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Recently, the media has given a lot of attention to how important your credit
rating is. The system of FICO, which stands for (Fair Isaac and Co.), was
developed to help creditors determine how much of a credit risk you may be.
These scores are determined by factoring in such things as amount of credit
owed, length of time the credit was established and if any late payments were
made.
Even just inquiring about a loan can count negatively on a score. For people who
have always managed to pay their debts on time, but suddenly find themselves in
a position where they are no longer able to do so, this is devastating. Your
credit rating determines if you will be able to buy a house, secure a credit
card or even a job. Employers have taken to running credit reports on
prospective employees, because they feel that it will indicate how responsible a
person is. Even some insurer's have started to run reports, and may base your
acceptance on how high your credit rating is.
If you are suddenly unable to repay your debts and have suffered from lowered
FICO scores, it is imperative to begin to repair your credit. Before you can
start the repair process, you must seek a solution to being unable to pay your
debts. Aside from trying to lower your expenses by trimming away unnecessary
things such eating out or other forms of entertainment, you may also be able to
get another job to make additional income to help you to pay off your debts.
This isn't possible for everyone, particularly if they have been out of work due
to an illness, or lost their jobs and went for a prolonged period of time before
finding another one. Now their debts have gotten so out of hand that a second
job will not be enough to cover the growing balances.
Bankruptcy is an option that some people consider to help them out of their
situation. The problem with bankruptcy is that it will appear on your credit
report for 7 to 10 years, making it very difficult to restore your credit
rating. There are also income limits and credit counseling classes that have to
be taken, as well as costly attorney fees. In addition the government has
recently taken steps to restrict the bankruptcy process.
In an effort to help people with their debt problems, many creditors will now
try to work with you to help you resolve the debt, by offering lower payments
that you may be better able to afford. There are also organizations such as the
United Way who has partnered up with Credit Unions, to help people find a way to
repay their debts by consolidating them. If find yourself in this type of
situation, contact the United Way to get the help you need to resolve your
debts.
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