Guest Post by Darin Sewell
When it comes to fixing a bad credit report and boosting a low FICO score the first question out of most people’s mouths is how long is this going to take. Truthfully that is a hard question to answer mainly because each individual’s credit and personal situation are different and are going to require its own approach and amount of work. But in most cases you can make some good progress inside of 3-6 months, but you have to make sure you follow along with some proven credit repair principles. Let’s take a Look at one of these principals below, debt reduction with a twist!
Before you can increase your credit score you are going to have to look at the amount of total debt that you currently have. If you have bad credit chances are that you have many accounts that are maxed out or near the account maximum so you need to find a way to get this debt paid down.
Why Too Much Debt Hurts Your Credit Score
Having a lot of accounts maxed out or near maxed out is very bad because anytime you carry more than 50% of your available debt, your scores will start to go down, and go down fast. To avert this, you need to pay down your debts as fast as you can. I know this sounds easier said than done but there are a few advanced tactics you can use to get it paid down faster.
An Advanced Tactic To Pay Your Debt Down Faster
One such tactic is called stacking. What this means is that you find savings in your monthly expenses and apply them to your debt reduction. It might be lowering your cell plan, cancelling Netflix or taking a lunch to work instead of buying it every day. You can then take the extra money you get from these savings and pay it towards your debt with the lowest balance.
To make this tactic work you will have to keep paying towards the debt until it is paid off and once it is paid off, apply the money that you used to pay towards that bill to another bill, in most cases you can often come close to doubling your payment amount and by the time you get to your last account you will have a large amount of money going towards its reduction every month.
Of course no amount of debt reduction effort is going to help you if you continue to spend and acquire more debt. So make sure to set a budget and stick to it. And do not open any new credit accounts during this time and do not close your accounts when you pay them off.
Maintain Your Credit Accounts
Keeping your existing credit accounts open is critical because along with the amount of debt you have, you are also scored by how long your accounts have been open. This means that an account that is brand new will not give you as much score boosting power as an account you have had open for a few years. Maintain these accounts even if you have late payment history on a seasoned account; do not cancel it, as most negative activity will disappear from your credit report 12 months after it appears.
How To Ensure You Never Pay Late Again
Once you get your debts paid down you will see your credit scores rapidly increasing, keep them on the upswing by not making any late payments. The best way to do this is to use only one card and set it up for automatic payments every month. While the auto payment will only make the minimum payment you can always send in more after the minimum is made. This will put your bill payment efforts on auto pilot and keep you from slipping into the same habit of late payments and too much debt!
Depending on how much debt you have to start with, this process can take a few months or a year or more, but it does get a little easier each month so stick with it because the only thing you have to lose is your low credit score.