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My FICO score is less than perfect * what can I do?

In my first lesson, *Free Credit Report * Why You Need One!*, we discussed why your FICO (Fair, Isaac; named for the company that created it) score is so important to your credit rating. This number indicates to your lender how trustworthy you are to re-pay your loan and directly translates into how much interest you will be charged on your next loan. FICO scores can vary from 300 to 850. It's very credit savvy for you to pay the $10 fee to any of the 3 major credit bureaus and receive your FICO score.

After you have received your free credit report,, go over it very carefully and check for any inaccuracies.

* Verify your full name, address and Social Security Number

* Review your list of reported credit cards. Look for any credit cards listed that you have never applied for and any cards that you no longer use

* Verify your car loan outstanding balance

* Verify your mortgage loan outstanding balance

* View your payment history to see if any of your creditors have inaccurately reported any late or missing payments

If you find any errors, this is the time to take action! Phone, email or write to the 3 credit bureaus mentioned in my first lesson (link listed above). After you have reported the problem, the credit bureau will open an investigation and contact your credit card company, bank or other lender. This agency will then check its records to verify the accuracy of your claim. In 30 days you will be told the outcome of your claim. This item will then either be corrected on your credit report or will stay the same if your claim is not upheld. If your claim is not upheld, you can still write a letter to the credit bureau telling your side of the story and ask to have this added to your credit report. After 2 weeks, go back and review your credit report to make sure that the changes have actually been made.

If a new credit card shows up on your credit report that you have never applied for, you may be the victim of identity theft. Contact the fraud department at one of the three credit bureaus immediately! Request a fraud alert to be placed on your credit cards. Doing this makes sure that you will be notified if anyone tries to apply for a new credit card in your name, change your address or make other changes to your current credit cards.

OK, what else can I do to improve my FICO score and clean up my credit report?

First, realize that improving your score and credit rating isn*t going to happen overnight. Bankruptcies will stay on your credit record for 10 years. Other judgments, such as liens, will stay on your record for 7 years. There's no getting around either of those problems. But there is something important that you can do while you*re waiting for a bankruptcy or lien or be removed from your record. The number one, most important thing you can do is pay your bills on time. You may be thinking, *That's it? No magic?* It may be hard to believe, but paying your bills on time can significantly raise your FICO score in only 3 or 4 years to qualify for a much improved interest rate on any loan you apply for. You can*t go back and make up for missed payments in the past, but you can make sure that it doesn*t happen again! More good news * your recent *good* credit history carries more weight than your distant *blemished* past.

Paying down your debt balance always helps to improve your score but be smart about how you pay off your credit debt. Prepaying on your installment car loan probably won*t help you much, but making headway on paying off your expensive credit card debt will help significantly. It's a red flag to credit bureaus if your credit card debt load is approaching your maximum limit. One trick to stay far, far away from your credit card maximum limit, is to ask your credit card company to raise your limit. This trick only works if you don*t use this extra lee way to make additional purchases!

Two final simple, yet amazing tips to help improve your score.

1. If you have credit cards that you no longer use * cancel them!

2. Avoid applying for any additional credit cards. Every time you apply for a new credit card, your lender will make an *inquiry* into your credit history. Too many inquiries will negatively impact your credit report. The fewer, the older credit cards you have, the better!