Last year I need to fix my credit rating and I needed to do it fast. I used to have a very low credit score of 523 points and I could not get approved for a loan or a gas card.
I am not going to tell you some sad story about how I lost my job and all was lost. That would not be the truth. The truth of the matter is that I was so careless with my spending and the way in which I was using my credit cards. Even when I had money, I would still charge things on my credit card.
If you know anything about credit cards, you know how easy it is to get a card once you have established yourself with a few of the top credit card companies. Well, my ex and I started applying for and receiving all kinds of credit cards. Back then we just figured that we could handle the minimum payments each month. You do not realize at first that even thought the payment maybe less than twenty bucks, you get several bills like that each month and it adds up quickly.
Below is valuable facts about credit ratings, understanding this information will surely help boost your score.
Get Your Credit Report and Credit Score
Credit Reports are maintained by organizations known as Credit Reporting Agencies, or “Credit Bureaus”.
You have the right to check your Credit Report – for free – as often as you want, and checking your Report does NOT affect it! You will have to pay a small fee if you want to get your Credit Score with your Credit Report.
Your Credit Report will contain the following information:
- Personal Identification, possibly including employment information
- A record of which organizations have recently asked for your Credit Report
- Your payment history for accounts that are reported to the Credit Bureaus
- Any information on the Public Record (collections, judgments, bankruptcies)
Understand Your Credit Ratings
Each account that is shown on your Credit Report will have a Rating, which reflects the current payment status of the account. The Rating will be a number between 0 and 9. This scale is NOT linear – the numbers simply describe the current payment status. Here are the possible Ratings:
|0||Account exists, but there is no recent activity to be rated|
|1||Account is “PAID AS AGREED AND UP TO DATE”. This is the “BEST” Rating.|
|2 to 5||Account payment is overdue (how long overdue will determine the exact rating), but the account is not considered “Bad Debt” yet.|
|7||Payments are being made through a third-party program.|
|8||Repossession or Foreclosure of collateral.|
|9||Bad Debt. Account is in collections.|
Understand Your Credit Score
Your Credit Score is calculated by converting information on your credit report to a number based on a formula called the “FICO formula”. This number assists creditors in determining your credit risk relative to others.
When you get your Credit Score, you will generally see a number between 300 and 850 – this is your score. The average score is in the mid-700s at present. You will also receive an interpretation of your score, which can be more useful to you than the number itself. It will explain why your score is at its current level.
The following points are the main drivers of Credit Scores:
- Payment History – the Ratings!
- Credit Already Used – Stay under 30 percent of your available credit for the highest credit score
- Negative information found in the Public Record such as bankruptcies, collections or judgements
Rebuild Your Credit History
This is relevant for anyone who has had credit problems in the recent past. Here is what you will need to know if they would like to start taking steps to improve their credit score:
- Any accounts in collection will show on the Credit Report for six years from the date of last activity.
- If it becomes possible to start repayment on accounts in collections, you should do so. Credit Canada Debt Solutions can help you rebuild your credit rating.
- You may want to apply for a secured credit card to assist you in rebuilding your credit rating.
Maintain Your Credit History
It is important to maintain your credit history. Here are some steps you should take:
- You should review your Credit Reports at least once a year.
- If you find incorrect information on your Credit Reports, contact Equifax or TransUnion so that they can begin the Dispute Resolution process.
- Pay all your bills on time!
- Don’t apply for too much new credit in a short period of time.
- Don’t bounce cheques! (Your bank might report to credit bureaus.)
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