Credit Repair

How to Repair a Bad Credit Rating, The Right Way!

If you have a bad credit rating, then you might find that your ability to get financing, loans, and even some jobs is greatly diminished.

Once you have a bad credit rating, it might seem like there's nothing that you can do about it but you don't have to believe that. It's not as difficult as you might think to get by with a bad credit rating; with a little work and time you can even repair it! Of course, before you do that its important to realize exactly what a credit rating is.

Every time a lender or other creditor makes a report concerning your payment history to them, this report affects your credit score.

Your credit score is a numerical indication of the positive and negative reports that you've received from creditors and lenders; if the number is high then you have a good credit rating, and if its low then you have a bad credit rating.

In the U.S. a 630 rating will qualify you for a mortgage. You can still get credit with a lower score but not at a premium interest rate.

The important thing to do is obtain your credit report and study it. Mark all the negative items. Most unsecured credit, mostly credit cards, can stay on your report for 7 years. If you find any over that, write to the credit bureau and ask them to remove it. They are required by law to research and report back within 30 days.

If they don't, you can threaten them with a letter to the Better Business Bureau or Federal Trade Commission.

Find any other negative items and determine they are correct. If not, write the bureau and tell them its not your debt.

Even if you aren't sure, ask the credit bureaus to investigate. Many times, they will not be able to verify the debt because the credit card company, auto loan company or other creditor won't get back them within 30 days (required by Fair Credit Act).

HOW TO IMPROVE YOUR FICO SCORE

Lenders analyze your credit scores to establish whether or not to grant you a home mortgage, a car purchase, and nearly all other types of loans. If you think that you may apply for credit sometime soon, it would be advisable to improve your credit status. However, note that this quick fix can only deal with current credit issues and not the ones which have been present for years.

The best way to have good credit history is always pay your bills on time. In case you do come across rough patch contact your creditors as soon as possible and discuss the best course of action you should follow. If you are vigilant and contact them within a good time period the companies may agree upon a lower rate or work out a payment arrangement. This can help reduce the portion that shows up on your credit reports. You can also consider contacting a non profit credit counselor.

It goes without saying that maintaining your credit card balances, and if possible, paying your bills regularly are good ways to keep your credit score good. Don't open new accounts that you don't require as a quick fix to achieve a better debt-to-credit-limit ratio. It actually would lower your score.

Similarly, don't open a number of new accounts in a short span of time, particularly if your credit history is no more than three years. Adding accounts too rapidly may be read as you are not able to handle your credit responsibly. Quite a few credit inquiries in a small time could lower you FICO score as you are attempting to open multiple new accounts.

Get Credit Cards and Use Them Wisely

If you survived your financial disaster and managed to hold onto one of your credit cards or a department store or gasoline card, use it and pay your bills on time. Your credit history will improve quickly. Most credit reports show payment histories for 24–36 months. If you charge something every month, no matter how small, and pay at least the minimum required every month, your credit report will show steady and proper use of revolving credit. Charge only a small amount each month and pay it in full. By paying in full, you will avoid incurring interest, as long as you have a card with a grace period.

The average consumer who makes only the minimum payment each month ends up paying hundreds of dollars in interest charges alone. For example, if you charge $1,000 on a 17% credit card and pay it off by making the minimum payments of 2% of the balance each month, you’ll take over 17 years to pay off the loan and will end up paying over $2,500 total.

Applying for Credit Cards

If you don’t currently have a credit card, apply for one. When completing your credit application. Don’t lie, but present yourself in the best possible light. Don’t plunge in until you’re ready. Getting new credit cards before your finances are in order is a bad idea. Wait until you’re out of financial hot water before you apply for credit. It’s often easiest to obtain a card from a department store or gasoline company. These companies usually open your account with a very low credit line. If you start with one credit card, charge items, and pay the bill on time, other companies will issue you a card. When you use department store and gasoline cards, try not to carry a balance from one month to the next. The interest rate on these cards can be very high.

Next, apply for a regular credit card from a bank, such as a Visa, MasterCard, or Discover card. Competition for customers is fierce, and you may be able to find a card with relatively low initial rates. Depending on how bad your credit history is, however, you may be eligible only for a low credit line or a card with a high interest rate. If you use the card and make your payments, after a year or so you can apply to increase your line of credit or reduce the interest rate. In fact, no matter what your situation, it makes sense to call your credit card company and ask for a lower interest rate. A study conducted by the United States Public Interest Research Group in 2002 found that more than half of the consumers who complained to their credit card company were able to reduce their interest rate, usually by as much as one third.