Jim Kemish asked:


The Growing Importance of Your Credit Score

Credit repair revolves around credit score improvement, and for good cause. You are probably aware that a low credit score can keep you from getting the credit you want. But did you know that lenders set interest rates based on credit scores? Late in 2007, Fannie Mae and Freddy Mac, the federally charted mortgage giants, modified their pricing to be more sensitive to credit scores than ever before. Even borrowers with excellent credit will now have their rate adjusted based on incremental score differences.

Every Point Counts

Mortgage lenders are not alone in their recent pricing policy changes. Auto finance companies, long known for tiered pricing, have also sharpened their pencils and are more score sensitive than ever. If you are applying for a loan you should be aware that every point on your credit score could affect your interest rate. Fortunately there is a way to control your credit scores and hasten your credit repair goals.

Credit Cards the Credit Repair Powerhouse

Effective credit repair is all encompassing. But there is a special category of debt that offers more control over your scores than you ever imagined – if you know what to do. Credit cards have a special place in the FICO scoring model, and therefore in your credit repair effort as well. Fair Isaac and Company, the creator of the FICO scoring model, interprets the way you use your credit card as a primary indicator of the risk a lender will assume when lending you money. And there is reasonable logic involved.

Credit Cards as a Barometer of Risk

Fair Isaac and Company is in the business of measuring the risk of lending money. Their method is to assign numeric value to every behavior they can identify within your credit file. These values are measured by a complex algorithm, or formula, which they license to the credit bureaus. The credit bureaus apply this formula to the information they collect about you and come up with a single number; your credit score.

Credit Card Behavior

Fair Isaac gives your credit cards special importance because your balances can change monthly and contain several indicators of potential risk. The indicators measured by Fair Isaac include your payment record, your balance relative to your high credit limit, and the age of the card. In addition, the importance of each indicator varies based on the value of the other categories. Let’s see why.

Credit Repair Rule Number One – On Time Payments

Many people involved in a credit repair effort open new credit cards to rebuild their credit. If managed correctly this can be a powerful score booster. But there is a dark side as well. If you miss a payment Fair Isaac will cut your score dramatically as a way of alerting lenders that you are a high risk. It’s simple. Your new credit card was seen by Fair Isaac as a test of your ability to manage new debt. And you failed. Credit repair rule number one, make your payments on time.

High Balances Equal Credit Repair Trouble

So, you got a new credit card, ran the balance up to the limit, and now you wonder why your credit repair efforts are not working. You can afford the payments, and you’re making them on time. What’s the problem? Unfortunately, all Fair Isaac can see is unproven debt and a person who may have no restraint. So you get categorized with a statistical majority who get in over their heads and soon default. As a result Fair Isaac will knock your credit score down to warn potential lenders to steer clear. Do you want to keep your scores up? Please keep your balances down.

The Age of Your Credit Cards

Once you have proven to Fair Isaac that you can manage the firepower in your wallet you will be rewarded with increased latitude. Your score will still suffer if you make a late payment, and you will be penalized if you let your balance approach the limit, but not as much. In addition, you will be rewarded with a higher score as Fair Isaac becomes more confident in your staying power. When it comes to credit repair, time is your friend.

Reaching Your Credit Repair Goals

Do you want to optimize your credit score? Make your payments on time and watch those balances. The latest release of the FICO score model recognizes five balance-to-limit ratios: 20%, 40%, 60%, 80%, and 100%. The first two tiers, 20% and 40%, will increase your scores, 60% is neutral, 80% is bad, and 100% is terrible. There is also a special deadly over 100% category, which you can expect to obliterate your score. If your credit cards are under one year old your behavior is especially important. If you exercise caution, your scores will soar, and you will reach your credit repair goals.

Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.

Jim Kemish asked:


Pay Your Bills on Time

Credit repair means timely payments. Does this go without saying? If you want to repair your credit and improve your credit scores you cannot afford new late payments on your credit report. New late payments will have a major impact on your scores, as much as 100 points. The initial impact of a late payment will fade over time, so get those late payments behind you forever.

Open New Accounts

If you don’t have any open and active accounts on your credit report you cannot expect your credit repair effort to succeed. Credit scores are based on two broad categories of data, the good and the bad.  Removing the bad stuff will get you halfway to your goal, but in the world of credit halfway doesn’t count for much. You need to build the good as well. It’s time to open new accounts, and credit cards are the perfect credit repair tool.

Try Secured Credit Cards

If you are trying to build new credit but can’t get approved for a credit card, try a secured card. It’s easy! Secured credit cards require a small saving account which will usually secure the entire credit line on your new card. Most secure cards require a minimum deposit of two to three hundred dollars. Don’t be embarrassed by the small amount, these little cards carry big credit repair power.

Manage Your Revolving Balances

The key to optimizing your credit scores with credit cards – aside from making your payments on time – is prudent balance management. The lower the better, but there are specific targets you should know. The current credit scoring model in use by lenders recognizes 20, 40, 60, 80, and 100 percent usage. 20 and 40 are good, 60 is neutral, while 80 and 100 percent usage will reduce your scores, and if you want credit repair success, don’t even think of going over the limit.

Credit Repair and Authorized User Cards

Authorized user accounts have been the subject of much debate. Some credit repair companies, operating in a gray area of the law, have sold authorized card status for years to people who wanted a quick credit score boost. On July 31, 2008 Fair Isaac announced a software fix which blocks the benefit of these brokered accounts while leaving intact the benefit of legitimate spouse and family member cards. So if you have a relative with awesome credit that wants to help your credit repair project, have them add you as an authorized user and watch your score pop.

Credit Repair and Your Student Loans

If you have student loan problems you should pick up the phone right now (really, right now) and explore the many options that are available to get you back on track. Student loans are unique amongst all forms of debt; they have no statute of limitation for collection. The longer you ignore them the worse it gets. As tough as it sounds, there are many great resolutions available. The Student Loan Ombudsman Office has been set up to help you understand your rights. Call them at (877) 557-2575.

Clean Up Your Reports

Don’t believe everything you read, especially if it is on your credit report. Credit reports are typically loaded with errors, many of which can devastate your credit scores. Order all three of your reports, one from each bureau and plan to spend an hour proof reading each one. Credit repair can be the best time you ever invested. Check every detail including the neutral looking information like credit limits and reporting dates. Once you have identified the errors dispute them with the credit bureaus.

Need Help? Hire a Credit Repair Pro

If you are not comfortable reading your credit reports, or if you don’t have the time, hire a pro. A credit repair professional will insure that the job is done right. They will check statute of limitation dates and reporting period limits, identify compliance issues that may otherwise be hard to spot, write the dispute letters for you, manage re-disputes, and counsel you to insure the optimal outcome. Credit repair is important, take action today.

Copyright © 2008 James W. Kemish. All Content. All Rights Reserved.