Phil's Personal Finance Tip of the Day:
Personal Finance: How Long Does It Take to Repair Credit?
By Alanna Ritchie/Debt.org
Adopting responsible credit habits is the only way to improve your credit score
and deciding when to start implementing changes is up to you.
You can begin addressing the problem of a low score by
understanding how your credit score is determined, what kind of activity
results in long-term credit blemishes and where you can make immediate
improvements.
Repairing credit is a process that takes time, and the exact
amount of time differs for everyone, depending on where your credit is now,
what type of activity damaged your history and what steps you are taking to
increase your score.
Immediate Changes
One way to quickly boost your credit score is to make any
corrections that have been overlooked in the past. You can obtain your credit report for free,
once a year, from each of the credit reporting agencies. If you inform them of errors, they should
respond to you within 30 days.
By taking the time to note any discrepancies, you will keep
yourself from losing points for mistakes you did not make or accounts that were
closed years ago.
How You Repair Credit
Part of expediting the credit repair process includes
understanding what factors contribute to low credit scores. The criteria to
measure your credit are based on these five main categories:
·
Payment history for credit lines
·
Amount owed on credit lines
·
Length of credit history
·
New credit lines
·
Types of credit lines
Making improvements in any of these areas can begin to raise
your credit score, even if it takes a substantial amount of time to notice the
difference.
Where to Start
The two categories that carry the most weight are payment
history and amounts owed. Actions that will impact this category are making
payments on time, carrying a lower month-to-month balance and utilizing a low
percentage of available credit.
You can increase your score by intentionally seeking to make
improvements in these categories. Make sure your phone receives alerts when
payments are due. Pay higher than the minimum amount owed. Sell personal items
to pay off debt and then stop
using credit cards to keep your balance lower than the maximum allowed on
each credit line. Each step makes a difference.
The Waiting Period
Many lenders look at the most recent information on your
report. So a record of a few years of on-time payments will make you look
favorable, even if there were late payments from five years ago. Because of
this, your credit record will reflect that your habits as a potential borrower
have improved, even if your score is not significantly improved yet.
To have a realistic understanding of the long-term
repercussions of certain credit choices, here are the lengths of time serious
actions will remain on your credit report; for accounts not paid, 7 years from
the date account first became past due; for late payments, 7 years; and for
bankruptcy, 7 to 10 years, depending on which type of bankruptcy is filed.
Taking on the task of repairing credit can be long and
difficult, but the sooner you take control of your debt the sooner your report
will reflect positive activity and your score eventually change.
Alanna Ritchie is a
content writer for Debt.org, where she writes about personal finance and little
smart ways to spend (and save) money. Alanna has an English degree from Rollins
College.
For more Personal Finance information please visit: http://www.debt.org/
No comments:
Post a Comment