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Understanding credit scoring, repair

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Credit remediation is a subject consumers often face with fear and trepidation, and for good reason.

With the exception of recognizing that the best score wins, the average home shopper knows very little about the whole credit scoring process. Sub-prime borrowers who are eager to move into A-Paper territory often find themselves at a loss when trying to find ways to upgrade their credit history.

The first step in the process is making sure that you have a current copy of your credit report. Congress recently amended the Fair Credit Reporting Act so that consumers may now receive one free credit report annually.

There are three major credit bureaus: Equifax, Experian and Transunion. Since entries can vary across bureaus, you'll want to request a free report from all three. Go to www.annualcreditreport.com.

Most A-Paper scores generally begin around 680, although this number may differ slightly among lenders. Increasing your score just 5 points can save a significant amount of money. For example, if your score is 698 and you increase it to 703, then you could save yourself thousands of dollars over time as a result of a slight improvement to your loan's interest rate.

Even if you have stellar credit, you can enhance your score through these steps.

* Evenly distribute your credit card debt to change the ratio of debt to available credit. If you have debt on only one card, and four additional credit cards with zero balances, evenly distributing the debt of the first card could move you closer, and possibly into, that ideal bracket.

* Keep your existing accounts open and active. The average consumer is usually anxious to close credit card accounts that have zero balances, but doing this can cause them to lose the benefits of a long-term credit history and increase their ratio of debt-to-available credit.

* Keep credit inquiries to a minimum. Each inquiry into your credit history can impact your score anywhere from 2 to 50 points. When it comes to mortgage and auto loans, even though you're only looking for one loan, multiple lenders may request your credit report. To compensate for this, the score counts multiple auto or mortgage inquiries in any 14-day period as just one inquiry, so try and stay within that time frame.

Improving credit scores requires time and diligent effort on your part, so it's a good idea to get the ball rolling at least three to six months prior to submitting your application for home financing.

If credit repair is what you need, you can either begin the process yourself or seek out a repair service. Diligently research and educate yourself on credit laws and consumer rights to ensure that you don't sustain any self-inflicted wounds. A good place to start would be the Federal Trade Commission's Web site, www.ftc.gov.

If you're facing severe or complicated credit issues, you'll probably want to enlist the assistance of a professional credit repair company. Before you do, be sure to familiarize yourself with the FTC's regulations on credit repair. Also, examine the FTC's information on fraudulent practices to avoid falling prey to credit repair scams.

If you would like to obtain a free Consumer Credit Scoring Booklet, call Sergio Haros toll free at (877) 270-3377. For more information, visit www.gwhomeloans.com.

Submitted by Sergio Haros, president of Great Western Mortgage

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