No Nonsense Guide to

Improving Your Credit
Understand the basics and learn how to improve your credit score.
Improving or rebuilding credit is an important step toward giving yourself a better financial life. When you improve credit (whether from good to excellent or from poor to good credit), you may find it easier to get a home loan or other financing. Plus, you may qualify for lower interest rates and lower mortgage payments. If you have less-than-perfect credit, you’ll be happy to know that it’s not as difficult as you might think to repair bad credit. We’ll help you understand the basics and share ways to improve credit scores.


What factors can improve credit?
Liabilities are debts, including home loans, equity home loans, credit card balances, car loans, student loans and so on. The amount you owe isn’t so important on its own, but lenders are very interested in how your debts compare to your income, as discussed below under “Debt-toIncome Ratio.”

Other Financial Information

Lenders also look to see if you have any situations that could make it hard for you to make your loan payments, such as lawsuits, collection activity, recent bankruptcy or property foreclosure, obligation to pay alimony or child support, or being a co-signer on another loan.

Payment History
The goal of improving your credit score, rebuilding credit or maintaining good credit is to give lenders, such as your bank or your home loan company, confidence that you will make your loan payments on time and will pay back what you borrow. To decide whether or not you are a good credit risk, lenders usually look at the seven factors below. By working on these key points in your life, you can start down the path to better credit or bad credit repair.

Your credit score can be hurt if you pay late just once by 30 days or more, whether it’s on a home loan, a credit card, a car loan or other bills. Starting now to pay your bills on time is a great way to maintain or rebuild your credit.

Credit Reports

Lenders will look at your credit reports, which are created by the three national Credit Reporting Agencies (CRAs): Equifax, Experian and TransUnion. These reports include details on your credit accounts and information on your payment history.


Lenders want you to have a steady income every month from earnings, commissions, investments, rental payments and other sources, such as government benefits or alimony. They also look for a stable work history, which generally means that you have been working steadily for the past two years.

Debt-to-Income Ratio

Lenders compare your monthly debt expenses to your monthly income to get this number. For example, if your gross monthly income is $3,500 and your total monthly debt payments total $1,000 then your debt-to-income ratio would be 29% (1,000 ÷ 3,500 x 100). In general, lowering your debt-to-income ratio can help improve your credit score and help you qualify for a home loan with better terms.


Assets are things you own that have value. Lenders want you to have assets that are “liquid,” or easy to turn into cash. This includes savings, investments, retirement funds and cars.


Do you need help improving
Nine warning signs of less-than-perfect credit.
Rebuilding credit begins with recognizing that you’re in trouble. If six or more of the warning signs below are true in your life, then you may want to start working on improving your credit. • You only pay the minimum amount due on your credit cards each month • You make late payments or sometimes can’t make a payment • You add more to your credit card balances than you pay each month • You rarely if ever see your credit card balances go down • You don’t know how much you owe, total, between your credit cards and other loans • You apply for new cards but are at or near your credit limit on existing cards • You pay for necessities such as groceries, gas or insurance with credit cards or cash advances instead of cash • You tap your savings to pay your credit card bills and other debt – or you have no savings. • You feel anxious or stressed when using your credit cards.

or rebuilding credit?

When you have less-than-perfect credit, lenders feel less confident that you will pay back the money you borrow. They offset a potential loss by charging a higher interest rate.

Improve Your Credit and Enjoy the Benefits

When you have good credit, you may find it easier to qualify for loans and lower interest rates, since lenders will consider you a lower risk. Lenders gain confidence when you have a:
• • • • Steady income High credit score Good credit history Relatively few debts

Lenders may also consider you to have lessthan-perfect credit if…
• Your income varies significantly from month to month • You’ve had credit problems in the past • You owe a lot of money compared to your income

So take heart: There are ways to improve your credit, making you more likely to qualify for loans with lower interest rates. See the tips to improve your credit on the next page and get on the road to bad credit repair.


Tips to Improve Credit Scores
Learn how to improve or rebuild your credit and get on track to lower interest rates and a lower mortgage payment.
Less-than-perfect credit lowers your credit score, which usually means your FICO® score, a rating system developed by Fair Isaac Corp. Lenders, including home loan companies, look at your credit score when deciding whether or not to lend you money — and how much interest to charge. When you repair bad credit and/or raise your credit score, lenders are more willing to let you borrow money and are more likely to charge a lower interest rate.

Rebuilding Credit: Check Your Reports

Rebuilding Credit: First Steps
To raise your credit score, start with these steps:
1. Always pay your bills on time 2. Work to pay off debt, don’t simply move it from one credit card to another 3. Keep balances low on all of your credit cards and other credit accounts, but don’t stop using them altogether. Ironically, having no balance on your cards doesn’t help improve credit — creditors want to see how well you manage using and paying off your credit cards. To improve credit, try to pay off at least what you spend each month. 4. Close credit accounts you don’t need. Only apply for and open new accounts when you really need them.

Checking your credit reports from the three CRAs can help you see why you may have less-than-perfect credit. You can find out how many credit accounts you have open, what your balances are and if you have any negative marks, such as late payments. If you see any errors, contact the credit bureau immediately to have them corrected. This could help improve your credit score. You can request a free copy of your credit report once every 12 months by doing one of the following:
• Visit Annual Credit Report • Call 877-322-8228 • Order a report by mail. You can download an order form at Annual Credit Report • Contact the individual CRAs: Equifax Experian TransUnion

Rebuilding Credit: Moving forward

Tracking your spending is one habit that will help you keep your credit and your overall finances in good shape going forward. Start by setting spending goals.


Write down a budget with your monthly income and expenses, from biggies like your home loan to little things like your morning frappucino. Every day, record what you’ve spent so you can see when you’ve reached your budget limit.

Bad Credit Repair Scams

Improving or Rebuilding Credit: Get a Helping Hand
There are several trustworthy, free or low-cost resources that can help you improve your credit. Here are some reputable organizations:
Federal Trade Commission 877-FTC-HELP (877-382-4357) CRC-240, Washington, DC 20580 Amerix Corporation 800-833-8628 8930 Standford Blvd., Columbia, MD 21045 National Foundation for Consumer Credit 800-388-2227 8611 Second Ave., Suite 100, Silver Spring, MD 20910 Experian 888-397-3742 Attn: Consumer Affairs, P.O. Box 9600, Allen, TX 75013 Equifax 800-685-1111 Attn: Consumer Affairs, P.O. Box 740241, Atlanta, GA 30374-0241 TransUnion 800-888-4213 Attn: consumer Disclosure Center, P.O. Box 1000, Springfield, PA 19022

Avoid companies that require a fee to help you repair bad credit. Many of these companies will cost you a great deal of money, could involve you in fraud and could leave your less-thanperfect credit in worse shape than before. Here are some signs that indicate a company may be running a bad credit repair scam:
• They ask you to pay up front • They don’t explain how you can help yourself improve credit for free • They say you should not contact a CRA yourself • They suggest that you create a new credit identity using an Employee Identification Number (EIN) or Individual Taxpayer Identification Number (ITIN) instead of your Social Security number. This is illegal.

It takes time to rebuild credit, and there are no shortcuts. But when you take smart steps to repair bad credit history and practice smart money management, you can eventually enjoy the benefits of good credit, such as lower rates and lower mortgage payments. The FTC Web site has additional information about credit counseling (

Improving or Rebuilding Credit: Know Your Score
One step toward improving or rebuilding credit is actually knowing your credit score. Scores range from 300 to 850. A score of 600 or less usually indicates less-than-perfect credit and signals that you should work to improve your credit.

Your FICO score is based on information collected from the CRAs: Equifax, Experian and TransUnion. Some lenders use one of these three scores, while other lenders may use the middle score. That’s one reason you should review all three credit reports for errors each year.


Less-than-perfect credit?
Your credit report can show you where you are today and help you identify steps to improve your credit score.
To decide whether you have good or less-than-perfect credit, lenders review your credit report and evaluate your:
• Credit Character – How responsible you are with credit obligations. For instance, do you make your home loan payments on time every month? • Credit Capacity – Your ability to take on a certain amount of debt, such as a home loan, without overextending yourself • Credit Capital – The financial assets you have to pay off debts

Keep tabs on your report

Understand credit reports to help monitor and rebuild your credit.

As you read your credit report and work to improve your credit, keep these important points in mind:
1. Your payment history includes current, open accounts as well as paid-off or closed accounts. 2. Bad credit repair doesn’t happen over night. Negative credit information can have an impact for years. Paying in full doesn’t necessarily remove a particular entry. 3. The good news about rebuilding credit, though, is that positive information, like timely home loan payments, usually stays on your report as long it’s being reported to the CRAs. 4. Credit and collection accounts remain for seven years from the date of the last entry. 5. Court records (such as tax liens or other monetary judgments) stay on your report for seven years from the date filed. Check with the CRA for exceptions, such as Chapter 7 and 11 bankruptcies, which remain for 10 years, even if dismissed or discharged.

6. The balance reported on each account listed should be the balance as it was on the date the lender reported this information to the CRA. 7. If you start an investigation that leads to favorable changes or deletions to your credit report, you can ask that an updated report be sent to any lender who received the older version during the past six months and to any company that received your report in the last two years for employment purposes. 8. When a lender checks your credit report (called an “inquiry”), it could have a negative impact on your credit score. Having too many inquiries can make it look like you are trying to open multiple credit accounts and are possibly taking on too much debt. However, while shopping for a home loan, you may give multiple lenders permission to pull your credit report. As long as these inquiries are made within a 45-day period, they will only count as one inquiry. When a company reviews your credit report to see if they can make you a “pre-approved” or “prequalified” offer, this does not count as an inquiry.


Monitor your reports as you improve your credit.
As you work to improve your credit, you may want to check your credit report more than once a year. That way, you can make sure information stays current and correct, which not only helps keep your credit score high but helps keep your financial identity secure, too.

After receiving your one free report every 12 months from each CRA, you’ll pay a fee for any additional reports requested — unless you’ve been turned down for credit (such as a home loan) within the past 60 days. To help you, each CRA has a monitoring program that will alert you to major changes in your report, for a monthly fee. You can also request your credit score for a fee set by each reporting agency.

Dispute errors to raise your credit score.

Mistakes can pop up in your credit report. Correcting them is an important part of rebuilding your credit. To challenge and correct these errors, and improve your credit rating, first obtain your credit reports by one of the methods listed above. Closely read each report, including personal information such as your name, address and Social Security number. If you find errors, you can correct them either online or by mail to help improve your credit rating.

Dispute an Error Online

If you order your credit report online at Annual Credit Report ( or from one of the CRAs, you can correct the report by following the instructions to file an online dispute.

4. Make a copy of your credit report, circle the entry that is in error and attach your dispute letter and any additional information you are sending. 5. Send your letter by certified mail and ask for a return receipt to be sure it arrives. When the CRA receives your letter, they will ask the creditor in question for an explanation. The creditor has 30 days to respond. If the information you are questioning is wrong or cannot be verified within 30 days, the item will be deleted from your report, which can help to improve your credit. If the information is later found to be correct, it will be put back on your report.

Dispute an Error by Mail

If you order your credit report by mail, then you must write a Dispute Letter to have errors corrected and help repair bad credit history. Here’s what to do: 1. Include your personal information, such as your Social Security number and date of birth. 2. Be specific about which item is wrong and why. For instance, if a credit card account is shown with a zero balance but the status should be closed, say so. 3. Make a copy of your dispute letter and any additional information you are sending, such as a statement from the creditor supporting your claim. Keep these copies for your records.


Dispute an Inquiry

When you apply for credit, such as a home loan, you usually give lenders permission to review your credit files. Creditors with whom you have open accounts also usually can review your credit report. If lenders/creditors make too many inquiries, this may impact your credit history. If you think an inquiry is incorrect or happened without your permission, you can dispute it to help improve your credit.

Rebuilding Credit Can Mean Lower Rates

There are two main reasons you should improve or repair bad credit. First, rebuilding credit makes it easier to get loans of all kinds, since lenders are more likely to see you as a good risk. For the same reason, when you improve your credit, you may qualify for lower rates on many types of credit accounts, including your home loan. And that can save you hundreds, even thousands of dollars on interest charges over the long term.

• Write a dispute letter to the CRA • Include a copy of the credit report. Circle the inquiry you are questioning and write “unauthorized” by it • You can also call or write the business or person who made the inquiry to let them know you have written to the CRA

Taking these steps can be an important part of your plan to improve or repair bad credit.

Add Positive Information to Improve Your Credit

Another way to improve or rebuild your credit history is to add positive details to your report. For instance, if you notice that an account you have in good standing is not on your report, you can request that the CRAs add it. Just realize that not all CRAs will add information that doesn’t come from their subscribers (lenders and creditors).


How Countrywide’s Full Spectrum Lending® Can Help You
When you’re looking for ways to improve credit, you need someone you can count on. That’s Countrywide’s Full Spectrum Lending.
Rebuilding credit isn’t always easy. At Full Spectrum Lending, a division of Countrywide Home Loans, we applaud you for taking the first steps to raise your credit score. If you’re not familiar with us, please take a moment to read on and see why we can be a reliable resource as you work to improve your credit.

On the Way to Bad Credit Repair
Less-than-perfect credit?
Nobody is perfect, and having less-than-perfect credit shouldn’t stop you from being approved for a home loan. At Full Spectrum Lending, we specialize in mortgages for people who don’t necessarily have perfect credit, and we’re proud to say that 4 out of 5 applicants are approved!‡ So whether you need more flexibility due to self-employment, high consumer debt or a less-than-perfect credit history, the Full Spectrum Lending experts can help you find the right home loan solution for your needs.

We’re experts in less-than-perfect credit.

Most lenders focus on the flaws in your credit history. We focus on your needs and work with you to find a home loan that’s right for your unique situation. We understand that bad credit is temporary, and our specially trained consultants are ready to help you on the road to bad credit repair with a debt consolidation loan, cash-out refinance or first home loan that suits your individual needs.

Home loans tailored to your needs, not ours.

At Full Spectrum Lending, it’s not about us. It’s about you and how we can help you meet your needs today and tomorrow. Our home loan consultants will talk with you one-on-one to learn your story and help find a solution that addresses your needs, whether you need a cash out refinance to cover unexpected expenses, need to consolidate debt into a single, convenient monthly payment, need to lower your monthly expenses or need a new home loan.

Call Countrywide Home Loans Today!



Resources to help you monitor your credit.

Countrywide is proud to team up with Experian® to offer you discounted prices on important credit and identity protection products, including: 3 Bureau Credit Report Get one easy-to-compare report that includes information from all three national CRAs, plus your Experian credit score. Visit the Countrywide Credit Center. Countrywide CreditGuard™ Member Center When you become a Countrywide CreditGuard member your benefits include: one 3 Bureau Credit Report and Experian credit score; daily monitoring of your Experian credit file, plus e-mail alerts; unlimited access to your Experian credit report and credit score; access to fraud resolution representatives. Remember, you can request a free copy of your credit report once every 12 months by doing one of the following:
• Visit Annual Credit Report • Call 877-322-8228 • Order a report by mail. You can download an order form at Annual Credit Report • Contact the individual CRAs: Equifax Experian TransUnion

We’re a home loan lender you can trust.

Full Spectrum Lending is a division of Countrywide Home Loans, member of the Countrywide family, America’s #1 Home Loan Lender.^ That means you have the expertise, resources and technology of the nation’s largest independent residential mortgage lender working for you. And it means you have a wide range of home loan options to meet your needs, including the Credit Repair mortgage and the Credit Comeback LoanSM — both specially designed to help you improve your credit situation. Pair that with home loan consultants who are experts in finding mortgages for people with not so perfect credit, and you have a lender you can count on as you work to rebuild your credit and regain a sound financial future.
‡ Based on the number of applications submitted and approved. ^ As ranked for 2005 by Inside Mortgage Finance (Jan. 27, 2006). © 2006

Countrywide Bank, FSB and Countrywide Home Loans, Inc. are Equal Housing Lenders. © 2007 Countrywide Financial Corp. Trade/servicemarks are the property of Countrywide Financial Corporation and/or its subsidiaries. All rights reserved. Full Spectrum® Lending is a division of Countrywide Home Loans, Inc. Countrywide Home Loans, Inc., 4500 Park Granada, Calabasas, CA 91302: Arizona Mortgage Banker License Number BK8805; Licensed by the Department of Corporations under the California Residential Mortgage Lending Act; Georgia Reg. #5929; Illinois Residential Mortgage Licensee (# 0139) by the Office of Banks and Real Estate, Mortgage Banking Division, 310 South Michigan Avenue, Suite 2130, Chicago, IL 60604, (312) 793-1409; Massachusetts Mortgage Lender License No. ML 1623; Licensed by the New Hampshire Banking Department; New Jersey (818) 313-6526, Licensed Mortgage Banker, NJ Department of Banking and Insurance; Licensed Mortgage Banker, NYS Banking Department; Registered with the Pennsylvania Banking Department; Rhode Island Lender’s License. Countrywide Bank, FSB, 1199 N. Fairfax St., Suite 500, Alexandria, VA 22314: Minnesota loans will be made by Countrywide Bank, FSB through its home loan financial centers. This is not an offer to enter into an interest rate lock-in agreement under Minnesota law. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply.

Make the most of homeownership! Learn about your home loan choices, the benefits of equity home financing and how rebuilding credit can lower interest rates and mortgage payments. Call Countrywide’s friendly, knowledgeable consultants today at 1-888-265-3662 for a no-cost, no-obligation discussion.