There is a set of numbers that rules your life. It is with you no matter what you do and where you go. Credit scores seem to be involved in every aspect of our lives. Good credit scores or even poor ones can determine whether or not you drive a new car, own a home or even have the job that you want.
It is hard to believe that something so simple, yet complicated, can make or break you. A good credit score is absolutely fundamental if you want to do anything in today's economy.
But there is a lot of confusion on how a credit score is calculated and what makes it a good score or a poor one. In this article we will cover how credit scores affect your daily life and how important it is to have good credit.
What is credit?
You can think of credit as something such as a material item or goods given to you now that you pay for later. You agree that you will pay back the merchant a set amount, plus interest, for letting you get something immediately. In the times before credit cards many people would open lines of credit with local merchants that sold food or machinery.
It was an easy and convenient way for farmers to get the goods they needed until their crops came in and they could get paid. People today use credit for just about everything. It is a record of how you have paid past debts and many institutions use these lines of credit to determine whether or not you are eligible for any further advances.
If my credit score is low, is there a way to raise it?
A low credit score can happen for two reasons. The first is that you simply do not have any credit yet. The second is that you have had credit but have defaulted on payment arrangements thus lowering your score. If you have a low credit score there are steps you can take to raise it.
It may mean applying for a high risk credit card to slowly build your credit back. It can also mean paying off any closed accounts due to nonpayment. If you need a loan for an automobile or a home you will probably need a cosigner with good credit.
Then you should start making your payments on time and at the right amount. Over time your credit score will begin to go up and you will be able to do more on your own.
What happens to my credit scores after a bankruptcy?
Bankruptcy is a hard hit to credit scores. The main reason is that you probably have already defaulted on some credit agreements. But once you declare bankruptcy and are either absolved of the credit debt or you have paid a portion of it back, bankruptcy will remain showing on your credit for many years.
Bankruptcy is not an option that you should consider lightly. But if you find that you are missing payments and are financially unable to pay back the debts, you need to speak to a bankruptcy attorney as soon as possible to go over your options. Your credit scores will be affected but you will get a chance at a clean slate to start over again with time.
How do I handle a dispute over my credit score and some erroneous information?
Yes, you can handle a dispute over your credit score and erroneous information. The first step is to have a membership to a website that monitors all three of the major credit bureaus. When you notice an account that you did not open or are disputing the claims, you will need to contact that credit bureau and open up a dispute.
The credit bureau will contact the financial institution and then an investigation will occur. Hopefully you will be able to provide documentation that the account was never requested, never opened or was opened by someone using your identity. This is why it pays to monitor your credit.
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