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How to pad your credit report if you have negative items

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The effects of good credit go well beyond getting approved for a credit card or loan. Potential employers may request your credit report as part of the hiring process. In some states, credit standing impacts insurance premiums. If you’re looking to rent an apartment or if you are self-employed and need to lease office space, you can pretty much expect a credit check to occur.

Even if you make plenty of money it still does not take the place of a bad credit report. Banks, employers, insurance companies and landords don’t care how much money you make if you have a history of failing to pay bills on time.

If the dispute process does not appeal to you there are several ways to overcome bad credit. One way is to pad a negative credit history with a positive one and here is how:

1. Establish a recent history of on-time payments.

Recent information has a greater impact on credit scores than old information. Credit scores are primarily based on the last 2 years of recent information. Even if you’ve been through difficult credit problems, it’s important to establish current, positive credit references that can boost your credit scores over time.

2. Open a credit builder loan at a credit union.

Because installment loans diversify the types of debt you accrue and pay, they can positively impact your credit score if you pay them on time. Types of credit used—what kind of credit accounts you have and how many of each—account for approximately 15 percent of your FICO score. Check out your local credit union to see if they offer “Credit Builder Loans.” Credit builder loans generally range from $500 to $3,000 with repayment terms up to 36 months. Not all credit unions offer these types of loans. The catch here is that you do not actually get the loan proceeds. The credit union makes a loan then freezes the money in an interest-bearing savings account in your name. You then make payments, with interest, until loan is paid off. At the time of payoff you get the money, along with whatever dividends have been earned on the savings deposit. Borrowers have an excellent chance to build a positive credit history if payments are made on time.

3. Show stability on credit reports.

Creditors like to see evidence of stability in your file. Clear up any discrepancies in your name, birth date, social security number, date of birth, current and former residence, and current employer. The only time you may not want all of your personal information on credit reports is when a creditor or collection agency is owed and you think you may be sued or when a creditor already has a judgment. Current employment information may be a green light for a wage garnishment.

4. Add your telephone number to credit reports.

Believe it or not something as simple as a telephone number could make or break a credit application. If you haven’t given the credit bureaus your phone number, a creditor may not be able to verify your identity. A creditor who cannot verify a telephone number may be reluctant to grant credit. But keep in mind once your telephone number is on your credit reports, any debt collector who wants to collect from you will be able to reach you. If you are not yet ready to deal with debt collectors, you may not want to add a telephone number.

5. Request credit bureaus include all positive information.

Often, credit reports don’t include the same accounts on all credit bureaus. Sometimes creditors will only send information to one or two of the major credit bureaus. If one report has credit information missing from others, send a copy of the more complete report to the other credit reporting agencies with a cover letter asking that the missing information be included in your file. Do the same if you’ve worked hard to clean up one report, and now want the others to reflect accurate information as well.

6. Revolving credit can show creditworthiness.

Revolving credit is the easiest way to pad your credit reports. Credit cards, secured and easy approval unsecured cards, credit accounts at retailers like the Gap or Fingerhut and even gas cards like Chevron can help pad your credit reports with positive information. With revolving credit it is important to maintain a low balance and never use your total credit limit. FICO scoring formula seems to favor using 30% or less of your available credit limits. In fact, FICO recently said consumers with the 800 and above scores never use over 7% of their available credit limits.

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