Your credit score goes up and down based on the ways in which you use credit. Scoring companies such as FICO and the the three main credit bureaus pull data from your credit reports, plug it into their formulas and come up with a three-digit indicator of your credit worthiness. You often can improve your score within about two months through disputes, settlements and other simple, free methods.
Assessment
Review your Experian, Equifax and TransUnion credit reports to get an idea of how much free credit score improvement you can accomplish. The Federal Trade Commission (FTC) website advises that annualcreditreport.com is the official free credit report source under the Fair Credit Reporting Act (FCRA). The three bureaus are not allowed to charge for reports ordered through that site, and you can obtain a credit report once each year from each credit reporting bureau. Find mistakes, which are disputable at no cost, and charge-offs and collection accounts that can possibly be settled at a discount.
Disputes
The most common credit report mistakes involve payment delinquencies, according to Motley Fool writer Dayana Yochim. Inaccurate reports of late payments hurt your score significantly, as do balances reported higher than they are, incorrectly listed credit limits and unpaid accounts that do not belong to you. Fill out the dispute forms on the Experian, Equifax and TransUnion websites for every error you find. The FTC reports that the FCRA only allows 30 days for the bureaus to process your claims and verify their records. The negative data is wiped out and no longer affects your score if the bureaus cannot verify its accuracy within the allotted time.
Settlements
Either creditors that write off accounts you stopped paying or collection agencies that bought your debts may accept discounted settlements. Liz Pulliam Weston, an MSN Money columnist, explains that many lenders charge off debts within six months of default, which gets reported to the credit bureaus and lowers your score. Collection agencies buy some of these debts, which adds another negative credit report entry. Call the creditor or collector and offer an affordable lump sum payment in return for removal of the credit report information. Negotiating costs you nothing, and you may get a discount on the bill and an improved credit score just for asking.
Other Methods
Payment history weighs heavily in credit score calculation, according to the MyFICO scoring company website, accounting for 35 percent of your score. Your bank may let you set up automatic deductions for free to guarantee your payments are received by your creditors on time, which raises the score. Otherwise, make your own strict mailing schedule that allows for possible postal delays because every payment received after the due date reduces your score.
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