This era of credit tightening by banks and other lenders makes it more crucial than ever to have and maintain a good credit report. Otherwise, it can become almost impossible to get a loan, qualify for insurance or even get a good paying job. But what do you do if your credit is already blemished or even severely damaged?
The first step is to understand the credit granting process. With home foreclosure rates growing daily and personal bankruptcies soaring, lenders are taking a closer and more skeptical look at credit histories and reevaluating the implications of credit scores. Historically, one's credit score, that magical 3-digit number generated by credit bureaus with range between 300 and 850, has been the major determinant creditors relied on to decide whether you were approved for credit, how much, and what terms applied to your individual transaction.
This number based on the individual's credit report is still relied upon but with greater scrutiny and increased caution. Because the real basis for credit is the likelihood and the ability to repay, the economy has thrown a new wrinkle into the mix on the ability to repay side of the ledger. People with good credit histories are not finding themselves unemployed and unable to make repayment. This phenomenon makes those who grant credit jittery.
So what lessons should people who have less than perfect credit draw from this new credit climate?
First: A credit score that is in the dumps will either prevent your being able to get a loan or if a loan is approved, it will carry very high interest rates. Perhaps more importantly in this economic environment, a bashed credit score could prevent you from getting the job you desire.
Second: The economy has also resulted in more credit related crimes. So it is a good practice to keep a vigilant eye on your credit bureau files to ensure that they are accurate and "un-fooled around with."
Third: If your credit score has been trashed, whether by your actions or someone else's, start the "fix my credit" work now. The process is one you can do yourself in most instances, but the changes will not appear overnight on your credit reports. So start now even if you are not currently in the market for a loan-based transaction, seeking employment, or insurance.
Credit Inquiries: This part of your record entails documentation of requests made for your credit report as a result of your having applied for credit, real estate rental applications, job applications and even life insurance. Many of the things people don't normally think of as credit-related do have a credit component that result requests being made for the information from the credit bureaus.
Given the high rate of credit reports with errors, you need to be prepared to stage extensive correction action to ensure that your report shows you in the best possible light. Radical surgery may be required to remove outdated and erroneous data from your credit file. So be sure to fully understand your legal rights and how to press them if necessary in order to clean up your information that is maintained by the credit reporting agencies.