Whenever you apply for a loan the lending institution or bank will run a credit check.
This is a common process whenever loan applications are being processed.
They want to see what your FICO score is because if it is high, you will be considered to be a low risk customer.
The lending institution believes that you will be able to make regular payments on time and thus they will not give you any hassle as you get pre-qualified for your loan.
On the other hand, if you have a history of bad credit, you will have a harder time getting a loan.
For this reason, people with bad credit really need to take the necessary steps in order to get out of debt.
One way in which you can improve your credit rating is by paying off your debts.
This will allow you to work at becoming more financially secure.
With this in mind, here are some ways in which you can work on fixing your bad credit.
Don't Be Misled By Scams You should never fall for those companies who are offering credit repair services through aggressive advertisements in fliers, newspapers, on T.
V, on the radio or even online.
There is absolutely no way that these companies can erase all of your credit problems 100% or remove all of the bad credit reports from your credit file.
Some of these companies will do this by giving you a new credit identity which can get you arrested for fraud.
This is because you are misrepresenting your personal details and falsifying both your financial and your work details in order to secure credit.
Since this is a federal offense, you can go to jail for doing it.
For this reason you really need to understand that you cannot simply wave a magic wand and fix all of your financial problems.
However, you can fix the problem yourself if you are patient, self-disciplined, determined and use some good, old-fashioned common sense.
Get a Copy of Your Credit Report You can obtain your credit report from the three main consumer reporting companies in the United States: Equifax, Experian and Trans Union.
While you can contact each of them separately, you can also go to their common website at AnnualCreditReport.
com.
This is the best way to get your credit report since you won't have to pay for it.
Just make sure that you do this every year, regardless of the type of credit you actually have.
By doing this you will be able to find any glaring errors that have crept into your credit report.
If you neglect to correct these errors they will spoil your credit rating.
In this day and age you also need to be on the lookout for identity theft.
There are a lot of scammers who are assuming legitimate identities and using them for fraudulent purposes.
It is a good idea to watch your credit report so that you will be able to avoid these types of problems.
Clear Up Your Debts Make sure that you pay off all of your outstanding debts as soon as possible.
The best way to do this is by starting with those debts with the highest interest rates and then work your way through all of your debts until you are completely debt free.
Stay Current on Your Bills You need to be prompt, on a regular basis, whenever it comes to paying your bills.
This is important because late payments don't reflect well upon you whenever someone looks at your credit report.
Reduce Your Credit Cards It is a good idea to cut down on the number of credit cards you have.
You may even want to completely close some accounts.
Whatever you do, don't apply for any new credit cards until all of your current debts are paid off.
Don't File For Bankruptcy Besides not filing for bankruptcy, you should also do your best to avoid credit liens and collection accounts too.
These things all figure heavily against you in your credit report.
This will be for 10 years for bankruptcy and seven years for both credit liens and collection accounts.
During this time you will have little to no chance of having your new loan applications approved.
Clean Up Your Act Instead of leading a lavish lifestyle, you should tone things down a bit until your debts are cleaned up.
This means cutting down on any unnecessary expenditures and possibly selling off some of your assets if you must have to.
Conclusion Once you have managed to clear up your bad credit, you will want to start all over again until you are sure that everything is corrected.