Cleaning Up Your Credit

Cleaning up Your Credit
Lenders generally check with three credit bureaus (1 for autos and consumer finance) in order to evaluate your past payment history. Your goal in cleaning up your credit report should be to clean up each of the three bureaus. If you only work on one, this does not effect the reporting to the other bureaus.

Get A Copy of Your Credit Report
The first step is to get a copy of your merged credit report, which shows all three of the major bureaus, Experian (formerly TRW), Equifax (formerly CBI), and Trans-Union. Most mortgage lenders will obtain data from all three of these bureaus in analyzing your credit history. The exception is that some portfolio lenders (usually adjustable rate lenders) may only review one. To make it easier for you, FreeCreditReport.com, iCredit, Credit.com and others will allow you to order a Merged Report on-line. It costs about $29 and is delivered to you by e-mail, mail or directly online once you have completed the request.

What to Say When You Call Your Creditors
There are two efforts that must be made. First, call any creditors reporting a negative and ask them to remove the negative item. Ask in a nice calm voice and do not get upset when they say no. Simply repeat your request over and over in your nice pleasant voice. If you get nowhere, then ask to speak to the supervisor. Make sure you keep a log of your conversation, noting the date, time, who you spoke to and what they said. Repeat this procedure over and over. In a high percentage of cases, it works.

Get Written Confirmation of Agreements
Be sure to ask for a letter by mail or fax that shows the creditor is correcting the negative information. You may need this letter for two reasons. First, they may not actually make the changes. With the letter, you can appeal directly to the credit bureau and they will make the correction. Second, if you are applying for a mortgage before the changes actually hit the credit bureau's report, your lender will need this documentation.

If you have a charge off or collection account that shows as unpaid, don't just send them a check and pay it off. Call the creditor on the phone, explain that you have the funds to pay the account in full, and calmly explain why it should not have been reported on your credit in the first place. Then ask if they will provide you a letter deleting the account entirely from all credit bureaus if you pay off the account. Try to get them to fax it to you. As before, be sure to document all of your telephone contact and always keep a nice pleasant tone in your voice. In a large percentage of cases, this also works.

Disputing the Report -- When Your Creditor Will Not Remove an Item
There will be cases when the creditor does not agree to remove the negative credit item. If it is an item that is definitely not yours, call the credit bureau immediately (except for Equifax, who only responds by mail). When on the telephone, do not discuss any negative items that are accurate. Do not discuss any items that may be accurate in general but have some small error in detail that you can dispute by mail. Once you confirm any accuracy at all, you cannot dispute it later by mail.

For the remaining items, you need to dispute them by mail, writing directly to the credit bureaus. Write a letter to the appropriate bureau including your name, social security number, address, disputed accounts, and account numbers. You must sign the letter. Inform the bureau that you are disputing the data as it appears on your credit report. One of the best changes in credit reporting and dispute resolution is the fact that the three bureaus will allow you to dispute online. Disputes still take 30 days to complete but you will be notified in writing of the results.

Increasing Credit Score
One of the quickest ways is to be added to someone else’s credit card as an authorized signor. This option will be going away soon but until such time, it does allow the positive credit reflected on that credit card to be added to the overall assessment of your current credit profile. This is not an option necessarily endorsed by this institution but merely an option that has been exercised in the past by others.
Obtain 2-3 guaranteed credit cards or bank loans. You may take a slight hit in the first 30 days after issuance, use the cards and pay them off by the third week of every month and you will reap the benefit of increased credit scoring. This option although slow can reflect in a 20-30 point increase in fico score for every two accounts activated.
Reporting Agency Contact Information

Equifax Consumer Relations
800.685.1111
P.O. Box 740241
Atlanta, GA 30374-0193
www.equifax.com

TransUnion Consumer Relations
800.888.4213
P.O. Box 1000
Chester, PA 19022
www.transunion.com

Experian Consumer Relations
888.397.3742
P.O. Box 2002
Allen, TX 75013
www.experian.com

Summary
It’s important to note that raising your FICO credit score is a bit like losing weight: It takes time and there is no quick fix. In fact, quick-fix efforts can backfire. The best advice is to manage credit responsibly over time and by just following these tips and raising your credit score over time.

Payment History Tips

• Pay your bills on time.
Delinquent payments and collections can have a major negative impact on your FICO score. This impact can be as much as 60-80 points the moment it is reported.
• If you have missed payments, get current and stay current.
The longer you pay your bills on time, the better your credit score.
• Be aware that paying off a collection account will not remove it from your credit report.
It will stay on your report for seven years. As noted above, you can negotiate removal at time of payoff. They may tell you they are not allowed to do it, realistically they are allowed because they posted the negative information in the first place.
• If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
This won't improve your credit score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time.

Amounts Owed Tips

• Keep balances low on credit cards and other “revolving credit”.
High outstanding debt can affect a credit score. It is widely believed that balances should be less than 40% of available credit to actually see scores improve or to maintain the high score.
• Pay off debt rather than moving it around.
The most effective way to improve your credit score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.
• Don't close unused credit cards as a short-term strategy to raise your score.
If you want to close accounts, do it over a period of time. Multiple accounts closed at the same time will actually drop your score. Inactivity can actually drop your score as well.
• Don't open a number of new credit cards that you don't need, just to increase your available credit.
This approach could backfire and actually lower your credit score.

Length of Credit History Tips

• If you have been managing credit for a short time, don't open a lot of new accounts too rapidly.
New accounts will lower your average account age, which will have a larger effect on your score if you don't have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.

New Credit Tips

• Do your rate shopping for a given loan within a focused period of time.
FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.
• Re-establish your credit history if you have had problems.
Opening new accounts responsibly and paying them off on time will raise your credit score in the long term.
• Note that it's OK to request and check your own credit report.
This won't affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.

Types of Credit Use Tips

• Apply for and open new credit accounts only as needed.
Don't open accounts just to have a better credit mix - it probably won't raise your credit score.
• Have credit cards - but manage them responsibly.
In general, having credit cards and installment loans (and paying timely payments) will raise your credit score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.
• Note that closing an account doesn't make it go away.
A closed account will still show up on your credit report, and may be considered by the score.