With the credit crunch making more difficult than ever to secure a mortgage, it’s never been more important to make sure that you maintain a good credit score. While it is certainly possible to repair your credit after running into trouble, the best thing to do is not to allow your credit score to be damaged in the first place. Regardless of if you have a long and well established credit history or have just gotten your first credit card, there are some things which you should know about keeping your credit in god shape and achieving credit restoration after a misstep.
One of the most important things to know about your credit score is that about 35% of it is based on your payment history. Your credit report goes back seven years; but it is the two most recent years which potential creditors will be most concerned with. How late your payments are makes a big difference. A payment which is 30 days late is not too serious, but one which is more than 90 days late is a big problem. Remember, it’s easier to keep your account in good shape than it is to repair it.
The best thing to do is to have different types of accounts and manage them all responsible. You should have a credit card which you keep a very small balance on (or keep paid off every month), along with an installment loan such as a car loan. If possible, you should have a mortgage too. Having several different types of accounts which you are managing well tells creditors that you are a good risk.
You should also avoid applying for any credit which you do not actually need. Opening too many accounts (or even making a large volume of inquiries) will have a negative effect on your credit score. You will also be exposing yourself to the temptation to use these accounts; this can get you into trouble. By only opening accounts you actually need, you can avoid having to use credit restoration.
Have a look at your credit report and check it to be sure that everything there is accurate ? this is a good beginning to any credit restoration plan. If the credit bureau can’t prove that an account is yours, you can have it taken off of your report. If you see small debts which you can afford to repay, pay these off.
If there are larger amounts, get in touch with the creditor and try to make a settlement with them. They will often take as much as half of the balance off if you are willing to work with them to repay the debt. While this settlement will still show on your credit report, it’s a lot better than having a debt on your report.
Even with the best of intentions, things will happen from time to time. For reasons entirely beyond your control, you can find your credit rating taking a hit. However, don’t let this discourage you. Credit restoration can get you back on track. Stay determined and you’ll be able to reestablish good credit once again.
