Credit repair versus credit improvement

Improving Credit

Credit Repair

Millions of Americans have bad credit due to the financial meltdown of 2008.  I know hundreds of folks who have bad credit because they fell behind in paying their bills due to loss of business, layoffs, or situations like divorce or medical issues.  Others have filed bankruptcy, had a foreclosure,  fell behind in paying their taxes so had tax liens, or fell behind on their payments.

What Is Credit Repair?

Credit repair is deleting derogatory items off your credit report.  Once you have a recent late pay on your credit report, it will drop your scores by at least 30 points or more.  However, as time goes by, the late payment has little or no effect.  Late payments, collections, charge offs, bankrutpcy, foreclosure, and other derogatory have little or no impact on your credit scores after 2 years.  As time goes by, your credit scores that dropped because of the derogatory will naturally improve.  However, it does not look good on your credit report and stays on your credit report for a period of 7 years.  Bankruptcies stays on your credit report for 10 years.  Judgments will remain on your credit report for 7 years although most judgments are good for ten years.

Deleting Derogatory Credit Items Versus Credit Scores

Repairing your credit might not necessarily improve your credit scores.  Deleting an old derogatory will probably not improve your scores, and many times, it will lower your credit scores.  However, your credit profile looks cleaner and you get a head start in getting it removed before the 7 year waiting period.

Home Loan After Bankruptcy And Foreclosure

If you are planning on applying for a mortgage loan after a bankruptcy and/or a foreclosure, most lenders do not want a mortgage borrower to have a late payment after a bankruptcy and/or foreclosure.  If this is the case, I strongly recommend that you dispute the late or derogatory credit item to all three credit bureaus or hire a credit repair company to do that for you.  Although your credit scores might not improve, it is wise to get the lates after a bankruptcy and/or foreclosure removed off your credit report.

Establishing New Credit Will Improve Your Credit Scores

If your intentions is to improve your credit scores, you need to establish new credit.  If you have low credit scores, the chances are very slim to be able to get an unsecured credit card.  I strongly recommend that you get three secured credit cards.  Each credit card should be able to boost your credit score by at least 20 points.  However, please keep your balance below 30% of your available credit limit.  You will get the maximum optimal effect by having three revolving secured credit cards.

Installment Loans To Boost Credit Scores

Try to also get an installment loan such as an automobile loan.  It is difficult for someone with bad credit to get an automobile loan but it is possible if you put a substantial amount down.  Get a used car and see if you can put 50% or more down.  For example, if you have the cash to purchase a $3,000 car, see if you can put down $2,000 and get a loan for $1,000.  The interest you pay is well worth the credit improvement this automobile loan will do for you.

Credit repair is a long process

Whether you do credit repair yourself or hire a credit repair company, credit repair is a long process.  It will take you months if not over a year to repair your credit.  Credit repair is a good thing for everyone to do but remember that credit repair does not necessarily improve your credit scores.  You need new credit and active credit for your credit scores to improve.  If you can do both, delete derogatories and establish new credit, that will be a winning combination.  Please monitor your credit report a few times a year and make sure there are no errors.  Credit reporting agencies are known in reporting erroneous items on consumer’s credit reports.

Credit Fix Advisors:

Every consumer should educate themselves about credit, credit scores, and credit repair.  Visit Credit Fix Advisors  at and sign up for their free daily credit newsletter at .

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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