How To Repair Bad Credit

How to repair bad credit-would you like to know these secrets?

Millions of Americans have been severely affected by the economic downturn and are now asking about how to repair bad credit.

Here is a brief run down on how credit is calculated:

Payment history is approximately 35% of your score

Many times the answer to questions like how to repair bad credit is staring us in the face. With a huge percentage of you score devoted to payment history, do you think you should focus on this segment? Sure, you can't change what has already happened, but every day you are making a new credit history. If you don't pay your bills in a timely manner, you will be hit hard when it comes to poor credit.

On the other hand, after you get hold of your credit reports, look to see if there are any reporting errors. If anything looks out of place write a dispute letter to the credit reporting agency. Deletions are sometimes difficult to get, but they will substantially increase your credit scores.

Unpaid debt is approximately 30% of your score

A critical component of your credit report is the current balance you are carrying. Creditors will lure you into carrying higher balances because it means more money for them, but these huge account balances are going to hurt you in the long run. The magic rule is to stay below 30% of the available balance when it comes to the debt you carry. That means that if you have a credit card account with an available balance of $8200, then you should not have more than $2460 in debt. If you are carrying more than 30%, you have to figure out a way to pay this down. Shift debt to another card, ask the lender for some debt relief or even request an interest rate reduction.

Credit history is approximately 15% of your score

Credit history is not the manner in which you pay your bills, but rather the length of your accounts. If you have an open account 10 years old, this is an indication of stability. You don't want to close these old accounts even if you don't use them and even if you have to pay an annual payment. They are like your resume and knowing you have been around gives lenders some comfort.

Pending applications are approximately 10% of your score

Where are you currently shopping for credit? Stay away from lenders like The Money Store, American General and jewelry store accounts. These types of accounts are labeled as "last chance' solutions and hurt your credit.

Credit Mix is approximately 10% of your score

The last calculation is a determination of the type of credit mix you have. Too many auto loans? Are you overextended with residential real estate loans? How many credit cards do you have in relationship to your income and your ability to pay down debt? these considerations are only 10% of the total calculation, but it does reveal a substantial amount of information about you.

Remember that to clean up credit report you must pay attention to all the above. A worthwhile credit report repair strategy should be a thorough investigation into each area and the most important, higher ranking percentages should be the focus.