CREDIT REPAIR

Hey, now-a-day, it is difficult to keep in the black financially, especially when we are young, starting out in life with almost nothing and work our way up.  Today is also very easy to stack up little debts that can bite us in the bottom if we don't pay close attention to them.  

A couple of quick ways to quickly remedy debts are to either win the huge lottery jackpot or to inherit a substantial sum of money... But we know that is only wishful and that it won't help us know.

Credit score in the United States. Credit score in the United States is a number representing the creditworthiness of a person,  and the likelihood that person will pay his or her debts. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers. (Source: WIkipedia)

There are three major credit bureaus that lenders use to find credit information for their applicants:  Equifax, Meridian, and TransUnion.  The bureaus gather all credit information about every consumer who has used any type of loans with the participation of lenders who report their customers' performance to the bureaus, whom, in turn, build individual consumer credit profile and grade them from 850 (perfect score) downwards (the lowest is 300).

The average Americans score between 600 - 720

Often times, it is the little debts that can put dents on credit scores because people have so many credit cards for each specific merchant and often they forget to pay one of them which will immediately lower the score. That is known as "Performance". Another way to reduce your score is by analyzing the amount of cards one owns.  Each card has a "borrowing value", adding the total of borrowing value of each card can send a warning message.  I.e. say that the total of borrowing value is $40,000 and one's income is $60-70,000, that sends a red flag because of the "tempting borrowing" potential.  When each card has some charges on each one, even if charges are minimal, it immediately lowers your score, unless you manage to pay off each card by the end of each billing cycle.  Also, when you start to make only minimum payments on each card, that sends another red flag indicating that you are beginning to feel the burden of your accumulated debts - that will lower your score even more. Then, if you continue to charge even more on each card but pay only the minimum  monthly charge - that will lower your score as well. That is called in lender/borrower terms "Debt to Income Ratio".  In other words, it is the formula used to calculate one's ability to pay their debts according to one's monthly or annual income.

To repair your credit, if in need,  or at least make it better, is to pay off as many little credit cards as possible (department stores, gas cards, internet accounts, etc.), then,  cancel them.  Keep only 1 or 2 major cards such as Visa and MC, and always pay your minimum payments, or more, or in full, on time.  

Your credit score in real estate (or buying a large item, like a car) can save you lots of money on  loan interest rates.  The higher your score, lenders will reward you with lower interest rates, and vice-versa.