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Restoring Your Credit Worthiness
By: Neil Beaton
Have you been denied a loan? Have you been offered one at an unbelievably high
rate of interest? Are you having trouble getting a new credit card? If these
things have happened to you you've got bad credit!
What is bad? Can you fix it?
The most important indicator of poor credit is a low credit rating, otherwise
known as a low FICO score. A score of 650 or lower will give you problems while
500 is abysmal. Fico is a number that is calculated, taking into account your
total debt, the number and length of late payments, and some other factors. This
number is calculated by three main credit reporting agencies and is then made
available to lenders and to the individuals themselves.
Improving your credit rating is difficult but definitely possible and is
certainly worthwhile. The first steps are personal and have to do with your own
habits and tendencies. If you have trouble with self-discipline or if you find
it impossible or difficult to keep financial commitments you may want to seek
some kind of counseling, perhaps from a credit repair specialist.
But there are other things that you can do that are definitely in your control.
You can begin by getting a copy of your credit reports from all 3 credit
reporting agencies: Experian, Trans Union, and Equifax. By law these must be
available to you for free once per year. They contain a list of all your debts
and indicate problems, such as the number of payments late by over 30 days. The
agencies may charge for the actual FICO score but you can sometimes get that for
free as well. Review the documents with a fine tooth comb and list all mistakes.
Involve a credit repair specialist, if necessary.
Estimates of credit report errors range from 85 to 40%. Some, such as an
incorrect age or address are easy to fix but some mistakes take a little more
attention. If accounts are shown as open even though you had closed them, or if
debts are listed that were incurred by a different person, you should make note,
gather your proof and contact the credit reporting agency and politely insist
that the information be corrected. Be aware that they will not simply take your
word for it but will check it out themselves, so be sure to be honest with them.
Next, make a detailed and realistic budget. Include all monthly obligations and
add in a buffer to take care of unexpected expenses. Determine to keep to that
budget. Then call all your creditors and tell them what you have done and ask
for a reduction of the debt. Be polite at all costs. If necessary, ask for a
supervisor. They may not immediately grant your request but as you keep making
steady payments they may respond more favorably when you make a follow-up call a
few months later. Keep notes of the agreements and keep your word.
Cut up and return as many of your old credit cards as possible. Keep paying on
the outstanding balance until the account is eliminated or you can convince the
creditor to forgive the remaining debt. Make sure that you try to make more than
minimum payments. You can spread this policy out or concentrate on one card at a
time. As a credit card's balance drop keep up the larger payments and when that
card is retired apply all your resources to the next card. But make sure to keep
up with your minimums on all cards while doing this. Some experts advise that
you pay off home loans first and then concentrate on small amount, high APR
debt. Pay off these accounts first and then move on to debts of larger amounts.
When applying for a new card, you have some options. You can obtain a secured
card, no matter what your credit rating is. You can use it just like any credit
card but the limit is determined by how much you actually put into the account.
This card should be for emergencies only.
Other, specific kinds of credit cards, such as gas cards or department store
cards may be easier to get and if you use them responsibly you can start to see
an improvement in your FICO score.
Fixing credit worthiness is less like a repair and more like mending. When you
repair something you quickly replace whatever is broken and make it like new.
When something mends, the process is much slower and takes a lot of patience.
But if you stick with it your credit can be mended just as surely as a broken
arm can be mended. So take the first steps now. Have a conversation with
yourself and follow the steps outlined in this article.
Stick with it!
Neil Beaton
About the Author:
Restoring credit worthiness- difficult but possible! This is a tough love
article. The advice on restoring your credit worthiness, if followed will enable
you, over time, to have much better financial prospects.
www.a1-mortgage-4-u.com
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