The Path to Perfection
Perfect credit requires timely payments, but that is just the beginning. If your goal is to have the highest possible credit score you must understand the mechanism of the FICO scoring model and structure the content of your report accordingly. Here are some well tested credit repair tips that will take you to your goal. Many of the adjustments you must make will seem like common sense, while others will be less clear, but you cannot reach the summit of credit perfection without playing by the rules.
Don’t’ make late payments. This cannot be over emphasized. A single late payment can devastate your credit score, and although the impact of a single isolated derogatory issue will fade substantially in a matter of months, it can put a serious dent in any financing activity you have in mind for the immediate present. Make sure this does not happen. Avoid silly mistakes; if you have a payment dispute make your payments on time until resolution, if you return a purchase don’t count on the credit to cover your payment on time. When it comes to credit repair, every detail matters.
Build New Credit
If hard times have left you without credit, you must open accounts now. Your credit score will languish forever if you are not feeding the credit bureaus positive data every month. If you can’t get approved for regular credit cards, get secured cards. The limit is of no consequence. Just get started today. Secured cards are the perfect credit repair tool and can make a major difference in your scores. As your score improves you will be able to phase out the secured cards as you are offered superior unsecured cards.
Eliminate Store Cards
The FICO scoring model does not treat all debt the same. Store cards and consumer debt, like furniture loans, are not a good way to rebuild credit. There are several reasons for this, but the crux of the issue is the built-in FICO bias against this type of debt. There is some logic behind this treatment, as this type of debt is often inferior and in many cases has a built in budget “time bomb” in the form of tempting time-limited no payment offers. This is not entirely fair, as many of these
offers make great financial sense, so make your best choice, but be aware.
Optimize Revolving Debt
Keep your revolving balances as low as possible. The optimal revolving balance for credit repair purposes is under 20 percent of the available limit. The FICO scoring model puts major importance on this factor; you can lose over 100 points for a maxed out credit card depending on the overall content of your credit report. The more depth and breadth your credit has the smaller will be the impact, but don’t ignore your balances. If you are planning any significant loan application in the near future make sure to reduce your balances at least 60 days in advance as the credit bureau balance updates are lagging.
Structure the Report Content
I am often asked what a perfect 850 credit score looks like. I’ve never seen a perfect 850, and wonder if such technical perfection is possible, but I have seen successful credit repair clients achieve scores over 820 and they all have similar characteristics. The perfect credit score seems to include the following: one mortgage over three years old, one or two auto loans over two years old, and between three and five credit cards over two years old with very low balances. You will notice that there is a time factor involved in all of these accounts mentioned, but there is also a neat equilibrium of clean installment and revolving debt.
Pay a Consultant
Your credit is important. Most lenders rate and price loan applications based on scores. The difference between decent credit and great credit can translate into thousands of dollars in interest payments each year. You cannot afford to ignore any opportunity to optimize your scores. Professional credit repair services are very affordable and will insure that no opportunity is missed. If you don’t feel up to the task yourself, make an investment in your life and hire a credit repair professional.
Copyright © 2009 Ian Webber. All Content. All Rights Reserved.
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Ian Webber is an expert in consumer law and credit repair. Ian is a graduate of the London School of Economics and The University of Chicago where he earned his LLM. Ian consults with one of the leading online credit repair services and is currently based in Florida.