Three Easy Ways to Approach Credit Repair

According to the Fair Isaac Corporation (FICO), nearly 47 percent of Americans are struggling with poor credit in 2011. High unemployment rates and an economic recession are among the catalysts for the recent increase. When faced with a sparse market and dim economy, how should consumers approach credit repair?

Credit repair can be a complicated process under the best of circumstances. In the wake of an economic recession and rising unemployment rates, many people are struggling to make ends meet. Who has time to consider credit repair in such a dismal market?

While the timing may not be ideal, taking the first steps to fix credit issues is essential to a smoother future. In September 2011, FICO reported that nearly 94 million consumers hold a credit score of 699 or less. As lenders continue to tighten their business practices and the cost of living rises, the need for a healthy credit score is more pressing than ever.

If you are ready to fix credit issues, begin by starting small. Easy steps may have a bigger impact than you anticipate.

1. Pay Your Bills On Time (or Early)

The simplest method of credit repair can also be the most challenging. Punctual bill payment is crucial to maintaining a clean credit history. If you have fallen victim to late payments or collections, the time for credit repair is now. Make an effort to pay your bills on time. If you are interested in cost-cutting, consider paying a couple weeks early to avoid any applicable interest. Not only will you save money, you will give your credit score a boost.

Learn more about How Late Payments Affect Your Credit

2. Utilize The Past

Credit length is a defining factor of overall credit scoring. A simple way to rejuvenate this component is to use your old accounts. Many people allow their old cards to fall by the wayside when a newer, flashier line presents itself. New credit can be good, but ignoring the past is never advisable. Dust off those old accounts and put them to good use each month. The results may surprise you.

3. Learn About Credit Utilization

Good credit is about striking an ideal balance between income, debt, and the management of both. While you may think your credit limit represents the ideal debt balance, think again. Although your total credit limit may be $20,000, you should never spend more than 25 percent of it--$5,000--in order to achieve an “ideal” balance.

This concept is known as credit utilization and applies not only to your total credit limit, but to each card individually. For example, suppose you have three credit cards, each with a $4,000 limit. To honor the ideal utilization ratio, you should spend no more than $3,000 of the total limit and no more than $1,000 on each card. Adjust your spending to accommodate these rules. Some simple restructuring could improve your credit score with little effort.

Learn more about Repairing Your Credit Score.

Credit repair is a way of life--not a quick fix. The good news is, it begins when and where you choose, and small steps count too. Aspire to a higher score by fixing credit issues whenever you’re able. It may not happen overnight, but your perseverance is likely to be rewarded.