What is bad? Can you fix it?



The most important indicator of poor credit is a low credit rating, otherwise known as a low FICO score. A score of 650 or lower will give you problems while 500 is abysmal. Fico is a number that is calculated, taking into account your total debt, the number and length of late payments, and some other factors. This number is calculated by three main credit reporting agencies and is then made available to lenders and to the individuals themselves.

Improving your credit rating is difficult but definitely possible and is certainly worthwhile. The first steps are personal and have to do with your own habits and tendencies. If you have trouble with self-discipline or if you find it impossible or difficult to keep financial commitments you may want to seek some kind of counseling, perhaps from a credit repair specialist.

But there are other things that you can do that are definitely in your control.

You can begin by getting a copy of your credit reports from all 3 credit reporting agencies: Experian, Trans Union, and Equifax. By law these must be available to you for free once per year. They contain a list of all your debts and indicate problems, such as the number of payments late by over 30 days. The agencies may charge for the actual FICO score but you can sometimes get that for free as well. Review the documents with a fine tooth comb and list all mistakes. Involve a credit repair specialist, if necessary.

Estimates of credit report errors range from 85 to 40%. Some, such as an incorrect age or address are easy to fix but some mistakes take a little more attention. If accounts are shown as open even though you had closed them, or if debts are listed that were incurred by a different person, you should make note, gather your proof and contact the credit reporting agency and politely insist that the information be corrected. Be aware that they will not simply take your word for it but will check it out themselves, so be sure to be honest with them.

Next, make a detailed and realistic budget. Include all monthly obligations and add in a buffer to take care of unexpected expenses. Determine to keep to that budget. Then call all your creditors and tell them what you have done and ask for a reduction of the debt. Be polite at all costs. If necessary, ask for a supervisor. They may not immediately grant your request but as you keep making steady payments they may respond more favorably when you make a follow-up call a few months later. Keep notes of the agreements and keep your word.

Cut up and return as many of your old credit cards as possible. Keep paying on the outstanding balance until the account is eliminated or you can convince the creditor to forgive the remaining debt. Make sure that you try to make more than minimum payments. You can spread this policy out or concentrate on one card at a time. As a credit card's balance drop keep up the larger payments and when that card is retired apply all your resources to the next card. But make sure to keep up with your minimums on all cards while doing this. Some experts advise that you pay off home loans first and then concentrate on small amount, high APR debt. Pay off these accounts first and then move on to debts of larger amounts.

When applying for a new card, you have some options. You can obtain a secured card, no matter what your credit rating is. You can use it just like any credit card but the limit is determined by how much you actually put into the account. This card should be for emergencies only.

Other, specific kinds of credit cards, such as gas cards or department store cards may be easier to get and if you use them responsibly you can start to see an improvement in your FICO score.

Fixing credit worthiness is less like a repair and more like mending. When you repair something you quickly replace whatever is broken and make it like new. When something mends, the process is much slower and takes a lot of patience. But if you stick with it your credit can be mended just as surely as a broken arm can be mended. So take the first steps now. Have a conversation with yourself and follow the steps outlined in this article.

Stick with it!

Neil Beaton