Do It Yourself Credit Repair - How To Improve Credit Scores

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Rebuilding Credit Isnt So Easy

A crucial part of credit repair is rebuilding your credit history. Rebuilding your credit involves adding positive payment history to your credit report. The more positive payment history you have, the better your credit will be. But, when youre rebuilding credit, there are some things you have to watch out for.

Watchout For Store Credit Cards

Store credit cards are often the easiest types of credit cards to get, especially when you have a tarnished credit history. When the store clerk offers to sign you up for their credit card, your mind quickly thinks to the positive impact the credit card will have on your credit score, but that might not be the case. Store credit cards often have low credit limits, so low that you only have a little available credit left after making your purchase. When your credit card balances are high relative to your credit limit, you have a high credit utilization. Credit utilization is 30% of your credit score and your credit limit takes a hit.

Not only does the high balance have a negative effect on your credit score, so does the new credit card. Credit inquiries are placed on your credit report each time you make a credit card application. These inquiries count 10% of your credit score. The more inquiries, the more your credit score will be hurt. The new card will also lower your average credit age which is 15% of your credit score.

FICO, the company who calculates the widely-used FICO score, doesnt place much emphasis on store credit cards because the cards area associated with future default. So, the store credit card you just opened wont do much good in the way of rebuilding your credit history.

The Best Credit Card for Rebuilding Credit

If you want to start rebuilding your credit, the best option is to get a major credit card from an issuer like VISA, MasterCard, Discover, or American Express. These credit cars are given more weight in the FICO scoring calculation and will go a lot further in helping you rebuild your credit score than store cards.

Major credit cards can be difficult to get, especially when you have a bad credit history following you around. You have a couple of options for getting one of these credit cards on your side. First, you might get a friend or family member to add you as an authorized user on one of their credit cards. This account history would get included on your credit report and aid in rebuilding your credit. The second option is to get a secured credit card. Though secured credit cards require a deposit to be made to secure the credit limit, you can often covert to an unsecured credit card after a few years of timely payments.

by: Juan J. Medina

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