Repairing Credit Scores

An individual who is hoping to get a loan - either to purchase a house or an automobile

or to put up a business - may feel reluctant to apply if his credit scores are poor.

These ratings, which are determined by so-called credit bureaus, are a reflection of a person's creditworthiness. Banks and other companies, such as utility service providers and insurers, often take these grades into account in deciding whether or not to transact business with an individual. Someone who has low grades, therefore, is likely to have his loan application turned down or will be able to get a loan only at a very high interest rate.

Nevertheless, there are ways of repairing poor ratings. One need not suffer from low scores forever.

One way of improving a person's grade is by promptly paying bills - such as for electricity, cable television, telephone line, cellular phone, etc. Doing so will help give the impression that a person is responsible in meeting his financial obligations and is, therefore, worthy to borrow money from any lender or crediting agency.

Another means of beefing up one's ratings is by checking for potential errors in their computations. Evaluators may have mistakenly given someone a poor rating after failing to record settlement of a debt that he has already made. Liabilities that remain overdue adversely affect a person's scores. Evaluating firms are not always correct in their computations, and it is an individual's responsibility to check for errors.

According to experts on scoring, it is advisable to ask for copies of the credit reports made by rating firms once every six months. Doing so makes sure that the companies use the right information as basis in computing the grades. The evaluators sometimes do commit mistakes, such as failing to register loan payments, in making their assessments. It is best to check the reports every now and then to make the necessary corrections.

These companies entertain complaints and rectify their computations if there is evidence of erroneous assessment.

Low grades should not be taken lightly because these will adversely affect an individual's ability to engage in various financial transactions. He may not be able to get a bank loan, or may only be able to borrow at above-market interest rates. Any mistakes in the evaluations should, therefore, be immediately rectified.

Another means of improving one's standing is to close unnecessary bank accounts. Only maintain a few, such as debit or credit card accounts that are properly serviced. It is also good to pay financial obligations before the due dates.

by: Leo Chu

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