Repairing Your Credit Score
Individuals can contest their credit report if it has errors. The laws provide for this. If you have evidence that your credit report has inaccuracies, there should be no problem fixing your credit score.
Given the importance of good credit, diligence dictates that you follow a methodical way of reporting the inaccuracy and providing supporting documentation so that the repair process goes quickly and efficiently. Follow these steps:
1. The first thing to remember is that the Fair Credit Reporting Act (FCRA) stands behind you, not against you. Use this Act to have errors rectified in your report. Maybe the error was not intentional. If you have a common name – say John Edward – there are probably at least 500 people in your state with the same name. And thousands more across the country. If one of these John Edwards misses a payment on his mortgage or line of credit or writes a check against insufficient funds, the entry could inadvertently make its way into your file. You can prove that you aren’t the John Edward that dodged a due payment.
You can contact the credit bureau in writing and point the mistake to them with supporting documents. If you have a receipt from the bank for that mortgage payment you made, attach it to your letter. Make sure you follow up with the credit bureau to see if they’ve adjusted your credit report by eliminating that erroneous entry.
If you’re curious as to what your credit score is, you can go to the FICO web site. They give out credit scores consisting of three digits. If your score goes above 720, you’re in great shape! If it’s under 720, you need to do something about it to get it higher. Don’t let a low credit score get you down. Just think -others are also struggling with low credit scores; at least they’re doing something about it, and so should you!
You can get an idea of the type of interest rates you’d be charged based on your credit score. The FICO web site has a section on interest rates. This is what we found: supposing you had a good credit score (720 and up) and you wanted to apply for a home equity loan, term 15 years. If you were looking around December 2007, the applicable interest rate would have been 5.799%. That rate jumps to 10.44% if your credit score was around 500-579. See how a good credit score can help a lot?
3. If your bad credit score is entirely your fault, again, don’t despair. The beautiful thing about credit is that you can re-build it. It may take time but with restraint your credit standing will recover. This is why it’s essential to use credit (a) only when you need to and (b) when you do, use it wisely. Here are some repair credit strategies for you:
avoid applying for loans or lines of credit you don’t need while you’re mending your credit score. Every time you apply for a new loan, the information is put on your credit record;
prompt payment of your bills is strong encouraged. We get into a cash crunch at some periods of our life leading us to skip a payment or two. While it’s not a criminal act, habitually missing payments will give you that “trapped” feeling – perhaps a worse feeling than actually being behind bars;
respect your limits – if your credit cards have a ceiling on how much credit you can use, respect that ceiling;
you may want to think about consolidating all your debts. Maybe paying different interest rates is beginning to disturb you. Ask your financial planner if it’s time to bunch up all your loans into one. With consolidation, you pay only one, not multiple rates;
have enough cash in your pocket when you shop so you can pay for all your purchases in cash. Be different. Instead of reaching out for that plastic, take the greenback out;
it pays to remain in contact with the financial people you deal with (bank officer, credit union officer, trust company) and to let them know how you’re doing. Goodwill and healthy relationships go a long way. Your credit union may choose to forgive one bad entry in your credit report because you’ve been a good customer.
Credit is sacred. If you have a bad credit score, don’t wait to get it repaired. Keep your receipts and send copies off to your credit bureau, if you need to submit proof.
Insist on a correction. You owe that much to yourself!
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