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Get Educated: tips for improving
personal finance
IMPROVING YOUR CREDIT
SCORE
By: Felicia Harris
Step
1:Order Your Credit Reports
- Cost for each report from each bureau is around $9-10. It will cost more to include your FICO credit score
- A FICO score is a credit score developed by Fair Isaac & Co. to determine the likelihood that credit users will pay their bills
- There are really three FICO scores computed by data provided by each of the three bureausExperian, Trans Union and Equifax. Lenders typically use the middle score (e.g. 650, 670 , 700)
- If you live in certain states such as Georgia , you can obtain 2 free copies per year
- If denied credit, you are entitled to a free copy of your report
- You have 60 days after denial to request your copy
Step
2: Examine your reports carefully
- Every consumer has at least one error on a report from one of the major credit bureaus
- It is a good idea to request a combined report with all information from the three bureaus
- Credit bureaus generate your report from information received from creditors
- Charge-off accounts (creditor writes off account), Judgments, Collection Accounts remain for seven years
- Bankruptcy remain for seven to ten years
- Chapter 7 (complete liquidation) is the most common
- Ten years from the bankruptcy filing date
- Chapter 13 (restructuring) repay debt in three to five years
- Seven years from the filing date
Step
3: Dispute and Document
- Clearly identify each mistake and state why its wrong (see example credit dispute letter)
- Send a photocopy of credit report with mistakes circled to credit bureau and include supporting documents
- Keep copies and records of forms, letters documents sent
- Credit bureaus have 30 days to investigate
- Any item not verified as accurate is removed
Step
4: Solve and Dissolve Debt
- Call creditors to negotiate to keep your account current and from being reported delinquent
- You can ask for reduced monthly payments or change due dates
- Unpaid collections are worst than paid collections
- Negotiate a pay-off settlement that reduces your bill
- Demand all derogatory remarks be moved or report balance paid in full
- Close unneeded or unused credit accounts
- Recommended to carry two to four major credit cards
Step
5: Add Stability to your credit file
- If you file for bankruptcy, undergo foreclosure, or have late payments, start to re-establish your credit
- If a derogatory statement is not removed from your credit report, you can add a brief (100 words or less) Consumer Statement (a note explain your side of a credit dispute)
- The faster you can improve your credit score, the sooner you can take advantage of the this historically low credit environment
- Open a secured credit card to help re-build your credit
- Shop around for best deals
- Sudden flurry of inquires results in low score
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