FICO Scores ø Part 3 of 3

How to Improve Your FICO Score

In two previous articles, we have discussed the importance of FICO scores and how the scores are developed. In this final article, weÕll talk about some immediate steps you can take to improve your score . Ê Let me say here that there is no such thing as credit repair. It is possible, however, to improve your scores by correcting inaccuracies that creep into almost half of the reports, perhaps yours.

Your credit report is easily available online from the following websites: Ê www. equifax.com (or www.myfico.com), www. experian.com , or www.transunion.com, Ê Note that if you get only one of the three bureaus, if there are any errors, youÕll also have to get reports from the other agencies too. Check for the following errors. Ê

1. Is your name and social security number correct? Ê Are their multiple names? Ê Are you listed both as Joseph and Joe? Ê Is information on a relative with a similar name ø your father, for example, - merged with your report? Ê This is easily fixed by following the contact information at the bureauÕs website. Sometimes you can do by phone, but mail is better.

2. Are any old accounts that are paid off or closed but still listed as open accounts or with balances? Frequently, you might pay off a car loan early and the lender doesnÕt report the paid off account. They just stop reporting it. Ê A new lender will assume that you still have that car loan with its $250 payment until you prove otherwise. Start out with the creditor and get them to send you a correction letter. Ê You can then use that letter to get the bureaus to correct. Ê Note: never rely upon a creditor that says, ÒWe will send a corrected report to the bureau.Ó They may do it; they may not. You have to follow up.

3. You know your mortgage payment is due on the 1 st of the month, but that you have a grace period, typically 15 days. Ê If you pay on the 16 th or 20 th , you owe a late charge. HereÕs the rub. Ê Some mortgage lenders will report this as a 30-day late. Get a mortgage history from your mortgage lenderÕs website or from their Servicing Department. See when your checks were cashed to determine whether you were 15 or 30 days late. Ê Then get the lender to correct its report.

4.Late payments on other accounts, even those that are closed hurt your score. Ê Examine the report of any account showing late payments and compare it your own record. Ê This is a good reason to keep credit card statements. If you donÕt have the statements available, examine canceled checks for proof that payment was made on time. Ê Then contact the creditor, as above. Ê Note that even if you were late only once or twice, frequently, the creditor will correct the record anyway, just to keep in your good graces. Ê Do not expect this courtesy if you have lots of lates.

5. Collection accounts are viewed very seriously. Ê The majority IÕve seen result from medical billing issues. Say you have a $1,000 doctor bill. You pay $200, or 20 percent of the bill. The hospital then sends a $800 bill to your insurance company, which subsequently pays only $735. The doctorÕs office may not call to alert you that you still owe $65. It sends the unpaid bill to a collection agency. It is important, first, to pay your bills. If there is a problem with the insurance company, it is YOUR problem, not the doctorÕs. The best tactic is to pay the doctor directly and then tell them to tell the collection agency to eliminate the record. Ê IMPORTANT: if you just pay the collection agency, they report it as a Òpaid collection account.Ó ThatÕs about as bad, and itÕll stay there for another 7 years.

6. Judgments and tax liens show up on a public records check.. Ê If you have either and they have been paid, it is important that you get a Release of Lien or Satisfaction of Judgment form and file it with the County Recorder Õs office. Ê

As you can see, the advantage lies with the creditor making the report. Ê When they say you were late and you presumed guilty until you prove otherwise. Your only advantage is that you can dispute any item with the bureau. When you do, they write the creditor, which has 30 days to corroborate what you have said. The good news is that many creditors will not bother to respond, particularly to disputes on items that are over 2 years old. They simply do not have the records anymore. So after youÕve worked with all your creditors, IÕd just start writing the bureaus, one letter per item, and dispute whatever is leftover. Ê

You can see that having god credit scores is worth the effort, but it is not a process that can be done quickly. Ê You will also not believe how persistent you have to be to get results. Ê That is why it is important to get your credit report early on in the process, perhaps even as long as six months prior to applying for a loan. ÊÊ Then go after your dream home.

Good luck!