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10-pART VIDEO SERIES AND DOWNLOADABLE MATERIALS TO LEARN CREDIT REPAIR

After your payment history, your credit utilization is the second highest factor in your overall credit score (about 30% of the total).

Remember, credit utilization is the percentage of available credit you’ve used. For example, if you have $5,000 in available credit and you have a total balance of $2,500, your credit utilization is 50%.

This means that if you have really high balances, your credit score will be brought down. If your credit cards are maxed or close to maxed, start paying balances down. Ideally, your credit utilization should be below 10%, but if you can get it below 30% that’s a good starting place.

Kelli Geldis offers this helpful tip:

Hint: If you pay a credit card off on time regularly, your issuer will likely see you as a good credit risk and increase your credit limit. Don’t however start charging more. Simply charge the same basic amount. Doing so will keep your utilization lower!

Your loan balances also affect your credit score. The higher your balance, compared to the original, the more it hurts your score. If you can pay down overall balances, it will benefit you. However, credit card debt hurts you more than loan debt, so focus on paying that off first.

Which is more important, credit card balances or past due accounts? Obviously, you don’t have unlimited funds to invest in repairing your credit. You still have bills to pay and groceries to buy. So how should you prioritize your efforts?

Because your payment history is a bigger factor in your credit score, you should focus first on getting your accounts current. Once you’ve dealt with accounts that are past due (or close to it), you can then move on to bringing down your high credit or loan balances. Finally, deal with charged off accounts and those sent to collections.

So, your order of actions should be:

1. Past due accounts
2. High credit or loan balances
3. Charged off and collections