You're struggling with debt, and want to improve your credit scores. Where can you go to get rid of bad credit information? How can you improve your credit? This article discusses how to improve your credit, what information impacts your credit score and how to avoid scams.
Too Broke to Pay Attention: What is Credit Reporting, Anyway?
Every time you make a payment for a car loan, credit card balance or student loan, the information is reported to one of three national credit bureaus. These companies, Trans Union, Experian and Equifax, store your credit information and make it available (with your permission) to anyone who wants to check your credit.
If you've made some mistakes with credit, it's possible to clean up the mess. A basic understanding of credit reporting and scoring is a great place to start.
Credit Scoring: Your Financial Life Expressed in a Number
A company called Fair Isaac Corporation (FICO) developed a method of assigning numerical scores to consumer credit records based on the information contained in them. You may hear about FICO scores and credit scores; they are one and the same. Typically, a credit score of 640 and above indicates fair credit. Good to excellent credit requires a score of 700 or more. Anything below 640 probably means that you won't qualify for credit in some situations, and won't get the best terms even if you are approved.
Although federal law guarantees access to one free credit report from each of the three major credit bureas each year, these free credit reports will not include your credit score. You can purchase each of your three credit scores along with your credit reports.
No Easy Way Out: Avoid "Credit Repair" Scams
There is no legal way to "erase" bad credit. Anyone promising to wash your credit record clean overnight is only interested in cleaning out your wallet. The only legitimate way to increase your credit score is to repay your debts over time.
Crunching the Numbers (and Your Budget)
If you have enough money to meet all of your debt payments after taking care of necessities (rent and groceries are necessities; a trip to the mall is not) You can work on paying down your debt by paying more on the debt with the highest finance charges (APR) first. When that debt is paid, apply the money you were paying on it to the next debt in line, and keep paying the minimum on the others. Repeat the process until your debts are paid. If you can't afford to make payments on all of your debts, it's time to get help.
Upside Down in a Sea of Debt: Here Comes a Life Preserver!
Contacting a credit counseling agency (not the place promising to erase your bad credit for a giant fee) can help you develop a cash-based budget, and negotiate a repayment agreement with creditors. Credit card companies may agree to waive late fees and reduce interest rates. This can help you pay off your debts faster.
If it Sounds too Good to be True: Don't Get Scammed!
There are many entities that are more interested in taking your money than in offering genuine help. It's a good idea to seek assistance from a non-profit credit counseling service. Their fees are minimal, and their goal is to help you get out of debt. See the link below for help in finding a credit counselor in your area.
When You Can't Pay Your Debts
If you cannot afford to repay your debt, filing bankruptcy may be necessary. Consulting an attorney specializing in bankruptcy can help you learn about the options, costs, and consequences. You will want to carefully consider filing bankruptcy, as it will stay on your credit reports for seven to ten years. On the other hand, if creditors are hounding you for payments you cannot possibly make, then bankruptcy offers legal protection from harrassment and a fresh start.
0 comments:
Post a Comment