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How to Undertake Credit Repair when Credit Score is Low?

By Janet Lacey
Published: Friday, August 17th, 2012

Many people all over the world have become victims of easy credit facilities in the last few decades. Lenders have been quite aggressive on auto loans, home loans, personal loans, and multiple credit cards. Consumers used these credit avenues indiscriminately and invariably ended with credit amount that they found quite difficult to pay off. Defaults on loans had become quite common. The global economic downturn and slow recovery of economy in most countries are adding to the pressure on prompt repayment by consumers. Wage cuts, pink slips, and stopping of many perks have resulted in seriously affecting the income of many of us. Several people have witnessed seizure of their automobiles or foreclosure of their homes because of defaults in repayments of monthly dues. This has led to sharp drops in credit scores or even bankruptcy for many.

However, credit repair is not that much difficult if you know the right methods of improving your credit score. It does not even matter if you have filed for bankruptcy and have availed the Chapter 13 facility. If you get yourself released from Chapter 13 or your credit score is quite low, you could start rebuilding your credit score anytime through several intelligent credit repair processes. However, you should remember that all your financial mismanagement details of the past remain on your credit report for several years. Lenders usually look at credit details of past 3 years or 5 years. If you have been consistently defaulting on loan repayments or have delayed repayments regularly, these misdemeanors would lower your credit score. Lenders would automatically consider you as bad credit and refuse fresh loans.

You should initially make a complete assessment of your total debt balances and the various types of debts that you have availed. When you have prepared a comprehensive list, the first step is to clear debts with high interest rates. This would reduce your monthly average financial burden. The second step is to reduce your overall debt balance slowly through regular payments in your various loan accounts. These two steps would ensure that your credit score improves over a period of time.

The third credit repair step is to pay all monthly dues and monthly bills on or before the due dates. You should ensure that no defaults or delays occur in any single month on even a single payment. This financial discipline would help in enhancing your credit score dramatically.

The fourth step in credit repair is to analyze the period of your various loans. Even if you have defaulted a few times and had made delayed repayments on your loans over a period of 3 to 5 years in the past, it is not a serious negative factor. You would be able to convince any lender that you have been paying your dues promptly on most occasions and the delays were due to factors beyond your individual control.

The final step in credit repair is to clear off personal loans and credit card loans as early as possible. When you practice all the above steps continuously, you would be able to achieve substantial credit repair and attain acceptable credit scores within a reasonable period of time.

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