Credit Repair – You Can Do It By Yourself
Credit is definitely a huge a part of our lives. It can be your shot at buying a house, getting financed, and even opening a banking account.
Truth be told, when your credit score is not very pretty, you’re actually on a downward spiral. You can fix this by raising your credit. However, you need not get help from any credit repair agency. You can do it all by yourself. I’ll give you some tips in boosting your own credit score without having to shell out extra cash for the credit repair companies.
Check your credit at all times just to be very accurate. It is definitely best to contact the three major credit agencies (Experian, Equifax, and TransUnion) and get your updated credit evaluation to make sure about the accuracy. Also, download letters written in advance which you will be needing for credit reporting agencies, it will be very helpful.
Know your annual credit history, you won’t be paying for it. In addition, don’t hesitate in requesting for a “proof of debt” out of your loan provider and work together in regards to your repayment plan to dodge any problem from arising in the long run.
If there are any judgment proceedings, see to it that you appear, no matter the situation. Moreover, it pays that you know the statue of restrictions for all your financial obligations.
There are actually tons of ways in enhancing your credit rating. Do your homework and do some research but don’t just stop there. All this information will go down the drain if you don’t implement it.
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Credit Score Concerns
If you have experienced being declined for a credit card or any loans, most likely, you have been offered a free credit report through snail mail in order for you to review and see why you have been declined. Unluckily, the numeric score that will determine the approval process cannot be found on these free credit reports, which makes consumers more confused. That being said, how does a free credit report given through snail mail 10-14 days later with no numeric score actually help educate an individual as to how why exactly they were declined? It actually doesn’t. You now have your 20-30 page credit report a week after the fact filled with verbiage that reads about as easy as mumbo jumbo.
Such free credit reports have the status and payment history of outstanding lines of credit and other financial obligations that include credit cards, charge accounts, home mortgages, car notes, as well as negligent medical and utility bills that were sold or outsourced to collection agencies. Such data will be used by the credit bureaus in order to generate your credit worthiness on their 300 to 850 numeric credit score scale. Lenders mainly use the credit score itself so as to approve a loan process, so it’s a must to get an understanding what they are seeing that coincides with the data on the credit report.
There may be a lot of questions when it comes to credit score, but one thing we know for sure is that it’s important. How about you, what are your concerns when this subject is being brought up?
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The Pains of A Poor Credit Score
Having a very low credit score can drive you nuts. Majority of creditors consider 620 as the bottom cut off for prime loans, which is kind of like the separating line between good and bad credit.
A credit score of above 620 would still most likely be considered as a sensible credit. You won’t essentially be deprived of credit, but the best rates will not be given to you. You might possibly learn that securing loans are extremely hard at this point. And if you ever get approves, the interest rate will be extremely high and the conditions might be a lot less than perfect.
That said, if you are looking to buy or refinance a home or a car, a higher mortgage rate is to be expected. You must take every measure just so you can boost your credit score to avoid being in this kind of rut.
It goes without saying that, the higher you can boost your credit score, the better benefits you will reap. Anything below 620 is basically a poor credit score. Your risk of default is pretty high and before a lender even thinks of approving you for a loan, strong compensating factors will be asked from you.
If your credit score is around 620, it may seem that you have done some financial mistakes. This predicament happens if you own credit cards that are maxed out. Spending way above your credit limit makes it much more damaging for your credit score. When you max out different credit cards or go beyond the credit limit, you send the wrong signal to your prospective creditors that you have troubles living within your means. The money you make is not adequate, so you resort to your available credit. This can have a negative impact on your credit score.
Always remember that your credit score depends on the data seen in your credit report. Therefore, vigilantly checking the information in your report is an essential measure to take.
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What Does Your Credit Score Mean?
Your credit score is a 3 digit number that is assigned as a convenient way for lenders to understand how credit worthy you are. It is often used to help them decide whether you qualify for credit and what the associated interest rate will be.
Anytime you apply for credit, your lender is likely to request a copy of your credit report which includes lots of information about your current credit standing. It will also include the numeric credit score. Since lenders can easily get their hands on this information, it is beneficial to you if you review the details yourself from time to time.
There are three companies that generate credit scores: Equifax, TransUnion, and Experian. They generate a number between 300 and 850. This number is often called the FICO score, which stands for Fair Isaac Corporation.
Here is a quick breakdown of the FICO score values:
• 720-850 – this is the range of average scores and better, a very good range
• 700-719 – rates may not be as good as above, but your credit is still decent
• 675-699 – at this level you are starting to lose out on the best deals
• 620-674 – you cannot get great terms here as loans will cost you extra
• 560-619 – this is really subprime so you’ll have to work to improve
• 500-559 – it’s going to be tough to get any loan
You can find another analysis of the numbers on our credit score rating scale page.
Among the factors that determine your score include your own credit history, the amounts you owed, how much remains, the duration of credit history, and the type of credit you have used.
You can improve your score by paying down any debts, staying well under your credit limit, and pay all bills before due dates.
Explore other resources on this website to learn more about your credit score and how to improve it.
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Explaining Your Credit Score
You probably want to know the precise details in terms of calculating your credit score. It actually takes a little while to finish it and it is done by three companies and they all have their own ways to come up with the results. Thus, a credit score from one company can come out different from the other. To have an estimate on your credit score on your own, take into consideration some of these factors.
If you don’t own a credit card, don’t have any type of bill in your name, or haven’t tried borrowing money, you basically have a zero credit score. Actually, it’s not considered as a bad credit, it will just be hard for you to get a loan if you have no credit at all. However, there are some lenders willing to run the risk and let you borrow albeit without credit. But generally, it’s always better to build up credit.
You credit history will make up around 35% of your credit score, so it is very crucial. If you have unpaid bills or debt that you were not able to repay, it will be listed in your name and it will take 7 to 10 years before it gets deleted.
Every little bad decision you make will ultimately affect you credit in the long run, of course, negatively. If you are trying to make up for unpaid debts, it will still apparently appear on your credit report as bills that were paid late.
The length of your credit history makes up for 15% of your total credit score. Thus, as soon as you can, start building up credit. It will improve over time just as long as you have your bank account maintained. Essential information such as length of employment as well as residency will also fall in to this category. Therefore, it is more ideal to be stable in life than always having to move around.
Furthermore, 30% will actually be based on your current debts. Even when you’re always on time with your payments, if you have multiple loans at a time, then you run the risk of being denied more credit. So always get only the loans that you badly need and be punctual in paying as you don’t only boost your credit rating, you also get to save a significant amount of money on interests. If you do so, it will show on your credit history so you’ll be given lower interest rates on your future loans.
10% of your credit score will depend on new accounts. They will check how many types of loans you have and how many you currently have open. Remember not to open or close any account abruptly as this can be detrimental to your credit rating.
Always be cautious and educated. Knowing things like how a credit score is being calculated can help you find errors if there is any. Get your free annual credit report and review meticulously to make sure your credit score is how it is supposed to be.
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High Credit Score
We know all too well that the higher your credit score is, the better your control is on your finances. Truth be told, you’ll experience better benefits, save money, and enjoy lower interest rates than most of the people who have lower credit scores.
If your credit score is high, creditors are more likely to back up your loan and give you the best rates possible as they believe in your borrowing skills. Suffice it to say, you should always strive hard and focus on getting your credit score as high as you possibly can.
One of the most vital things to avoid is having too many credit cards since this can give your prospective lenders the wrong idea that you can’t live within the money you can make and giving you another loan might just prevent you from meeting further obligations. The best thing to do is to limit your credit cards to three or four cards.
Also, pay your bills on time. You should have at a record of at least seven years of promptly paying your financial obligations. Most creditors don’t approve individuals applying for loans with a history of late payments. Simply put, if you plan on applying for a loan in the future, start getting in the habit of paying your bills on time.
Also, always obtain you credit report. Just so you know, you are annually entitled to a free credit report from credit bureaus such as and Equifax, Experian, and TransUnion. Check for any error or inconsistency and if there is any, immediately report them to the bureaus which will then fix it within 30 days after a thorough investigation. Save and monitor all account statements you have as some credit card companies have the tendency to raise your interest rate or drop your available credit if you are late on a payment, even if it’s not to their own company.
Start improving your financial status. With time and effort, you will definitely get that score you’ve been rooting for.
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How Credit Score Can Affect Job Offers
Nowadays, access to public information can be very easy. A lot of prospective employers are looking for information about you as much as they possibly can before they even offer you the job. It depends on the type of employment that you’re looking to have, though. This could involve things such as a police check or obtaining your current credit rating with certain agencies.
If there are recorded court judgments against you out there, regardless of whether you know about it or not, or you haven’t paid a utility account on time and it has been passed to a debt collection agency, or you have missed on loan repayments, these quickly get in the radar of these organizations and can be obtained from them for a small fee.
A lot of people find jobs with the help of recruitment agencies, and it’s no surprise if they may wish to research our credit score. This is not necessarily because they think it makes you any less employable, but they can get a glimpse of your character, reliability and stability. If they want to put a certain person in a role expecting them to stay there for the long haul then a person’s credit history may help them assess the applicant’s suitability.
It is common for employers’ job offer to be withdrawn from the table due to a poor credit rating. If you’re one of these unlucky people who happens to have a poor credit record and outstanding debts, it could help you if you seek the services of a professional financial advocate.
They can negotiate with creditors and reporting agencies for you and for the most part, can have these entries expunged. They are quite aware of the laws regarding credit and your personal rights for privacy and it is not a rare result for them to not only do efforts to clean up your credit file but also have the debt cancelled or remarkably lessened, too.
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The Real Story Behind Every Credit Score
Did you ever receive a letter from your credit agency showing your credit score and the question running through your mind is how this happened? Well, that is the typical scenario a credit holder experiences when they see how low their scores got. Don’t you just hate that to happen to you all the time? After reading this article, you will never have to suffer from that again.
First thing to know is that your present credit score is based on your past payments which comprise 35% of your overall credit score. If you have been paying religiously, then there is no room for asking questions. But if you missed a couple or more due dates, then this could mean bad news for you. Although creditors have different standards on when they will account a late payment, it is still advisable to pay on time. Second, the 10% of your score comes from your variety of credit. This means having different categories such as car loan, house rents or simple credit cards show your capability to handle an array of credit options as long as you remember when to pay all of them of course. Third, 15 % of your credit score is based on how long you have a history of credits. The better you have handled them over the years would determine good score. Fourth, 30% comes from the total amount you owe. It is weighed parallel to your income. So make sure to make your debt lower than your income so as to keep you scores floating. And last but not the least, 10% of the credit score you owe from inquiries regarding your credit. This could mean an overdue or a forgotten due date which is totally not for the best.
The root of this mysterious credit score is the credit holder’s lost of control and lack of knowledge. As much as you want to put all the blame to the credit agency not informing you ahead, you have to accept the fact that you are responsible for the kind of position you are currently on. You can now do the calculating all by yourself. With all these explained in simple terms, ignorance of the policies is no longer an excuse.
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Foreclosure and Its Effect on Your Credit Score
Foreclosure is the lawful procedure that terminates the rights of a homeowner and gives the ownership to the mortgage lender. This happens when a homeowner fails to pay the monthly mortgage payment as agreed upon.
Foreclosures can greatly affect one’s credit score, but you can avoid it if you have control over your finances to begin with. If you have been included in the foreclosure listing, it can decrease your credit score by up to 250 points. The severity of this damage, however, depends on your credit history.
If you have been paying your credit card bills and other loans on time, it can positively alter the impact of the foreclosure. If the amount of your current debt is considerably lower than the amount of your available credit, then the effects of the foreclosure on your credit score can also be tempered.
Payment history makes up 35% of your total credit rating, and your late mortgage payments are included here. Current debt makes up 30%, the length of your credit history accounts for 15%, your credit card and installment loan balance makes up 10%, and your recently opened credit account makes up 10%.
Foreclosure accounts are normally listed in the Public Information category of your credit report and it will be there for seven long years. However, during that period, the effects of the foreclosure on your credit score lessen as each year passes by. New home loan applications will be considered three years after a foreclosure.
If, by error, the foreclosure is still present in your credit report even after seven year, you can file a complaint so that the credit bureau will have it removed. The three credit bureaus that are held accountable for the information in your credit file are TransUnion and Equifax and Experian.
If you’re not good at handling your credit, a foreclosure is inevitable. And even though the effects of foreclosure lessen with time, you still don’t have an excuse to live outside your means.
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Improving Your Credit Score The Right Way
When you have taken some steps to clean up your finances, your credit score is bound to improve.
What you should do next is check your credit score. Don’t go overboard; don’t check it frequently. This can be a red flag to lenders. You only need to get a baseline, and then check again in about 6 to 9 months to see the progress. You can get free credit reports from different places. Always see to it though that you read the fine print, so you don’t sign up for something you have no idea about.
When you check your score, don’t just look at the number. See to it that you really go through the report. In many cases, you will find that there are many errors on the report. Such errors could cost you so much.
Look at the reports from all three credit bureaus (Experian, Equifax, and Transunion), and check every entry for accuracy. If you see a negative item on the report that is in any way inaccurate, you can file a dispute by writing a letter (not an email) to the credit bureau that logged the negative item with any documentation you have. The bureau will then investigate. Even a single negative item removed could make a remarkable difference in your score.
If you have a credit problem in the past that was supposed to be eliminated from your credit report but is still there without any reason why, you’ll need to notify the reporting bureau. These problems could be:
- Bankruptcy (should disappear after 10 years)
- Lawsuits (should disappear after seven years)
- Tax liens (should disappear after fifteen years)
If you think it’s enough, think again. Whatever cause you to have a poor credit score to begin with can easily do it to you again. Start over and get it right!
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