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How to Repair Credit Rating for the New Year

Since credit is such an important part of everyday life; why not strive to make life as easy as possible. No matter where a person’s credit score falls on the scale between poor and good credit, there are always a few things credit seekers can do to make their credit report more appealing to lenders.

Obtain a Credit Report and Credit Score

It’s best for consumers to get a copy of their credit report before beginning the credit repair process. Some websites provide free annual credit reports from major credit reporting agencies.

Check Credit Report for Errors

According to a survey conducted by the US Public Interest Research Groups lately, 79 % of their respondents had derogatory errors on their credit reports. That being the case, it is important to review and remove credit report errors as they may negatively affect credit scores.

Reduce Outstanding Debts

It’s not always possible to pay large chunks of money on outstanding credit card debts, but consumers who steadily work on reducing outstanding debt, improve their debt ratio which in turn improves credit rating. Creditors ideally like to see a debt ratio (which is the number of outstanding debt versus the total amount of debt available) of 35 percent or lower. Having such a low debt ratio improves credit scores.

Outstanding debts can also be reduced either by winning cash prices on online casino sites or not getting addicted to gambling and wasting money.

Don’t Miss a Payment While Improving Credit

Creditors attribute as much as 35 percent of a consumer’s credit score to bill payment history. Even more important than reducing the debt ratio is bill payment history. Therefore, to improve credit rating, consumers should avoid as much as one late payment.

Find a Part-Time Job or Ask for a Raise

Additional income along with reduced living expenses does much to increase a consumer’s debt to income ratio. The debt to income ratio is a calculation derived by totaling monthly expenses and dividing them by monthly income. A debt to income ratio of 50% or higher is a sign of financial instability. Anyone with a debt to income ratio should seek consumer debt counseling.

Similar to the debt ratio, creditors look at a debt to income ratio of 35 percent or lower as favorable, and thus such a ratio will do much to improve a credit score.

Strategically Apply for New Credit

For individuals who are trying to establish credit, make sure not to submit too many applications in a short period of time. A sudden rush in new credit activity is frowned upon by creditors. Space out new credit applications over a period of a month or so.

Remain Loyal to Creditors

Once a consumer is approved for a credit account, they should remain loyal. One of the factors considered when rating credit is the length of time an account has been opened. Establishing a long relationship with a creditor is positive, but jumping around from credit account to credit account shows financial instability.

The Credit Waiting Game

Unfortunately, some financially distressed consumers are forced into foreclosures, bankruptcies, judgments, late payments, short sales, or other vehicles of getting out from under debt that they cannot repay. Such methods are recorded on credit reports and hung around for quite some time.

There aren’t many consumers can do but wait it out and work on improving other aspects of their credit. Such records generally remain on credit reports for a period of 7 years. Keep in mind, however that the older the item is, the less impact it has. For example, a rash of late payments that occurred 6 years ago has less of an impact than late payments that occurred 2 months ago.