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Helpful Information on how to Improving Credit Score - The Bills.com Blog
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Helpful Information on how to Improving Credit Score
Question: I have a low credit score because i have no debt and no credit history. I'd like to apply for a mortgage soon but my mortgage counsellor told me that my credit score is too low. if i open a credit card now, how soon will it increase my score? also, I've paid off 1 delinquent item on my credit report. how soon will that be reflected and howmuch would my credit score increase from taking something off the delinquent side?
Answer: Establishing a positive credit rating is very important, especially since you are considering purchasing a home, as a positive credit history could save you thousands of dollars in interest over the life of your loan. There are several steps you can take to help improve your credit rating, but building and maintaining a good credit score requires diligent effort and a long-term commitment to financially sound living.
First, you should obtain a copy of your credit report from each of the three major credit bureaus–Experian, Equifax, and Transunion. You can request free copies of your reports by visiting www.annualcreditreport.com. Once you have received copies of your reports, you should carefully review them to make sure that all listings, especially the listings appearing in the “derogatory” category, belong to you and are being reported accurately. Credit reports are notoriously inaccurate, with consumers frequently finding listings of derogatory accounts that never belonged to them or that were paid off years ago. If you find any inaccurate listings, you should dispute them with the appropriate credit bureau. The Federal Trade Commission provides
a comprehensive guide to disputing items on your credit report, available at www.ftc.gov . Clearing up inaccurate derogatory accounts may significantly improve your credit score, depending on the number of inaccurate listings you find on your reports.
In regard to the account that you recently paid off, the amount that it will increase your score depends largely on the creditor with whom you paid off the account and how quickly they report the updated information to the credit bureaus. Most creditors report updated information to the bureaus once a month, so you should pull your credit report around 45 to 60 days after the account was paid to verify that the account is reporting accurately. If the account information is not updated on your credit report within 45 to 60 days, you should consider contacting the creditor about the inaccurate reporting, and dispute the inaccurate listing with the credit bureaus. The creditor should be willing to update the information if you point out the error; if that fails, the credit bureaus should remove the inaccurate listing if you provide proof that the account was paid. As for your credit score, there is no guarantee that paying off a single account will improve your credit score. There are simply too many factors
that go into calculating a credit score to make a broad statement as to the effect of paying off any single account.
Finally, since you do not already have a long, positive credit history, you should begin to build one. You can start by opening a few small credit card accounts, making charges on them, and paying off most, if not all, of the balances each month. By doing this, you will show yourself to be a responsible user of credit, and your credit score should improve with each month you continue to show a positive payment history. If you find that you cannot obtain a traditional credit card because of credit problems, a secured credit card, in which you deposit cash in an account as collateral for the credit line, can help build a positive credit history. Again, I cannot tell you how much or how quickly opening a new credit account will improve your credit rating, but building new positive trade lines is the key to improving your credit score over the long term.
To learn more about credit and strategies to improve your credit score, I encourage you to visit the Bills.com Credit Solutions and Resources page.
I hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
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