What better way to learn how to improve your credit score and repair your history than by getting tips from the people who created the standard by which you are judged. The following tips are from the myFICO site. This is a good article because it’s like the teacher giving you the answers to the exam and these are all doable steps. Most people have one or two things to fix, while others may need to do more work.
The first best steps are:
- Check, read and understand your credit report, it’s quick and easy. Click here to find out how.
- Set a bill pay reminder to make sure you pay your bills on time. We’re all late every once in a while, set up a system that works for you.
- Reduce the amount of debt you owe. It’s easier said than done. Prices are going up and pay isn’t. Use your credit report to prioritize the order to pay your debts. (This will be covered in more detail in a future post). The quick and easy is to pay your highest interest debts first by paying above the minimum.
The next step is knowing how you’re graded:
- Paying bills on time accounts for 35% of your score
- If you miss a payment get current quick. There is a bit of a grace period before it’s reported, so be sure to take care of it when you can.
- Paying off a collection doesn’t remove it from your credit history. Great job getting it paid, but it will stay there for seven years.
- If you’re having trouble making ends meet talk to your creditors to make a plan. Most just want to know you’re committed.
- Amount Owed is 30% of your score
- Keep your credit card balances low.
- Pay off debt versus moving it from one creditor to another (however this is a good way to reduce your interest rate when done correctly).
- Don’t close credit card accounts, this may actually have negative impact on your score.
- The opposite is true too, don’t open new lines of credit in an attempt to improve your score.
- Length of credit history has bearing as well. Not having any debt can be just as bad as having too much debt. You need just enough debt to show you’re a good risk.
- New Credit, such as mortgage shopping, as an impact as well, inquiries to your credit history lower your score
- However, they are so benevolent as to distinguish between a search for the best loan versus random applications for credit (aren’t they kind).
- Checking your own credit report has no impact at all, check as much as you like.
- Type of credit used has a bearing. Using credit cards more than an installment loan for example could have a negative impact. Just be balanced in your approach to borrowing money. Make no mistake a credit card is borrowing money at extremely high interest rates.
The one thing the article doesn’t mention is how to deal with a mistake on your credit history. It does happen. Each of the credit reporting agencies has a process for requesting a correction to your report. It primarily consists of providing them with proof of your side of the dispute. If it’s a creditor but the information being reported is wrong gather your paperwork. If it’s completely erroneous be prepared for a little more of challenge. The creditor has probably erroneously reported you when they meant to report someone else. In which case you will also need to contact the creditor for more information. Hopefully, it’s not a case of identity theft which is drastically much harder to prove and clear up. This begs the question, are credit monitoring companies worth the money? Let’s explore that in another post.
I’m just keeping it new.