5 steps to do-it-yourself credit
By Dani Arthur Bankrate.com
Blotches on your credit report cost
you. But, don't despair. It's never too late to become credit
worthy -- just get started, and remember that it won't happen
Here are 5 steps for improving
your credit rating:
1. Order your credit reports
Find out what the top three credit bureaus -- Equifax, TransUnion
and Experian -- are saying about you. It's likely that they're
all slightly different. Yes, different! Creditors don't have
to report to all three credit bureaus, so they typically report
to the credit bureau to which they also subscribe.
Useful phone numbers and addresses
Federal Trade Commission consumer response center (877) 382-4357
P.O. Box 740241
Atlanta, GA 30374-0241
Experian (formerly TRW)
P.O. Box 2104
Allen, TX 75013-0949
Trans Union Corp.
760 W. Sproul Rd.
Springfield, PA 19064-0390
Time and money is wasted, says Steve Rhode, president and co-founder
of Myvesta.org, if you only order a report from one credit bureau.
You can order a credit report from each bureau. Costs vary from
state to state, but in most states, it costs around $9 to get
If you've been denied credit, insurance
or employment because of your credit report, you are entitled
to a free copy of your report from the reporting agency. The
company you applied to must supply the credit bureau's name,
address and telephone number. You have 60 days after receiving
the denial notice to request your copy.
2. Examine your reports carefully
Nearly every consumer has an error on at least one credit report
from one of the major credit bureaus, says Rhode. Credit bureaus
generate your report on information they receive from your creditors;
they don't verify.
Keeping your credit report a true
reflection of you is -- like it or not -- your job. Get ready
to clean and polish. Carefully look for everything from typing
errors, outdated and incomplete information to inaccurate account
histories. You'll want to make a thorough list of items you
dispute and why. Be meticulous.
Here's how to read and understand
your credit report.
If the negative information in your
report is true, only time and improved habits can change that.
Late payments and charged-off accounts remain on your report
for seven years; bankruptcies for 10. Most creditors, however,
look for a pattern of payment rather than focusing on one-time
or rare occurrences; so consistent on-time bill payments will
improve those blemishes.
3. Double-D strategy -- dispute
Remember, a bad report costs you money. So, it pays to be thorough!
You can either complete the dispute form provided with your
credit report or write a letter. Clearly identify each mistake
and state why it's wrong. A recommendation is to send a photocopy
of your credit report with the mistakes circled to the reporting
credit bureau. Include copies of supporting documents.
Document, document, document. Keep
copies and records of all the forms, letters and documentation
that you send the credit bureaus, plus dates sent. The credit
bureau must investigate any relevant dispute within 30 days
of receiving your letter. Any item that is not verified as accurate
by a creditor is removed.
Sometimes it's necessary to contact
your creditors to resolve mistakes. Bankrate's 7 steps to fixing
your credit report will help you tackle the serious errors.
If the credit bureau makes any changes
to your credit file, it will send you the results and a free,
updated copy of your credit report. Once a negative item is
removed from your report, the credit bureau cannot put it back
on unless a creditor verifies its accuracy and completeness
-- and sends you written notice.
Looking for a better credit card? Check rates in your area.
4. Solve and dissolve debt
Now's the time to devise a spending plan that reduces your debt
and sets you up to pay on time, every time.
If you're having difficulty making
payments, be proactive. Call your creditors and negotiate to
keep your accounts current and from being reported as delinquent
or "bad debt." You can ask for reduced monthly payments,
or even change due dates to balance out your monthly bills.
The same strategy can be used for
fixed-loan payments. Remember, though, that this is a short-term
strategy. You'll pay more interest to extend the repayment schedule,
but it allows you to stay current and save your credit rating.
Use the extra money to pay off debts one at a time, gradually
increasing payments to other debts.
Check out Bankrate's 10 steps to
paying off credit cards for more ideas.
Deal with any collection accounts.
Unpaid collections are worse than paid collections. You can
negotiate a pay-off settlement that reduces your bill, plus
demand that all derogatory remarks are removed from your credit
report or at least reported as paid in full. Be sure to get
verbal agreements in writing before sending off your payment.
Slowly close out unneeded or unused
credit accounts. Most experts recommend carrying between two
and four major cards. But, be cautious when canceling because
closing accounts can negatively impact your credit score, commonly
called a FICO score. FICO considers the ratio of total debts
to total available credit. A good rule of thumb is to keep your
revolving debt to 50 percent of your available credit.
Remember that cutting up the card
doesn't close out the account. Here's a step-by-step guide to
smartly close out your account.
Close out your newest accounts so
that you don't lose your longer credit history.
Close out accounts slowly over several months.
Verify that all accounts you've closed are reported as "closed
by consumer" for the best report.
Even if creditors offer to raise credit limits, allow yourself
only moderate credit limits.
Keep your balances low and avoid revolving balances.
5. Add stability to your credit file
You can also work to add positive information and show stability
in your credit file.
You may have been denied credit
because of an insufficient credit file, yet you have credit.
Some creditors -- such as, travel, entertainment, gasoline card
companies, local banks and credit unions -- may not report your
credit history to the credit bureaus. You can try asking the
credit grantors to report your account information and monthly
payment history to a credit-reporting agency. Not all will do
that. So, in the future, before opening a new account, ask if
your on-time payments will be reported monthly to a credit-reporting
agency, recommends Myvesta.org.
If you have really bad credit --
perhaps even filed bankruptcy -- don't let your credit status
go dormant. "The faster you begin to re-establish good
credit, where you pay on time, every time," says Craig
Watts, consumer affairs manager of the Fair, Isaac and Company,
"the faster you'll improve your credit score."
Build a solid credit history. A secured credit card offers those
with no credit and those repairing their credit this opportunity.
Shop around for the best deal available, but limit your applications.
Credit bureaus look at how many new accounts you've opened,
and the number of "inquiries" for new accounts that
are listed. A sudden flurry of "inquiries" results
in a lower score, because many times consumers anticipating
money problems increase their credit lines. Inquiries made by
creditors wanting to make "prescreened" credit offers
are not counted.
Lastly, open a savings account at
your bank. This shows creditors that you are working to save
and that you have reserves to repay debts.