If you have ever applied for a mortgage, car loan, business loan or even opened a credit card, you have run a credit report. There are two parts to your credit report: your FICO score and the report that lists every lender you owe or have owed money to. This is what banks and creditors are looking at to evaluate how creditworthy you are, therefore, you want to make sure your FICO score is as high as possible and there are no errors on your credit report.
Begin your credit report checkup by running your current credit report and get your credit score. One place to do this is at www.myfico.com. You will get your FICO score and a credit report from each of the 3 credit agencies: Experian (www.experian.com), Equifax (www.equifax.com), and Trans Union (www.transunion.com). If you have run your credit report in the last 12 months and don’t have any credit card debt, you don’t need to do it again. It is important to get all 3 credit agencies’ reports because there are often mistakes. If you have any credit card debt, running a credit report is especially important, because it is the most accurate report of how much debt you actually owe.
What does your FICO score mean? It is out of 850, with 850 being the highest and best rating. A lower credit rating means that, according to the lenders, you are not as creditworthy. When you need to borrow money, such as buying a home or getting a small-business loan, the higher your credit score, the lower interest rate you will get. More than 75% of mortgage and auto loans are based on a FICO score.
Once you have run a recent credit report, check it for errors - Carefully! Ask the following questions: Is your personal information correct? Are there any debts that aren't yours? Is there duplicate information? If you find an error, call the credit agency and creditor (the company that lent you the money) right away. Copy the report and highlight the error. Send it back to the credit-reporting agency with an explanation. They should contact the creditor and verify the information. Creditors have 30 days to respond to a dispute. You can also dispute it online.
If you have made a late payment, ask the lender to remove the item. Explain it will never happen again. They usually remove it the first time. You can also write letters to your creditors to take late notices off your record. You should also try to resolve any outstanding bills.
You can raise your FICO score by any of the following:
• Don’t use more than 50% of the available credit on any account.
• Stop applying for new credit cards.
• Request limit increases on your existing cards (but don’t charge more!).
• Pass up department store and other store charge cards (for example, Banana Republic) so you don’t load up on debt you owe. Plus, they are known for very high interest rates.
• Avoid too many inquiries. Another reason to avoid applying for as many credit cards as you can is you want to avoid too many inquiries from credit card companies and lenders. This will lower your FICO score.
Just like most of us get a physical checkup every year, checking your credit report is part of your annual financial checkup. Even if you think you don’t want to apply for a new credit card or buy a home (or refinance), you might want to in the future and you should get it ready. It can take a while to clean up your credit report. But, it’s worth it when you are buying a home and the process goes without a hitch!
Written by Galia Gichon
DOWN-TO-EARTH FINANCE
(Copyright Down-to-Earth Finance LLC 2006)
Galia Gichon, Founder of Down-to-Earth Finance, demystifies personal finance – particularly to women – through unbiased financial education. With over 14 years experience in financial services and an MBA in Finance, she does not manage money or sell investment products. You can subscribe to her weekly e-mail newsletter at DownToEarthFinance-On@zines.webvalence.com for smart tips to save more money and independent advice about mutual funds and retirement. She can be reached at 212.734.0433 and http://www.downtoearthfinance.com
Article Source: http://EzineArticles.com/?expert=Galia_Gichon
