How Credit Works
Credit is undeniably important and can influence everything from
your ability to secure a loan to your ability to acquire a job.
In basic terms, your credit history illustrates how well you
have paid your bills and handled credit extended to you in the
past, as well as how well you are handling credit today.
Credit bureaus or credit reference agencies collect information
about you and your paying habits from banks, credit card
companies, lending institutions, and retailers with which you
have had financial dealings. Credit bureaus compile information
about your credit history into something called a credit report.
This credit report contains information about your payment
history for such things as credit card accounts, home rentals,
utilities, automobile loans, and student loans.
When you apply for a loan or credit, the lender, from which
you've requested the funds, purchases a credit report from one
or more of the available credit reference agencies. The lender
then reviews and analyzes the information on your credit report
to decide whether or not to offer you a loan. Typically,
individuals with better credit histories are offered better loan
terms and rates. However, having bad or slow credit does not
resign you to being unable to secure a loan at a good rate.
You'll just have to work a little harder to get the best deal.
It is wise to periodically check your credit report to make
certain the entries listed are correct. Sometimes mistakes are
made that could cause you to be denied credit. If you find
errors on your report, contact the credit agency in question for
details on how to correct the mistakes.
Ways To Repair Bad Credit
Bad credit can cause numerous problems, such as making it
difficult to obtain loans and credit cards, get certain jobs,
and even rent a place to live. Those with bad credit often feel
hopeless and quite sure their negative credit histories will
follow them around forever. However, there are ways to repair
bad credit and make obtaining credit easier.
Start by obtaining a copy of your credit report. Review your
credit report and begin repaying old debts. While paying old
debts will not repair the damage to your credit file, it will
prevent additional negative reports from being filed.
Furthermore, these debts will be reported as paid, helping to
ensure that your credit history does not continue to get worse.
After you've repaid some of your old debts, you want to make
sure new, positive reports are filed. To make this happen,
consider opening a new bank account or applying for a credit
card designed for those with bad credit. If you obtain a new
credit card, be sure to keep the balance low and pay on time.
You don't want to create any new negative reports. You might
even want to consider refinancing, with a home equity loan, to
pay off several accounts simultaneously.
Eventually, negative credit reports do simply go away.
Unfortunately, it takes five to seven years for negative reports
to expire and cease dragging down your credit score. This means
that in addition to repaying old debts and opening new accounts,
you must have the patience to wait for negative items to drop
off. You can, however, take comfort in the fact that the steps
you take to improve your credit report will cause your score to
rise, as you wait for older items to be removed.
By Luke Ashworth http://www.accepted.co.uk
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