The simplest way to build, keep and maintain a good credit score is to have at least 3 Revolving Credit cards that you keep the balance at 20% or less of the maximum allowable credit, and pay them on time every month.
But, sometimes life situations occur that cause credit to be tarnished. Death, Divorce, illness, loss of job, etc. When it does happen, fear not. A credit score is a dynamic thing(it changes). What goes down can come up. Here are the 3 levels of credit repair that I see daily in my quest to help folks finance their homes:
- Level One: This is where the credit score may be a little low causing the interest rate to be somewhat higher. In this case, we can run our credit analyzer to determine what actions would be necessary to increase the score. In one instance recently, I had a client pay one credit card down by $2000 and the score increase allowed us to get them a better rate.
- Level Two: This is where the credit score is basically too low for us to do a home loan. Usually below a 620 middle score. In this case, there are usually only a couple of items that may require attention. We still run our credit analyzer to determine the best course of action. One client had a 590 score and all they needed to do to get their score over 620 was to pay a $350 past due revolving credit card account.
- Level Three: This is where the credit looks like someone dropped a bomb on it. It includes any of the following: Mortgage Lates, Past due auto loan payments, Accounts placed for collection or charged off, tax liens, medical collections etc. In this case, I generally refer my client to a reputable credit repair company. They can help you develop a plan for negotiating with creditors, disputing debts, etc.
I know this is a simple explanation of credit repair, but it is important to know that fixing credit is not impossible or hopeless.