THE TRUTH ABOUT YOUR CREDIT SCORES
Some of us just haven't been lucky enough to have perfect credit
scores, and some of us have been unluckier than others when it
comes to credit. However, all's not lost. Did you know there are
ways to increase your scores? When you know all these little
"how to's" you can sometimes increase your credit scores by 100
points.
A lot of people think that paying off old, delinquent accounts
will improve their credit, and the collection agencies certainly
want you to keep thinking so. But paying a charge off or a lien
after it's over two years old can actually hurt your credit
score. Although a charge-off will severely affect your credit,
the software that scores your credit looks at the last activity
on the credit report to determine what effect it will have on
your score. The collection agency will update your report as
"Paid Collection" whenever you pay off the account, making the
software pick it up as "current". If you're going to pay off an
old account, the best way is to insist that the collection
agency send you a letter that they will delete the account from
your credit if you pay it. Some collection agencies will and
some won't, but it will increase your score and is definitely
worth the effort.
Past due amounts, however, will totally destroy your score. Any
amount in the past-due column on your credit report needs to be
paid, or, if it's not owed, contact the creditor and get them to
take the amount off. In fact, I would suggest that you pay off
any past due amounts before paying a collection agency once your
account has reached the charge off stage. Then the software
can't pick up any past due amounts. You can call your creditors
that have reported late payments, and ask them to remove the
late payments in "good faith", but remember politeness is the
key. If you're antagonistic toward them, they won't lift a
finger to help you, and you want your credit score to increase.
If your credit limit is not being reported, make sure the credit
bureau has that information, because an account being reported
with no limit gets scored as though the account is at its
maximum amount. And, furthermore, the software will penalize you
even more when your balance exceeds various percentage levels of
your limit on credit cards. These levels are at 30%, 50%, and
70% of your credit limit. If you can, bring your balances below
the 30% level for the maximum benefit, and you get a higher
score when you have all your cards below the 30%, 50%, or 70%
mark, rather than to have a zero balance on two cards and one
card over the 70%.
And, last, but not least, don't close any credit card accounts,
unless you absolutely have to. Leave them paid off, but open,
and use them about once every 6 months. You are scored on the
percentage of credit available versus the amount owed. When you
close an account, it increases your debt ratio which will
decrease your score, because it reports as having less credit
available with the same amount of debt as before you closed the
account. If you have too many department store cards, you can
close the newest ones and leave the older cards open, because
the older cards show a long history of credit, because 15% of
the credit score is determine by the age of the file.
So don't let your "less than perfect" credit get you down. There
are ways to overcome bad credit.