Your Credit Rating Explained
The majority of us now have a credit record but not many people know their rating or what they should if it causes problems. It is extremely important to make sure that your rating is correct, especially if you are thinking of applying for a loan. Whichever company you approach will not supply you with a quotation until your credit record has been checked; if they then refuse your request then you won’t be able to do anything about it even if you don’t see any reason for the rejection. The best idea is to examine your rating whilst you still have time to get any mistakes corrected, so that you can begin your loan search with the knowledge that the facts on which your rating is based are correct. Firstly, you need to contact a credit record agency to get a copy of your record. There are three companies- Equifax, Experian or Checkmyfile- which can supply this information either by post or on-line. A one-off check by post, which will provide the information you need, costs around £2 whilst a longer term check or one that is available quicker costs more and is available on-line.
The most important thing on your credit report is your score; this figure specifies your credit worthiness. Equifax have been very helpful in giving details of their credit record rundown which details their rating for you relative to your score -
0 to 49 is rated poor and shows potentially severe problems in getting credit.
50 to 69 is rated fair which shows that some difficulty can be expected.
70 to 89 is rated good, with a good opportunity of credit being granted.
90 to 100 is rated excellent. With this score you should not expect any problems.
If you find yourself in the poor sector, the reason for your rating should be obvious to you – perhaps you may have had a County Court Judgement against you or you may have taken an IVA (Individual Voluntary Arrangement) or you may have been declared bankrupt. If you are still in the same situation then it will be very difficult to improve your rating but if, on the other hand, you have been able to demonstrate that this was a temporary failing and that you can now manage your money sensibly, then you should attempt to get your rating updated. There are several actions which you should take and the increase in your score may not register for up to 12 months. One easy way to improve your rating is to ensure that you are on the electoral role. This probably confirms some stability. Check for straightforward mistakes and get them corrected. Tidy up the record by getting rid of previous accounts which are no longer needed. Make sure that any new enquiry you make is requested as a quotation search because it will not influence your rating, whereas a credit search will, especially if it is rejected.
Finally, to reconstruct your record, you need to demonstrate that you are a responsible borrower; one way to do this is by taking out a high interest rate credit card and using it every month to purchase just a few small items. Then make sure you pay off all of the debt within the interest free period. This will demonstrate that you are able to manage debt responsibly by clearing any outstanding balance on time. If you want to maintain your improved rating then you must keep this record as a reliable payer when you have secured the desired loan.
Sheila Challiner
http://www.articlesbase.com/finance-articles/your-credit-rating-explained-752406.html
Please explain to me what a debt consolidation is. Is is bad for your credit rating? Why doesn’t everyone?
apply for it? Does it take a certain about of debt to qualify. Please give me the low down. I have excellent credit but just a large amount of debt. I may consider this as an option.
Why would you want to roll all your debts into one, then take years to pay them off?
DON’T do debt consolidation. It just moves your debt around. It rolls high interest items AND LOW interest items into the same loan at a mid-range interest rate. It might lower your monthly payments, but that means it will take even LONGER to get out of debt. It also frees up all your lines of credit so you can simply run them up again! Finally, you often have to pay a loan origination fee.
Call all of them and work out a payment plan and try to get your interest lowered or stopped.
Then, make the minimum payments on every one of them. On the lowest dollar value, put all your extra effort toward paying it off. Once it is paid off, then roll that extra money to the next largest balance. Continue this snowball until all your debts are paid off.
You probably need to cut your expenses back to the bare minimum. Get rid of cable, cell phones, internet, etc. Lower your electric bill, gas bill, water bill, etc. Don’t eat at a restaurant until your debts are under control. Take a sandwich for lunch. Cancel the gym membership.
Try to increase your income by getting a second job. If you have a car with payments, get rid of it, and buy a good dependable used car for CASH.
Go to the library and get "The Total Money Makeover". Read it and follow it carefully.
Go check out Dave’s website as well. Yahoo is blocking his site again, so take out the spaces in the following:
www. Dave ramsey. com
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Debt consolidation is just that merging all debt into one loan, it is best not to let people just run your credit report as each time it is ran, it lowers your score. Talk to banks, credit unions, or a good credit card company. Take the lowest rate, after consolidating debt keep paying higher amount if you are paying it now keep paying it for a while to lower the PRINCIPLE not interest, if you can use real estate it is the best tax write off. For example I was paying out over $4,500 a month, after I consolidated my debt I now pay about $1,200 a month and still pay alot extra, in four month I have lowered the principle about $1,500, YES the amount looks large but the interest rates is now around 8% vs the credit cards average of 18% to 20%, cars and motorcycle at 10%, and house was a ARM (DON’T GET) went to 16% from 5%. Good Luck!
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If you have numerous debts all at different rates, some rather high a debt consolidation loan can be a great idea. You may be able to get a lower rate and have only one payment. There are a couple of problems however. In light of the recent sub-prime mess the people who need them most are least likely to qualify for a consolidation loan at a decent rate. Another problem is lack of discipline. Many people who qualify for such a loan once they see their credit cards are paid off go back into their old bad habits and crank up the cards again and now have both the credit card debt and the new consolidation loan.
You say you have great credit but a large amount of debt. Your credit may not be as good as you think.
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Debt consoidation sounds good, but it is usually just another mistake.
It takes what you owe and spreads it out over amny year. You end up paying mre in interest (which is why they are all pushing it – it is profitable for THEM).
Many people who consolidate, end up running up large amounts of debt again on credit cards – it is a vicious circle. There is no incentive to stop unning up debt until it is too late.
Pay off your cards, use the "snow ball " theory. Starting with the lowest balance or highest interest rate first. Then once it is paid, take that payment, plus what ever you are paying on the next one, and so on and so on.
Working this way will maintain or imporve your credit score, and help you to learn to focus on debts and get them paid off. Don’t add any additional debt – at least until they are all paid off. Better yet – get rid of all those cards and close those accounts!
Good Luck
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If you have a home you should concider refinancing and paying off your debt, and actually you can use the interest on your credit card to payoff your home faster, so you’ll use your debt on your favor might sound tricky but is actual and real, not many banks advertise this process because you’ll payoff faster.
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