5
steps for improving your credit rating
By Dani
M. Arthur • Bankrate.com
Blotches on your credit
report cost you. But, don't despair. It's never too
late to become credit worthy -- just get started, and
remember that it won't happen overnight.
Here are 5 steps for improving
your credit rating:
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 they're all slightly
different. Yes, different! Creditors don't have to report to all three
credit bureaus, so they typically report to the credit bureau to which
they also subscribe.
Federal
Trade Commission consumer
response center (877) 382-4357
Equifax
P.O. Box 740241
Atlanta, GA 30374-0241
(800) 685-1111
Experian (formerly
TRW)
P.O. Box 2104
Allen, TX 75013-0949
(888) 397-3742
Trans
Union Corp.
760 W. Sproul Rd.
Springfield, PA 19064-0390
(800) 888-4213
Time and money is
wasted, says Steve Rhode, president and co-founder
of Myvesta.org,
if you only order a report from one credit bureau.
You can order a credit report from each bureau for
around $9. Some states cap.
If you've been denied credit,
insurance or employment because of your credit report,
you are entitled to a free copy of your report from
the reporting agency. The company you applied to must
supply the credit bureau's name, address and telephone
number. You have 60 days after receiving the denial
notice to request your copy.
2. Examine your reports
carefully
Nearly every consumer has an error on at least one credit report from
one of the major credit bureaus, says Rhode. Credit bureaus generate
your report on information they receive from your creditors; they don't
verify.
Keeping your credit report
a true reflection of you is -- like it or not -- your
job. Get ready to clean and polish. Carefully look
for everything from typing errors, outdated and incomplete
information to inaccurate account histories. You'll
want to make a thorough list of items you dispute and
why. Be meticulous.
Here's how
to read and understand your credit report.
If the negative information
in your report is true, only time and improved habits
can change that. Late payments and charged-off accounts
remain 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; so consistent on-time bill payments will
improve those blemishes.
3. Double-D strategy
-- dispute and document
Remember, a bad report costs you money. So, it pays to be thorough! 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.
Document, document, document.
Keep copies and records of all the forms, letters and
documentation that you send the credit bureaus, plus
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.
Sometimes it's necessary
to contact your creditors to resolve mistakes. Bankrate's how
to fix your credit report will
help you tackle the serious errors.
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.
4. Solve and dissolve
debt
Now's the time to devise
a spending plan that reduces your debt and
sets you up to pay on time, every time.
If you're having difficulty
making payments, be proactive. Call your creditors
and negotiate to keep your accounts current and from
being reported as delinquent or "bad debt." You
can ask for reduced monthly payments, or even change
due dates to balance out your monthly bills.
The same strategy can be
used for fixed-loan payments. Remember, though, that
this is a short-term strategy. You'll pay more interest
to extend the repayment schedule, but it allows you
to stay current and save your credit rating. Use the
extra money to pay off debts one at a time, gradually
increasing payments to other debts.
Deal with any collection
accounts. Unpaid collections are worse than paid collections.
You can negotiate a pay-off settlement that reduces
your bill, plus demand that all derogatory remarks
are removed from your credit report or at least reported
as paid in full. Be sure to get verbal agreements in
writing before sending off your payment.
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.
Remember that cutting
up the card doesn't close out the account. Here's
a step-by-step
guide to smartly close
out your account.
Other tips:
- Close out your newest
accounts so that you don't lose your longer credit
history.
- Close out accounts slowly
over several months.
- Verify that all accounts
you've closed are reported as "closed by consumer" for
the best report.
- Even if creditors offer
to raise credit limits, allow yourself only moderate
credit limits.
- Keep your balances low
and avoid revolving balances.
5. Add stability to
your credit file
You can also work to add positive information and show stability in your
credit file.
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 bureaus. You can try asking the credit
grantors to report your account information and monthly
payment history to a credit-reporting agency. Not all
will do that. So, in the future, before opening a new
account, ask if your on-time payments will be reported
monthly to a credit-reporting agency, recommends Myvesta.org.
If you have really bad credit
-- perhaps even filed bankruptcy -- don't let your
credit status go dormant. "The faster you begin
to re-establish good credit, where you pay on time,
every time," says Craig Watts, consumer affairs
manager of the Fair, Isaac and Company, "the faster
you'll improve your credit score."
Build a solid credit
history. A secured
credit card offers those
with no credit and those repairing their credit this
opportunity. Shop around for the best deal available,
but limit your applications. Credit bureaus look
at how many new accounts you've opened, and the number
of "inquiries" for new accounts that are
listed. A sudden flurry of "inquiries" results
in a lower score, because many times consumers anticipating
money problems increase their credit lines. Inquiries
made by creditors wanting to make "prescreened" credit
offers are not counted.
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.
Source: Broker Agent
News, 11/03 |
