Credit Score: The Beginners Guide for Building, Repairing, Raising and Maintaining a Good Credit Score. Includes a Step-by-Step Program to Improve and Boost Your Bank Rating.

Introduction

Peter is a 30-year old mechanic who rents an apartment with a credit score of 436. He has been having fun a lot lately and enjoys going out with his mates. This situation has caused him to incur more expenses than what his budget allows. Peter’s salary is not enough to cover all his expenses and he has started to pay his bills when they are past due. During the last two months, Peter has used his savings and credit card to purchase groceries, pay for utilities, and cover his rent. But this month is different, and Peter has some tough decisions to make. He only has a few hundred dollars left and knows it is not enough to cover his monthly expenses – something is not getting paid this month. Will he skip his rent payment? Will he go without utilities? Will he finally break his spending habits? How can he cover all his costs when there just isn’t any money left? And how will he pay back all his debts? 

Mary and Joe recently got married and want to buy the house of their dreams. They know that their income must be pooled to afford the home they want, and thus they will co-sign a mortgage agreement. Both have stable jobs and they work according to a strict budget. To ensure they get home loan approval, Mary suggests that they request their credit records from Experian. Upon receiving their credit records, Joe finds that he has a credit score of 790, and Mary has a credit score of 565. Mary carefully critiques her credit record and identifies areas to improve her credit score. One year later, Joe’s credit score is 820, and Mary has increased her credit score to 650. The couple has also managed to save $15,000 for a down payment on a house. The higher credit scores help them to secure a mortgage with a low interest rate and they move into their brand new home. 

How do you spend your money? Are you a Peter who is quickly tumbling over the edge? Or are you representative of Mary and Joe, who take their credit seriously? You may be somewhere in the middle of these two scenarios. Regardless, this book is for you – the person who needs to start getting serious about credit. 

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Money – it makes the world go round... or so they say. Millions of people across the world are indebted, which means credit actually makes the world go round. Countries across the world are in debt, a lot of debt, and Americans are no different. Both governments and private people owe money to others. 

Approximately 90% of people own a credit card and use it more often than is good for them. Most families are fueled by debt and have an average credit card balance of $8,500. Many people owe even more money, especially if they have two or more credit cards. Altogether, American credit card spending is in excess of $1 trillion per year. By the end of the year, Americans will still owe at least $500 billion in credit card debts. This spending means that disposable income is now being used to pay back debts rather than saving money. 

Most people already have many bills to pay each month. Adding credit card expenses onto these bills makes it even more difficult to get the most out of your salary every month. Some people also have home loans or need to pay for vehicle financing. If your credit and spending aren’t managed by a strict budget, then you may find yourself in trouble quite quickly. In many cases, individuals start to have issues paying their bills and eventually use credit cards for everyday expenses. In other circumstances, people choose to skip paying some of the bills or pay their accounts later than the due date. This situation can spiral out of control at a rate much faster than you can pay back your debts. 

Financial institutions know that people cannot manage their spending, but banks do not like to lose money. For this reason, financial institutions and banks started to use credit scores and credit records. The credit scoring systems make it easier for lenders to know how people use their available credit, and if you are making repayments on amounts owed to companies. 

Your credit score is a number that shows how well you handle your debts. The higher is your score, the better you are at managing your debts. The credit score goes hand-in-hand with a credit report (or record). Your credit record will show how much money you owe to institutions, a list of your creditors and your payment history. It will also indicate any public filings against your name. All of this information is combined to obtain a credit score for you as an individual. A good credit score is important if you want to secure vehicle financing or a mortgage at a later point in time.

Credit card swiping is out of control and loans compound the problem. Forecasters estimate that at least one family out of every hundred families will file for bankruptcy each year. Don’t become one of the statistics! Now is the time to change and become a responsible credit user. You have already picked up this book, and we will guide you through the process of credit success! 

This book does not contain all the answers for how to manage your finances, or how to get rid of credit. But, the aim of this book is to provide you with information on good credit management, and how to improve your credit score. The strategies outlined in the text may help you to think more about how you are using your credit card, and give you a guideline for using credit in the future. 

Each chapter will explain an aspect of credit scoring. The book starts with some definitions used throughout the book; you can refer back to the terminology at any time if you are uncertain about a word. The following chapters will discuss good credit scores and the benefit of having a high credit score. Further chapters discuss the calculation of credit scores and the importance of checking your credit record. We will also look at obtaining credit for the first time, how to maximize your score, and things to avoid that lower your credit score. The final chapters discuss myths about credit scores and explain credit counseling as a credit control strategy. 

Learn the Lingo

Terminology can be quite a daunting thing, especially when you are trying to wrap your head around new concepts. To make it easier for you, we have compiled a list of the terms (words) frequently used in this book. This list is great to reference back to when you are uncertain about a specific concept or need clarification. 

Bankruptcy: a process administered by the courts when a person can no longer pay the money owed to creditors and seeks to have debts nullified through legal measures. 

Collection account: a credit account that has not been paid in several months and thus been handed over to a collections agency. 

Charged off: a debt written off by the creditor because the company has given up on getting the money from the debtor. 

Credit bureau: an organization that collects data regarding an individual’s credit transactions and provides it to financial institutions. 

Credit record/ report: a detailed history of all your credit transactions and dealings with creditors. 

Credit score: a grade you receive indicating your financial performance in relation to debt. 

Creditor/ lender/ lending institution: the company you owe money to after