Getting Your Credit Back On Track

As one of the most important aspects of your financial life, poor credit can easily drag you down and make obtaining financing difficult. Whether you have suffered a financial hardship that resulted in a bankruptcy, failed to make your payments on time for a few months or carry several high balances, your credit could most likely use some repair. Regardless of your situation there are some easy ways to boost your credit.

Quick Credit Boosters

The first thing to know is that there is good debt and bad debt. Bad debt is any amount of debt that you cannot afford to repay or has a balance-to-limit ratio over 40%. This means that even if you can afford to make your payments each month, having a balance over 40% of the total spending limit can be detrimental to your credit. The idea is to carry two or three lines of credit with manageable balances under 30-40% of the total spending limit.

Also, it is important that you do not pay off a line of credit and immediately close it. Having one or two open lines of credit with a zero balance can actually help your credit. At some point, you will want to place a small balance on the account and pay it off over a few months time. The goal is to establish a long history of purchasing and repayment in a timely manner. The longer your positive payment history, the better your credit score.

While credit card debt can be the most convenient type of debt to manage, it is important to have at least one line of secured debt to improve your credit. It doesn’t matter if your secured debt is a mortgage or a car loan, the important thing is having a line of credit in which you have an asset secured as collateral. Keeping a positive history on one secured line of credit is quick way to a higher credit score, but remember that they are also more dangerous in the event of future default.

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