Credit Repair: Raising Your Credit Score

All aspects of an individual's life will in some way be directly or indirectly affected by how they have conducted themselves with regard to managing their finances. Whether it involves obtaining a loan for an automobile or home or applying for employment, your credit history will come into play to determine whether or not you're successful in these goals. The totality of someone's credit history is condensed down into the FIFO credit score. Due to the importance of a credit score, if you've had bouts of bad credit either due to mismanagement or through no fault of your own, it is important to keep this number as high as possible. The following are some tips to help individuals raise their credit score.

Removing Errors

The quickest and easiest way to raising your credit score is to check for errors or outdated information on your annual credit reports. Federal law requires the three major credit reporting agencies to provide one free report per year to consumers. This allows individuals to check their credit report for errors and incorrect information periodically to make sure it is an accurate representation of how they manage their finances.

The three credit reporting agencies have procedures in place to allow consumers to notify and correct inaccurate information. This normally involves filling out a form providing information and supplemental documents to support your position and then mailing it to the credit bureau. Legally, they are required to address your concerns within 30 days and either remove the information or explain why it won't be removed. Correcting errors on your credit report is the quickest way to raise credit score.

Making Payments

The second easiest way to raising a credit score is simply to start making timely payments for the correct amount. While making on-time payments is simple to do it does take time before you make any sort of substantial impact on your credit score. This is because for each line of credit a grid is provided on a credit report detailing monthly payments for a period of years. This allows any creditor, or anyone else for that matter reviewing your credit report, to visually see a distilled overview of how you've managed a particular line of credit. If the entire grid is covered in green that instantly conveys responsible financial management and is probably someone who's responsible in all aspects of their life.

Credit Utilization

When a consumer has total available credit of $20,000 across multiple credit cards and currently has debt of $5,000 this results in a credit utilization of 25%. Credit utilization is an important factor when repairing credit to raise a credit score because it shows overall debt load which can be an indicator of likely default. In the same scenario, if someone has 19,500 in credit card debt and $20,000 in available credit that would raise a significant red flag to anyone who views this credit report. This tells employers and other lenders that the individual is walking a razors edge and could be filing for bankruptcy in the immediate future.

By reducing debt load across multiple credit cards and thereby reducing your credit utilization it shows lenders that you know how to manage your finances in a responsible manner. It is also important to note that the solution is to pay down existing debt and NOT to apply for additional credit. It will be plain to see to anyone who views a credit report that instead of being financially responsible a consumer just went and opened two new credit cards to make the credit utilization look smaller than it actually is. Additionally, new lines of credit will actually count against the credit score and could negatively impact an individual's ability to get a home or auto loan.

Conclusion

Credit repair consists of many different factors all of which affect either raising or lowering a credit score. Most of the steps which are geared towards raising credit scores will be based in common sense ideas such as don't get in over your head and make monthly payments on time. What many consumers fail to realize is that a low credit score affects more than just the interest rate they pay on their current credit card. Raising a credit score should be the goal of all consumers looking to get the best interest rates on many different types of credit. Being financially responsible goes a long way toward saving money and making life easier with making big financial decisions.