Credit Scores, Financial Planning, and Rebuilding Credit

In the past couple weeks we’ve taken a look at how credit scores, financial planning, come together in some situations. While credit scores are generally not related to estate planning, they can have a significant impact when it comes to financial planning and your financial options. This is especially true for people who, for example, have gone through bankruptcy or suffered financial hardships and who wants to rebuild their credit scores to a level where they can once again obtain loans or competitive loan rates. Today we’re going to take a look at this idea of rebuilding or repairing credit, and what it’s really all about.

Financial Planning and Your Credit Score

As we mentioned in our previous blogs, credit scores are really only important if you intend to obtain or use any kind of loan or other form of consumer credit. Whether it’s a credit card, car loan, or mortgage, your credit score will play a key role in not only determining whether you can obtain a loan, but also in the kinds of terms you can get with it.

So, for financial planning purposes, understanding what your credit score is and how you can improve on it is absolutely essential. Because lenders will use your credit score as one of the main factors in determining any loan offer they might make you, understanding what your score is and what you might be able to expect will help you plan for future financial situations.

Financial Planning and Rebuilding or Repairing Bad Scores

Some people have low credit scores because of a variety of factors. While we have already discussed the main factors that credit scoring companies used to determine a credit score, the most common reasons that people have low scores is because they have fallen delinquent in making timely debt payments. Whether it’s a few late payments made each year, or a series of late payments made, a history of not paying bills on time will lower your score. Other factors, such as filing for bankruptcy or having some of your debts go unpaid will also negatively affect your score, and do so for years.

So what is someone has a bad or low credit score to do? Sometimes you might hear of companies that offer credit repair or rebuilding services. These companies offer you the ability, they claim, to improve your credit score in a very short amount of time.

In general, companies that offer these kinds of services are not doing anything special, or anything that you cannot do on your own. As long as you make your debt payments on a regular basis and behave like a responsible borrower, your credit score will increase with time. If you have a lot of negatives on your credit report, the time it takes to rebuild your score can be lengthy, but you are typically under no need to hire someone to help you to do it. Rebuilding or repairing your credit score is simply a matter of behaving like a responsible borrower.