Has your loan application been turned down? Are low credit scores giving you sleepless nights? If yes, don’t give up. Instead, take time to understand your credit rating and then follow the tips outlined here to nurse it back to health.
Your credit rating or credit score is a number calculated on the basis of your credit history. Lenders use this number to determine your credit worthiness or ability to manage a new debt. Approximately 40% people in the U.S. have a credit rating or Fico score in the range of 750 to 850. However, a lot of people have a score that is way below this magical range. If you are one of them, you would know how difficult it is to get a personal loan or a credit card at reasonable terms.
Your credit rating is calculated by rating agencies and maintained in a credit bureau. You are entitled to one free copy of your report from each of the three national credit reporting agencies-Equifax, Experian, and TransUnion.
Once you’ve obtained your report, follow the tips outlined below to repair or improve your credit rating:
· Check your credit report for any mistakes. Check whether your debts are listed correctly and all your repayments are reflected accurately. If you find a mistake, request for a change. You may have to submit documentary proof, such as a record of the actual payments, to the rating agency.
· Add notes of correction to explain any past mistakes you have made. For example, if you missed loan payments because you suddenly lost your job or there was a medical emergency in the family, you can add an explanation. This reduces the amount of damage that the record does to your overall credit rating.
· Analyze your report to find out what is going against you. In most cases, it’s repayment history. Each time you miss a payment on your bills, your credit rating goes down by 50 to 100 points. The good news is that making regular payments is the easies way to repair your score. If you tend to miss payments because you forget the due dates, sign up for automatic direct debit services. If you can’t make full payments, try to pay off the minimum amount on each bill. If you are going through a period of financial stress, contact your lender and work out a revised payment schedule.
· Improve credit behavior. To push up your credit rating, you must widen the gap between the amount you owe as and your total credit limit. To do so, reduce expenses and use cash more often to pay for your purchases.
Finally, avoid bankruptcy. Bankruptcy can lower your credit rating by as much as 200 points. A record of bankruptcy remains on your credit report for up to 10 years. If you’re in a financial crisis, work with a non-profit credit counseling service to identify alternative means, such as debt consolidation, to reduce financial pressure.
Rebuilding your credit rating takes time. If you feel disheartened, remember that you are not alone. More than 30 million people in the U.S. have low credit ratings. Concentrate your efforts on getting your credit record back on track.
Learn more about credit repair, how to boost your FICO fast and tips to improve your credit rating
Tags: credit rating, credit score, improve credit rating
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