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How To Repair Your Bad Credit History

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John Matkowsky

Bad Credit - What is it and how to Repair it.

What determines bad credit? Your credit score! Credit scoring is a system creditors use to help determine whether to give you credit. Information about your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report.

Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. This credit score helps predict how likely it is that you will repay a loan and make the payments when due.

The score is the 'grade' with which financial institutions use to judge the risk they take when extending you credit. The higher the FICO score, the better. FICO scores are based on 22 pieces of data collected by the three major credit bureaus. The lowest possible score is 300, while the highest is 850.

Under the Equal Credit Opportunity Act, a credit scoring system may not use certain characteristics like -- race, sex, marital status, national origin, or religion -- as factors. In short, it is likely that your score will be affected negatively if :

· you have paid bills late

· the amount you owe is close to your credit limit

· you have an insufficient credit history but that can be offset by other factors, such as timely payments and low balances

· you have applied for too many new accounts recently

Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. Scorers may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home

If you are denied credit, the Equal Credit Opportunity Act requires that the creditor gives you a notice that tells you the specific reasons your application was rejected. The creditor also needs to inform you that you have the right to learn the reasons if you ask within 60 days. Indefinite and vague reasons for denial are illegal, so ask the creditor to be specific.

Acceptable reasons include :

· Your income was low

· You haven't been employed long enough

Unacceptable reasons include :

· You didn't meet the creditors minimum standards

· You didn't receive enough points on their credit scoring system.

If you have been denied credit because of information from a credit report, the Fair Credit Reporting Act requires the creditor to give you the name, address and phone number of the credit reporting agency that supplied the information. You should contact that agency to find out what your report said.

If you've been denied credit, or didn't get the rate or terms you expected, then ask the creditor if a credit scoring system was used, what factors were used in that system, and what is the best way to improve your application.

If you get credit, ask the creditor whether you are getting the best rate and terms available and, if not, why not.

To smash (repair) your bad credit go to Bad-Creditrepairer.com

John Matkowsky has two websites - Bad-CreditRepairer.com and Affiliateprogram-websitebuilder.com which are dedicated to
helping people on the web by providing information on credit repair,
affiliate programs and website building
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