Approximately 35% of a credit score may be based upon payment history. A credit score is negatively impacted if bills are paid late or if there is a history of delinquent payments listed on the credit report, including matters of public record such as bankruptcy, collection accounts, etc.
Approximately 30% of a credit score may be based upon amounts owed or other outstanding debt. A credit score can be negatively impacted if the amount owed is close to the credit limit. A low balance on two credit cards may be better than a high balance on one credit card.
Length of Credit History:
Approximately 15% of a credit score may be based upon length of credit history. A credit score can be positively impacted the longer that accounts have been open, especially if they are with one financial institution.
Taking on More Debt:
Approximately 10% of a credit score may be based upon how much new debt a consumer is incurring. A credit score may be negatively impacted if someone has recently applied for a number of new credit accounts.
Promotional inquiries usually do not negatively impact a credit score.
Types of Credit in Use:
Dont carry high balances on credit cards. Ideally you would never go over half the available amount on your credit card for any extended period of time.
Fix bad credit
Serious credit problems could range from a 30-day late payment to a , judgment or Despite what you may have read on some internet sites, theres no quick fix to repair bad credit. There are, however, ways to remove inaccurate information and improve your credit over the long run.
If there is inaccurate negative information on your credit report, get it removed. Dispute the charge with the agencies by writing to them or going online to their websites. They have 30 days to respond to your dispute. If they cannot verify the negative information, they have to remove it.
If you have a 30-day late blemish on your credit you can dispute the negative information as above. If the credit bureaus cant verify the 30-day late payment with your creditor, the information must be removed.
If you have more serious credit problems such as a judgment, bankruptcy or foreclosure, it may be in your interest to seek a non-profit credit counselor or an attorney specializing in credit repair. The latter can sometimes settle your debts for less than 35 cents on the dollar and may be able to get some of the information removed. If you simply pay off the judgment for example, it is still going to stain your credit for a minimum of 10 years. For a foreclosure the term is 7 years, for a bankruptcy, 10 years; and for tax liens, 5-7. Even after that amount of time goes by you will need to aggressively go after the agencies to get the information off your credit
Should I declare bankruptcy?
There is no “quick and easy” answer to this question. You should discuss your situation with a credit counselor or a bankruptcy attorney, to evaluate the costs and benefits of bankruptcy given your personal financial situation.
Not every debtor qualifies to file for Chapter 7 bankruptcy. A means test is applied to determine if you will be able to repay a substantial percentage of your debt, and if you are determined able to do so you will be ineligible for a liquidation of your debts and will likely have to engage in a repayment plan as part of a Chapter 13 bankruptcy.
The type of debt you owe can be a significant factor in whether you file for bankruptcy, as well as the form of bankruptcy you pursue. Factors which may affect your decision to file for bankruptcy protection are detailed in this associated article: Filing For Personal Bankruptcy Protection in a U.S. Court.
Reestablish Credit after a Bankruptcy
Your ability to rebuild credit after filing bankruptcy is better than it has ever been. After you get your discharge, you will receive many solicitations from lenders offering to finance homes, vehicles and credit cards.
Here are some tips to responsibly and successfully rebuild credit:
Credit score facts and fallacies
Fallacy: My score determines whether or not I get credit