LIKE most people, you’ve probably had your fair share of financial indiscretions: a few pricey shoes, a car bigger than what you really need, a few frivolous pieces of furniture, and an unused fitness club membership. An occasional splurge doesn’t hurt, but you might have gotten carried away at some point, spending more than you could afford. You maxed out your credit card, and found yourself spread too thin. And just like a drinking binge, you wake up from your buying binge with a hangover: bad credit.
Your credit report is essentially an evaluation of how risky it is for a borrower to lend you money and currently being also evaluated by employers prior to hiring new employees. It is important to understand this is an evaluation at a certain point in time, as a person’s credit history can vary over the years. Thus, more recent payments are given more weight than transactions made a few years ago.
The first step is obvious. Look for the following errors in your report: late payments made over seven years ago, bankruptcies discharged over ten years ago, settled mortgage debts thru Short Sales, credit inquiries made over two years ago, accounts that aren’t yours, open accounts which have been closed, or any errors in your personal information such as your name or SSN. Report any errors to the credit bureaus, which have thirty days to respond. You want to obtain your copy of your credit report from each of the major credit bureaus: Equifax (800) 685-1111, Trans-Union (800) 888-4213 and Experian (888) 397-3742. You may get it for free if you are unemployed, or have been denied credit within the past 60 days because of information in your credit report, or if you receive public assistance, or if you believe there are errors in your report.
This means that if you have less than perfect credit, take heart. If you act soon enough, you can still salvage what remains of your credit score. First off, you need to start paying your bills on time. This is the single most important thing you can do. Payment history accounts for over a third of your credit score. Don’t take these debts personal, its all business and your creditor will give everything they got to fight you in getting their money back. Be smart we are very small fishes in this huge ocean of fishes and sharks. We have to always be in communication with them, you will notice that once you start trying to negotiate with them, they will let their guards down and be open to your suggestions as long as they are reasonable. More serious credit whammies include bankruptcies, foreclosures, tax liens and judgments. Bankruptcies generally stay on your record for seven to ten years. The sooner you can reestablish a history of timely payments, the faster your score will improve. In fact, if you manage your credit well, you can apply for credit cards six months after a bankruptcy discharge, and even take out a good mortgage after a year or two years. Key is “Re-establishing” your credit. Don’t be afraid to borrow again, just make sure you cap your limit.
Almost as important as your payment history is the amount of unpaid balances you have outstanding. Creditors are understandably jumpy about lending to people who owe a lot of money. Try to keep credit card balances down. Besides the total dollar amount outstanding, your score is also affected by the number of different accounts with outstanding balances. Paying off your accounts one by one rather than just keeping several of them current will help raise your score as well. Try to keep accounts open to add to your total credit cards, the more open accounts that have zero balances the better.
Other factors that could impact your score include the length of time you have been managing your credit (with longer being better), and less importantly, the frequency with which lenders access your credit report.
If you have small collection debts that are currently being reported on your credit, this would be the first to consider to payoff or negotiate a payoff with creditors to avoid a derogatory remark that would lower your scores. The scoring system is particularly sensitive to recent late payments on your credit card, car payments and mortgage payments, usually they give more weight to late pays within 24 month period, sometimes credit scores could decrease by 50-75 points due to these recent lates. When negotiating a payoff with creditors remember if you have the cash some creditors or collection agency will agree to take less to clear this account, which makes it a win-win situation for both. Remember to request for copy of a receipt to show proof of payoff or a letter from the creditors to verify the account paid clear.
A note about credit repair companies. You see them all the time in the papers or on TV, promising to help you get a car loan or mortgage. Except for legitimate nonprofit credit counseling organizations, we don’t usually advise people to use these services, because much of what they do, you can do on your own for free. All it takes is some common sense and legwork.
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For further clarification or for a free consultation with a free credit check, please call Ken Go at (562) 697-7028. Call now and we will advise on how you can raise your credit scores in 3 days guaranteed to help you obtain a better loan for you and your family.
