Are Credit Score Quick Fixes Fact or Fantasy?

The world of credit repair is filled with promises of fast fixes. Some of them are an exaggeration at best and criminal at the worst. There are a few ways to fix your credit score immediately, but nothing remedies poor debt management. Practice good borrowing habits now, however, and your score will rise eventually.

Fixing Your Credit in Hours

Quick credit scores fixes are not entirely a fantasy. Rapid re-scoring can clean up a credit report within 72 hours, but only if you have mistakes. If you can prove a negative item on your report is false, such as a collections account that belongs to someone else, a rapid re-scoring company can verify it and update your report far faster than the 90-day turnaround on most credit report dispute cases.

Other Quick Fixes

Paying down as much credit card debt as possible reduces your credit utilization ratio -- the proportion of your credit used compared to the amount available -- immediately. Adding a new type of loan boosts your credit mix. If you have a mortgage, for instance, you should have a credit card and retail card. These "fixes" won't show up immediately. The credit rating agencies can update their reports whenever they please, but they usually only do so quarterly.

Watch Out for Scams

No credit counselor or repair company should guarantee to remove negative items from your report -- legitimate negative items stay for 7 to 10 years. Fraudulent credit repair companies may claim to have a in with the credit bureaus or a foolproof tactic to convince creditors you do not owe a certain debt. Also, some ask for money up front, which is illegal as of 2011. An honest credit repair company will meet with you face-to-face and offer some type of financial education.

Tip

Do not ask creditors to lower your credit card limit. Actually, you should inquire about an increase to reduce your credit utilization ratio as long as it does not involve a credit check. Only apply for a loan when you need to improve your mix of credit. Adding a loan to try to increase your number of "good" accounts only adds the risk of a missed payment.

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10 Best Ways to Fix Your Credit Score

The higher your credit score, the more likely your chances of being approved for loans, credit cards and discounts from your bank. Many people strive to keep their credit score within a particular high range, but variables often influence the ability to accomplish this. If your credit score drops below a point of comfort, bringing it back up is not impossible. Fixing your credit score takes time and effort, but is doable.

Get Organized

Keep your finances organized so that bills do not get lost -- either physically lost within the regular mail or digitally lost in your email in-box, if you use electronic banking. Misplacing your bill due to disorganization leads to late payments, which hurt your credit score. It is important to identify one place in your home for keeping financial statements, account balances and transaction receipts organized so that you can access information when you need it.

Know the Debt

It is smart financial management to know what you owe if you want to pay off debt and improve your credit score. If you are single, then make a list of all of your debt and come up with a grand total. For people who are married, work on this project as a couple so that you know your combined outstanding balance.

Make Timely Payments

A late payment on your mortgage, car loan or credit card brings your credit score down. It also causes you to endure penalty fees for late payments, which end up costing you more money -- on top of what you already pay in interest. If you keep an automated calendar of when to mail your payments, or sign up for automatic bill payments with your bank, then you'll pay your bills in a timely fashion, and subsequently bring up your credit score.

Overpay Bills

Many people over pay their minimum fees on loans and debt so that they may eliminate the balance faster. When your debt is paid off, your credit score improves, so overpaying your monthly bills is smart financial planning.

Stop Charging

If you can afford to pay for things out of pocket, then avoid charging purchases. Many people use credit cards out of convenience because taking out cash requires a trip to the bank. But every time you use your credit card, your balance increases, and it affects your credit score. The less you use your credit card, the more your score will improve.

Read Financial Statements

Financial institutions are not flawless, and they sometimes make mistakes. When you get a financial statement, read it over carefully to make sure the information is accurate. If you find a discrepancy between something that is on the statement versus what your receipts say, then dispute the difference. You want as much accuracy as possible when attempting to fix a credit score.

Check Credit History

Each year, get a copy of your credit report from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion. Make sure no one opened any new accounts under your name. Make sure the accounts you paid off no longer show as active. Credit bureaus can make mistakes, and their mistakes work against your credit score.

Consolidate

Depending on the type of debt you have and who you bank with, you might qualify to consolidate your debt. Consolidating your debt rolls multiple debts into one, so that you pay off one sum as opposed to several smaller ones. This option is for consumers who needs help staying organized, and it may even provide consumers with a lower interest option so that they can apply more money toward the principal balance.

Build Credit

You might be one of those people who may have to build their credit in order to fix their credit score. This action is generally if you have zero to little debt. In such a circumstance, get a credit card and use it every now and then for things like gas and groceries. Pay off the total balance every billing cycle, then use the card again for similar items the next month. As long as you pay it off every billing cycle, the debt will strengthen your credit.

Negotiate

Since creditors want to get their money, they might strike a deal so that they get paid. If you are up for the challenge, then negotiate with your lender about erasing a late payment from your credit history, in exchange for paying off your current balance. It never hurts to try.

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How to Post Trade Lines

A trade line is an industry term which refers to any item listed on a credit report, including a mortgage, car note and credit card accounts. Each individual account on a credit report is referred to as a trade line. Getting trade lines posted to one's credit report can be vitally important, especially if it reflects on time payment history, as it helps improve one's overall credit score.

Instructions

1

Obtain your credit report from all three credit reporting agencies: Transunion, Equifax and Experian.

2

Take a look at all three credit reports and determine any active accounts you have which are not being reported and which could also help you build a better credit history and overall score.

3

Contact all three credit reporting companies and request they add any credit lines which are missing. Credit reporting companies can add any credit accounts they are able to verify, though they are not required to do so. Be prepared to provide proof of the positive credit line you have with the vendor.

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Answers for Credit Solutions

Knowing the various methods to improve your present credit situation can make you a good candidate for a low-rate auto loan, mortgage or credit card. Credit is imperative, and people with low or bad credit scores tend to receive more credit rejections than someone who shows creditworthy habits. Fix your credit now, and open the door to numerous financing opportunities.

Lateness and Payments

Solve credit problems with better payment habits. Your payment record influences your credit score, and building a stronger credit history starts with timely payments to your mortgage lender, auto loan lender, credit card company and other creditors. According to My FICO, timely payments make up 35 percent of personal credit ratings. Each payment received by the due date slowly increases your credit score. Stop late payments altogether, and you could significantly increase your FICO score.

Eliminate Balances

Another effective move to bolster a weak credit score includes paying down balances on credit cards. Credit scores factor in how much you owe, or your debt ratio. The less debt you carry, the better. MSN Money recommends paying down credit card balances to below 30 percent of the credit limit to help fix a low score. Getting rid of debt is often a slow process. But with increased monthly payments and limited credit card use, you can reduce the amount you owe and improve your credit.

Credit Reports and Accuracy

Outdated or completely inaccurate information on your credit file can bring down your FICO score. Avert problems when applying for loans and credit by regularly checking your credit report -- at least once a year. Annual Credit Report issues free reports to each consumer on an annual basis. Order reports online, and check the document to ensure the correctness of information. Dispute inaccuracies online or write your creditors.

Deleting Negative Information

Certain negative information can remain on credit reports for seven years. This includes collection accounts, credit judgments and charged-off accounts. Negative information on reports eventually age and fall off. But you can expedite the deletion of this information by negotiating the removal of negative items upon satisfying the debt. Contact creditors or collection agencies to see if this is an option. If so, schedule a plan to submit payments to pay off the old debt.

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How to Rebuild Your Credit With No Upfront Fees

Some credit repair companies ask for high upfront fees to wipe out bad credit, but the Federal Trade Commission (FTC) explains that this is illegal. A credit repairer cannot collect any money from a customer until it performs its job. Unscrupulous firms ignore this requirement and usually do not fulfill their promises. You can rebuild your own credit without paying anyone because you can use the same methods as legitimate repair companies and some financial actions of your own.

Instructions

1

Pay all of your current credit cards, loans and other accounts by the monthly deadlines. Timely payments play a big role in your credit score, according to the FICO scoring company. Your score goes up as you rebuild your on-time payment records and your account balances go down.

2

Request credit report copies from the federal website run by Experian, TransUnion and Equifax, AnnualCreditReport.com. The credit bureaus all sell reports, but the Fair Credit Reporting Act forces them to give consumers a free annual copy through the special site, the FTC explains. They will charge you or make you sign up for paid services like identity theft protection if you order reports through their direct websites.

3

Read the reports to make sure your current on-time payments are showing up. They do not help rebuild your credit score if they are not being reported by the creditors. Call any lenders who are not sharing positive information with the credit bureaus and ask them to do so.

4

Circle any harmful credit report items that contain mistaken information. Dayana Yochim of the Motley Fool financial education website warns that eight out of 10 reports have errors, most of which are tied into late payment dates. You can dispute any error, including general issues like misspellings, and it may get the item removed from your reports if the creditor does not cooperate with the credit bureau investigation of your challenge.

5

Fill out the online dispute forms on each credit bureau website to challenge the error-containing items. The FTC explains that they must try to verify each entry's accuracy with the reporting creditor. Some may not respond, which forces the bureaus to erase those entries, resulting in a higher credit score.

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The Definition of "Risk Based" Underwriting

Some borrowers are more creditworthy than others. That is why lenders are willing to offer the lowest interest rates to people who have the best record of repaying their bills and debts on time. Lenders and other financial institutions such as insurance companies use "risk-based" underwriting to either set or adjust the price and other credit conditions for a particular borrower or client based on that person's credit history. Anyone applying for an insurance policy or any type of loan, including mortgages, cars or credit cards, can expect that the rate they are offered is based on risk-based underwriting. In the age of advanced credit scoring systems and major credit bureaus, risk-based underwriting has become a standard practice in the financial industry.

Risk-Based Pricing Rule

As of Jan. 1, 2011, every creditor must send a risk-based pricing notice to any consumer who has either been turned down for credit or was offered a higher interest rate due to his credit history. The notice will explain why the institution made an adverse decision on the loan request, and lenders also are required to provide consumers with the three-digit credit score that was used to reached the credit decision. The rule, issued by the Federal Reserve and the Federal Trade Commission, is intended to shed more light on the loan approval process so consumers who are turned down for credit or receive poor terms have more information concerning how they can make improvements to their credit profile.

Other Factors

When financial institutions use risk-based underwriting to evaluate a credit application, the credit score is not the only factor considered. Underwriters also take a close look at a person's income, his occupation and his length of time on the job. Combining all those elements in the risk-based pricing process helps build a better picture of who the applicant is and what level of risk he may pose.

Housing Industry

Risk-based underwriting has become more important than even in the housing industry since the sub-prime collapse in 2007. Since then, the largest purchasers of residential mortgages, Fannie Mae and Freddie Mac, have made changes to their risk-based pricing criteria, which require borrowers to have higher credit scores and more equity in order to qualify for a loan. Home buyers with poor credit histories and less than 20 percent to put down will either be rejected for a mortgage or must pay additional fees. In this instance, risk-based underwriting has raised the standard for people to qualify for home purchases and caused many existing homeowners who do not meet the standard to be unable to refinance higher interest loans for a better rate.

Insurance Industry

Insurance companies use your credit score to determine how much you will pay for insurance, which is another form of risk-based underwriting. Missing payments on credit cards can lead to you paying higher premiums or even having a policy cancelled with an insurance company you've been with for a long time. Insurance companies also will use risk-based pricing to assess how certain perils might affect a customer's profile. A single homeowner's risk profile is always changing, and there are times when the premium is adjusted for perils such as fire risk, water damage and the potential for theft.

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The Advantages of Good Credit History

A person's credit history is a seven-year record of the positive and negative reports that creditors have made in regard to his payment patterns. A credit history that contains mostly positive reports results in a higher credit score, which in turn can open up further opportunities. Those with good credit histories can secure financing more easily at lower rates and will be more attractive prospects to employers and landlords.

Credit Cards

Credit cards are easier to get when you have a good credit history, since this indicates to card issuers that you are likely to make all of your payments on time. When applying for a new credit card, those with good credit histories are more likely to receive lower interest rates and higher credit limits.

Loans and Purchases

As with credit cards, people with good credit histories typically can borrow larger sums of money at lower interest rates than those with average or poor credit. When buying a car, for example, there may be restrictions on how low the interest rate can go. In this case, dealers may be willing to lower the selling price for those with good credit histories.

Rentals

When a tenant is renting a home, business location or vacation property, landlords and property management companies typically perform credit checks to determine whether potential renters are likely to make payments on time. A good credit history can help ensure that an individual's rental application is approved and may also persuade owners to lower or eliminate rental deposits as well.

Insurance

Insurance companies often check credit scores to evaluate whether applicants are likely to pay their premiums. Having a good credit history makes it easier to get insurance and typically reduces the amount that the insured has to pay each month.

Employment

Some employers check the credit of potential employees, especially if the employee will be working with money or other valuables. Those with low credit scores may not be hired as it shows that they are not dependable and that they may not be trustworthy. Having a good credit history can help an applicant to have an advantage over competitors also seeking a job.

Utility Deposits

Utility companies typically check credit scores before establishing service to determine whether an individual is likely to pay his bill on time. Those with good credit histories often receive a reduction on their utility deposit or may have the deposit waived completely.

Business Startups

When starting a new business, entrepreneurs typically have to secure funding based on personal connections and their ability to get loans or credit lines. Having a good credit history makes someone much more likely to receive a business loan with a favorable interest rate and may also allow him to apply for a larger loan amount than he would otherwise qualify for.

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