rebuilding your credit will pay off in the long run, but sometimes you may need a little help from a professional credit counselor along the way to help with credit repair.

Find Out What Your Current Credit Score Is

Credit scores and positive credit history require that you stay in-the-know with your current credit profile. Check your credit report so that you are aware of any incorrect information that it may contain. (Identity theft is a current reality of our digital world. You think it won’t happen to you, but it can. Other technical errors can occur too that may need amending).  Filing a dispute against something on your credit report allows you to take charge of how you are represented to credit agencies and potential lenders.  It may seem like a hassle to file disputes tor to contact creditors that have filed negative hits on your credit, but these credit repair steps can add points to your credit that can make all the difference in both your borrowing power and in the type of interest rate you receive on a future loan product.

Never underestimate the power of petitioning a creditor to lift a negative report, even if you are at fault. Some credit card companies, for example, have some flexibility with first-time offenses with late payments. It never hurts to ask.

Know Your Credit Repair Options

At one point or another, most of us find ourselves needing financial counsel at one level or another. If you find yourself buried underneath heavy debt, don’t hesitate to reach out to a credit counseling service. The National Foundation for Credit Counseling can help you find a reputable service that you can trust.

Credit counselors may recommend a Debt Management Plan (or DMP) to help negotiate a reduction in your monthly payments. Commonly, this will translate into one monthly payment to the credit counseling service, which then will deliver funds to all of the accounts you owe on.

Another option could be a consolidation loan via a personal loan or a balance transfer credit card. Borrowers can benefit from lower interest rates in these scenarios and typically will also have a lower monthly payment associated with the loan that makes repaying debt more manageable.

Understand Your Credit Utilization Rate

Part of your ability to secure a loan lies in what is called your credit utilization rate. This is calculated by an analysis of your credit available compared to your current debt.  The general rule of thumb is to keep your credit utilization rate under 30 percent. If it creeps higher than this, it can bring your credit score down.

If you find your credit utilization rate to be climbing (or over 30 percent) you can help turn the scales by committing to pay off current debt balances or by increasing your total available credit by petitioning to have a credit limit raised on an existing account (or open a new account). Keep in mind that choosing to increase a credit limit can put you at risk of getting into more debt. Make sure if you choose this option that you are disciplined enough to not run up your balance.

Also, when you apply for new credit, an inquiry will hit your credit report which will temporarily bring down your score, so time this application appropriately.

Keep Making Your Payments

The best thing you can do to build a positive credit history is to keep making on-time payments. Make this your primary goal.

Ready to Find Your Best Loan?

Compare Your Mortgage Options Quotes. Get Started Today.

Compare My Rates

Free Credit Analysis

Learn your current credit status to know what next steps to take!

Credit Repair Resources

Need to bump up your credit? We can help!

Credit Repair FAQs

Get answers to the most commonly asked credit repair questions.