10 tips for repairing your credit history, raising score

The Baltimore Sun

Credit repair scam artists will charge you anywhere from $500 to $1,500 or more upfront, and promise you everything from a new Social Security card to perfect credit.

What should you do if you have bad credit? Here are 10 tips that are designed to improve your credit history and raise your credit score:

Pull a copy of your credit history from AnnualCreditReport.com.

Sponsored by the three credit reporting bureaus, Equifax, Experian and TransUnion, AnnualCreditReport.com is the only place you can go to get a truly free copy of your credit history. Each credit reporting bureau is required to give you one copy once a year.

While you're there, buy a copy of your credit score from Equifax.com.

Equifax offers a FICO score, also known as a Beacon score, which is from Fair Isaac Corp., the company that created the concept of credit scoring.

Most creditors will pull a FICO score, so you should see what they're seeing. Your credit score will give you a snapshot of what your credit information means to your creditors. The FICO score runs from 350 to 850. The higher the number, the better. Your target should be to have a credit score of at least 720.

Check your credit history thoroughly.

You're looking for errors, misinformation and negative information that might count against you. File a dispute with the three credit reporting bureaus if you spot any errors. Most credit reports have some serious error in them, so fixing these will boost your score.

Understand what kind of debt you're facing.

Make a list of everything you owe, the interest rate each debt carries, and the minimum payment due each month. Then, establish priorities for your debt: mortgage, real estate taxes, credit cards and medical bills should be paid in that order.

Negotiate with your creditors for a lower interest rate.

Paying less in interest means more of your payment each month goes toward paying down your balance.

If you have a good credit score (over 720 is a starting point), you should be able to find other credit cards featuring zero percent to 5 percent in interest for the first year, or for the life of a balance transfer. (Check out Web sites such as CardRatings.com and CardTrak.com to compare credit card offers.)

Just be sure you read the fine print: Some credit cards require you to charge on the new account each month or face a stiff fee.

Pay down the debt with the highest interest first.

Pay your mortgage and home-equity loan and lines of credit in full each month.

Then, throw any spare cash at the debt that carries the highest interest rate first.

Pay everything on time, even if you can only make the minimum payment.

The most crucial component of your credit history and credit score is your ability to pay your bills on time each month.

Even one late payment can seriously damage your credit history and credit score, even though it can take a year's worth of on-time payments to start to heal your credit history and raise your credit score. It doesn't seem fair, but that's how the credit industry works.

Don't charge more than 25 percent of your maximum available credit limit.

If you carry a credit card balance that is a higher percentage of your available credit limit, your credit score will go down.

Why? Because creditors believe if you charge the maximum on your credit cards, it means you can't properly manage your credit. You're better off spreading out your debt between three or four different cards than having it all piled on one card.

Don't open and close a lot of accounts.

Again, a credit score tells current and future creditors how likely it is that you won't pay back your debts.

Every time you apply for a new credit card, that creditor pulls a copy of your credit history from the credit reporting bureaus. That "inquiry" gets reported on your credit history.

Don't share credit (except with a spouse).

It's easy to tell someone that you'll co-sign a credit card, student loan or a mortgage loan application, especially if it's someone you've known for a long time. Once you're a co-signer for a loan, you're legally obligated to make those payments -- whether or not you can afford them. So think carefully before you agree to co-sign a loan, and nip the problem of bad credit before it begins.

Contact Ilyce Glink through her Web site, www.thinkglink.com, by mail at Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022 or calling her radio show at 800-972-8255 from 11 a.m. to noon Sundays.

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