Dunnan on Dollars

  Personal Finance Tips from Nancy Dunnan

Credit Where Credit Is Due
Boosting Your Credit Score

February 1, 2008 - The Fed has been very busy for some time now cutting interest rates. One positive that comes with reduced short term interest rates is that loans - mortgages, car loans, personal and business loans and home refinancing -- are cheaper than ever. So are credit card rates.

Before Applying For A Loan

o Get your three credit reports

These come from the three major credit reporting bureaus, Equifax, Experian and Trans-Union. By law, you are entitled to one free credit report each year from each of each of the three bureaus. Order all three from: http://www.annualcreditreport.com/.

Note: When you apply for a loan, lenders generally review all three reports.

Once you have the reports in hand, set aside time to look for errors. They're not at all uncommon. One of the most prevalent mistakes is misinformation in your report that belongs to someone whose name is the same as yours or very similar. That's why using a middle initial is important.

Check for other errors as well and report any to the credit bureau or bureaus. By law, credit bureaus must investigate any items in dispute within 30 days.

o Ask for your FICO credit score

Unfortunately, your credit score does not come with your annual credit bureau reports. If you order it from Equifax, it will cost $7.95. Or, order all three from Fair Issac at: http://www.myfico.com/. The cost is $47.85 for the three scores and all three reports.

o Improve your credit score

Once you have the facts in hand you'll know whether or not you need to improve your score so it reaches 750 or above. Here are three ways to reach that magical number.

(1) Pay your bills on time. Late payments can remain on your credit report for up to seven years. But don't panic. The older the late payments are, the less impact they have on your score.

And, once you begin making all your payments on time, your score will quickly improve.

(2) Cut back your debt level. The amount of debt you are carrying plays a big role in your credit score. In fact, the amount of debt as a percentage of your credit limit constitutes about 30% of your score. You want to reduce your debt level and total balances due so they are not greater than 10% of your available credit.

(3) Avoid opening new accounts. Your lender will ask for your credit record. His request will appear on your credit report. If you have a number of such inquiries (and requests for new accounts factor into the number of inquiries) it is seen as a negative. That's because lenders are of the opinion that borrowers who assume a pile of new credit are more likely than other consumers to get behind in their monthly payments.

The aboves steps will help you land the most favorable loan - in terms of interest rates and conditions.

For More Information...check out http://www.fairissac.com/

- Nancy Dunnan