Free ways to improve/build your credit score

[loans_n_fishes]

I posted this in another thread, but thought people might be interested in how to improve their credit.

If you are trying to build credit:

1. Go to your bank and request a secured card. (You give them x amount and they issue you a card for that credit limit). Charge a small amount each month and pay it off on time every month.

2. Apply for 2-3 major credit cards. Again, charge a small amount on each one every month and pay it off on time every month.

3. Pay ALL bills on time. Some loans let you use "alternative credit" like phone bill, etc as credit.

4. Keep records: 12 months of cancelled checks from rent, 3 months of bank statements and paystubs, 2 years of tax returns/W-2s, copies of any alimony/child support etc payments and agreement, divorce decree. If you are self employed, use a CPA. Many times a letter is needed from your CPA to verify income for a loan.


If you are improving your credit:

1. Dispute all derogatory information with all three credit bureaus. If the information is inaccurate or cannot be verified within 30 days, it will be dropped from your report. (I have form letters with addresses if you need them)

2. If there are derogatory accounts that have not had any activity for one year or more, DO NOT pay them when you are applying for a loan. I know it's weird, but lenders would rather it be old and unpaid than active (even if you are paying it off).

3. Pay your active accounts down to 1/2 of the credit limit OR have your credit limit raised so you owe 1/2 or less of your limit.

4. If you have no accounts in good standing, do the above steps for building credit. Buying a car is an excellent credit source as well. REMEMBER you only need 3-5 active credit lines.

5. Ask friends or family members to add your name to an account of theirs in good standing (With not much owed on it and not a new account). This does not affect their credit standing. However, their good performance on these accounts will greatly help your score.

If you are applying for a loan immediately, just dispute the derogatory information, add "friends and family" accounts, and POSSIBLY open the secured card. Applying for several forms of credit at once can make lenders nervous.

Your credit score should improve within 30 to 90 days. DO NOT PULL YOUR CREDIT AGAIN UNTIL YOU ARE READY TO APPLY FOR THE LOAN. Pulling your credit repeatedly can drive your score down. I would recommend you letting your loan officer do that when the time comes.

If your credit is suffering because of extenuating circumstances, I can help you write a letter of explanation for derogatory credit to include with your application.

Be sure your credit report includes all 3 bureaus with a credit score from each. If you need help going over your report, I can take a look at it with you if you like.

If you are ever looking for a home loan, drop me a note. ;)




Angela

[mathias]

#5 in my opinion is a horrible idea..... your putting your credit in someone elses hands...


#1 the secured bank card with a prepaid balance will not show up on any credit score or history, but it is a good way to manage your money...


Other than that great ideas.... esppecially if you have collections best thing to do is fight them... there is a huge misunderstanding that 7 year old accounts will just vanish... they don't those debts are sold and time restarts....

[tony]

i have entries on my credit report from 15 years ago

great info, thanks for taking the time angela

[loans_n_fishes]

I've had clients that have the secured card show up on their credit reports. I wonder if it matters which bank/card you use. I will double check on this one.

For someone with challenged credit, putting one's credit in the hands of someone with good credit is a decent option. Many people don't have anywhere to go but up. Just don't go nuts adding accounts and know your friend/family member well enough to know that their credit is excellent. One or two should be enough to make a difference. This can really help when you need a boost in the short term. DO NOT RELY SOLELY ON THIS. It is extremely important to build good credit on your own. MOST IMPORTANT: Pay your bills on time! One late pay drops your score dramatically.

[loans_n_fishes]

[QUOTE=tony;572573]i have entries on my credit report from 15 years agoQUOTE]

Good credit stays on your report indefinitely!

[tony]

I've had clients that have the secured card show up on their credit reports. I wonder if it matters which bank/card you use. I will double check on this one.

i would imagine it is the card issuers discression the same way that is their discression as to how often they report. to my knowledge there is no law that says they have to report anything good or bad.

[Mr Cob]

i would imagine it is the card issuers discression the same way that is their discression as to how often they report. to my knowledge there is no law that says they have to report anything good or bad.

Thanks for this thread that may help someone!

I have disputed all negative credit on my report with the code "ND", which is "No Data". This means the creditor did not input any Data for the month. By law (to my understanding) they are required to report monthly if they choose to report at all.

When I have disputed the ND's they ALL have either been removed or updated. Fortunately the number removed has far exceeded the ones that were updated. When you dispute an item on your credit report and the owner of the credit does not respond after 30 days it is automatically removed from your report and can not be "re-added" later.

This info is based on my own experience, I have been cleaning my credit report up myself over the past 6 months after paying a small company a couple grand to do it for me with little progress.

Best advice to cleaning up your credit in my experience is this 4 step process:
1) Dispute everything negative especially the ones with "ND"
2) Apply for a secured credit card if you can not get an unsecured one and pay it regularly (make sure the company reports to ALL 3 Credit Bureaus)
3) Start paying off the smallest accounts that were not removed from your disputes and then the larger ones.
4) Keep the current ones CURRENT

Bonus Step for yourself: *Pay off the ones that were deleted from your report...(you still owe them even though they were deleted)

Hope my input helps someone.

Ps: STAY FAR away from PAYDAY loans...they are the "DEVIL"!

[Richard]

I have a good credit score from years of being in debt.

Now I subscribe to the Dave Ramsey philosophy towards credit scores... don't care about it, don't get in debt.

[MissT]

I think on the secured credit card thing that it totally depends on your bank. Some of them report to credit bureaus and some don't on that type of card. A lot of major banks use their secured credit card program to help customers with bad or no credit to help them earn positive credit. I had one with Bank of America right after high school, and part of signing up for it was that they'd report monthly to help me build some credit. And it worked really well.

[loans_n_fishes]

After one gets their credit in a good place, one should try to charge something small to each account every month (like a pack of gum or jeans) and pay it off. Keeping your credit active AND yourself out of debt is very important. Lots of things require good credit scores including new jobs, car loans, home loans, refinancing, personal loans, credit cards, etc. Better to have good credit and not need it than need it and not have it.

Oh, and DO NOT sign up with any credit consolidation company. It can hurt your credit score.

Under certain circumstances I would recommend hiring a credit repair specialist, but not until you do all the free stuff first. If you think you need more help getting your credit cleaned up, let me know and I can refer you to a credit repair guy. He charges a flat $500, but not until he is able to help you out. There are a lot of crooks out there, so be sure to pick someone recommended AND legal!