How To Build Good Credit Scores
Credit repair, credit history, and credit scores will point out some interesting facts. Your situation will dictate if you can find a way out of any debt problem. Debt reduction can become very stressful leading to depression caused by your situation. Our current economic enviornment is very tough and daily lives are stressing enough, we don’t need to add anymore. When confronted, and you admit there are problems you need to find workable alternatives.
A thorough evaluation of your current credit situation is needed start to plan the important tasks ahead with rebuilding your credit and repairing your credit file. You must also realize these same steps need to be evaluated to reduce credit debt. Be serious about repairing your credit and watch out for internet rip-offs “They’re Everywhere“. As complicated as the problem already is, as bad a situation you are in, you don’t want to make a mistake and get further into debt.
Anyone that tells you they can repair your credit in 3 easy steps or fix your credit report in 24 hours “PLEASE RUN”! Your decision for solutions have to be researched and find a method that will work for you, let’s begin with some basics avenues for repairing, and rebuilding your credit.
Look at the first thing “How your credit score is generated”:
Credit scores are generated by assigning weighting models to different components.
35 % is based on your credit history (more than 30 days late)
30 % is based on amounts owed compared to total credit limit (debt ratio)
15 % is based on length of credit history ( history and paying accounts on time means better scores)
10 % is based in number of new accounts, inquiries ( looking for new credit could mean financial trouble)
10 % is based on types of credit revolving, installment, consumer (a good mix of the 3 is great)Each of these criteria depending on how good you handle them will generate a scoring range for you, and the risk level the lenders will take.
Ok, here is a pretty straightforward plan to build good credit scores, you need to remind yourself the bad credit situation didn’t “just happen”, when you accept this fact you are on your way to building GOOD credit. Patience, documentation, and following up on everything is important.
Let’s get started…
Let’s clean up your credit report. Request your free reports http://www.annualcreditreports.com review the reports thoroughly and file disputes for each reporting error, with the respective agency for inaccurate information.
Look for some of the following:
Missing accounts paid on time, prepare documentation of these accounts, and tell the agency or agencies to add theses accounts.
Work information is wrong
Never lived at address showing
Wrong names, and aliases show up as you
Possible identity theft
Accounts not belonging to you (a biggie, name or city, state wrong (also SS number) etc…
If you find any of these errors dispute the errors with all three credit bureau’s Experian, Equifax, and TransUnion. It could take from 30 to 45 days to correct but be consistant and follow up.
Now, on to “Your Debt”, and “Building Good Credit”.
A budget outling spending will be needed:
Write down all expenses, track spending and charges.
Excel or word can create a spreadsheet for you to use in tracking, plain or graph paper works too
Start on the 1st of the month to follow expenditures for the month
Track every day seperately, carry a pad for notes if you are out
Record payments by cash, atm, credit card, electronic bank withdrawal
List the items paid for food, utilities, clothes, gas, etc…
Do this for at least 3 months
Add all items to establish your monthly expenses.Continue to track expenses for 3 months, this will show where the money is going, monthly, and quarterly expenses will be shown here like car insurance, taxes, vacations, professional services etc…
Next make a list of all income use a seperate spreadsheet to show all sources of income as it flows in:
Pension or social security
Alimony or child support
Public Assistance (Food stamps, welfare, unemployment)
List net amounts coming in, receipt of the income(weekly, monthly etc), total these number to produce monthly income.
Subtract expenses, from income, the results will show what is left is spendable cash, look to see if your spending more than your taking in. If the latter is true you need to make some tough decisions either cut down on expenses or secure more income.
“Credit Card Debt Reduction”
From having many credit cards to only one. This is a process I have done a few times when my own spending got a bit out of control.
List all credit card accounts with credit limts, balance due, and monthly payment on a sheet of paper or in a spreadsheet. Pick the card with the highest rate of interest or the one you owe the least amount on (whichever is best for you). I just started with the lowest balance due, it let me achieve a goal sooner rather than later.
Pick which card to start with, and increase the monthly payments ( plan when you will pay it off)
Maintain the minimum payments due on all other accounts (On time)
Pay more than the minimum due on the selected card
Prepare to payoff the next highest card balance ( project a pay-off date)
Continue to due this until you are either paid in full or you’re happy with the progress, and balances
Remember the above on debt ratio to available credit, by maintaining a 30 to 35 % balance due vs total credit limit an increase in credit scores should result by following these steps.
A different tactic you can use is to call each credit card company and ask for a reduced interest rate, inform them of your plans, some might lower the interest rate.
One very important lesson to be learned concerning the financial crisis, your credit score is the financial projection of your good name.
Good scores will save you money in the long haul, but you need to maintain, because a small slip up can be very costly.
In closing, if you need additional resources, or need a honest respected company to help rebuild your good credit score, see my personal recommendation at http://www.mikescreditstory.com
Good Luck !
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