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How To Raise
Your Credit Score
by: Gene Pimentel

Your credit score is a truly valuable asset. Never underestimate the impact your credit has on your life. Many people go through life not knowing their credit rating or understand how it affects them. A poor credit rating often translates to being denied even the simplest of loans and can cause you to pay the highest interest rates if you do find a lender.

There's no great mystery to the system, but it takes effort to keep informed about what companies or lending institutions have reported to the credit bureaus about you.

The first thing you need to realize is that your credit report is free to you annually. Every 12 months you are entitled to view the details of your credit history. Don't abuse this service however, as checking your credit information more frequently will likely cause your credit score to actually lower. When lending institutions see a large number of inquiries to access your credit report, they assume you are frequently applying for credit cards and loans. This leads them to believe you are a greater risk to them, and your credit score gets lowered because of it.

Be sure to Get a 3-in-1 Report

When you do check your credit report, be sure to get a three-in-one report. The three major reporting agencies, Experian, Equifax and TransUnion each calculate your credit score in a different way. You need to know what each of those reports are saying about you.

If you have plans to apply for a mortgage, car loan or borrow money for any other reason, it is in your best interest to get ahold of your credit report as early as possible. While some issues can take just days to fix, It can sometimes take many months to clear up problems that are shown on your credit report.

Never Hire a Third Party to "Fix" Your Credit

Don't make the mistake of dealing with companies who claim they can fix your credit for you. Save your money. These companies charge a small fortune to do very little to change your credit outlook. They don't have any special capabilities that you yourself don't have. Do it yourself and save the unnecessary expense.

Review your credit report line by line. Be careful to note any negative issues. Your goal is to remove as many negatives as possible in the shortest amount of time. Fortunately, most of the information on your credit report should be accurate. But errors do happen frequently, and erroneous information can do a lot of damage to your personal credit. A common error is that you may have owed money on an old bill but have long since paid it off. Sometimes this information is not updated, so it appears to lenders that you have not met your obligations.

The worst scenario is when you discover that someone else has been using your identity to hide from their own poor rating, or just living it up at the expense of your good credit!

What to do if You Find an Error

Make note of any incorrect information you may find on your report. You will need to write a short, but informative letter to the reporting agency. You will need to state in clear terms what the truth of the matter really is. Include any supporting documentation. If you have receipts or cancelled checks, send along a copy. Be sure to mail the letter by certified mail with a return receipt requested. Look for the same error on the other two credit documents. If they contain the same error, you must write to them as well.

Factors That Contribute to Your Credit Score

Any time you pay a bill, any time you have an account balance, any time you open new lines of credit, your credit history is updated. The age of your established credit comes into play, as well as recent inquiries and/or accounts that have been opened. These are the major factors that determine your overall score.

Avoid offers that promise an instant discount by opening a charge account. You'll often find such offers at retail stores trying to get you to use their brand of credit card. The percent you might save on the purchase usually isn't worth the negative impact it may have on your credit score.

Too Many Credit Cards?

There's no need to be concerned about having too many credit cards unless you are unable to support them. In fact when used responsibly and properly, having many credit cards can work to your advantage. Your credit score is formulated by monitoring the balances on your credit cards. If you've maxed out many of your cards, your score will probably be negatively impacted. But closing your credit card accounts will not necessarily change your rating either. The key is to regularly pay down your balances as much as possible. It is recommended by experts that you have at least 25% of your credit unused at any given times. Cross that line and it begins to appear that you are unable to support your buying habits.

If you manage to pay down a credit card to zero, don't close the account. It will not improve your score to close it. In fact, it will reflect well on you that you have an unused open credit source. The zero balance is a positive factor in your score.

Consolidating your credit cards may be beneficial to you if it allows you to reduce the interest rate you're paying, but don't assume that it will help your credit score. Moving your credit around is often a red flag to lending institutions and can hurt you more than it helps.

Lastly, to maintain the highest score possible, be sure to pay your bills on time, every time. If you are the type of person who often forgets deadlines, it would be extremely beneficial to set up a reminder system or take advantage of automatic payment systems that are available from most of your debtors.

Be patient, as it takes time to establish or improve your credit score. But make no mistake, it will be well worth your effort and you will be rewarded handsomely.