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How to raise your credit score.

Credit Scores: How Your History Predicts Your Future

I Raised My Credit Score 150 Points... You Can Too!

Like most of you I consider myself to be a responsible adult.  I am never going to go bankrupt or let the bank foreclose on my house.  However I am a busy man with responsibilities.  During college I juggled some bills and in the military I occasionally let a bill slip while deployed.  One time I got into a billing dispute with my cell phone company.  No big deal-- right?

Wrong!  When I went to buy a house I found that my credit scores were such that no one would give me a normal interest loan.  So you just make some phone calls and straighten it all out-- right?  Wrong again!  Your credit history is used as an indicator of the likelihood that you will repay any NEW loans given to you.  It's not about love; it's about money.  If your history is correct then your credit score is correct too.

Credit Scores are rated on a scale up to 900 points. In general you can get a loan with scores above 620 to 660 (although not at the lowest interest rate).  Anything above 700 or so will get you the best rates.  One mortgage broker told me that in his entire career he has seen only one score in the 800's and that was from a person with a 30-year credit history and no late payments in his life.  Most of us are not that diligent.

Lesson Learned:  Credit Scores are about your willingness and ability to pay off any NEW loans you take out.

So how could I improve my scores?  First I ordered my credit reports (with scores) to see what was on them.  In April 1999, my credit scores were 557, 562, and 595 from the three Credit Bureaus.  There were some obvious mistakes since my father and I have the same name.  Some of his accounts were on my report and that was making it look like I had borrowed too much money already.  A few letters to Sears and Mastercard and those were corrected.  I paid off a couple of the accounts and by November 1999 my scores moved to 597, 611, and 637.  Which is where they stayed.  I decided not to buy the house and I didn't need any credit so why worry about my credit scores?

Lessons Learned:  Get a copy of your credit report and scores.  Look for the obvious mistakes such as debt that is not yours or accounts that should have already been closed.

I did keep track of my credit scores however.  In September 2001 my scores were 541, 603, and 621.  In April 2003 I again decided to buy a home.  I knew I would have to get serious about my credit scores to get the loan at an affordable rate.  My Credit Scores that April were 576, 601, and 639.  Now, the big problem dragging my scores down was that I had fought a billing dispute with Cingular Wireless.  What I hadn't known is that they were reporting me as delinquent while this was going on and when I refused to pay for services I hadn't received they wrote off the account.  You can imagine what a mortgage loan officer said about that!  "Cutting off your nose to spite your face."  Being right with a bad credit score would cost me thousands in interest.  I decided it was better to be wrong and rich(er).  I called Cingular, asked them how much I owed (including interest it was less than $200), and paid them off. I was able to get a 6% mortgage and now I get even with Cingular by badmouthing their poor service whenever I can.

Lesson Learned:  By paying the Writeoff amount to the company directly (not its collection agency) they stopped reporting on my account. 

In March 2004 I sold some property and decided to use some of the money to improve my scores once and for all. Once again I ordered a copy of my credit report and the scores were 592, 635, and 646.  I discovered that some of my credit cards and mortgages were double reporting due to the bank that issued them being bought out by another bank.  Due to this it looked like I owed between 182,000 and $208,000 overall.

I also found that the Credit Bureaus did not like that I owed more than 90% of my credit card limits.  In the past I paid a card down and then I closed it.  So this time I paid some of them down (or off) and left them open.

By sending correction notices to the banks and paying down some of the credit card debt, my balances owed (mortgages, car notes, and credit cards) dropped to $90,000 by May 2004 which is roughly correct.  More important is the fact that by May 2004 my credit scores jumped to 707, 722, and 725.  For any future loans, if my income is large enough to pay the note then I am now eligible for the lowest interest rates available.  A bank loan officer will not have to explain the loan to his bosses since the scores meet the bank’s lending requirements.

Lesson Learned:  Make sure the Credit Reports are correct about the amounts of money that you owe overall and on each account.

Improving your Credit Scores takes time!
Overall, the scores are accurate.  They aren't about Love; they are about Money.  They measure your ability and willingness to repay a new loan.  When my scores were low I would have been stretching to repay anything new, but now my financial health is much better and my credit scores reflect that fact.

© 2004

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