How to Fix Bad Credit.

So, you just went to by a new hi-fi, wanted on the special three year no-money-down low interest option, and Bingo! Application turned down. Shock, horror, embarrassment – what could have gone wrong?

Unfortunately, to many people, credit scoring is a black art that reeks of ‘Big Brother’ and they also think that there is nothing you can do about it. There are three main credit agencies in the Western World, Experian Equifax, and Trans Union, and guess what – they all use similar, but sometimes totally different ways of measuring your credit score! So if they can’t agree between themselves how to measure your creditworthiness, how on earth can you do anything about it you may ask?

Luckily, a new system comes into effect later this year, called the Vantage method, and the major credit scorers will all be adopting it.

Before you can even try and do anything about your credit score, you really need to know what it is all about and what affects it value.

A credit score is a number between 400 and 800+, where the higher your score, the lower the risk you will appear to be to anybody thinking about lending you some funds. Everybody over the legal age will have a credit score (if they have ever had any sort of credit). This credit score will probably change on a month by month basis, which is good, as we will be giving you some pointers shortly in how to affect your credit score in an upward direction.

A whole load of variables go into calculating your credit score, many of these being proprietary to each credit scoring company. Your payment history is obviously important, number of debts, what is outstanding on each debt, and any other factors such as bankruptcy, and brushes with the law, all contribute to your credit score.

So, apart from the obvious, like not breaking the law, not going bankrupt, and being careful to watch out for identity theft (see other articles on this topic) , what can be best done to improve your credit score?

The biggest killer to your credit score is paying a debt late. Obvious really, but this credit scoring activity is all about determining your ability, and perhaps even your willingness, to pay off a debt on time. Even if you are late on a payment, try as hard as you can to bring it up to date within the next 29 days, as each 30 days missed on a debt really hurts your score.

Next, some debts carry more weight than others, mainly due to their value, and their importance to your everyday living. Miss a payment on your mobile phone, and it may not even go un-noticed. Miss a payment on your mortgage or car loan, and this will flag up big alarm bells, and knock your credit score horribly.

Get a new credit card, run up a bill, and then clear it as soon as you get the bill. This will build your credit score up really rapidly.

Overall advice, is get all of your monthly debt payments on a direct debit system from your bank, but do make sure you have sufficient funds as the banks themselves have a nasty habit of wading in with horrendous penalty charges if a payment gets refused, making a bad situation even worse.