Sounds Like A Plan – Credit Scores
Author: Ryann Cairns
One of the things we work hard to build up most of our adult life is our credit score or “good credit” as we call it. Like a strong resume or a good reputation, it is something that takes some care to build and maintain. And just like with those other areas of life, we don’t like it if something happens to our credit rating that hurts our future credit reputation. Our viability in the economic world depends on that rating staying healthy.
Our credit ratings is maintained by a centralized reporting and ranking mechanism that is often referred to as your credit report. There is a systematic scoring system called the FICO™ score that determines on a week-to-week basis what our credit rating will be. Now we know the basics of keeping strong credit relationships, paying bills on time to keep our credit rating in tiptop shape. But a not very well known truth is you can see your FICO™ score and credit report and you can take more aggressive action to affect its contents for the better.
This isn’t “cheating”, just taking responsibility for something that makes a big difference in your financial health, your credit rating. Get a Good Look The first is to order a copy of your credit report and review what is on it. It is very likely when you get a copy, you will find errors and entries you do not like. But it’s a starting point and we can take action once you know where your FICO™ score stands to begin to improve it. It is not expensive to get a copy moving. You can order it from one of the major credit reporting agencies. Here is a short list to get you started.
- Equifax, www equifax.com
- Experian, www.experian.com
- TransUnion, www.transunion.com
In this article, we will get you started with some inside information on how to change what you see there and start bringing up that FICO™ score. This is the stuff companies will charge you lots of money to do for you but in reality, you can do it yourself.
The Eight Commandments
Besides the general rules of healthy use of credit we discussed earlier, there are some very specific guidelines that most of those high priced credit agencies will use to guide you to improve how the FICO™ Score ranks you. These guidelines pertain directly to how the FICO™ formula work and are based on the insider thinking of creditors as to what makes a good credit risk. So instead of ten commandments, we have eight and they are..
- Reduce credit inquires. These are the number of times someone looks at your credit report that you ordered. So if you apply for a lot of credit or order the report a lot yourself, that raises the amount of inquires. Too many inquires give the impression you are hungry for credit and maybe in credit trouble.
- Pay credit bills early, not just on time.
- Pay off revolving credit every month.
- Never drop an account, keep them open rather than opening new ones. Once you clear them off, those creditors will have a strong motivation to offer you good credit deals.
- Avoid paying off one creditor with another just because the rate is better
- When making changes to your credit report, make sure your oldest accounts stay in place.
- Keep your major credit accounts open to two if possible.
- Always keep 50% or more of your credit limits available.
You may have to work toward these goals but knowing how your FICO™ score views these variables helps you make a long-range attack plan. It Pays to Complain Another little known fact about credit reports is you can dispute entries on them and get entries deleted. If you find entries that are just plain wrong, you definitely should make a plan to go on the offensive to get them off of there. But you can work toward having perfectly valid entries removed if they are negatively affecting your FICO™ score. You can dispute the entries to the credit reporting agency, the consumer affairs department of that agency and to the creditor themselves. Often times just the act of filing the dispute will get the problem entry deleted. For all of your disputes, contact the agency by printed letter.
You want all the documentation you can get. You can even have the letter certified so you can keep documentation and a signature that it was delivered and received for future reference.