There is an inextricable link between a person's credit rating and the probability of them defaulting on the agreement. Repairing credit history is in that person's best interests because a better credit score increases the likelihood of approval. It is also a lot cheaper to borrow money. The timeframe to repair credit rating varies depending on the severity of the transgression, with chapter 7 bankruptcy causing the largest fall. Minor credit indiscretions, such as a late payment, can be recovered from relatively quickly.
Repairing Credit History Leads to Lower Borrowing Costs
- An individual with a $200,000 mortgage and a score of 620-639 should expect to pay an interest rate of 6.018% and a monthly payment of $1202.
- Should that person have an excellent credit score of 760 to 850, the APR would be 4.429% and the monthly payment just $1004.
* The above figures are provided by myFICO on June 18, 2010.
Get a Better Credit Report by Fixing Errors
The information held by credit reference agencies isn't always as accurate as might be anticipated. Every American should check for errors as creditors are unable to tell the difference between bad credit and poor quality data. The onus is firmly on the individual to get a free copy of their report from Experian, Equifax and TransUnion, check for mistakes and get any issues corrected. The Fair and Accurate Credit Transactions Act entitles every U.S. citizen to a free credit report every 12 months.
Repairing Credit History by Paying Back Debt Punctually
Although fixing errors is the quickest way to boost credit scores, the only way to achieve a better rating following a default is to pay back bills and debts on-time. A credit rating doesn't just stand still, it moves up and down in-line with how reliably repayments are managed and how much debt that person has relative to his disposable income. Making a series of timely repayments on both installment and revolving debt will lead to a better credit score in the future.
A Credit Card for Poor Credit to Repair Credit Rating
After eliminating debt with a debt relief program, such as a debt settlement program, there may no longer be a form of revolving credit still active. Even people with an adverse credit history can still get approval for a guaranteed credit card or a secured credit card. As with all credit and store cards, avoid using more than 30% of the maximum allocated credit limit in a single month. Credit reference agencies look closely at credit utilization so using just a small percentage of this limit is highly beneficial.
Building a Credit Score More Quickly
The only way to get a higher credit score quickly is either by repairing errors and redistributing revolving debt. Repairing credit history is achievable, but it takes time to achieve. However, each timely debt repayment will lead to a slightly higher credit score. It is possible to boost credit scores either personally or with the assistance of a credit repair attorney. A professional attorney may be especially helpful for some of the more serious problems, such as identity theft.
Sources
"Improving your FICO credit score." myFICO.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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