When many people think about credit repair, they think about “ removing negative“ from their credit report. Unfortunately, they stop there. What those people are missing is that there is more to improving your credit score than just removing negative items.
A portion of your score consists of credit utilization, for instance. So while removing negative accounts is great, you’ll be even better off if you can start building positive payment history too.
While many people focus completely on the “historical”aspect of credit repair (i.e. fixing things that have already gone wrong), a much better approach is to not only try to fix things from the past but also work on the future by attempting to rebuild credit.
And how exactly is that done?
Let’s say that you have some late payments, collections, charge-offs, and other negative items on your credit reports. It’s great that you’re attempting to clean up your credit by tackling those things, but there is a lot more that you can do that will help your credit score.
You might do something like…
1. Get a $5,000 or $10,000 line of credit added to your credit report using a merchandise card that reports to at least one major credit bureau. This will raise your high credit limit substantially and may help open the door for pre-approved credit offers.
2. Get a couple more credit cards, such as a sub-prime (high fee) Visa or MasterCard or a secured credit card. Whether you use one type of card or both, make sure that they report to the credit bureaus (as they are useless for rebuilding credit if they do not.)
3. Make regular purchases using your Visa/Master cards and run up manageable balances. Pay them off over the course of 10 months or so, and then do it again. This way you will build positive payment history. Do the same thing with the merchandise card to add to the positive payment history you are building.
4. Be sure to NEVER miss a payment or be late. If you do, you’re working against your goal of rebuilding credit. You must pay on time every time, period.
5. Make sure you are “OPTED IN” to marketing offers based on your credit and relationships with your creditors. This will help insure that you start receiving pre-approved offers as quickly as possible.
6. If you have any existing credit cards that are maxed out or have very high balances, consider moving the balances around or paying off some of the balance so that the usage isn’t so high (though the merchandise card account should help with this).
7. After you have started receiving credit card offers in the mail, pick a good one and apply. You can also try starting with a department store card as sometimes these cards will be easier to get approved for.
The whole point of this process of “rebuilding” credit is to build up payment history and add new positive accounts to your credit report so that your credit will look better to lenders offering loans and credit cards with better terms. Most people will find that their credit score goes up as a result of their efforts, and in anywhere from 3 months to a year they will be getting all kinds of offers in the mail for better credit cards with lower fees and higher credit limits.
As you and I both know there is a ton of free credit building and repair information out there. But how do we separate or know whats valid, useful information and whats a scam, outdated, or just plain wrong? Luckily thats one of our goals. To find, create, and distribute highly effective and actionable information that you can start using right away.
I asked three very well known credit experts one simple question. “What are 2-3 habits that everyone building or rebuilding credit should have or adopt to be successful.” There is so much content out there that is either out of date, misleading, or simply wrong and on of our goals at CR Publishing is to provide a place for the consumer to get honest and effective credit repair help and information!
Many of you know Dan Sater. Dan has been serving as our “In-House” Credit Expert and answering all of your questions on our Members-Only Forum. Dan has also been in the credit repair industry for over 20 years and has helped thousands of his own clients and members of the CR Publishing Family build and rebuild their credit… Here is what Dan had to say when I asked him “What are three habits that someone should have or adopt when building or rebuilding their credit?”
It is hard to pick only three habits to have in building or rebuilding credit.
MAKING TIMELY PAYMENTS
The first must be to Pay Bills On Time!! If you are currently behind on a payment, you must stop the bleeding and bring that account current. A recent late payment will be devastating to building or maintaining a good credit score. If one has a great score, one late payment can drop their scores by over 100 points. Because this is so important, and we all have busy life where it is easy to forget about making a payment, I recommend that you use your banks autopay system to be set up to pay at least the minimum payment in case you forget to make the payment.
KEEPING CREDIT CARDS OPEN
Don’t close credit cards that you decide you don’t want to use. FICO has said for many, many years that you never, never, never get any benefit by closing a credit card – it can only hurt your scores. From a scoring point of view, any credit line you close will reduce the available credit limits and can lower your credit scores. If you have a number of credit cards you don’t want to use, (and they are paid off) put them in a drawer or another safe place. BUT, you need to take them out once, or better, twice a year and make at least a small purchase to keep them active and ensure that they will continue to be scored by the credit scoring model.
USING YOUR CREDIT EXCESSIVELY
The third bit of advice to build and maintain the best scores is not to charge your credit card balances anywhere near your credit limits. We call this maxing-out your credit cards.Let me impress how important this is for your credit scores. If you have good credit, no lates, collections charge offs or even public records appearing on your credit report, youwill lose a lot of points from your scores. How many points? If you have 5 or 6 credit cards and you max out those cards, you will see a point drop of 100 to125 points! This can take a perfect credit profile with no negatives reporting down from a prime, to a sub-prime rating overnight.
The second credit expert that we asked is Jose A. Rodriguez Jr. Jose is the CEO at Clean Slate Credit Solutionsand has personally helped hundred of people rebuild their credit, keep great credit, and even helps businesses build credit and get financing. Clean Slate’s mission statement is something that proves how dedicated they are when it comes to helping people with their credit. “Our mission is to help you escape credit prison and enjoy life with obtaining the credit you always wanted. With our “5 Plates to a Clean Slate” program, we will help you delete or correct inaccurate or unverifiable information from your credit report and empower you with the knowledge you need to maximize your credit scores.” Now lets take a look at what Jose has to say about building habits to build and rebuild great credit:
1. When building or rebuilding credit, you want to ensure that you are applying for the right cards. You can’t expect to get approved for an American Express or top tier Chase credit card, when your credit score doesn’t warrant that type of approval. I always tell my clients to start small. Get a secured credit card with their local bank or credit union, and possibly with Capital One & Discover who offer great credit builder/starter credit cards. They have to be able to show the top tier credit cards that they are responsible and can handle paying their credit cards on time. So in a sense, prove them selves. Even though they might have to put money down to get approved for credit cards in the beginning, it will be worth it in the long run because it is allowing them to get rewarded with a good credit score as they pay their credit card every month.
2. After getting approved for a secured credit card, you want to ask an immediate family member if they can add you as an authorized user to one or two of their credit cards. Please make sure that you are asking someone in your immediate family and not a friend. It has to be someone that you have an actual relationship with. The credit card that you get added as an authorized user to, should not have any late payments and should not be maxed out. By getting added to this credit card as an authorized user, you are adding the positive payment history and the length of history from when that card was open to your credit report. Imagine of the credit card is 10 years old, has a $10,000 limit and was never late. This would really boost your credit score and help you in the credit building process. I must add that you should never , I mean never purchase tradelines or authorized user accounts from a broker or another company. That is actually illegal since you have no direct relationship with person.
3. Now that you have one or two secured credit cards, and one or two authorized user accounts, (make sure they hit your credit report, usually within a month of applying and getting added), you want to continue to make on time payments and pay more than the minimum payment that is due. It is not necessary to pay off the entire balance, just make sure you do not go over 30-40% of the credit limit. If you have a $200 secured credit card, do not put more than $80 on the card or it can drop your credit score. Around the 6 month mark you paying your secured credit cards, you are going to ask the bank that you got the credit card from if they can switch the card to a regular credit card and return your deposit. Then, you want to apply for a department store credit card like Target or Kohls. Then in less than a year, you will have the credit score needed to apply for the top tier cards, like American Express and Chase.
So with these three steps, I promise you that if done correctly, you will build your credit properly and increase your credit score the right way. Another great tactic is that once you start applying for credit cards and are paying your cards on time & not maxing out your credit limit, you want to ask for a credit limit increase with your credit cards every 8 months. By doing this, it will increase your credit limit which will then increase your credit score.
The third expert we heard from was Derrick Harper Sr. of Point Boosters Credit Repair
Derrick was kind enough to hop on the phone with me around 7pm and share some of his amazing wealth of knowledge (you might be seeing more from him later)! He even gave us access to a FB Live Video that answers the question and then goes into some super tactical solutions that you can go and implement right away to rebuild your credit.