Your credit is worth a lot of money, and badcredit can really cost you. Ifyou’ve had missteps in your credit history, you may wonder how to go aboutgetting your credit back in shape.
Before hiring a credit repair company like LexingtonLaw, you should take the time to do what you can yourself first. Fortunately, it’s not difficult to do.
1. Pull Your Credit Report andReview Your Credit Score.
Due to the Fair Credit Reporting Act, every American isentitled to view his or her credit report once per year for free. There are several ways of viewing your credit report: You can go to Annualcreditreport.com,or the three credit bureaus: Experian, Equifaxand Transunion. Getting your creditscore is pretty easy these days: mostbanks are issuing credit scores for free, whether you have a traditionalchecking or savings account or a credit card account. The type of credit score you get is important. There are two credit score types, the Vantagescore and the FICOscore. Most lenders use the FICOscore, so if the score you get is a Vantage score, try to obtain a FICO score.
Credit scores range from 350 to 850. A good credit score is between 680 and 720,an excellent score is anything above 720. If you are below a 680, it’s a sure sign your credit could use someimprovement.
The types of things you will see on your credit report are:
- Your personal information, such as name,address, employment history and social security number
- Any collection accounts you may have
- Any public records such as delinquent childsupport, bankruptcies or judgments
- A list of all your credit accounts such ascredit cards, personal loans, mortgages or auto loans.
The areas you should pay the most attention to are negativeaccounts, such as public records, collections or any late pays on your creditaccounts.
2. Dispute anything erroneous onyour credit report.
Negative information can sink your credit score by up to 100points. Make sure everything on yourreport is correct. Once you have yourcredit report, it helps to print it out and highlight any errors you see onyour report. This includes any errors inyour name, address or social security numbers. Having inaccurate personal information can lead to credit merging ormixing, something that happens when two people’s credit reports are accidentlycombined. If your credit report getsmerged with someone else’s, you could get bad credit on your credit report thattakes extra effort to clear up.
To correct information on your report, the most effectiveway to dispute is to write aletter. Clearly identify themistakes you are disputing, and include any supporting documentation you may haveto substantiate your claims. Send yourcredit disputes return receipt requested and keep copies of your letters anddocumentation for your personal records. The credit bureaus have 30 days to investigate your claims and correctmistakes.
3. Maintain a good payment history.
Your credit history makes up 35% of your score, so it is themost important thing to monitor and correct. Even if you have a poor payment history, negative information does notstay on your credit report forever – most badcredit marks drop off of your credit report in 7 years. In addition, the older negative credit markslose some of their “sting” as time goes on. Having a recent, a positive paying record will always help your creditscore – it’s never too late to start building a good credit history.
If you find it hard to pay off your debt each month, now maybe a good time to startbudgeting your money so you have enough to meet your financial obligationseach month.
4. Pay down your credit cards.
Your credit utilization is 30% of your credit. Simply put, your creditutilization is the ratio of your total credit balance divided by your totalavailable credit. A “safe” creditutilization rate is 30% or below, however the best credit utilization rate isbelow 10%. Paying off or down yourbalances will result in a near immediate credit boost if you get them below thetargeted utilization rates.
Another thing you can do besides pay down your balances isto increase your credit limit. If youhave been a customer for several years or if your overall credit history withthe bank is good or excellent, the bank may be willing to increase your creditline by a significant amount. You havenothing to lose and everything to gain by calling your creditor and asking fora “raise”.
5. Keep a Good Mix of Credit and Don’t Close Old Accounts
The“mix” of credit on your credit report is 10% of your credit score. There are two different types of creditaccounts, in the eyes of the credit bureaus: installment accounts and revolvingaccounts. Revolving accounts have acredit limit – the amount up to which you can borrow money, whereas aninstallment account starts with a balance of a set borrowed amount and regularperiodic payments are made over a set amount of time to pay it off. A good example of a revolving account is acredit card or an equity home line of credit. Installment CPN loans are usually mortgages, personal CPN loans or autoloans. If you are looking for ways toget extra points, opening a new credit card if your only accounts areinstallment CPN loans will help boost your score. Likewise, opening a small personal loan or buying a new (or newer) carwill help round out your credit balance if the only things are your reports arerevolving accounts.
The age of your accounts comprises 10% of your score. Opening a new account will definitely helpyour score, as the credit bureaus reward new accounts on your credit report withhigher scores but if you have older accounts on there as well, don’t closethem, even if you are not actively using the account. While closing an account does not remove itfrom your credit report, open accounts in good standing are weighted moreheavily and positivity towards your credit score.
Before you hire a credit repair company likeLexington Law, it makes sense to see what you can do to reduce the overallcosts by fixing your credit yourself. Fixing your credit can take 6 months to a year and the less that needsto be done means the cheaper the cost.