Six Ways to Quickly Repair your Credit

Before you can repair your credit it is important to understand what a credit score is, how it is generated and why it is used.

The credit score was originally created by a corporation called Fair Issac which developed the models for the credit score in the late 1950’s. They began to gain widespread use in the 1980’s and 1990’s when mortgage companies began to use them for automating the underwriting process in order to determine your eligibility to receive a mortgage approval. They have grown in popularity over the years as they began to be utilized by more and more credit grantor’s. Some felt that they took away the negative aspect of loan approval by removing the human tendency to discriminate, out of the decision making process. All you had to do was look at someones history, IE; their credit score to make the lending decision. Credit scores were kept a mystery by the credit bureau’s until the Federal Trade Commission revised the Fair Credit Reporting Act in 1996. Up until that time the consumer could not find out what their scores were. The law was updated in 2003 primarily due to laws passed in California which required lenders to provide California residents with the score used to make a decision on their mortgage loan applications. The law also required Equifax, Transunion and Experian to disclose the credit score to consumers that requested them. Scores now are not “freely” available but they are now available to the general public upon request for a “fair and reasonable fee”. The FTC or Federal Trade Commission oversees the credit bureaus and sets the rules instructing the bureaus how to operate. Still the law does not require the Credit Reporting Agencies to disclose the scores that lenders actually use. Many times the score a lender receives will differ from the score the consumer receives. So the CRA’s (Credit Reporting Agency’s) now disclose what they call “educational scores”,which although having some relationship to the score a lender gets is not the same. Mortgage companies are required by law to give a disclosure which shows the scores they use to determine an underwriting decision, as well as the reasons for those scores.

One way is to know your score is to order them directly through the CRA’s. Log onto, or Any of the three will direct you through the process of getting your credit scores. The cost for Equifax is $24.95 to receive all three of your scores. Experian will give you your credit report and score free, but you will pay extra if you want to get the score from the other agencies. TranUnion will also sell you there 3 in 1 credit scores and monitoring for $11.95 per month. Some of the other sites, like Free Credit and say they are free but if you go to their websites, you will find they ask you for your credit or debit card information, even though they say they are free. If you go to you can order your credit report free, however you will have to pay if you want to get your scores. You need to go to, call 1-877-322-8228 or fill out the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, PO Box 105281, Atlanta GA 30348-5281. At least with the free credit report you will be able to determine what information is in your report.

According to Credit Scores and Credit Reports by Evan Hendricks, “a credit score is a number that reflects your credit worthiness at a given point in time. For most models the higher the score the better the risk.” The score is based on information in your credit report created by data received from your creditors. Although each bureau has it’s own scoring model, there are similarities between them. 35% of your score is made up of payment histories (late payments, collection accounts, charged off accounts and public records). 30% of your score is account utilization (balances being carried on credit cards, installment loans and mortgages). 15% of the score is the length of your credit history, 10% is the credit mixture or the types of credit you carry, and 10% is inquires. Lets talk about each of these area’s in a little detail starting with payment history.

When you make a payment to your creditor that payment is reported to the credit agency as being on time. If you make the payment 30 days past the due date, that payment is considered late and is reported on the credit report as such. If the payment is 60 days past the due date it’s reported as one times 60 and if it’s 90 days past the due date it’s reported as one times 90. If the payment goes to 120 days past the due date then the payment is considered in default. The next step for the creditor is to begin reporting the account as a collection. This means the creditor will either turn the account over to an internal or external collection company to try to collect the debt owed. Some creditors will eventually advance the account to the point where they may go to court in your local jurisdiction and try to collect the debt through a court injunction. This is called a judgment. Judgment’s are generally as far as a creditor can go for unsecured debts. With installment accounts the creditor can go to the length of placing a lien against property. With a mortgage debt there is already a lien against your property. That’s what a mortgage is, so the creditor’s only recourse if you don’t pay is to foreclose (ask for the payment in full or sell the property in order to collect the money owed) on that lien. When a creditor goes to court to collect an unsecured debt and gets a judgment, that goes on your credit report as a public record.

Another 30% of your credit score is account utilization. Let’s say you have two credit cards and each card has a $500.00 high credit limit. You go out and charge your groceries, your gas and your coffee on your card. The balance on the card goes to $499.00. You get your credit card bill at the end of the month and your bill says this month your payment is $25.00. You faithfully mail in the $25.00. You do this each month. You never miss a payment and you always get the payment in on or before the due date. Your score is still going to negatively reflect on you because the balance to the high credit limit is considered to high. Now you only use this one card. Your other card stays at home in your drawer and you never use it. It would be better if you carried two cards with a $250.00 balance on each one than to carry the one card. The reason is you spread the risk among more players. The higher the balances on the card to the high credit limit issued to you by the credit granter the more unfavorable the score will be. The same applies with “Home Equity Loans”. Because most home equity loans are considered revolving accounts, if you have a high balance on the account, in other words you have borrowed against the account to or close to the maximum of the credit line, the scoring model will look at the home equity line just like the credit card and the score will reflect this accordingly. This is known as credit utilization.

15% of your credit score is the length of time you have used credit. The newer your credit history the more unfavorable the scoring model ranks the credit. Many times if you are a new credit user and you purchase a big ticket item, like a car or home, you will initially see your credit score drop. The computer model recognizes you have never had that much credit before and it is designed to calculate that into the risk you pose as a credit user. If your payments are on time, however, the drop is usually temporary and the score will soon go back up.

The type of credit you have is very important. Some say you don’t want any credit cards. Well that is actually not true with the credit scoring model. The model looks for credit cards in the history. Not having a card can actually hurt the score, although not dramatically. The best mixture is two or three credit cards, and one or two installment accounts.

Finally the model looks at inquires. This again is a very misunderstood area of the credit report. Many people think you should never have an inquiry on your credit. The fact is in order for someone to grant you credit, they will need to look at the current history, this is called an inquiry. Too many inquires can be detrimental but it depends on the number of inquires, how frequently they were done and for what purpose they were done. An inquiry for a credit card is more detrimental than one for a mortgage. Also only the first 10 inquires count against the credit score. When shopping for a mortgage or car loan, you can have fourteen inquires in a twenty-one day period without having it affect the credit score at all. This was not always the case. It was changed by law called the Fair And Accurate Credit Reporting Act or FACT ACT of 2003. For more information on the FACT ACT go to or link on to

There are a number of reasons why credit scores are very important. Most of those reasons revolve around finances. There are other reasons which are not directly related to finances. In order to get a security clearance to work in many government jobs you have to pass a background check. Part of that background check may include a credit check. According to a security clearance will include the following things; “verification of US Citizenship, search for investigative files and other records at the Federal agencies, such as the FBI, Search for criminal records at local law enforcement agencies, fingerprinting, polygraph (lie detector test), credit and other financial checks, checks of court records, rental agencies, and former employers and interviews with your references and you.” So having good credit scores can affect your getting a job.

As it relates to finances, credit scores can affect how much you pay for insurance on your car and home, how much you pay for credit card interest, how much you will pay to buy a car, a house or almost anything you want to purchase for which you cannot pay cash. As our society grows credit, and credit scores become more important.

Credit scores range from 850 to 300. A score of 780 to 850 is considered to be a low credit risk, meaning you can get any type of credit you desire without any problem. Scores of 740 to 780 are considered medium to low risk; scores of 690 to 740 are medium risk, 620 to 690 are high to medium risk and 620 and below are high risk or sub-prime risk. Your score can change quickly depending on changes in the history. Also insurers may use their own scoring models to determine the risk factors they want to consider.

According to statistics over 80% of the information contained in most peoples credit report is inaccurate or erroneous. That is a very sobering statement considering how much we are all judge based on this information. There may be many reasons why there is inaccurate information in your credit history. For instance, I have a son. He’s named after me. Information from my credit can appear in his report simply because we have the same name. Sometimes names are misspelled,social security numbers are transposed, or someone has a name similar to yours. Any of these things can cause errors to appear in your credit report. If you are not checking your credit, you will not know this has occurred. As a result you can get turned down for credit, and not know the reasons why you were turned down. Generally the creditor will only say it was due to information obtained from a credit bureau, but won’t say specifically what that information is. Many people just accept this and say “oh well, I guess I have bad credit”. That could be true or it could be there are correctable errors in your report. Remember these are human beings putting in the information, and even if it’s done electronically, computers can only report on information they receive. Correcting errors in your credit report can be a tedious process. Many people won’t even try because they see the task as daunting. There are services available which will correct errors for you, however you need to be very careful about using them if that is a route you choose. There are also many scams out there that will take your money, promising you they can raise your credit scores overnight. Please don’t fall prey to the scam artist. There is no one that can raise your scores overnight. There are however some legitimate service companies. You need to check them out with the FTC to see if they are compliant with the law. You can also do most, if not all of what they do yourself, and keep your hard earned dollars in your pocket. One company I recommend is Financial Destination, Inc.( They are a financial services company and have a service called CreditTrax which provides first class credit restoration services free as part of a membership. There is also a company called Credit Resources ( which provides this service for a fee. The fee can be very expensive, but if you don’t have the discipline to do this yourself, its worth having someone reputable do it for you. Mainly it’s time and conscientious effort and a plan for repaying your debt that will improve your credit and thereby your credit scores.

Some tricks of the trade that can give you a quick lift in your scores and are simple to do are:
1. Pay down the balances on credit cards to below 50% of the high credit limit. I have personally seen this on act lift scores between 50 and 100 points.
2. Open a new credit card. Most people when I tell them this look at me as if I am crazy. However if you don’t have credit or all your credit history is negative, you need to find away to create history that’s positive. One way to do this is with a credit card. You have to be careful about the card you get however as some have fees that will eat up the credit limit of the card even before you use it. A secured card that reports to all the bureaus is a good way to get a card. Always check the card to see what the fees are, if any. Look for a card that has very low or no fees.
3. Don’t pay collections unless they are new. Paying collections refreshes the date of last activity on the account. Remember the credit card is a history based on new information. When you pay off a collection you have to make sure the collection is accurate, that it was placed on your credit legally, and that paying it will not negatively affect your credit score. If it meets that criteria then get the creditor to give you a letter of deletion BEFORE you pay the collection account off.
4. Pay all your creditors on time. Time will heal your credit score if you pay your creditors on time. Negative items will come off your credit over time as well. For collection accounts, judgments late payment history, the time is seven years. For bankruptcy the time is ten years. For foreclosure and repossession accounts the time is also seven years.
5. You can ask your creditor to remove late history from your accounts. There is a saying, “you have not because you ask not”. Call your creditor, especially if you have been with them as a customer for a length of time and ask them if they will remove the late payment. You would be surprised at the number of times they may agree, just because they want to keep you as a customer. Make the case that you are a long time customer or you are a new customer and have a reasonable explanation for why the late occurred. If it was just this one or two times then the creditor is very likely to go ahead and remove the late history.

Debt is a serious problem in our country today. We are under the highest level of debt in history. We need to seriously start to consider how we handle debt and how we handle our credit. The problem will not just go away if you ignore it. We need to become aware of the problem, admit that we have one and then go to work on the cure. You can overcome negative history and go on to success. You can have the credit you deserve.