Fix Bad Credit

Before your loan application is processed, it is usual for the lending institution or bank where you have applied to run a check on your credit report and get your FICO score.

If your FICO score is high that means that you are a low risk customer, you can be counted upon to make your premium and interest payments regularly and on time, and you will face no hassles in getting prequalified for your loan.

Having a history of bad credit can reflect very poorly on your chances of getting a mortgage or a refinancing loan. If you have bad credit, it is important that you take the proper steps to mitigate the debt. Your credit rating will improve as you pay off your pending debts and you can work towards becoming financially secure.

Here are some of the many ways in which you can go about fixing a bad credit.

Don't let the scammers mislead you

In the first place, do not under any circumstances fall for the tall claims made by the sundry companies hawking their Credit Repair Services through aggressive advertisements by way of fliers, newspapers, T.V., Radio, and Internet. There is no legitimate way they can 'erase' your credit problems '100%' or remove bad credit reports from your credit file.

And if you go along with their offer of giving you a new credit identity, you could find yourself arrested and charged for fraud. Misrepresenting your personal details and falsifying your financial and work details for the purpose of securing a loan application is a federal offense, a crime you can go to jail for.

So, understand this, there is no magic wand that anyone can wave to cure your financial woes. You have to salvage the situation yourself by a good deal of patience, common sense, self-discipline, and determination.

Get a copy of your credit report

The credit report can be obtained from the central bureau of the three main consumer reporting companies – Equifax, Experian, and Trans Union. Remember that you can directly contact the credit report bureau. There is absolutely no need to go through a credit service company that will charge you a good amount in fees for something you can access for free.

You should apply for your credit report every year actually, whether you have bad credit or whether your financial situation is sound. It is possible that certain glaring errors may have crept into the report and, if you neglect to get these errors correct, they may spoil your credit rating. Another thing to watch out for is Identity Theft.

There are enough stories around about scammers appropriating legitimate identities for fraudulent purposes. It is better to keep an eye on your credit report and avoid such problems.

Clear your debts

Start paying off all your outstanding debts. Try to clear up your debts as soon as you can. First repay all the debts that have the higher interest rates and then work your way through the others.

Don't lag behind on current bills

Be prompt and regular about paying off your current bills. Late payments will not reflect well on your credit report.

Reduce the credit cards

Cut down the number of credit cards you have or close down the accounts altogether. Don't apply for a new credit card until you have paid off all your debts.

Do not file for bankruptcy

And do try to keep away from tax liens and collection accounts as well. If you file for Bankruptcy, tax liens, and collections, it will figure prominently and not to your advantage on your credit report for ten, seven, and seven years respectively. Which means that for the next ten years you will have little or next to no chance of getting your new loan applications approved.

Polish up your act

If you lead a lavish life-style, well, do consider sobering up a bit – at least until your debts are cleared out of the way. Cut down on all unnecessary expenditure and sell some of your assets if it becomes absolutely crucial.

And after you have cleared up your bad credit, you may return to square one and start all over again.

Protect Your Credit Rating

Your credit rating is basically your personal finance history, whatever accounts and forms of credit you'd had in the past and any missed payments, defaults or notices on those accounts are marked on your credit rating. Finance companies use credit reports to see how individuals manage or fail to manage their :


bank accounts,
credit cards,
personal loans,
mortgage payments,
mobile phones.


This helps the lenders to gain a profile of the kind of customers they're more likely and less likely to lend money to in the future. But can you really protect or make your credit rating better?

Well, yes, there are certain things you can do to make sure your credit rating is the best it can be. First off you should always tell the truth whenever you're applying for credit. In the end it will only be you that suffers if you cannot afford to make the repayments on your debt.

This is the first basic rule of lending, don't fool yourself - can you really, honestly afford to make the repayments? If you lie on an application form lenders can easily find out and it could be deemed as a fraudulent application which will cause problems for you in the future.

Don't apply over and over again with different lenders, this will only leave a trail of rejected applications behind you. Each time you make a new application the lender will see on your credit rating how many times you've already applied and which lenders you've applied to. If you feel that you might be able to get a more competitive quote from another finance company then ask for just that - a quote. Then you can go on to make a formal application. If the finance company say they need to run a credit check to give you a quote then ask them to make sure it will only show up on your credit rating as a quotation search, rather than a credit application search.

Your credit report will also show other people with whom you have joint accounts or any form of joint credit. Obviously these people could be ex-partners that you no longer share a relationship with. Make sure you keep you credit report up to date by telling the credit agencies to remove the people who are not financially connected to you. Lenders may look at the credit ratings of financially connected people on your credit rating and if they have a bad credit rating you could be affected.

You should always check your ID, if there is anything suspicious looking like applications you can't recall then let the agency know. Infact if you find anything in your credit report that you think should not be there then write to the credit agency and ask them to amend it or let you know exactly what it means. For example if you have settled a CCJ then make sure this is showing. You need to ensure the corrections you have made your efforts to clean up your rating are being shown.

The easiest way to keep your credit rating clean is to make your payments every time, on time. Even if the payment is just a few pounds it shows that you are responsible with your finances and can budget correctly. If you think that you might miss a payment in the future then contact the lender immediately, burying your head in the sand will not help the problem and things will only get worse.

Improve Credit Rating

Every individual and business entity earns a certain level of credit worthiness in a lifetime or phase of function. The credit rating is either evaluated as a credit score or as entries in a credit report. Credit ratings are awarded to individuals, business corporations and even countries. The calculations of the debit-credit facets are made at government-supported credit bureaus.


Calculations include averages summed up from the financial history of the individual or entity, and the available current assets and liabilities. A credit rating is a very important evaluation that tells an investor or lender whether or not a fiscal avenue being explored or the borrower is financially healthy enough to pay back the desired line of credit. Credit ratings are also sought to calculate and adjust insurance premiums and interest rates.

The readings, and sometimes the final score, help to determine employment eligibility. A poor credit rating simply attracts high interest rates and/or loan refusal. The factors that commonly influence credit rating include the amount of credit availed of, saving and spending patterns, incurred debt and current ability to repair the impaired history.

How to Improve Credit Rating:

Credit rating is usually compiled and maintained by the Experian, Equifax, and TransUnion credit bureaus. A person or business entity's credit worthiness is usually determined via statistical analysis of the evaluated credit data. The records reveal a 3-digit credit score, also referred to as the FICO or Fair Isaac Corporation score.

The credit rating agencies calculate debt obligations and debt instruments that can be traded within a secondary market. Credit ratings are commonly accessed by investors, banks, issuers, broker-dealers and the government. The rating helps evaluate the current credit risk associated with the person or business.

The steps to improve credit rating involve:

• Paying bills on time and minimizing debt.
• Clearing incurred debt as soon as possible, and refrain from acquiring fresh debt.
• Avoidance to transferring debt balances.Keeping low or no balances on credit cards.
• Keeping old bank accounts operative.
• Interceding for an immediate intervention of a payment plan and outside help, if the debt incurred is more than you can handle.

It is very important to assess the situation from a third person perspective and work in tandem with a lender. It helps to earn goodwill via regular payments, to improve your credit rating. The credit rating vouches for your credibility. You should focus on ironing out your previous history of borrowing and repayment and repair the liabilities-assets ratio, to feature more assets than debts. It is critical to tally facts within the credit report and take remedial action to eliminate errors and omissions.

You can use factors such as transparency in the stock market and public investment enhancement patterns to your advantage. You need to apply all your energy to meet impromptu expenses and train yourself to optimize credit-in-hand. Monitoring and reviewing past credits and identifying wanton expenses also help to maintain a good credit rating. The regularity with which you address repayment of incurred debt greatly reflects your financial stability. A credit rating addressed and repaired in time attracts smaller rates of interest and easily manageable credit balances.

Designing your own finance management strategy will help you to enjoy a stronger credit rating in the near future. Paying back high interest rate credit card debt and not spending more than 30% of your total credit limit are both highly beneficial to a sore credit rating.

Credit Rating

Credit rating is the means of assessing the credit worthiness of individuals, companies, states and countries. It indicates the ability of the debtor (individual, company, state or country) to fulfill his financial commitments. Credit rating can refer to personal, corporate or sovereign credit rating.


Personal Credit Rating

Credit Rating:
In the US, creditors use a scale of 0-9 in order to rank a debtor. The numbers can be preceded by the alphabets R or I. I refers to credit that is repaid in installments (like mortgage on a house), while R refers to a system of revolving credit (credit cards), whereby the debtor is only required to make minimum monthly payments.

R1/I1 means that the debtor repays his debt in one month, while
R2/I2 means that he repays within 2 months.
R7/I7 indicates a situation wherein debts are paid by consolidation.
R8/I8 implies that debts are recovered by repossession.
R9/I9 is the worst rating and indicates the inability to repay debts.

Credit Report and Credit Score:
Information about credit inquiries, bankruptcies, liens, judgments or collections is sent to the credit bureaus, which prepare an individual's credit report, and assign credit scores. A person has 3 credit scores assigned to him by the following bureaus: Equifax, Experian and TransUnion. While these scores may differ, the underlying principal is the same.

The credit bureaus calculate scores based on the credit scoring system created by Fair Isaac Corporation (FICO) in the year 1958. Credit scores computed by Experian are called 'FICO or FICO II', scores calculated by TransUnion are called 'Empirica', and credit rating computed by Equifax are called 'Beacon'. Fair Isaac Corp. has also developed the next generation FICO scores, which are meant to be user friendly. The FICO advanced risk score is used by Experian, while TransUnion uses Precision, and Equifax uses Pinnacle, to calculate credit scores.

Credit bureaus also assigns weightage to the following factors while calculating credit scores: 30% to previous credit performance, 30% to current indebtedness, 15% to the use of time of credit, 15% to the types of credit available, and 5% to new credit.

FICO scores are fast gaining popularity over the R/I multiple rating system. Hence, we can discuss the importance of good personal credit rating from the perspective of maintaining good FICO scores.

What is a Good Credit Rating for an Individual?

Credit ratings for an individual range between R0/I0 and R9/I9. 9 is the worst rating while 0 would mean that a person has no credit history. Credit scores for an individual are generally in the range of 360 and 850. A score below 620 is considered unhealthy. The worst score, of course, is 360 and the best is 850. Higher the credit score, lower the risk of a person defaulting.

A poor credit score/credit rating would result in lenders charging a premium for providing loans. If the credit score/credit rating is very poor, lenders may refuse to provide credit. A credit score between 650 and 690 is considered good, while a score above 700 is considered optimal, by the lenders.