How do I Improve My Credit Score?

Excellent Tips for “How to Improve my Credit Score?”

1. Why does my report still reflect balances on some of my paid accounts? Often, creditors stop reporting to the credit bureaus once they are paid off. So, your report may show the last balance before the payoff. Creditors are not worried about your credit score—only about getting their money out of you. Be sure any paid accounts reflect a zero balance. If the account is closed, make sure that fact is reflected as well.

2. Why should I avoid having my credit checked by lenders? People have their credit checked every time they apply for more credit. Whether or not they accept the line of credit once they are approved is irrelevant. Just the fact that you have had your credit checked matters to the bureaus even if you don’t increase available credit lines. Each inquiry will ding your credit a few points. Inquiries remain on your report from 90 to 180 days. This is especially important to those who are shopping for a home loan. You will want to shop around for the best rates. When you speak with a loan officer, he may want to check your credit. If you talk to several lenders while you are shopping around, and each one checks your credit, you will hurt your credit score. Take a copy of your credit report with you to show the loan officer. This will save the lender from having to do a credit inquiry.

3. Why is the same account listed more than once on my credit report? One account listed several times on the credit report is usually an account that has gone to collections. Collections agencies will report a delinquent account several times just to make sure it makes it on your report. The scoring programs that compute your credit rating may not pick up that the same account has been reported multiple times. To the program it appears that you have several accounts in collections. Of course this results in an inaccurately low score. Be sure that any collections only appear once and the account status is accurate (outstanding or paid in full).

4. Is it necessary for me to pay off outstanding charge off accounts and collections prior to refinancing or purchasing a home? Doing that can actually hurt you in the short term. Here’s why:Collections agencies sometimes report one time when the account goes to collections and do not report again. A collection account from 5 years back may not have been reported since then. So, that account is not affecting your credit score as much as an account from a few months ago. Paying off the old account will cause a report on a derogatory account that may not be affecting you that much now. It’s better to leave it alone. While the pay off would be positive, it is still “digging up bones” because it will show an old account as a “current collection”. This may actually lower your score for a few months.For the sake of your long term credit score, pay all collections. But do it at least six months (or a year, to be perfectly safe) before you apply for a refinance or a home mortgage

5. Should I close my credit card accounts? Credit bureaus love to see long term credit history. If you close credit card accounts, close the newest ones. New accounts reduce your credit for the short term until you establish that you can handle the account responsibly. That takes time (six months to a year). The immediate impact upon your credit score is a reduction.

6. Is there a recommended number of credit accounts I should have? Yes. Three active lines of credit is the minimum recommended amount to build good credit. Try to vary the types of credit accounts you open: home loans, auto loans, credit cards or college loans. You want your credit report to reflect that you can manage many types of credit lines.

7. Should I pay my credit card balance off every month? Paying a balance in full every month is not a bad thing. But it is OK to carry a balance. Remember, the credit bureaus want to see you manage your credit lines. If you are constantly paying them off, you are not really “managing” them. Keep the balance below 30% of the limit. Pay it off once or twice a year. Your credit will go up, up, up.

8. What is Rapid Rescore, and is it a good way to boost my credit? Rapid Rescore is a method of quickly resolving errors on your credit report. If it works, it will get your errors removed more quickly. Usually, it is used when a home buyer applies for a home loan and errors are found on the credit report. Your loan officer assists you in contacting the creditor(s) and getting written statements directly from them stating that the account was paid off, that the account is not yours, releasing a lien, a bankruptcy discharge, a letter of deletion, etc. If it works, Rapid Rescore will allow you to qualify for better interest rates. However, this method is not guaranteed, and will cost you about $50 for every error you attempt to correct.Many times, credit report errors disappear within 30 days just by your sending a dispute letter. If you have written statements from the creditor(s) proving the error, send copies of that along with the dispute letter. This speeds up the process because you’ve made the credit bureau’s job easier.

9. What if I don’t have written evidence from the creditor about an error on my credit report? If you don’t have proof to refute the information on your credit report, send a dispute letter by registered mail. Federal law says that anytime the credit bureaus receive a dispute letter, they have a “reasonable amount of time” to investigate your claim. They must contact the creditor for verification. The report will be amended accordingly. The rule of thumb for “reasonable amount of time” to contact the creditor is 30 days. So Are you still asking the question – How do I improve my credit score?

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