Fixing Your Credit Score

             Solomon said “A good name is more desirable than great riches” (Proverbs 22:1). This is certainly true in the financial realm, where a good name on your credit report can open the way to purchase a car or a good home. Yet, because of life circumstances or poor judgment, many of us have poor credit reports. For example, about 70% of auto buyers have bad credit.  


            You can’t relive the past. Once you have bad credit, creditors will make false promises to fix your credit score for unaffordable payments and “credit repair” companies will often give you false hope. How, then, can you fix a broken credit score?   


            The first thing you should do is get a copy of your credit report. You can get a free report once a year from the three major credit bureaus at Credit reports often contain errors and you have a right to dispute incorrect information. The creditor which provided the incorrect information must respond within a limited period of time, and the erroneous information is removed if they fail to respond on time. The FTC reports that 80% of disputes result in a changed credit report.


            In the long run, the best way to fix your credit score is to make all of your payments on time. Late payments can negatively impact your score for seven years. However, the older the late payment, the less is reduces your score. And watch out for debt collector payments on old debt: these payments can hurt your credit score by showing up as new late payments. A payment on and old debt can also restart the statute of limitations for collections, which would otherwise be close to expiration.


            Another way to help your credit is to keep the debt to credit limit ratio under 30%. You can, of course, reduce the ratio by paying down on the credit card. However, you can also reduce the ratio by requesting a higher credit limit. If you don’t use your higher limit, your credit score will go up without any cash outlay.


            In the end, you have to decide how much you are willing to pay for a better credit score. People who can afford it should correct credit report records, keep their payments current, and pay down their credit lines. But if you have to decide between feeding your family and paying your credit cards, you should feed your family. If you cannot make your debt payments, your choice is between sending all your cash to lenders and still having a bad credit score, or keeping your cash for the family and living with a bad credit score. Our advice in that situation is to keep the cash.


            A good credit score is a valuable thing, but people with bad credit buy cars and houses every day. So take care of your family first, and then worry about fixing your credit score.         


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