You have the right to include a statement of as many
as 100 words in your report to explain your version of the disputed
item. This will be included in reports provided in the future.
The credit reporting companies make mistakes -- oodles
of them. So many, in fact, that there is a 50/50 chance that there's
a mistake on yours. The Fair Credit Reporting Act gives you the
right to challenge the reports, and have them corrected if they're
wrong.
The Federal Trade Commission's Web
site presents a concise summary of your rights under the act,
written in language that's easy to understand.
Recheck your score -- it could
be worth it
Once you have corrected mistakes, check your FICO score again in
30 to 60 days to see how much, if any, it has changed. How important
is, say, a 50 point swing in your score? It could mean the difference
in getting approved for a zero percent loan offer or paying 7 percent.
Is it worth the wait? Let's say you were financing
$20,000 for five years. A zero-percent loan would give you payments
of $333.33 and, naturally, zero dollars of total interest over the
life of the loan. A loan at 3.9 percent would mean monthly payments
of $367.43 and total interest of $2,045.71. A 7.9 percent loan would
mean payments of $404.57 per month and $4,274.28 in total interest,
or $71 a month more than the zero-percent financing.
 |
| If you are financing $20,000 for five years... |
|
| 0% |
$333.33 |
$0 |
| 3.9% |
$367.43 |
$2,045.71 |
| 7.9% |
$404.57 |
$4,274.28 |
In addition to disputing items on your credit reports,
there are other ways to improve your FICO score:
- Pay down any credit cards that are near
their limit. Your FICO score suffers if it looks like
you've maxed out your credit, even if you've made all the payments
on time.
- Don't apply for new credit, even
if you are just exploring the option of financing a new washer
and dryer. Frequent inquiries from credit providers can decrease
your score.
- Close old accounts you no longer use. That VISA with the $15,000 limit that you have in your
wallet just in case of a catastrophic emergency could depress
your score. FICO looks at how much credit you have available,
not just what you've used. There's a catch, though. Closing
all your accounts could adversely affect your FICO because the
calculator likes to see that you have and use credit wisely.
- Keep older accounts with a good history
and let new credit mature. If you're just starting out
and have only had that MasterCard for six months, wait a while.
You'll score higher with a longer history of handling credit.
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