Tuesday, 15 November 2011

How to Fix My Credit

If you've recently been denied a loan application, you are well aware that you need to fix your credit. The first step is to request your reports. You can request a copy from each of the three major agencies once per year for free. These will not give you a FICO score, but will provide information about what is on your file.

Once you receive these you want to look it through and make sure the information is correct. If there is anything that is not accurate, you have the right to submit a dispute, along with supporting documentation, to the bureau, who will then forward the information to the financial institution for verification. If it is found to be inaccurate it will have to be deleted.

If the information is accurate, there really isn't a quick solution; however, there is a way to dramatically improve your score so that your past blunders are overshadowed by your present responsibility. This three digit number is calculated based on payment history, how much you owe, length of history, new, and types of accounts. Below are some things to keep in mind concerning each of these areas.

Your payment history is the largest portion of your score at 35%. This means that it is vital for you to make at least the minimum payments, on-time, every time. A potential lender wants to see that you will hold your end of the bargain in paying back the loan. A clean payment history is one way to show this, even if it is not completely paid-off. If you have been late on a few payments, start making them on-time and you will see a steady increase in your score.

This brings up the point that it is not advantageous to close an account that you have made late payments on in the past because the history will stay for 7 years regardless. Closing it can also hurt you because it can shorten your history (15% of your score), as well as change the ratio of how much you owe to how much you have available (30%).

A general rule of thumb is to keep your monthly balances at or below 30% of the limit as well. This means if you charge a large amount to one card each month, even if you pay it off, it would be better to spread the charges across your accounts to keep them below that 30% threshold at any one time.

The next factor, is new accounts and this is 10% of your score. Here it is best to do your rate shopping within a short period of time so that it does not look like you are borrowing money from everywhere you can, which could make you more to be viewed as a risk by a potential lender.

The last major factor is type of account, which is 10%. There are two types: installment and revolving. Installment loans are those which are personal, auto, mortgages and student. Revolving are credit cards. It is important for you to show that you can handle both types responsibly. If you do not currently have an installment line, you might consider getting a small personal loan.

If you are finding it difficult to gain approval for a revolving, you can seek out a secured card in which you make a deposit to the bank in the amount the bank will be making available to you. In either case, ensure that any new borrowing you do, the company reports your behavior to all three agencies.

For more about how to fix my credit by removing inaccurate and questionable items from my reports visit us. You can also get a free credit consultation by calling 800.251.3505 and find out how you can improve your credit.

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