We have all heard of credit scores and how they are used to try to determine the probability that you will be able to pay your bills. A credit score combines a number of factors including both negative and positive information obtained from a credit report, open credit accounts and the amount of credit available compared to the amount of credit used. Improving your credit score is a crucial aspect of repairing your credit.
In 1958 the Fair Isaac Corporation, a publicly traded company you will find under the symbol FIC, developed the first credit scoring system. This later became known by the acronym FICO, or FICO score. Later in 1970 the Fair Isaac Corporation created the first credit scoring system for a bank credit card. There are additional companies that do credit scoring but none are as well known as the FICO score. Improving your FICO score will help in repairing your credit.
Factors such as late payments, financial difficulties in the past, current amounts of credit limits compared to credit used are the objective measures used to validate a credit score. Factors such as race, gender, ethnicity and marital status are not considered. The FICO score is regarded to be an unbiased representation of an individual's creditworthiness. You can increase your FICO score if you take measures to repair your credit and make sure that your credit report does not contain any false or erroneous information.
By using credit scores a lender will make the decision on whom they will extend credit to, how high the interest rate will be and what the credit limits will be. They may also use credit scores to determine if they will want more collateral or require a more extensive income and asset verification. Repairing your credit score will improve your chances of getting credit.
A credit score can vary among the three major credit-reporting agencies, which are TransUnion, Experian and Equifax. They each use variable criteria and consider the data in different ways. As you are repairing your credit make sure that you get a report from each of the three companies. Many lenders will pull from just one company but some will take an average of the three. Each company's report is important to consider as you repair your credit.
The next thing to acknowledge is how you handle your finances. When you want to repair your credit it is important to make sure that your expenses are in line and your payments are made on schedule. Much of your credit score is based upon how much credit is available compared to how much credit you have used or are using. For credit scoring purposes and to repair your credit, it is to your advantage to have a larger credit line yet use very little of it, just enough to make a consistent small payment.
Increasing your credit scores and repairing your credit will also take into consideration the time of your credit history, any outstanding loans or credit cards, and credit applications. Every time you apply for credit the inquiry will take down your credit score for a specified period of time so be aware of applying for credit, even when the department store offers you 20% off. It may not be worthwhile in the long term. Also, do not cancel credit card accounts but rather just get rid of them if you do not plan to use them as canceling an account will count against you.
Within 6 months to a year you can impressively improve your credit scores and repair your credit substantially. Just be unfailing and on time with all of your payments, use your credit infrequently and do not apply for credit unnecessarily. With just a bit work and a little time you can repair your credit.
Tuesday, April 21, 2009
Discover How to Handle Charge-offs On Your Credit
There is a great deal of confusion with consumers about what to do about charge-offs on a credit report. It is well known that charge-offs are considered to be derogatory credit but what is the best way to handle it? Do I pay off this bad debt? Should I not pay off this bad debt? Well the answer may confuse you as the answer to both questions is "yes"!
When a lender is not able to collect a debt they remove it from their accounts and report a charge-off to your credit account. Many times they will then give the account to a collection agency which can be a double problem for you as the consumer because both the original debt owner and the collection agency will report the bad credit for just one debt.
Your credit can be influenced by a charge-off for as long as 7 years. You can get an old charge-off deleted from your credit, however this is easier to do if the charge off is a paid charge-off. Even so the problem with paying off an old charge-off is that the account then becomes current and the cycle of 7 years starts over again so a "paid charge-off" will show for another 7 years no matter how many years it was on there before.
The only way to fix this dilemma is to use a technique called a "pay for delete". Before you pay off the old debt get an agreement in writing from both the original lender and any collection agencies that they will remove the negative information from your credit report upon payment. This is the only effective way to pay off an old charge-off and deflect future problems.
Many people are unaware that they have the right to dispute items shown on their credit report. The Fair Credit Reporting Act states that any consumer can dispute any derogatory credit on his or her credit report and this means charge-offs, collection accounts, tax liens, judgments, repossessions and even bankruptcies and foreclosures. You can dispute these items and get them deleted yourself or you can hire a professional credit repair agency to assist you.
To dispute something on your credit report begin by contacting the consumer reporting agencies. You can call them on the phone or contact them online but the safest way to contact them is to send a formal letter. That way you will always have the proof in a paper trail. Make sure each agency that is reporting the bad credit gets a copy of the same letter and make sure that you keep strict documentation of all of your efforts. The agencies have 30 days to investigate your allegations somake sure you document the dates.
During that 30-day period the credit reporting agency is supposed to contact the original lender and the collection agencies with your disputes. They will also verify any public records. It is up to you to follow up with them and make sure that everything is being completed. Credit repair takes some time to finish but if you don't follow up it can end up taking even longer.
While it is possible to repair your credit by yourself a professional credit repair company has developed the knowledge and expertise to simplify the process. Since a professional can do it quicker and easier it may be worth your time to consult with them first to see if they can help you.
When a lender is not able to collect a debt they remove it from their accounts and report a charge-off to your credit account. Many times they will then give the account to a collection agency which can be a double problem for you as the consumer because both the original debt owner and the collection agency will report the bad credit for just one debt.
Your credit can be influenced by a charge-off for as long as 7 years. You can get an old charge-off deleted from your credit, however this is easier to do if the charge off is a paid charge-off. Even so the problem with paying off an old charge-off is that the account then becomes current and the cycle of 7 years starts over again so a "paid charge-off" will show for another 7 years no matter how many years it was on there before.
The only way to fix this dilemma is to use a technique called a "pay for delete". Before you pay off the old debt get an agreement in writing from both the original lender and any collection agencies that they will remove the negative information from your credit report upon payment. This is the only effective way to pay off an old charge-off and deflect future problems.
Many people are unaware that they have the right to dispute items shown on their credit report. The Fair Credit Reporting Act states that any consumer can dispute any derogatory credit on his or her credit report and this means charge-offs, collection accounts, tax liens, judgments, repossessions and even bankruptcies and foreclosures. You can dispute these items and get them deleted yourself or you can hire a professional credit repair agency to assist you.
To dispute something on your credit report begin by contacting the consumer reporting agencies. You can call them on the phone or contact them online but the safest way to contact them is to send a formal letter. That way you will always have the proof in a paper trail. Make sure each agency that is reporting the bad credit gets a copy of the same letter and make sure that you keep strict documentation of all of your efforts. The agencies have 30 days to investigate your allegations somake sure you document the dates.
During that 30-day period the credit reporting agency is supposed to contact the original lender and the collection agencies with your disputes. They will also verify any public records. It is up to you to follow up with them and make sure that everything is being completed. Credit repair takes some time to finish but if you don't follow up it can end up taking even longer.
While it is possible to repair your credit by yourself a professional credit repair company has developed the knowledge and expertise to simplify the process. Since a professional can do it quicker and easier it may be worth your time to consult with them first to see if they can help you.
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