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Before you take out a home loan or make any
major purchase, you should be aware that any
prospective lender will want to take a look at
your credit report. Your credit report is a
record of all of your past financial dealings,
and any loans, credit cards, judgements,
bankruptcies or other major financial
transactions are listed there. Along with your
credit report will come your credit score, which
is a three digit number between 300 and 850 that
represents a distillation of all of the above.
That score represents your entire financial
life, and your ability to obtain financing for
any major purchase depends on having a good one.
What if you don't have a good record? Should you
go to one of those companies that promise to
repair your credit? What you should do is repair
it yourself.
The idea of credit repair is a myth. There is
no magic solution to fixing problem credit, and
any company that promises to do so is only
interested in your cash. Your credit report and
score are maintained by three separate credit
bureaus that keep pretty accurate accounts of
all financial dealings done under your Social
Security number. There is no way to quickly
"fix" a faulty credit report. You can, however,
fix it yourself and fix it for free. It just
takes time.
The way to repair your credit record is to
start paying your bills on time and paying off
your debt. More than one third of your credit
score is determined by your past ability to pay
bills and to pay them on time. Start doing so
now. It may take a year or two, but steadily
paying your bills without making any late
payments goes a long way towards repairing a
credit score. Another third of your score is
determined by your ratio of debt to available
credit. If your credit cards are maxed out, you
need to pay off or pay down your balances. It's
tough to obtain a loan when you are already in
debt to the gills.
Stop using your credit cards, if possible.
Don't cancel them; just stop using them,
particularly if you have a balance to pay off.
You want to reduce your debt. Pay cash when you
can. And check your credit report for problems.
You can obtain a copy for free from the free
credit report Website.
Repairing your credit record takes time and
discipline. There is no quick solution other
than paying your bills, paying them on time, and
waiting for the damage to heal. After that, you
should be in good shape to obtain your home or
car of your dreams.
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