Repairing Your Credit

It is estimated that there are at least 30 million people in the United States with credit scores under 620. Many have blemishes on their credit report that can hamper their ability to qualify for a mortgage, while others have issues that result in higher interest rates. Even if your credit score is 620 or higher, improving your credit improves the mortgage options available to you. If you are one of the unfortunate 30 million Americans with credit blemishes, there are steps you can take to improve your credit score and thereby improve your ability to qualify for a loan with a lower interest rate.

Before you can improve your credit rating, you first need to know where your credit stands. You should get a copy of your credit report from all three major credit reporting agencies. Once you have copies of your credit report, then you will know what steps to take to start improving your credit score. One of the first items on your "To Do" list, in terms of repairing your credit, should be to pay down any debt you currently have. Paying down revolving accounts will do more to improve your score than paying down installment loans, although paying down all debt is important.

In addition to paying down your balances, other factors, such as paying your bills on time and using revolving accounts in moderation, also improve your credit score. Naturally, ensuring you pay your debts in a timely manner is the hallmark of a good credit rating. However, the way you use revolving credit accounts says as much to lenders about your financial responsibility as your payment timeliness. Even if you pay your cards off in full each month, experts recommend that you never charge more than 30% of the credit limit for each card. This shows financial restraint and credit responsibility.

Talk to your current lenders about the blemishes that show on your credit report in terms of your accounts with them. If you've been a long-time customer, and usually pay your debts on time, your lender or credit card company may be willing to erase a delinquent payment showing on your report. Such "goodwill adjustments" must be requested in writing. Likewise, they may be willing to re-age your account after making on-time payments consistently for one year. These can help your current debts to show a more positive payment history, thus improving your credit score.