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If you've attempted to take out a loan or open a new line of credit recently, you know that the days of obtaining easy credit are long gone. Lenders, insurers, landlords and even some employers are more diligently scrutinizing consumers' credit histories to see if they're a worthwhile risk. And while some have lost their jobs, others have had major medical bills that have led to foreclosures, repossessions, late credit card payments, and even bankruptcies -- these all have left tarnished credit scores.

In the today's economic climate, it is even more critical now than ever to protect and repair your credit score. A low credit score can cost a small fortune over the course of a lifetime. So what can these people do to repair their credit?

A good starting point would be to focus on the aspects that make up your FICO score. The FICO score is that all powerful three-digit number based on the information in your credit report that lenders use to estimate your credit risk – how likely you are to pay your credit obligations as agreed. Essentially, the FICO score snapshot of your credit profile at that moment. Lenders use your credit score to supplement their own selection criteria to determine whether you are a worthy credit risk.

Generally, five factors are used to determine your credit score: payment history (around 35 percent of your score), amount owed (30 percent), length of credit history (15 percent), newly opened credit accounts (10 percent), and types of credit used (10 percent). These five categories may be weighted differently depending on your individual circumstances. The recently launched website, http://scoreinfo.org, explains the importance of credit scores and how they are used in areas other than just obtaining a loan. What many people don’t realize is how credit scores are being used to make decisions by companies that have nothing to do with credit. Even though FICO scores were designed to be used purely for financial reasons, they have now become part of the application process for employment, car insurance and health insurance.

Until banks, insurance companies and employers find alternatives to the traditional FICO score, it will still be king of the hill. The best antidote for a poor FICO score is time; however there are also a few ways to speed up the process of improving a FICO score.

Assess the Situation

Before you start taking any action, make sure that you are able to pay your bills on time and that you will not do any further harm by neglecting any further payments. If you are having difficulty keeping up with credit card payments, then call the issuer, explain your situation and see if you are able to negotiate payments that you can afford. If they agree to new terms, make sure you get it in writing.

Next, assess all the damage by getting free copies from each of the three credit bureaus through websites like http://annualcreditreport.com. Each of the credit bureaus can also provide FICO scores based off the data they collect for an additional fee.

Depending on your situation and where your credit started, you can lose anywhere from the following:

  • Exceeding a credit card limit might lower your score by 10 to 45 points.

  • A single late payment exceeding 30 days -- 60 to 110 points.

  • Losing property to foreclosure -- 85 to 160 points.

  • Filing for bankruptcy -- anywhere from 130 to 240 points.

Clean Up That Score

Start with fast-fixes. If you have inaccuracies on your credit report or you were late paying a bill from a company that doesn’t exist, begin contesting this information by writing dispute letters to the credit reporting bureaus. The information on your credit report has to be correct and verifiable.

Next, focus on paying off loans – especially revolving lines of credit, like credit cards. Paying off these loans will give you the most bang for your buck, however getting your debt under 30% of your credit limit will also provide a nice lift to your FICO score. Part of the FICO calculation is your debt utilization rate, whereby FICO considers how the total amount of debt on each of your credit cards compares with your total available credit.

Secured Credit Cards

Obtaining a traditional credit card can be difficult when you have poor credit history. Secured credit cards, if used properly, can help you get your credit back on track more quickly. Typically, these cards require you to deposit a set amount of money in a bank account, which is used for collateral. The amount of available credit will most likely be equivalent to the amount of the deposit.

Since one of the factors that influences your FICO score are things you’ve done most recently, adding a secured credit card, paying it on-time, and keeping the balance low will help boost your credit score. Although, be sure to read the fine print and check the interest rates before signing up for a secured credit card.

Check Out Your Local Credit Union

These financial institutions may be more willing to work with members who have less-than-perfect credit history. While their offerings vary, some credit unions have unique products that can be tailored for people with poor credit, such as rebuilder loans, which are often structured as a loan that is coupled with a built-in savings component so that the person gradually builds up funds that can act as partial collateral for the loan.

A local credit union may offer more competitive interest rates than a traditional bank, while still offering the convenience of multiple branches and ATM’s.

There are many good resources for learning more about what you can do to protect - or repair -your credit score, including MyFICO.com's Credit Education Center and the FTC's Credit & Loans page.

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