Wednesday, September 16, 2009

Do You Need Help On Bad Credit?

Are you one of the millions with no credit, and no collateral to secure approval for a loan or credit card, or you just have extremely bad credit and no one wants to help you, and all you hear are stories and more stories?

Bad credit is a term used to describe a poor credit rating. Common practices that can damage your credit rating include making late payments, skipping payments, exceeding credit card limits, or declaring bankruptcy. Bad credit rating can result in being denied credit, and in some cases even employment.

The good news is that raising your credit rating is possible. This is important because lenders will give people with high credit rating lower interest rates on mortgages, car loans and credit cards.

Your credit rating is part of a statistical method used to assess your credit worthiness, based on your credit card history, the amount of outstanding debt, the type of credit used, bankruptcies, collection accounts and judgments, too little credit history or too many credit lines are all included in arriving at your credit score.

Here are six things you can do to raise your credit score:

  • Your credit score is what shows up in your credit report. Review your credit report from all three credit bureaus: Experian, Trans Union and Equifax once every year, and at least three months before applying for a loan or credit card, as it can take 30 days or more to correct a mistake on your credit report.

  • Find a job, or better still two jobs to earn enough income to begin making your credit card payment on time. Aim at paying more than the monthly minimum payment on each card, as your payment history makes up 35% of your total credit score.

  • Avoid as far as possible missing a payment on any credit card, as that can take off 50 to 100 points from your credit score. Paying your bills on time is the best way to rebuilding your credit rating and raising your credit score.

  • An important factor in determining your credit score is how much money you owe on your credit cards compared with your total credit limit. Generally, it is advisable to keep your balances at or below 25% of your total credit card limit.

  • With today’s credit scoring statistical method, closing old credit card accounts could hurt your credit score, since doing so will lower the total credit available to you, and cause your current credit card balances to appear larger relative to your total credit limit.

  • Aim at avoiding bankruptcy. A bankruptcy is the single worst thing that you can do to your credit score. It will lower your score by 200 points or more, and remain on your credit report for 10 years. During that period, you may get credit only from high-interest lenders, if at all. Money you could keep in your pocket will go to paying high interest rates for everything you buy on credit.

When you are deep in debt, and the debt collectors are ringing your phone off the hock, the easiest way out may seem to file for bankruptcy, but also the most problematic in the long run. By getting credit counseling instead of filing for bankruptcy you can get the credit collectors off your back, as well as raise your credit score in a shorter period of time. 

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