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.

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What factors can improve credit?
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.
Income
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.
Assets
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.
Liabilities
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-to-
Income 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
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.
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.
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Do you need help improving
or rebuilding credit?
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.

• Y ou only pay the minimum amount due on

your credit cards each month
• Y ou make late payments or sometimes can’t
make a payment
• Y ou add more to your credit card balances
than you pay each month
• Y ou rarely if ever see your credit card balances
go down
When you have less-than-perfect credit, lenders feel less
• Y ou don’t know how much you owe, total, confident that you will pay back the money you borrow.
between your credit cards and other loans They offset a potential loss by charging a higher
• Y ou apply for new cards but are at or near interest rate.
your credit limit on existing cards
• Y ou pay for necessities such as groceries, gas Improve Your Credit and Enjoy the Benefits
or insurance with credit cards or cash advances When you have good credit, you may find it easier to qualify
instead of cash for loans and lower interest rates, since lenders will consider
you a lower risk. Lenders gain confidence when you have a:
• Y ou tap your savings to pay your credit card
bills and other debt – or you have no savings.
• Steady income
• Y ou feel anxious or stressed when using your
• High credit score
credit cards.
• Good credit history
• Relatively few debts
Lenders may also consider you to have less-
than-perfect credit if…
So take heart: There are ways to improve your credit, making
you more likely to qualify for loans with lower interest rates.
• Y our income varies significantly from month See the tips to improve your credit on the next page and get
to month
on the road to bad credit repair.
• You’ve had credit problems in the past
• You owe a lot of money compared to
your income

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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 www.myfico.com, 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: 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 pay-
ing 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.
Rebuilding Credit: Check Your Reports
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:
• V isit Annual Credit Report
www.annualcreditreport.com
• Call 877-322-8228
• Order a report by mail. You can download an
order form at Annual Credit Report
www.annualcreditreport.com
• Contact the individual CRAs:
Equifax www.equifax.com
Experian www.experian.com
TransUnion www.transunion.com
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.
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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.
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:
Bad Credit Repair Scams
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-than-
perfect credit in worse shape than before.
Here are some signs that indicate a company may be running
a bad credit repair scam:

Federal Trade Commission • They ask you to pay up front

www.ftc.gov/bcp/conline/edcams/credit/index.html • They don’t explain how you can help yourself
improve credit for free
877-FTC-HELP (877-382-4357)
CRC-240, Washington, DC 20580 • They say you should not contact a CRA yourself
• They suggest that you create a new credit
Amerix Corporation identity using an Employee Identification
www.amerix.com/customers/home.aspx Number (EIN) or Individual Taxpayer Identifica-
800-833-8628 tion Number (ITIN) instead of your Social
8930 Standford Blvd., Columbia, MD 21045 Security number. This is illegal.

National Foundation for Consumer Credit

www.nfcc.org
It takes time to rebuild credit, and there are no shortcuts. But
800-388-2227
when you take smart steps to repair bad credit history and
8611 Second Ave., Suite 100, Silver Spring, MD 20910
practice smart money management, you can eventually enjoy
Experian the benefits of good credit, such as lower rates and lower
www.experian.com mortgage payments.
888-397-3742
Attn: Consumer Affairs, P.O. Box 9600, Allen, TX 75013 The FTC Web site has additional information about credit
Equifax counseling (http://www.ftc.gov/bcp/edu/pubs/consumer/cred-
www.equifax.com it/cre41.htm)
800-685-1111
Attn: Consumer Affairs, Improving or Rebuilding Credit: Know Your Score
P.O. Box 740241, Atlanta, GA 30374-0241 One step toward improving or rebuilding credit is actually
knowing your credit score. Scores range from 300 to 850.
TransUnion
A score of 600 or less usually indicates less-than-perfect
www.transunion.com
credit and signals that you should work to improve
800-888-4213
your credit.
Attn: consumer Disclosure Center,
P.O. Box 1000, Springfield, PA 19022
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.

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Less-than-perfect credit?
Keep tabs on your report
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:
6. T he balance reported on each account listed
should be the balance as it was on the date the
• C redit Character – How responsible you are with
lender reported this information to the CRA.
credit obligations. For instance, do you make your
home loan payments on time every month? 7. If you start an investigation that leads to
favorable changes or deletions to your credit
• Credit Capacity – Your ability to take on a certain
report, you can ask that an updated report be
amount of debt, such as a home loan, without
sent to any lender who received the older version
overextending yourself
during the past six months and to any company
• Credit Capital – The financial assets you have to that received your report in the last two years for
pay off debts 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
Understand credit reports to help monitor make it look like you are trying to open multiple
and rebuild your credit. credit accounts and are possibly taking on too
As you read your credit report and work to improve your much debt. However, while shopping for a home
loan, you may give multiple lenders permission to
credit, keep these important points in mind: pull your credit report. As long as these inquiries
are made within a 45-day period, they will only
1. Y our payment history includes current, open count as one inquiry. When a company reviews
accounts as well as paid-off or closed accounts. your credit report to see if they can make you a
2. Bad credit repair doesn’t happen over night. “pre-approved” or “prequalified” offer, this does
Negative credit information can have an impact not count as an inquiry.
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. -5-
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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 4. Make a copy of your credit report, circle the entry that is
If you order your credit report online at Annual Credit Report in error and attach your dispute letter and any additional
(www.annualcreditreport.com) or from one of the CRAs, you information you are sending.
can correct the report by following the instructions to file an
5. Send your letter by certified mail and ask for a return
online dispute.
receipt to be sure it arrives.
Dispute an Error by Mail When the CRA receives your letter, they will ask the creditor in
If you order your credit report by mail, then you must write
question for an explanation. The creditor has 30 days to respond.
a Dispute Letter to have errors corrected and help repair bad
If the information you are questioning is wrong or cannot be
credit history. Here’s what to do:
verified within 30 days, the item will be deleted from your
1. Include your personal information, such as your Social report, which can help to improve your credit. If the information
Security number and date of birth. is later found to be correct, it will be put back on your report.
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.

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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).

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How Countrywide’s Full Spectrum
Lending® Can Help You
On the Way to Bad Credit Repair
When you’re looking for ways to im-
prove 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.
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!
1-888-265-3662
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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.
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.

Remember, you can request a free copy of your credit ^ As ranked for 2005 by Inside Mortgage Finance (Jan. 27, 2006). © 2006
report once every 12 months by doing one of
the following:

• V isit Annual Credit Report

www.annualcreditreport.com
• Call 877-322-8228
• Order a report by mail. You can download an
order form at Annual Credit Report
www.annualcreditreport.com
• Contact the individual CRAs:
Equifax www.equifax.com
Experian www.experian.com
TransUnion www.transunion.com

Countrywide Bank, FSB and Countrywide Home Loans, Inc. are Equal Make the most of homeownership!
Housing Lenders. © 2007 Countrywide Financial Corp. Trade/servicemarks are
the property of Countrywide Financial Corporation and/or its subsidiaries. All
Learn about your home loan choices,
rights reserved. Full Spectrum® Lending is a division of Countrywide Home Loans, the benefits of equity home financing
Inc. Countrywide Home Loans, Inc., 4500 Park Granada, Calabasas, CA 91302:
Arizona Mortgage Banker License Number BK8805; Licensed by the Department of and how rebuilding credit can lower inter-
Corporations under the California Residential Mortgage Lending Act; Georgia Reg. est rates and mortgage payments. Call
#5929; Illinois Residential Mortgage Licensee (# 0139) by the Office of Banks and
Real Estate, Mortgage Banking Division, 310 South Michigan Avenue, Suite 2130, Countrywide’s friendly, knowledgeable
Chicago, IL 60604, (312) 793-1409; Massachusetts Mortgage Lender License No. consultants today at 1-888-265-3662
ML 1623; Licensed by the New Hampshire Banking Department; New Jersey (818)
313-6526, Licensed Mortgage Banker, NJ Department of Banking and Insurance; for a no-cost, no-obligation discussion.
Licensed Mortgage Banker, NYS Banking Department; Registered with the Penn-
sylvania 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.
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