Boost Your Credit Score
How To Get That House Or Car!
Tip#1 Before You Get Started—Know These Terms:
- Credit Score-What is it?
- What’s Considered a Good Credit Score?
- What is a “Middle Score”?
- Credit Bureaus, who are they?
- What is a Dispute or Investigation? Why does it boost my credit score?
- What is Deletion Letter? What is a Payoff Letter? Why do they boost my score?
Tip #2 Step by Step Game Plan
This is what you have to know to fix your credit in a hurry:
You must know your 3(three) scores from each of the 3(three) credit bureaus. This will be explained below.
You must get your credit report from all three credit bureaus with a “confirmation number” that allows you to follow up on your disputed items by phone or internet. The quickest way to get your report is online. You must know which score is your “middle score” if you are applying for a home loan. When applying for a mortgage a lender will pull what they call a “Tri-merge” credit report this is a credit report with all three bureaus. The lender will throw out the lowest and highest score leaving the middle score. If you are applying for a car loan it helps to know which credit bureaus the car dealer is pulling from then you will know what your credit score is.
Depending on the credit bureau you can change your score within a few days with using the following techniques:
Starting an immediate investigation by phone or online for any credit item you are in dispute with (disputes immediately boost your score with Equifax)
Starting an internal investigation with your creditor, if they are a big creditor like MBNA Visa card the dispute will show a pending deletion on Experian right away, in other words, any bad items will be temporarily suspended pending an investigation.
Fax any proof from the creditor that may have on the items you are disputing to help the credit bureau speed up the process. Although they take up to a week to change your report, you can try talking nicely to someone at the credit bureau and see if it may get done a little quicker.
Tip #3 Know your credit scores
It’s possible that you already know your scores, but let me go over what they are. About ten years ago some Ph.D.’s at a company called Fair Isaac developed a system to “predict” who might go into credit failure from people’s credit reports. This system gained more popularity in recent years and now each of the three main credit bureaus licenses Fair Isaac’s system for generating credit scores. Equifax calls the score based on this technology your FICO, Experian calls it your BEACON score, Trans Union calls it your EMPIRICA score.
Why does this score matter? People like you and me applying for a mortgage or car loans are nothing but a “number” our credit score. And even though you may be a fine upstanding citizen and pay just about every bill on time, the Fair Isaac algorithm for predicting credit failure may mark you as a poor risk using its predictive analysis. Even if you have paid your bills for many years, and someone else has claimed bankruptcy in the past three years, the “bankrupt” person may be the one to get the credit! It is not fair, but to understand the system you must think like a “computer” thinks. Picture this—the person that has just claimed bankruptcy has no debt, and is forbidden from filing bankruptcy again within another 7 years. Furthermore, they may be applying for a house or car which is a “secured debt”—meaning that the loan they are applying for is “secured” by some kind of house or car. The lender likes this security or collateral; they can take that house or car away and sell it, which is a secure situation for them. You on the other hand may have lots of “unsecured debt”—debt like credit cards that are not secured by any property. So in short, you may not be able to get a loan because of to much unsecured debt. Unsecured debt is things like credit cards whether it is a visa or department store. It has nothing attached for collateral. It could also be a personal loan or sometimes called a signature loan.
How do you find out your credit score? There are three bureaus, Trans Union, Experian, and Equifax. Trans Union will tell you for free sometimes over the phone. The other two bureaus will “sell” you a look at your score, online is the fastest easiest way to buy them. There is a website “myfreecreditreport.com” they will show you a copy of your report once a year for free, but they will sell you your score. Remember you need to go to each of the three bureaus so you can get a confirmation number.
Tip #4 Why you dispute your derogatory items
There are some credit repair consultants that will charge you $700. to “fix” your credit. In fact all they are doing is disputing derogating items on your credit so that they come off. Why does this work? Well, it can work in two ways:
- The item is inaccurate- you in fact don’t deserve to have this thing on your report and it is inaccurate. For instance, let’s suppose there is an open collection on your credit report for $150, but you really paid it over two years ago. If you dispute this item with the credit bureaus as inaccurate, you are exercising your rights under the Fair Credit Reporting Act to get this item taken off. Your creditor is required by law to verify the items and report back to the credit bureaus within 30 days. If they find the item is old or inaccurate, they will tell the credit bureau and the item will be deleted.
- The item is accurate but the item gets deleted anyway—this can happen for several reason:
- The creditor got paid and doesn’t care to respond to the dispute from the credit bureau. They let the item get deleted by not responding. This happens mostly with small collections that were paid. But guess what! Each collection items deleted can be up to 20-25 points each. So in other words, you can get items deleted when you dispute and the creditor doesn’t try and prove the item accurate.
- You can talk to your creditor directly and ask them “do you delete?” It is a collection agency, about 50% of the time they will “Delete”—in collection lingo that means to delete the item from the credit bureaus once you pay. Sometimes you have to pay a little deletion fee. But remember, every collection taken off of your score is going to raise your score. Make sure you get a letter from saying if you pay they will delete the item if paid in full.
- The item is accurate, your creditor doesn’t “delete”. But they don’t want to be hassled or sued—by calling the creditor and saying you are buying a house or a car, sometimes they will temporarily delete the item from you’re your credit (last 6 months). They know the purchase is important to you and don’t want the hassle of you calling and writing to dispute it again and again. About 30% of the time the creditor will delete your item temporarily, I have seen this happen with Capital one Visa (2 60 days late) Bank of America mortgage (1 30 day late). If they say no they will not do that fax, and send them a letter every week asking them to delete. Send it the attention of the credit manager in charge. Also dispute every 30 days until the creditor grows weary and they delete it.
Dispute and use persistence, that’s what the professionals do. Now you can do it to.
Tip #5 Know how to “pull” your credit report and how not to
If you pull your credit report yourself, there will be no negative consequences in the form of “inquires”, a mark against your credit. However, if any car dealer, mortgage lender, credit card companies, or any other type of creditor pulls your credit report, it counts against you of an inquiry. At present, these inquire stay on your report for two years and are difficult to get removed. If you are applying for a mortgage refinance or new home loan, you can apply for up to 6 home loans in a thirty day period before your score changes. Just to be safe, if you are curious about your credit reports always pull it yourself first. Another thing to think about if you go to two or even three places and you get denied there is a good chance you have some work to do on your credit.
Tip #6 High balances on unsecured debt—knock them down
Remember that lenders do not know how much you earn from looking at your credit report. But they can tell whether you are “maxed out” on your credit cards. Being maxed out is sign that you’re spending may be exceeding your income, this is a strong possible sign of the future credit problems, at least as far as credit scorers reckon. You may have the best of intentions, but have a poor credit score because of your high credit balances.
Tip #7 Watch out for “high interest” lender that hurt your score
There are several companies that are high interest Money Stores that hurt your credit score. Beneficial and Citi Financial are two that I can think of right off the bat. These companies are considered “last resort lenders” by credit scoring gurus.
Tip #8 Consolidate your debt on a higher limit credit card
Remember it is not how much credit card debt you have, but how much credit card debt you have in comparison to your card limit. It is good if your balance is 75 percent or less of your credit limit. They say by having your credit cards over the 75% range can drop your score up to 50 to 80 points. If you have two credit cards maxed out at 5000 dollars each, and you get offered a 20 thousand dollar credit card, it might be better to transfer balances onto the 20 thousand dollars card. Just one thing: don’t max this one out as well!!
Tip #9 Just the past 12 months counts
In today’s credit lending environment, lenders are not looking at the past seven years like in years past but they are really focusing on the last 12 months. This could be good or bad news: if most of your mistakes are in the past previous to the12 month cut off then it is easier to qualify. But if you were a saint for seven years and in the last 12 months you slipped up it is going to cost you. It is important that you know the last 12 months is what counts the most.
If you have had a bankruptcy the rule of thumb is 24 months after the bankruptcy was discharged. If you have had a foreclosure or a foreclosure started you have a 3 year wait before getting a new mortgage.
Tip #10 Pay collections for the fastest results to boost your score
Think the way the “computer” thinks: people that are about to default on their loans start by “getting behind” on there phone bill, credit cards, and other accounts. Any unpaid collection or 30+ days late on your revolving accounts will be about 35% or more than one third of your low credit score. The good news: paying collections is one of the fastest ways to improve your credit score.
When talking with the collection agency don’t forget to ask this question “do you delete?” By asking them this question you are asking them if you pay will they remove this from your credit report. About 50% will, even if they don’t delete make sure you get a receipt paid in full and that way if it is not updated on your report you can prove it to the three bureaus yourself.
Tip #11 Have three to five trade lines of credit
If you have a mortgage, a car loan and three credit cards you have five trade lines or 5 lines of credit. Three to five is seen as ideal. More than that may be seen as excessive.
Credit Score – What is it?
Your credit score is now the most important factor that lenders use to evaluate your credit worthiness. Your credit score is a 3 digit score calculated by the credit bureaus from credit history. This score was once called FICO or Beacon score–it was invented by Fair Isaac, a company that created a way to predict your chances of credit failure using just your credit report. The score was invented about ten years ago by some Ph. D.s at Fair Isaac: this system gained more popularity in recent years and now each of the three main credit bureaus, Equifax, Experian, and Trans Union licenses Fair Isaac’s system for generating credit scores.
What’s Considered a Good Credit Score?
Your credit score can range from 200 to 850. Lenders will give you a home loan or car loan at about a 580 and up. However, the “Golden” score is considered to be 720. 720 is the “magic” score for getting any type of credit including nothing down home loans, loans with no income verification, home loans with an equity line included, etc. Want one of those car loans with zero percent interest? Have a 720 credit rating. Even if you don’t have a 720 there are still lots of programs and loans available. Even zero down mortgages! We have one mortgage that says they are not credit score driven, FHA says they do not look at scores but pays more attention to last twelve moths pay history. You can have no late pays in the last 12 months or any new collection in the last 12 months.
What is a “Middle Score?”
Mortgage lenders pull credit reports from all three bureaus, Equifax, Experian, and TransUnion. They then look at the middle score. They throw out the low and the high score and take the middle score. One would think they would take an average of all 3 scores to get the middle score. That is not how it works. Example if your score is 580 with TransUnion, a 622 with Equifax and 634 with Experian your middle score is 622.
Attention: Consumer Services
PO Box 740241
Atlanta, GA 30374
(800) 685-1111 Phone
(877) 685-8099 Fax
Attention: Consumer Assistance
PO Box 2104
Allen, TX 75013
Attention: Consumer Assistance
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Chester, PA 19022
(800) 916-8800 Phone
(610) 546-4605 Fax
Free annual credit report
1 (877) 322-8228
Fair Isaac Credit Score Hotline
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Sample Letter Format
Disputing an Inaccurate Report
To (Creditor or Your Name:
Credit Bureau) Current Address:
Address/ Zip Date of Birth:
Your SS #:
To Whom It May Concern:
(Slow or late payments)
Upon receiving my current credit report I have discovered the notation that claims a late payment to my account (give account number). My records show this to be untrue. Please research your records and locate the fore mentioned discrepancy. This has created a negative mark on my credit report and I would appreciate this being corrected as soon as possible.