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How to Improve
Your Credit Score
By First Federal Bank
Special to The Truth
When was the last time you
checked your credit report? Errors on your credit report can
lower your credit score – and you may not even be aware of
them. The Federal Trade Commission found that one in four
people discovered an error on their credit report that could
affect their credit score.
If you’re looking to apply
for a mortgage or make a big purchase, fixing your credit is
a smart move. Before you can fix any problem, you need to
determine the root cause. The tough part with credit is that
there are many factors that make up your credit score and
credit bureaus take time to reflect any changes..
Understanding how to fix your credit is the first step and
First Federal Bank is here to help you on your journey.
Step 1: Get Your Free Credit Report
By law, every U.S. citizen
is entitled to a free copy of their credit report every 12
months, available at
annualcreditreport.com. You’ll need to pay extra, or use
a different service, to get your actual credit score, but
your credit report will show you what’s being stated.
Step 2: Review Credit Report for Errors
One of the easiest ways to
improve your credit score is to fix errors on your credit
report. Here are some of the common credit report errors to
look for:
·
Incorrect street address
·
Incorrect name (look out for a similar name or suffix being
reported on your report)
·
Fraudulent accounts that you didn’t open. Beware, as this
could be a sign of identity theft.
·
Incorrect account information such as:
o
Inaccurate credit limits
o
The wrong origination date on a loan
o
Wrong Social Security Number
o
Wrong birth date
o
Spouse’s information is inaccurate
o
Accounts that are mistakenly shown as being open or closed.
Look to see if there’s a notation on the account saying if
you or the creditor closed the account (and if that’s
accurate).
o
Wrong payment status information
Step 3: Dispute Credit Report Errors
Once you’ve reviewed your
credit report for errors, next you’ll want to dispute any
errors with the credit bureaus. You can do this by mailing a
letter or online through each of the three credit bureaus. A
sample dispute letter can be found at
https://www.consumer.ftc.gov. In both scenarios, you’ll
want to point out the errors, state why the information is
inaccurate, then request that the items be fixed and/or
removed.
It’s a good idea to send a
copy of your credit report and, if you are disputing by
mail, send it via certified mail. If you prefer to dispute
your credit errors online, use the links below for each of
the three credit bureau’s pages with information on their
process:
·
Transunion - https://www.transunion.com/credit-disputes/dispute-your-credit
·
Experian -
http://www.experian.com/disputes/main.html
·
Equifax -
https://help.equifax.com/s/article/ka137000000DRQxAAO/How-does-the-dispute-process-work
After you file a dispute,
be diligent and follow up to make sure it was resolved.
Step 4: Lower Debt
Your debt-to-credit (DTC)
ratio refers to percentage of your income that goes toward
paying your debt each month. Keeping a lower debt-to-credit
ratio can help improve your credit score. Lenders want to
make sure that you’re living within your means before they
allow you to take on more debt.
Strategies for lowering
your DTC are to pay down your current debt and get an
increase on your credit limit, without utilizing it. Racking
up big balances can hurt your scores, regardless of whether
you pay your bills in full each month. You often can
increase your scores by limiting your charges to 30 percent
or less of a card's limit.
Step 5: Set up Automatic Payments
Credit worthiness makes up
35% of your credit score. It measures your ability to pay
bills on time. First Federal Bank’s online or mobile banking
tools can help you avoid missed payments by setting up
recurring or one-time payments with Bill Pay. When using
bill pay, we recommend starting with reoccurring bills first
to make sure those are always paid on time – especially your
credit card payments and loans.
Be Careful with New Credit
Another factor that makes
up your credit score is new credit. Be cautious the next
time a retailer offers you 10 percent off and double points
if you open a store credit card. When opening a new line of
credit, don’t jump at the first appealing offer; compare
rates, fees and options.
Talk to Credit Counselors if You’re in
Trouble
Using
a legitimate, non-profit credit counseling agency can help
you manage your debt and won’t hurt your credit score. For
more information on debt management, contact the National
Foundation for Consumer Credit (www.nfcc.org).
Fixing Bad Credit Is Worth the Effort
Improving your credit score takes time, but with some effort
and planning, it can help you qualify for a
mortgage or get a lower interest rate on
a
credit card. Want to talk to someone in person
about your credit? Visit one of our
locations in Ohio, Michigan or Indiana, or
contact us online. |
