Use These Tips to Repair Your Credit

We've all been affected in some form or fashion by the recessive economy and many of us by the hard hit housing market.  Whether it be late payments on credit cards, or struggling to pay a mortgage, many people have seen their credit take a hit.  So what can people do to repair their credit?

Focus on FICO

The FICO score was developed about two decades ago by Fair Isaac Corporation and it is the main measurement used to determine creditworthiness.  The FICO scale runs from 300 points all the way up to 850 points and the higher your score, the better your credit standing.  Having a high score is the best way to get credit.

What Is Your FICO?

Time is truly the main component in repairing your credit score.  However, you can take steps to start the process.  The first thing to do is figure out where you are financially.  Get a copy of your credit report.  There are three major credit bureaus:  Equifax, Experian and TransUnion.  Then do some research to understand your credit score and how it's affected.  John Ulzheimer, president of consumer education at, provides some pertinent information.  Ulzheimer notes that if you have bills that have gone to collection agencies for example, you can expect to lose anywhere from 80 to 150 points on your credit score.  He also notes that a short sale or foreclosure "would turn a FICO of 790 into 590 overnight."  Knowing what you're up against is the first step to recovery.  You'll also want to understand your debt-utilization rate and work toward improving it.  FICO looks at how much available credit you have and how much of that you're actually using.  People who have the best debt-utilization rate typically don't have debts that exceed 7 percent of their available credit.  Whatever your percentage, lowering it will help.

Cleaning Up Your Score

Once you know and understand your credit score, you can concentrate on approaching any past due items.  If you have credit cards that are the source of your burden, you may want to contact the cardholders and talk to them to see if you can negotiate payments you can better afford.  It's also advisable to ask them how this will reflect on your credit report.  Make sure the new terms will show up as "paying as agreed" on your credit.  Then, get that in writing.  Notably, if you're late paying bills with companies that have changed ownership or gone out of business, you may be in luck.  If the credit reporting bureau can't verify the accuracy of your past due debt, they are required to remove it.  According to Ulzheimer, "it has to be verifiable."  Next, focus on paying off your debt, especially your revolving debt such as credit cards.  This will lift your score the most.  One approach to this is to contact a credit counseling agency that can help you reconstruct your finances and work with creditors to negotiate payments, as well as help you budget and even avoid foreclosure on your home.  There are many different agencies such as that can be found online or in a phone book.

Add A Note

Another thing you can do, is add a note to each of your credit reports pulled by perspective employers or others.  Explain your hardship, such as loss of a job.  Each of the three credit bureaus allow you to add a brief statement to your report through their Web sites.  Just be aware that FICO will not consider your statements when determining your actual score.

Get Secured Cards

John Ulzheimer says secured credit cards can actually help raise your FICO score.  Unlike regular credit cards, secured cards require you to put a set amount of money in a bank account, such as $500.  This is then used as collateral for the card.  The amount of available credit should be equivalent to the amount on deposit.   According to Ulzheimer, "if you add a secured card and pay it religiously and the balance is low, it will help your score a lot more quickly than if you do nothing."  Just make sure the card issuers are reputable and report to the three major credit bureaus.

Credit Unions

Credit Unions may be more willing to work with members who have troubled credit histories. What they offer varies, but they may be more likely to consider alternative credit scores, offer free credit counseling or have products tailored for people with poor credit histories.

Ultimately, knowing how your FICO score is determined and learning about ways to improve it is a crucial key to cleaning up your credit and securing your financial future.


Michelle Trimmell, RA, MBA