Learn What You Can Do For Effective Credit Repair
Posted at by ifydcat on category CreditAlthough many people think that they can repair their credit scores through ‘disputing’ the details of their payment histories, ‘disputing’ only accounts for about a third of their credit scores. For effective credit repair, you need to understand how your scores are calculated and what you can do to improve them.
The reason “disputing” only accounts for 35% of your credit score is due to the fact that you are working on repairing your “payment history”. For instance, say you have a few late payments, or possibly a charged off account. If you dispute these and successfully remove the items from your payment history, you have successfully improved your “payment history”. However, your “payment history” accounts for just 35% of your total credit score, so is not the only factor when it comes to credit repair. The next question you should be asking yourself is how do I improve the other 65%?
30% of your score is made of Utilization Ratios. This is the balance owed versus the limit allowed on revolving accounts, or credit cards. If you have a high utilization ratio on a credit card you may be negatively affecting your credit scores. For example, you have a $1000 limit on a credit card and your balance is $850. Therefore the utilization ratio is 85%. It is said that the credit bureaus like to see utilization ratios below 30%. Once a utilization ratio goes above 30%, you may be considered a risk to the credit scoring model and your credit score can be lowered. The higher your utilization ratios the lower your credit scores.
There are a number of ways to decrease your utilization ratios and improve your credit scores. For example, you can pay off the balances on your cards until the ratio is lower than 30%. However, the lower the ratio, the better your score will be, so you may want to pay off even more than this. Alternatively, you can ask your credit card issuer for an increase in your balance. This will decrease your utilization ratio, since their will be a lower amount of debt in comparison to the amount of extended credit. This option may be suitable for people who do not have the money necessary for paying off their debts immediately.
Since your utilization ratio and payment history account for two thirds of your total credit scores, you may need to take additional steps to repair your credit. For effective credit repair, you will need to pay off your credit cards on time every time. You will also need to be very careful about when you choose to pay off those balances, since your creditors may report your scores to the major credit bureaus, including Experian, Equifax, and Trans Union, on different dates. For example, one of your creditors may require you to make a payment on the tenth of each month, but they may report your balance to the credit bureaus on the first of each month, while another creditor may require your payment to be made on the fifteenth of each month, while reporting your details on the third of each month. In this case, you will need to ensure that your utilization ratio is below 30% by the first of each month. To ensure that you are paying off your balances at the most beneficial times, you may want to call or email your creditors to find out when each of them report your balances.
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