Understanding Credit Files to Repair Credit

If you want to start repairing your bad credit, you need to understand how credit works. Your credit score is affected when you have severely delinquent payments which can result in not being able to get approved for loans. Even though there are exceptions, you will always pay higher interest rates if you do get approved for loans. What your credit score is affects how much creditability you have. If your credit score is low, landlords, lenders, or providers will not hesitate in turning you down for a loan.

A credit score is a ‘numerical’ system that establishes a person’s financial stability. Credit scores are generally rated around 300 to 850 points. There are people who have scores higher than 850, but they are extremely rare. Not having credit can be just as damaging as having bad credit. If creditors cannot find your credit on file, they can’t determine if lending you money would be risky or not. That is why establishing good credit at an early age is so important.

If you need to establish credit from scratch, obtaining a credit card is usually the best way to go. Just remember that you will probably need a cosigner when you apply for your very first credit card. If you miss payments on that credit card, the responsibility falls to your co-signer, so be considerate.

Once you establish your credit there are laws that protect it. The three credit bureaus, TransUnion, Equifax, and Experian are coordinated and monitored by the Federal Trade Commission who operates under the Federal Fair Credit Reporting Act (FCRA). The credit bureaus also have to respect and abide by the laws of a specific state. It is important to understand how your credit score can be affected, and how to protect it. For example, the Fair Credit Reporting Act requires credit bureaus to investigate any inconsistent charges on your credit that you report. This protects you, for example, if you are a victim of identity theft.

The act also limits the amount of time that negative accounts can remain on your record. The act also regulates who can see your credit files. Most creditors such as credit card companies and landlords are allowed access to your files, but there are many others that are not allowed access to your files without your written consent.

The amounts of creditors that have access to your account are endless, so remember before you sign any contract that every time your credit is checked your score is lowered. If you are in a situation where you have bad credit, don’t hesitate to request copies of your credit history, and then learn how to read and understand your credit score.

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