Credit repair can involve much more than simply getting negative items removed from your credit report. If you have very limited time, removing negative items may be your only credit repair choice, but if you really want to do the best job of improving your credit, you should take the time to also work on rebuilding your credit. Your credit score is determined by more than just the negative items on your credit report. In fact, if the negative items on your credit report are more than a couple of years old your open accounts have a much larger impact on your credit score.
Keep in mind that the advice you are about to receive should be used with great caution. If you have had credit problems in the past, slipping back into old habits of trying to live above your means can be easy. However, the only way to obtain a higher credit score is to show that you can use credit responsibly. Many of the tips below involve using products or services that consumer experts or financial gurus who believe in not using credit will warn you against because you may have to pay extra fees that a person with good credit would not have to pay. If you have good credit you should not be using these techniques, and once you achieve a good credit score using these techniques you should drop these services over time.
Below are some ways to improve the open account portion of your credit report.
Tip Number One – Use merchandise cards that get reported to credit bureaus.
A merchandise card is an account which is generally only good at one store or group of stores. You can do an internet search and find a wide variety of them available. These cards have higher fees and are not of much use except that most people, even those with poor credit, are given a credit limit of $5000 to $10000 that reports to the credit bureaus. Over time, one of the most significant factors in raising your credit score will be the amount of unused credit you have available. You may have to buy an overpriced or unneeded product every once in a while to keep the card active, but that extra credit limit can raise your credit score by 50 to 100 points. This will help you get better credit offers over time.
Tip Number Two – Get some secured and/or “sub-prime” credit cards that report to the credit bureaus
Once again, these may have ridiculous annual fees and high interest rates when compared to what is available to people who already have good credit scores, but if you don’t have good credit those costs are well worth it for some people who need to improve their credit profile as quickly as possible.
Tip Number Three – Use those credit and merchandise cards regularly.
Having a large available credit balance is one aspect of a higher credit score, but using that credit responsibly is just as important. The easiest way to handle this if you have had problems using credit is to set up a separate checking account (or prepaid debit card account if you don’t yet have a checking account). Always have the cash available for your purchases, but use the credit cards instead. Every time you use the credit card, stash the cash for the purchase in the account you have set up. This way you will always have the money to pay the cards off when the time comes.
Tip Number Four – Any time you have the chance, be sure that you opt in to receive marketing offers from your creditors.
This can cause an irritating increase in the amount of junk mail that you receive but that is a small price to pay for the opportunities you will receive to get better credit cards. As time goes by and you make more payments on time, you will start receiving offers for better credit cards with lower interest rates and lower fees. Take advantage of the best of these, but wait before closing your original accounts entirely. Only close them if the fees for them are absolutely intolerable and only if you already have another account with at least the same credit limit.
Tip Number Five – Lower the balances on any cards you already have
Often, when people have low credit scores the problem is that they have maxed out the credit cards they have. Your first option should be to do whatever is necessary to pay down those balances. Have a garage sale, cash in savings, get a part time job, or whatever you need to do to lower those balances. In the end, paying them off is the only long term solution for your credit score. However, in the meantime, once you have some secured cards or subprime cards available, you can transfer some of the balances from the maxed out cards to the new account. This will raise your credit score quickly. However, if you have time paying them off is the best option.
Tip Number 6 – Never, ever, ever be late on a payment on any of these accounts.
Even if you have to live on beans and rice, never let a payment on one of these accounts be late or the entire project to raise your credit score will be ruined completely. Raising your credit score in this manner can be risky and this is the biggest risk of all. You must be fully committed to keeping these payments on time.
Tip Number 7 – Start applying for regular credit cards.
After 8 to 10 months of on time payments you will start to receive those offers for better cards that you opted in to receive. Some of these offers will be for a department store or gas cards. These types of cards will improve your credit score a little, but don’t get too many of them. Try to concentrate on the big name cards if you can, however, go ahead and get a couple of the easier to qualify for a department store or gas cards. Be careful when applying for these. Every inquiry on your credit report, which does not match a new account will lower your credit score. So you may want to wait a couple of months after you start receiving these offers before you start applying.
These techniques for rebuilding your credit can be very risky. If you are not dead sure you are going to make the payments on time, then don’t even start down this path. However, if your circumstances have changed drastically (for example, you have more income now) and you believe you can handle the costs, these techniques can work wonders for improving your credit score.
If you have a business than you can always opt for an unsecured business loan to ensure your credit doesn’t get hampered.