Boost Your Credit Rating in Nine Steps

Physician's Money Digest, September15 2004, Volume 11, Issue 17

Do you know your credit score? Most doctors don't, and it may be costing them big money. Until recently, credit scores were a closely guarded secret. However, all three major credit-reporting bureaus (Trans Union, Equifax, and Experian) now allow physicians to buy their credit scores along with their credit reports for between $10 and $40. Physicians can also obtain a copy of their credit score through Fair Issac's Web site, www.myfico.com, for only $12.95.

Credit Score Importance

Lenders inspect a doctor's credit score when determining whether to approve financing and on what rates and terms. Moreover, more than 90% of US insurance companies now use credit scores to set insurance premium rates and/or deny coverage.

Credit scores, which range from a low of 350 to a high of 850, use your credit history to predict your likelihood of paying on time. The better your credit record, the higher your credit score. Below is the percentage of Americans within each credit score range:

Following is a chart showing how doctors' credit scores can affect the interest costs on a 30-year mortgage of $150,000:

Ways to Raise

Doctors can use the following nine strategies to boost their credit scores for significant savings on interest and insurance costs:

1) Correct credit report errors. The error rate on credit reports is quite high and can prove costly. Doctors who find errors in their credit report or determine that they have been a victim of identity theft should contact the credit bureau that issued the report and request corrections in writing.

2) Remove late payment notices from your credit report. Late payment notices from mortgage companies, credit card merchants, and other vendors can dramatically reduce your credit score. Doctors can attempt to have these late payment notices removed from their credit record, thereby improving their score. One way is to request a "goodwill adjustment." Simply ask the lender that reported the late payment to remove it from your record—pointing out your good payment record, explaining why you paid late, and promising not to do it again.

3) Request limit increases on credit cards and use less than half of the available credit. Doctors' credit scores are decreased if they use more than 50% of their available credit, even if they pay off the balance each month. Accordingly, either increasing the credit limit or reducing the amount used can improve the credit score.

4) Time your payments. Paying off credit card balances just before the issuer sends its monthly report to the credit bureaus will give your score a short-term boost. Determine when the credit card company reports balances to the bureaus and then make sure your payments are made before that time.

5) Reduce the number of credit cards. This will reduce the amount of available credit and improve your credit score. Do away with the most recent accounts first, since keeping the older accounts boosts your credit score.

6) Provide lenders with a copy of your credit report. The more inquiries lenders make into your borrowing history, the lower your score. Providing a copy of your credit report means one less official inquiry that will count against you in the future.

7) Build goodwill from others' credit. Ask a relative or friend with a good credit score to authorize you as a card co-user, thereby raising your score.

8) Shuffle your debt cards. A borrower who makes timely payments on a home, boat, and a few credit cards actually scores better than someone with only multiple credit cards.

9) Stop applying for new credit. This is particularly important if you apply for a mortgage or large loan. If you do, be sure to wait at least a year before applying for a new credit card or smaller loan to preserve or improve your credit score.

Source: The Blair/McGill Advisory (704-424-9780; www.bmhgroup.com)