The Necessary Steps To Improve Your Credit Rating

good credit scores

Did you know that 60% of your credit rating is based on the activity within the last 24 months? You may be lamenting over those old collection accounts or an old bankruptcy filing, but if you have since gotten back on track, or plan to get back on track, then there is a silver lining for you. Borrowers can eradicate bad credit scores by establishing a short and long term financial plan aimed at mitigating bad debt and maximizing good debt.

Improving credit scores involves avoiding many things. In the order of importance, they are late payments, high credit card balances, closing credit card accounts and having too many in-store charge cards. Late payments carry 35% of the weight in terms of your credit score, so do not take them lightly, even if it's just a store charge card, a cell phone bill or a rent payment. Your credit score can drop by as little as 20 points or more than 100 points, depending on how often you are late and how many accounts you're late on, as well as whether you are 30, 60, 90, or more than 120 days late.

Secondly, your credit usage should be no more than 40% of what is offered to you. If your credit line is $1,000, then you should owe no more than $400, and that goes for all lines of credit you have open. If you have any maxed out cards, then pay them down until you hit the 40% mark! Some people think they should close out their accounts to "do the right thing" or "prevent overspending," although this will decrease your overall credit offering and will reflect negatively on you.

Instead, work on paying those balances down and once you're finished, aim to purchase one thing a year on those cards to keep them active, and pay them off right away. Lastly, opening and closing store charge cards just to get that 10-15% initial discount is a signal of irresponsible credit behavior and will not result in high scores for your credit.

Once your past debts are paid off, you may want to negotiate your way toward a higher credit rating. If you were a good borrower but missed a payment, often lenders will remove your delinquency if you ask. If you're in larger trouble, then you can ask your lender to "re-age" your account and delete previous delinquencies by making 12 consecutive on-time payments. Some people hire a credit bureau to blitz old blemishes, such as late payments, charge-offs, fraudulent collection items, under-reported/inaccurate credit limits, accounts listed as "settled," "paid derogatory," "paid charge-off" or anything other than "current" or "paid as agreed," accounts listed as "unpaid" if previously settled by bankruptcy or items that are more than seven years old but have not disappeared yet. Good credit scores can't always be negotiated but if you have some of these ugly mishaps on your report, it's worth a try.

To get a better credit rating, you may want to call in and ask that new, updated information be added. Lenders like to see that you have steady employment, so including your current employer could be an asset. You can also include your date of birth, checking account and current residence. If your credit report is missing accounts you regularly pay on time, then you can send the credit bureaus recent statements and payment history records to prove you're re-establishing your credit score. You can also use a Chevron credit card to buy gas each month and pay it off in full right away.