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First, congratulations for taking responsibility for your situation and working to improve it.
The higher your credit limits, the fewer points you'll gain for paying down the balances. The more maxed out the credit cards are, the more points you will gain by paying them down. So you should gain 10 - 30 points by paying the balance down, so your FICO score should improve to 700 - 720. FICO 673 - 723 is average, depending on the survey.
To be clear, to improve your FICO credit score, you must demonstrate continued good behavior, not just stop bad behavior, if any.
Try to pay off your balances, but do not close the accounts once you pay them off.
15% of your FICO score is for length of credit history, the longer the better. The average credit user has an oldest open account that has been open for 14 years. Where do you fit on this scale? These are the toughest FICO points to earn. They also score you on the average length of time all your open accounts have been open. So if you close the old account, you'll hurt your score because (1) you lose your oldest account and (2) the average age of your accounts goes down.
30% of your score is credit utilization: how much of your credit limit is used up by your balance? On each revolving account, you need to keep your balance below 30% of your credit limit, or you will hurt your FICO score. For example, if you have a $200 credit limit, you must not have a balance higher than $60, which is 30% of $200. So a paid off account will have a zero balance on it, and you can't get any better than 0% utilization. They also look at total utilization: they total up all your balances, and all your credit limits. That total percentage utilization must be kept below 30% of total credit limits, or you'll hurt your FICO score. Close the old paid off account, and you'll take away $0 in total balance, but you'll take away all those dollars in credit limit, and up goes your total utilization, and maybe down goes your score. If you have the money to pay down balances, this is the easiest way to raise your score. You'll see big results in about a month or two, as long as it takes your creditors to report your payments to the 3 major Credit Reporting Agencies (CRAs).
10% of your score is on credit mix. The good types of credit are mortgage, secured car installment loan, prime (unsecured) major credit card (MC, V, AmEx, Disc) and store cards (Macy's, Home Depot, etc.). The bad types of credit are payday loans, personal-finance loan accounts for purposes of cash advances, still-secured credit cards and overdraft loans. Ideally, you want to have at least one account for each of the good types of credit. Close the last account in one of the good types of credit, and down goes your score.
As for payment history, you must pay at least the minimum every month without ever being late, or you will hurt your credit score.
Let's suppose you have paid off all the balances on your credit cards. Keep your open cc accounts healthy by making one small, NECESSARY purchase (one purchase of groceries, gasoline or a utility bill on autocharge to the cc) each month and using auto-pay to pay it off in full the next month. No finance charges necessary to score max FICO points for the 35% of your score that is for payment history. Just purchase your way, once each billing period, to a small positive balance, and pay it off in full after the bill arrives, before the due date.
10% of your FICO score is about new lines of credit. Every time you apply for credit, the lender makes a hard inquiry into your credit history, and this type of inquiry hurts your FICO score a few points. You get all these hard inquiry points back over the course of a year after the hard inquiry, and the inquiry falls off your reports at the 2-year mark.
Lastly, get your free annual copies of your credit report at http://www.annualcredit report.com and go over them carefully for mistakes. About 70% of the population has a mistake on at least one of their credit reports. Dispute your mistakes and if your dispute is accepted, you might get a score increase as a result.
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dolly blaine
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Repairing the credit score is not that difficult provided you take these 5 simple steps into consideration.
1. Check your credit report regularly
This is a must to ensure that you know your current credit score, and what is ailing it. If there are any inconsistencies in your credit report get them corrected. Keeping bills of all the transactions you make can be very handy and helpful in correcting any errors in your credit report.
2. Get rid of those extra credit cards
The temptations to own a new credit card are so numerous in modern times that many of us end up with a purse-full of them without any real need. They stay there and cause a lot of problems in repayment. The confusion that comes with too many credit cards can easy lead to a missed payment and resulting penalties. Frequent defaults will reflect poorly on your credit score. So, keep only the necessary and discard the rest.
3. Repay on time
Every credit card transaction is a loan that has to be repaid on time with interest. Don't ever miss out on any repayment. If you are not able to make full payments, make half, or even the monthly minimum, but don't default. This will keep you in the good books of credit card company and help your credit score. If you are not able to pay anything to the credit card company, don't shy away from them, call them, explain your problem and work out things so that a negative report doesn't land up with the credit reporting agencies. Read more about it at: http://www.credit-card-gallery.com/article/239,Credit_score_repair_in_5_simple_steps |
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