A credit score can turn out to be one of the most important numbers in your life, at least your financial life. A credit score is a numerical representation of your creditworthiness. It is based upon all of your past credit history, your current credit status and other factors that are contained on your credit report. You can repair your credit by increasing your credit score.
Within the United States the most commonly used credit scoring system is the FICO score. FICO stands for the Fair Isaac Corporation, which is a publicly held company. There are other entities that also do credit scoring, however, the FICO score is the most used and the best known.
FICO scores are considered to be one of the best predictors of creditworthiness because it only takes into consideration fair and objective measures such as past credit history, how you handle your credit and the current debt load.
The majority of lenders will rely heavily on the credit scores of their applicants. The credit score can determine if you will receive the loan, the interest rate you will be charged and the limits on the credit line. When you take steps to repair your credit and increase your credit score it can be very beneficial for your financial life.
As you begin your attempts to repair your credit, the first step you need to take is to get a credit report from all of the big three credit reporting agencies. In the United States, they are TransUnion, Equifax and Experian. Each company has their own report and their own credit score so it is very important to make sure that you get all three reports. You can get one report for free one time per year or you can also get a tri-merged report with all three reports in one for a fee.
You need to be sure that your income and financial life are in order before you begin to repair your credit. Every current obligation that you have must be paid on time so that the repairs that you make will stick. If it is possible you should pay down all of your debt to less than 20% of your line of credit. Much of your credit score is based upon the amount of credit you have available compared to the amount of credit that you have used. Try to keep all of your balances below the 20% level to achieve the highest credit scores.
The length of your credit history is also very important so use the credit cards that you have had the longest most often. A new credit card is not beneficial and can actually be damaging to your credit score. Also, every time you apply for new credit your score gets dinged by the inquiry so try not to ever apply for credit. Another consideration is that if you happen to cancel a line of credit, your score will go down because you will have less credit available. Therefore do not cancel credit cards or lines of credit but rather just stop using them.
In a rather short period of time, less than 6 months usually, you will have made quite a bit of progress on your credit repair. Make all of your payments on time and use the credit you have very sparingly. Check for any mistakes or discrepancies that you can dispute on your credit report and it will not take long for your credit score to be increased and your credit rating repaired and improved.