Using Credit Cards For Credit Repair
Those credit cards in your wallet can contribute dramatically to your credit repair success, or failure. Here is what you need to know!
Where Are Your Credit Cards?
Credit cards can do more to speed up your credit repair effort than anything else. In fact, they are the perfect credit repair tool. If you are launching an attempt to improve your credit scores without credit cards you are doing yourself a great disservice. So, if you do not have credit cards now is the time to get them. It is never too late, and given the availability of secured cards, you cannot make the excuse that you will not get approved.
Secured cards are easy to get and you will not get denied. A secured credit card is a regular mainstream credit card that will report to the credit bureaus and contribute to your credit score. It just happens to be collateralized by a small savings deposit that you will make with the card issuer. If you are starting from scratch and have no credit cards at all you should get two secured cards to get your credit repair project into high gear.
Other Forms of Credit
Not all forms of credit will contribute to your credit repair project to the same extent. In fact some forms of credit are downright useless. The credit scores used by most lenders are called FICO scores. The FICO scoring model is very particular about the type of credit that you have. Mainstream credit cards like MasterCard and Visa are excellent, while many forms of consumer debt can be a credit score liability. The forms of consumer debt that you should avoid include store cards and financing offered by furniture and electronics stores.
Using Your Cards Right
Once you have your credit cards you must manage them properly. Your credit cards can move your credit scores by over one hundred points, both up and down, so be very aware of the way you manage this powerful plastic. For the best credit repair results you should only use 20 percent of the available limit on the card. If you max out an account you stand to be penalized by as much as 100 points. On the other hand, you can go ahead and use your credit cards as you wish; max them out if you want, as long as you do not have an immediate need for your scores to be at their best.
Credit Repair Timing
The great news about revolving debt is that your scores will rebound as if nothing ever happened once you reduce your balances. But make sure to consider the timing very carefully. It can 60 days for the credit bureaus to receive and update new balance information from the credit card company. So if you will need those scores to be great, plan in advance and get your balances down. Here is an odd little trap that many people fall into unintentionally. Your credit card billing cycle is not likely to coincide with the date that the credit card company reports your balance to the credit bureaus. This means that if you use your card to the limit and pay it off every month there is some likelihood that the bureaus will catch you with a high balance, and your scores will suffer! Plan ahead. Get your balances down and keep them there until you no longer need your scores to be their best.
Get Some Help
Credit repair requires some skill and finesse. If you feel lost as you begin the process, how about picking up the phone and interviewing a couple of professional credit repair services. Pick one that you feel comfortable with and get the job done right. Good luck!
Copyright © 2008 Edward White. All Content. All Rights Reserved.
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ABOUT THE AUTHOR
Ed White is a credit repair expert and financial consultant. In addition to his own private practice he consults for one of the nationís leading credit repair services. Ed is a graduate of the University of Pennsylvania and has a degree in economics.