Free Credit Repair

­ We apply for credit for many reasons -- maybe it's to buy a new car, house or computer or get a student loan. Did you know, however, that there is a special number that can determine whether you can do these things, or at least how much it will cost you? Your credit score is a three-digit number that can do just that.

How can a single number be meaningful enough to determine whether you can buy a house or car? If you've read How Credit Reports Work, you know that your credit report contains a history of how you've paid your bills, how much open credit you have, and anything else that would affect your creditworthiness. Your credit score boils down all of that information into a three-digit number.

In this article, we'll find out how this formerly secret number is used and how it affects how much you pay for credit, insurance and other life necessities.

A credit score is a number that is calculated based on your credit history to give lenders a simpler "lend/don't lend" answer for people who are applying for credit or loans. This number helps the lender identify the level of risk they may be taking if they lend to someone. While the same end result can come through reviewing the actual credit report (which lenders usually do), the credit score is quicker and less subjective. The system awards points based on information in the credit report, and the resulting score is compared to that of other consumers with similar profiles. With this information, lenders can predict how likely someone is to repay a loan and make payments on time. It's the credit score that makes it possible to get instant credit at places like electronics stores and department stores.

Although there are several scoring methods, the score most commonly used by lenders is known as a FICO because of its origins with Fair Isaac and Company. Fair Isaac is an independent company that came up with the scoring method and software used by banks and lenders, insurers and other businesses. Each of the three major credit bureaus (Experian, Equifax and TransUnion) worked with Fair Isaac in the early 1980's to come up with the scoring method.

The three national credit bureaus each have their own version of the FICO score with their own names. Equifax has the Beacon system, TransUnion has the Empirica system, and Experian has the Experian/Fair Isaac system. Each is based on the original Fair Isaac FICO scoring method and produces equivalent numerical results for any given credit report. Some lenders also have their own scoring methods. Other scoring methods may include information such as your income or how long you've been at the same job.

One of the first things you need to do, whether you filed bankruptcy or just need to rebuild your credit, is to set out a plan to rebuild your credit, as well as how you will use your borrowing abilities in the future. Without a good plan of attack on your financing and borrowing usage, you will run the risk of being in financial trouble again within a few years or so. Don't become a repeat statistic. Plan now, for protection later.

You have two options when it comes to repairing your credit ...

* hire someone, preferably an attorney who knows the credit laws;
* do-it-yourself using a good quality guide and your 3-in-1 credit report;

Whichever way you decide to go, here are just a few tips to keep you on track:

* Don't fall for scams that tell you to create a new credit file ... that's credit fraud if you do it, and can make you subject to legal repercussions;
* Do read the Fair Credit Reporting Act so you have an idea of your rights while you go through the credit repair process;
* Get yourself organized and committed to the process, there is no overnight fix;
* If you use an online service, you want to know what the fees will be, monthly or "as you go" is best, and you want to be able to cancel at anytime;
* Always act in a cooperative and professional manner when dealing with creditors or collection agencies;
* Don't make threats, however subtle, if you can't back them up.

There is a great eBook where you can repair your credit score and it's all for free. Click here for more information about the free eBook