Raising Your FICO Credit Rating For Free
People with FICO credit score troubles often hire debt consolidation firms or credit counselors to help them get their credit rating to an acceptable number. These debt experts take your money and (may or may not) go to bat for you with the credit card companies, correcting misinformation on your credit history and having bad credit information taken off your FICO credit report.
But there’s nothing these credit repair firms can do that you can’t do by yourself for free. Mainly, it’s a matter of knowing how to raise your FICO credit score for free.
What Is a FICO Credit Score?
FICO is the most famous credit score, developed in 1958 by the Fair Isaac Corporation (or F.I.Co.). When you go to a bank or other lending institution, it is most likely to take a look at your FICO rating. The three credit card reporting agencies – TransUnion, Equifax and Experian – calculate FICO scores using FICO software and report these scores to creditors.
This means you have three FICO scores at any given time, since these three firms may include or exclude different information from your credit history. You can buy your Experian FICO rating and your TransUnion FICO report from either of these companies, or buy them from the Fair Isaac Corporation.
With that in mind, here’s how to raise your FICO credit score for free.
1. Collect and Correct Inaccuracies on Your Credit Report
Buy your credit reports and go over every transaction on your credit history. Locate any inaccuracies and make a list of these. Find records that contradict these inaccuracies. Remember, there are three different credit reporting agencies and all three have people entering this data into their databases. This means errors will naturally find their way in. Otherwise, all three credit scores would be exactly the same.
When looking for errors, pay attention to any statements besides “Current” or “Paid As Agreed”. Anything but those inclusions are likely to be negative information. When you see statements like “Paid Derogatory,” “Paid Charge-Off” or “Settled”, these are telling the credit reporting agencies that you did something wrong in paying off your debt.
Credit collections, late payments and charge-offs are all bad for your credit report. Check each and every one of these to make sure they’re accurate. If not, take steps to correct them.
Look for duplicate listings, such as a debt listed under your original creditor and the same debt that’s gone to collections. Have the older one removed. Make sure that bad credit information (after 7 years) and bankruptcy information (after 10 years) are taken off your report.
2. Correct Misleading Credit Line Information
Your creditors have reasons to damage your credit rating by under-reporting your credit line. If you have a worse credit rating, that creditor’s competitors are less likely to extend credit to you. So make sure your credit lines are reported correctly.
3. Correct Misleading Bankruptcy Information
Creditors often won’t list bankruptcy charge-offs until you dispute this with them. So if you’re gone through bankruptcy, make certain your creditors are reporting their charge offs correctly.
4. Have One-Time Late Fees Wiped Off Your Credit Report
If you had a one-time late fee, call your creditor and have them remove this from your credit report. Typically, creditors will remove one-time incidents to maintain you as a loyal customer.
5. Negotiate the Removal of Bills That Have Gone to Collections
When you have a bill that’s already gone to collections, call your creditor and negotiate a payment settlement in exchange for having that debt removed from your credit report. Never admit that you failed to pay your bill, because this gives your creditor the ability to restart the statute of limitations or even sue you.
Simply mention that you are contacting them about your account number and that you want to create a settlement in exchange for having that information removed from your report.
Always get this settlement in writing. Do not negotiate a settlement unless it’s in writing, or they won’t have to follow the letter of the agreement.
6. Keep Old Credit Card Accounts Active
If you have too many credit card accounts or old accounts you no longer want to use, do not close that account. These account are an advantage on your credit report. Cut up the credit cards associated with these old accounts or store these credit cards in a home safe, the top of your closet, the desk in your home office or a kitchen’s drawer.
7. Pay Down Credit Card Debts to 30% of Your Credit Limit
Creditors want to see that you aren’t overextended on your credit lines, but they want to see that you use your credit. If you have charged over thirty percent, that makes you look like a credit risk. If you never use your credit, then they aren’t going to make any money off the interest. Most important, though, you need your debts at a manageable level.
8. Have Three Revolving Credit Lines
Around three revolving credit lines are the best. This shows you use credit and you have multiple credit sources. If you don’t have three, then apply for new credit lines. Keep in mind that applying for new credit lines (less than a year old) generally hurts your credit score. These credit cards won’t help you for a year, but they should become an asset to your credit rating after that.
9. Give Your Credit Report a Little Time
You’re going to have to show a little patience. As mentioned earlier, you won’t always improve your FICO credit score overnight. Some resolutions at the top of this list will do so, but some issues you’ll need a little time to resolve. Most of all, keep in mind that there’s nothing a credit repair company can do that you can’t do yourself. Save yourself some money and raise your FICO credit score for free by doing it yourself.