- Kirk HaverkampNovember 10, 2011 - MortgageLoan.com
Wednesday, Nov 9, 2011
Building good credit is a slow process and recovering from bad credit takes time. However, there are certain situations where you can do things that will boost your credit score fairly quickly.
Donât expect to be able to patch over a bankruptcy, foreclosure or a history of seriously late payments â if your FICO score is floundering in the 500 range, itâs just going to take time to rebuild your credit. However, itâs sometimes possible to fix small dings and dents in your credit history enough to boost your credit score into a higher bracket, making it easier to qualify for a mortgage loan or obtain a lower interest rate.
Here are five possible ways to quickly boost your credit score, depending on your situation.
Correct errors on your credit report
This is the first thing you want to do, and the most important. Order copies of your credit report from each of the three major credit reporting agencies â TransUnion, Equifax and Experian. By law, youâre entitled to a free copy of your report once a year from each one.
Go through them and check for any errors related to your payment history or credit limits â missed payments that were actually made on time, collection actions over billing disputes that were settled in your favor, credit limits listed as lower than they actually are. Be alert for terms such as âsettled,â âcharge-offâ or âpaid-derogatoryâ on accounts youâve paid off â anything other than âcurrentâ indicates a black mark.
Any inaccurate items should be challenged. You do this by sending a letter to the credit agency letting them know you are disputing an item, along with copies (not originals!) of any supporting documents. They must then investigate the item â usually within 30 days â and report back to you. If they are unable to resolve it, your next step is to follow up with the creditor in question, again in writing and with copies of supporting documents.
Pay down large balances
One of the things that negatively affects your credit is using too much credit. If it looks like youâre carrying too much debt, it will reduce your credit score. They way to correct that is by paying down that debt.
Of course, many people carry high debt loads precisely because they lack the means to pay it down. However, if you have savings or other funds you can tap, it sometimes helps to pay down a chunk of debt if youâre trying to obtain a mortgage or other major loan â remember, higher credit scores equal lower interest rates. Just be careful that youâre not using money that youâll need for a down payment, since that make it more difficult and expensive to obtain a mortgage loan as well.
Divide debt among several credit cards
Even if youâre not carrying a lot of debt, it can hurt you if youâre carrying too high of a balance on any one credit card. Ideally, you donât want to be using more than 20-30 percent of your credit limit on any one card. If you have one card with a high balance and several others with little or no debt, try using the other cards more while you pay the big balance down. You can also use balance transfers to spread the debt around several cards, but you could find yourself paying a high interest rate to do so, either immediately or after a temporary low rate expires.
Beg for mercy
You can actually do this. Creditors will sometimes agree to withdraw a negative item from your credit report, particularly if youâve been a good customer otherwise and you ask them nicely. Called a âgoodwill adjustment,â itâs sort of like getting a late fee waived the first time youâre a day or two late on a payment. However, this isnât likely to work if youâve had multiple incidents with the same creditor, or if itâs a really negative item. At the same time, you might be able to get two or three separate creditors to all withdraw individual minor items separately (maybe you were going through a bad period), which could give your credit score a pretty good boost.
One thing to note â youâre most likely to get a goodwill adjustment if you request it immediately after the event. Itâs less likely to work if youâre asking them to withdraw a year-old late payment report.
If your credit score is getting slammed because youâre currently in a dispute with a creditor, or because the debt is in collection, you may be able to negotiate a non-report in return for settling the account. Creditors will often do this, because getting paid is more important to them than reporting the incident to credit bureaus. Just remember, you need to do this before you settle the debt â once itâs paid, youâve lost all your leverage.