Rebuild Credit Five Steps for Improving Your Credit RatingBlemishes on your credit report can cost you, but don't despair. It's never too late to become credit worthy. You just need to get started, using our five steps for improving your credit rating, and remember that results won't happen overnight. 1. Order you credit reportsFind out what the top three credit bureaus (Equifax, Trans Union and Experian) are saying about you. And remember that your information on file is likely to be at least slightly different at each one. Creditors aren't required to report to all three bureaus, so they typically report to the one to which they also subscribe. Therefore, it is preferable to order a three-bureau, merged credit report. Credit reports should be reviewed at least twice a year. If you've been denied credit, insurance or employment because of your credit report, you are entitled to a free copy of your report from the reporting agency. The company you applied to must supply the credit bureau's name, address and telephone number. You have 60 days after receiving the denial notice to request your copy. 2. Examine your reports carefullyNearly one-third of credit reports contain serious errors that could cause consumers to be denied access to mortgages, car loans and credit cards.That's because credit bureaus don't verify the information they receive from your creditors. Like it or not, keeping your credit report clean and true is your job. Once you get your three reports, look carefully for everything from typing errors to outdated and incomplete information. Make a thorough list of items you dispute and why. If the negative information in your report is true, only time and improved habits can change that for the better. Late payments and charged-off accounts remain on your report for seven years, bankruptcies for 10 years. Most creditors, however, look for a steady pattern of payments rather than focusing on one-time or rare occurrences, so consistent on-time bill payments will improve those blemishes. 3. Dispute and documentSince a bad report can cost you money, it pays to be thorough. You can either complete the dispute form provided with your credit report or write a letter. Clearly identify each mistake and state why it's wrong. One recommendation is to send a photocopy of your credit report with the mistakes circled to the reporting credit bureau with copies of your supporting documents. Keep copies and records of all the forms, letters and documentation that you send the credit bureaus, plus dates sent. In short, document, document, document. The credit bureau must investigate any relevant dispute within 30 days of receiving your letter. Any item that is not verified as accurate by a creditor is removed. If the credit bureau makes any changes to your credit file, it will send you the results along with a free, updated copy of your credit report. Once a negative item is removed from your report, the credit bureau cannot put it back on unless a creditor verifies its accuracy and completeness -- and sends you written notice. 4. Dissolve your debtThe next task is to devise a spending plan that reduces your debt and allows you to pay on time, all the time. If you're having difficulty making payments, be proactive. Call your creditors and negotiate with them to keep your accounts current and not be reported as delinquent or "bad debt." You can ask for reduced monthly payments, or even change due dates to balance out your monthly bills. The same strategy can be used for fixed-loan payments, but it should only be used for the short-term. You'll pay more interest to extend the repayment schedule, but it allows you to stay current and save your credit rating. Use the extra money to pay off debts one at a time, gradually increasing payments to other debts. Deal with any collection accounts. Unpaid collections are worse than paid collections. You can negotiate a pay-off settlement that reduces your bill, and demand that all derogatory remarks are removed from your credit report or at least reported as paid in full. Be sure to get verbal agreements in writing before sending off your payment. Slowly close out unneeded or unused credit accounts. Close out your newest accounts first so that you don't lose your longer credit history, and close them out slowly over several months. But remember that cutting up the card doesn't close out the account. And be cautious when canceling because closing accounts can negatively impact your credit score, which considers the ratio of total debts to total available credit. Verify that all accounts you've closed are reported as "Closed By Consumer" for the best report. A good rule of thumb is to keep your revolving debt to 50 percent of your available credit. Keep your balances low and avoid revolving balances. 5. Add stability to your credit fileYou can also work to add positive information to your credit file. You may have been denied credit because of an insufficient credit file, even though you do have credit. That's because some creditors (local banks, credit unions, and travel, entertainment and gasoline card companies) may not report your credit history to the bureaus. Try asking the credit grantors to report your account information and monthly payment history to a credit-reporting agency. In the future, before opening a new account, ask if your on-time payments will be reported monthly to a credit-reporting agency. If you have really bad credit or even filed for bankruptcy, don't let your credit status go dormant. "The faster you begin to re-establish good credit by paying regularly on time, the faster you'll improve your credit score. A secured credit card offers those with no credit and those repairing their credit an opportunity to build a solid credit history. Shop around for the best deal available, but limit your applications. Credit bureaus look at how many new accounts you've opened, as well as the number of "inquiries" for new accounts. A sudden flurry of inquiries results in a lower score, because many consumers anticipating money problems increase their credit lines. Lastly, open a savings account at your bank. This shows creditors that you are
working to save and that you have reserves to repay your debts.
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