The Ultimate Guide to Easy Credit Repair
Have you suffered from bankruptcy, repossessions, foreclosures or you have a history of late payments? Well, you are one of the millions of people who suffer from bad credit. If you feel that you will never be able to buy a car or home again, then you need to understand the rebuilding process.
The first step in rebuilding your credit is to get your finances under control. The second step is to educate yourself on the credit reporting system. Lastly, you need to make sure that you are adding positive and not negative items to your credit report. To get on the road to recovery, you must start making your payments on time.
Understanding Credit Reports
There are three major credit bureaus, Experian, TransUnion, and Equifax. These companies are all-for-profit, and they are not run by the government. They work with banks, credit card issuers, lenders and other financial organizations to compile your credit into a report. Telephone and utility companies may or may not report to these bureaus too.
All of these companies operate independently of each other. They may or may not have the same information. For instance, one lender might only report to TransUnion, while other lenders may report to two. Because of variances, many lenders will pull all three reports to get an average score.
You will find the following in a credit report: personal information, monthly accounts, public records, credit inquiries, and collection. Your credit report can be seen by current creditors and potentially new creditors.
Why Your Credit Score Is So Important?
Credit scores are a bit different. These numbers are assigned based on your capacity to repay a loan. The FICO score runs from 300 to 850. Those who are on the lower end of the score have horrible credit, while those on the higher end are more credit worthy.
When a lender pulls an application for credit, they look at the credit score. They will also review the credit report too. However, the score has more bearing. You will find the following in a credit report: personal information, monthly accounts, public records, credit inquiries, and collection.
Your credit report can be seen by current creditors and potentially new creditors as well as potential employers and those who wish to do a background check.
The Importance of Capacity, Collateral and Character
Your capacity is the amount of debt you can handle based on your income. Your collateral is the assets that can be taken when you don’t pay your bills. Finally, your character is the stability that you show to lenders.
Lenders typically look for long-term employment, stable housing, and your payment history. To be able to clean up your credit report, you need to know how and what to do.
Review Your Credit Report Annually
Regardless of your current credit standing, you must review your report annually. Every 12 months, you can get a credit report at annualcreditreport.com for free. You can also call the bureau directly if you have been denied credit. If you need it and none of the circumstances are present, then you can pay $10 to get a report.
You must carefully comb through your report. Do you see any errors? The first way to start rebuilding your credit is to remove all incorrect information. You may have some things that are out-of-date too. You can easily submit a form to the bureau for corrections.
If there is a creditor that is publishing incorrect information, then filling out this form can help. You can also call the creditor directly. The bureau will investigate the error on your behalf. If the lender doesn’t respond to their requests, then they will remove the report. However, if they do respond, the charge will be reduced or stand.
Doing a simple scan of your credit report, and removing any errors, can boost your credit score quickly. Be careful if you have filed for bankruptcy. Once a bankruptcy is discharged, the credit bureau should remove any notations of “past due” or “charged off.” These comments signal that the debt is not being paid. It should be changed to “included in bankruptcy.”
Consider Adding to Your Credit File
Many people don’t know that they have the option to add to their credit file. If one of the bureaus is not reporting a loan that is in good standing, you have the right to include it. You can add it by submitting a copy of the history to the bureau that is missing it.
You can also include a comment about a credit dispute. If there is an issue with a lender, you have the right to put a comment for potential lenders to see. You can also ask the credit reporting agency to correct address and phone number errors. This will help show stability if you haven’t moved around a lot.
How Credit Scores Are Calculated
To improve your credit score, you must know how they calculate the score.
Around 35 percent of your score goes to your payment history. Another 30 percent goes to what is owed on your credit accounts. The length of your credit history will account for 15 percent, and new credit counts as 10 percent of your score.
You want to keep a healthy mix of credit. You don’t want too many credit cards or vehicle loans. You want to keep your credit cards at about 30 percent of your available credit to get the optimal points for that area.
Starting The Rebuilding Process
Starting the rebuilding process is never easy. First, you need to admit what you are doing wrong. You must correct your spending habits. Second, you need to review those credit reports. Start cleaning up what the agencies are reporting for a boost in your score. Lastly, there is no quick fix when it comes to credit.
You must be faithful in payments, keep your credit cards from being maxed out, and don’t apply for new credit unless you absolutely need it. Following these steps will ensure you have a nice credit report and score for years to come.