Bad credit can overshadow any financial transaction you are about to make.
Most companies will go through your credit reputation before they plan to get into business with you. For this reason, individuals with a diminished credit history normally want to turn things around by hiring a credit repair company.
Credit repair companies are a viable option for getting you a favorable credit score.
You may be told that you can improve your credit on your own, but this is not a wise move when dealing with bad credit. However, before you make a decision, be aware of:
Credit repair means that you have to work on improving the information in your credit report. A credit report has accurate information on how good your credit score is – which is what makes you eligible for taking loans and applying for a line of credit.
A good score means you are reliable while a bad score won’t get anywhere, especially when it comes to applying for a credit card or taking out a mortgage. Evaluating the information in your report is the first step you need to take prior to deciding whether you are going to turnover your credit score or not.
You can get a copy of your credit report from credit bureaus such as TransUnion, Equifax and Experian.
The information in your credit report makes up your credit score which then acts as a threshold to establish the condition of your credit. A low credit score is an indication that your credit history is not the best.This information is based on 5 factors, which are:
Purchasing your credit score every time you need to check up on the info can get costly. This is why you can use companies such as Credit Karma or Credit Sesame to give you a free overview of your report. When signing up for a service that allows you to monitor your credit report, search for an option that does not require credit card based payments. This can lead to monthly charges even when you are signing up for free trails.
However, you have to understand that this won’t be your actual credit score that they will be monitoring, but a precise estimate.
Removing “accurate” negative or positive information is more of a hassle than you would think.
You are allowed to remove any inaccurate information that may be a part of your credit report and credit bureaus will help you do it. However, an accurate report added by a credit bureau is impossible to edit or remove. And even if you try to do that – the credit will be obligated to report it as an offense.
The best way to steer clear of any discrepancies is to use your debt validation accounts to view all your valid payables. Plus, you will also be able to remove any information not consistent with your credit report.
It is not necessary that a bad credit will follow you forever.
The negative information will be a part of your credit report for up to 7 years. However, bankruptcy and tax liens that fall under Chapter 7 may remain in your report for 10 years.
Removing the negative information from the account just as it is about to drop off may necessarily not be the best strategy.
A credit score is essentially a financial tool used by lenders or creditors to assess the risk of crediting assets or money.
Financial institutions use it as a decision-making tool to mitigate the risk of incurring bad debts as much as possible. This method is valid for all kinds of lending procedures including loans, credit card issuance and other debts.
A good credit score is a kind of insurance that you are willing to pay your debts and have the financial standing for it.
Depending on where you are living, most credit companies will use a specific score to rate whether you are eligible for a granting credit. Scores in most countries needs to be around 300 onwards to 850. The higher your credit score the easier it is to get a loan or a credit card. Some lender rates refer to how your credit is rated, for example between the levels of Poor credit, Average credit or Good credit.
A credit score below 630 is considered poor, from 630 to 690 it is considered average and good credit lies between 690 to 720. Anything above 720 can be considered excellent or most favorable credit.
Your credit score can impact any credit-related financial products to a large extent.
In fact for loans, mortgages, credit cards and any other transaction in which lending is involved, your credit score will be considered a threshold that determines whether you get the funds or not.
If your credit score lies below 630 you will not be cleared for any funds, you may have to go the credit repair route for this.
Your credit score is not just determined by how much you have paid back or failed to pay, there are other components that also affect this rating. Your credit score will consist of the following components:
Your history of repaying loans or debts makes up most of your credit score. This is a track record of your previous transactions and whether you have paid them back in the designated period. Paying on-time will be considered as a positive element – and will help increase your overall credit history. However, if you have delayed any payments even a little, it will become a part of your bad reputation as a borrower.
Delayed paybacks along with defaulted payments are aspects that translate into negative payment history.
A negative credit history means that the risk is greater for the lenders (such as banks) and they will consider their options more thoroughly before they give you a green light for a loan or mortgage. You may even disqualify for most credits.
Your debt burden at the time of application for a loan is calculated. This is done in relation to all the other factors that influence a credit score. This means that it does not matter whether you just need to pay a little or a lot – every factor will be taken into consideration.
Your credit history comprises of all the accounts that have been in credit-based transactions under your name. This is considered one of the most effective ways to determine whether the potential borrower is willing and financially stable enough to pay. The longer the history of your transaction the more historical data creditors have to base their decisions on.
The types of credits you have been exposed to are considered by the lenders. This is done to check whether the borrower has been exposed to different procedures and rates of interest. If you have been able to pay all those credits on time this may work in your favor whilst getting a new loan.
This refers to the number of times credit bureaus or lending institutions have done a complete search into your finances and borrowing activities. This can also affect your credit score and the decision that lending bodies will take.