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Know Your Credit Score


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Summary:
The most important part of qualifying for a mortgage isn't how much of a down payment you can make, it's
how good your credit score is. The better your credit, the more easily you can secure a mortgage loan, even
without a fat bank account or a high-paying job. The first and most important action you should take is to
get your credit report from each of the three major credit bureaus, Experian, Equifax, and TransUnion. You
have to get all three reports because the companies and utilities that extend you credit don't report to all
three bureaus. The result is that each consumer has three credit reports with three different sets of
information. You can access the reports for free at least once a year. If you find errors and report them (see
below for details), you can get a revised report for free.



Keywords:
Home improvement, home repair, investing, personal finance, credit score, invest in your nest



Article Body:
Excerpt
The following is an excerpt from the book Invest in Your Nest
by Barbara Kavovit
Published by Rodale; June 2006;$19.95US/$26.95CAN; 1-59486-151-X
Copyright © 2006 Barbara Kavovit


Know Your Credit Score
The most important part of qualifying for a mortgage isn't how much of a down payment you can make, it's
how good your credit score is. The better your credit, the more easily you can secure a mortgage loan, even
without a fat bank account or a high-paying job. The first and most important action you should take is to
get your credit report from each of the three major credit bureaus, Experian, Equifax, and TransUnion. You
have to get all three reports because the companies and utilities that extend you credit don't report to all
three bureaus. The result is that each consumer has three credit reports with three different sets of
information. You can access the reports for free at least once a year. If you find errors and report them (see
below for details), you can get a revised report for free.


Your credit score is based on the information in the credit report. In the simplest terms, the score indicates
how likely you will be to pay back a loan in full and on time. According to Steven Burman, president of
Credit Advocates and an expert credit counselor, it reflects your credit history, how much debt you currently
carry (called outstanding debt), how much debt you're already approved to carry in the future (add up the
credit limits on your credit cards for the answer), how long your credit history is, and how timely you are in
paying bills. The higher the number, the better your credit is, ranging from a low of 300 to a perfect score of
850. Do everything you can to improve your score -- it's even more important than saving money, in my
opinion! Why? Because the higher your score, the better the interest rate you will get. If you have a very
high score, you may even be able to buy a house with no money down.


Improve Your Credit Rating
Steve says that you have to take personal responsibility for your credit, and I agree. The first time many
people see their credit reports is when they are about to purchase a home or a car. Because it can take about
3 months (and sometimes much longer) to change a credit score, if the score is wrong or low at that time, it
could be too late to fix it. You could lose that fabulous apartment! Don't let that happen -- start changing
your score today. Here are six proven ways to improve your score:


1. Check and correct your credit history
Thirty-five percent of your score comes from your credit history, according to Steve. Unfortunately, 70
percent of credit reports contain errors -- mistakes that can adversely impact your score! Mistakes range
from the misspelling of names, to reporting wrong addresses or places of employment, to confusing the
accounts of people with the same name, to including outdated information. You can and should report errors
to each of the credit bureaus since they do not share information. You can file disputes by phone or by mail,
but you may find that it is most convenient to dispute errors online. Once the credit bureaus receive a
dispute, they have 30 days to investigate. If they cannot verify the information in that time, it is deleted or
corrected by default. Once you dispute information, the onus is on them to prove it. If your payment was late
once or twice and the creditor reported it to the credit bureau, you can ask the retailer or credit card company
to issue a letter of correction. For example, many retail stores would prefer to keep your business by issuing
a correction than lose it by refusing to. Always follow up on promised corrections by rechecking your credit
report. If some of the accounts on your report are old and closed, tell the credit bureau that you don't
recognize them. They will investigate, find that you are not a customer, and remove them. It's best if your
credit report lists only active accounts. Even when some of the accounts are closed, having dozens of them
may make lenders assume that you are not a stable credit risk.


2. Pay down high balances
The amounts you owe on revolving credit accounts are responsible for 30 percent of your score. Steve says
the fastest way to improve your credit rating is to pay down balances. After he advised one client to use all
of his available cash to pay down his credit card bills, the client's credit score went up by 100 points. Keep
revolving credit accounts under 30 percent of the available limit. For example, if your credit card limit is
$10,000, keep the balance under $3,000. High balances adversely affect credit ratings. Plus, credit card debt
is expensive to carry. Some cards charge up to 24 percent interest on unpaid balances. Are the designer jeans
and fur jacket really worth that? Pay off your credit cards! You can also negotiate with your credit card
company to reduce or eliminate interest charges and sometimes even reduce what you owe.
3. Make history with your credit
It's good to have some activity and history on the account. "Many people think closing accounts will make
their credit look better, but it depends," says Steve. "Look at the accounts you are closing and keep the
oldest one. Length of credit history counts for 15 percent of your total score."


4. Think twice about new credit
When you open a new credit card account, the creditor makes an inquiry to one of the credit bureaus to
evaluate your history. The number of recently opened accounts and credit inquiries accounts for 10 percent
of your score. (Note that checking your own credit report doesn't count as an inquiry, however.) "If you start
applying for loans at an auto dealership or a bank and each one does an inquiry, it's a negative," says Steve.
When a store sends you a sales pitch saying you're preapproved for credit, resist the temptation to fill out the
application form. One credit card is all you really need. At any rate, closing an account doesn't mean it
automatically disappears from your credit report. You have to ask them to remove it. Better yet . . .


5. Pay with cash
Using debit cards and cash are good ways to control your debt (and therefore maintain a great credit score).


6. Pay all your bills on time
Late payments can have a substantial negative impact on your score. For example, you can raise your score
by as much as 20 points simply by paying bills on time for 1 month!


For more information on improving your credit rating, visit the Federal Trade Commission's credit repair
page at www.ftc.gov/bcp/conline/pubs/credit/repair.htm. To dispute information in a credit report, here is
how to contact the credit bureaus:


Equifax Information Services, LLC
Disclosure Department
PO Box 740241
Atlanta, GA 30374
800-685-1111
www.equifax.com


Experian
475 Anton Boulevard
Costa Mesa, CA 92626
or
955 American Lane
Schaumburg, IL 60173
888-397-3742
www.experian.com
TransUnion LLC
PO Box 1000
Chester, PA 19022
800-888-4213
www.transunion.com


Annual Credit Report Request Service
PO Box 105281
Atlanta, GA 30348-5281
877-322-8228
www.annualcreditreport.com


Annualcreditreport.com is the official site that helps consumers obtain the free credit reports they are
entitled to annually, as required by law.


Reprinted from: Invest in Your Nest: Add Style, Comfort, and Value to Your Home by Barbara Kavovit ©
2006 Rodale Inc. Permission granted by Rodale, Inc., Emmaus, PA 18098. Available wherever books are
sold or directly from the publisher by calling (800) 848-4735 or visit their website at www.rodalestore.com.


Author
Barbara K is CEO of barbara k!, a comprehensive lifestyle brand that offers solutions for women through
innovative home enhancement/repair and automotive products. She is also the home improvement expert for
AOL Coaches and author of the inspirational fix-it handbook Room for Improvement. Barbara has been
featured in the New York Times, USA Today, Real Simple, and O, The Oprah Magazine, among others, and
has appeared on numerous television and radio programs, including Today and Good Morning America. She
lives in New York City with her son, Zachary. For Barbara K's products, visit www.barbarak.com




credit disputes letters

				
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