Simple ways to improve credit score in 2009

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Simple ways to improve credit score in 2009
2 years ago
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With today's deepening financial and housing crisis is there a more critical number than your credit score? Nearly all lenders use a formula developed by the banking consultant Fair Isaacs Corp to calculate this important number. This simple 3 digit number can mean the difference in whether you successfully obtain a loan as well as whether you will qualify for the best lending terms available. There are hundreds of books available discussing the subject; here are some of the more critical items that can help you boost your score quickly.

First of all, get a copy of your credit report. Go to annualcreditreport.com and request a free copy from each of the three big credit bureaus. You are entitled to one copy per year. Consider getting a copy from a different bureau every four months rather than all three at the same time; this will allow you to review your credit data throughout the year for errors. Keep in mind that you have to pay a small fee to get your credit score. The credit report is free, but not your credit score. Be careful navigating the web sites of the major credit bureaus; they constantly try to sell you services such as credit monitoring that you probably don't need.

Review your credit report for accuracy. Financial experts claim that 80 percent of all credit reports contain at least one error. Credit bureaus don't verify data they receive from creditors; they merely generate the credit reports. If you find any discrepancies, you'll need to contest the error with the credit bureau. Be prepared and meticulous before initiating the dispute and have your corrected information available. Always keep copies for your records.

Negative items such as charged-off accounts or late payments remain on credit reports for 7 years; bankruptcies up to 10 years. If your credit report has been tarnished by any of these, only time and prompt payment habits will change the situation. Nevertheless, creditors supposedly are more interested in a pattern of payment rather than an isolated incident.

Your debt to credit ratios matter even if you don't carry a monthly balance or have never exceeded your credit limit. Also, termed debt utilization it is calculated by dividing what you have spent by your available credit. It is a key component of your credit score because lenders want evidence that you are spending within your means. On the Equifax report a debt to credit ratio exists for mortgage, installment and revolving accounts. The lower your ratios the better your credit score. Experts recommend keeping your ratio below 30 percent.

Consider increasing your credit card limits to reduce your debt to credit ratio. Skip this suggestion if you can't avoid the temptation of adding additional debt. If you handle debt responsibly, the worst a creditor can do is say no to your request. At the same time try to pay down your debt as much as possible, but beware. Because of how debt utilization is calculated you want to pay down the balances on all accounts incrementally rather than leaving one account with an excessively high balance. If you don't, it can partially negate the benefit of debt reduction.

Make sure you pay your bills on time, even if you can only afford a minimum payment. Experts claim that one recent skipped payment can reduce your credit score by a painful 100 points. Be proactive. Call creditors to negotiate reduced monthly payments or change due dates. Do whatever is necessary to keep your accounts current and to avoid being reported as delinquent.

Avoid adding additional credit cards as an attempt to increase your available credit. Recent hard credit inquiries by potential lenders constitute 10 percent of your FICO score. Each new inquiry in a specific time frame can deduct points from your credit score as lenders may believe you are intending to take on new debt.

Be careful about closing credit card accounts. This will reduce your overall available credit, thus altering your debt to credit ratio. You should on occasion use an old card to keep it active and prevent the insurer from closing the account due to inactivity. If you need to close an account, at least close your newest cards. The longer you've had a particular credit card, the better.
Once an account is closed have the lender send you written verification to avoid future problems.

Consider piggybacking on one of your spouse's accounts if your spouse has a good extended history and a high limit. Simply request to be added as an authorized user. Authorized users are not liable for the debt and the positive payment history gets factored into their credit score.

These simple tips can make a big difference in your credit score. Why not give them a try?
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Comments
2 years ago
I could be wrong, but I have read several articles in both print and internet sites and from what I gather "piggybacking" is no longer a benefit for the authorized user. Years back a Texas based company was selling authorized users accounts for 2-3000 dollars each to people with bad or not great credit history. Folks with long, nearly perfect credit would allow them to "piggyback" off of them for a fee and the Texas based company would take a percent for setting everything up. The "piggybackers" never received the credit card, it would be shredded onced delivered. FICO figured this out, and changed their scoring system accordingly. They began this change in the early part of 2009, if memory serves, it started in April. Just a heads up, if this was your shot at bumping your score, time for plan B.
2 years ago
You are right that FICO reconsidered their credit score model and you will not be able to enjoy the benefits of "piggybacking", if you don't live on the same address as original cardholder and have other "suspicious" indicators that tell that you are "fake" authorized user. However if you are true authorized user, your credit score will raise.
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