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Filed under credit by on Aug 31st, 2010. Comment. 
The days of robbing Peter to pay Paul hopefully is over for some consumers. People are now figuring it out; paying debt with debt only creates more debt. But if you are like many Americans with not so perfect credit, you are looking for ways to correct it so that you can get a home, make bigger purchases and get approved for a personal and business loans. Credit scores to matter since they determine whether a lender will trust to give you a loan plus it also serves as a prediction of how likely you are to make your credit payments on time. Your FICO score is based on the information in your credit report whether negative or positive. Below I have listed some tips on how to get started on the right track toward a healthy financial future.
1. Get a credit report.
Hiding from your self the mess that it has taken year to create is not going to make it go away and there is a possibility that there is some negative reports on your credit that is untrue. You can only dispute what you can see so I suggest you order a credit report. You can order a free credit report at www.annualcreditreport.com to get started. Below is all 3 credit reporting agencies.
INDIVIDUAL CREDIT REPORTING AGENCIES:
Equifax
Web: www.equifax.com
Phone: 1 800 685 1111
Experian
Web: www.experian.com
Phone: 1 866 200 6020
TransUnion
Web: www.transunion.com
Phone: 1 800-888-4213
2. Check for all negatives on your report
They say that all credit reports average at least 1 error. These are the things that can be disputed and by law they must give you an answer within 45 days. Some of the most common errors to look for is:
- payments that the report shows as late but which you actually paid on time
- accounts that don’t even belong to you
- debts that you paid off, but which still show an outstanding balance
- negatives, charge-offs and late payments that should have come off your report after seven years or more than 10 years for a bankruptcy.
3. Start paying all of your bills on time
Now that you know what lenders are seeing, you need to correct it by something so simple yet overlooked: start paying your bills ON TIME. Period. Even if you can only afford the minimum payments, make them. If you can’t afford it, don’t charge it! Get a calendar and mark all of your bills due dates and pay them before or on that date. Create a separate account for bill payments only and if you have online banking you can set it up to where it automatically sends the payment out for you. Make arraignments with the debtor if your going to be late. Do what ever necessary to be on time to establish a great payment history.
4. Continue to use Credit
I know this almost sounds counter-productive but it’s true; you have to continue having your lines of credit open and use them to show that you are reestablished. Only buy things that you can pay off in cash once the bill comes. Don’t pay for things that you can’t show for like food, clothes and rent. Continue to make those payments on time and remember: if you can’t afford it, don’t charge it!
5. Avoid obvious red flags
Don’t max out your credit cards if you can help it. It shows on your credit that you’re a high risk and unable to pay off the balances. Most creditors would prefer if you keep your balances around 50% or less. Another red flag to creditors is excessively applying for more credit. Every inquiry that you make to get credit card or a loan will continue to show up on your credit report and takes about 3 years for them to fall off so be wise and only apply if you can afford it.
6. Let time take its course
Time does help repair some credit scars that may be still damaging to your score. For some things it will take 7 years for it drop off from your credit history which should help. As you continue to apply these steps for the next year, you will see that your score will reflect a responsible consumer that has been pays their bills on time and can be trusted. And wasn’t that who you were always?
Below are some scenarios that I found at http://www.pueblo.gsa.gov/cic_text/money/creditscores/your.htm regarding
Meet Don and Doris
| Behavior of action | Change in score | Don and Doris’s current FICO score |
| March 2004 Don and Doris are married and in their 50s. They have twin sons who graduated from college a year ago, have good jobs and live in different states. Don and Doris have been managing their money carefully for 30 years. They are making payments on a mortgage, three credit cards with large balances, and a $50,000 bank loan that paid for their sons’ college. Now that their sons are on their own financially, Don and Doris focus on paying down their credit card balances by making larger monthly payments and using their cards sparingly. |
— | 690 |
| March 2005 After a year of steady payments, their credit card balances are significantly lower. They continue to manage their credit well and haven’t opened any new accounts. |
+50 | 740 |
| June The couple decides to go on an extended vacation, taking leaves of absence from the jobs to so they can tour the U.S. in a motor home. They buy their motor home with help from a new bank loan at a favorable rate, thanks to their good credit scores. But opening the new loan lowers their scores a bit. Since their plans will keep them on the road for three months, they put one of their sons in charge of paying their monthly bills. |
-20 | 720 |
| September They have a wonderful vacation. When they return, they find they had neglected to tell their son about the bank loan. He didn’t open the invoices they received from the bank thinking they were monthly account statements. Now their bank loan payment is 60 days late. |
-75 | 645 |
| October Doris calls the bank, explains the mix-up and sends in the overdue payments immediately. A couple of weeks later their bank conveys their new account information to the credit reporting agencies, where it is available to influence their credit scores. |
+20 | 665 |
| April 2006 After six more months of on-time payments, their credit scores have steadily improved. Although the late payment will remain on their credit reports for seven years, it will impact their scores less as time passes. Don and Doris are on track once again to regain their good FICO credit scores in the 700s. |
+30 | 695 |
| * Don and Doris have separate FICO score, but in this example, they would rise and fall together. | ||
Filed under Other by on Mar 4th, 2010. Comment.
