Capitalizing On Your Credit Report

When considering a large purchase such as a vehicle or a home, there are many steps in the process which can sometimes seem daunting.  The first item you should be concerned with is the state of your credit, as obtaining a loan hinges largely on your past credit history and current credit score.  Missed payments, over indulgences and less than stellar scores can create a credit picture that is not attractive to banks and mortgage companies. But all hope is not lost when it comes to your individual credit report and there are actions you can take to improve your report and increase your score.

You should take advantage of the free annual report, which you are entitled to, that shows information from the three major credit reporting agencies, TransUnion, Equifax and Experian.  Just as you check the state of your physical health, tune up your car or make renovations on your home, you should be inspecting your credit report at least on an annual basis.  Additionally, there are services that will also provide you with your actual score.  Take the opportunity to scrutinize the report for complete accuracy, and begin with the basics by making sure your name and social security number are being accurately reported.  There have been countless instances where family members with same names, one being a junior and one being a senior, have been inadvertently mixed up and reported on one another’s reports.  

You should also be checking on any “authorized user” accounts that you may be a party to.  If somebody allows you to be a user on their credit cards, you may think this has no adverse effect on you.  In reality, if the primary account holder misses payments or pushes the balances to the maximum, this will also be reflected on your credit.

Make sure you look at the inquiries that are being made into your credit situation.  “Soft inquiries” are different than “hard inquires” and can negatively affect your credit.  Mortgage lenders require you to explain inquiries made in the past 90 days when obtaining a mortgage.  You don’t want to be applying for any new credit or submitting applications with multiple companies when you’re in the process of obtaining a loan.

Rolling late payments can be a nightmare for your credit and your pocketbook.  Late fees add up quickly and the damage to your credit score can be stiff.  Try to get current on past due balances as soon as possible to get your credit back on track.  Working with creditors doesn’t always stop negative reporting, but indicating to them that you are trying to remedy the situation can sometimes result in solutions that work for both parties.

You should be weary of closing any accounts while in the process of obtaining a loan.  Conversely, opening new accounts as a way to boost your history and score can also backfire.  Once you decide to move forward with securing a loan of any type, you should ensure corrections on your report are made, but stay away from opening and closing any accounts.

If you’ve had difficulties along the way and your report reflects collections, bankruptcies or judgements, be sure the disposition of these accounts is accurately reported.  Generally, these types of issues involve a lengthy resolution process and in some cases the end results do not get reported to the bureaus.

If you see errors on your report, be sure to dispute any inaccuracies with the appropriate credit bureau.  Be sure to include supporting documents such as copies of correspondence, cancelled checks, et cetera, along with a clear description of what you are requesting.  Make sure you indicate whether you are requesting that the item be deleted or corrected and clearly highlight the item you are disputing.  Usually within a 30-day time frame you will hear back with their decision.  Also, you should contact the individual creditors with the same documentation and inquiries that you are presenting to the credit bureaus.

Many times a little legwork on your own behalf can result in enough of an increase in your score to move forward with a loan or purchase.  And, checking on the health of your credit is vital if you’re trying to secure a loan.  You want your credit picture to be accurate and as favorable as possible.  With a small investment of your time and attention, you can make sure your credit is working for you and that it represents a creditworthy individual.

Credit Dispute photo is courtesy of State Farm on Fllickr
Free Credit Report photo is courtesy of Get Credit on Flickr