On-time payments cure the stinkiest credit My credit score stinks. I am currently living with family because I cant afford an apartment. I have no outgoing income. I make $889 a month. Am I able to get a credit card to help rebuild my credit? My scores are 540 to 570. Please help. -- Tanya Dear Tanya, Youre right -- your credit rating really isnt smelling like roses. Dont despair, though. With information and action, you can sweeten it up. To do so, youll have to first identify where the stench is coming from, then clean it up. FICO is a credit rating system that spans from a low scire of 300 to a high of 850. Scores in the range you describe are considered to be bad. Since payment history and credit utilization are the most important factors, examine them closely. Chances are youll find out whats ailing your digits in these two areas. Payment history Assuming youve had loans and lines of credit before, you also have had to make payments on those accounts. If youve been sending what you should in a timely fashion, fantastic. Youre bulking up the most significant portion of your FICO, as this section is 35 percent of the score. But if youve paid accounts late or have defaulted, your numbers nosedive. The more recent those infractions, the more severe the damage. To cure such problems, make amends. If you have delinquent accounts that are now in collection agencies, pay them. Once the balances are at zero, your scores will spike. Not enough money to pay in full? Try for a settlement. Many collectors accept less to close the case. Evidence of the delinquency will remain and be factored in, but technically the debt will be satisfied and your FICO scores will increase. Outside of that, start meeting your bills on time, every time. Your scores will gradually and steadily rise. Credit utilization Now explore your debt load. Hanging on to large liabilities, even if youve never skipped a payment, can wreck a score. Credit utilization is 30 percent of a FICO score, measuring what you owe compared to how much you can contractually borrow. Owing less than 30 percent of your credit limit is ideal. For example, if your credit card limit is $1,000, your revolving balance shouldnt exceed $300. Mind that revolving debt (such as a credit card balance) is weighed heavier for scoring purposes than installment loans, since the balance steadily declines with each payment. Therefore the easiest way to get this section in good shape is to expand your utilization ratio. Lightening your debt load is the best method, but you can also request a larger credit line. If youve been a good customer, your issuer may agree -- and your scores will benefit. The remaining scoring categories are length of credit history at 15 percent, types of credit in use at 10 percent, and pursuit of new credit, also at 10 percent. Clearly these are minor points, but cumulatively may drive a score down. You cant speed up time, but in the future it would be wise to add different forms of credit to the mix -- as long as you dont overdo applications. What should be apparent by now is that FICOs dont include income. Earnings are not listed on a credit report, so are irrelevant to a score. Yet to a landlord, what you make is as relevant to qualification as the way youve managed your money and credit. Try as hard as you can to bring more cash in, so you can save for a home of your own while also sweetening up your credit rating. CreditCards By Erica Sandberg To make an apppointment call our office at 856-589-8901 or through our website @pfdlaw.
Posted on: Thu, 12 Jun 2014 12:20:52 +0000
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