Your credit history determines your credit score. Your credit score, in turn, allows lenders to determine if you are eligible for future loans, and if you are, how much interest you will have to pay. Credit scores play a major part in lenders verifying whether you are capable of repaying a loan or not, especially with large loans where security isn’t involved, such as most common loans for business, or unsecured personal loans. Therefore, you should ensure that you always have a healthy credit score. But how do you ensure that your credit history stays clean?
Check your score regularly
You are entitled to a copy of your credit history so get one from the bureaus. Go though it with a fine tooth comb and look for mistakes. Creditors don’t report payments as diligently as they do missed ones. Even one missed payment can lower your credit score. So promptly report any anomaly in your credit report to the bureau and mark a copy to your creditor. They have to rectify any mistake within 45 days of it being reported.
You should also look out for possible occurrences of identity theft. This is one main cause of people developing bad credit ratings. If you suspect identity theft report it to the bureau and the police immediately. The bureau is not supposed to make personal information public.
Repair bad credit history
If you find that your score is below average, or not good enough for you, get down to repairing your credit history immediately. Credit history will not repair itself; you need to do certain things to repair it. First of all you will need to determine which outstanding debts you need to pay off. Start with the smaller ones that you can handle by yourself over a few months. While you do that, stop picking up fresh credit by putting your credit cards away for some time and concentrate on living within your means and repaying bad debt.
Pay off the small amounts over the next few months and make sure the creditor reports each payment to the bureau. With each payment your score will improve a little. Once you have paid off the smaller amounts concentrate on the larger ones.
Consolidate your debt
If repaying your larger debt will mean not being able to take care of other regular monthly household expenses you may consider taking out a debt consolidation loan. This is a great way to repair bad credit history and ensure your credit history stays clean.
If you have outstanding credit card payments, missed mortgages, outstanding bills that you have not been able to take care of for any reason, you need to repay them in one clean sweep to wipe your credit history clean. This is done with the help of a finance professional who will help you get a debt consolidation loan. The loan can be repaid over an extended period of time in easy instalments, which will leave you with money to take care of your regular monthly expenses.
Most of your bad credit will be wiped out when the debt consolidation loan is used to repay outstanding debt improving your credit score immediately. Then with each monthly payment towards the consolidation loan the score will keep improving. Business debts can also be consolidated through a similar process where you refinance your business loans.
Finally, over a period of time you will be left with no debt and a great looking credit score!
So, if you want to keep your credit history clean, first of all remember to live within your means so that you can repay your debts on time and resort to credit repair techniques as soon as you find your credit history going bad.