Five Steps You Can Take To Repair Your Credit Right Now... Published: April 18, 2008 Check your credit history for any Errors. Up to 80% of us have or have had at least one error on our credit history over the last 5 years. These errors could be lowering your credit score by 5, 10 or even 20 points! Find them and rectify them immediately to boost your credit score, without paying a dime to anyone. There are three kinds of errors that may appear on your credit history.   1. There may be two or more accounts for the same debt on your credit history. Your original creditor may have sold your debt to a collection company. You will probably be aware of this because you get annoying phone calls and mail from them on a daily basis, harassing and threatening you to pay the debt. That company might then turn around and sell the debt to another collection company, and so on. What you might not be aware of is that all of these creditors might show up on your credit history at the same time, when you really only owe the money to one of them. That’s right, one delinquency or derogatory mark on your credit history might be reflected as 2, 3 or more delinquencies! This will be easy to spot because they will all be for about the same amount and they will all show the same original creditor. This is illegal and you have the right to have all of the creditors deleted from your history, except the company that currently holds your debt. In order to fix this, send each credit bureau a letter stating that there is an error on your account, explain what it is, and ask that the previous creditors accounts be erased, so that only the current holder of the debt remains. 2. A creditor may have reported you delinquent for a payment you actually made on time. If you find this type of error, contact the creditor directly and ask that they send a letter to the credit bureaus stating that the mark is an error and to correct it. Also ask that they send you a copy of the letter stating the same, so if the mark remains after 30-60 days, you can contact the credit bureaus yourself and present them with the letter from the creditor stating that the mark is an error, so that the credit bureaus can take it off your credit history. 3. An account appears on your credit that is not yours. This type of error is a serious issue and probably means you have been a victim of identity fraud. If you find an account on your credit history that does not belong to you, immediately contact the credit bureaus’ fraud department and inform them that the debt is not yours and you believe you have been a victim of identity fraud. They will put a fraud alert on your credit account that will protect you from more fraud than you have already suffered and will work with you to delete the bogus accounts. Maintain at least 3 Revolving Credit Lines. These must be credit cards with one or more of the four major credit card companies, Visa, Mastercard, American Express and Discover. Many people think it is most responsible to have and use only one credit card. That may be true in terms of your personal finances, but it is not true with regard to your credit score. If you only have one credit card, the credit bureaus don’t consider your account to have enough depth for them to determine your payment history. They will view your credit history most positively if you have at least three credit cards. However, never open more than one new credit card in any 6-month period. Doing so will make it look like you are desperate for money and you are opening multiple accounts because you don’t have any cash in the bank. So if you have only one credit card currently, or none, open one new card every 6-9 months until you have three. You don’t need more than three, so don’t open anymore when you have three. If you already have more than three cards, don’t cancel any of them. Canceling a credit card can only hurt and will never help your credit score! Maintain all your credit accounts as active, even if you normally only use one or two of them on a regular basis. In order to do this, connect some bill you have to pay on a monthly basis to each of the accounts that you don’t normally use with automatic payment. That way each will register a new charge every month and will not go inactive. For example, you can have your electric bill on one card, your gas on another, your cable on still another, and your phone(s) on others. If you are too lazy or busy to keep track of all of them and pay each individually each month, attach each of them by automatic payment to the cards you do use regularly, that way you only have to actually send a check each month to one credit card company. Always keep your expenditures below 10% of your credit limit on each individual card, and absolutely never spend more than 30% of your credit limit on any one card. For example, if you have a credit limit of $10,000 on your Visa card, never spend more than $1,000 dollars on that card. The maximum amount you ever put on the card will be the measure by which the credit bureaus evaluate your spending history. Now you might think that if you pay off your account in full every month, it doesn’t matter how much you run up on the card, because it all gets paid off each month. You couldn’t be more wrong. The credit bureaus do not reflect whether you pay off your card completely each month or whether you merely make the minimum payment each month. All they show is that there was a payment made. So while you may avoid paying interest by paying off your cards each month in full, you are not necessarily helping your credit score. Furthermore, if you are spending more than 30% of your credit limit on any card(s) you are actually significantly hurting your credit score, whether you pay it off or not! There are three possible solutions to this dilemma. First, don’t put so much money on your cards, pay cash for anything more than 10%. Of course that’s easy to say if you have the cash to pay it. If you don’t have the cash to do that, the second thing you can do is to contact your credit card companies and request that they raise your credit limit so that the most you ever spent on your card, and what you spend each month, will not exceed 10% of your total credit limit on each card. Even if they won’t raise it high enough to bring your past expenditures below 10% or 30%, get what you can out of them and stop spending so much, starting now! The third thing you can do is to transfer your debt so that you spread it out among the different cards you have, and none of them have more than 10% or 30% of their credit limit on them at any time. For example, suppose you have 5 credit cards cards, each with a limit of $10,000. You really only use one of them on a regular basis, which you spend up to $5,000 a month on it, a 50% usage rate, while you spend practically nothing on the other four cards. Transfer $1,000 from that account to each of the other four accounts and now you have only 10% on each, even though you still have the same amount of debt! From now on, if you have to spend more than 10% on any one card, start using another card, before you exceed a 10% rate of usage on any one card, and as I said before, never ever spend more than 30% of your credit limit on any one card, whether you pay it off each month or not. Take out an Installment Loan on something you need, like a car, television or computer. An installment loan is usually a loan on some real property, which serves as collateral for the loan. For example, if you get a car loan, and you fail to make your payments, the creditor can repossess the car from you. This type of loan adds even more depth to your credit history than merely using credit cards and paying them off. It shows the credit bureaus that you can take on different types of credit and pay them off without any problems. On the other hand, if you take out an installment loan and fail to make the payments on time, it will hurt your credit score more than it will help if you did pay it on time every month. It only takes one late payment, whether 30, 60, 90 or over 120 days to damage your credit score severely, no matter how many times you paid it on time before or since the delinquency! Now I am not advising you to go out and buy something you don’t need, just to get an installment loan on your credit history, but if you are going to buy something, ask to get an installment loan for it, and ask the retailer to make sure your loan will be reported to the major credit bureaus. Always date your rent check for the 1st of the month, regardless of what date it is actually due. Most landlords prefer to receive their rent on the first of the month anyways, and prorate your first month of rent so that it is always due on the 1st. However even if they don’t do this, always make out your check for the first of the month, regardless of when you give your landlord the check. When and if you apply for a mortgage, you may very well be asked to provide copies of your rent checks for the last couple of years. If they are dated on different dates, or are all dated on a day other than the 1st, it will appear to the mortgage broker that you are not on time with your rent payments, which makes you seem like a risky loan recipient. For example, if your rent is due on the 15th of the month, make out the check for the 1st of the month. It doesn’t matter to your landlord what date the check is dated for, and when your mortgage broker sees the checks, he/she will think that you always paid your rent on time, whether you were late or not!

 

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