subject: Restoring Credit Worthiness And Raising Your Credit Score [print this page] If your credit is bad, your credit worthiness out the window, no bank will give you a loan without charging you skyhigh interest rates. You may even find it difficult to open or keep a bank account, and financing relatively simple purchases such as a car, may be nearly impossible. Fortunately, even the worst credit is fixable. It is always possible to repair bad credit, and if you are sufficiently motivated, you can even do it for free.
Your credit worthiness is largely measured and tracked by a number that is known as the FICO score. FICO stands for the Fair Isaac Corporation, and your FICO score is a number between 300 and 850. If you score is 800 or above, your credit is golden, and you may find banks and other financial institutions practically begging you to borrow money. But if your score if below 650, you may have problems, and if your 400 or below, you may count yourself lucky to even have a bank account. The FICO score is used by the nation's three primary credit reporting agencies and is a kind of numerical picture of your credit worthiness and is calculated by taking into account the many different elements of your credit history.
The steps you need to take to establish good credit can be very personal as you will need to take a good look at your financial life and commit yourself to meeting your financial responsibilities. Credit repair isn't rocket science, but it does require determination and discipline, and the resolve to see it through. Because it is so personal, you may want to use the services of professional credit counselor, but all of the information you need to do it yourself for free is outlined on the ftc.gov website.
The first and hardest step of often just making the decision to do it no matter what. However, once you have determined to repair your credit, the next thing that is absolutely crucial is to get a copy of your credit report. Believe it or not, you are entitled by Federal law, though the Fair Credit Reporting Act, to a free copy from each of the major credit reporting agencies, Equifax, Transunion, and Experian. We suggest that you get not just one, but three copies, one from each agency. The FTC has even set up a special website from which you can request your copies, annualcreditreport.com.
When you receive your credit reports, you carefully review them for errors. Estimates of credit reporting errors range from 8% to 40%, and so it likely that you will find mistakes. It is imperative that you correct these. Examples of typical errors include accounts shown open that are either non-existent or were closed long ago, incorrect address and age, and debts owned by other people. It follows then, that once you have done your work with the reports, that you correct each error that you find.
One of the most important credit repair steps, one that you must start immediately, is to figure out a realistic budget. Make a list of all your sources of income. Figure your total income, and then make note of your essential fixed expenses, such as utilities, rent/mortgage, food, insurance premiums, and so forth. Figure out your non-essential expenses and eliminate what you can and cut back on the others.
After you have arrived at a realistic assessment of your budget, income, and working capital, you will need to make a list of each of your creditors along with the amount of debt and take steps to contact them. This is crucial. It is important to let them know that you are sincere and want to pay them back. The point of this step is to open a discussion with the people and/or business you owe money to in order to renegotiate the terms of your account. What you want to achieve is renewed trust and a financial agreement that is in line with your current financial condition.
Restoring credit worthiness is not complicated, but neither is it really easy. Because it is so personal, it may be one the hardest simplest actions you have ever undertaken. However, repairing bad credit and raising your credit score is all within your grasp and is entirely realistic. You can restore your credit reputation if you persist and stay the course.
