Before anyone tries to secure a home mortgage, car loan, or new credit card, the first step should always be to fix bad credit. Credit scores and the state of a credit report have a huge effect on interest rates and whether or not a loan application will be accepted. There are many services specializing in fixing bad credit, and there are many things a borrower can do own their own to improve a credit score.
The process through which one can fix a bad credit report has been made easier through the Fair Credit Reporting Act. Every individual has the right to look at his or her credit report and dispute any information he or she believe to be incorrect. It is quite common for duplicate or outdated items to appear, and these can have a major impact on credit scores. All claims must be made in writing and submitted with documentation proving the error. The claim must be settled within thirty days or the disputed item will automatically be removed from the report.
An important factor in determining credit ratings is the status of any outstanding accounts. Late payments on credit cards or mortgages have a huge negative impact on credit score and should be paid as quickly as possible. It is important that all accounts be up to date before applying for any new lines of credit. If you have any forgotten loans that are in default, make payments and approach the lender about their willingness to remove it from your report.
Another reason for a bad credit rating is having too large an outstanding balance on any individual card, or having a large amount of outstanding credit in total. If any cards have reached or exceeded their maximum limits, make an effort to pay them down. When potential borrowers look as though they are already overextended, it gives lenders pause about offering them even more credit.
The number of times your credit report has been requested factors into your credit score as well. When examining your credit report, make sure that all requests to access the report were authorized; any that were not should be removed. Additionally, be aware that anytime you apply for a credit card or other type of loan, move to a new apartment or change insurance companies, your credit report will be accessed. Make a concerted effort to cut down on the number of requests for this report and your score will go up.
There are some items on a credit report that cannot be removed. Bankruptcy or tax liens are two such examples. These items will only be expunged from a report after a period of years, and it is important to make every effort in the interim to keep credit pristine.
There are also a number of for and nonprofit services that teach you how to fix bad credit. Many of these services offer additional financial counseling to help implement the lifestyle changes necessary to fix bad credit in the long term.
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