Wednesday, October 24, 2007

5 tips for: 'fixing credit'

I had a myspace friend ask about how I 'fixed' my credit - although I'd say it's far from being fixed and the only real way to 'fix' for your credit is through 'time' & 'effort' but, here's my basic response:

'fixing' credit is not an easy or quick ordeal. Each person's situation is different. For me it was about:

  1. Checking my credit report every 6mos - 1 yr
  2. Learning about the factors that affect my credit score - such as: paying on time, eliminating negative trade scores (like collections & judgments)
  3. Reducing the outstanding balance on credit cards and other debts.
  4. Correcting any errors on my credit - such as incorrect debts, addresses, occupations, etc.
  5. Keep the debt-to-income ratio low. Or the amount of debt you have compared to your annual income. A person making 50,000 a year with 85,000 of debt has a debt-to-income ratio of 1.7 - which, according to is somewhat average for a 30-yr old. My current debt-to-income ratio is .015. That will change drastically when I make the first step towards home-ownership.

Bottom line is pay your bills on time and check your credit regularly every 6 mos or 1x a year for mistakes and potential identity theft.

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