Credit 101 : Repairing Your Credit Score (Page 2 of 2)
You could go on a wild spending spree to raise the limit, but a more sober solution would simply be to pay your balance down or off before your statement period closes.
Check your last statement to see which day of the month that typically is, then go to the issuer's Web site about a week in advance of closing and pay off what you owe. It won't raise your reported limit, but it will widen the gap between that limit and your closing balance, which should boost your score.
- Dust off an old card. The older your credit history, the better. But if you stop using your oldest cards, the issuers may stop updating those accounts at the credit bureaus. The accounts will still appear, but they won't be given as much weight in the credit-scoring formula as your active accounts. That's why many financial companies recommend to their clients that they use their oldest cards every few months to charge a small amount, paying it off in full when the statement arrives.
- Get some goodwill. If you've been a good customer, a lender might agree to simply erase that one late payment from your credit history. You usually have to make the request in writing, and your chances for a "goodwill adjustment" improve the better your record with the company (and the better your credit in general). But it can't hurt to ask. A longer-term solution for more-troubled accounts is to ask that they be "re-aged." If the account is still open, the lender might erase previous delinquencies if you make a series of 12 or so on-time payments.
When trying to improve your credit score or credit history, avoid any of the following:
- Asking a creditor to lower your credit limits. This will reduce that all important gap between your balances and your available credit, which could hurt your score. If a lender asks you to close an account or get a limit lowered as a condition for getting a loan, you might have to do it – but don't do so without being asked.
- Making a late payment. The irony here is that a late or missed payment will hurt a good score more than a bad one, dropping a 700-plus score by 100 points or more. If you've already got a string of negative items on your credit report, one more won't have a big impact, but it's still something you want to avoid if you're trying to improve your score.
- Consolidating your accounts. Applying for a new account can ding your score. So, too, can transferring balances from a high-limit card to a lower limit one, or concentrating all or most of your credit-card balances onto a single card. In general, it's better to have smaller balances on a few cards than a big balance on one.
- Applying for new credit if you've already got plenty. On the other hand, applying for and getting an installment loan can help your score if you don't have any installment accounts, or you're trying to recover from a credit disaster like bankruptcy.
By the way, all these suggestions work best if you have poor or mediocre scores to begin with. Once you've hit the 700 mark, any tweaking you do will tend to have less of a positive impact.
And if your scores are in the "excellent" category, 760 or above, you'll probably be able to eke out only a few extra points despite your best efforts. There's really no point, anyway, since you're already qualified for the best rates and terms. Here's one area where it's really OK to rest on your laurels and worry about something else.
If you are in serious, serious credit problems, sometimes the only solution is to file for a bankruptcy. This is a last-ditch thing, though, and should only be done if you’ve dug yourself in so deep that the odds of getting out of debt are little to none.
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