Repairing Your Credit

One of the most important keys to repairing your credit is understanding what a credit history is all about. After all, your credit history is the basis for so many aspects of modern living that it is simply foolish to ignore it.

Whether you are actively involved in it or not, every financial transaction you make influences your credit history. Bills paid - or not paid - on time and in full, your income, monies you've borrowed, purchases you've made. All these factors are weighed against each other to establish your credit worthiness.

Credit worthiness describes the risk you present to a lender or service provider when you ask to borrow money or establish a long-term service contract. The borrowed money may be intended for a mortgage on a new home, to finance a new car or new furniture, perhaps a swimming pool, college degree, or surgical procedure not covered by medical insurance. All credit card purchases are technically transactions on an ever-changing loan. Long-term service contracts are those you establish with your utilities companies, telephone and internet service providers, property management companies from whom you rent, and rental car agencies, to name just a few.

Lenders and service providers will review your credit history when they decide to approve or deny your application for money or services. A credit history that is less than perfect doesn't always mean your application will be denied but it may determine the rate of interest you will be charged or it influences the amount of deposit you must pay to obtain services. Repairing your credit history can mean money saved from reduced deposits and lower interest rates.

Credit worthiness represents your current credit report, credit score, and your income. Credit reporting companies assess a credit score based on your past record of payments, including whether or not monthly financial obligations have been paid in full and on time.

Income is usually not a factor in a consumer's credit score but it is a factor when determining credit worthiness. A very high credit score may not be good enough when a consumer applies for a loan or services that will stretch their income to a dangerously thin margin. Credit worthiness is based on history but it's also based on the applicant's current ability to pay additional debts.

Maintaining a good credit history can mean the difference between living in your dream home or a smaller, less desirable one. It influences your ability to make "big ticket" items, those things that most people don't purchase with cash, such as automobiles and furniture. It can also influence which jobs you do or do not get.

Employers are increasingly turning to the credit histories of job applicants during the hiring and promotion processes. Applicants who have poor credit histories are often viewed as people who are not disciplined, don't handle financial decisions adequately, and have trouble managing time effectively. In the worst cases, an applicant who has a troublesome financial life may be considered a risk for theft and other potential criminal issues.

You may not take your credit history seriously but you are literally surrounded by people who do take your credit history seriously. Now, more than ever, repairing your credit is a wise investment in time and effort.