Improving Your Credit Report
When you get stuck with a poor FICO score, it feels like there’s nothing you can do to make your financial situation better. A FICO score below 650 is like a kiss of death when it comes to taking out lines of credit. It’s difficult to get approved for lines of credit or loans of any kind, and the credit you do get approved for is usually offered at an interest rate you’d rather not pay.
Improving your FICO score means improving your credit report. Changes to your credit report take time to make, and even longer to show up in your credit history. Credit counselors will tell you that the best methods of improving your credit report are simply paying bills on time and waiting–most negative items on credit reports have time limits. After seven to ten years, many of your bad credit history is wiped from the record, instantly improving your credit score.
Here are other ways of improving your credit.
Fair Credit Reporting Act
You can use the Fair Credit Reporting Act to help you on your path to improving your credit report.
Under the FCRA, credit reporting companies and the creditors who are providing information about you are actually responsible for correcting any inaccurate or missing information in your credit report. To learn more about your consumer rights under the FCRA, contact any of the three credit reporting companies and your creditor to begin the search for inaccurate or incomplete information.
Your first step is to contact the credit reporting bureaus in writing including what information on your consumer credit report you think is inaccurate. You should include copies, not the originals, of documents that prove your opinion.
Your request should include your full name and complete mailing address, and the accompanying letter should identify every part of your report that you dispute, with details about the facts of the case and why you’re disputing them. Then, most importantly, you have to request that this information is deleted from the report or corrected.
Do as much as you can to help the employees at the credit bureau, including printing out a copy of your credit report with the fault items on the report circled or highlighted. You should also deliver this letter by certified mail and request a return receipt so you can prove the date that the bureau received the letter.
By law, credit reporting companies have to investigate your claims within 30 days and report back to you about the results of their investigation. If the investigator agrees that the disputed information is inaccurate, he or she then lets all three nationwide credit bureaus know so they can correct your report as well.
Fixing Your Debt Problem
Once you’ve removed any false informati0n from your credit report, it is time to solve your debt problem. If you find yourself falling short of your bill payments, getting letters from lawyers, collection agencies, and creditors, or worrying about losing your home, it may be time to fix problems you have with debt.
There are many reasons for personal financial crisis–illness in the family, losing a job, going through a divorce, or simply overspending or not knowing your budget can cause these crises and these problems often seem totally overwhelming. If your financial situation is currently bad, there are steps you can take to keep it from getting worse.
There are four options for out of control debt–proper budgeting, long-term credit counseling from a respected credit counseling organization, debt consolidation, or legal bankruptcy. The option that will work best for you depends on your circumstances–your amount of debt, your financial discipline, and your financial future.
Developing a Budget–The first step for you to take control of your financial life is to assess how much money comes in and how much goes out. The first step is to list your income, then list your fixed and regular expenses. Fixed payments can be mortgage payments or rent, payments for a car note, insurance premiums, etc.
Next, list your varying expenses–entertainment, recreation, groceries, clothing, etc. Putting all your expenses down on paper, even your expenses that seem insignificant to you, is the best way to track your spending habits. This budgeting process helps you identify your necessary expenses and build financial priorities. Budgeting is a process of making sure you can pay for your basic needs–housing, food, health care, insurance, and anything else you need to pay to maintain your standard of living.
Contacting Your Creditors–When you are having trouble meeting your financial commitments, you have to contact your creditors right away, tell them about your situation, and work together to plan a modified payment schedule that reduces your payments to a level you can manage. The only alternative is to have your payments sent to a collection agency. This will negatively affect your credit and could put you in worse condition than you started in.
Credit Counseling–Credit counseling is the final piece of the puzzle for people who have had problems putting together a financial plan that keeps their heads above water. Most credit counseling organizations are nonprofit and work with consumers to fix their financial problems, no matter how dire. Beware of credit counseling services that charge high fees or put pressure on you to make what they call voluntary contributions to their company in exchange for credit counseling and advice.
No matter what kind of financial situation you’re in, there’s probably a way out. If you want to improve your credit report, you’ll have to act with discipline. Over time, your new good credit habits will improve your credit history, which in turns improves your credit score.