How to improve your credit score?
With the economy being in the worst shape since the great depression and financial institutions tightening standards for credit, maintaining excellent credit is now at the top of the list for everyone. Whether you are planning to buy a new car, applying for a lower interest rate on your credit cards, financing a new home, or refinancing your existing home, now is time to boost your FICO score. With the economy expected to remain in a recession for the remainder of 2009, you can now take the time to sit down to review your credit history and take some steps to boost your score, and more importantly, prepare yourself for the much antcipated rebound. Here are some simple tips, complied by the Fair Isaac Corporation, to help you take a proactive approach to managing and boosting you FICO score:
- Make all of your payments on time. Roughly, thirty-five percent of your credit score is payment history. Avoid being delinquent by paying at least the minimum monthly payment if your money is tight. With the newest version of the Fair Isaac’s score set to roll out in 2009, which is more sensitive to payment history, an overdue bill can significantly lower your score.
- Keep credit card balances low. You credit score receives a boost when your available credit balance is below 70 percent. If your credit card balances are near their credit limit, try to consolidate to the card with the largest available limit to stay below the 70 percent threshold or start a financial plan to make debt reduction a priority.
- Keep your debt reasonable. Opening too many new credit accounts can have a negative effect on your credit score, so be cautious about opening too many accounts.
- Know your FICO score. While there are many companies offering credit score online, FICO is the score trusted by 90 percent of the largest financial institutions. Check your score today to get FICO® Score & Credit Report
- Order a free copy of your credit report from each nation credit-reporting agency through annualcreditreport.com, and review your credit history for errors. Roughly, one out of every four-credit reports has an error which could result in a lower credit score, according to the 2004 study from the U.S. Public Interest group.
- New-Contact your local bank or credit union and ask if you are eligible to receive your FICO score free every month. Currently, in excess of one million consumers have access to their credit score on their online statements.
By proactively managing your FICO score and taking control of your credit situation, you can improve your chances to buy that new car, apply for a lower interest rate on your credit cards, finance a new home, or refinance your existing home.
For those of you, who are just curious to what your credit score is, try the online credit-score simulators at the following websites:
Credit Repair
The most common question asked by friends, family, and clients: What is the best time to start the credit repair process? The rule that I have establish and tell everyone, is to start the credit repair process once your financial difficulties that cause your credit history problems is behind you, that is the time to start rebuilding your credit. If you have recently filed for bankruptcy and/or currently going through foreclosure process, wait until the process has been resolved. Generally, you should start the rebuilding process within 12 to 18 months after conclusion, even though a bankruptcy and/or foreclosure could remain a negative mark on your credit report for up to 10 years. Note: Most credit bureaus delete all items after seven or 10 years with the exception of unpaid judgments. You should begin your credit repair process by doing the following things first:
- Obtain a copy of your credit report from the big three credit reporting bureaus in order to review your report for errors, accuracy of negative information, and for missing positive information.
- If you wish to obtain a copy annually go to annualcreditreport.com
- Dispute incomplete and inaccurate information; correct any errors that you find.
- Add missing positive information to your report.
- Maintain all accounts that you still have current.
- Start developing good money management skills.
- Learn personal finance skills free at Mint.com
Alternatives to DIY Credit Repair
Many individuals find credit repair difficult or do not take the time to repair their own credit. Additionally, many of you have undoubtedly seen or heard ads for nonprofit debt relief counseling agencies that pretend to be Credit Counselors or Budget and Credit Counselors who claim they can fix your credit, qualify you for a loan, or get you a credit card. While their sales pitches sound inviting, especially if you are desperate for a new house or car. You should avoid these outfits at all cost, as they are advocates for your creditors. These agencies make standard arrangements with your creditors to manage your payments of approximately 80% of your debt spread out over time often up to six years. They then turn around and make the same deal to you, but for 90% percent of the value, pocketing the 10% difference. Secondly, they charge you for what you could do yourself. Third, many of their practices are fraudulent, criminal, or illegal. Lastly, debt management programs have no consumer protection if you miss a payment. Additionally, debt management programs require that you pay your debt back in full and a creditor may pull the plug on your plan at any time. At this point, you may ask yourself, if credit repair agencies are not the best choice to correct your credit situation, what should you do? The answer is to continue reading Overindebted.com. If this has not persuaded you from using a credit repair agencies, please adhere to the following:
- Contact your local Better Business Bureau and state consumer affairs office. Ask for a list of complaints on file for the company.
- Contact the National Fraud Information Center (NFIC) at 800.876.7060 or by going to the NFIC to find out if any complaints or legal actions have been taken against the credit repair agencies.
- Ask to see a copy of the contract before your agree to sign. Look closely at the fees, what they claim they can do, and your right to a refund.
- Ask if the agency is bonded. A legitimate company will give you the name of their bonding company.
- Avoid companies with money-back guarantees.
- Do not give the credit repair agency money up front.
- Lastly,do your due diligence and review our article on Debt Management Companies
Remember you may not be charged until the agency has completed all the services in their contract.
The Credit Repair Organization Act
The federal Credit Repair Organization Act (CROA) was signed into law in 1996 and enforced by the Federal Trade commission (FTC). The CROA was designed to help consumers make informed decisions when rebuilding credit and to prevent abuses by credit repair firms. The main purpose for the CROA was to regulate for-profit credit repair clinics; however, many clinics today try to get around these regulations by setting themselves up as nonprofit. Don’t be fooled by the nonprofit status, this alone should not lull you into a sense of security about their motivations. These firms will take your money, provide poor results, and/or do nothing for you that you could not do for yourself. Be wary of advertisements that promise easy solutions to debt. Those so credit consolidators and credit/debt repair experts may end up causing you more harm than good. Read full article...