Okay, last post on this topic – I promise.
Improving your score. First, there is no magic bullet. Credit scores are improved best by prompt payment history over time. Here are some tips to improve your score from www.myfico.com.
1. Check your credit report. You don’t know what’s wrong until you know what’s on it.
2. Pay bills on time. Sounds trite, but it’s true.
3. Reduce debt you owe. Especially credit cards. The lower the balance, the better. Cancelling your credit cards can hurt your score because the score model looks at percentage of credit card debt to available. For example if you have 10,000 available on two cards and a $5,000 balance you have 50% available. If you cancel one of those cards and now have a $5,000 balance and $7,500 total available you only have 33% available and that hurts your score.
4. Get current and stay current. Older accounts with problems hurt you less than newer accounts with problems (but problems are still problems and stay on your credit report for 7 years except bankruptcies and foreclosures which stay 10 years). The more you are current the better your score.
5. Pay off debt rather than moving it around. I hear lots of people open new cards to get a teaser rate and transfer debt. This hurts your score and for most people leads them to increase their debt.
6. Watch inquiries. Don’t do lots of inquiries spread out over a long period of time. If you are buying something like a car, keep the credit inquiries few and close together (a day or two).
Lets say you have a dispute over an error.
Write a letter to both the credit agency and the company you have the dispute with. Here is a sample of the letter’s format: http://www.myfico.com/CreditEducation/Rights/SampleLetter.aspx include copies of documents that prove the error (not originals). Make sure you keep copies of the letter you send and the date. Expect that it will take 30 days or more for anyone to respond. Be prepared to follow up, be persistent but not pushy or angry. The credit agency is required to investigage the issue and render a decision based on their understanding of the facts. If their decision does not go your way, you can have a statement put on the credit report that you disagree with the item on your credit – this may cause some lenders in the future to contact you and get your side of the story.
So that sums up credit. Remember, it’s your credit not the credit agencies so it’s your responsibility to make sure it is as good as you want it to be.