Repairing Your Credit Score

Individuals can contest their credit report if it has errors. The laws provide for this. If you have evidence that your credit report has inaccuracies, there should be no problem fixing your credit score.

Given the importance of good credit, diligence dictates that you follow a methodical way of reporting the inaccuracy and providing supporting documentation so that the repair process goes quickly and efficiently. Follow these steps:

1. The first thing to remember is that the Fair Credit Reporting Act (FCRA) stands behind you, not against you. Use this Act to have errors rectified in your report. Maybe the error was not intentional. If you have a common name - say John Edward - there are probably at least 500 people in your state with the same name. And thousands more across the country. If one of these John Edwards misses a payment on his mortgage or line of credit or writes a check against insufficient funds, the entry could inadvertently make its way into your file. You can prove that you aren't the John Edward that dodged a due payment.

You can contact the credit bureau in writing and point the mistake to them with supporting documents. If you have a receipt from the bank for that mortgage payment you made, attach it to your letter. Make sure you follow up with the credit bureau to see if they've adjusted your credit report by eliminating that erroneous entry.

2. Everyone's entitled to a free credit report once a year. To obtain your credit score, however, you need to visit the web site of FICO. There are 3 digits in your credit score. If you obtain a number that is higher than 720, this is a good score. Below that score, you need to do some credit repair. But don't let this low score discourage you. Remember that numerous people are in the same boat and are trying to fix their credit standing - just like you!

When you're shopping for a loan it does pay to have a high FICO score. The FICO web site home page displays interest rates that are applied depending on your score. For example, if you want to apply for a 15-year home equity loan, a score of 720 and up will fetch an annual percentage rate (APR) of only 5.799% (as of December 1, 2007) versus an APR of 10.44% for a score of 500-579. Notice the big difference in rates?

3. If your bad credit score is entirely your fault, again, don't despair. The beautiful thing about credit is that you can re-build it. It may take time but with restraint your credit standing will recover. This is why it's essential to use credit (a) only when you need to and (b) when you do, use it wisely. Here are some repair credit strategies for you:

while you're in the process of repairing your credit score, stay away from any applications for additional loans - be it for a car, a revolving line of credit, a personal loan. This is because any application you make for a loan gets registered in your report;

prompt payment of your bills is strong encouraged. We get into a cash crunch at some periods of our life leading us to skip a payment or two. While it's not a criminal act, habitually missing payments will give you that "trapped" feeling - perhaps a worse feeling than actually being behind bars;

like everyone else, you have a limit of how much you can use from a revolving line of credit. If your bank offers you say, overdraft protection of up to $1,000, stay within that limit;

consider debt consolidation - if you're feeling choked by a whole slew of interest rates, ask your financial adviser if it makes sense to consolidate all your loans. That way you pay one loan with one interest rate;

pay with cash, if possible - lots of people walk around with heavy-duty plastic in their wallets. Dare to be different. Pay cash for your purchases;

communicate often with your bank officer or loan officer. Time to turn on the public relations person in you. Let them know about your financial plans, show them you care about your credit standing. Maintain regular contact - who knows, your banker may just increase your line of credit even if your credit report is not so outstanding.

If your credit score is unsatisfactory, roll up your sleeves and get it higher. Getting your credit score up to par should be your # 1 priority. Good credit is as good as gold. Contact your credit bureau immediately if you notice that your credit report contains inaccuracies.

Don't stop until the errors are corrected. Be persistent and do the necessary follow-ups.

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Steven J. Talrechi has studied credit reports and credit reporting practices for the last ten years. He is keen in assisting people get a 2nd chance checking account and 2nd chance bank account when banks turn them down.

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