Business of Home: Fix Your Credit Score

Have you checked your credit report lately? Do you know your score?

Experts say credit scores are sinking due to the economic downturn. It’s estimated one in four people have scores below 599, making obtaining loans and credit cards with reasonable terms tough.

"It’s astounding and needs to change," said Gerald Lewis, a vice-president at Harris Bank. He adds, “It’s trending downward.”

Credit scores of 750 and above are considered Excellent.  Scores in the 659 to 749 range are considered good.  If you're sitting at 650 or below, you need improvement.

The economic downturn has made paying bills on time difficult, but Lewis said one late mortgage payment can be a credit score killer. 

"A late mortgage payment could be 20 to 30 point reduction in your credit score right off the top," said Lewis.

To fix the damage and boost your score, you have to create a history of improvement.

Lewis, who runs credit restoration seminars, offers these fast fixes:

  • Pay your bills on time.  Credit bureaus track trends and cycles.
  • Pay more than the minimum monthly payments.  Even a small amount can make a big difference. Paying more principal and less interest helps.
  • Don’t throw away credit cards, use them.  Even one small purchase for $10 every month, overtime, will boost your score as long as you pay it on time.
  • Mix it up. Revolving credit is not enough. You need a history of installment loans such as a car loan. Even a personal loan helps.

Lewis said taking these steps can offer up results in as few as three months.

If you don't have any credit at all, try this:

  • Get a Secured loan on savings or CDs.  It's a great way to set a history for yourself and boost your score
  • Press credit, rather than debit, on debit purchases.  The more credit transactions you have will affect you positively.  It may not boost your score, but the pattern will impact your ability to get the credit you need that will impact your score.

Also important: check your credit report twice a year through Experian, TransUnion and Equifax. You can fight mistakes and outdated items with a letter and typically the credit bureaus have 30 days to respond.

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