Blogs in Real Estate

I hope you’re finding my credit repair course to be useful.  If you’re following my suggestions, you know that the process is a tedious, but it’s worth it in the end.  I’m happy to be providing you this information and I hope that you’re doing your part to make sure that we’re successful in our efforts to improve your credit score.

Now that you know how to dispute errors on your report, you need to be aware of the other factors that can reduce your credit score.  These factors are:

High credit balances
Credit inquiries
Closed accounts
Late payments
High Credit Balances
Your credit score suffers when you have a balance on any account that is greater than 50% of your credit limit for that account.  So, if you have a credit card with a $5,000 limit and you’re running a $4,000 balance, your score will suffer.

Most likely, you don’t have a wad of cash to pay down the balance (if you do have the cash, by all means, pay down the balance).  So, how do you solve this problem?  You can use two strategies to lower your balance.  First, you can simply call the creditor and request a credit line increase.  In most cases, the creditor will quickly and willingly grant you an increase on the spot.  The second strategy is to pay down your balance using available credit from another account.  The point here is that it’s better to have two $5,000 credit lines with balances of $2,500 each than to have one balance of $4,000 and another of $1,000.

The target balance percentage is up for debate.  Obviously, the lower your balance the better.  Most experts agree that you want to carry a balance of no more than 50% of your credit limit.  Many experts believe that your score is not hurt at all if you carry a balance below 30% of your credit limit.  So, shoot for a balance of 50% or less.  And if you can get the balance down below 30%, you’re in great shape.

Credit Inquiries
Almost any time you apply for credit, the creditor runs a credit check on you.  That credit check is an “inquiry” that will lower your score by 3 - 5 points.  So, be careful who you allow to pull your credit.  You want to minimize inquiries as much as possible, particularly before making a big purchase (home, car, etc.).  Don’t go by a car, furniture or any other large purchase involving a credit check while you’re trying to get your credit score in shape for a home loan!!!

A couple of important points…  First, your credit score is not hurt when you check your own credit score with the credit bureaus.  This is considered a “soft” inquiry and it has no effect on your score, although you will see soft inquiries on your credit report.  Second, when applying for credit, all related inquiries in a two-week period count as one inquiry.  This means that you should compress your shopping into two-week time frames so that your score is not hurt each time your credit is pulled.

Closed Accounts
It is best NOT to close accounts when you are trying to boost your credit score.  This is particularly important regarding your credit accounts that have been open for a long time.  You see, part of your credit score is determined by the length of time and the amount of credit you have available to you.  So, if you close an account that you’ve had open for a long time or that has a generous credit limit, you will probably hurt your credit score.

So, what should you do if you pay off the card or no longer use the account?  Well, during the time period that you’re working hard to boost your scores, don’t do anything.  Then, once you’ve achieved the score you need, you can close an unused account, but be sure to specifically tell the creditor that you want the account to be “closed at customer’s request.”  Those are the words your creditor should report to the credit bureaus in order to avoid the appearance that the creditor chose to close your account.

Late Payments
The absolute most important way to improve your score is to pay your bills on time.  That’s not much consolation when you’re in a race to improve your credit score because on-time payments take about 6 months to have an impact on your score.  But the impact is significant.  So, start paying everything on time right now… and you’ll avoid credit hassles in the future.

In summary, to improve your credit health, you should first dispute all errors on your report and then you should:

Maintain low balances (below 50%, or as low as 30%, if possible)
Get creditors to increase your credit limits
Avoid credit inquiries if at all possible
Don’t close out your accounts
Make your payments on time!
Monitor your report frequently to ensure accuracy and improvement