|
||
Today's headlines can be depressing, particularly if you're having money problems. From the decline in the value of your home to the tightening of the credit market, the bad news can seem overwhelming. It's at times like these that the slick operators and "scam-sters" crawl out from their hiding places like cockroaches.
There is any number of credit repair and debt consolidation companies that would like you to believe that you can't improve your bad credit without their help. Don't believe them. Particularly be wary of companies that want you to pay for credit repair before they provide any services, or if they suggest that you create a "new" credit identity. Some of these approaches can get you into deeper financial (and maybe even legal) trouble.
There are many, common sense steps you take yourself to fix some of your credit problems. Many will require discipline on your part, and some might be downright painful, but you can get your financial affairs back in order.
Credit card debt is one of the easiest debts to fall into because it's the easiest way to get credit. You'd be surprised how many people think of paying off their credit cards in terms of making the minimum payment each month. Are you one of them? That approach just keeps digging the debt hole deeper. You have to make progress in paying off the balance of your credit card debt before you can gain control again. This will mean developing a payment plan you can live with, and calling your bank or lender to get their buy-in.
How do you keep your credit card balance from creeping up again? How about putting away the plastic, and paying with cash. I know, easier said than done. If just cutting down on restaurant meals doesn't free up enough cash, that's when it starts getting painful. You might have to make drastic changes to your lifestyle in order to reach the goal of repairing your bad credit. Could you drive a used car instead of a new one? Sure. Could you take public transportation instead of owning a car? Let the pain begin.
Once you are able to make meaningful (and on-time) payments on all your monthly debt, you can turn your attention to your credit report with the goal of raising your credit score. Request copies of your credit reports from the three major credit bureaus (Experian, Equifax, and TransUnion). Look for the negative information in your report. Some may be valid, but focus on inaccurate data. Maybe one of your creditors is reporting you have an outstanding, overdue balance, but you can prove that you have paid off that loan. Contact the credit bureau in writing, specifying the information you think is inaccurate. Include copies of documents that will prove your point, and request that the negative information be removed or corrected. Also contact the lender that originally provided the inaccurate, negative information. Request, in writing, that their records be corrected, and include the written proof of your point.
These are just a few of the steps you can take yourself to fix your bad credit. At the end of the process, you'll have your finances under control. And you didn't have to pay a credit repair service to help.
Don't worry if your score isn't considered “excellent” or even “good”, there are plenty of lucrative investment plans available for you. However, as your credit score increases so will the number of investment plans available to you. That is why it is important for you to improve your credit score. The more investment options available to you, the more quickly you will be able to achieve and exceed your financial goals.
IMPROVING YOUR SCORE
The following tips will help you improve your FICO score:
1. Never carry balances over 50% of the available limit on your credit cards. If necessary, break up high balances on to several different cards to avoid that 50% number.
2. Always make more than the minimum payment on your cards. Minimum payments generally imply that you are struggling to even make your payments and you are therefore considered a higher risk.
3. Avoid excessive inquiries. There are two different types of inquiries, hard and soft. A hard inquiry is when a potential creditor is pulling your credit to determine whether or not they want to lend to you. These are the inquiries you want to avoid. Granted you can't avoid inquiries all together but be selective about who you allow to pull your scores, as each inquiry lowers your score. A soft inquiry is when you or an insurance company, for example, pulls your credit not because they are considering lending to you, but rather to see how you have performed in the past on your obligations. These inquiries don't lower your score.
4. Establish longevity. Don't open and close accounts too frequently. Be selective of which accounts you want to open and maintain them for long periods of time.
5. Don't have excessive available revolving credit. Now don't misunderstand: available credit is good, but too much available credit poses a risk to potential lenders and therefore lowers your score.
ESTABLISH GOOD CREDIT
If you don't have any credit history established, apply for and obtain three different credit cards. Use these cards to purchase all of your necessities such as groceries, gas, etc. This isn't an opportunity for you to be frivolous and incur debt, but rather an opportunity for you to pay these lines off every month which will help you establish some history.
Go to a local bank or credit union and tell them that you are interested in obtaining a secured loan for the purpose of establishing your credit. The bank will give you a loan, generally $1,000 which will be placed into an account in your name. Each month the bank will pull enough money from your account to make the loan payment. The benefits you will receive of establishing a solid credit history far outweighs the minimal interest expense you will incur by utilizing this strategy. Repeat this process at several banks to expedite the desired result.
Three to six months after following steps one and two, pull your credit report and verify that these accounts are showing up and you have a score. Once you do you are on track to establishing impeccable credit.
REPAIRING POOR CREDIT
Do whatever it takes to resolve any unpaid collections and ALWAYS make your payments on time. This may entail cutting your expenses wherever necessary in the beginning but rest assured that your sacrifices early on won't go unrewarded in the end.
Avoid the services of credit counselors who negotiate balances and interest rates with your creditors. Potential lenders often frown on these services even more than a bankruptcy. There are legitimate resources out there for repairing your credit, but if negotiating with your creditors is a part of their process, beware.
Even if you have experienced bankruptcy, foreclosure, etc. after following these steps and proving that you are now an acceptable credit risk, you will notice your score improve fairly quickly.
CREDIT RULES TO LIVE BY
Avoid bad debt purchases. Bad debt purchases are any purchases for frivolous, depreciating items.
Pay your debts on time and in full.
Monitor your credit monthly. Subscribe to a service such as Privacy guard that allows unlimited access to your reports for a nominal annual fee.
Dispute any incorrect, derogatory remarks that appear on your credit. Also keep an eye out for accounts that you have never opened that may be erroneously reported in your history.