Fixing Your Credit for Higher Scores
Fixing your credit scores can definitely improve your image as a borrower. Anything less than a 600 credit score is going to make it nearly impossible to get credit. Even scores below 700 are questionable to most lenders these days. Therefore, you need to make sure that you are cleaning up your credit so that you can be a better candidate for the best home loan rates and low interest credit. You need to get your free credit report, which you can get annually from Transunion, Experian and Equifax. This is the starting point because you can't fix anything until you know what is broken. By fixing your credit, you can avoid bad credit loans that will cost you thousands of dollars over year.
Higher credit scores equate to lower interest rates so you need to make sure that you have the best scores if you want the best rates on your loans and credit. Once you have your credit report in hand, you will need to begin the process of finding errors and getting them fixed. Most people have at least a few small inaccuracies on their credit report and don't even know it. What's worse is that these issues can actually cause a lot more trouble than what you might expect. Get rid of ALL the errors on all three reports before moving forward.
One the errors are gone, you can get started on cleaning up your credit by paying down debts. Pay down current balances first to reduce your debt-to-income ratio. If this is lower, you will always have better credit. Once those are taken care of, you can start paying off old accounts or collections that you might have. Even when you pay off collection accounts, they remain on your credit for up to 7 years in some cases. Therefore, there is no point in paying them off first because they won't make as big of an impact on your score as paying down revolving debt will.
Make sure that you don't close accounts when you are fixing your credit scores. This is the worst thing that you can do. Just pay down the account and leave it. If it makes you feel better, you can cut up the card. However, your credit score is largely affected by the length of your credit history. If you close older accounts, you will lose valuable points because you are shortening your history. If you go through these steps with your credit scores, you will see improvements in no time at all. Of course, the most important part of fixing your credit is to avoid messing it up again in the future.