Effective credit repair requires know-how. You need to do your homework to get the best results. If you manage your credit repair effort right you will be richly rewarded. But do it wrong and you may cause more damage than you might imagine. Having said that, I should add that most credit repair errors are quickly reversible, so don’t sweat it. Here are a few of the most common credit repair mistakes that people make. Avoid them if you can!
Running Up Balances
Your credit cards have more of an influence on your credit repair success than you may be aware of. You may make all of your payments on time, but if you let your balances approach the limit your scores may plummet over one hundred points. You should understand that the FICO credit scoring model is designed to measure credit risk. The FICO software treats high limits as a potential default indicator. The good news is that as soon as you reduce your balances your scores will recover as if nothing happened.
Opening Store Cards
Store cards and consumer debt, like furniture store accounts, are potential credit repair disasters. There are several reasons for this. First of all the FICO credit score model has a bias against this type of debt regardless of how well you manage it, so you should not view these accounts as credit rebuilding tools. Secondly, these creditors almost always issue credit lines just above the amount of your purchase; this creates an instant maxed out account. If opening a store card gets you a nice discount, do it! But try to pay it off as soon as possible.
Closing Good Accounts
There is nothing wrong with simplifying your life. In the spirit of spring-cleaning many people close out inactive credit cards. Oops! In the word of credit repair and credit score optimization old credit is king. You are better off, in most cases, leaving these old accounts open. On the other hand, if you have lots of cards you may be better off closing a few. There is a tipping point. Keep five cards open. Close the excess, but set your priorities. Lower rate cards have the financial benefit, and older cards have the credit score benefit.
Get Some Good Credit Repair Advice
There is no need to struggle with credit repair on your own. Call a credit repair professional and ask for a consultation. An expert should be able to quickly identify all of the actions that should be taken to balance out the content of your credit and optimize your credit scores. Need credit repair help? Please feel free to give us a call.