Repair your Credit, Improve your Life

By: Gus Parker

All of us, at one time or another, have come across an item that we just had to have. Many of us, unwilling to postpone our gratification even for a moment, go against our better judgement and "charge it". When it comes time to settle up, some of us will learn the hard way that "credit" does not mean "free money". For many consumers, the desire to posses an object far outweighs the concerns of the far off future. Often, people believe it will be easy to get the money by the time the credit bill is due, unfortunately, this is often not the case. Millions of Americans are thousands of dollars in debt, with little savings, and rapidly accumulating credit card balances.

A good credit score is important to build and maintain, in order to qualify for a home mortgage or an auto or personal loan. A poor credit score can disqualify you from receiving the best interest rates, or from obtaining any credit at all. There are three national credit reporting bureaus, TransUnion, Equifax and Experian. These agencies maintain a database of your personal payment history, balances owed, and account information for each credit line extended to you. Each U.S. consumer is entitled to a free copy of his or her credit report once a year. You should not contact the three credit agencies directly, the FTC recommends using the website www.freeannualcreditreport.com. Beware of other websites offering a free credit report, often these free reports have hidden costs involved. There was an FTC investigation pertaining to this practice, and several companies have been required to offer More information can be found at MyCreditBusiness.

Your credit score is based on two main factors, how well you have repaid your debts in the past, including the punctuality of payment arrival, and the total amount of debt you owe to various lenders. Be careful not to make the mistake of applying for multiple credit offers at one time, each individual credit inquiry will be recorded on your credit report, and too many of these "hard" inquiries in a short time span could have a negative impact on your credit score. Allowances are made for auto loans and home mortgages, because people tend to shop around for the best rates on these products, so several inquiries of these types will not have an influence on your score. Lenders also tend to look at your debt to income ratio in determining your eligibility for a loan.

It is more important to maintain a good payment history over any other factor. Many consumers have found their credit score to be quite high, even with only one credit card used to establish credit. Making sure the payment arrives in the office well in advance of the due date is key, even if you have to only pay the minimum balance that month. Late and missed payments are the surest way to ruin your credit rating. One should always strive to pay the entire balance due each month, to avoid the accrual of interest charges, which can be substantial. This ideal is not always possible, however, but getting the payment in on time should not be a problem given a little forethought.

If, despite your best efforts, you find yourself in credit trouble, there are steps you can take to recover. First, obtain a copy of your credit report, and check it for accuracy. Occasionally mistakes can be found and disputed. There is a standard form to fill out to dispute an item on your credit report. Make every effort to pay off high interest accounts first. Find ways to budget and save your money, cut out expenses that are not essential, take an honest look at your finances and what you really need to get by. Only with self discipline can one recover from financial trouble without resorting to bankruptcy. With the new bankruptcy laws, this option has become much less desirable, the consequences of filing can be very damaging and last years. Credit counseling services can be helpful, but be sure to deal with a non-profit organization. Creditors are quite often willing to accept a fraction of the original balance in order to obtain settlement of the account. Also, interest rates can be frozen, or payment plans worked out, in order to assist in the receipt of payment. The credit companies would rather recoup a smaller portion of the original balance, rather than lose out on the entire sum.

Consumers must be diligent in all aspects of their financial lives, to maintain the level of awareness needed to succeed. Many pitfalls await the unwary person, but great success has been achieved by many using the same set of rules. Take time to learn the rules before you play the game, this is the only path to success in any endeavor. Learning to manage money correctly is one of the most important lessons in life. Become master of your finances, only then can you be truly free.

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