What is Credit Repair and Credit Rating

« « New Consumer Protections Will Probably Not Remedy Everything | Credit Repairing on Your Own » »

Wednesday, March 10th, 2010 Subscribe To Our Feed

There is a relationship between credit rating and credit repair. In order for you to be in good standing, credit repair is needed if your credit rating is 600 or below. There are a lot of options to help you with credit repair, you can seek the help of professionals like a non profit debt relief or try to work things out on your own.

But what is a credit rating? This is an indicator that tells creditors if you are credit worthy. A simple way to do this is to put certain things about you in the computer and within seconds, they will see the results appear on their screen.

Credit rating ranges from 350 to 850 and as mentioned, having a score of 600 or below is bad because if you apply for a loan, you will be paying higher interest rates compared to someone who has a rating of 700 or above and usually 5 factors affect this.

First, the number of inquiries you have made in the past 2 years. Did you apply for a credit card or loan? If you did and this was approved, then as long as you pay it on time, you will have a good credit rating.

Second, what types of credit you actually have? If you have funds, then that is good. If you don’t, well don’t expect to have a high credit rating.

Third, what is the length of your credit? Compare to someone who just graduated from college, people who have a line of credit for 5 years or more have a better credit rating.

Fourth, how much is your debt? It is okay to have debt once in a while as long as you are able to pay for it. If you don’t owe money to anyone, then good because this will be reflected on your high credit rating. If you do, there is always the option debt relief counseling to help you sort things out.

Lastly, what is your payment history? This is somehow connected with your length of credit because this will show if you have been able to make payments on time. If you missed a payment that could be bad but if you have not, then you should have a good credit rating.

All these five factors are equally important. So you can see if you have any problems, get a credit report from one of the three crediting agencies namely Equifax, Experian, and Trans Union.

A copy can be attained from each one at the same time or you can do it at different times of the year. You should obtain a copy annually since the report changes.

The different reports may not always reflect the same thing. When this happens, don’t be alarmed because each one uses a different set of protocols in coming up with those figures.

However, is something is outdated or mistaken, it should be corrected. If you have the supporting documents, write a letter and send this to the credit agency.

If what the report says its true and you are in a lot of trouble, then steps have to be taken to initiate credit repair. You can do this on your own or with the help of a counselor. Sometimes other steps that have to be taken include getting a debt relief loan etc.

Regardless of who is involved, paying off any outstanding debt is the only way to improve your score.

Don’t expect that your loan application will be approved if you credit rating is not very good. Do something about it because credit repair is your only option.

Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages.