How to Improve Your Credit
There are many simple things you can do to improve your credit. In addition to making it easier and more affordable to get a loan, these actions can help make your financial future brighter and more secure.
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Check Your Credit Reports
Contact each of the 3 national credit bureaus to get your current credit report. Review them carefully for accuracy.
Correct Errors on Your Credit Reports
Credit bureaus may not always have accurate or up-to-date information. If you find mistakes on your reports, write the creditor and the credit bureau.
When you write the creditor, describe the problem clearly and include any documentation you have (such as a copy of a check or a receipt). It's a good idea to send the letter by certified mail so you have a record that you mailed the letter and that it was received.
Send a written explanation to the credit bureau, along with copies of your documentation. Ask the credit bureau to include a brief explanation of your side of the story when furnishing reports to lenders. Both the credit bureau and the creditor are legally required to investigate a credit dispute and report back to you in writing within a reasonable time (usually no more than 30 days).
Close Unnecessary Credit Accounts
If you have a lot of credit accounts, consider closing those you aren't using or don't think you'll need. That helps remove the temptation to overspend. Don't close all your accounts however — you need to have some credit accounts in order to maintain a solid credit history.
Track Your Spending
Do you have a good idea of where your money goes on a monthly basis? Most people spend a great deal of money on little extras (fast food, beverages, little treats and splurges) without really being aware of it. Try tracking where all your money goes for a month to get an idea of what you must spend versus what you're actually spending. Remember to factor in an allowance for expenses that aren't monthly, like semi-annual or yearly taxes, auto insurance and maintenance expenses, home maintenance, gifts and vacations.
Set New Spending Goals
Once you know where your money has been going, take charge and establish how you want to spend to meet your goals. Then keep tracking you’re spending monthly, to make sure your plan is realistic and help reinforce your new spending habits.
Pay On Time, Every Time
Set up a simple system to remind yourself when bills are due. Keep all bills together, in order by the date due, and check them weekly. Or write the dates due for each bill on your calendar, and check your calendar frequently.
Pay monthly bills, or set aside the money, before spending for "extras". If you can't make payments because of a short-term emergency, talk to your creditors before you miss a payment to see if they can help you with reduced or deferred payment schedules.
Consider Using Your Home's Equity for Debt Consolidation
If you've owned your home for a while, you may have equity you can use to pay off high-interest debt with a "cash out" refinance loan or Home Equity Line of Credit. Since home loans can have much lower interest rates than credit cards and other types of loans, you can save a lot of money on interest. Because interest on home loans is often tax-deductible, you may save even more (consult your tax advisor).
YourHomeLoan.info offers a number of refinance options that reward you for paying on time with interest rate reductions and give you other features to help you save money and build good credit.
Get Reliable Information and Help with Credit Issues
If you're feeling overwhelmed by credit issues or problems, there are excellent free and low-cost resources to help you.
For information and publications on personal finance and credit problems, try these federal information resources:
Federal Trade Commission:
Consumer Information Center
Pueblo, CO 81009
Consider Using a Qualified and Reputable Credit Counselor
Avoid companies that promise to "fix" your credit for a fee. The fees can be quite high and many of the services are scams. Some companies may suggest bankruptcy to "clear" your debts, and that can be very bad advice. Bankruptcy should be absolutely your last resort because bankruptcy is included in credit reports for up to 10 years and can negatively affect your ability to get loans, obtain other credit or even get a job.
Instead, contact a reputable consumer credit counseling organization or referring agency, like the ones below. They can usually provide reliable information to help you work on long-term solutions.
8930 Stanford Boulevard
Columbia, MD 21045
National Foundation for Consumer Credit
8611 Second Avenue, Suite 100
Silver Spring, MD 20910