7 Steps to Better Credit

Your Credit score (also known as a FICO score) is a number that views how banks, mortgage companies, credit card companies, and even employers see you. The interest rate you get with a lending institution will weight heavily on your FICO score. Understanding what is on your credit report and correcting any errors will save you lots of headaches when you get ready to make a major purchase. Follow these simple steps to improve your credit score now!

Obtain a FREE copy of your credit report from each of the 3 credit reporting agencies. Federal law entitles you to a free copy of your credit report annually. Go to http://www.annualcreditreport.com/ to obtain your credit reports. If you have already received your free credit reports, you can go to each of the credit reporting agencies websites and request your copy there. There will be a small charge associated with the credit reports you get from the credit reporting agencies.

There are 3 major credit reporting agencies:

TransUnion

Equifax

Experian

Look through each page in your credit report to find any inaccuracies. Any delinquencies from loans or credit cards are reported a maximum of 7 years. Bankruptcies, tax liens, and judgements can be reported up to 10 years. Check any account balances, collections, dates that appear incorrect.

If you find inaccuracies, your first order of business would be to dispute these directly with the credit reporting agency where the error occurred. If the same error is on more than one credit report, you must send a letter to each credit reporting agency where the error occurred. Send each letter certified mail, return receipt. The law states that the credit reporting agencies must verify with the creditors' in question that what they are reporting is accurate. If there is an error, the credit reporting agency must correct the error within 30 days or remove the offending data from your credit report.

Pay Your Bills on Time. I know this goes without saying, but it bears repeating. Paying one credit card past the 30 day late mark can tank your score by 50 points or more! 35% of the overall fico picture is how you pay your bills.

Keep those balances low. FICO wants to see the amount of your credit card balances below 30% of the overall credit line. If you are maxed out on all of your credit cards, even though you are paying your bills on time, you can still have a low FICO score.

Do not close old credit cards. That very first credit card you opened on your first day of college can keep your credit score strong. Age of your credit history plays an important part in the credit scoring model. If you start closing old, unused cards, you will cut your credit age to that of your next oldest card.

Use your cards sparingly. We know you should keep your balances below 30% of your total credit line. You should also rotate your cards so FICO can see some activity at least once every 6 months. Experience has shown that a maximum of 4 cards should show a small balance at the time you receive your bill, which is typically when the credit card companies report your balance and payment history to the credit bureaus. If you always pay in full every month, the credit card companies can still report a balance to the credit bureaus because they typically do so as soon as they cut your statement. I have found that only a select few credit card companies don't report every month.

Following these tips monthly will do wonders for your FICO score and overall credit picture. Good luck and please contact me if you have any questions or need additional assistance!