The word is out. Your credit cards can make or break your credit improvement effort. Manage your credit cards right and your scores will take off; manage them wrong and you may send your scores into a nose dive.
The Utilization Ratios
You may pay your bills on time, but let your card balances get too high and your scores may fall by more than 100 points. The relationship between your current balance and your credit limit is called the Balance-to-Limit ratio. The FICO credit scoring model used by lenders recognizes five Balance-to-Limit ratios: 20, 40, 60, 80, and 100 percent.
Controlling Your Scores
You can think of a 60 percent Balance-to-Limit ratio as a neutral tipping point. The other Balance-to-Limit ratios will bring positive or negative results on a sliding scale. For the best credit repair results pay your balance below 20 percent and watch your scores jump. Conversely, if you exceed 100 percent your scores will plummet.
Scores Recover Quickly
Have you run up your balances and seen your scores fall? Here is some good news. Reduce your balances and your scores will rebound as quickly as your credit card issuer can update the bureaus. If you will need your scores in the near future please allow up to 60 days for your new balances to report to the bureaus.
Try Rapid Rescore
If you are getting a mortgage and absolutely need your scores updated to reflect your new reduced balances ask your mortgage lender about Rapid Rescore. Rapid Rescore is a credit repair tool offered exclusively by mortgage originators which permits them to update your credit scores with the credit bureaus in a matter of days.
Managing Secured Cards
For those of you in our credit repair program who have recently acquired new secured credit cards as part of the credit rebuilding process, balance management is doubly important. The FICO scoring model puts more weight on new accounts than older seasoned accounts, so be very careful with your balances.
Increase Your Limits
It may be helpful to know that you can reduce your Balance-to-Limit ratio, and increase your scores, without paying down your balance. Just ask your credit card issuer to increase your credit limit. The credit markets are tight these days and the creditor may not be willing to comply, but nothing ventured, nothing gained.
Credit Repair Help
There are many factors that affect your credit scores. If you are in our credit repair program we will provide guidance appropriate to your situation. If you are not currently in our program we invite you to contact us for a free consultation. We will be happy to discuss your issues and answer your questions about our credit repair services.