Many people are not affluent and have modest earning but heavily rely on using the credit option, whether it is buying a house, a car, or paying their tuition fees. We live in a society where most people are dependent on credit utilization and then making subsequent monthly payment according to their financial situation. The one most critical factor that allows a person to get credit according to his terms is the credit score, also called the credit rating.
The credit score shows the creditworthiness of a person and how regular is the person in paying the debt that he owes. The credit score is regularized and maintained by FICO (Fair Isaac Corporation), and it consists of a number ranging from 300 to 850. The FICO scoring system is used by many banks and lending companies who loan money that the individual may fulfill his financial obligations. The list of scores and their meaning is given below
- 800 to 850 = Excellent
- 740 to 799 = Very Good
- 670 to 739 = Good
- 580 to 669 = Fair
- 300 to 579 = Poor
An excellent or good score means that a person has timely paid his debt and can easily obtain a new loan without any trouble and with making a small deposit and less interest rates. The poor or bad credit score, on the other hand, means that a person has not been punctual in making the debt payments and can default on his loan amount. The banks and lenders do not easily give loans to people with low or bad credit as it shows that they already have missed regular repayments, and it would be risk handing them another loan amount. The individuals with a bad credit score need to take some time to improve their score or play a big down payment and also pay high interest rates.
Bad credit scores make it very difficult and tough for individuals whether it is asking for a mortgage loan, buying a new car, paying utility bills, getting a job, and even asking for a loan to set up a business. The credit score is a combination of factors that includes
- Debt payment history
- The total loan amount owed by the person
- The length of the time of credit history
- The type and nature of credit; and
- Any new credit or loan that is added
Unfortunately, bad credit is quite common as people do tend to fall back on their debt payments due to financial liabilities and crisis, but there are certain companies that provide credit repair services. But one has to ensure the authenticity of the companies before asking them to review the bad credit case as there many fraudulent companies who advertised to remove bad credit, but in reality, it does not happen.
You can easily contact a reputable financial company that promises to repair bad credit fast services by performing simple steps that include
- Reviewing your credit report
The first task the company does is to get a copy of your annual credit report from the credit bureaus that include Experian, Equifax, and TransUnion. The entries or information on all the three reports will be the same, but it is not always correct.
- Disputing any negative marks on the report
Traditionally, the people with bad credit use to write letters to the credit bureaus if there was any discrepancy or error. Now, the credit repair company looks for other elements other than the credit score, which consists of any derogatory remarks such as judgements and collection accounts. The main focus of the credit repair company is to find errors and dispute them with the bureaus until the error is removed and the credit score is fairly improved. But it is a lengthy process, as the credit bureaus also investigate and find out whether the error is genuine or not.
- Disputing the incorrect late payment entries
It happens many times that you may have paid the debt on time, but the lender may not have entered the correct date for payment which may be then noted as a late payment. The credit repair company will ask for your payment details and then match them up and find out if there is a similar error like the one such as derogatory remarks or not.
- Asking you to review your financial situation
One of the best ways to improve your credit score is to take some time and analyze how you can manage the scheduled payments and the past payments to prevent your credit score to further weaken. The credit repair company will also ask you to pay your bills and debt payments on time. Also, it is advised not to spend more than you earn in a month. You should examine your tax returns for the past 2 years and see how much you actually earned in the two years and then subtract your monthly expenses, car/home/and health insurance. But the only way to drastically improve your credit score is to pay bills and debt payment on time.
- Ask you to not apply for any new loan
Temptation is one thing that drives most people to get new credit or loan irrespective that they have a bad or poor credit score. Also, whenever you apply for a loan, a hard inquiry is placed on your credit report, and if they are far too many, then the credit score will suffer.
There is a monthly fee that you have to pay to the credit repair company which is determined by the scope of credit damage and what steps will be taken to sort the credit report. The correction of the credit report can take six months to one year.
Maggie Gayle is a credit repair specialist and also writes for an online financial magazine. She helps the readers know about the importance of credit scores and how can they take steps to improve bad credit scores.