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Debt-ridden Families Encouraged to Have a More Positive Outlook

By Sally Maison
Published: Tuesday, November 17th, 2009

Majority of American families fell during tough economic times but specialists advise them to remain positive since they can easily get their finances back on track.

Debt-ridden Families Encouraged to Have a More Positive OutlookAccording to experts, the most important way to rebuild a credit score is by paying bills on time. Lenders typically report a late payment if it is 30 days past due so consumers are advised not to worry if they are week late on their bills. More importantly, consumers are advised not to panic when if they a hard time meeting bills last year, when the economy was the worst America has seen in decades. Financial author Edie Driskill assures consumers that late payments are removed from a credit report after 36 months, adding that a consumer cannot ruin his credit rating for life.

Specialists say there are many ways to improve a rating but it all starts by understanding credit scores, as they remind consumers there a different rating models used by lenders. Consumers are told about the different rating scale followed by each model, with the model developed by Fair Isaac and Company, FICO08, cited as the most widely used by lenders.

The FICO score ranges from 300 to 850, with the bigger number denoting better performance. But experts note some lenders which use their own rating model through their own set of criteria. Additionally, FICO has other models as well which experts advise consumers to know if they want to fully understand how they are rated. Specialists say a clear understanding of how each model works helps a consumer improve his credit score faster.

Experts tell consumers, however, that their credit score is not the only thing that matters in getting the best loan deals. Lenders also look into employment and residential history in determining the creditworthiness of a client. They explained that moving a lot or changing employers numerous times without seeing an increase in wages is viewed by creditors as a sign of instability.

Banks also look at other creditors, such as finance companies, unfavorably so consumers must stay away from them, experts suggest. Going to finance firms and subprime lenders implies greater likelihood of defaulting on a loan.

Instead of relying on credit too much, consumers are advised to keep plenty of cash on hand and to limit plastic spending. But limiting use of credit cards does not imply cutting old ones or applying for new ones offering better deals, specialists warn. Keeping old plastics which have excellent payment history can be very helpful.

Experts guarantee consumers that they can get their family out of financial trouble if they rebuild their credit score one point at a time.

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