Credit Repair
Home Buyers Prep

Credit repair is often a necessary part of a major purchase. The importance of having good credit cannot be understated. So how do you overcome past mistakes?

Credit reporting is regulated by federal law. Derogatory credit can only be reported for a limited time, usually 7-10 years. Depending on nature of the credit issue, the time will vary. Eventually, bad credit naturally goes away. Here are some active approaches to credit management.

Remove Incorrect Information

So how can you fix it sooner and what issues can be repaired? The simple answer is that any incorrect information can be disputed. The law requires that upon your request, credit bureaus must verify information. If proven incorrect, the bureaus must correct your report within 30 days.

If you are really in a time crunch, contact Josh about "rapid rescore" options. It is possible for your credit report to be corrected within only a few days.

Pay Down High Balances

High credit balances have a negative effect on your credit score. Often, paying down certain balances can increase your score. It is important to plan and use strategy as to which accounts gets paid down and how much.

Most creditors prefer to see accounts with less than two thirds of the credit limit. For instance, it is wise to carry a balance under $2, 000 if your limit is $3,000. Creditors are often concerned with individual accounts and your overall credit limits combined.

On loans, the credit limit is usually equal to the original balance. Newly established loans are at 100% of their credit limit.

There are many factors to consider in your payment strategy. Several key factors are the interest rates of individual accounts and the effect each account has on your credit.

Sophisticated software is available to help you know how much any given payment will affect your credit score. Using such tools can save you thousands of dollars and many months of credit repair. Contact Josh if you would like a sophisticated credit analysis.

About Correct Information

Correct information cannot legitimately be removed from your credit bureau. If the derogatory information is correct, then time is the best medicine. Remember, consistently pay your bills to develop a good track record.

Derogatory information can remain on your credit report for up to 10 years. Even so, you may find that it no longer inhibits your mortgage qualification after a year or two. Particularly bad payment histories and collection accounts may take longer to overcome.

There is good news. Some lenders will only report derogatory information for a limited time. Perhaps only three to four years. Call your lender to find out their reporting guidelines. After that shorter time elapses, you may be able to dispute the information off of your credit report.

Be sure to check your local laws before disputing accurate information.

Open Several Credit Lines

Credit repair involves more than just removing the bad accounts. Good credit requires multiple good accounts. Balance is important to achieve the correct number and the correct types of accounts.

Some people prefer not to use credit for any purpose. This is not advisable unless required by a serious lack self control. Using credit doesn't need to cost any money. See Build Your Credit While Saving Money.

Most people who refuse to use credit cannot qualify for the home they want. This is because the lender has no proof of payment history. Credit history must be established over time - several years.

It is important to remember that excessive numbers of accounts are also unwise. Too many or too few lines of credit will damage your credit score. Here is a good rule of thumb.

1-2 car loans

2-3 credit cards

A mortgage

A personal line of credit

Total for all lines of credit around 4-6 accounts

Change Your Habits