Posts Tagged ‘Unsecured Credit Cards’

How Students Can Repair Credit Score History

Sure, there are credit cards for people with bad credit and you can still get a loan with bad credit, but why not focus on how to repair credit score history to ensure that you get the best deals in life? Students are often handed their first unsecured credit card with little explanation on how to use it wisely. Most understand that it’s ideal to only use what can be paid off within the month, but the balance can so easily accumulate. Many people don’t realize that it could take 10 years to pay off their balances if they just pay the minimum monthly payments and that maxing out their cards will drop their scores significantly, as will paying one bill late.

The first step to repairing your credit score history is to understand the breakdown of that three-digit number and what factors into your score. Your payment history comprises 35% of the score, so always pay every bill and credit payment in advance. This tells the lender how likely you are to pay them in full and on-time, without hassle. Also, the more recent the mistake, the worse it will be for your score. Another 30% of the score is based on outstanding debt, such as how much you owe on car loans or home loans and how many credit cards you have at their credit limits. You should have no more than 3 credit cards at 25% or less of their limits. This indicates whether you’re out-of-control, using up your limits, and whether you’re literally living off credit or not. The length of time you’ve had credit will account for 15% percent of your score because lenders want to see that you have a long-standing history of paying responsibly. Furthermore, 10% of the score is based on the number of inquiries on your report. If you are applying furiously for tons of credit cards, then this indicates that you’re in some kind of financial trouble. The last 10% of the score is based on the types of credit you currently have, which should be a mix of unsecured credit cards and revolving loans to show you’re capable of managing money. Credit report repair should start with making timely payments, then working balances down to 30% of your credit limit, then on to things like type of credit.

To repair credit score numbers overnight, many credit repair companies will call and dispute items, dates, status or other information found on your credit report. You can also do this work yourself by pulling up your free credit report at www.annualcreditreport.com, then writing letters to the credit bureau and contacting past creditors to fix credit errors. If the lender doesn’t respond to your inquiries, then the items will be changed to your version of the truth or automatically dismissed, which can sometimes improve credit scores by as much as 100 points. However, if the negative information is all true, then your best hope is time and improved money management habits.

You can apply for a secured credit card to repair credit score history as well. This is particularly useful for people who wouldn’t be approved for an unsecured credit card. You’ll deposit money with a lender and then use your card as you would a debit card. Screen your card issuer carefully, though, as there are a lot of credit repair scams. The best cards will offer no application fee, no annual fee, will be reported to all three credit bureaus and will convert to a regular credit card after 12-18 months of on-time payments. After you’ve had your credit card for a year, then you may want to apply for a small installment loan from a bank or your credit union. Choose something with a year or two timeframe and limit the amount of interest you pay.