Do you know that our credit history, late payments debts owed etc are all recorded at credit bureaus and how our FICO score is calculated? In fact many people do not know how much bad credit can cost them until it is too late. For example, whenever you get a new loan or credit card, an entry is made in your credit report. When you missed a loan repayment or card bill, that is also recorded in your personal debt history. And when you wanted to borrow a fast 500 loan, the lenders will make a decision based on your FICO score.
When you are declined by bank loan officers for a new loan to buy a car or take a home mortgage because you are getting married, then you realize how bad FICO score and borrowing history can derail your plans. It is necessary for you to do credit repair and improve your FICO score before you can get cheap bank loans approved.
The FICO score is a metric commonly used by both secured and unsecured lending companies to check your borrower risk of defaulting on the loan. The FICO score methodology was developed by the Fair Isaac & Company during the 1950s and is approved by the US Federal Trade Commission for making assessments of loan applicants. The FICO score is computed from the various types of loan options you have used, your loan payment history, how much you owe in debts, how long you have been in debt, when is your latest new activity and so on. This allows banks and loan companies to easily gauge your ability to pay off the new loan you want.
You FICO score will not improve on its own if you do nothing about it and continue to get into more debts with your credit cards and high interest rate consumer loans. It will take much more time and effort for credit repair than it is to get a bad score. Firstly, you need to stop adding more debts and a good way is to cut all your credit cards into two. You cannot terminate these accounts because you have outstanding bills and these leave a record on your borrowing history. Next, you need to make punctual loan repayments every month, or any late of default payments will affect your FICO score again. If you simply have too much debts to service every month such that they are beyond your disposable income, one way is to sign up for free debt counseling programs available at many websites to get professional debt management to negotiate with your creditors such reduced interest charges and smaller monthly payment amounts.
You need to work on all the above for around 6 months to see a much improved FICO score. There is really no other ways because of your poor personal financial management and reliance on high interest unsecured loans. Until you FICO repair shows signs of rewards, try not to take on any more unsecured personal loans with bad credit because their interest fees are quite high. Try to make more than the minimum loan payment required every month as this will help to clear your debts faster or you could be paying only the accrued interest and not reducing the loan principals. After you get a better FICO score, you will be eligible for cheap personal loans with low interest. This will allow you to change all your debts into one with lower interest, and save a lot over interest fees.
The FICO score is an important measure of your past financial history and determines your personal financial future. If you have less than 700+ FICO scores, you can check out various websites on how to do credit repair yourself or engage credit restoration services available at many websites.