Tuesday, November 5, 2013

Raise Your Credit Score In 30 Days!

OK, so you have a little (or maybe not so little) problem with your credit report. All is not lost, but you will have to dedicate some effort and time to "fix or repair" your credit score. Keep in mind that it took more than 30 days to screw your credit score up, so make sure that you follow the basic guidelines of restoring it.

There's a lot of jargon and information you need to know before you start your repair project. Repairing your credit score is not brain surgery but you do need to adhere to some basics in order to accomplish your goal of a higher credit score. There's a lot of misinformation out there about just exactly what a credit score is and how you improve it.

Don't Get Ripped Off

Another problem with credit repair is there are 100's if not 1000's of scoundrels out there that prey on the unsuspecting person with less than stellar credit. They will make unrealistic claims that promise to fix anything for a price. And the worst part is that not only will they take your money, they can actually cause damage to your credit score.

Our less than perfect credit rating system is regulated by the government. Which can be both a good thing and a bad thing. But you should know a few facts and don't get fooled.

You can also get a FREE credit report from all three major credit bureaus. Don't pay for something that you can get for FREE. Go o the Federal Trade Commission's site here to get the full details:

The only catch 22 is that you don't get a credit score with your credit reports. But if you have been turned down by a creditor (or given what you think is an unfair rate) you can request the information from them and they will provide the score they used to determine your rate.

But it's still pretty clear on the credit reports what might be having a negative impact on your credit score. So these reports are the first step in working on raising your credit score.

And keep in mind there are no secrets, no special methods, and certainly no one has any better chance than you, the owner of the credit score, to repair or fix your credit score.

What Is A Credit Score?

A credit bureau, or credit repository, is an entity that gathers information about consumers' credit histories. Your credit history/report includes information regarding the following items:

-- Identity information such as your name, address, social security number, spouse and date of birth.

-- Payment habits such as how promptly you have made payments to previous creditors.

-- Public records such as records of arrests, indictments, convictions, lawsuits, tax liens, marriage, bankruptcies, and court judgments.

-- Debts.

-- Other relevant credit data Information concerning your current employment such as the position you hold, length, and possibly your income.

-- Information about your personal history such as the number of dependents you have, your previous addresses and information about your previous employment.

Credit bureaus sell credit reports to credit grantors, such as banks, finance companies, and retailers. Credit grantors use credit reports to determine whether or not a potential borrower is creditworthy.

There are three major credit bureaus in the United States:

* Equifax: 800-685-1111

* Experian: 888-397-3742

* Trans Union: 800-916-8800

These three bureaus provide nationwide coverage of consumer credit information. The credit bureaus are a for-profit system that generates billions of dollars in revenue each year from selling copies of credit reports to creditors and mailing lists. Trans Union made 1.5 BILLION dollars last year.

It is essential to understand that Credit Bureaus are nothing more than record keepers, and sometimes not very good ones. Consider the fact that these organizations are tracking millions of people with up to 40-50 entries per individual. In all fairness, I can't even type a letter without making a couple of typos.

So mistakes happen, wrong information gets into the wrong file, and all three credit bureaus don't talk. They are competitors so they don't share information and all three can generate a different score. They all loosely base these scores on the FICO method.

FICO scores are based on 22 pieces of data collected by the three major credit bureaus. The lowest possible score is 300, while the highest is 850. None of the credit bureaus will apply these methods exactly the same and also may not have the same data so it's common to get a different score from each one.

The lending companies (or creditors) will usually use this FICO based score provided to determine the risk of lending money or granting credit. The higher your score, the less risk, so the lower the rate. The difference in credit cost can be dramatic. If you are applying for a $216,00 mortgage and have a score of 630, your rate could be $1568 per month at 7.89%. If your rate was 680, you could get a rate of $1394 at 6.7%. That's a $2100 per year difference so you can see how 50 points can have a big impact on your credit cost.

Basic Repair/Fixing Methods

You often hear that you should dispute (challenge) any and all negative information. But most people don't know or advisors fail to mention that the creditor and the credit bureau may declare the disputes "frivolous" and not have to respond. So before you go crazy on disputes, keep that in mind. Many of the negative items do have a time limit imposed, depending on the item. Here's a good set of guidelines on what to challenge:

-- Information is not based on you (mistaken identity)

-- Information is inaccurate based on what actually occurred.

-- Information is outdated - there was an issue but it has been resolved.

-- The time limit on the information has occurred.

-- The information is totally incorrect with no valid basis

So once you have requested your FREE copies of your credit reports, you need to review them to find any inaccurate or false information. When you find a negative entry that you want to dispute, you need to send a letter of dispute, or file the dispute on line directly from the credit bureau website. Some say the online method is much quicker and since USPS does take days it probably is faster. The credit bureau has up to 30 days to verify the dispute with the filer of the negative information. If you forget to give all the necessary information and they request more information they can get an additional 15 days (total 45).

You can get a sample credit dispute letter here: www.newcleancredit.com/creditdisputeltr.pdf. So it's important to make sure you provide all required information to shorten the process. Once filed the credit bureau will respond to you with the results.

The good news about our credit reporting system is that time marches on and you can start improving your credit score immediately. Most experts in the financial industry agree that the last 18 months is the most important. Try and negotiate any negative items that are true (bring payments up to date, settle old claims, work out new payment plans, whatever). Most creditors will be more than willing to work with you if you make an honest effort in resolving the negative issue. But make sure the creditor agrees to update your credit record.

You can also make sure any good credit information is listed. If you have credit experience that is favorable, write or contact the creditor and as to have it added to your credit report. Many times good information is never reported. You can also open new credit accounts from creditors and pay them off early (even if you have the money to pay cash) to get addition good credit entries.

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