Real Estate by Nick Abbadessa
Nick Abbadessa
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How to improve your credit score / fico

Improve your credit score

Fixing your credit and increasing your credit / FICO score to obtain the least-expensive home loan possible may seem daunting and time consuming; however, it is possible and can be achieved sooner than you think. To help simplify your home-buying process and make it more affordable, I’ve listed ten ways to boost your credit score.

1) Find and dispute errors on your credit report – To accomplish this, first get a copy of your credit report from the big three reporting agencies: Experian, TransUnion, and Equifax. You can visit AnnualCreditReport.com to get a free copy once a year. After you get it, scrub it for such errors as collections that aren’t yours, late payments that weren’t late, credit limits with incorrect limit lines, balances that have been paid off, and loan inquiries you didn’t authorize. To dispute, you must build your case. In a clear and concise letter explain the error and show documentation and proof as to why it is an error. Make it easy for the credit agency. Circle the errors…highlight the evidence…write notes…etc. The FTC has a great sample letter for disputes(CLICK HERE FOR SAMPLE DISPUTE LETTER). It’s best to submit your dispute to the credit bureaus first, but you can also dispute it with the credit reporting agency. CLICK HERE for a sample dispute letter to the credit reporting agency. Once you have your case together, next submit it preferably via snail mail, but you can also submit it online. Please allow approx. 45 days for review. I’d like to point out two things: One, negative reports must be removed from your file in 7 years from last activity (10 years for bankruptcies). Therefore, if you find older reports, don’t touch it so that you don’t make it active again. Two, if you notice the same error with multiple agencies, you have to dispute it with each credit bureau.

2. Negotiate – If you’ve actually stopped paying a credit card bill, you’ll have a difficult time arguing it as a reporting error. However, you can negotiate to remove the debt or account that went into collections. For instance, write a letter offering to pay the remaining balance in contingent that the creditor will remove the account from the bureaus. Make sure to get it in writing first.

3. Request for a “Good Will Adjustment” – Things happen. You can be a great customer until an emergency takes place and/or you lose your job and unfortunately late payments arise. In such situations, write the creditor a letter demonstrating your good payment history till the lates, then explain what happened, and ask for forgiveness.

4. Get a Credit Card (BUT BE CAREFUL) – Demonstrating that you know how to handle credit cards responsibly will improve your score. However, if you think having access to credit lines will cause you to get into more debt, then avoid this tip. Moreover, when applying for credit, your credit will be ran. Running your credit often will actually lower your score. Therefore, if you have none or just one credit card, consider getting an additional one and not exceeding 10% to 30% of the line (while making sure to pay it off monthly).

5. Try for a Secured Credit Card – A secured credit card is a line of credit based on the money you place in a security deposit account as collateral. When obtaining a secured credit card make sure to choose one that reports to all three credit bureaus.

6. Become an authorized user – This is a touchy tip as it may not be easy to convince a friend or family member to allow you to become an authorized user on their account. However, if you come up with an agreement to only place your name on the account for purposes of re-establishing your credit and not utilize the credit card, they may be more inclined to agreeing.

7. Pay down your balances – In order to improve your score you should try to only use 30% of your credit limits and ideally even lower, to around 10%. As such, analyze each account and pay down the maxed ones first.

8. Raise your credit limits – Similar to the above tip to obtain a new credit card, you can also attempt to raise your credit limits. However, use this tip carefully as well…as you have to trust yourself not to get into more debt and acknowledge the fact that your creditors may have to run your credit again, negatively impacting your credit.

9. Don’t cancel your cards – As you pay off your cards, don’t cancel them as that will lower your score. Instead, keep them open and continue to use 10% of the line, paying it monthly.

10. Pay your bills twice a month – Not only should you pay your bills on time, but try breaking it into two payments a month…one before the statement closing date and one right before the due date. This will look good to the bureaus and help pay your balance down faster.

Unfortunately, your credit plays a big role in obtaining financing. But, if you’re in need of a credit score boost, it is possible by such tactics as disputing errors, asking for forgiveness, reducing balances, increasing limit lines, and making your payments on time. And if all else fails, it’s good to know that in general, negative information more than seven years old from the date of last activity (ten years for bankruptcies) can be removed from your file.