There was a time not too long ago where lending decisions were based on a human being looking at every application and taking all facts into consideration. Unfortunately, most lending decisions are based either completely or in part on your credit score. Even health insurance rates are influenced by your credit score. However, there are also several private lenders that can provide loans even with bad credit like DrCredit.
Banks have found scores to be highly accurate in predicting default rates so employers, insurance companies and other entities now use credit scores in part of their decision making process. So what is your credit score and how do you improve it? The truth is, no matter who says otherwise, no one knows for sure what precisely goes into a credit score and on top of that, the calculation keeps changing. The concept was developed by a company Called Fair Isaacs. It is also called a Beacon score. The secret for this algorithm is more closely guarded than Colonel Sanders seven herbs and spices.
We do know from experience what influences a score up and down. Many companies and individuals have tried to break this code but your score is influence by the following: Payment history, number of open accounts, percentage of credit used versus available, delinquencies, charge-offs, judgments and tax liens. Some experts say to keep your credit cards at 30% of their maximum, not pay them off completely. I think you should do both. Installment loans for some reason carry a lot of weight as well.
So what do you do if your credit is already damaged? All credit card companies want you to pay them and have signed on with Consumer Credit Counseling services all over the country. In most cases the CCC as they are known will negotiate and lower your interest rate, collect one payment from you and distributed it among all the credit card companies. The interest rate is either zero or half of what it was. HOWEVER these credit cards will still report you delinquent – a fact the CCC’s seem to skip over. This method is not a good way to rebuild your credit, but may in fact make it worse.
You can dispute anything that you believe is inaccurate on all three of your reports, Transunion, Equifax, and Experian. You can even demand that the creditor provide evidence that what they are reporting is accurate. Once you have “cleaned up” your credit file it is time to rebuild. Whatever information that shows on your report most recently is going to have more influence than older credit.
You can obtain a secured credit card by using a savings account to back the card but the credit line and payments will be reported. Almost anyone can get a secured credit card. Some car dealers who finance in-house also report to the credit bureaus. It is never too late to start rebuilding your credit. Paying someone to do it is an option but they are simply going to keep disputing items just like you could to try and have them removed.