It is incredible how a bad credit history can cause you to literally pay thousands of dollars through higher interest rates and fees. If you’re looking to repair a bad credit score or simply just improve your credit score so you can get approved for financing an upcoming purchase, there is no question that you should!
As a result of the mortgage crisis and subsequent banking crisis to get approved for new lines of credit today is very difficult. From experts in banking and lending we have learned that you must have a credit score of 700 to qualify for any purchase. Some of you may be asking “is it really worth all the trouble to try and raise my credit score a mere 30 points or give it a minimal bump so I can get the lowest interest rate?”
In short yes, especially if you are shopping for a mortgage, car loan, or any sizable purchase. Let’s look at a example to get a better understanding of how much bad credit is really going to cost you in real dollars and cents. With a home loan for 30 years on a house worth $100,000 if you have a low credit score but are still able to qualify for approval today, and you are even able to secure a reasonable interest rate of 8%.
When compared to an excellent credit score at a low interest rate of 6%, the individual paying 8% interest will pay roughly an extra $25,000 for the same home! Granted you will have the next 30 years to pay this extra $25,000 but wouldn’t you rather use that money to purchase a car or pay for a child’s education? The truth is some individuals are paying mortgage rates as high as 12.5%, that is an extra $50,000 they are paying on the same home using our earlier example!
How Can I Repair My Credit
When your credit score gets calculated there are couple very important pieces of information used. Your payment history and your available credit to debt ratio are the two largest and most important pieces to your credit score.
Your Payment History
Your payment history is simply your credit report. Do you have a lot of outstanding unpaid debts such as: credit card charge-offs, unpaid medical bills, judgements, debt collections, and more. If your credit report has any of these items is going to be very difficult to ever achieve an excellent credit score.
The reason is because no matter how many other steps you followed to raise your credit score these negative items are always going to indicate that lending money to you is a risky for a creditor. One of the most effective steps to repairing credit is by removing and challenging the accuracy of the negative items on your credit report. You are entitled to do this by federal law using the credit report dispute process.
This right is given to you under the Fair Credit Reporting Act a piece of legislation passed by Congress. This law enables you and every consumer to file a dispute with the credit bureaus about any information on your credit report. If it were not for the Fair Credit Reporting Act then victims of identity theft would be stuck with incorrect and damaging information on their credit report with no means of fixing this information.
Furthermore many debt collectors violate federal law and will be illegally report derogatory information about you to the credit bureaus, past the legal seven year statute of limitations. Therefore it is important for you to not only understand some basic credit law but also to take action to protect your credit score and if you just want to correct your credit report without any effort or time on your end, then we strongly encourage you to consider hiring a professional credit repair service.
You are judged by many businesses, individuals, and increasingly even employers just entirely on this number. If you think about a home mortgage costing an extra $25,000 over 30 years and then start thinking about all the other fees and expenses associated with having bad credit such as: higher premiums on your car insurance, higher interest rates on credit cards, higher interest rates on auto purchases, and much more. We believe conservatively you can expect to pay an extra $100,000 over the course of a lifetime in avoidable interest rates and fees!
Available Credit to Debt Ratio
The other factor is your available credit to debt ratio, this is also called your utilization ratio. This is where all your debt (credit cards, mortgage, auto loan, student loans) are added up and compared to your available credit or money that you can borrow today. Your available credit for example would be any unused money on your credit card.
If your credit card has a credit limit of $1,000 and you have a balance of $200, then you would have $800 of available credit. Surprisingly having a lot of debt really does not hurt your credit score, however you must have available credit in order to ever get a really good credit score.
The easiest and most effective way to do this is through the use of an unsecured major Visa or MasterCard. It is recommended that you try to keep your monthly balance at about 30% of your credit limit. Using the earlier example of $1,000 credit limit, you would want to keep a $300 monthly balance.
Repair Your Bad Credit Today and Stop Paying!
The longer you wait to repair your credit score the more money you’re going to pay. This extra money is all money that could be better used! And money that you can avoid paying! It is completely 100% legal to file a credit dispute with the credit bureaus and potentially remove bad credit items from your credit report.
You can potentially do this even if the item is accurate, and even if it still within the seven-year statute of limitations. Once you file your dispute the credit bureaus are going to contact the debt agency or lender that reported the negative information about you, and the bureau will ask them to verify the account.
Experts estimate that up to 80% of all credit bureau investigations result in an account not getting verified and according to the Fair Credit Reporting Act if that is the outcome then the item must be erased from your credit report.
Take action today and get a free credit consultation with a certified FICO professional by calling toll-free 1-877-418-7596. And for more about how to repair credit with Dan Willis, sign up for our free newsletter, and join our congregation.
Get a FREE Credit Consultation