For one, to whiz by on a Porsche or to go green in a Japanese Hybrid car or even to own a simple, less expensive car that gets them from point A to B, they will either look at their massive savings or a... good credit score. The first step towards obtaining that desirable high credit score is to achieve a clean credit history. A Credit Score is a mathematically devised indication rating that approximately gauges the potential risk of a bad debt a borrower poses to the lender. Such a score is evidently built upon four broad indicators of an individuals' financial disposition, namely:
- Income/Profession
- History of credit default
- Outstanding credit payments
- History of access to credit
The most prominent credit rating model is called FICO and was compiled by Fair Isaac & Co. and typically ranges between 300 and 850 where a higher score determines stronger credit worthiness of a borrower. Through evolution over time and the given fragile and unstable economy, the FICO score has also come to be used by lenders to determine the pricing of loans, i.e. higher rates, fees and terms for borrowers with lower FICO scores. In general practice, a score of 620 is stipulated by many lenders as the safe "cut-off" point. Hence, the score combines all information from the past and present to determine the viability of your ability to repay the loan. According to Fair Isaac & Co. the scores are quantified according to a distribution scale which is as follows:
- 35% determined by payment histories on all credit arrangements
- 30% determined by outstanding amounts with all lenders
- 15% on the duration of using credit arrangements
- 10% is the access to credit over the very recent past
- 10% weight is placed on the portfolio of credit in place, such as loans, leases, mortgages, credit cards, etc.
Credit repair services in essence come to the aid of the "Porsche fanatic" in question that does not have a clean credit report. Such services essentially serve the purpose of consulting the borrowers on how to better manage previous credit arrangements, on how to schedule and pay off reported outstanding debts and position the borrower in better position, help the borrower assess how they ended up in a credit default mess and thereafter also suggest ways to fix them. The service helps also organize and streamline credit repayments due in the future so as to avoid any possibilities of default. The service can help negotiate with lenders that may have scrutinized past events such as power supply disconnection at the residential premises, breached credit card limits etc. besides any instance of repossession of a car.
Credit repair services also come to the rescue in pointing out and erasing any irregularities or discrepancies in previous credit records which may range from incorrect overdue statements of a gas or Phone Company or even your credit card overdrafts. Credit Repair companies will assist by deliberating with the concerned parties in order to remove such irregularities from the credit report of the "Porsche fanatic".
However, these services as magical as they may sound, have also been under scrutiny for many large scams in the past. Certain such false repair services offer to clean up all credit defaults in the past and present an entirely new and immaculate clean credit report. Other scams have also surfaced where certain unsuspecting borrowers have found themselves to have paid the repair fees only to find the agency itself has disappeared overnight. The Federal Trade Commission or FTC regulates the functioning of credit repair services and oversees false schemes that exploit consumers.
After having announced several crackdowns on credit repair operations that claim that they could erase negative yet accurate information from consumers' credit reports, which is in fact impossible. The 'Operation Clean Sweep' was launched by the FTC last year along with 24 state agencies in 22 states. This was launched after credit repair operations violated the FTC Act and the Credit Repair Organizations Act to crack down on many such nation-wide scams that make money for promises they cannot legally deliver. To learn more about the 'Operation Clean Sweep', you can check the FTC website.
It is therefore crucial to watch your back when it comes to credit repair. While credit repair services can be extremely beneficial, it is always advisable to educate yourself about credit rating which is why I wrote this article for you so that you may finally attain that clean credit report. It is important to note that there are better and more economical ways to achieve the an effective credit repair by using credit repair software programs that help you do it yourself with proven and tested friendly guidance and online follow-up tools.
In addition to credit repair services, a different and actually better solution recommended by the FTC, is using software programs such as Credit Repair Magic. They are significantly less expensive, safer to use and they act as a step by step guide to better credit management. The smart and automatic software program eases the borrowers work by doing the tedious tasks like writing repeat letters required for follow up, etc.
To sum up, minimize expenditure and start saving if you really want to see the Porsche on your driveway and act fast to obtain a favorable and clean credit report by selecting the one best suited for you from the many services that are available today.
Autor: Dan Spark
Dan Spark has a Master degree in business with extensive experience in financial analysis. He pays special attention and focus on improving financial literacy among adults and youth around the U.S. You can read and learn more on how to increase credit score by going to http://www.increasecreditscoresite.com
Dan can be reached at dan@danspark.info.
Added: November 30, 2009
Source:
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