Five Steps For Improving Your Credit Score

5 Steps For Improving Your Credit Rating

Errors on your credit report can cost you. But, there are ways to improve your credit rating. It’s never too late – just get started and remember that it won’t happen overnight

1. Order Your Credit Reports

Find out what the top three credit bureaus – Equifax, Trans Union and Experian – are saying about you. It’s likely that there could be slight differences between all three. Creditors don’t have to report to all the credit bureaus, so they typically report to the credit bureau to which they subscribe.

Thanks to a new federal law enacted in 2005, you are now entitled to one free credit report from each of these credit reporting agencies per year.

The reports will not automatically be sent out. Each consumer must request their reports one of three ways.

            1. Go to www.annualcreditreport.com, which is the ONLY authorized source online to access your credit report.

            2. Call 1-877-322-8228

            3. Complete the form on the back of the Annual Credit Report Request brochure and mail to:

                        Annual Credit Report Request Service

                        P.O. Box 105281

                        Atlanta, GA 30348-5281

The new rule doesn’t replace the other ways to receive a free credit report. You are still entitled to a free credit report if:

• you’ve been denied credit
• denied insurance or employment based on your credit
• you’re applying for unemployment or receive public assistance
• and, you currently reside in a state that already offers an annual free credit report from each credit reporting agency (CO, MA, MD, ME, VT and GA).

2. Examine Your Reports Carefully

Nearly every customer has an error on at least one credit report from one of the major credit bureaus. Credit bureaus generate your report on information they receive from your creditors; they don’t verify the information.

Remember, a bad report costs you money. You can either complete the dispute form provided with your credit report or write a letter. Clearly identify each mistake and state why it’s wrong. A recommendation is to send a photocopy of your credit report with the mistakes circled to the reporting credit bureau. Include copies of supporting documents.

Now is the time to devise a spending plan that reduces your debt and sets you up to pay on time, every time.

You may have been denied credit because of an insufficient credit file, yet you have credit. Some creditors-such as travel, entertainment, gasoline card companies, local banks and credit unions- may not report your credit history to the credit bureau. Before opening a new account, ask if your on-time payments will be reported monthly to a credit-reporting agency.

And lastly, open a savings account at your bank. This shows creditors that you are working to save and that you have reserves to repay debts.

If the negative information in your report is true, only time and improved habits can change that. Late payments and charged-off accounts stay on your report for seven years; bankruptcies for 10. Most creditors, however, look for a pattern of payment rather than focusing on one-time or rare occurrences. Consistent, on-time bill payments will improve those blemishes.

Carefully look for everything from typing errors, outdated and incomplete information to inaccurate account histories. You will want to make a thorough list of items you dispute and why. Be meticulous.

4. Solve and Dissolve Debt

If the credit bureau makes any changes to your credit file, it will send you the results and a free, updated copy of your credit report. Once a negative item is removed from your report, the credit bureau cannot put it back on unless a creditor verifies its accuracy and completeness, and sends you written notice.

Keep copies and records of all forms, letters and documentation that you send the credit bureaus along with the dates sent. The credit bureau must investigate any relevant dispute within 30 days of receiving your letter. Any item that is not verified as accurate by a creditor is removed.

5. Add Stability to Your Credit File

Slowly close out unneeded or unused credit accounts. Most experts recommend carrying between two and four major cards. But, be cautious when canceling because closing accounts can negatively impact your credit score, commonly called a FICO score. FICO considers the ratio of total debts to total available credit. A good rule of thumb is to keep your revolving debt to 50 percent of your available credit.

The same strategy can be used for fixed loan payments. Remember that this is a short-term strategy. Deal with any collection accounts. Unpaid collections are worse than paid collections. You are able to negotiate a pay-off settlement that reduces your bill, plus demand that all derogatory remarks are removed from your credit report or at least mark them as paid in full. Be sure to get verbal agreements in writing before sending off your payments.  Get the name of the person you are speaking with and keep detailed notes.

If you’re having difficulty making payments, be proactive. Call your creditors and negotiate to keep your accounts current. You can ask for reduced monthly payments, or even change due dates to balance out your monthly bills.