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4 Steps to Improving your Credit Score

Though the mistakes people make in handling their credit is well documented no one argue that good credit is vital. A good credit score is a stepping stone to many advantages in wealth creation. Here are a few credit basics to improving or maintaining your score.

Step 1: Go directly to the source to see what exactly your credit is. You will want to pull all three credit reports from www.equifax.com, www.transunion.com, and www.experian.com. These are the bureaus that your creditors report to and you will need to investigate all three to determine what incorrect and derogatory items you have.

Make sure that you get both your credit report and score. Do not waste your time with a so called free credit report service as those are usually a waste of you time. They are usually trying to sell you into some monthly credit monitoring plan that is expensive and unnecessary.

When you receive your three reports take the time to review each one individually. Each credit repository reports your score based on a different matrix and some creditors do not report to all three bureas. Make note of any item that is reflecting as late or is listed as a public record.

Step 2: Dispute. When you begin the dispute process always write your dispute letters in your own words. Do not use the forms provided by the bureaus. Disputes are handled by real people and should be treated as such. Employees at credit bureaus are trained to sniff out credit repair companies and false disputes so you are always better off putting the dispute into your own letter in your own words.

Challenge all the inaccurate information on your report. It can make a huge difference in credit score very quickly. If there are derogatories on you report that are in fact yours then it is best to begin by contacting the creditor directly. Creditors will often remove derogatory information at the request of a current client. Sometimes putting pressure on them to act in your behalf by threatening to close the account if you are not satisfied will produce quick results.

Step 3: Wait it out or pay it off. Something to be aware of is that almost all derogatory credit “falls off” a report after 7 years. If you have credit issues that are old you may be better off waiting for those to come off by themselves rather than investigating them. The 7 year waiting period is from the last activity on the account. I have seen credit situations that reactivated because a dispute was issued on an old item. If this happens and the item is found to be valid then your score will drop and the clock will reset for 7 more years.

You can see an immediate benefit to your score by adjusting the balances of your credit cards. A good rule of thumb is to never allow your cards to go over 50% of available balance and preferable 30%. Having one card at zero and another maxed out will cause a lower score than having each card at 30% of max. Transfer part of the balance onto that card with zero and balance your accounts.

Step 4: Be cautious in establishing new credit and especially don’t close old accounts. It’s important to know that one of the major contributing factors in your credit score is the length of time that credit has been established. Older accounts, even ones you’ve not used, will positively effect your score. Newer accounts will skew the average and lower your score.

By applying these basic steps you can fix or maintain your credit. Though it is not an easy task it is worth the effort. There are some cases where using a reputable credit repair agency is helpful but first apply these simple steps that I’ve outlined here and you’ll be on your way to great credit and financial security.

Wednesday, July 30th, 2008 at 7:31 pm and is filed under Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.