How To
Improve Your Credit (FICO) Score?
Your
credit score is constantly changing as your credit report
information is always changing. Unless you have incorrect
information showing on your report, taking steps to improve your
credit report may not significantly or immediately impact your
credit score since the scoring models study patterns of credit
behavior over time.
Keep
in mind that as negative information ages, it has less importance.
It usually takes one full year of good credit behavior to see a
significant change in your credit score. This means you should
exhibit a full year of responsible payment behavior in your credit
report -- specifically, conservative use of credit, paying on
time, and not requesting too much credit during a short period of
time.
Here
are some general tips on how to improve your credit history,
which, if you follow these tips over time, will improve your
credit score
1. Review Your Credit
Report
Reviewing Your Credit Report Puts You In Control. You have to know
what's there before you can make it better. There are three major
bureaus: Equifax, Experian, and Trans Union. It is recommended
that you get all three or a consolidated credit report because
many mortgage lenders will obtain data from all three of these
bureaus in analyzing your credit history. The cost for all three
is typically only $22.00. By making sure that only your accurate
credit history appears on your report, you ensure that the credit
score it generates isn't lowered by inaccurate information.
Checking your credit report on a regular basis allows you to stay
on top of what credit grantors will read about you when they check
your credit history, and enables you to correct any inaccuracies
and catch fraud before these problems impact your loan. Real
Estate for sale.
2. Correct Errors on Your
Credit Report
You have
to make sure all information on your credit report is complete and
correct. For example, if you have paid off an account but it is
still listed, make sure the report lists a zero balance. In
particular look for:
-
Incorrect or incomplete name, address or phone number
-
Incorrect social security number or birth date
-
Incorrect, missing, or outdated employment information
-
Incorrect marital status -- a former spouse listed as your
current spouse
-
Bankruptcies older than 10 years or not identified by the
specific chapter of the bankruptcy code
Lawsuits or judgments older than seven years
-
Paid
tax liens older than seven years, delinquent accounts older than
seven years or accounts that omit the date of the delinquency
-
Credit
application inquiries older than two years
-
Unauthorized credit (not promotional)
inquiries--credit-reporting agencies usually do not remove these
at a consumer's request, but it never hurts to ask
-
Co-mingled accounts -- credit histories for someone with the
same name or similar social security number
-
Duplicate accounts; premarital debts of your current spouse
attributed to you.
-
Lawsuits you were not involved in
-
Incorrect account histories -- such as a late payment notation
when you paid on time or a debt shown as past due when it was
discharged in bankruptcy
-
Paid
tax, judgment, mechanic's or other liens listed as unpaid
-
A
missing notation when you disputed a charge on a credit bill
-
Closed
accounts incorrectly listed as open
-
Accounts you closed that that don't indicate, "closed by
consumer"
-
Incorrect aliases
A few other things to
remember:
-
Accounts that have been paid off can still be listed on your
report, although they should indicate that you've paid them off.
-
If
you've been through bankruptcy, both the public record
information about the fact that you've been through bankruptcy
can be listed and the individual accounts that were discharged
may also have a notation that they were discharged may also have
a notation that they were included in your bankruptcy.
-
Information about accounts you share, or used to share, with a
spouse will be listed in both your reports.
-
Many
people incorrectly assume that if they have paid off a past-due
debt, the old negative information will be removed. It will
remain on the credit report for up to seven years.
-
Once
you've compiled your list, complete the request for
reinvestigation form that came with your credit report or type a
letter describing every problem. Send your letter to the address
provided by the credit-reporting agency for disputing
information. Enclose copies of any documents you have that
support your claim. Keep in mind that any corrections you make
to your report takes 30 days to take effect.
3. Add Information Showing
Stability
Creditors
like to see evidence of stability in your file. If any of the
items listed below are missing, send a letter to the credit
reporting agencies asking that the information be added. Enclose
any documentation that verifies information you're providing,
-
Current
employment -- employer's name and address and your job title
-
Previous employment if you've had your current job less than two
years.
-
Current
residence, and if you own it.
-
Previous residence if you've been at your current place under
two years.
-
Date of
birth
-
Credit
reporting agencies aren't required to add this information, but
they often do.
4. Avoid Unnecessary
Inquiries
Every
time you apply for credit, or your credit report is accessed for
another reason, that fact will be listed on your credit report as
an inquiry. Many inquiries make it appear that you are shopping
for credit, which indicates that you anticipate the need for many
lines of credit. Inquiries for pre-approved credit card offers you
didn't accept, as well as inquiries created when you review your
own credit report, will not count against you. Homes for sale.
5. Do Not Close Unneeded
Accounts
Closing unused accounts helps your credit is one of the biggest
myths in credit repair and lending today. For example, lets assume
you have 3 credit cards each has $1,000 credit limit for a total
of $3,000. Lets also assume you have reached your $1,000 credit
limit with one credit card issuer, have a $500 balance on your
card with another and zero as a balance with the third, for a
total of $1,500 of your $3,000 available credit used. If you close
the $1,000 credit card your not using, you have just reduced your
available credit to $1,500. Now your at 100% of your available
balance vs. 50% if you had left the card open and unused. This
could have a detrimental impact on your credit (FICO) score. Not
to mention, you have removed an available "trade reference or
trade line" for a lender to use to establish a pay history. Most
lenders require a minimum of two to four trade lines open for a
minimum of 12 to 24 months.
6. Build a Great Payment
History
It goes
without saying that paying your bills on time is the key to a
great credit rating. While there's not much you can do to remove
accurate late payment information, you can start mailing every
single payment on time from here on out. Negative information
loses its potency over time: a recent late payment is weighted
more heavily than a late payment four years ago.
7. Pay Off Credit Cards
This shows you use credit wisely and aren't spreading yourself
thin. Keep your credit limits and outstanding balances down.
Conservative use of credit is important. DO NOT CLOSE THE PAID ACCOUNTS!
8. Keep Credit Card
Balances Low
If you
carry a balance, you should keep it low. For a good credit score,
you should keep your account balances below 50% of your available
credit. For example, if you have a $2000 credit limit, you should
have a balance of no more than $1000.
9. Take Care of Collection
Accounts
Make
sure collection accounts are paid and listed as paid on your
credit report. You may be able to negotiate a reduced settlement
with the collection agency to get a debt paid, but there may be
consequences. Depending on your individual situation we may advise
you to wait to pay these accounts at closing. Paying these debts
before closing on your loan may lower your score. Also having
collection accounts may not prevent you for obtaining a mortgage
loan. Some lenders may allow you to leave open collection
accounts. Real Estate for sale.
10. Satisfy Any Public
Records
Satisfy
any public records, such as tax liens or judgments. Consult your
loan officer at Aggressive Mortgage before paying your judgments
and other public records. Depending on your individual situation
we may advise you to wait to pay these accounts at closing. Paying
these debts before closing on your loan may lower your score.
By law you can order your credit reports at least
once a year for FREE. This will allow you to see exactly what's
being reported about you by the credit bureaus.
EQUIFAX INFORMATION SERVICES, LLC
P.O. Box 740256
Atlanta, GA 30374
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TRANS-UNION, LLC
Post Office Box 2000
Chester, PA 19022
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EXPERIAN INFORMATION SOLUTIONS, INC.
National Consumer Assistance Center
P.O. Box 2104
Allen, TX 75103
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