When Repairing Your Credit, Don't Forget About Good Debt
by Steve Kappre, NJ Loan Officer
Anyone who takes the initiative to restore their credit profile should be commended. Keep in mind though that along with removing negative debts and history, many times new debt (that is good debt) needs to be established.
As time passes, older items on a credit report have less and less effect on the credit scores. This is good in the case of bad debt, and not so good in the case of good debt. Good debt would be considered an account that has been active, has on-time payment history, and has low balances (in regards to the allowable limit).
Good debt can be a mortgage, a car loan, credit cards, or installment loans. Some debts are a little better to have than others but that is beyond the scope of this piece.
As a individual makes the effort to rid their profile of negative items, for the score to improve, the credit scoring system will need to see some timely (on-time) accounts. If your credit is too damaged to open a bank loan or credit card, the common method of re-establishing credit is through a secure credit card, which is basically a credit card where you put the "credit" upfront ($500 limit on a card would require a $500 deposit, for instance).
So remember, knowing how to correctly remove and repair items on the credit report is only part of the equation. Be sure to establish new, good debt.
Credit Links
Credit Scoring - What Makes Up My Credit Score? (1 of 6)
Credit Scoring - Payment History (2 of 6)
Credit Scoring - Balances (3 of 6)
Credit Scoring - History (4 of 6)
Credit Scoring - Mix of Accounts (5 of 6)
Credit Scoring - Inquiries (6 of 6)
Steve Kappre is a mortgage loan officer in New Jersey. For more info or questions feel free to contact Steve.
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