Keeping and Reconstructing your Credit Profile

Everyone knows what a pain in the posterior a less-than-perfect credit rating can cause. In the opinion of that very pretty girl (Peeper) and her beloved Mum the credit reporting industry is in dire need of an overhaul and the thing called FICO (the ultimate vampire) should have a stake driven through its wretched heart.

Mortgage rated continue to drop and many homeowners would to take advantgage of low mortgage rates along with first time buyers and move-up buyers. However, with the ongoing credit crunch with lenders tightening credit requirements, there are a lot of good people out that are missing the chance to lock in a low interest rate loan. What is the primary reason? Well, it's that old ridiculous creature called FICO. During past seven years, a FICO score of 720 was good enough to obtain a mortgage at preferred interest rates. Fast forward to 2009. Lenders demand a FICO of 740 for the very best mortgage interest rates.

Well, enough of the bad news, now, here is the good news. Yes, it is possible that you can boost your credit rating and scores if you get a grip on your finances.

The median FICO is 720 on the 300 - 850 FICO scale. First you must realize that you can not raise your credit rating and scores if your finances are in a free fall. If you are unable to pay your bills that isn't going to help your credit. Real credit score restoration will have to wait until your financial problem has been resolved and you have enough money to cover your expenses. Next, you'll need to start paying down your debt. You can't raise your credit score if you don't use credit. This I am in total disagreement with the lending and credit industry. Living in a cash only lifestyle certainly is great for your pocketbook or wallet; however, believe it or not, it will not make a lick of difference if you don't use credit, thus boosting your credit scores.

The term "using credit" is not the same as carrying a balance on a credit card. Carrying a balance is expensive and it is ruinous to your financial health. Many people achieve 800 plus FICO scores by paying their credit cards in full every month. If you pay in full every month, you aren't nicked for the outrageous interest and other fees.

Oh, don't expect all of the aformentioned to happen overnight. You will see an improvement in your FICO scores within thirty (30) days if you pay down a large amount of your credit card debt. That is a huge factor! If you have serious derogatory tradelines, a bankruptcy or foreclosure, you will see an improvement in your scores over a period of time, which can be anywhere between 2, 3, 4, 7 or 10 years.

Credit Basics:

BE TOP COP WHEN PATROLLING YOUR CREDIT REPORTS:

As previously discussed the information for FICO comes directly from your consumer credit reports. The Big Three are: Experian, Equifax and Trans Union. You are entitled to a free copy every 12 months from the government run program at: http://www.annualcreditreport.com/. Of course, you can purchase individual copies directly from the three credit reporting agencies for a fee. Upon receipt of each report, check for accuracy and dispute serious errors such as:

• Accounts that do not belong to you.
• Late payment notations when you know you've paid on time.
• Bankruptcy cases that are over 10 years (Chapter 7) or older than 7 years (Chapter 13 Wage Earner Plan).
• Collection tradelines that are more than 7 years old.
• Late payments that are over 7 years.

GET A MAJOR CREDIT CARD:

Lenders like to see positive tradelines such a major credit card like Visa, MasterCard, Discover & American Express. Gas company and retail store cards are fine, but to really boost up your FICO, get a major credit card. Make sure the credit card company or bank reports to all three credit reporting agencies on a monthly basis.

SET UP AUTOMATIC PAYMENTS FOR EACH CREDIT CARD AND LOAN:

Very, very important! If you set up automatic payments, there is no way you can be late on your obligations. In addition, you will have proof that you paid on time through your bank statements.

DON'T LET A DISPUTE WITH A LENDER OR CREDITOR GET SENT TO A COLLECTOR:

You have a legal right to dispute all or any part of a bill. You must dispute the matter with the creditor or lender within thirty (30) days of the problem. However, don't let a dispute get packed off to a collection agency. Collection tradelines are serious derogatory marks on your credit reports.

APPLY FOR CREDIT SPARINGLY:

If you don't need the credit card, then pass on it. Wait to apply for new credit cards after you have secured the mortgage loan or car loan. Use your credit cards sparingly.

If you follow the formula as set out above, you'll be on your way to the magic number of 740.

(C) Copyright 2009 by Ellen R. Day, Credit, Debt & ID Theft Specialist, New Century Legal Center - a Legal Services & Investigations Office. All rights reserved. http://www.nclc.law.officelive.com/.