Improving FICO scores before making an application for finance will increase your creditworthiness. It not only determines the likelihood of approval, it also reduces the cost of borrowing. Filing for bankruptcy and mortgage foreclosure don't mean that you'll never get credit again.
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 some companies, rapid credit repair is rarely possible. Improving your credit can only be achieved by making punctual repayment on current and future credit agreements. You cannot legally get a new credit report because the false attainment of credit constitutes fraud.
Free Access to Credit Reports
Under the Fair Credit Reporting Act, you're entitled to a completely free credit report from Experian, Equifax or TransUnion. It's important to scrutinise all three of your reports because they all hold completely different information about you.
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 debts before applying for new credit.
- Avoid maxing out credit cards. It's 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. Too many applications decreases the likelihood of approval.
How to Repair Bad Credit
- Validate that all of the searches are correct. With the exception of credit cards, these can 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 you 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 errors as the corrections 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.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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