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A Guide to Bad Credit Finance Options
Have you been trying to find out what bad credit finance options were available? Perhaps you're in the market for a new car or truck, but aren't sure if you can find a dealer or lender who'll offer you a bad credit finance? You shouldn't worry too...
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Credit cards - The top 3 things you need to know
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What Does Your Credit Score Tell You?
When you apply for a loan or a mortgage, the first thing the lender does is to check your credit score. Based on your credit score, the lender decides the amount of finance you are eligible for and the interest rate at which you will be charged. So...
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Repairing Your Credit
Repairing credit scores cannot be deemed an easy task, but also
cannot be considered an impossible task, either. Many
individuals have less than ideal credit scores due to a number
of factors. It can be due to a job loss, where bills fell behind
due to reduced household income. Repairing credit scores can be
necessary in situations where a medical emergency occurred, and
medical bills have piled up beyond reason, or the individual
that was injured was contributing to the household income is now
unable to work. Credit scores can be reduced due to a debt ratio
that is much higher than the income level, and can also occur if
all payments are not made on time or are not made at all. A bad
divorce can also contribute to an individual's financial well
being, and can lead to poor credit scores when bills are in the
middle of an argument and payments are not made on time or are
not made at all.
Regardless of the reason for poor credit occurring, be assured
that you are not alone. Many individuals need to repair credit
scores, and while it can create a dilemma when a loan is needed,
even loans are not impossible in most situations, though
interest rates may be higher. If possible, try to repair credit
scores before applying for a loan, if time allows. Take a few
important steps to repair credit scores.
1. Request copies of your credit reports to assist in repairing
credit scores. Lenders rely on three reporting credit bureaus:
Experian, Equifax, and Transunion. These three bureaus are where
all lenders turn prior to offering a loan to any business or
individual. To understand what they are seeing, obtain copies of
your reports offered by each of these credit bureaus. You may
obtain a free copy of your credit report from each bureaus once
per year, or more if you have been denied a loan or have been
denied some type of credit due to your scores. In addition to
requesting the reports, be sure to also request your credit
scores be revealed. The reports and scores can be requested
online at Experian.com, Equifax.com, and Transunion.com, or can
be obtained by calling their toll free numbers. Experian:
888-397-3742 Equifax: 800-685-1111 Transunion: 800-916-8800
2. Once you've obtained your credit reports, review and
understand them in order to repair credit scores. In order to
repair credit scores, it's crucial to understand what it is that
needs to be repaired. When creating a credit report, the three
credit bureaus study the credit history of an individual and
calculate a credit score, which lenders use in considering
whether or not to approve a loan. This credit score is known as
the FICO score, and is calculated using software created by the
Fair Isaac Company. Credit scores range from 300, for no credit,
to 850, for perfect credit. A credit score below 619 is
considered poor credit and the borrower is considered a high
risk to a lender.
3. To repair credit scores, read through each item listed. If
there are items on your credit report that are not yours, such
as a loan that was given to your spouse after a divorce, report
those errors to each of the credit bureaus who lists those
errors. Likewise, there may be occasions where identity theft or
other errors on the part of the reporting bureaus have occurred.
Read through each item carefully, and contact each credit bureau
that has incorrect information regarding your credit history.
Don't be afraid to dispute anything at all that may be of
question. Contact each bureau promptly with these disputes.
There is normally a 30-day waiting period after filing a
dispute, where the credit reporting bureaus will contact each of
the creditors in which you're disputing, offering the creditors
the opportunity to respond or remove the listing from your
credit report. If not response is received, the credit
bureaus
are required by law to remove those items from your credit
reports, which will be one step in assisting you on repairing
credit scores.
4. Consider a consolidation loan, reorganize your financial
structure, and maintain control of your spending in order to
repair credit scores. Obtaining a consolidation loan, such as
refinancing a home or obtaining a home equity loan, is an
excellent step in the right direction when it comes to repairing
credit scores. By consolidating all debt into one lower monthly
payment, even if the interest rate is higher, it usually will
have more positive impact than negative impact because it can
greatly assist in repairing credit scores. A consolidation loan
will pay off as much existing debt as possible, and credit
scores will increase over time, provided new debt is not
incurred due to the loan.
Not everyone gets a fresh start, so it's crucial to keep that in
mind after signing for the loan. If you're tempted to spend more
once the loan is in place, consider the impacts involved. Your
attempt to repair credit scores could possibly be lost with
careless spending. Spending more money once obtaining a
consolidation loan will only reduce credit scores more than what
they were previously. Stay away from payday loans, and destroy
all but one credit card, which should be used only for
emergencies, such as unexpected automobile repairs. If the card
is needed for such an emergency, pay it off in full before using
it again. Don't splurge or make any purchases in haste, or your
efforts to repair credit scores will be lost.
5. Make payments on time to repair credit scores, either with or
without a consolidation loan. Especially if you've decided to
obtain a consolidation loan, make all payments on as scheduled.
To fully repair credit scores, this is one of the most important
steps to take. Showing that you can pay your bills is one of the
highest impacting actions that you can make. It illustrates you
as a financially responsible individual, and can increase your
credit scores as much as 100 points or more in just one year. By
repairing credit scores simply with making payments on time,
within that one year, it's possible to bring yourself into a
better credit rating bracket, with more financial opportunity
available in the future, including lower interest rates, which
lead to lower monthly payments.
If you opt not to obtain a consolidation loan, start making
payment arrangements with your creditors to aid in repairing
credit scores. Start by making arrangements with the creditors
in which payments are the latest. Most creditors will gladly
work with you if you make payment arrangements and stick to the
payment plan. By not communicating with your creditors, they
assume the worst of you. If you make them aware of your
financial difficulties, most will be flexible enough to work
with you so that your debts can be paid. If your creditors
involved credit card companies, ask them to re-age your
accounts. By re-aging credit card invoices, the credit card
company will remove all late payments and added interest,
significantly reduce the interest rate you're paying on the
account, and bring your payments current. They'll also report
the payment arrangement with the credit bureaus, and this step
alone will help repair credit scores. It may mean that the
accounts will be closed, but having them open in the first place
are the reasons for many financial problems due to unnecessary
purchases.
About the author:
Rebecca Game is the founder of Digital Women ®, an online
community for women in business. A 30 year entrepreneur and
dedicated to helping other women find small business loans.
Visit her site: Loans for Women
http://www.digital-women.com
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| CUNA: The Credit Union National Association |
| News and resource directory about credit unions. |
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| Credit/Debt Management - Tools and Advice for Managing Credit and Debt |
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