Credit Denied? It's Never Too Late to Mend!
Written by James Chan, Dongmiao Cui   


A credit score under 620 will make it very difficult for you to obtain loans and credit cards. You also want to improve your scores to borrow money at a cheaper cost. However repairing a bad credit score is not easy work. It requires strict self-discipline and good money management skills. To make this process easier, you can check out the following list of tips that can help boost your credit scores. Applying the tricks and sticking with a good spending habit in general may help you cut short the time you have to live with the consequences of a bad credit.


Paying Bills On Time

The only way to repair a score blemished by a bad payment history is to pay your bills in time. Focus on the most delinquent bills first. If left unpaid, the late payments may result in one or both of the following:
  1. Charge-off: This is an acknowledgement filed by the credit issuer to indicate that the debt is unlikely to be repaid. It is usually marked 180 days after you fail to make at least the minimum payment. Even though your creditor may have written off your bad debt, you are still required to make the payment.
     
  2. Collection Account: Your account can be turned over by the original credit issuer to a debt collection agency (however you have the rights to stand up against abusive debt collection practices). This can drop your credit score by 20-50 points, so you want avoid this at all costs.
Both of these scenarios will severely hurt your credit score. You want to make sure that you pay your late bills in time and pay off the delinquent accounts as early as possible.


Paying Off Debt

The amount of debt you owe is another factor that go into the calculation of your credit score. To fix a bad score negatively affected by your debts, you would want to pay down your debts as soon as possible. Although conventional wisdom says to always pay down the debt with the highest interest rate, you may also need to give special priority to maxed-out credit cards, since they tend to harm your credit score more severely.


Using Credit Cards Wisely

Even if you pay all your bills in full, on time, every time, running big balances on your credit cards can still damage your credit scores. This is because what typically used to calculate your credit scores is the credit utilization ratio. Creditors favor a bigger gap between your credit limits and the amount of credit you are using.

You can boost your credit scores by limiting your card uses to 30% or less of your credit limits. It will be helpful to convince your bank to raise your credit limit.

MSN Money offered another quick trick to widen the gap between the limit and your closing balance: pay off your debt about a week in advance of closing. By checking your last statement, you can find out on which day of the month your statement closes.


Taking Advantage of Old Cards

Old credit cards indicate your long credit history, which is good for your credit score. However if you have stopped using the oldest ones, they will not be given as much weight in the credit score calculation as the active cards. So you can use your old cards every few months and charge a relatively small amount; then pay off in full to increase your credit score.


Getting New Loans

If you do not have any installment accounts yet, getting an installment loan can help raise your score, especially if you are recovering from a credit calamity such as a bankruptcy. To find out more strategies about bouncing back after bankruptcy, please read How to rebuild credit score after bankruptcy.

More over, if you can get someone else with a good credit history to cosign your loan, you may be able to take out more loans than you normally can’t. You will also benefit from including their account history in your credit report.


Strengthening Your Credit File

With a bad credit, you are more likely to get rejected when applying for new credit cards. However your opportunities to rebuild a solid credit history are still open. One way to strengthen your credit file is to get a secured credit card. With a secured credit card, you pay an amount in advance as a deposit. If you don’t make your monthly minimum, money will be taken out of the deposit in order to make up for the difference.

You want to be careful with opening new credit card accounts. A spree of credit inquiries for new accounts will hurt your credit score.

That being said, however, opening saving accounts at your bank will not hurt. Rather it shows that you are making reserves to pay off debts. 


Negotiating With Your Lenders

If you have been paying bills on time most of time, and only missed one payment, your lender might be willing to drop that one late payment from your payment history. The better credit you have, or the better relationship you have with the company, the big chances you will have for this kind of “goodwill adjustment”.

You may also ask your lender to adjust the “age” of your accounts by erasing previous delinquencies if you have made a series of 12 or more payments in full, on time.




Last Updated on Wednesday, 16 February 2011 13:59