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Michael Zuren

8 Steps to Better Credit

Saturday, October 15, 2016 - Article by: Michael Zuren - American Midwest Mortgage - Message

This blog will help you repair and re-establish your credit. The information in this blog will take the guesswork out of improving your credit and pulling your scores up. The following details will help you understand how a credit score is calculated.

The Fair Isaac Corporation developed the "FICO" scoring system. This system calculates credit scores by applying algorithms, which includes the following: past credit history, type of credit used, length of payment history, and percentage of credit used. Each bureau updates scores every 30 days. Keep in mind that creditors can report payment, balance, and account delinquency status at different times during the month.

Below is an example of what the FICO score calculation is composed of:

o35% Payment history

o30% Percentage of credit limit used on revolving debt

o15% Length of payment history

o10% Type of credit used

o10% Inquiries

By understanding what factors are used to calculate a credit score, the following suggestions will help you repair and re-establish your credit.

1. Request Credit Report - Request a free copy of your report from This report will include your credit information from the 3 main agencies (Transunion, Experian, and Equifax).

2. Review Credit Report - Review your report and dispute any inaccuracies.

3. Bring Your Past Due Accounts Current - Usually you can bring delinquent student loans current by negotiating a payment arrangement with the creditor. Then after 6 months of on time payments, the creditor will likely report the account as current. Another suggestion would be to change the payments on credit cards and loans to an automatic deduction. That will ensure your future payments are paid on time.

4. Avoid Closing Revolving Accounts - Usually the credit bureau does not differentiate between a credit card closed by the consumer or the creditor. Closing accounts can affect your score by decreasing the amount of long-term established credit.

5. Rebuilding Your Credit - Secure credit cards are offered by large banks online, local banks, and credit unions. A secure card usually requires a $300 to $500 deposit to open an account. This type of credit card will report payment activity to the credit bureaus just like a standard credit card. You may need a co-signer if your credit scores are below 500. Remember to keep your card balances under 30% of the available limit to maximize your scores. If you are unable to open a secure card, look into becoming an authorized user with a relative.

6. Limit Your Inquiries - When shopping for a new credit card, installment, or auto loan research the requirements first. If you do not qualify for the loan, go to another lending institution. The last thing you want to do is lower your credit scores from excessive inquiries.

7. Protect Your Identity - Contact the credit bureaus to put a freeze on your accounts. This will prevent new accounts from being opened unless you contact the bureaus first. Identity theft protection services can be purchased which will monitor your credit activity and alert you of any potential fraud.

8. Seek Help - If your debts are overwhelming, contact a credit counseling agency or bankruptcy attorney for advice.

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