Improving FICO scores before applying for a credit card, mortgage or loan is fundamentally important. It not only determines the likelihood of an application being successful, it also affects the cost of borrowing. Filing for bankruptcy and mortgage foreclosure does not mean that credit will never again be available.
Improving FICO Scores
Raising credit scores can only be achieved through reliable repayment over a period of months. Although foreclosure and chapter 7 bankruptcy show on credit reports for 7 and 10 years respectfully, it is possible to partially repair bad credit in 24 months. Minor problems can be corrected in just six months.
Avoid Credit Repair Scams
Contrary to the promises of certain companies rapid credit repair is not possible. Improving FICO scores can only be achieved through making reliable repayments on current and future credit agreements. It is not legally possible to get a new credit report as the false attainment of credit is fraud.
Free Access to Credit Reports
It is possible to get a printed credit report from Experian, Equifax or TransUnion for a few dollars each. However, free access to credit reports are available online on a seven day trial basis. It is important to scrutinise the report from each credit reference agency as they all hold different information.
How to Increase FICO Scores
- Check that the information provided doesn't belong to the wrong person. This can be validated by checking the name and Social Security number contained in the report.
- Pay off any old, outstanding personal debts before applying for any new sources of credit.
- Avoid maxing out credit cards; it is better to have a small balance on several credit cards.
- Don't make too many credit applications as each search will show for a period of 12 months. An excessive number of applications will decrease the likelihood of being approved for credit.
How to Repair Bad Credit
- Validate that all of the searches and applications for credit are correct. With the exception of credit cards, these need to be corrected directly through the credit reference agency.
- Ensure that future repayments are made punctually on loans, mortgage and credit cards each month. An unsecured bad credit card can help to achieve this objective.
- If a short sale has taken place, ensure that this shows as paid off and doesn't reflect an unpaid balance (the difference between the sale price and the loans secured on it).
Improving FICO scores and correcting inaccurate data takes many months to achieve. Don't leave it until the last minute to correct any issues as these won't be reflected in time. Beware of credit repair scams that promise rapid credit repair or a new credit report.
Sources
Sichelman, Lew. (October 11, 2009). "Start repairing your bad credit rating now." The LA Times.
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