Is it Time to Fix Your Credit?

As is often times the case, even things as dire as today's credit crunch have a silver lining. And in the case of the credit crunch, the lining is that the cost of big ticket items are falling. Plummeting interest rates with already lower asking prices work together to make now one of the premier times in decades to purchase a home or a new car.

But there is a catch.

Not everybody can take advantage of this opportunity. Credit is harder to come by, hence the term "credit crunch". After years of reckless lending resulting in a record number of defaulted loans and foreclosures, lenders have been forced to be more conservative in their lending practices. Today, they are only able to extend credit to the least risky consumers.

Lenders largely determine credit risk by looking at your credit score. A low credit rating tells them that you cannot be counted on to repay your debts on time and maybe not at all. As a result lenders will deny credit to people they feel are too high of a credit risk, and charge higher interest rates to those who are a moderate risk to make sure they can still turn a profit even if a small percentage of those people default on the loan.

Today, lenders tolerance for credit risk is much lower than in previous years. A credit score in excess of 750 is now required by many lenders to get approved for a loan with the best interest rate and the best terms. Anything lower than that, and you have to pay extra. Too far below that and you run the risk of being denied for credit altogether.

But what happens if your credit score says you are a poor credit risk, even though you really aren't?

Credit reporting errors, flawed scoring models, and irrelevant credit listings combine to give many people credit scores that are not indicative of their true credit worthiness. They are dependable consumers, but their credit scores tell a different story. For people in this situation, fixing their credit score may be the best option for getting the credit rating they deserve.

So if your credit is holding you back, don't just sit idly by and wait for it to get better on its own. You have the right to a fair and accurate credit score and there are steps you can take to legally fix your credit. Take action today and you may even be able to benefit from the credit crisis.