| Credit score is a three digit number that influences just | | | | People who put the information into the computers |
| about every major financial decision you make. | | | | aren't perfect and mistakes can happen when entering |
| Everybody you do business with will look at your credit | | | | the information into your file. |
| score to determine the interest rates and terms you | | | | Step 2: Dispute every negative item on your report in |
| will be offered on your credit cards, car loans, and | | | | writing. |
| home mortgage, as well as whether you will be able to | | | | The Fair Credit Reporting Act gives consumers the |
| get approved for apartment rental or cell phone. | | | | right to review and challenge the items in their reports. |
| There are three primary credit report agencies in the | | | | Challenge every negative item by requesting proof |
| US today: Equifax Credit Information Services, Inc. | | | | that the accounts is yours. Do it in writing, via |
| (equifax.com), Experian (experian.com) and Trans | | | | registered or certified mail, and keep a copy of the |
| Union (transunion.com). Like a big brother - the credit | | | | letter. Credit agencies are required by law to prove the |
| bureaus know how much you owe, how much you | | | | accuracy of the information within 30 days. If they are |
| spend, and whether or not you pay your bills on time. | | | | unable to do so, the item must be removed. |
| From all that data, filed by everyone you do business | | | | Three out of four credit reports contain errors. Find |
| with, the credit bureaus calculate your credit score | | | | these mistakes and let the reporting agency know |
| using a formula developed by Fair Isaac. | | | | about these mistakes. By law they must remove them, |
| While a credit score can range from 300 to 850, you | | | | which could increase your score 100 points or more. |
| should aim to get your score as close to the 720-850 | | | | Step 3: Increase your credit limits on your existing |
| range as possible. | | | | accounts or open new accounts with high credit limits |
| This will mean THOUSANDS OF DOLLARS saved on | | | | but keep the balances on these accounts low. |
| every major financial transactions every year! | | | | This will help your debt-to-credit ratio. If you only use |
| Just learning what goes into your report and how it is | | | | 10% to 30% of the credit you have available, your |
| calculated should give you some ideas how to improve | | | | credit score will improve dramatically. However, don't |
| it. | | | | go crazy applying for many accounts at once, as this |
| So, what exactly goes into your credit score (FICO | | | | will only hurt your score (many new inquiries will lower |
| Formula)? | | | | your ranking). |
| 35%: Record of paying your bills on time | | | | Step 4. Protect your credit history. Generally the longer |
| 30%: Total balance on your credit cards and other | | | | your history, the higher the score. So if you have credit |
| loans compared to your actual credit limit: | | | | cards or accounts that you want to close, think about |
| 15%: Length of your credit history: | | | | it first. Canceling a card will wipe out part of your |
| 10%: New accounts and recent applications for credit | | | | history and increase your debt-to-limit ratio, both of |
| 10%: Mix of credit cards and loans | | | | which will reduce your FICO score. |
| Step 1: Request a copy of your credit report for free | | | | Step 5: Work on improving your relationship with |
| from or another source and review the information | | | | money. |
| carefully for errors and negative items. | | | | Even if you manage to improve your credit score |
| Look at is any negative items that are over seven | | | | using the method described in step 4, it will not stay |
| years old. Except for a bankruptcy, which stays in the | | | | that way if you fall back into old spending habits, late |
| file for ten years from the date of discharge, other | | | | payments, and other vices that made your credit |
| things can generally be challenged and removed. | | | | score so bad in the first place. |