When Reapairing Your Credit, Don't Forget About Good Debt

By
Mortgage and Lending with 1st Colonial Community Bank | Bank - New Jersey NMLS# 149277 & 149276

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.

New Credit CowboyAs 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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Call direct @ 856-419-3561 | Subscribe to Steve's blog via e-mail | NJ Loan Officer .com

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Rainmaker
1,447,782
Rebecca Gaujot, the GO TO REALTOR
Coldwell Banker Stuart & Watts Real Estate - Lewisburg, WV
Lewisburg WV Real Estate, Greenbrier County

Steve, very good advice. I remember getting this advice when I first started working and tried to get a loan.

Mar 10, 2010 08:46 PM #1
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664,522
Sheldon Neal
Bergen County, NJ - RE/MAX Real Estate Limited - Maywood, NJ
That British Agent Bergen County NJ

Ha ! Wise words brutha ! Too many people think paying off all debt is the only way to improve their credit scores. As you stated, using certain credit, the right way, is paramount for good credit scores !

Nice !

Mar 10, 2010 09:02 PM #2
Rainer
146,742
Coleen DeGroff
eXp Realty - Gainesville, FL
Haile Plantation Real Estate - Gainesville FL

Great advice, Steve!  This is just the type of info that so many of today's buyers need.....so glad to read a cogent analysis.  Thanks!

Mar 10, 2010 09:03 PM #3
Rainer
290,849
Richard & Carol DeGrace
1st Colonial Community Bank | Bank - New Jersey - Cherry Hill, NJ
Mortgage Loan Officers NJ 609-209-3700

Rebecca - Glad to hear you got good advice!

Sheldon - It's not rocket science. Just have to do it right.

Coleen - Great to hear!

Mar 10, 2010 09:57 PM #4
Rainer
47,489
Brian L. Nelson
AllTrade Home Inspection - Lake Tapps, WA
Seattle WA - Tacoma WA Home Inspector

Interesting Post! Good information, thank you for sharing.

Mar 10, 2010 11:12 PM #5
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Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate
Realtor / Owner - RE/MAX Access - Philadelphia, PA

Steve - It is imperative that a consumer have a "go-to" source in terms of what to do to both repair their credit AND to maintain their credit score.  You are that "go-to" person as you have loads of valuable info on the topic !

Mar 12, 2010 10:12 AM #6
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Rainer
290,849

Richard & Carol DeGrace

Mortgage Loan Officers NJ 609-209-3700
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