It seemed like just yesterday when you were eating mom’s home-cooked breakfasts and hitting up dad for occasional gas money. Suddenly, you’re thrust out into the world of adulthood without a clue or a personal finance plan. Even if you worked your way through high school, you likely spent all of your money on your first car, concerts, movie tickets, gas money, new clothes and fast food. With credit card offers in the student union and large lump sum loans assaulting you from all angles, it’s easy to find yourself suddenly paying the price for your spending spree. So how can you repair credit score history and back-paddle out of this mess?

The first step to repairing your credit score history is to understand the breakdown of that three-digit number and what factors into your score. Your payment history comprises 35% of the score, so always pay every bill and credit payment in advance. This tells the lender how likely you are to pay them in full and on-time, without hassle. Also, the more recent the mistake, the worse it will be for your score. Another 30% of the score is based on outstanding debt, such as how much you owe on car loans or home loans and how many credit cards you have at their credit limits.

You should have no more than 3 credit cards at 25% or less of their limits. This indicates whether you’re out-of-control, using up your limits, and whether you’re literally living off credit or not. The length of time you’ve had credit will account for 15% percent of your score because lenders want to see that you have a long-standing history of paying responsibly. Furthermore, 10% of the score is based on the number of inquiries on your report. If you are applying furiously for tons of credit cards, then this indicates that you’re in some kind of financial trouble.

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This entry was posted on Thursday, November 13th, 2008 at 6:39 am and is filed under Financial Services. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.