By
Claire Bowes
What is
Credit?
Credit means
that you are using someone else's money to pay for
things. It also means that you are making a promise
to repay the money to the person or company that
loaned you the money.
Whenever a
person applies for a loan, mortgage, a credit card or
for any other purpose for which he needs to borrow
funds from a lending agency, the agency will check
the financial credit-worthiness of the person and
based upon its assessment of the financial risk
involved in the deal, the agency will decide upon the
terms and conditions of granting credit. A positive
assessment necessitates a sound financial background
and a credit history with no bad remarks.
What is Credit
Repair?
'Credit
repair' is a process in which consumers with
unfavorable credit histories attempt to re-establish
their credit-worthiness. The process usually involves
procuring a credit report from the rating agencies
and then taking appropriate steps to address any
apparent issues such as errors, omissions,
misinformation, misreporting or misinterpretation. A
consumer can then formally dispute those errors or
issues which unjustly distort their financial
healthiness and credit-worthiness. Various laws and
regulations designed to ensure legal and fair
undertaking of the credit repair process can then be
utilized to formally and legally start the credit
repair process.
Consumers
are entitled to a copy of their credit report
legally, if they have been denied a credit card or
loan and if the information provided on the report is
inaccurate, an investigation relating to true facts
is necessary for a credit repair.
Why
Repair Credit?
A consumer's
credit record significantly influences his future
purchasing power and his eligibility of availing any
credit facilities in the future. A good rating, or
score, can insure a low interest rate and loans for
longer term for various purposes like credit card
balances, car or home loans. A poor rating makes a
consumer vulnerable to finance companies charging
exorbitant interest rates and imposing various
unnecessary repayment and loan terms. Considering the
stakes and the consequences involved, it is
absolutely imperative for consumers to understand the
importance of repairing their bad or low credit
ratings.
The Safe
and Legitimate Way to Repair Credit
Credit
repair can only be achieved through
financial discipline and hard work. Any easy way out
of a poor credit history is undoubtedly tempting, but
it may lead to further financial difficulties in the
future.
If a poor
credit history is due to circumstances beyond a
consumer's control, and they are able to somewhat
make amends to their credit records after that time,
then a creditor can be requested to upgrade credit
rating because of a sense of customer loyalty.
Most creditors
don't trust the customers defaulting on their debts,
so it may be very difficult to obtain new credit. But
once a person is able to demonstrate continuing
income stability and prompt payment patterns, his
situation can improve in a period of two to three
years. This way, even in the case of bankruptcy, a
consumer is likely to be offered charge and credit
cards within a year or two if maintaining a steady
income.
What is most
important is evaluating the financial situation. If
one finds that they are unable to make at least the
minimum payment on outstanding accounts, a contact
should be made with the creditors. Many creditors
will appreciate the willingness to pay and are most
likely to help set up plans for repayment. Avoid
making promises which cannot be kept as a small
payment is preferable to a large payment that never
arrives. Sometimes a small contact can be enough to
reduce payments and forestall more severe measures.
The next
step is consulting a credit counseling agency. These
organizations are staffed with trained individuals
experienced in the credit field. A distinction needs
to be made between these and the commercial
"credit repair" companies who claim that,
for a fee, they will undertake credit repair.
No one can
legally remove accurate and timely negative
information from a credit report. But the law does
allow one to request a reinvestigation of information
in their file that may be inaccurate or incomplete.
There is no charge for this. Everything a credit
repair clinic will do can be done by a consumer
themselves at little or no cost.
The most
important factor in credit repair is
recognizing the legitimate and viable options
available, recognizing what the scams are, and
differentiating between the two. A poor credit
history can make it difficult to obtain additional
lines of credit making consumers fall prey to many
unethical programs that target consumers with less-
than-perfect credit. There are no quick fixes in
credit repair. Common sense tells you that a third
party doesn't know your credit history better than
you. Through contacting credit bureaus, making your
own corrections, consolidating your debts and
budgeting, you can improve your own score. You don't
need to pay someone to fix it for you. It's better to
apply that money towards discharging your debt.
Summary
Understanding
the basics of credit repair and knowing what exactly
is needed in order to rebuild your credit history
goes a long way to getting it resolved. However, you
must be disciplined, find the right credit repair
solution for you and not be tempted to fall back into
debt.
__________________
About
the author:
Claire
Bowes is a successful freelance writer and owner of http://www.uk-secured-loans-centre.co.uk where you will find
further advice and information on all aspects of
secured loans for debt consolidation, car loans and
home improvement loans.
Free financial help
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