Read these 19 Rebuilding Credit Tips tips to make your life smarter, better, faster and wiser. Each tip is approved by our Editors and created by expert writers so great we call them Gurus. LifeTips is the place to go when you need to know about Credit Report tips and hundreds of other topics.
If you are contacted by someone claiming they can help fix your credit report score quickly, don't always trust them. There are a lot of scams out there to take money from unsuspecting victims. There is no quick and easy way to fix your credit report score. In most cases, it just takes time to get an improved credit score.
On the other hand, sometimes you can go through a process known as rapid rescoring by working with a mortgage lender or broker. You will have to pay a fee and wait a few days, but it is possible to legitimately remove some inaccurate items. It is particularly useful when trying to get approved for a mortgage loan and you need to improve your credit score.
The best way to improve credit score is by gaining control over your financial situation. If you have too much debt, look at the assets you have available to help you pay off the debt. You may look at getting a home equity loan to consolidate loans and credit cards into one payment. This could also get you a lower monthly payment, a lower interest rate and a longer term to repay the debt. A home equity provides you with another advantage since it may be tax deductible.
Some financial institutions found on the Internet may offer online credit scores. This may be enticing since knowing your credit score can help you determine if you will be able to get a loan, credit card or some other financial product. Remember that your credit score will be from one of the three credit reporting agencies and the information they have may vary. Your credit score will vary for each credit bureau because of the different information that may be reported on each, as well as the fact that they each use a different formula.
The process to improve credit rating is not easy. If there are inaccuracies on your credit report, you should contact each creditor and work with them to fix it. You also need to contact the credit reporting agency and notify them of the error. While you could work only with the credit reporting agency to dispute the error, it doesn't hurt to also contact the creditor. If it turns out that the information on your credit report is correct and you just have bad credit, your best bet to improve your credit rating is to contact the creditor and see if you can work something out to make good on the debt.
Bad credit – while not ideal – is not the end of the world. You can fix credit by making payments on time, as well as paying off collections and chargeoffs. If you have a lot of debt, you also need to reduce it, so it doesn't appear like you have more debt than you can handle. Potential creditors do not like to see that you are maxed out on your credit cards and that you have too many credit cards. When looking to fix your credit, don't expect it to be a quick process. It will take time to repair all of the damage.
Improving your credit report can be time consuming and, if you're not careful, expensive. There are many companies that claim they can help you clean up your credit. This may not be true. You can work with credit counselors who can help you better manage your debt, but there is no sure fire way to fix your credit overnight. Improving your credit report can take a long time. Not only does it take a while to correct mistakes on your credit report, but if you have negative items it will take awhile to improve them. During the process of improving your credit, do not make things worse by having more negative items appear on your report because you fail to pay as required. Make a commitment to improving your credit and follow a plan to make it a reality.
When considering how to improve bad credit, start by identifying what the items are. A bankruptcy, for example, is something you can't change. In fact, it can remain on your report for up to 10 years (depending on which type you filed). Other items, like collections and chargeoffs (bad credit considered uncollectible), may remain on your credit history even after you have paid them off. In cases like this, you can contact the creditor and explain you want to do a repair credit report. They may be willing to update the information and remove the negative. Whether or not they will change your credit report to remove the negative is ultimately up to them so don't count on getting it off there.
Cleaning up your credit report starts with a review of your credit history. Know what's on it and determine what you need to fix. Then, rebuild your payment history by making all payments on time. Don't apply for any credit cards or loans that will add an additional inquiry to your record. If negative items have been on your credit report longer than required, contact the credit reporting agency to request they be removed.
Free credit scores are available through different websites, such as Credit.com. Having this information in advance can help you determine not only if you can qualify for a loan, but also if you can expect a higher interest rate. If you have excellent credit (800 and above), you may be able to negotiate a lower interest rate or better terms on your loan or credit card. If you can't find a site that offers free credit scores, you could always go to myfico.com and pay a small fee for your credit score.
There are useful things you can do today to to maximize or improve your credit score. Here are some ideas for building the highest credit score:
* Pay your bills on time.
* Get current with past due payments and stay current. Your credit score is based on your history of paying your bills responsibly each month.
* Keep balances low on credit cards, credit lines, and other revolving credit.
* Don't close unused credit cards as a short-term strategy to raise your credit score.
* Limit the number of new credit cards.
* If you are a new credit card holder, don't apply for too many credit cards at once. This could lower your credit score.
* Apply for and open new credit accounts only as needed.
* Have credit cards - but manage them responsibly.
There are lots of false rumors on how to improve your credit score. Here's a list of popular myths and misconceptions and the actual truths behind them:
* Myth: Your credit score will drop if you check your credit score.
Fact: Checking your own credit score will not affect the credit score at all. However, it is important to check your credit score through the right service. Checking your credit score through a friend who is lender or auto dealer may accidentally damage your credit. Your credit score can be negatively affected if lenders are regularly checking it, which is why you should limit your credit applications.
* Myth: Closing accounts will help build you credit score.
* Fact: Canceling accounts can actually hurt your credit score. Also, closed accounts remain on your credit report.
* Myth: As a co-signer to an account, information from this account will not help or hurt your credit score.
Fact: Any account you co-sign appears on your credit report and affects your credit score, just as if it were an account of your own.
* Myth: Paying off a debt will add 50 points to your credit score.
Fact: Credit scores are developed through complex algorithms. You can't guarantee that paying off a debt will add a specific number of points, though it always helps to pay your bills.
If you have credit problems, your credit score may be too low.
Your credit score will drop if you've missed or made repeated late payments.
There are simple steps for rebuilding your credit score -- but no quick fixes. Bankruptcies stay on your report for 7-10 years, keeping your credit score lower than it needs to be.
Most negative items -- collection records, missed payments -- stay on your credit report for seven years.
Here are tips for rebuilding damaged credit and improving credit scores:
* If you have missed payments, get current and stay current. Your debt will not go away, and it affects your credit score.
* If you are having trouble making ends meet, contact your creditors and ask for an extension or lower interest rates.
These are all good first steps toward improving your credit score.
* Pay off debt rather than moving it to a new credit card. Even when an account is closed it stays on your credit report.
* Rebuild your credit history by opening new accounts and paying them off on time.
A credit score is compiled by a complex algorithm that looks at hundreds of small details on your credit report.
But when it comes down to it, there's really only one way to obtain and keep the high credit score that will help you get lower interest rates and more attractive terms: Be responsible. You need to be responsible about obtaining, using and paying back credit accounts. These practices will improve your credit score. Don't borrow more than you need. Use credit for necessities. Keep a credit card, but stay away from impulse purchases.
Pay back all your debts on time and don't miss any due dates, which can hurt your credit score.
If you keep these in mind, you will have the kind of credit score that will allow you to obtain credit for the lowest possible cost with the best payback terms.
If you have a good credit score, it's not very hard to get more credit under your name. You can ask your credit card company for a larger credit line, or take advantage of one of the many offers you probably have mailed to you on a regular basis -- the credit card companies keep close track of who has good credit scores and regularly offer pre-approved credit to them. If your credit score is high enough, your credit card company might even simply increase your borrowing power without being asked.
But the questions you need to ask yourself include the following:
* Do I really need this credit?
* Am I being responsible? Do I have the means to pay back this credit if I use it?
* What are the terms and conditions of this credit card?
It all comes back to personal responsbility: If you borrow it, can you pay it back on time? If you can answer yes, go ahead and do it. But if you can't absolutely say that your spending plans are necessary and fiscally wise, you should be thinking twice about increasing your credit.
Improving your credit reports and credit scores can be very challenging. To make matters worse, there are all sorts of illegal services, con artists and misinformed businesses out there that offer "credit repair" services. Many of these services are ineffective, damaging to your credit and illegal. Avoid these traps and instead work on improving your credit on your own. All three credit reporting agencies (Equifax, Experian and TransUnion) have detailed learning centers full of information and advice for consumers. Search online for free, unbiased information about improving your credit. By doing your research and using credit responsibly, you can take care of your credit problems.
There are hundreds of slightly different credit scoring formulas developed for specific business purposes. A credit score developed for auto loans is slightly different from a credit score developed for insurance. The most common credit scoring systems use a formula close to this:
* History of payments, including any late payments you've ever made, represents 35 percent of your credit score.
* Total amount of debt -- credit cards, installment loans, lines of credit and mortgages -- is 30 percent of your credit score.
* Length of your credit history, or how long you have been successfully borrowing money, is 15 percent of your credit score.
* The types of credit you use: credit cards, installment loans, etc., represents 10 percent of your credit score.
* The number of recent inquiries made on your report by lenders is 10 percent of your score.
Credit scores are an indication of how responsibly you manage your money. Credit scores are calculated based on your credit report data with the credit bureaus (Equifax, Experian or TransUnion). Usually on a scale of 300-850, it's best to have a high credit score. What is the average credit score? According to Experian, the average credit score in the US is 678. According to FICO, the median credit score is 723. How does your credit score compare to these statistics? In order to get the best rates of credit cards and major purchases, you should aim to have a credit score above 750.
A lot of consumers feel they need to improve their credit scores. Some have made too many late payments; others have defaulted on loans. Maybe you've been good about payments, but you have too many credit cards and too much debt. How you manage your debt directly affects your credit score and your ability to borrow in the future.
The first step to ensuring you have the credit score lenders look for is to know your credit score. Every consumer has a credit score.
Is your credit score lower than it needs to be? Find out your credit score from one or all of the three credit reporting agencies. Once you have your credit score and understand how it is calculated, you can then develop a plan for rebuilding it.
Be a prepared consumer and know your credit score. The best way to check your credit reports and scores is online through the credit bureaus. By law, you are entitled to one free credit report from Equifax, Experian and TransUnion every 12 months. You can order this report from www.annualcreditreport.com. These free reports don't include a free score, though. You'll have to add your score on for $6-8 each. In addition to these free reports make it a habit to check your credit reports and credit scores online every 3-6 months. Registering for a credit monitoring program that tracks your credit data automatically may be the best option if you want to check your credit data quite often. You should also make it a habit to check your credit scores and credit reports 30-90 days before a major purchase.