How To Improve Your Credit (FICO) Score?

Your credit score is constantly changing as your credit report information is always changing. Unless you have incorrect information showing on your report, taking steps to improve your credit report may not significantly or immediately impact your credit score since the scoring models study patterns of credit behavior over time.

Keep in mind that as negative information ages, it has less importance. It usually takes one full year of good credit behavior to see a significant change in your credit score. This means you should exhibit a full year of responsible payment behavior in your credit report -- specifically, conservative use of credit, paying on time, and not requesting too much credit during a short period of time.

To order a copy of your credit report, contact Ben Borden at 1st Metropolitan Mortgage. We will give you a free copy of your credit report and make it easy for you to stay on top of the information in it.

Here are some general tips on how to improve your credit history, which, if you follow these tips over time, will improve your credit score

1. Review Your Credit Report

Reviewing Your Credit Report Puts You In Control. You have to know what's there before you can make it better. There are three major bureaus: Equifax, Experian, and Trans Union. It is recommended that you get all three or a consolidated credit report because many mortgage lenders will obtain data from all three of these bureaus in analyzing your credit history. The cost for all three is typically only $22.00. By making sure that only your accurate credit history appears on your report, you ensure that the credit score it generates isn't lowered by inaccurate information. Checking your credit report on a regular basis allows you to stay on top of what credit grantors will read about you when they check your credit history, and enables you to correct any inaccuracies and catch fraud before these problems impact your loan.

2. Correct Errors on Your Credit Report

You have to make sure all information on your credit report is complete and correct. For example, if you have paid off an account but it is still listed, make sure the report lists a zero balance. In particular look for:

• Incorrect or incomplete name, address or phone number

• Incorrect social security number or birth date

• Incorrect, missing, or outdated employment information

• Incorrect marital status -- a former spouse listed as your current spouse

• Bankruptcies older than 10 years or not identified by the specific chapter of the bankruptcy code
  Lawsuits or judgments older than seven years

• Paid tax liens older than seven years, delinquent accounts older than seven years or accounts that omit the date of the delinquency

• Credit application inquiries older than two years

• Unauthorized credit (not promotional) inquiries--credit-reporting agencies usually do not remove these at a consumer's request, but it never hurts to ask

• Co-mingled accounts -- credit histories for someone with the same name or similar social security number

• Duplicate accounts; premarital debts of your current spouse attributed to you.

• Lawsuits you were not involved in

• Incorrect account histories -- such as a late payment notation when you paid on time or a debt shown as past due when it was discharged in bankruptcy

• Paid tax, judgment, mechanic's or other liens listed as unpaid

• A missing notation when you disputed a charge on a credit bill

• Closed accounts incorrectly listed as open

• Accounts you closed that that don't indicate, "closed by consumer"

• Incorrect aliases

A few other things to remember:

• Accounts that have been paid off can still be listed on your report, although they should indicate that you've paid them off.

• If you've been through bankruptcy, both the public record information about the fact that you've been through bankruptcy can be listed and the individual accounts that were discharged may also have a notation that they were discharged may also have a notation that they were included in your bankruptcy.

• Information about accounts you share, or used to share, with a spouse will be listed in both your reports.

• Many people incorrectly assume that if they have paid off a past-due debt, the old negative information will be removed. It will remain on the credit report for up to seven years.

• Once you've compiled your list, complete the request for reinvestigation form that came with your credit report or type a letter describing every problem. Send your letter to the address provided by the credit-reporting agency for disputing information. Enclose copies of any documents you have that support your claim. Keep in mind that any corrections you make to your report takes 30 days to take effect.

3. Add Information Showing Stability

Creditors like to see evidence of stability in your file. If any of the items listed below are missing, send a letter to the credit reporting agencies asking that the information be added. Enclose any documentation that verifies information you're providing,

• Current employment -- employer's name and address and your job title

• Previous employment if you've had your current job less than two years.

• Current residence, and if you own it.

• Previous residence if you've been at your current place under two years.

• Date of birth

• Credit reporting agencies aren't required to add this information, but they often do.

4. Avoid Unnecessary Inquiries

Every time you apply for credit, or your credit report is accessed for another reason, that fact will be listed on your credit report as an inquiry. Many inquiries make it appear that you are shopping for credit, which indicates that you anticipate the need for many lines of credit. Inquiries for pre-approved credit card offers you didn't accept, as well as inquiries created when you review your own credit report, will not count against you.

5. Do Not Close Unneeded Accounts

Closing unused accounts helps your credit is one of the biggest myths in credit repair and lending today. For example, lets assume you have 3 credit cards each has $1,000 credit limit for a total of $3,000. Lets also assume you have reached your $1,000 credit limit with one credit card issuer, have a $500 balance on your card with another and zero as a balance with the third, for a total of $1,500 of your $3,000 available credit used. If you close the $1,000 credit card your not using, you have just reduced your available credit to $1,500. Now your at 100% of your available balance vs. 50% if you had left the card open and unused. This could have a detrimental impact on your credit (FICO) score. Not to mention, you have removed an available "trade reference or trade line" for a lender to use to establish a pay history. Most lenders require a minimum of two to four trade lines open for a minimum of 12 to 24 months.

6. Build a Great Payment History

It goes without saying that paying your bills on time is the key to a great credit rating. While there's not much you can do to remove accurate late payment information, you can start mailing every single payment on time from here on out. Negative information loses its potency over time: a recent late payment is weighted more heavily than a late payment four years ago.

7. Pay Off Credit Cards

This shows you use credit wisely and aren't spreading yourself thin. Keep your credit limits and outstanding balances down. Conservative use of credit is important. DO NOT CLOSE THE PAID ACCOUNTS!

8. Keep Credit Card Balances Low

If you carry a balance, you should keep it low. For a good credit score, you should keep your account balances below 50% of your available credit. For example, if you have a $2000 credit limit, you should have a balance of no more than $1000.

9. Take Care of Collection Accounts

Make sure collection accounts are paid and listed as paid on your credit report. You may be able to negotiate a reduced settlement with the collection agency to get a debt paid, but there may be consequences. Depending on your individual situation we may advise you to wait to pay these accounts at closing. Paying these debts before closing on your loan may lower your score. Also having collection accounts may not prevent you for obtaining a mortgage loan. Some lenders may allow you to leave open collection accounts.

10. Satisfy Any Public Records

Satisfy any public records, such as tax liens or judgments. Consult your loan officer at 1st Metropolitan Mortgage before paying your judgments and other public records. Depending on your individual situation we may advise you to wait to pay these accounts at closing. Paying these debts before closing on your loan may lower your score.

By law you can order your credit reports at least once a year for FREE. This will allow you to see exactly what's being reported about you by the credit bureaus.

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