If you are fixing your credit report then you realize just how important your credit score is. Your credit score can control your quality of life just as much as how much money you earn.
With a poor credit score you may have been turned away from a job that you are clearly qualified for. You may have been turned down for a credit card or a car loan. The times you have gotten approved it is with a high down payment and an exorbitant interest rate.
However if you can learn how the credit system works then you can use it to your benefit. You can create a higher quality of life for yourself and your family without earning any extra income.
When the credit bureaus calculate your credit score they use an algorithm. They plug in your information including payment history, types of accounts, balances, ect., and then a computer calculates your credit score.
Your credit score is a way for lenders and employers to measure you. Lenders will often not look at any other factor other than your credit score when you apply for a credit line. You credit score determines how the credit world perceives you.
How do you use the credit system to your advantage? There are two factors that carry more weight than anything else in the credit system equation.
1. Remove negative accounts. Negative accounts on your credit report will do the most damage to your score and need to be removed.
2. Have an unsecured line of credit in good standing. This is a simple step and everyone can do it.
The credit bureaus equation is kept secret and not released to the public. However after review of thousands of credit files it has been learned that having an open unsecured line of credit is just as important as removing negative items.
The unsecured line of credit will improve your credit score because:
1. Every time you pay your bill you are creating positive payment history. Just so you know the credit bureaus like this account to be aged or open for some time.
2. Increase your ratio of debt to credit. This is how much credit you have in relation to how much debt you have. You want to be able to show the credit bureaus that you are not using all your available credit.
Your open credit line will carry more influence on your score if it is unsecured. However if you can not be approved for an unsecured loan then I would suggest a secured credit card.
The credit line will help tremendously but it is most important to delete negative credit from your report. If you can not get approved for an unsecured credit line try to remove the negative marks from your credit report and then reapply.
You can achieve a 700 credit score, no matter how bad your credit is today. Work on removing the negative listings and replacing those with positive listings.
