Tuesday, January 02, 2007

Eliminating Negatives from Credit Report

By Jack Tanner

Eliminating negatives from credit report and increasing your FICO score can be both easy and extremely profitable.

If you only increase your credit score by just 10 points, you could save thousands of dollars in interest over the term of a home equity mortgage.

The reason eliminating negatives from credit report is so important is because lenders believe homeowners with poor credit scores are risky.

What's their proof? More than 16% of "subprime" mortgages are delinquent and another 4% are in foreclosure.

Lenders therefore charge higher interest rates and extra fees and points to people with poor credit. So, if you want a lower cost loan, clean up your credit reports and present yourself in as positive a manner as possible before applying for a mortgage.

Begin by requesting copies of your credit reports from Equifax, Experian and TransUnion. These three major credit report companies are now required by law to provide you with one free report each year.

However, don't contact each individual credit-reporting agency directly. They've set up a mutual website, toll-free number and mailing address to make this service easier for consumers.

Just be careful that you go to the official source. The web is crowded with companies out to make a profit by charging consumers money for credit reports that they could get for free.

When you get your reports, check for mistakes. Research shows that three quarters of credit reports have correctible mistakes. And one quarter are serious enough to deny you credit or penalize you with a higher interest rate.

So the smart thing to do is immediately write the credit agency, giving them specific details and requesting your reports be corrected.

Then pay all your past due accounts, since these can significantly lower your score.

Once you're up to date, contact your creditors again and request they remove all records of late payments from your files. If you're persistent, there's a good chance they'll do it.

Next, if you're in good standing with any creditors, ask them to increase your credit limit. This improves your debt to credit limit ratio, which helps to increase your credit score.

But, first make sure they won't pull a credit report on you, since recent credit inquiries lower your score. By the way, personally requesting a free credit report for your own information has no effect on your score.

One last point! In the process of eliminating negatives from credit report, never close inactive accounts. The number and type of different credit accounts you have adds up to about 10% of your total FICO score. And canceling accounts lowers your score.

You're better off making a small purchase to reactivate the account, as active accounts look good and add points.

Following these steps will probably take about six weeks to complete, but they can improve your FICO score by as much as 100 points or more.

This could make the difference in you getting a loan or not and/or saving a lot of money in interest. So it's definitely worth the time and effort.

Jack Tanner blogs about his experiences with home equity loans and rates at www.HomeEquityLoansZone.com. Stop by and learn all the tips and tricks he's used over the years to take advantage of home equity loans.


mybadcredit said...
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ALEISH said...

It is important to monitor your credit report in order to prevent errors on your credit report. You will save yourself a lot of problems or unpleasant surprises when you have to get that credit card or if you’re considering buying a home. You will also be aware of any potential problems that may stop the credit grantor from approving you for the credit you seek.