Solomon said "A good name is rather to be chosen than great riches" (Prov. 22:1). This is certainly true in the financial realm, where a good name on your credit report can open the way to purchase a car or a good home. Yet, because of life circumstances or poor judgment, many of us have poor credit reports. For example, about 70 percent of auto buyers have bad credit.
You can't relive the past. Once you have bad credit, creditors will make false promises to fix your credit score for unaffordable payments and "credit repair" companies will often give you false hope. How, then, can you fix a broken credit score?
The first thing you should do is get a copy of your credit report. You can get a free report once a year from the three major credit bureaus at annualcreditreport.com. Credit reports often contain errors, and you have a right to dispute incorrect information. The creditor that provided the incorrect information must respond within a limited period of time, and the erroneous information is removed if they fail to respond on time. The FTC reports that 80 percent of disputes result in a changed credit report.
In the long run, the best way to fix your credit score is to make all of your payments on time. Late payments can negatively impact your score for seven years. However, the older the late payment, the less it reduces your score. And watch out for debt collector payments on old debt: These payments can hurt your credit score by showing up as new late payments. A payment on an old debt can also restart the statute of limitations for collections, which would otherwise be close to expiration. Generally speaking, past negative credit items will slowly go away if you keep up your current payments.
Another way to help your credit is to keep the debt to credit limit ratio under 30 percent. You can, of course, reduce the ratio by paying down on the credit card. However, you can also reduce the ratio by requesting a higher credit limit. If you don't use your higher limit, your credit score will go up without any cash outlay.
In the end, you have to decide how much you are willing to pay for a better credit score. People who can afford it should correct credit report records, keep their payments current and pay down their credit lines. But if you have to decide between feeding your family and paying your credit cards, you should feed your family. If you cannot make your debt payments, your choice is between sending all your cash to lenders and still having a bad credit score, or keeping your cash for the family and living with a bad credit score. Our advice in that situation is to keep the cash.
A good credit score is a valuable thing, but people with bad credit buy cars and houses every day. So take care of your family first, and then worry about fixing your credit score.
Ron Allen is a Christian businessman, CPA and author who serves in local, national and international ministries, spreading a message of reconciliation to God, to men and between believers. He is founder of the International Star Bible Society, telling how the heavens declare the glory of God; the Emancipation Network, which helps people escape from financial bondage; and co-founder with his wife, Pat, of Corporate Prayer Resources, dedicated to helping intercessors.
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