When it comes to one’s financial future, the credit score happens to play one of the most important roles. There are few things in one’s financial profile that can affect one’s future ability to buy a house or borrow money for a business, education or luxury purchases.
Most people understand the importance of maintaining a good credit score and they even take steps to ensure that those their FICO score is protected. But we’re all human and sometimes in life, certain events can happen which can adversely affect the score. Such events may include foreclosure, repossession, a sickness, a bankruptcy or divorce.
What steps can one take to remedy their credit score in the event that they are overrun by any of these disasters?
1. Order a copy of your credit report.
The law in many states now offers citizens a way to receive a free copy of their credit report very year. You can easily Google the terms “free credit report” and you will definitely come up with a few results. Scrutinize this report for errors. Be careful when ordering this because the companies that offer these free credit report request for your financial information and if you do not read the fine print you can end up signing up for a costly monthly service that they are promoting in the backend.
2. Organize a game plan to despite erroneous items
When you notice items on your report that you believe should not be there you need to write them down. Note the name of the company and /or collection agency handling the case and their contact information.
3. Contacting the creditors
Be careful when attempting to contact the collectors for the outstanding or charged off. In some states, when you surface and declare that you want to pay an old debt you may invite a lawsuit. In some the collectors may not be very friendly. Before you pay the debt, get the collectors to commit that they will take the item off your credit report. Also try to negotiate a lower settlement amount. Since the collectors have already purchased this debt from the original collector, they will have no problem agreeing to a lower payment amount.
4. Acquire new credit
Contrary to popular belief having no debt does not necessarily improve your credit score. The FICO calculator awards high ratings to someone that can demonstrate responsibility in debt management. Having a healthy debt ratio is what the credit bureaus look for. Having no debt can sometimes have the same consequences as having bad credit.
The best way to acquire new credit is to apply for two or three credit cards. Some people especially those with bad credit or no credit can experience problems getting approved for a unsecured credit cards so the best route is to apply for a secured credit card. When applying for a secure credit card, be very cautious. Read the fine print and do not fall for the first offer. The most recommended place to apply for a secured credit card is from a credit union.