Credit Repair and Existing Credit Cards
Credit repair can provide benefits beyond obvious derogatory issues. Increasingly, existing creditors are monitoring your universal payment history and altering their terms accordingly. Over the last two years millions of people have been surprised to get a letter from their credit card companies informing them that their account limits have been reduced. Generally this has been an attempt on the part of credit card companies to mitigate risk. Specifically the lever used to make these decisions has been your credit report. Credit repair has a pervasive reach.
Your Limits and Your Scores
If you want your credit repair project to succeed you must reduce your revolving balances. Credit scores hinge largely on the relationship between your credit card balances and your account limits. No matter how punctual your payments, if you keep your balances near the account limit your scores will suffer. For optimal credit repair success, reduce your balances so that you are only utilizing 20% of the card limit.
Rebuild With Secured Cards
If you do not have any open accounts you must start to rebuild right now. Credit repair can clean up derogatory information on your report, but without open credit cards your scores will languish. In today's credit environment you may not be able to qualify for regular credit cards. Don't worry; just get a couple of secured cards. They are the perfect credit repair tool. Keep your balances low, make your payments on time, and watch your scores climb.
Credit Card Timing Issues
If you are planning a significant transaction in the immediate future and need your scores to be their best you should be aware of credit card timing issues. If you plan to pay down your balances to boost your scores make sure to do it at least 60 days in advance; the credit bureaus can take this long to reflect the new balance information. And if you are going to open new credit cards as part of your credit repair effort, be careful. New credit cards will lower your scores for the first couple of months they report. In the long term the score benefits of these new cards will be impressive, but watch your timing.
Avoid Store Cards
Store cards are not good for your credit repair project. Fair Isaac, the creator of the FICO scoring model, has a bias against high cost consumer debt. Some store cards may offer great benefits, but nevertheless should be avoided when you are trying to boost your scores. For real score benefits stick with MasterCard, Visa, American Express, and Discover.
How Many Credit Cards?
Don't go crazy with credit cards. For optimal credit repair results, when you are trying to rebuild your credit, you only need two active accounts. In the long run, as your scores improve, you will receive offers for more cards. If you go over 5 cards you will start to lose points as FICO will start to see you as a potential risk.
Get a Professional Evaluation
Most credit repair services offer a free consultation and should be happy to review your credit report to help you map out a plan. There may be many opportunities to restructure the content of your report. Even small adjustments can translate into significant credit score gains. It's your credit, and it matters!
