Credit score is important for every one and improving it very vital to get a better loan deals like auto loans and mortgage offers.People get advice basing on the inference of some one.Some times this leads to wrong assessment of the truth.In the previous posts we had a discussion about a misconception that closing a account improve credit score. This is not true and shall understand the concept properly. Misconceptions and real truths about raising the fico score like checking accounts,not using the available credit improve the three digit score.
Further misconceptions are
Pay interest and get better credit score :
Another wrong idea is you have to carry forward the debit that you have by missing the monthly bills.This lead to the payment of interest rate and gives good impression for the lenders.Though lenders get extra money in the name of interest,they feel insecure.Your credibility about paying back the commitments comes under scanner.
You need to have both revolving accounts like credit cards and installment accounts like a mortgage. The other way is if you are looking for improvement of the score.Here you can take a small loan,pay it back every month on time and your three digit number will be improved over the time.But you need to shell out the interest money.This can establish your history of payments and show positive impact.
Adding 100 word statement improve the score when dispute is unsolved:
At times it happens that you are billed for a service that is not given to you.Like a phone bill or a club membership.You have asked them to disconnect and remove,still they continue billing to you.The problem is you can dispute them and ask for verification.At the same time you can not stop paying the bill issued.This lead to the information passed to the credit reporting agency.In turn affect your three digit score.So even if you dispute,pay the bill and ask for refund.This can be done at least when the billing amount is small.This shall not be understand that you are advised to loose your valuable money.This is to tell you that do not loose your valuable credit score.
You can not say that I will add a 100 word statement and come out of the problem.Only human beings can read it and in most of the cases,weather you get a loan approval or not is decided by the standard computer software.When your score is low it automatically rejects your application and you have no chance to explain about your problem to the machine.
FICO score is not adjusted basing on your hundred word statement that you have added.This only help you to explain to some one when you meet the lender directly about the wrong thing in the report.That is why pay the small disputed bill on time and sue the lender or service provider in small claims court.
If you have bought some thing with credit card and it is not working then you can use the companies dispute resolution process.They can help you in dealing the business person who has given a bad service.
Credit Counseling reduce your FICO Score
When you run into financial trouble,you can go for a credit counseling and it will be reported in the report.But it is not a negative one like bankruptcy.According the present system,this treated as a neutral one not either positiver or negative by the agency.They can negotiate a lower interest rate for and and put all your debits into one monthly installment.This reduce your burden and helps in making your financial life better.They are not going to do any magic and reduce your total principle to be paid and they can try reducing the debit by negotiating with the lenders.They cart plans for your monthly payments so that you need not file a bankruptcy.
Any way you have chosen as you have no other option and suffer the pain it could give.Some lenders may report as your payment after debit management plan as late since you are not paying as promised.You have no option other than baring this.Though it is a negative factor for the lenders in the report,it will be removed from the report,once you pay back the money as per the plan.But do remember it is much better than bankruptcy as it remains in the report for a long period of minimum seven years.
This you shall choose only when you are able to pay only minimum of the total debit that you had.
(Picture source : http://www.flickr.com/photos/39299636@N00/2553694525/)
File Bankruptcy,You will never get credit once again
It is last option that you have and definitely affect your score seriously.This report stay back with black mark for a minimum of seven years.It does not mean that you are in a list that you will never get back the loan or a credit.
You need to recover your score and make your report further good after filing the bankruptcy.Handling the credit responsibly further and paying the bills on time make it better and recover your score.Having less balances to pay for the settled amounts make it better.
You need to look for specific lenders who offer the loans to you after filing the bankruptcy.There will be non main stream lenders offer auto loans at higher interest rate for you.You need to pay that extra money and get the deal.You can establish the new history by paying the bills on time.
You need to have more patience to find some one who is ready to offer a loan and give second chance.
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