Improving Your Credit Profile: What You Can And Cannot Do - CREDIT RATING

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CREDIT RATING: Improving your credit profile: what you can and cannot do


Have you ever tried to rent a car or reserve a hotel room without a credit card? If you have, you know how important good credit is. Those without good credit find it difficult to obtain financing for the car they want, they have trouble qualifying for a mortgage, and their days are often filled with worry over unpaid bills.

If you have credit problems, you can improve your credit profile on your own for little or no charge. Unfortunately, to many consumers are falling prey to enticing ads by "credit repair" companies that demand an up-front fee for the false promise that they can "repair" your existing credit record or create a new one for you.

Fraudulent credit repair companies may claim that they can remove negative information from your credit report. Or they may encourage you to create a "new" credit report or identity by applying for an Employer Identification Number (EIN) to use instead of your social security number. An EIN is used primarily by businesses, and obtaining an EIN under false pretenses is a crime. A credit repair company cannot remove negative, but accurate, information on your credit report. It will be removed only after the required amount of time as stated in the Fair Credit Reporting Act. For example, records of bankruptcy can remain on a your credit report for 10 years and foreclosures are reported for seven years.

To legally improve your credit profile, you should:
  • Remember to pay all your bills on time. When you are delayed or delinquent in a payment, late fees are charged, more interest accrues and your credit health is negatively affected.
  • Apply for a department store card or gasoline credit card, which are often easier to qualify for, and pay those bills on time.
  • Contact your card issuer immediately if you were unable to pay your bills on time, or if you have found an error in a bill. Be sure to make any complaints, and get corrections, in writing.
  • Maintain a small number of credit cards and close unused accounts. Creditors look at your potential for going on a spending spree and falling too deeply into debt. The more credit cards you have, the larger your debt potential.
  • Keep your debts reasonable. Financial experts say that, as a rule, non-mortgage debt payments should not exceed 10 to 15 percent of your take-home pay each month. If your debts are higher than that, try to reduce them before applying for another loan.
  • Avoid unnecessary inquiries. Any time you authorize a creditor or other business to check your credit report, an inquiry is added to your report. If you have a large number of inquiries in a short amount of time, creditors may infer that you are either applying for too much credit because of financial difficulties or taking on more debt than you can repay.
  • Order a copy of your credit report at least once a year from each of the three credit reporting companies to stay on top of changes to your credit profile and to check for identity theft.

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