Credit is the most important factor when financing items such as a car, house, and insurance. That is why it is so important to maintain your credit. In order for any company to do business with you they must take a look at your credit report first. This will give the company a feel for the type of customer you will be. Either you are labeled a good customer who pays there bills on time or you will be labeled a risk and have to put down a hefty deposit. If you know your credit score or have a general idea use the table below to find out where your credit ranks.
720 - 800 Superb! You get what you want
700 - 719 Wonderful! You get top rates & terms
680 - 699 Good! You get good rates & terms
660 - 679 All right. You pay higher costs & rates
640 - 659 Okay score if good income
620 - 639 Weak. You need good income & some money
600 - 619 Poor. Use creative loan broker & pay more loan costs
580 - 599 Almost impossible without large down payment
Under 580 Work on fixing credit without delay
Ok, so you need help fixing your credit and you aren't sure where to start. The best way to get your credit on track is by paying your bills on time.
Make sure you send your payments 5 days before they are due, giving the post office a sufficient amount of time to get it there. If your payments are late this could mean late fees, interest hikes and of course a bad mark on your credit. Once you have established a monthly bill regimen you should take a look at all of the bills that are in collections. All of your bad debt MUST be paid off before your credit score starts to look any better. This is not going to be easy but, I have come up with many easy ways for you to pay down your debt.
First, preparing a realistic budget will give you an idea of how much you are spending on your bills, food, entertainment, etc. it will show you your problem areas and where you need to cut back. The next step in financial freedom is living below your means. You may not like it or can't seem to go without your mocha Latte from star bucks, but this is a crucial part of getting out of debt and improving your credit. A couple of ways to cut back could mean switching to basic cable, taking all of the extra's off your home phone line, including long distance (You can use your cell phone). Cancelling your Gym membership and downgrading your DSL from ultra to light could save you about $70 a month. All of these minor changes result in a monthly savings of $150. Or better yet, $1800 a year. The littlest changes could make a difference.
Right now would be a good time to pull your credit report. I normally use annualcreditreport.com, it is a centralized service for consumers to request free annual credit reports. It was created by the three nationwide consumer credit reporting companies - Equifax, Experian and TransUnion. This will give you an idea as to what you have in collections, how bad your credit score is and if there are any mistakes that could be making your score worse.
Now, that you know what is outstanding you can work on paying off your bad debt. There are two ways to pay off the debt. First, you could put aside your monthly savings until you are able to make the payment in full or you can send monthly payments to the collections company. I prefer saving the money until I can pay it in full because you may be able to get the debt reduced. Start with the smallest bill in collections. Call the company and haggle with them. More than likely they will want to comply with you. But, make sure you have 100% of what you them first. If they decide to accept your offer they will want you to overnight the payment to them.
