#1 Get Rid of Your Collection Accounts Did you know that paying a collection account can reduce your score? Credit scoring software reviews credit reports for each account’s date of last activity to determine its impact on the overall credit score. When payment is made on a collection account, collection agencies update credit bureaus to reflect the account status as “Paid Collection.” When this happens, the date of the last activity becomes more recent. Since the guideline for credit scoring software is the date of the previous activity, current payment on a collection account damages the credit score more severely. This credit scoring method may seem unfair, but it must be worked around when trying to maximize your score.
How is it possible to pay a collection and maximize your score? The best way to handle this credit scoring dilemma is to contact the collection agency and explain that you are willing to pay off the collection account under the condition that all reporting is withdrawn from credit bureaus. Request a letter from the collector stating their agreement to delete the account upon receipt and clearance of your payment. Although not all collection agencies will delete reporting, removing all references to a collection account ultimately will increase your credit score and is certainly worth the effort involved. #2 Get Rid of Your Past Due Accounts Within the delinquent accounts on your credit report, there is a column called “Past Due.” Credit score software penalizes you for keeping accounts past due, so past due accounts can destroy a credit score. If you see an amount in this column, pay the creditor the past due amount reported. Some creditors will waive late fees. Some creditors will reduce the overall balance owed if you agree to pay off the entire balance (e.g., you owe $1,000, but they allow you to pay $800, and the balance is reduced to $0). Ask your creditor about your payment options. #3 Get Rid of Your Charge–Offs and Liens Chargeoffs and liens barely affect your credit score when older than 24 months. Therefore, paying an older chargeoff or a lien will neither help nor damage your credit score. Chargeoffs and liens within the past 24 months severely hurt your credit score. Paying the past due balance, in this case, is very important. If you have both chargedoff accounts and collection accounts but limited funds available, pay the past unpaid balances first, then pay collection agencies that agree to remove all references to credit bureaus second. #4 Get Rid of Your Late Payments Contact all creditors that report late payments on your credit and request a reasonable faith adjustment that removes the late payments reported on your account. Be persistent if they refuse to remove the late payments first, and remind them that you have been a good customer who would deeply appreciate their help. Since most creditors receive calls within a call center if the representative refuses to make a courtesy adjustment on your account, call back and try again with someone else. Persistence and politeness pay off in this scenario. If you are frustrated, rude, and unclear with your request, you make it very difficult for them to help you. #5 Check Your Credit Limit and Evenly Distribute The Balances You are Carrying Make sure creditors report your credit limits to bureaus. When no limit is reported, credit scoring software scores the account as though your current balance is “maxed out.” For example, if you know that you have a $10,000 limit on your credit card, make sure that the limit appears on the credit report. Otherwise, your score will be damaged as severely as if you were carrying a balance of the entire available credit. Credit scoring software lets you carry credit card balances as close to zero as possible. If it is difficult for you to pay down your balances, read the following guidelines to maximize your score as much as possible under the circumstances: There are different degrees that scoring software can impact your score when carrying credit card balances. Balances over 70% of your credit limit on any card damage your score the most. The next level is 50% of your balance, then 30% of your balance. To maximize your score without paying down your balances, evenly distribute your credit card balances among all your credit cards, rather than carry a large balance on one credit card. For example, if you are carrying a $9,000 balance on a credit card with a $10,000 limit, and you have two other credit cards with a $3,000 and $5,000 limit, transfer your balances so that you have a $1,500 balance on the $3000 limit card, a $2,500 balance on the $5,000 limit card and a $5,000 balance on the $10,000 limit card. Evenly distributing your overall balance will maximize your score. #6 Do Not Close Your Credit Cards Ever Closing a credit card can hurt your credit score since doing so affects your debt to available credit ratio. For example, if you owe a total credit card debt of $10,000 and your total credit is $20,000, you are using 50% of your full credit. If you close a credit card with a $5,000 credit limit, you will reduce your credit available to $15,000 and change your ratio to using 66% of your credit. There are caveats to this rule: If the account was opened within the past two years or if you have over six credit cards. The magic number of credit card accounts to maximize your score is between 3 and 5 (although having more will not significantly damage your score). For example, if a card was opened within the past two years and you have over six credit cards, you may close that account. Close the newest accounts if you have more than six department store cards. Otherwise, do not close any at all. #7 Open Business Credit Cards Most business credit cards do not report to the personal credit report unless the person pays the card late. Any debt carried on these cards does not hurt the credit score if it is not reported. You can have credit card debt on these cards without hurting your credit score. Just apply for business credit cards now to start building this segment of your credit. #8 Keep Your Old Credit Cards Active The age of the credit file determines 15% of your credit score. Fair Isaac’s credit scoring software assumes people who have had credit for a longer time are at less risk of defaulting on payments. Therefore, even if your old credit cards have horrible interest rates, closing those cards will decrease the average time you’ve had credit. Use the old card at least once every six months to avoid the account rating changing to “Inactive.” Keeping the card active is as simple as pumping gas, purchasing groceries every few months, and then paying the balance. Fair Isaac’s credit scoring software ignores an inactive account, so you won’t get the benefit of the positive payment history and low balance that card may have. The one thing all credit reports with scores over 800 have in common is a credit card that is twenty years old or older. Hold onto those old cards, trust me! Preparing credit is a slow and time-consuming process. Complete knowledge of your credit profile and how it represents you to creditors and credit bureaus is pivotal to complete credit restoration success. Credit bureaus always advise individuals that they have a right to dispute their credit files, but when the rights of the credit bureaus slow you down, you know where to ask for help. About CreditRepairEnforcers.com: Get the benefits and experience of a firm that concentrates on helping people with credit problems without paying huge setup fees. Credit Repair Enforcers has successfully removed erroneous, unverifiable, outdated, and inaccurate information from our client’s three credit reports for over 20+ years. We assist with all things credit repair and credit building. We have helped people who need assistance with personal, business, and corporate credit repair and credit building. Credit Repair Enforcers fight for your credit rights!
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