Rebuilding Credit: Get the Bad Credit Skeleton Out of Your Closet
If you’ve recently experienced a financial hardship or had a serious credit breach, letting time pass and taking some corrective action are two effective strategies for repairing the damage, according to a recent article in USA Today.
From banks to credit card companies, lenders use credit scores to evaluate the potential risk in lending money to someone, and scores are one of the main reasons credit is available to so many people. One of the most widely used is the FICO score. In 2013 alone, lenders purchased more than 10 billion FICO scores.
“The impact of any credit event on a person’s FICO score is strongest when it initially happens,” Anthony Sprauve, senior consumer credit specialist at FICO, told USA Today. “Current behavior carries more weight than past behavior.”
The news isn’t all bad: Because negative information from your past will eventually be deleted, you can take steps to improve your credit by taking control of your debts and building a new history of on-time payments.
The steps you take should include:
- Paying your all your bills on time — no exceptions
- Not exceeding 30 percent of the available credit on any of your credit cards at any point during the month
- Not opening new credit accounts
- Using your credit cards consistently and responsibly
- Reviewing your credit reports at least once per year for accuracy
If you take no steps to improve your credit, it may be difficult to secure a mortgage loan with favorable terms, and it will make refinancing more expensive.
View the full article for more tips on recovering from a bad credit event.
Source: “Time heals all wounds when it comes to credit,” USA Today (Nov. 30, 2014)