Common Credit Repair Mistakes
Most people make mistakes when they try to repair their own credit. It isn’t that credit restoration is complicated or that you need to hire a credit repair company to do it for you. It’s just that you need to take the time to learn how credit repair works so that you can avoid making credit repair mistakes. Here are some common mistakes that you want to avoid!
Paying Off Collection Accounts
Paying off your collection accounts is a good thing – right? Most of the time, no! The reason you never want to simply pay off a collection account is that paying the account off will renew the date of last activity. When this happens, the account influences your credit score more heavily because recent accounts impact your credit score much more than older accounts.
What you need to do is set up an agreement with the lender that they agree to delete the account from your credit file as long as you make a payment in full. Just make sure that you get the agreement in writing before you make a payment!
Closing Credit Card Accounts
I can’t tell you how many times I have read an article on the internet advising people to close credit card accounts so that lenders wouldn’t worry about them going out and getting into debt. While this might make sense logically, this simply isn’t how the credit bureaus work!
A full 30% of your total Fico Score comes from what is called “credit utilization.” (That is why many people looking for fast credit repair pay off debt.) This is the relationship between how much credit you have available to you versus what you owe. When you close accounts, you lower your total available credit. This will ultimately lower your credit score. If it is an especially large credit line, sometimes the results can be dramatic. If you want to resist the temptation to use your credit cards, a better bet is simply cutting up the card.
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