Best Way to Fix Your Credit Report
Most consumers are increasingly aware their credit score is one of the most important numbers in life.
These simple three-digit numbers are used in all types of consumer lending but also factor into how much you’ll pay for car insurance premiums and whether or not you’ll get the job you just interviewed for.
Credit scores are mysterious to most consumers, and complex even to the most informed financial analysts.
Even with such a high level of complexity, it’s important to understand what kinds of things can affect your credit score. Then you can start to fix your credit report.
- Closing Accounts
Most of us think paying off high-interest credit card bills is a good thing – and it is good – for your bank account. You’ll pay less interest overall when you pay off credit card balances.
The truth is, though, it isn’t always best for your credit score, especially if you close out the paid-off account. Scores are calculated based in part based on your debt-to-credit ratio. Closing an account means the available credit no longer shows up on your report, hurting your score.
- Opening Accounts
It may seem like a Catch-22, but opening new accounts can damage your credit score just as closing accounts can. Generally, your credit score takes a hit when you open a new credit account and for as long as a year afterward. Be smart when applying for credit, and don’t take on too much at once.
- Making Payment Arrangements
If your debt has not yet been charged off and is still held by the original creditor, (and not a debt-collection agency), you might not be helping your credit score when you make payment arrangements.
If your lender offers to let you pay off the bill for less than you owe, it might sound like a good deal, but it could hurt your credit. The notation of “settled” will be viewed negatively, and could even be worse than having an account “charged off” and sent to collections.
- Paying Old Debts
Depending on your state’s statute of limitations, it may be better to just let old debts roll off your credit report. One reason is that making payments on an old account can restart the clock on the statute of limitations.
Another reason is that a new payment on an old account instantly makes the entire account seem more recent. The more recent activity on your credit report weighs more heavily when determining your credit score, and if the account was in arrears or charged off, it could show up as negative credit information that’s also very recent.
If you want to fix credit report programs, find the lowest-rate credit cards you can. Use them sparingly, and pay your bill on time, every time. That’s really the best way to fix your credit report.
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