Are you worried that your bad credit will hold you back from the life you deserve? If so, it’s time for you to take action and start repairing your credit. But don’t worry — you don’t have to do it alone. This article will provide a beginner’s guide on repairing your credit score in five easy steps. With just a few simple changes, such as improving payment history, reducing debt-to-income ratio, managing utilization ratio, disputing errors on reports and taking advantage of credit-building tools — you can get back on track with your finances and achieve the financial freedom that once seemed out of reach. Let’s get started.
A credit score is a three-digit number that represents your creditworthiness and financial trustworthiness. It indicates how creditworthy you are and can determine whether or not lenders, credit card companies, landlords, employers, etc., will give you credit/approve your applications. The higher the credit score, the more creditworthy you are. Conversely, the lower your credit score, the less creditworthy you may be perceived by potential lenders.
To find out what your score is, all you have to do is request a credit report from any one of the three major credit reporting bureaus: Experian, TransUnion and Equifax. Your credit report will include information about your account history with creditors, loans, and lines of credit, as well as other personal data that goes back about seven years. Knowing your credit score can help you make smart financial decisions since it’ll give you an idea of how finance-related institutions view you when evaluating your creditworthiness.
Your payment history is the most important factor in your credit score. Each time you miss a payment, it will have an adverse effect on your credit score. To start improving your payment history, make sure to pay all of your bills on time every month. You may also need to make arrangements with creditors or collections agencies to catch up on missed payments.
A debt-to-income ratio is a consumer debt measurement tool that is used to measure how much debt an individual has in comparison to their total income. The debt-to-income ratio method is important for various working professionals, especially those who are considering taking out major debt, such as a mortgage or a car loan, as it helps them assess the number of debt obligations they can handle versus their income. Debt-to-income ratios allow consumers to gauge whether they will be able to afford these large obligations before applying for them. Accurately understanding debt-to-income ratios before taking on debt allows individuals to borrow responsibly and make well-informed decisions about their financial future.
Your credit utilization ratio is one of the most important numbers in relation to your credit score. This ratio, found by dividing the sum of all credit balances by the total credit limit across all cards, shows what percentage of available credit is being used. Generally, lenders prefer to see a credit utilization rate below 30%, as this indicates that you are likely managing your credit well and unlikely to miss payments.
Keeping an eye on your credit utilization rate can help you make informed decisions about when to apply for additional lines of credit with other lenders. It will also allow you to plan ahead and work toward improving your credit score by appropriately managing credit use.
Errors in your credit reports may be preventing you from getting the financing or loans you need. You should review all three major credit bureaus — Experian, TransUnion, and Equifax — to make sure there are no errors on your reports. If you find any incorrect information, dispute it immediately with the credit bureau and provide supporting documentation as evidence of the mistake.
You can also take advantage of credit-building tools such as secured credit cards, which allow you to build good credit by making payments on time each month. You may also be able to open a savings or checking account with a bank that offers overdraft protection in case you ever accidentally overdraw on your account. Taking advantage of these kinds of tools can help improve your credit score over time.
Taking these five steps should improve your credit score and help you live a financially free life. You can do many other things to maintain good credit, but this is a great place to start. If you have any questions about credit repair or need professional help, call us. We’re here to answer your questions and help you get on the path to financial freedom.
Credit problems can affect your entire financial picture. If you’re falling behind on a credit card or mortgage payment, you could be negatively affecting other areas of your financial life.
That’s why we’ve developed a full-scale credit repair solution that addresses the problems you currently have and those you may not have anticipated. At ASCENT, we approach your financial landscape with foresight to assure financial recovery and long-term financial stability.
Many of our clients have experienced substantial increases in their credit scores, have modified their home loans, have significantly lowered their monthly mortgage payments and changed their overall credit status in ways they never thought possible.
Credit scoring started in the late 1950’s to support lending decisions in large department stores. The concept was revolutionary and by the end of the 1970’s most of the nation’s largest commercial banks, finance companies, and credit card issuers used credit scoring. It became widely accepted once Fannie Mae and Freddie Mac fully endorsed the use of the FICO score for home mortgage lending.
The FICO score was first created in 1956 by William Fair and Earl Isaac when they created their company Fair Isaac Corporation (FICO). Their system used a mathematical model (algorithm) and a computer to help depict consumer lending risk. To be more specific, the FICO score originally was designed to represent or predict a consumer’s risk of going 90 days late on an account within the next 3 years.
Until 2001 consumers were not even allowed access to their credit scores. This changed when California adopted a law stating consumers were entitled to know everything about what is on their credit reports.
At the same time FICO started developing customized scoring models for each individual credit bureau. Today each bureau still has their own specific FICO designed score. Which is one of the reasons why you will very seldomly see all three of your credit scores be exactly the same at the same time. Equifax commonly names their score model BEACON. Experian many calls their model Experian/ Fair Isaac Risk Model. And Trans Union has named theirs simply FICO.
Even though the bureaus have their own FICO models, in 2006 they decided they wanted a bigger piece of the pie and announced their intent to design their own credit scoring model. Today that model is known as Vantage Score and is offered on the credit monitoring sites owned by the credit bureaus. The intent of the bureaus is to have Vantage Score widely accepted by lenders to eventually replace the FICO score.
Even though the bureaus have their own FICO models, in 2006 they decided they wanted a bigger piece of the pie and announced their intent to design their own credit scoring model. Today that model is known as Vantage Score and is offered on the credit monitoring sites owned by the credit bureaus. The intent of the bureaus is to have the Vantage Score widely accepted by lenders to eventually replace the FICO score.
Vantage score is VERY different than FICO. For one, FICO’s credit scoring scale ranges from 350-850 while Vantage ranges from 500-990. This is a BIG difference in credit scoring and can be very confusing to consumers and lenders. A 700-credit score with FICO is “A” credit, but with Vantage a 700 score would be classified as “D” or poor credit.
There are also many different algorithms used by the FICO depending on why a credit report is being pulled, an example maybe someone looking to open a $1500 Revolving Account with a department store is going to get a much different score than if they are applying for a $35,000 car loan, simply because of the type of account which is being applied for.
And those “free” credit score offers should not be looked at as anything but a possible trend of how your scores is going due to the fact that when you are looking at those sites and requesting your score(s) you are not even applying for anything, so there is no risk calculation used in that particular algorithm. Stick with a TriMerge Mortgage Credit Report for the most accurate FICO scoring for yourself.
Are you worried that your bad credit will hold you back from the life you deserve? If so, it’s time for you to take action and start repairing your credit. But don’t worry — you don’t have to do it alone. This article will provide a beginner’s guide on repairing your credit score in five … Continued
Read MoreCredit scoring started in the late 1950’s to support lending decisions in large department stores. The concept was revolutionary and by the end of the 1970’s most of the nation’s largest commercial banks, finance companies, and credit card issuers used credit scoring. It became widely accepted once Fannie Mae and Freddie Mac fully endorsed the … Continued
Read MoreWE COMMUNICATE WITH ALL THREE CREDIT BUREAUS FOR YOU:
