As consumers find themselves in a position to begin repairing bad credit which may have resulted from troubles related to their employment situation or simple poor spending habits, there are various methods which have been used by these individuals that can both be independently helpful when it comes to increasing a bad credit score or collectively useful to putting a consumer in a better overall credit position by building a stronger credit history and, ultimately, raising their credit score. Obviously, financially responsible habits of spending within one’s means and repaying debt obligations in a timely manner are one of the preventative measures that may be used to not only build a positive credit history but, after a bad credit score has been repaired, will typically keep a consumer in a positive credit position.
However, one step that consumers often take is to simply lower their debt-to-credit ratio, also called a credit utilization ratio, as this can have an impact on their credit score as well. Consumers who have access to a large amount of credit can be viewed in a positive light by many credit scoring agencies, but if the amount of debt is quite high compared to the amount of available credit, this can lower one’s FICO score and necessitate measures being taken to repair one’s bad credit standing.
Obviously, taking this step is one of the more practical and common sense methods that consumers who are attempting to repair a bad credit score will use as paying off debts is necessary before a bad credit score can be properly repaired. Yet, there are some consumers, particularly credit card users, who may pay off a credit card and simply cancel their account, which again, has been linked to a drop in a consumer’s credit score because this, again, will lower the overall amount of credit they may have compared to debt which is still outstanding.
Understandably, consumers who have had problems with credit cards in the past feel that by closing the account they can benefit from only having one or two cards as this will cut down on the temptation to spend on credit. Yet, there are cardholders who have simply paid off their credit card debts and put these cards out of sight only to be used periodically for small, affordable purchases. However, no matter how a consumer handles their credit cards, erasing these debts must be accomplished first so that a consumer can begin building a more positive credit history.
Typically, bad credit consumers who may have unsecured cards can simply make affordable purchases on these cards, budget in such a way that allows them to pay off the entirety of their credit card balance from month to month, and continue to acquire positive items on their credit history which could increase their credit score over time. Many advisers suggest that after a cardholder pays off their credit card debt, the credit card with the longest history should be used, as this too can be more helpful than cards that may be much newer.
However, simply lowering the amount of debt one has compared to the overall lines of credit which are at their disposal is one of the many ways that consumers can begin the process of repairing their bad credit score, but care must be taken and smart financial practices used as erasing debts is simply one part of the bad credit repair process and consumers must continue to live within their means so that they will avoid being overwhelmed by various forms of personal debt obligations.