Improve Your Credit Score

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Improve Your Credit Score Powered By Docstoc
					by: Chris McElroy and Jennifer Tarzian

What does Credit Score mean? A measure of credit risk calculated from a credit report using a
standardized formula. Factors that can damage a credit score include late payments, absence of
credit references, and unfavorable credit card use. Lenders may use a credit score to determine
whether to provide a loan and what rate to charge.

Do you know what your credit score is? You wont know what you need to do to improve your
credit score unless you first know what your credit score is. To find out, order a cop y of your
credit report. An amendment to the federal Fair Credit Reporting Act requires each of the major
nationwide consumer reporting companies to provide you with a free copy of your credit reports,
at your request, once every 12 months.

To order your free annual report from one or all the national consumer reporting companies, visit
http://www.annualcreditreport.com , call toll- free 877-322-8228, or complete the Annual Credit
Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281,
Atlanta, GA 30348-5281. You can print the form from ftc.gov/credit. Do not contact the three
nationwide consumer reporting companies individually; they provide free annual credit reports
only through http://www.annualcreditreport.com , 877-322-8228, and Annual Credit Report
Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Under federal law, youre also entitled to a free report if a company takes adverse action against
you, such as denying your application for credit, insurance or emp loyment, and you request your
report within 60 days of receiving notice of the action. The notice will give you the name,
address, and phone number of the consumer reporting company that supplied the information
about you. Youre also entitled to one free report a year if youre unemployed and plan to look for
a job within 60 days; youre on welfare; or your report is inaccurate because of fraud. Otherwise,
a consumer reporting company may charge you up to $9.50 for any other copies of your report.

To buy a copy of your report, contact:

Equifax: 800-685-1111; www.equifax.com

Experian: 888-EXPERIAN (888-397-3742); www.experian.com

TransUnion: 800-916-8800; www.transunion.com

For more information about credit card debt, identity theft, raising your credit score, obtaining
credit cards, and more you can also go to http://creditcards.youngparentsmagazine.com

Under state law, consumers in Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey,
and Vermont already have free access to their credit reports.

If you ask, only the last four digits of your Social Security number will appear on your credit
reports.
What can I do to improve my Credit Score?

Pay your bills on time. This is the big number one! Its always good to pay your bills on time and
that keeps your credit score healthy. It is especially important that all of your recent bills have
been paid on time if you intend to apply for new credit or a new loan. Recent late payments
weigh against your credit score tremendously.

Don't close or open credit card accounts near loan time. A good rule of thumb is do not open any
credit accounts near a time when you will be applying for a loan. It can lower your credit score,
especially if you do not have a proven track record. What's more, a new account will lower the
average age of your accounts, another factor in your FICO score. (FICO is an acronym for Fair
Isaac Credit Organization) If you have several credit card accounts but are only using a few of
them, you'll raise your balance-to- limit ratio if you close the unused ones.

Pay off debt rather than moving debt to other places. The ratio of your credit card balance versus
your credit limit is the key, so, closing out an account and transferring the balance someplace
else simply means you increase that ratio, which is more than likely to lower your score.

Example: You owe a total of $1000 on four credit cards, each of which has a $1,000 limit. Your
total credit limit is $4,000, of which your total balance ($1,000) accounts for 25 percent. If you
transfer all your balances to two cards and cancel the other two, your total credit limit is reduced
to $2,000, and your $1,000 balance now accounts for 50 percent of that limit.

Reduce your credit card balances. A heavily weighed factor in your FICO score is how much
money you owe on your credit cards relative to your total credit limit. Generally, it's good to
keep your balances at or below 25 percent of your credit card limit, said Jeanne Kelly, founder of
The Kelly Group in Brookfield, Conn., which helps clients improve their credit scores.

Examine your billing statements for errors. This is a commonly overlooked place to reduce debt.
Companies do make mistakes. This includes examining all of your bills, not just your credit card
bills. Jennifer Tarzian wrote more about this at http://www.youngparentsmagazine.com Youd be
surprised at how much money you recover due to correcting common billing mistakes.

Correct blatant mistakes in your credit report. Your credit score is only as good as what shows up
in your credit report. Review your reports from all three credit bureaus for accuracy once a year
as well as several months before applying for a loan. Changing a mistake on your report - such as
a payment that is wrongly labeled as late -- can take 30 days to three months, sometimes longer.
The way to obtain your credit score and report is listed above in this article.

Healthy credit is important in todays day and age. More information sharing between companies
has been made easier due to new technology, so any blemishes on your credit will be known by
all credit reporting agencies almost immediately. Keeping up with your credit score and taking
steps to improve you credit score is essential, so take the time.

This article was posted on January 08, 2006

				
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