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How Your Free Credit Report Can Help To Repair Bad Credit
By EchoBay Loans Staff Writer

Unplanned life events can upset the delicate balance of many consumers' month-to-month cash flow. If your credit has suffered because it has happened to you, you should know that you can begin to rebuild a strong credit file and higher credit score immediately. The critical first step is reviewing your credit report from all three credit bureaus.

Getting your free reports

If you spend any time on the Internet, you have no doubt seen offers for free credit reports. Are free credit reports really free? Yes, and you can order them comfortably without worrying about incomplete or otherwise compromised information due to the no-cost status. Consumer credit reporting agencies want to entice you to sign up for subscriptions to ongoing credit monitoring services, which is why they will provide free credit reports-a trial offer of sorts.
The monitoring services can be valuable, but in most cases, you can receive your free online credit report and elect to cancel the additional services with no additional obligation.

Because each bureau can hold somewhat different information about your credit history, you should obtain an Equifax credit report, an Experian credit report and a TransUnion credit report. For a report from each of the bureaus, you will typically place three different orders; some companies offer reports from all three bureaus, and others only offer free reports from a single bureau.

By the end of the year 2005, the three credit bureaus will be legally obligated to furnish you a free credit report annually upon your request. The purpose is to help prevent errors, fraud and identity theft.

Repairing bad credit

To repair bad credit, you need to examine the credit report information and focus on three areas: Errors, actual past payment problems and hidden opportunities.

A surprising number of reports contain errors. The errors are most frequently caused by creditors reporting wrong information to the bureaus. (The bureaus themselves do not create the information, as some consumers mistakenly believe.) Some errors are very minor and have no effect on the credit score, while others can cause a score to plummet. Check for errors in payment histories, open and closed accounts, public records still listed that should be dropped (after 7-10 years), duplicate accounts at the same bureau and especially check for accounts you didn't open yourself.

Past payment problems are the hardest to overcome. Don't trap yourself in despair over them, though, because as time passes and you pay your accounts as agreed, you'll find that the negative accounts influence your score less and less. 13-24 months of on-time payment after serious problems, even bankruptcy, can begin to heal the worst credit file.

Another payment history tip: If you have a long-standing, good relationship with a particular account, like a mortgage holder, and you have only one late payment, you can ask the creditor to remove the late reference. It may not occur but many creditors understand occasional trouble and will sometimes work with you. Removing one late payment, depending on the rest of your credit report, can have a surprisingly large impact on your score.

Your free credit reports may also contain opportunities to repair issues with amounts owed. Are you carrying more than a 50% balance against the credit limit on any accounts? If it's possible to pay them to under 50%, do so for an immediate score boost. Don't have extra cash? See if you can transfer balances between accounts or raise credit limits to achieve the desired balance. For real credit health, paying off debt works better than moving it around, but knowing where the trouble spots lie gives you additional options.

Do you have a reason code or scoring factor listed on your credit report labeled "Insufficient credit history"? If so, you may need to open an account to show more credit usage. Carrying a revolving credit card account, a revolving store account and an installment account (mortgage, auto loan, furniture loan), paid on time for at least 13 months, will give you the right mix for an optimized credit score. Just make sure to open the accounts you will use responsibly, and don't open an account thinking it will raise your score immediately.

Free credit reports: All benefit

When it comes to credit reports, errors can be fixed and bad credit doesn't last forever. The sooner you start working on your credit profile the faster it will take you where you want to go. It's easy and free to see your credit report so start today.


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