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what can you do about information that's correct but damaging
to your creditworthiness? The only real solution is to understand
how your creditworthiness is measured, and then start acting in
a credit-responsible fashion. As time passes, prior slipups become
less important as you demonstrate that you are now less of a credit
risk.
What are some specific things you can do to improve
your credit?
- First, know what's on your credit report. If you have been
denied credit, you have the right to request a free
credit report. Or, for a reasonable fee you can conveniently
order your merged credit report,
which includes information from all three national bureaus.
Take the time to understand not only what's on your report,
but why you have been denied credit.
- Check for mistakes on your credit report. Be sure to examine
your files from all three bureaus, as the information may not
be the same on each one. If you find errors, take steps to dispute
the information in order to remove it from your file.
- If you are having difficulty paying your bills, develop a
plan now. Make a list of everyone you owe and how much you owe.
Contact your creditors and discuss payment options. Begin now
to catch up with late payments. These efforts will show you
are earnest in meeting your obligations.
- Look for ways you can consolidate bills. You might be able
to do a balance transfer to another credit card with a lower
interest rate and also eliminate three or four other credit
card accounts you currently have.
- Identify ways you can decrease your spending and increase
your income. Ask a friend or family member to help you come
up with a realistic budget that will help you catch up with
late payments.
- Don't use credit again until you are on more solid footing.
You may want to cancel-;or just hide-;your credit cards until
you are in a financial position to use them responsibly again.
- Try to pay your bills consistently and on time. This can
be made easier by creating a budget and sticking with it
- Try to reduce the amount you owe, and avoid using credit whenever
possible. Consider a secured credit card instead.
- See if there are any open lines of credit on your credit report
that you no longer need, such as credit cards that you don't
use anymore. A large amount of this type of "potential
debt" can scare away other lenders.
- Stay on your best behavior for seven years. That's when most
negative information, such as late payments, accounts that your
lender turned over to a collection agency, and court judgments
against you, are removed from your credit report. Your good
behavior will pay off even before the seven years have passed,
because more recent information is factored in more heavily
than earlier information. On the plus side, positive information,
such as a history of paying back debts on time, stays on your
credit report forever.
If you are just starting out on your own, perhaps after a divorce
or just out of college, you'll want to begin establishing a positive
credit file. This will play an important role in determining your
future creditworthiness and in ensuring that you have a good credit
score when it comes to evaluating your file for a mortgage
or other type of loan. If you have little or no prior credit history,
consider these tips:
Limit the number of accounts you have. Resist the temptation
to sign up for every credit card you can. Find a revolving credit
card that has a reasonable credit limit ($300 maximum) and stay
within your budget. Pay your bills on time. Every month, your
creditors release information to the credit bureaus. Make sure
your creditors are reporting only positive information about your
bill-paying history. Ask a family member to help you get credit.
If you have little or no credit history, you may need the assistance
of someone with an established and positive credit record to co-sign
a loan for you. However, if you do this, be sure you are responsible
in making all your loan payments on time.
Remember, your credit history influences your ability to rent
or buy a house, get a job, buy insurance and purchase items with
a credit card. Many lenders and creditors consider it a direct
reflection of your character. Start now to ensure that you have-;and
maintain-;a good credit history.
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