Credit Repair: Good Credit References

Earning a good credit references can be as simple as making and following a sound financial plan. Good credit references happen when you manage your spending according to your income and goals and pay your bills on time.

There is, unfortunately, no magic credit repair wand. You will need to devote a good deal of effort, discipline and patience to the task.

It is a good idea to begin by requesting copies of your credit report from each of the three credit reference agencies. Credit reference agencies do not make credit decisions. They only compile and provide identifying and credit history information to potential lenders. Increasingly, this information is also provided to potential employers.

The three credit reference agencies are TransUnion, Experian and Equifax. Most states provide for at least one free credit report annually. You can usually obtain your report by making a request through the automated telephone service, by email and by regular mail (a telephone request is easiest, in my opinion). Once you receive your report, review it carefully for errors or outdated information. Any problems should be reported in writing immediately. Include whatever supportive documentation you have available to substantiate your claim.

If you are like a growing number of Americans you probably have at least one negative credit reference on your report. These include such credit crimes as:

* Defaults (the lender has given up hope that you will repay owed funds)

* Late Payments (it is always best to pay early. Credit reports include an accounting of the number of times you paid 30, 60, 90 and 120+ days late)

* Judgments or Liens (legal action by a lender to recover payment)

* Bankruptcies

* Repossessions

* Excessive Credit Inquires (a typical/acceptable number of inquires is 1 or 2 each year - your own inquires do not count toward this number. more often signals trouble and lenders are hesitant to work with you)

Obviously, some credit crimes are more serious than others. But generally, your credit report will be more attractive to lenders if the negative credit references are fewer (preferably nonexistent) and/or not recent.

Because lenders do not know you personally they must rely on some system that allows them to make wise credit decisions. In other words, if you've been denied credit know that it isn't personal, its business. After all, would you give money to someone who has a history of not paying it back and/or paying it back late? Probably not!

Rather than getting down on yourself, make a plan to develop some good credit references. As you pay off and pay down debts, your credit report, and therefore your appeal to lenders, will improve.

Let's start with the basics:

* Make a budget and pay your bills early (in the long run you will save money on interest and fees)

* Pay down debts (high debt to income ratios is cause for concern among lenders. If your debt load is high and you are robbing Peter to pay Paul -transferring balances/paying bills with credit cards - lenders will not look favorably upon your application)

* Stabilize (lenders tend to look more favorably upon applicants with long-term housing and employment situations)

* Handle current accounts well (increasingly, lenders view your credit report in search of signs of trouble. If found, they could cost you in the way of higher interest and fees) So"┬Žnever bounce checks, pay late, pay less than the minimum or max out credit accounts

* Maintain accounts (if you can control your spending keep accounts open after the debt is paid. Available credit provides a more positive credit reference than exhausted or maxed out credit)

* Keep your head out of the sand (if you've had an emergency such as illness, unemployment, etc. you must communicate that to your lender. Often, they can work with you to make suitable arrangement. Ignoring the bill/call will not make it go away)

* Consider online banking (pay your bills with a click, no stamps or envelopes required)

Each of these steps will help you to build good credit references with time. Other things you can do include paying rent/mortgage and utility bills on time. Even if you have a number of negative credit references, you can take action today to offset them with good credit references. Each month that you pay your bills on time or pay down your debt you create a good credit reference.

If you do not have any credit or are trying to regain credit footing after bankruptcy proceedings, etc. You might try starting with a secured credit card (you deposit all or a portion of the spending limit on your credit card in an account held by the lender). Pay this bill early, in full each month. With time, additional credit options will be available to you. Make sure to choose a lender that reports regularly to a credit reference agency. You should also consider opening a savings account, which demonstrates financial discipline and responsibility.

Earning a good credit reference is easier than you think. There is absolutely no mystery or secret involved. Decide today that you will exercise patience and discipline in fiscal management. With time, the negative references will come off. Identity theft aside, you alone have the power to replace the negatives with good credit references.

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