Credit Card Repair
When you are trying to repair your credit, credit card repair may be the most important aspect of it.
Most credit scores are determined by credit history on lending that is unsecured. Meaning the loan or credit was extended purely on the judge of your financial character.
Whereas secured credit may use that judgement of your character in part but the loan or credit extension is guaranteed by the property used to secure it such as an automobile.
Credit scores are used by lenders to make a determination of how likely you are to pay back the money lent to you. So it makes sense that your "financial character" that these scores determine would be based on money lent without any motivation (such as loss of property) to pay it back.
situations that can hurt your credit
There are several situations that can make that credit score start to slide downward and result in the need for some credit card repair. Some of these situations are obvious and others not quite so till a loan or credit denial comes your way. Knowing what lenders will use as factors for denial can help you avoid these situations if possible.
- amounts on your accounts are too high or balance to limits are too high Keeping balances on any credit cards that you might have under the 30% use of your balance will keep you from getting this factor held against you.
- too many of your accounts have balances Holding too much debt is never attractive to lenders. It also makes life difficult if emergencies arise. Try to use only one card that gets paid at the end of the month for everyday purchases. Keep one card free of any balances for emergencies. Any other cards with debt should be paid down as soon as possible.
- too many recently opened accounts and too many inquiries Generally it is suggested that you apply for credit only once or twice in a 12 month period. After that you will start losing more than just a few points on your credit score. Lenders do not view this behavior well. It is looked upon as acts of a desperate person.
- lack of recent history or too few accounts with recent history. Lending decisions are made usually on the last two years of your credit history. If you have accounts but have stopped using them and have no balances that is a good thing. Lack of debt is something many are yearning for at this time, but you must use credit in order to show a history. You can also run the risk of having that credit line closed by the lender for lack of activity. Using cards with 0 balances every 3-6 months will keep that from happening and this factor as a reason for denial. You don't have to carry balances, occasional use of these cards is a good credit card repair practice.
- late payments, missed payments and delinquencies. These are of the actions that will obviously hurt your credit. One late or missed payment will hurt, but with time and good payment history added back in this will only be a slight blemish. Consistent missed payments or letting your account get charged off and into collections will put you into the bad credit category. Usually this will lead to the following being labeled on a credit denial notification.
- too many accounts with delinquencies
- too few accounts paid as agreed
- Serious delinquencies
Usually the last three are due to special circumstances beyond our control. However these came to be, clearing them up as soon as possible or fixing the problem that made these occur is a high priority. The longer they are back in good standing the better your credit will become.
If your situation is only slightly less than desirable such as some of the scenarios above then some fine tuning and adjustments are all that will be needed. Time is also a factor in credit card repair. After cleaning up your credit report, it will take a few months for the changes to weigh in.
When there is a problem with your credit but you are not sure of where it may be, getting a copy of your credit report is your next step. Finding a good credit monitoring program may also be helpful. Getting your report is usually part of the deal and many times negative factors that you were looking for will already be highlighted for you. A good program will also suggest ways to improve that score with your current situation in mind.
If your spending got a little out of hand then perhaps you need to put those credit cards away and maybe consider debt consolidation, debt management or counseling as a way to solve that situation.
Counseling is the way to go if you want credit card repair and you do not have the discipline to put a budget of your own in place. Many times they can work out a reduction in percentage rates or reduced payments if your income is lacking.
Once you get balances under 30% of your total limit on each account, you should see that credit score improve.
When credit turns bad
There are many circumstances that lead up to a bad credit situation that needs credit card repair. Sometimes the situation is in your control and other times it may not be. Job loss, illness either yourself or a family member, the resulting care giving or costly medical expenses, divorce. These can all make your situation seem overwhelming. Regardless, there will be decisions to be made about the best way to go about the credit card repair needed.
If your situation is a heavy debt load that you can no longer manage, some hard questions may need to be answered. You must figure out what is most important to you. Is the removal of the debt load more important or preserving the credit history. Sometimes people think the credit history must be preserved at all costs only to find out that it is not even feasible.
You need to be reasonable with what you can truly accomplish. If you are like many in this difficult economy and your pay has been cut or your hours shortened or worse you lost your job then preserving your history is probably not in the cards.
Sometimes we wait just a bit too long before taking any real action. Then late payments occur and if the situation is particularly bad a charge-off can occur. As soon as the situation starts to look like it's heading downward a call to your creditors to discuss the problem should be done quickly.
You may be able to save yourself problems before they truly start. Stress to your creditor that you want to avoid bankruptcy or collections. If you are not forceful enough they won't take you seriously till they have to when you have become a problem for them.
Then the damage is done leaving you thinking maybe the more aggressive forms of relieving the debt should have been taken at the onset. When you take the course of reducing debt as the more important aspect, your score and history may take more of a hit but then when it is reduced the damage is then stopped and you can focus on rebuilding that score.
If you don't assess your situation in the beginning properly and continue trying to save the credit history when it is not reasonable to do so then the damage can go on longer and go deeper.
So you may ask how do you reduce the debt when you your pay is less or gone? Usually either debt settlement or negotiation, some type of bankruptcy or some try using the statute of limitations as a methods to reduce or eliminate the debt. Problem being is that these stay on your report for long periods of time.
Though these stay on your report for a long time, if done right they stop the damage quicker allowing you to focus on adding good forms of credit back in. If you had a long history with good credit before the problems this would be to your advantage. Even if good credit was not in your history previously, the stopping of the damaging information and then adding good is the best course of action in credit card repair.
If your pay has recently been reduced and you have assets such as Certificates of Deposit or cash value to insurance policies and you have thought of liquidating them as a means to reduce debt then debt settlement or negotiation (which is what debt settlement is) is a good option as you want the most done with the money you have on hand.
Other problems leading to bad credit and credit card repair
There are those persons that never were able to build good credit in the first place. If you do not set a good financial foundation when you are using credit, many times it will lead to a bad credit needing credit card repair.
I have heard of many stories of those when they were young and just starting out with credit that ran up their cards, maxing them out and not being able to pay the money back.
Or they had a checking account with the accompanying debit card and constantly overdrawing without thought or oversight of their account as to how much funds were in that account.
Subsequently using more money then was at their disposal. Like the maxed out credit card they found themselves in the position of not being able to pay back the overdrawn amounts.
This particular situation will introduce you to the chex system and it's report. Once there you will find banks not willing to work with you till you clear the debt. This makes bill paying more difficult. One of the options to help this situation out are the prepaid credit card accounts that are popping up everywhere.
If not using these you will be forced into a cash only lifestyle which does teach restraint and discipline which are probably the best tools for credit card repair. Unfortunately learned the hard way.
