If you really want your credit repair effort to succeed you must have at least two open mainstream revolving credit cards. By mainstream I mean MasterCard, Visa, American Express, or Discover. There are no substitutes. Store cards are useless for building your credit, in fact, they are downright dangerous. And consumer debt like furniture, appliance, and electronic store financing is not much better and should be avoided if you are trying to get your credit repair effort off the ground. Here are the problems with store cards and consumer debt.
Store Card Trouble
There are several reasons that store card accounts will halt your credit repair progress, knocking as much as 150 points from your precious score and leave you wondering what went wrong. Most score cards are opened at the point of purchase. And in most cases the credit limit is set only ten percent over the purchase amount. The problem here is that you get three simultaneous strikes against your credit score. First, you get an inquiry. Second, any new account appearing on your credit report will cause your score to fall for the first three months. And third, any revolving account with a high balance relative to the limit will put a major dent in your credit repair project.
Credit Repair and Consumer Debt
Common forms of consumer debt include furniture, appliance, and electronic store financing. Store cards and these other forms of consumer debt serve their purpose, and can provide great convenience when used right, but there is a dark side, and a reason that anyone in a credit repair program should avoid them while in credit rebuilding mode. First is the hit from the inquiry. Second is the appearance of the new account. And third, as above, is the deadly balance to limit ratio impact on your credit score. Put it all together and your credit repair results are heading the wrong direction. But there is more.
Credit Repair Prejudice
Fair Isaac Corp, the creator of the credit scoring model used by lenders, has a bias against store cards and consumer debt. Even if you were to manage these accounts with great care, reducing the balance and letting the account age well beyond the first three months, these accounts are still credit repair poison. These forms of debt are generally inferior, more costly, and often used by consumers that have no other options. This may sound harsh, but Fair Isaac interprets the use of these forms of debt as potential sign of future financial trouble and adjusts your credit score accordingly. So if you want the right credit repair results choose your accounts wisely. Good luck!