There are obviously several things to talk about when it comes to improving your credit. I decided (for several reasons, not the least of which is that I needed a refresher) to do some research and found mountains of information on the subject?especially when it comes to mortgages and credit scores. Because of the stacks of data from various sources, no matter how hard I try I can?t condense it into a decent blog entry, so this will probably be the first of a series on the topic.

No matter where I looked, or what I read, the first item on everyone?s list is to pay your bills on time. Seems like a no-brainer, but it?s probably the first and most important place that most lenders or brokers investigate. Although a few 30 day late payments aren?t going to cause too much damage to your credit, the same amount of 60 days or any public judgements, and your score could drop significantly. Your payment history is particularly important near or around the time you are planning to apply for your loan.

FICO scores are determined largely by five categories, and Payment History accounts for 35% of your score. I checked it out, and FICO (roughly anyway) determines Payment History to encompass the following:

  • Payment information on specific types of credit, which include credit cards, retail accounts, installment loans (like car payments for instance), finance company payments, and mortgages.
  • The presence of negative public records (like bankruptcy, lawsuits, liens, wage attachments, and collections).
  • Severity of past due payments (how long the payments were past due)
  • The amounts of past due payments on accounts or collection items.
  • How recent the past due payments or public judgements were.
  • Number of past due items are on your record
  • Number of accounts that have been paid as agreed.

If you have missed payments, the best things to do is get current and stay that way. Again, seems like a no-brainer, but it holds enough weight that it needs to be mentioned here. The longer your bills are consistently paid on time, the better your credit and score will become.

Obviously getting up to date is important, and it?s equally important (at least I think it is) to realize that paying off collections won?t remove them immediately from your credit report. Most public judgements or liens will stay on your credit for seven years, and bankruptcy may follow you for up to ten. Don?t let that be too discouraging though. Although taking control of your debt won?t improve things right away, it can and will get better.

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