Credit Repair: Learn How to Improve Your Credit Score
The lending agencies have turned down application for loans of a person, because his credit score has gone below the lower limit necessary to be eligible for securing finance. He now understands how important credit repair is for him.
· There are many companies providing credit repairing services. The person contacts expert professionals of a credit repairing company, but he learns the following:
a) Grandiloquent assurances made by the company appear confusing and doubtful.
b) Their promises of quick remedy demand scrutiny.
c) The budget is really high.
He begins to comprehend what credit repair is.
· Credit repair refers to improvement in the credit score which is generated from credit report. Equifax, Experian and Trans Union are financial bureaus which have collected details of his financial operations, his borrowing and repayment, late payment and less payment, arrears and defaults etc. They have used these and used his personal details and also details of his lenders to create his credit report.
· Each of the financial bureaus has prepared one set of his credit file. He realizes that he should go through his credit file. He approaches the financial bureaus and collects a 3-in-1 credit file which contains all about his transactions. The bureaus are legally bound to offer him a free copy of his credit report once in a year as the Fair Credit Reporting Act has made it possible.
· The credit report, sometimes, contains mistakes. This is why he moves to verify. He finds some mistakes in entries made by the bureaus staff. Some closed accounts and written off accounts, he finds, have not been removed. He reports this to the bureaus staff and wants that they should make the required corrections. It is an imperative for the financial bureaus to send the rectified credit report to the lenders who have offered loans or mortgages to this person. The person can lodge a complaint if the bureaus do not pay attention to the mistakes committed by their staff within a month.
· He finds that his credit status is shaped in accordance with the movement in the total credit he can avail and the entire amount of his debt. The relation between this credit and his debt creates the utilization ratio. Utilization ratio is produced when the entire debt is divided by the credit which he can secure.
How does it work?
1) There exists a difference between the credit which he can obtain and the credit which he has taken out by this time. When this difference is great, the credit score soars upwards. It is just the opposite when this difference is small. Sometimes, people do not take steps to repay the total outstanding of their idle credit cards, but they decide to close them. This is a time when the credit score slips down.
2) It is good to continue with small balance. Credit status of a borrower is weak, when utilization ratio is low. Outstanding can bear pressure of 30% of the credit score. Thus, it is clear that the debtor should not look for a finance which is more than thirty percent of his credit balance.
· He has observed that the credit score senses some sort of tremor if the relation between the debtor and the creditor is anything other than cordial. The debtor should not misuse the opportunity available in the financial market. It has been noticed that some borrowers send dues to a credit card that has been conditioned to charge interest at lower rates. A credit report showing this type of maneuverings is sure to derive lower credit score.
· This person has experienced that simple and straight approach leaves good effect on the health of the credit score. A borrower may face tremendous monetary crisis for a period. He can read, well in advance, that he would default. It is good for him to state the truth to his creditor. The creditor will, most likely, create provision of extension in the reimbursement tenure. The borrower, in return, should be back with a lump some amount to reciprocate the fine gesture he has noticed in his creditor.
· He has also marked how credit score is conditioned by the repayment:
1) A late payment of 30 days does not touch the credit score, whereas the same of 90 days causes a lower sliding for the credit score.
2) One third of the credit score is shaped with the history of repayment.