Fix My Credit

You want to buy a new car or purchase some high priced appliance but your credit is just too bad to make that much needed purchase. You wonder How can I fix my credit? Well with a little effort and determination on your part you can fix your credit quite easily.

First you should know how banks and other creditors determine if your credit is strong enough for them to give you a loan or extend credit. Most creditors use the FICO score to determine what your credit risk is. This system looks basically at five different criteria:

1. Your payment history. This is the most important item you must guard as it accounts for 35% of your score. If your payment history is sketchy then the first thing you should do is get your payments up to date as soon as possible and continue to make payments to your creditors on time.
2. How much you owe. At 30 %, this is the second most important item looked at. Your debt to income will determine if you have too high a payment schedule compared with your income to grant you further credit. Your creditors don't want to take a chance of you getting over your head with payments so you will miss instalments so you can help fix your credit by keeping your debt payments below what you can comfortably pay.
3. Length of Credit History – This accounts for 15% of your credit score. The longer you have established credit with someone the better your credit rating will be. Don't pay off your old credit cards with a new card in favour of a lower interest rate. Your shorter credit history will lower your score. Pay the higher interest and maintain the longer established credit history.
4. New Credit. This accounts for 10% of your credit score. You can increase your score by getting a couple of new, small loans and pay them off quickly, on time. This will show that others have determined that you are worth the credit risk.
5. Type of Credit. This last item looked at accounts for another 10% of your credit score. Your credit score will be higher if your credit is granted by a bank rather than a department store. Department stores are noted for giving credit to just about anyone while banks are more cautious. So, you can fix your credit somewhat by getting a low interest loan from a bank to buy that new appliance rather than using a department store charge account. The department store will also charge you a much higher interest rate than the bank.

So, one of the best ways to fix your credit is first know what criteria the creditors look at and then see what you can do to improve these areas. Concentrate on the first two items first and look after your payment history. This can be greatly improved by keeping track of what you owe and don't over spend.