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Managing Your
Credit Score |
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A most
Important Number
It's not your social
security number, your phone number, or your birth date. While
most of us don't know this number, it is essentially dictates
your finances. This number is your credit score..
A credit score is a number
that lenders use to help decide 'if I give this person a loan or
credit card, how likely it is that I'll be paid back on time"?
Also called a risk score, this number is a statistical measure
of the risk that you'll be able to repay the debt as agreed.
If you're planning on
making a major purchase, taking out a loan, or applying for a
credit card, you're going to need a good credit score.
If you've come to
the realization that your rating isn't as positive as you had
hoped, it's time to start improving it, and here's your
guide to getting started.
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| Find out where you stand. |
| The first step towards
developing a better credit score is to determine where
it currently stands. Start by checking with the three
major credit reporting agencies (CRAs) listed below.
You're entitled to one free report per agency, per year,
and you have the right to dispute any mistakes, so
request that each CRA send you a copy of your report.
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| Figure out the Facts.
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| Credit reports in hand,
take a good hard look at the data in front of you.
Credit reports are rarely as spotless as you think -
that one late payment on your Visa can stay on your
report for up to seven years (long after you've
forgotten about it). In addition, in October 2004, CBS
News reported that nearly 80% of credit reports contain
at least one error, proving how vital it is to make sure
that everything is accurate. |
| After identifying and
discrepancies, you need to eliminate them. A dispute
form usually is sent along with your credit report - or
you can request one from the CRA's website - so fill out
the form and send it back to the CRA as registered mail.
Make sure you document each step that you take in
clearing up your report in case you need backup later
on. Fortunately, the law is on your side, stating that
any item that is not verified as accurate must be
removed from your report. |
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| Call in the clean-up crew.. |
| You've cleared up any
errors, but there are still a few legitimate dark spots
on your report. What's a person to do? |
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| Clean up.
Identify any debts that are still pending, and set up a
plan for eliminating them. Clearing up debt can take
time, which makes it even more important to get started
immediately. Remember that you have the right to add
remarks to your report, such as highlighting a loan that
you paid on schedule. |
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| Fix, rinse and
repeat. |
| Time is your best ally
when it come to your credit report - consistent payment
(no matter how small, so long as they meet the minimum)
prove that you are responsible enough to repay loans as
promised, over time they will outweigh the negative
points on your credit report. |
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Ask DC's Condo Guy !
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