Learn All About FICO Scores and Credit Repair
By Michael Redbourn

The number of Americans whose credit ratings are worsening or are getting ruined continues to climb, and judging by the what one reads in the newspapers, there is unlikely to be any noticeable improvement in the situation in the coming year.

There is a chink of light at the end of the present economic black hole though, and that ray of light is already causing many people to consider credit repair, and there is some good news for them.

If you're really determined to start fixing your FICO score (Fair Isaac Corporation), then the good news is that the thing that will most quickly cause an upward tick in your rating is arguably the easiest thing to implement.

Credit rating agencies maintain a record of everyone's debt to credit ratio, and looked at through their eyes it looks similar to this.

50% and above is considered high-risk. 43%-49% is borderline and signifies likely financial trouble. 37%-42% means that the person needs to reduce their debts. 36% or less and you're looking really good.

So how do you discover what your debt to credit ratio is?

Very easily, because credit reports from the three leading credit rating agencies, Equifax, TransUnion, and Experian now include it.

If you'd like to get a quick idea of what yours probably looks like then the way that it's arrived at is as follows.

You have for example, a balance of $3,500 on a credit card with a $9,000 credit limit then the calculation is as follows, $3,500 divided by 9,000 and multiplied by 100 = 38.88%

However, since you most likely have several credit cards, along with other debts, you'd have to apply the above formula to all of them, so I'd suggest just waiting for your credit reports to arrive, because in order to improve your credit rating you're going to need them anyway.

Before getting into the steps that are necessary to repair a credit rating, it might be worth noting that the credit agencies also take into account a person's debt-to-income ratio, and the method they use for that is;

(MDP) Monthly Debt Payments = $ 950 (credit cards, car loan, personal loan) (MTHI) Monthly Take-Home Income = $3,400 (employment income) $950 divided by $3,400 multiplied by 100 = 27.94.57%

Higher than 35% is high risk. 21% - 35% is risky. 10% - 20% and you're probably good for future credit. 10% or less and you can get a loan everywhere.

OK, if you haven't got current copies of your credit reports from TransUnion, Equifax and Experian in front of you then tut tut, because you should already be checking them on a regular basis, if for no other reason than that, difficult as it might be to believe, a full 1/3 of them not only contain errors, but they're often serious ones to boot.

Whether or not you have your credit reports, they will be almost useless they contain your 'credit scores', so if they don't contain them then please ask for another copy that does includes them, and you shouldn't be charged a second time.

It's now time to check your FICO score, because what you'll need to do next will depend on what you find there.

If you see the number ..

700 and above means that you can stop reading this and can take a long and well deserved vacation.

680 to 699 - you're looked at favorably and a loan won't cost you an arm and a leg.

620 to 679 - you're an OK candidate, but you'll pay high interest if you want a loan.

580 to 619 - Banks and lenders think you're great and they're hoping you'll contact them immediately!

Yes, you read that right!

You're not in really serious trouble yet, so they will lend you money and charge you an enormous amount of interest, and rake in a lot of commission as well.

500 to 579 - You smell bad! You'll get a loan, but will get crucified!

Most people reading this will most likely get the above score, and the bad and the good news is that you should apply for a loan.

You'll get shafted, but if you pay it back on time, then you're credit rating will improve enormously.

499 and below ..

This is the worst news, and we need to fix your credit rating right away, because nobody will lend or rent you anything.

43%-49% is on the edge, and indicates looming financial trouble!

Not so difficult?

Just do the following ?

1) Check your credit report and if you find errors then dispute them, and don't forget to include any documents that prove the error. Send your letter and documents by registered mail and be aware that the corrections to your report won't cost you anything.

2) If you have credit cards from companies like Lowes, JC Penny, and Sears etc. then try to get rid of them in any way that you can because they damage your credit rating far more than Visa and Master Card do.

Get in touch with all of the companies that you owe money to that have restricted an account, and tell them that you intend to start paying down your debt. Reduce the amount that you owe them by as much as possible each month and remember that consistency and not speed is important; so do it at a pace that is comfortable and maintainable.

4) After you've reduced the amount for a few months, even by a little, contact them and ask if you can have your account reactivated. If they say "yes", then you're already on the home stretch because this will affect your credit rating more than anything else!

After you feel that your credit score has improved somewhat, please check your credit rating online before you apply for any new loans, and tell the lender clearly and plainly, "this is my credit rating at the moment", and ask, "Will I get approved?".

What you don't want appearing on your credit report at this point, is refused credit comments.

Hopefully what you've read here will have helped you to better understand the credit rating system, and will also help you return your credit score to what it once was - or even, wasn't.