Improving Credit Score
Improving Credit Score
Improving Credit Score: How To Do It?
Although your credit score is a factor in determining your mortgage rate. your credit score also influences rates you get on credit cards and car loans. It can also have an impact on your homeowner's and car insurance rates, and it may even be considered when you apply for a job!
Here are some tips on improving your credit score:
Get a Free Credit Report
Your credit score is only as good as your credit report, and getting a copy is both easy and free. The Federeal Fair Credit Reporting Act (FCRA) requires each of the three major credit reporting companies, Equifax, Experian, and TransUnion, to provide you an annual report at no cost. You can request it in one of three ways:
1) Online at www.annualcreditreport.com
2) By telephone at 877-322-8228
3) By mail at Annual Credit Report Service, P.O. box 105281, Atlanta, GA 30348-5281
Reports are limited to once from each company every 12 months. Otherwise you pay a fee of $10 per report.
In addition to your name. address, Social Security number, and date of birth, be prepared to provide previous addresses if you've moved in the last two years as well as at least one piece of personal information only you would know, such as regular monthly payment amount on a mortgage or auto loan.
AnnualCreditReport.com is set up by the three major credit reporting companies, and it's the only authorized Web site that exists. Other sites may offer a similar service but do so in an attempt to sell you unnecessary services or collect personal information. The official site will never solicit you or sell your name or information.
After you read and understand what's on you credit report, your next steps are to build on the existing good information and to minimize or eliminate the negative.
Fix All Errors and Ommissions
You have the right to dispute the accuracy or completeness of any item in your report. The credit reporting companies are required to update the status, or delete unverifiable information, within 30 days of receiving your request. Use the Request for Reinvestigation form that's provided with your credit report. If not provided, you may obtain one from the agency's Web site. Using these forms speeds up the process. Enclose copies of documents that support your claim.
When sending supporting evidence with your Request for Reinvestigation form, never send the original documnents, and always track your submissions by using certified mail with return receipt requested or a similar service.
If you don't receive satisfactory or timely response, contact the creditor directly and demand that your claim be investigated, copying the credit reporting agency.
Avoid credit repair clinics. At best, they don't do anything you can't do yourself. At worst, these firms charge outrageous fees and suggest potentially illegal practices.
You are allowed a brief statement (100 words or less) explaining any disputed information on your report, but your statement can't just explain factually correct but negative information; you can use this statement only to dispute errors. However, statements to the credit reporting companies are rarely effective. It's usually best to explain negative information directly to a potential creditor.
Add Good Information to Your Report
Yes, you can request that each of the three agencies add information to your file. Although they're not required to do so, they often do if the info can be verified. Focus on missing positive account histories, even if the account is closed. Also add information that explains or corrects potentially negative information.
Creditors care most about demonstrated payment responsibility. Account diversity also matters, as does the extent of historical credit, so an old credit card payment history is well worth the effort to add to your credit report.
Add missing information
Often, you find an account's positive credit history missing on only one or two of the three credit reporting companies. Send a copy of the correct report from the agency with the complete information to the agencies missing it. Include a brief cover letter explaining your request. Copies of monthly statements from the missing creditor make it more likely the information will be added.
Missing or incomplete information on current and prior employers or residences can make it difficult for potential creditors to verify information or obtain a sufficient profile to make a favorable determination. This is particularly important if the job or address change has happened in the last two to three years.
Don't assume the information you've corrected or added will be permanently changed on you report. Sometimes your corrections inadvertently disappear. Review your report at least annually amd more frequently of you know you'll be applying for a large amountof credit sooner than that.
Keep a good mix of accounts
Don't close all your old accounts. A variety of accounts over a long period of time and with proven patterns of borrowing and full repayment creates a favorable credit profile. Closing unused credit accounts decreases your utilization: your ratio of total debt outstanding to available debt. Potential creditors like to see low utilization.
Opening a bunch of new accounts solely to improve this ratio, however, is also a bad idea. The mix of newer and older accounts helps determine your overall creditworthiness. A number of new accounts opened over a short period of time negatively impacts your life.