A Cure for an Ailing Credit
Credit has become a much-used word, thanks to the various connotations that it is being used in. Transactions in which the payment is deferred to the near future are termed as credit transactions.
Ever thought why the grocer sells goods on deferred payment- because of a good credit that you enjoy. Credit is the reputation or standing that a person has in the society. Though credit includes various non-financial aspects, our study primarily includes the financial aspect.
The lending community watches every financial transaction of the person in question with its hawkish sight, and classifies the cases from excellent to worst. One cannot be sure of staying on a particular credit rating for a long time, owing to the volatile nature of the credit reports.
A single instance of default or late payment can tarnish the credit for a long time. Having contracted bad credit once, you would always find yourself facing the same situation, unless some serious efforts are taken to get out of the muck.
Do you think that the issue is insignificant to your case? Think again. Checking with your counterpart having a good credit rating will reveal the higher rate of interest being charged by you. The reason for this extra charge is a bad credit tag that accompanies your credit report. It will be much easier for a person with good credit to get a loan than for a person with bad credit.
These and many more reasons make credit repair a priority. First check the credit report. Every person who has ever indulged in credit transactions will have a credit report prepared by the credit reference agencies. A person can apply for a credit report within 60 days of receiving the bad credit notice. Make a note of any discrepancies in the credit report. There are many debts that you have not incurred but are present in the credit report. Many trivial matters like divorces, lawsuits etc affect credit. It will thus be important to see that even the smaller discrepancies are not overlooked. Credit report must be regularly checked to fix such small discrepancies within time. This will also help trace identity theft on your account. These must be fixed immediately.
The paragraph above dealt with entries in the credit report not conforming to the person. Next, we deal with the case when there actually is a debt that has not been paid. The debt must be paid up as quickly as possible. Delay beyond a month will make payment inconsequential because the credit reports will incorporate the defaults, thus making the bad credit irreversible for a period of about six years.
Credit counseling will be beneficial for people who are not much aware of the various options available to them. Various credit-counseling agencies are available on the net and on phone. They even conduct personal meetings with the clients. After having a chat on the problem being faced by the client, they suggest viable solutions. However, the client can refuse using the solution if they do not find it useful.
Prevention is better than cure. Certain steps may be taken to prevent credit rating from worsening. Only a few loans must be taken. The number of debts will vary with the income capacity of every individual. Regularity in payments will also have a positive impact on the credit rating. A considerable time gap must be maintained between any two loans or mortgages. Having too many loans with a shorter repayment period can have serious repercussions for the finances. This too will affect the credit rating.
These will not clean up the credit report altogether, but will at least help to make a small dent in the bad credit history. With a concerted effort over a period of time, the credit history will transform.
James Taylor holds a Master's degree in Commerce from JNU he is working as financial consultant for
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