During the current economic recession, people now, more than ever, are suffering from poor credit scores. It is important that this not be ignored and that you begin to fix your credit today. In order to fix credit, you must first review your credit report and look for possible errors. It is also helpful to understand how the credit system and FICO score works, that way you understand the best way to fix bad credit.
The credit system is based on the FICO score. The FICO score is a number that is based on a multitude of factors. Some of these factors are: length of credit history, number of creditors, ratio of credit used compared to credit available, amount of late or slow payments, bankruptcies or repossessions, etc. All these factors are statistically combined to come up with a number that is between 300 and 850. A great credit score is 720 and above, good credit falls in around the 680-679, fair credit is 620-679 range and poor credit is below 580-619 (this is the range that banks and lenders love, because they can charge you the highest interest rates). For the best interest rates and terms you really want a credit score above 680. However, just have a good credit score does not guarantee approval, but it sure does help your bottom line!
Fixing credit can be a simple process if you just follow some standard rules. As mentioned before, the first thing you should do is check your credit report for errors. Look for creditors that you have paid off yet they still claim you owe them money, for bankruptcies or repossessions that should have fallen off your record by now, and most importantly, for items that do not belong to you. Sometimes a family member with the same name will have items reported on your credit, or sometimes you have been the victim of identity theft. This is the first step in how to fix bad credit.
The next step after all errors have been cleared from your credit report is to start paying all your monthly payments on time and to pay down your balances. Your total outstanding debt should be under 30% of your total available credit. You can increase your FICO score by as much as 40 points by reducing your debt a substantial amount. If all else fails, paying your monthly payments on time for the next four to six months can drastically increase your credit score by as much as 100 points! That should be enough to bring almost anyone into the fair to good credit range.
These are just a few tips to show you how to fix credit. In order to fix bad credit you may need to do all of these steps, but it can be done and it will be worth your effort in the end. Qualifying for better interest rates and loan terms can save you thousands of dollars over the life of a loan. If you want more tips on how to fix your credit, do some research online for companies that can assist you.
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