Tips on Repairing a Weak FICO Score


The importance of a good credit score

The importance of a good credit score


Understanding your credit report, and resulting FICO score, is important; repairing a weak one is crucial to your future ability to qualify for any type of loan, buy a car on credit, rent apartments or homes, or participate in any transaction requiring financing or proof of financial security.

How do I know if my credit report needs repair?

In 2003 President Bush signed into law the Fair and Accurate Credit Transaction Act.  One of its provisions required each of the 3 major credit bureaus (Experian, Equifax, and TransUnion) to provide consumers free access to their credit report every 12 months on request.  By applying on line at, or calling them at 1-877-322-8228, you may order free reports from each of the three bureaus at the same time, or you can stagger your requests throughout the year.  The reports are lengthy summaries of all accounts you have established with lenders, such as credit cards, car loans, student loans, and mortgages. Your lenders have supplied information on the date that each account was opened, the loan/balance amount, and payment histories.  As for the resulting FICO score, the bureaus are not required to give free access; by going to FICO’s website, and paying around $20, you can also order your FICO score.

Is a credit report difficult to read?

Each account on your credit report has a rating.  A sample credit report will be provided to assist you with reading your report.  You will see a letter indicating what type of account (I for individual, J for joint, etc.), followed by a number signaling the rating; a ‘1’ would be an account paid on time, while a ‘5’ could mean a late payment.  Make a note of all accounts with numbers higher than ‘1’,  and especially any that were turned over for collection… definite repair items.

If you discover a number of negative items on your credit report that are accurate, there are steps you can take to remediate your credit standing.  Repairing bad credit is a bit like losing weight; it takes time and there is no quick fix.

How can I repair my negative credit history?

1)       Pay on time!  Your payment history accounts for 35% of your credit score, and is the first thing lenders and landlords consider.  Set up payment reminders, or arrange for direct automatic deductions from your bank account and direct debits to a credit card.  Select 2 days a month to sit down and pay any accumulated bills all at once.

2)      Create a monthly budget. Track your spending for 30 days to calculate your income and expenditures, budget for those fixed expenses, and leave money for non-recurring and miscellaneous expenses.

3)      Stop using your credit cards so much.  If your credit card balances grow, and you’re only paying off the minimum each month, stop using it!  Try existing for a while on cash or a debit card, while paying down those large balances.  Constantly using more than 35% of your card limit is a red flag to creditors; try to keep usage under 20%.

4)      Don’t open a lot of new credit cards.  Too many new accounts will lower your average account age and therefore lower your score, while a long credit history with at least 3 “trade lines” or credit cards raises your score.  With that said, don’t close unused credit cards as a short-term strategy to raise your score; closed accounts still show up on your report, and canceling a credit card can drop your score by 30 points or more.  Lastly, don’t open charge accounts or credit cards with department stores; stick to established bank cards.

5)      Reach out to your creditors.  If you are surprised (or not) to find accounts that have been turned over for collection, and the charges are correct, contact the collection agency and ask them to accept a payment plan that will fit your budget.  If you have a budget, and can show how much you can pay each month against the debt, they’re more likely to accept your offer of lower payments.  Once you have paid a collection debt in full, ask for a settlement letter from the collection agency, and send a copy to all 3 credit bureaus so they can update your report.  Even though you pay off the collection account, it will stay on your credit report for 7 years but will be reflected as paid.

6)      Pay down some of your larger debts.  Total debt outstanding constitutes 30% of your credit score.  With close budgeting, consider opening 2 bank accounts…one for everyday expenses and one to be used only for making debt repayments each month.  Focus on making payments on the highest interest debt first.

7)      Seek help from a credit counseling organization.  If you’re not having luck creating a budget or working out repayment plans with a creditor, you might consider finding a reputable organization that offers in-person counseling.  Some are free non-profit organizations, and some charge.  Beware of claims for quick fixes, “erasing bad credit”, or removing negative items from your credit report with requirements to pay in advance…they’re very likely signs of a scam.

What if I find an error on my credit report?

If you discover negative items on your report that are inaccurate or incomplete, you should take steps to have them removed:

**Tell the credit bureau, in writing, what information you believe to be inaccurate.  Clearly identify each item, and include copies of any documents to support your claim.  State the facts and reasons you dispute the information

Understanding your credit score…and tips on keeping it healthy

The importance of a good credit reportYou’ve been working diligently with a good realtor for several months and have finally found your dream home.  A price has been agreed upon, and the offer has been accepted.  You meet with your lender, and all the effort and excitement comes to a screeching halt… you can’t get the mortgage because of your low credit score.




In today’s world of commonly financed purchases, whether it’s a major acquisition of a home or a minor splurge at your favorite spa, understanding and managing your credit report and FICO score has become more important than ever.  The FICO score is used in more than 90% of consumer credit decisions and has become the global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries.


Your FICO credit score is determined using information from accounts you have established with your lenders (think credit cards, car loans, students loans, mortgages). Your lenders supply information on the date that each account was opened, the loan/balance amount, and payment history to three major credit reporting companies: TransUnion, Equifax, and Experian. .   Your FICO score may be slightly different depending on the company that reports your credit, and the range is from 300 to 850 – the higher, the better. When you apply for a loan or mortgage, you give your lender permission to obtain your credit report and FICO score, and their decision (and frequently interest rate) is largely based on these numbers.



Managing your credit


Each of the three credit reporting companies are required to provide you with a free copy of your credit report once every 12 months, and it’s important to review these for accuracy.  To get your FICO score, you usually have to pay a small fee; these are considered ‘soft inquiries’ and don’t lower your score.  Once you obtain your reports, conduct a detailed review of each account to make sure balances, payment history, and number of accounts are correct.  You’re also entitled to a free credit report if your application for credit, insurance, or employment is denied because of information on it.


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[TIP: When a lender or business does a credit inquiry, it’s considered a ‘hard inquiry’ and can lower your credit score slightly.]


What affects your credit score?


Most of the negative events below will remain on your credit report for an average of 7 years.  While some financial disasters, such as bankruptcy, can’t always be avoided, there are other practices that can be improved.


1)      Late payments:  This is one of the first thing lenders consider when you apply for a loan, especially if it happens frequently.  Schedule payments ahead of time, and allow several days for mailed payments.  If you’ve forgotten to pay an invoice, call and see if the company will take a telephone payment that day.  Scheduling automatic deductions from your checking account, or automatic payments on your credit card are also methods to ensure prompt payments.

2)      Closed accounts:  Accounts that are closed, even those in good standing, also affect your record for up to 7 years.  Avoid having a large number of credit accounts; the next time a store offers you a 10% discount for opening a credit card account that day, which you’ll most likely never use, decline the tempting offer.

3)      Excessive debt: using more than 35% of a credit account limit consistently: Bumping up against your credit line and only paying the minimum payment each month identifies you as a highly leveraged risk.  Furthermore, if you add in the high interest rates being charged, you will never be able to pay it off with minimum payments.  Conversely, accounts that have been open for a long time, and those with high credit limits but low balances, can actually have a positive impact on your credit score.

4)      Collection accounts: Once a creditor sends an overdue account for collection, that record becomes part of your report.  If you pay it, make sure that the “paid collection” is noted on your report .  If you settle with the collection agency for less, that will also be noted.  Again, rather than allowing accounts to be charged-off or sent to a collection agency, work with the creditor to see if a reasonable payment plan can be established.

5)      Charged-off accounts: Rather than accepting the charge-off, try to work with the creditor on a repayment plan that might work.

6)      Foreclosure:  A foreclosure can drop your FICO score as much as 150 points.  By keeping accounts in good standing, and making all payments on time, you can start to improve your score within 2 years.  Wait at least 3 years before applying for a mortgage or other major loans.

7)      Bankruptcy: Chapters 7, 11, and 13 appear as public record items for up to 10 years after filing, although Chapter 13 filings are sometimes taken off after 7 years.

8)      Judgments:  small claims, civil claims, and child support judgments will be recorded on your report, as will tax liens.


After reviewing your credit accounts and scores, you may be surprised to find inaccuracies, as well as elements that just need overhaul and repair.  How to go about that? There is a right way and a wrong way to close accounts and report inaccuracies. Watch for the next blog on how to repair a bad credit report.