How to fix dated bad credit?

Question

I have bad credit from when I was younger and I wanted to know what the best strategy was to attack it and begin to fix it head-on. I can pay them down now, but they are from years (more than 3 in some cases) and I really want to fix them the best way possible.

Answer 1

The best starting point is knowing how the system works. Your credit score is determined by the following:

35%: Bill-paying history. Mostly everyone knows how important it is to pay your bills on time. And that's because that's the factor that can the most impact your credit score. It's also worth noting that it's more a question of pattern. What that means is that one 60-day late payment will have less of an impact that a string of 30-day late payments

30%: Debt usage ratio. That is the amount of debt you have outstanding compared to your total credit limit. A generally accepted rule of thumb is that this ratio should be kept under 25% for best results. Between 25 and 50% isn't too good for you, but the impact is fairly manageable. Going over 50% should definitely be avoided

15%: Length of credit history. The longer your history, the better. It allows any potential lender to have a more accurate picture of you.

10%: Mix Of Credit. Showing the ability to successfully manage different types of credit has a posotive impact on your score (revolving credit, consumer finance, installment loans, and so on)

10%: Pursuit of new credit. Having many recent inquiries on your credit report is interpreted by lenders as a sign that you're financially strapped. The good news is that since shopping around for a loan is the smart thing to do, credit score calculations have been altered so that all inquiries of the same type, made within a reasonable time frame (15-30 days, depending on the type of loan in question), count as one single inquiry.

The credit score calculation formula gives more "weight" to new information, making it easier to offset previous negative information with a couple years' worth of good behavior. Of course, it also works the other way and one bad year will greatly damage an otherwise perfect picture. In that regard, if you have debt that's over 3 years old, making a payment will bring them to "current" status, thus damaging your score.

Because of the "debt usage ratio" and "length of credit history" factors, it's also unwise to close credit accounts even if you've paid them off. Doing so reduces your credit limit, so any ratio you had will automatically become higher. And it's also like you're deleting credit history because that information is no longer accessible to lenders. In short, the longer you've had the card, the bigger the limit, and the better you've managed it, the more you stand to lose by canceling it.

One of the fastest ways to build (or rebuild) credit is to go to a local bank and purchase a CD, then use it as a collateral on a 6- or 12-month loan. The interest rate will be very low, and the payments will help your credit history in several areas, namely bill-paying history and mix of credit.

Hope that helped

Answer 2

You have a chance to improve your credit rating and therefore brighten up your financial future by being patient, a conscious effort, and a personal debt repayment to improve your credit report. The most practical and effective way to truly improve credit is through a number of practical steps designed to help you not only improve your credit rating but also to maintain a decent credit rating once it has improved. No matter how bad your credit is, taking following steps will make it better.

STEP 1: Dispute Inaccurate Information or Frauds in Your Credit Report
STEP 2: Pay all of your bills on time
STEP 3: Reduce the number of credit cards you carry
STEP 4: Avoid bankruptcies, tax liens and collections
STEP 5: Request for Lower Credit Limits
STEP 6: Get a Small Loan or Credit Card with Co-Signer
STEP 7: Get a Secured Credit Card
STEP 8: Periodically Get a Copy of Your Credit Report

Find complete explanation for each step at:
http://www.howtoestablishgoodcredit.com/Credit_Articles/index.php

Answer 3

I would say to first grab copies of your credit report from the three major agencies (Equifax and TransUnion are two of the three). Next, call the companies in question, let them know that you would like to pay them, get the address information, and ask them to send you a letter stating that the debt has been paid. You can then use these letters to send copies into the reporting agencies so that your file can be updated to paid status. Another thing to do is to check to see how long certain types of information remain on your credit (i.e. inquiries, late pays, etc.). You may be able to get rid of some of the old stuff just because those items should have, by law, fallen off of your report within a certain timeframe. On those items, you can dispute the time limit and I think they have to be removed. I hope this helps you.

Answer 4

A lot of this depends on what state you live in and how old these debts are. Paying old debts doesn't necessarily restore credit. It can actually harm you. I know this sounds weird, but it is true. Here in Texas, the statute of limitations is 4 years for debt and no collector can make you pay after that. For restoring bad credit, the best way is to start small and work your way up. With this I mean, get a small secured loan through your bank and pay it off on time. Then do it again. Each time you do this it improves your credit. My bank helped me with this. After doing this for a while you will be able to get unsecured credit in small amounts. By small amounts I mean, $500. Once you can get unsecured credit, start getting small loans and pay them off. In time this will help you build up points on your credit rating.
With newer credit, there are times when going bankrupt is actually better in restoring you credit rating. You become a less risk to creditors, because you can't file for another 7 years.

Answer 5

Get a current copy of your credit report from all three credit reporting agencies. File a credit dispute report for any unfamiliar, inaccurate or fraudulent information that appears on your credit reports. Inaccuracies could include a wrong name, wrong creditor, wrong date, wrong amount of debt report or other judgments you are not aware of. Begin a plan of action to reduce your overall credit account debt. Call creditors and negotiate with them. You may be able to get your interest rate reduced, monthly payments lowered, or change the due date to help may help you manage your payments.Pay your bills on time. Late payments, judgments and bankruptcies can affect your credit score for a very long time and can significantly lower your credit score. Mark’s book-Hidden Credit Repair Secrets can help you fix your credit also.

Answer 6

Bad credit is one of the worst problems to have... however there exists a solution.

I will hereby talk from my personal experience.

I did debt consolidation a couple of years ago, however If I had to do it again I would pay to some minor details,
if someone wants to get out of debt today it is pretty easy with a debt consolidation plan, however it may get a bit tricky at times, I suggest you get as much information as possible online on this first,

a good place to start in my humble opinion is astraight to the point ebook with question and answer I found :

http://umgarticles.atspace.com/debt-consolidation.htm

if it helps kindly remember me in your voting!.. cheers!

Answer 7

Just a piece of info for you. Because of a horrible illness, I got into huge debt. Fortunately for me at the time, my parents agree to work with a bankruptcy attorney who suggested we hire him to "settle" them, which means he will usually negotiate the pay off price down to 50% -66%. NOW, I don't know how this affects your credit report, not as well as paid of course, but we were in a predicament where they wasn't enough money to go around and we had to deal with it. Just a thought and maybe some more trained professionals will read this and tell you the bad parts of it.

Answer 8

You could try a credit restoration company. There are only three legitimate ones in the United States so do your due dilligence. you can go with a company like this one: http://www.saltlakecity.bbb.org/commonreport.html?bid=2000829 that has 273 complaints against them in the last three years or you can use one like this one: http://www.thebbb.org/commonreport.html?bid=39000730 who has only one complaint against them over the last three years.
It is a fast way to get the information removed from your report.

If you have any questions regarding your credit issues you may email me at [e-mail]

Answer 9

Great, you are on the right road! If you want to learn how to repair your credit then visit http://www.thecreditrepairmanual.com