Credit Repair: Repairing the Credit Score, of Course with Patience
Numerous credit repairing companies are active now-a-days. They have well-equipped professionals to guide and help the people whose credit report is too weak to secure finance from any of the lending agencies. Services offered by these companies are, however, highly expensive. How can a person bear such financial pressure when he has been searching means to get rid of a debt-trap? Credit repairing requires, in most of the cases, time to recover from the undesired plight. It is not like a medicine, intake of which will provide immediate remedy. Professionals from the credit repairing companies attract people with lofty assurances which demand scrutiny in the practical field. It is not wise to look for assistance from these credit repairing agencies. On the other hand, people can begin with the basics.
· The borrower who requires repairing of his credit status should first review the credit report. Credit report is created by Equifax, Experian and Trans Union which are actually financial bureaus. These bureaus work with the materials of financial transactions which include personal details of the borrower, amount of loans he has borrowed, amount he has paid, accounts of less payment/ late payment/arrears/bankruptcies etc.
· The financial bureaus prepare the credit report of an individual debtor independently, and their credit reports may not lead to the same results. Result is meant for the credit score which is derived from details of the credit report. The greater the credit score is, the greater will be the chance for the debtor to be eligible for finance. The borrower must collect free copy of his credit report from the financial bureaus, one piece from each of the three. The Fair Credit Reporting Act has made this legal and the borrower can avail his credit report once in a year.
· The borrower may find errors in the credit report. He may find that his credit report contains written off or closed accounts too. He should approach the bureaus for necessary correction. The bureaus must send the corrected copies of the credit report to the lenders who have advanced loans to the borrower for half of a year last. The bureaus may appear unwilling to get the mistakes corrected. The borrower should write dispute letters, and the bureaus are legally bound to take adequate action within one month.
· Sometimes, the borrower may have shortage of finance. He may foresee that he will fail to reimburse the monthly installments at the right time. It is always right to bring his incapacity to the notice of the lender who can allow an extension in the repayment schedule. The lender will count him as a trusted customer if he, within a short time, comes back with what is called overdue payment.
· He should keep the following in his mind:
a) 35% of the credit score is built up with the accounts of repayment.
b) The credit score may remain unaffected for any late payment of 30 days, but late payment of 90 days lowers the credit score.
· The debtor must not indulge in any foul game. This deteriorates mutual trust between the lender and the debtor. Sometimes, borrowers transfer the outstanding to a credit card in which interest is charged at lower rates. The lender does not approve this. This type of moves wears away the credit score.
· The borrower should keep an eye on the utilization ratio. Utilization ratio is obtained by dividing the total debt by total available credit. Health of the credit status responds to that of the utilization ratio.
a) The difference between the credit that a person has already utilized and the entire credit that he can secure plays a role to shape the credit score. The credit score goes down if the difference becomes smaller. A thing like this takes place when a person attempts to close his sleeping credit cards without reimbursing their total dues.
b) The borrower should learn to maintain small balance. A healthy utilization ratio paves way for better credit status. Dues take responsibility of 30% of the credit score. Therefore, the debtor must not apply for a loan which is greater than 30% of the credit balance.