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Friday, 23 March 2012 / Published in Advice, Credit, Mortgage, Tips

3 Insider tips for fixing your credit

Maintaining good credit is a bit like staying in good health – it requires a fair bit of work and just a little bit of luck.  Yes some people are guilty of being inattentive to their credit in the past, but the more common scenario we encounter is when people suffer through unfortunate scenarios like a job loss, divorce, health crisis or even having your identity stolen…all of which can lead to credit problems.

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All it can take is one missed payment and you are jarred with a seemingly never-ending bout of “bad credit,” but fear not; in this blog post we are going to show you a few “insider tips” on how you can help fix or improve your credit!


Tip #1 – Get the Facts in a Credit Report

Surprisingly, some people think their credit is worse than it actually is, so it pays to review your report with a mortgage professional to ensure you have the facts.  So the first step when trying to fix your credit score is to assess the real damage, so to speak, with a credit report. While this can be stressful, please try to bear in mind that we will also show you how to amend and correct your credit report.

If you are applying for a mortgage, we will run a credit report for you.  However if you are not quite ready to apply, there are many free trials available online which can show you your credit report in minutes.

 

Tip #2 – Pay down your credit card balances

Paying off your credit cards may seem like a great idea and if you can afford to do so, then by all means go ahead. But did you know that if you “pay down,” and reduce your balances to less than 30% of your total balance, and maintain a small balance, it could have a much better impact your credit score?

This is because lenders look at the amount of “available credit” you have when you apply for a mortgage.  If you are maxing out your credit limits on a monthly basis, than you have fewer options for things like unexpected home repairs.  And we all know that life is full of unexpected surprises like those!

Maxing out may also indicate that you are having trouble balancing your spending habits with your income – another warning sign that lenders look for.  Therefore, keeping sensible balances gives the appearance of using your credit responsibly, and indicates that you can manage your debts and income.  Plus it shows that you have “borrowing capacity” in the event of an emergency.

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Tip #3 – Document, Document, Document

All too often we see borrowers who claimed to have paid an outstanding debt that is reporting negatively, but don’t have the documentation to back this up.  When this is the case it can be very difficult to remove the negative ratings.

The bottom line is that no matter what you do to pay off, pay down, or resolve credit issues – you must document everything!  If you send off a double payment to a creditor, make a copy of the check before you send it.  Or if you are wiring money to pay off a collection, keep a copy of the receipt.  Another good practice is to use certified mail when you are sending checks, that way you have a receipt of when your payment was received by the creditor.

It’s not always necessary to document every payment you make, but if you are attempting to catch up or pay off a debt, this is absolutely critical especially if we will need to present that documentation to a credit rating agency for updating.

 

Lastly, a few additional tips to consider for those with credit issues:

  • Set up payment reminders in advance so you don’t accidentally forget a payment.
  • Take advantage of automatic payment plans when possible so your bills are paid automatically.
  • Sign up for e-banking which will allow you to pay bills instantly online and keep closer tabs on your payments and balances.

 

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