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Improving Your Credit Score

If you are trying to establish or re-establish credit history, the following tips will help you:

• Re-establish your credit history if you have had problems. Opening new accounts responsibly and paying them off on time will raise your score in the long term.

• Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix. It probably won’t raise your score.

• Manage credit cards responsibly. In general, credit cards and installment loans (and making timely payments) will raise your score. Someone with no credit cards tends to be higher risk than someone who has managed credit cards responsibly.

• Be aware that closing an account doesn’t make it go away. A closed account will still show up on your credit report, and it may be included in your score. Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information. Your social security number, date of birth and employment information are used to identify you. These factors are not used in scoring. Updates to this information come from information you supply to lenders.

If you have accounts on which you carry a balance, the following tips will assist you:

• Keep balances low on credit cards and other revolving credit accounts. High outstanding debt can affect your score.

• Pay off debt rather than move it around. The most effective way to improve your score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.

• Don’t close unused credit cards as a short-term strategy to raise your score.

• Don’t open new credit card accounts that you don’t need just to increase your available credit. This approach could backfire and actually lower your score.

• If you have been managing credit for only a short time, don’t open several new accounts too quickly. New accounts will lower your average account age. This will adversely affect your score, particularly if your file contains limited credit information. Additionally, rapid account buildup can look risky, especially if you are a new credit user.

The following are tips that will help you maintain a good credit history:

• Pay your bills on time. Delinquent payments and collections will have a negative impact on your score.

• If you have missed payments, get current and stay current. The longer and more consistently you pay your bills on time, the higher your score will be.

• Be aware that paying off a collection account will not remove it from your credit report. Your history will stay on your report for seven years. However, most lenders require that collection accounts be paid in order to proceed with your mortgage approval process.

• If you are having trouble making ends meet, contact your creditors or see a legitimate non-profit credit counselor. This will not improve your score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time. A list of housing counseling agencies that MFA partners with is on the menu bar to the left.

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