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How to Avoid Credit Repair Scams

Oct 4, 2017 by

Having good credit means it will be easier for you to get loans and low interest rates. Low interest rates usually translate into smaller monthly payments. Credit can be a valuable tool when it is part of an overall financial plan. It can make life more comfortable and long-term goals more attainable.

The difficulty in obtaining credit is consistently rated by firms as one of the greatest barriers to operation and growth. Creditors are in business to make money and avoid losses. Typically, creditors will analyze the information provided in your credit application and will access a credit report from one or more of the 3 major credit bureaus.

All creditors have slightly different criteria, and they will make a judgment about the creditworthiness and potential risk of each applicant. When deciding whether to grant credit or a loan, creditors will consider a number of different factors, such as your income, how long you have lived at your current address, what kinds of assets you have, the balances in your checking and savings accounts, your promptness in paying bills, how long you have been working for the same company, and how much you owe other creditors.

Yet many consumers are unclear about the best way to go about establishing their credit. There are a number of ways to establish credit.

  • If you decide to use the services of a credit repair agency, you should be careful. Be on the lookout for the following signs of a scam:
  • Credit repair companies that want you to pay for credit repair services before they provide any services.
  • Credit repair agencies that do not tell you your legal rights and what you can do for yourself for free.
  • Credit repair agencies that recommend that you not contact a credit reporting company directly.
  • Credit repair agencies that suggest that you try to invent a new credit identity and then, a new credit report by applying for an Employer Identification Number to use instead of your Social Security number.
  • Credit repair services that advise you to dispute all information in your credit report or take any action that seems illegal, like creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution.

Once you get your credit score, it is beneficial to know where your credit score falls on the total range of credit scores and whether it is sufficient to qualify for different types of credit; otherwise you mat y still need to improve.

Credit Cards

To qualify for a credit card you usually need a credit score of 660. With a lower credit score or even no credit, you might be eligible for what is often called “bad credit cards” but frequently these are either secured credit cards or prepaid credit cards. Boost or improve your credit score to a 740 and you will qualify for a credit card with the lowest interest rates and the best deals on balance transfers, cash back cards and travel reward cards.

Home Loans

In today’s economic climate, a FICO score of 620 is commonly the minimum credit score you must have to meet the criteria for a home loan. With a FICO score of 620, you will not be eligible for the lowest rates. At today’s interest rates, you ought to be able to get a loan at around 5.9%. Increase credit scores to a 760 or higher and you can likely get a mortgage at today’s rate of about 4.3%. If you compare that to the 5.9% that you would pay with a credit score of 620, you can save tens of thousands of dollars over the life of the loan.

Auto Loans

To get the most favorable terms on an auto loan you would need to increase credit scores to a 720 or higher. It is possible to be eligible for an auto loan with a credit score of 500, but it will be extremely costly. With a 500 FICO score, you are looking at a loan at 19.1%. On the other hand, a 720 FICO score at today’s rate could get you a loan at around 5.3%.

Monitor Your Credit Score

Remember to always manage your finances responsibly so your credit score can be as high as possible. Improving your credit score will boost your good credit rating which can save you thousands of dollars a month in lower interest rates and fees. Anytime new information is added to your credit report, your credit score can change. Therefore, it is essential to monitor your credit report on an ongoing basis.

Anyone can improve their credit score with the right tools and information. Act now, and start the process of improving

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