| Sure, the economy may be flailing, but learning to | | | | your report are less than favorable, there are ways to |
| preserve and maintain your creditworthiness and | | | | improve your credit score further. |
| improve your credit score is still extremely important. If | | | | How Lenders Judge Your Ability to Re-pay a Loan |
| you've spent any time watching or reading the news, | | | | If you receive your credit report and there a few items |
| you're aware that bad mortgages obtained with faulty | | | | on it that you are less than happy with, you do have |
| credit lending practices and other flawed methods | | | | some recourse in the situation. Most of all, however, do |
| have sent the economy into a tailspin. | | | | not pay someone to help you out of your mess. A |
| Creditworthiness is defined as being financially | | | | credit counseling agency will offer advice on how to |
| established to the point where lending credit is deemed | | | | improve your credit score and boost your |
| a sound judgment by a bank or financial institution. | | | | creditworthiness but will charge you extensively for this |
| Your credit score determines many things - if you're | | | | information. Basically, working to improve your credit |
| responsible enough to re-pay a loan on time and not | | | | score and fostering creditworthiness is a three step |
| default as well as your experience handling lines of | | | | process: 1. Request and review your credit report from |
| credit and interest rates. In the eyes of a financial | | | | multiple agencies; 2. Pay in full your overdue accounts; |
| institution, your creditworthiness will help you acquire a | | | | and 3. Open new lines of credit, starting slowly with |
| loan for a car, house, or other large asset much easier. | | | | either a pre-paid or unsecured credit card. |
| The Dynamics: Maintain and Improve Your Credit | | | | When lenders or creditors pull up your credit report, |
| Score | | | | they apply the word 'risk' to the situation. If someone |
| Developed as a mortgage tool in the mid 1990s (1), | | | | with a low credit score is looking for a home loan, a |
| your credit, or FICO (R), score essentially determines | | | | lender will likely view this individual as high risk and |
| what, if any, loans you are eligible for and the amount | | | | perhaps deem him unable to re-pay the loan in a timely |
| of interest you'll be required to pay. As your score | | | | or even responsible manner. However, lenders will also |
| decreases, the rate of interest increases. Credit | | | | consider your current income, occupation, and the |
| companies often say that timely payments are | | | | amount of credit you need. |
| perhaps the most important factor to foster and | | | | If you're reviewing your credit report yourself, the |
| continually improve a credit score that is high or within | | | | following scale will come in handy: |
| an acceptable range. | | | | - Below 550 to 599: Your credit problems need to be |
| Your credit score is broken down into many factors: | | | | addressed. Lenders and/or creditors consider these |
| 35% is your payment history; 30% is the current | | | | credit scores to be terrible. |
| amount you owe; 15% is the time you've had your | | | | - 600 to 649: Within this range, you will have trouble |
| credit lines open and active; 10% comprises new credit | | | | finding loan approvals and you may receive poor |
| lines; and the remaining 10% is the type of credit you | | | | interest rates. Lenders will consider you to be high risk. |
| use (2). If you've fallen behind on payments and the | | | | - 650 to 699: While close to 700 is considered healthy, |
| amount you owe is increasing, your creditworthiness (in | | | | as you get closer to 650, the tables begin to turn. A |
| the eyes of the lending institutions) may be floundering. | | | | score of 650 is not great but is considered average. |
| Send Away for Your Credit Report - for Free! | | | | You need to think about a course of action to improve |
| Are you interested in seeing what's on your credit | | | | your credit score. |
| report and determine your creditworthiness for | | | | - 700 to 750: Anything between these two scores is |
| yourself? It's easy to get this information. Simply write | | | | considered financially stable and you will receive the |
| a letter stating that you wish to receive your credit | | | | best interest rates. |
| report from the three following credit reporting | | | | - 751 to 850: While 850 is the highest on the FICO |
| agencies, and you'll be mailed your report free of | | | | scale, the high 700s are ideal and are considered the |
| charge when requests are made once within each | | | | least risky for lenders. Your creditworthiness is |
| year. Please note that there is an additional fee to | | | | considered quite high. |
| obtain your credit score from the credit reporting | | | | Creditworthiness Means Heightened Diligence |
| agencies. | | | | Poor credit can really come back to haunt you. That's |
| - Experian: receive your credit report free of charge | | | | why diligence in making your payments on time and |
| by visiting the Experian website; requesting a copy by | | | | regularly checking your report to improve your credit |
| writing to P.O. Box 2002, Allen, TX 75013; or by calling | | | | score or maintain your creditworthiness are two of the |
| 1-888-397-3742. | | | | most important things you can do to ensure you |
| - TransUnion: request a copy of your credit report by | | | | remain in balance financially. |
| writing to P.O. Box 1000, Chester, PA 19022 or view | | | | Ultimately, your credit determines what loans you are |
| your report online with a free trial subscription. You can | | | | eligible for, and if you have less than spectacular credit, |
| also call the credit agency at 1-800-888-4213. | | | | you may have a hard time securing a loan for a car or |
| - Equifax: write a letter of request to P.O. Box 740241, | | | | a home. And if you do receive that loan, the interest |
| Atlanta, GA 30374 or call 1-800-685-1111 for more | | | | rates will kill you in the long run. A little diligence goes a |
| information. You can also view your credit report online | | | | long way - work to improve your credit score and |
| with a free 30-day trial (3). | | | | lenders and/or creditors will help you embark on your |
| Knowing the dynamics of and working proactively to | | | | path to financial health and stability. |
| improve your credit score will help you boost your | | | | Sources |
| creditworthiness and perhaps even protect you from | | | | 1. Privacyrights.org |
| identity theft or credit fraud. And, if the numbers on | | | | 2. 3. Fightidentitytheft. |