Know Your Credit Score

Tip! The key to finding a lender, who specializes in low credit score refinance loans is to do your research. The power of the internet cannot be underestimated, when it comes to shopping for a poor credit refinance lender.

The most important part of qualifying for a mortgage isn't how much of a down payment you can make, it's how good your credit score is. The better your credit, the more easily you can secure a mortgage loan, even without a fat bank account or a high-paying job. The first and most important action you should take is to get your credit report from each of the three major credit bureaus, Experian, Equifax, and TransUnion. You have to get all three reports because the companies and utilities that extend you credit don't report to all three bureaus. The result is that each consumer has three credit reports with three different sets of information. You can access the reports for free at least once a year. If you find errors and report them (see below for details), you can get a revised report for free.

Your credit score is based on the information in the credit report. In the simplest terms, the score indicates how likely you will be to pay back a loan in full and on time. According to Steven Burman, president of Credit Advocates and an expert credit counselor, it reflects your credit history, how much debt you currently carry (called outstanding debt), how much debt you're already approved to carry in the future (add up the credit limits on your credit cards for the answer), how long your credit history is, and how timely you are in paying bills. The higher the number, the better your credit is, ranging from a low of 300 to a perfect score of 850. Do everything you can to improve your score -- it's even more important than saving money, in my opinion! Why? Because the higher your score, the better the interest rate you will get. If you have a very high score, you may even be able to buy a house with no money down.

Tip! Compare the debt consolidation loan programs that each lender can offer. If you have a very poor, low credit score like 450, 480 or 500 - your loan will be a subprime debt consolidation loan.

Improve Your Credit Rating Steve says that you have to take personal responsibility for your credit, and I agree. The first time many people see their credit reports is when they are about to purchase a home or a car. Because it can take about 3 months (and sometimes much longer) to change a credit score, if the score is wrong or low at that time, it could be too late to fix it. You could lose that fabulous apartment! Don't let that happen -- start changing your score today. Here are six proven ways to improve your score:

1. Check and correct your credit history Thirty-five percent of your score comes from your credit history, according to Steve. Unfortunately, 70 percent of credit reports contain errors -- mistakes that can adversely impact your score! Mistakes range from the misspelling of names, to reporting wrong addresses or places of employment, to confusing the accounts of people with the same name, to including outdated information. You can and should report errors to each of the credit bureaus since they do not share information. You can file disputes by phone or by mail, but you may find that it is most convenient to dispute errors online. Once the credit bureaus receive a dispute, they have 30 days to investigate. If they cannot verify the information in that time, it is deleted or corrected by default. Once you dispute information, the onus is on them to prove it. If your payment was late once or twice and the creditor reported it to the credit bureau, you can ask the retailer or credit card company to issue a letter of correction. For example, many retail stores would prefer to keep your business by issuing a correction than lose it by refusing to. Always follow up on promised corrections by rechecking your credit report. If some of the accounts on your report are old and closed, tell the credit bureau that you don't recognize them. They will investigate, find that you are not a customer, and remove them. It's best if your credit report lists only active accounts. Even when some of the accounts are closed, having dozens of them may make lenders assume that you are not a stable credit risk.

Tip! Closing unused accounts is a negative strategy to raising one's credit score. Factually, fewer open accounts with the same amount of debt ultimately reduces a credit score.

2. Pay down high balances The amounts you owe on revolving credit accounts are responsible for 30 percent of your score. Steve says the fastest way to improve your credit rating is to pay down balances. After he advised one client to use all of his available cash to pay down his credit card bills, the client's credit score went up by 100 points. Keep revolving credit accounts under 30 percent of the available limit. For example, if your credit card limit is $10,000, keep the balance under $3,000. High balances adversely affect credit ratings. Plus, credit card debt is expensive to carry. Some cards charge up to 24 percent interest on unpaid balances. Are the designer jeans and fur jacket really worth that? Pay off your credit cards! You can also negotiate with your credit card company to reduce or eliminate interest charges and sometimes even reduce what you owe.

Tip! Try to keep your credit balances as low as possible. You can also ask the lender to increase your credit limit which can increase your credit score.

3. Make history with your credit It's good to have some activity and history on the account. "Many people think closing accounts will make their credit look better, but it depends," says Steve. "Look at the accounts you are closing and keep the oldest one. Length of credit history counts for 15 percent of your total score."

Increase Your Credit Score -fast! Save Thousands By Correcting Your Credit Yourself. Easy Step-by-step Instructions.

4. Think twice about new credit When you open a new credit card account, the creditor makes an inquiry to one of the credit bureaus to evaluate your history. The number of recently opened accounts and credit inquiries accounts for 10 percent of your score. (Note that checking your own credit report doesn't count as an inquiry, however.) "If you start applying for loans at an auto dealership or a bank and each one does an inquiry, it's a negative," says Steve. When a store sends you a sales pitch saying you're preapproved for credit, resist the temptation to fill out the application form. One credit card is all you really need. At any rate, closing an account doesn't mean it automatically disappears from your credit report. You have to ask them to remove it. Better yet . . .

Tip! Any new credit: How much credit have you recently applied for and been granted. They will also look at how many enquiries have been made concerning your credit score.

5. Pay with cash Using debit cards and cash are good ways to control your debt (and therefore maintain a great credit score).

6. Pay all your bills on time Late payments can have a substantial negative impact on your score. For example, you can raise your score by as much as 20 points simply by paying bills on time for 1 month!

For more information on improving your credit rating, visit the Federal Trade Commission's credit repair page at www.ftc.gov/bcp/conline/pubs/credit/repair.htm. To dispute information in a credit report, here is how to contact the credit bureaus:

Equifax Information Services, LLC Disclosure Department PO Box 740241 Atlanta, GA 30374 800-685-1111 www.equifax.com

Experian 475 Anton Boulevard Costa Mesa, CA 92626 or 955 American Lane Schaumburg, IL 60173 888-397-3742 www.experian.com

Annual Credit Report Request Service PO Box 105281 Atlanta, GA 30348-5281 877-322-8228 www.annualcreditreport.com

Annualcreditreport.com is the official site that helps consumers obtain the free credit reports they are entitled to annually, as required by law.

Reprinted from: Invest in Your Nest: Add Style, Comfort, and Value to Your Home by Barbara Kavovit © 2006 Rodale Inc. Permission granted by Rodale, Inc., Emmaus, PA 18098. Available wherever books are sold or directly from the publisher by calling (800) 848-4735 or visit their website at www.rodalestore.com.

Tip! If you have paid off all your debt, and your credit score seems to be at a stand still, you might want to make small purchases each month with your credit card and pay them off immediately. Often times the credit bureaus like to see at least some kind of activity.

Barbara K is CEO of barbara k!, a comprehensive lifestyle brand that offers solutions for women through innovative home enhancement/repair and automotive products. She is also the home improvement expert for AOL Coaches and author of the inspirational fix-it handbook Room for Improvement. Barbara has been featured in the New York Times, USA Today, Real Simple, and O, The Oprah Magazine, among others, and has appeared on numerous television and radio programs, including Today and Good Morning America. She lives in New York City with her son, Zachary. For Barbara K's products, visit http://www.barbarak.com

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Know Your Credit Score