Loans / Lines of Credit

Posted on: Jul. 30, 2009

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Q. How long does it take to correct a persons credit score, and what are the best ways to prevent damaging it in the first place?

A. A credit report lists all your credit information, good and bad, for up to seven years. With some forethought and planning, you can improve your credit score – and the sooner you can do that, the sooner you will have financial freedom.

Credit reporting allows companies to determine the degree of risk involved in granting credit or a loan. If you can, your best bet is to take a proactive approach to keep your credit in good standing. Remember, too, you can’t change your past, but you can start today to improve your personal credit score.  The good news is, you are the one who makes the decisions that affect your credit score.

Start with the facts. Knowing what’s in your report puts you in control. Make sure all information is accurate and complete. You need to know what it is that you need to repair. Pay particular attention to the reason codes. Those will give you a starting point for your list of areas you want to improve.

You will also find help by discussing your credit situation with your lender or a financial planner. They can review your situation and credit report with you, and help plan steps to achieve your goal. There are strategies you can use that you may not have thought of, including ways to reduce your debt in a way that is manageable and at lower interest rates than what you might be paying now.

You also asked about preventing damage to your rating in the first place. To prevent damaging your credit score, pay attention to factors that include:

• Timely Payments - A good record of on-time payments will help boost your credit score.
• Amount of debt in relation to available debt. Take credit cards as an example. Have you “maxed out” how much you can borrow on your cards? That can be a red flag when borrowing.  Try not to max out your credit limit.
• Recent inquiries. Every time you make a new credit application, it is recorded on your credit file.  Applying too frequently will reduce your score and come up as a flag when trying to borrow.  Apply for new credit in moderation.
• Credit account history. A good credit history will improve your chances of borrowing.

To recap, if your credit score is a little low, plan your spending, pay your bills on time, reduce your debt, ensure the report is accurate and avoid new enquiries for a few months. Soon, your credit difficulties will be behind you. Congratulations!

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