Maximizing Your Credit Repair

Successful credit repair involves a wide spectrum to cleaning up your credit report and restructuring your credit. Everything matters. But some aspects of credit repair are more potent than others. Among all of the techniques you can use to boost your scores, the proper management of credit cards is the most powerful. Proper use of your credit cards can easily yield a 100 point improvement in your scores.

How Do I Get Approved?

If you do not have credit cards, you need to sign up for one or two as soon as financially possible. If you want to maximize your credit repair results, establishing new credit can help propel your scores. Most people working through the credit restoration process will be unable to be approved with conventional credit cards. You will need to select a secured credit card to start the process. You can find some very good options here.

What cards do I choose?

Not all credit cards will benefit your credit repair effort equally. In fact, some credit cards can be harmful. Department store credit cards and gas cards, will not help your credit repair and should be avoided. For score building purposes you should stick with mainstream cards like MasterCard and Visa. Initially you will have to start with small limits, it's just important to monitor your balances, and try to keep them below 50%, and continue to use them regularily. When you're ready to re-pull your credit, make sure to pay down the balances completely.

Managing Your Balances

The credit scoring model used by most lenders is called the FICO model. FICO places a significant amount of weight on the relationship between your account balance, as reported to the credit bureaus, and your limit. For credit repair success you must keep your balances low. The credit scoring model recognizes card utilization in 25 percent increments. If you run your balance over 75 of your limit your scores will tumble. But use less than 25 percent of the cards capacity and your scores will be increased.

Timing is EVERYTHING!

Managing your credit card balances for credit repair success is an art. In theory there is no harm in using your cards to their limit as long as you manage to reduce the balance before the date that the creditor reports the card balance to the credit bureaus. This is not as easy as it seems. Many people pay their balances in full when they receive their monthly bill, only to be shocked to see that their credit report shows that their cards are maxed out. It is unlikely that the billing cycle and the creditors schedule for reporting to the credit bureaus will coincide. For credit repair purposes you may want to reduce your balances and keep them low.

Wrapping it all up!

Would you like to give your credit scores a powerful boost? Now is the time. By using these credit repair techniques you will make your credit cards work for you. If you do not have any open credit trade lines, open two new accounts today. Since initially you probably won't be approved for unsecured credit cards, get a couple of secured cards. Stay with MasterCard and Visa, and avoid store cards and gas cards.

Avoiding Credit Card Debt

Credit cards should always be used wisely. You don’t ever want credit card debt because the more you have the harder it is to get out on top. However, it’s even harder to watch credit card spending during times of economic hardship like the current credit crunch we are facing. Here are a few tips on how to avoid increasing your credit card debt during a credit crunch:

1. If anything, you should be aggressively paying down your credit card debt. Things are getting worse and interest rates are going up so if you can, pay them off. Credit card companies will also be attempting to lower your available credit limits if you start to show potential risks. Always Always make your payment on time, even if it's just the minimum payment.

2. Be weary of using credit cards to pay for frivolous things. Ask yourself, do you really need the item? Is it a necessity? Forgo those purchases unless you know you can pay them off once the bill arrives. Not being able to pay off these items will cost you much more in the long run because you will be paying the high interest rates.

3. If you have no choice but to put daily necessities on your credit card such as food and gas, pay off those items as soon as you can. Lenders these days are reducing credit limits while increasing interest rates so if you’re not paying off the bill then those items are costing you double or even triple the price if you were to pay in cash.

The main thing to keep in mind is that you should be spending wisely and saving aggressively so you can pay down any credit card debt you may have. It’s not worth ruining your credit over.

If it's too late, and you've already started missing payments, and you can't seem to catch up, contacting a debt settlement company, that works closely with a credit repair firm will help you to move past your troubles in about 12-24 months. If you want to attempt to repair the problems yourself, check out http://www.free-credit-repair.info/ for more information. If you want some assistance, then check out Minnesota Credit Services.

3 Myths About Your Credit Score

With debt a big part of modern life, many people know they have a credit score and it determines whether they can obtain a loan at a decent interest rate. But after that, confusion reigns.

The most important thing people need to understand about credit scores is what goes into the calculation. Payment and Credit History history accounts for 50% of your score. The amount that you owe accounts for 30%. Applications for new credit and types of credit in your record each account for 10% of your score. This means that 60% of your score can be corrected with the use of credit repair.

Credit scores range from about 350 (lowest) to 850 (highest). Generally the best interest rates go to people with a score above 740. In today's tight credit environment you will have difficulty getting credit with scores under 660 and will likely be forced to pay much higher interest rates.

Credit Myth # 1:

You Have One Credit Score

There isn't just one type of credit score. In fact, there are at least six primary ones that are given to consumers and many more assigned to businesses. The primary driving force behind most of them is the Fair Isaac Corporation, known by most as FICO.

Each of the three credit reporting agencies has a slightly different formula for calculating scores, but all are developed by FICO. Equifax's is called BEACON, TransUnion's is called FICO Risk Score and Experian's is called FICO II. You'll find your credit score is not exactly the same at each agency. The major reasons for the variation in your 3 scores, is because every account that reports to the bureaus, may not report to all 3 bureaus.
Credit Myth # 2:

You Should Close Cards to Improve Your Credit Score

Sometimes when you apply for a loan for a major purchase, such as a mortgage, you're told you can improve your credit score if you close some of your credit cards. Don't believe it. In fact, sometimes when you close an older card you can actually cause your credit score to go down.

That happens for two reasons. First, the best scores go to people who use credit moderately over a long period of time, so the older the cards, the better. If you need to close some accounts, close the newest ones first so you retain the cards with the longest history of prompt payment. If you don't have a credit history you'll find it very hard to get a major loan when you need one.

Second, credit scoring agencies put a lot of emphasis on what is called your 'utilization ratio.' It is essentially your total debt as a percentage of all your available credit. If you lower your available credit by closing cards, your utilization rate can actually look higher, hurting your credit score.

Credit Myth # 3:

You Must Pay Off Your Cards in Full Each Month to Get a Good Score

You may think you have to pay down all your credit cards to zero to get a good credit score. That's not true. In fact, to show you know how to use credit wisely, it doesn't hurt to occasionally pay a card over time. Showing you know how to use credit wisely can actually help you get a better credit score.

If you don't buy on credit and pay everything with cash, you'll likely have a lower credit score because you have no credit history for the credit scoring agencies to use. Not having a score can prevent you from acquiring new credit, if you're having problems acquiring new credit, companies like Minnesota Credit Services can help you establish new accounts with secured credit cards, and credit builder loans. This not only hurts your credit score, but it can also impact your insurance costs because insurance companies do use your credit score when determining rates. They believe people with a higher credit score file less claims and therefore are lower risk, so they get the best insurance rates as well as the best interest rate offers.

The ideal way to use credit is to use 10% to 20% of your available credit and pay all bills on time. The only problem is that everyone runs into a little trouble now and then, and reputable credit repair companies can help you to get back to where you below.