How to Restore Your Credit

The Dollar 'Get Out of Debt' Course

After you've begun a program to solve your debt problem, it's time to address any damage that your credit score may have suffered. According to FICO, 90% of all lending decisions rely on FICO scores. So it's important for you to know your score and get it as high as possible.

Your credit score is made up of reports from a variety of people that you do business with. They keep track of how good you are at paying your bills and pass the information on to the credit agencies who use a formula to give you a credit score.

You actually have many credit scores. Some are specialized for a specific use. Two are the most commonly used: FICO and VantageScore. FICO has been around since 1989. VantageScore is a newcomer created by the three major credit bureaus (Experian, Equifax and TransUnion). All evidence is that if you improve one the other will improve, too. So we'll focus on the FICO score.

FICO scores range from 300 to 850. FICO doesn't say what's a 'good' score. They leave it to the lenders to decide what score is acceptable to them. But some general guidelines apply.

  • >under 630 = bad credit
  • 630 to 689 = average credit
  • 690 to 719 = good credit
  • 720 to 850 = excellent credit

Check your report for errors. Approximately 1 in 4 credit reports contain an error that's big enough to affect the interest rate you'd pay for a loan. Take the time to check your report for errors. This article will show you how to do it.

Revisit Your Loans. After you've raised your credit score it's time to see if you can borrow at a lower rate.

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