You benefit by having a good credit score. Lenders give you lower interest rates on mortgages, car loans and other financial products.
Any time your credit score falls below 620, it becomes difficult for you to get loans with reasonable terms. In such a case, you need to undertake credit repair to improve your credit rating. There are simple ways by which you can raise your credit scores and undertake credit repair. Let us have a look at them:
*Check your credit report - Ensure that you regularly get your credit report. If you notice any irregularity or discrepancy in the credit report, immediately report to the credit bureau to have it corrected. Once corrected, it will raise your credit score. Ensure that your credit report comes from one of the three major credit bureaus: Experian, Trans Union or Equifax.
*Pay bills on time - Ensure that you pay your bills on time. 35% of your credit score is dependent on your payment history. The current or recent payment history has more weight than that of three years ago. Remember, missing one payment affects your credit score by 50 to 100 points. Timely payments are the best way to rebuild and raise your credit score.
*Pay down your debts - Your outstanding balance on your credit card is reported once a month to the credit bureaus. To them, it does not matter if you pay or carry your balance forward every month. Credit bureaus, generally, do not bother whether you are carrying balance on your cards or not. What matters is that there is a lot of gap between the amounts of debt you carry and your credit limit. The more wide the gap, the better your credit score. The less you charge on your card, the more it will raise your credit score.
*Do not close old accounts - Most people close old accounts they are not using. This used to make sense, but with today's system of scoring, this actually hurts your credit score. Closing these older accounts, in effect, lowers the total credit available to you and this causes the balances you have, to appear larger when calculating credit scores. Closing of old accounts also shortens your credit history, making you appear less creditworthy.
When faced with a case of Identity Theft, you would tend to close your old or paid off accounts. This may lower your score minimally, but by not closing your old accounts, you raise your credit score.
*Avoid bankruptcy - This is a sure shot way to destroy your credit score, as much as by 200 points. A bankruptcy gets reported up to 10 years. Avoid bankruptcy at all costs.
Credit repair is necessary for not only getting loans and credits but also to get them at a good rate. You need to keep your outstanding debts at bare minimum and pay your dues on time to enjoy a healthy credit rating.
Rachel writes for several directories on finance. Read more of her work at: Quick Loan Resource and Credit and Debit
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