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	Tips to Repair Credit

Maintaining a good credit rating is essential in today’s world. If you find that your application was rejected due to bad credit, do not be surprised. A credit rating below average can be due to various reasons. This article looks at the reasons for decrease in credit rating and the methods of preventing them.

Late payments are more commonly responsible for a bad credit rating. So ensure you pay your bills on time. If you fail to do so, your creditors will note down that information and send the details to the credit reporting agencies. When your prospective lenders access this information, they get worried about their ability to recover their money. The simplest method to pay your bills on time is to use the online bill pay facility offered by your bank. This ensures your bills will be paid automatically every month. If you do not want automatic pay, you can go for a manual system, where you can spend some time each week to pay all your bills on time.

Owing excessive debt can also lower your credit score. If your debts are far higher than the income, your credit score will be affected. This is known as a high debt-to-income ratio, and prevents the lenders from lending you money due to their doubts about your financial capacity to repay it. While studying your credit report, lenders consider not only the total amount of debt but also the number of open credit card accounts. Even though these cards do not carry any balance, there is a chance that you can use these cards for further borrowing, thus reducing your repayment capacity more. If the amount of credit is high, the sensible approach is to select one or two cards and try to repay them completely. Close some credit card accounts to lower your available credit. But take care not to close an old account as long credit history will work in your favor.

Collection accounts can also harm the credit scores. If your account has been sent to a collection agency, it is important that you sort the problem quickly. If you dispute the debt, write to the creditor, and inform the credit bureau that this debt is disputed. After you have paid a collection account, follow up religiously to see that the company informs the credit bureau that you have settled the account completely. Your credit bureau report will keep the fact there was a collection in your name for another 7 years. But if you have paid off the account it will work to your advantage rather than keeping it unpaid.

Follow the precautionary measures outlined above to keep your credit report clean.

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