Learn how to increase your credit score and make the credit reporting system work better for you
Posted by Thomas (TJ) Underwood on 11/15/2014
It is important that you use a proactive approach to managing your credit scores, credit files and your finances. However, we realize that not everyone who discovers this site is in position to use a proactive approach to managing their credit and finances.
If you are in an unfortunate position where you have poor credit there are a number of relatively painless ways that you can enhance your credit and credit score. I say relatively because it will take some effort and initiative on your part to improve your credit file and credit score to a satisfactory level.
There are ways that you can legally remove inaccurate, negative and outdated information in your credit file and improve your credit score and your ability to utilize credit and get a better or the best rate when you engage in credit transactions. For starters you can go to AnnualCreditReport.com and get a free copy of your credit report from the three major credit bureaus, TransUnion, Equifax and Experian.
In today’s economy credit influences many of our activities and you must know how to manage and improve your credit file and credit score effectively due to the importance that it will play in reaching many of your future goals.
Your credit score (FICO Score) determines if lenders will extend you credit and at what amount! The higher your credit score—the better off you are as far as utilizing credit as your fees on various types of loans will be much lower than those who have a lower credit score.
Building solid credit and properly establishing an emergency fund is at the foundation of transforming your life and operating daily in an intelligent, consistent and proactive manner.
Depending on the type of loan(s) that you have or desire to obtain—you could lose anywhere from hundreds to potentially thousands of dollars on an annual basis due to poor credit and finance management. Whether auto, credit cards, employment, home, insurance, rental property, utilities, cable, phone or any other creditor—your ability to get a good or the best rate will be influenced by your credit habits.
Some companies (including utility companies) will even deny you credit or require that you pay by debit card (or a monthly recurring debit from your checking account) if your credit is not at an acceptable level.
Do you at this time desire to get started on a serious path to success?
Credit Reporting Agencies
There are many credit reporting agencies however the three major credit agencies and the ones that you should be particularly aware of include:
These 3 credit bureaus maintain records on millions of consumers who have borrowed in the past or who have a credit profile (you can establish a credit profile in 6 months if you do not have one at this time).
Thousands upon thousands of credit grantors such as credit card companies, retail stores, utility companies, apartment complexes and other lending agencies inform , Transunion, Equifax and Experian of their update activity on a monthly basis or when a consumer becomes delinquent.
The information sent to the credit agencies are your credit usage patterns including your payment history. In the case of utility companies, apartment complexes and taxing agencies—negative information may be reported to TransUnion. Equifax and Experian if you become delinquent in your payment history, however your positive payments to them would not generally be included in your file, as they are considered to be a part of the “4th Bureau” that very few consumers are aware of.
Disputing Information In Your Credit File
As a consumer you have a lawful right to dispute information that you believe to be inaccurate, outdated or unverified.
If you feel that information in your credit file is inaccurate, outdated or unverifiable you can dispute that information online or by mail. Be sure to include your personal information, name, address, social security number and date of birth and if mailing send it by certified mail with return receipt for legal proof that you mailed your dispute letters to the credit agencies.
By doing so you preserve the 30 day timeline which the credit bureaus must abide to by law! The credit bureaus must respond to you within the 30 days by law.
Be as clear and precise as possible by stating clearly what you are disputing and why! If you have added proof in the form of documents, cancelled checks, payment receipts etcetera—include a copy (be sure to keep the original) along with the dispute letter and be sure to keep a copy of the dispute letter for your records.
In the dispute letter state how your credit has been harmed and how the disputed information is delaying or preventing you in achieving your future goals.
Furthermore, you must clearly request that the disputed information be removed, updated or corrected. Standard wording such as “never late, not my account, paid in full” etcetera or whatever is appropriate must be included to ensure that the credit agencies can begin an appropriate investigation.
It is important that you are aware of what collection companies can and can’t do!
I have worked with many past clients who allowed collection companies and creditors to dictate the tempo of communications—and cause frustration and anxiety in their life.
Of primary concern is the fact that collection companies cannot collect a debt without the necessary documentation (signed contract) or evidence.
In many cases when collection companies are pressed to provide the documentation they are often unable to do so. If they cannot provide the documentation to validate the debt the account must be deleted from your credit report (you must do so individually at all three credit bureaus).
After you receive the first collection notice, by law you have 30 days to request what is called “debt validation” and demand that the collection company prove that you owe the debt.
If there is collection debt in your credit file and it is determined to be legitimate by the credit bureau and you agree that it is legitimate and within the statute of limitations in your state you can possibly settle for a fraction of the amount and improve your credit score and credit file some—however, the approach for doing so is beyond the scope of this discussion.
Once You Clear Up Your Credit File You Can Start Improving Your Credit & Credit Score
While it is important to remove damaging and misleading information (Negative Information) from your credit file, it is also important to add positive credit to your credit report.
You can do so in a number of ways:
- Pay off or pay down your debt
How you Utilize your credit is important as you must keep your outstanding balance low compared to your credit limit. By consistently paying off your debt you help improve your credit score. There are a number of approaches that you can use to pay off or pay down your credit card debt or any debt.
By purchasing Managing & Improving Your Credit & Finances for this MILLENNIUM—my debut book (® 2012) you can learn 8 debt payoff methods—one that I am sure that you can use effectively to improve your financial position. In addition, be sure to put a written plan in place based on your monthly budget to pay off or pay down your outstanding balances in a timely manner. Be sure to accelerate the payment of your loans if your “Cash Flow” allows you to do so!
- Stop the use of your credit cards or use them sparingly
You want to positively affect your credit file therefore be sure not to use your credit if your goal is to improve your credit score in a more timely manner. In addition, be sure to keep older accounts open as the longer the Time period a file with a positive payment history remains in your credit file the higher your potential credit score.
Be sure to stop using credit if your Cash Flow and Financial Position allows you to do so or use sparingly (quarterly or so) if you have a zero balance card so that you can keep the account open, active and part of your credit mix!
- Get a one or two year installment loan through your credit union
You want to have more than just one Type of credit (1 credit card and 1 installment loan is better than 2 credit cards) if you want to build your credit score at a faster pace. An auto loan for 2 years will be sufficient or an installment loan for other purposes for one or two years would be sufficient—just make sure the lender reports your activity to the three major credit bureaus.
- Get a secured or retail credit card
If you can’t get a regular credit card or a retail store credit card (revolving loan) get a secured card and keep the balance low and pay off the balance as soon as you receive the bill! Depending on your future goals and current credit position you may need to open several secured or unsecured credit card accounts!
- Keep Your Inquiries Low
After you remove negative and inaccurate information from your credit file and you have at least 3 types (ideally) of credit open—you want to pay in a timely manner over a period of time. That time period will vary based on your unique credit file.
Be sure to get your credit file several times a year to see the progress that you are making and determine if you need to make additional moves in order to get your credit score at a level that allows you to reach your and your family’s future goals. Only apply for new credit if it is a part of your credit building strategy or reaching your future goals as too many Inquiries based on you seeking new credit can lower your credit score some.
Final Thoughts on Improving Your Credit Score & Credit File
Depending on your own particular credit situation and cash flow position restoring your credit to an ideal level (Credit Score of 680 or above) may realistically take anywhere from 30 days to two years.
It is important that you address your credit report comprehensively and you are disciplined along the way—as you must remain focused on your intended outcome.
It is also important that you realize that your credit file and credit score is often used for insurance and employment purposes.
With what you have just learned you have put yourself well ahead of consumers who manage their credit on a daily basis. However, it is not what you have just learned that is really important!
In addition, you must be aware of credit repair scams as they are prevalent throughout the credit industry. Be sure to visit the Federal Trade Commission prior to putting together your credit restoration or credit improvement plan.
The Consumer Finance Protection Bureau may also be able to assist you after you have disputed information in your credit file and the credit bureaus or creditor’s do not respond appropriately after you have contacted them.
By doing so you can avoid many of the mistakes that unsuspecting consumers have made over the years and also find a template for creating and sending in dispute letters that can help remove negative information that is inaccurate from your credit file.
After doing so you can truly be in position to manage your credit scores, credit files and your finances in an intelligent, consistent and proactive manner and produce the outcomes that are in your and your family’s best interest!
If you desire to address your credit issues (whether positive or negative at this time) in a more focused and comprehensive manner, be sure to consider purchasing 1-2-3 Credit & Me so that you can totally take control of your credit and finances throughout your lifetime so that you can enjoy life in a more bountiful manner!
About This Article:
The above Credit Improvement article was written by Thomas (TJ) Underwood on November 15, 2014.
Thomas (TJ) Underwood is a licensed real estate broker in the state of Georgia and is the writer behind The Wealth Increaser, Home Buyer 411, Home Seller 411, The 3 Step Structured Approach to Managing Your Finances, Managing & Improving Your Credit & Finances for this MILLENNIUM and CREDIT & FINANCE IMPROVEMENT MADE EASY—FREE GUIDE.
He is the creator of TheWealthIncreaser.com where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner. He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future.
You can contact him from a number of sources but the most direct way is to contact him through Realty 1 Strategic Advisors Website. You can also get other highly relevant tips on “living your life more abundantly” and possibly earn revenue at the same time by linking to TheWealthIncreaser.com.
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