Bad credit destructing my financial status

Hi Ian

Welcome to the forums.

Based on the FICO scoring system, a loan will have higher rates of interests if the scores are less and vice-versa. So, you will have to increase your credit scores in order to get lower rates of interest.

You will see an increase in your scores after you are successful in repairing your bad credit. Most of financial institutions will extensively research on the following areas of your credit report.

• Your payment history is analyzed.
  
  
• The amount that you owe is taken into consideration.
  
  
• Length of your credit history is determined.
  
  
• They look out for the types of credit that you have used so far.
  
  
• They will look into your new credit.
  

Please use the following tips to improve your credit score.

Check for incorrect entries - It is mandatory to check your credit report for any mistakes from all the three credit reporting agencies. You can review your report for at least once in a year as well as several months before you apply for a loan.

Timely payments It will be considered a very good practice if you always pay your bills on time. Your prompt payments will put you in a much comfortable position before you apply for a loan. This point is emphasized because a late or missed payment just before applying for a loan lowers the credit score and has worse impact than a missed payment five years ago.

Bring credit balance to the minimum - It is always beneficial to reduce the credit card balances as much as possible. The FICO scores get affected due to how much money you owe on some cards relative to your total credit limit. Credit scores are seen improving if the balances are kept below 25% of the credit card limit.

Don't linger your payments It is suggested not to increase the ratio by closing an account and transferring the remaining balance to another account since the ratio of the credit card balance is linked to the credit limit. Doing this will lower the credit score which should not be generally done while you are on your way to increase your credit score.

Unused accounts to be kept active - While you are applying for a loan, it is suggested not to close any unused account. At the same time, it is suggested not to open a new account also during that time. It is said because if you are having a short credit history or less number of accounts, the credit score gets lowered when a new account is opened as there is no proven track record of it.

Once you have repaired all the bad credit, you are likely to see an increase in your scores. It will become easier to negotiate with your creditors for a fair deal.

Regards
Roxette