July 2007 ~ Personal Finance and Money Management

Tuesday, July 31, 2007

How to Erase Negative Credit Reports

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Every credit report has a credit score associated with the report. The credit score relates to how well you have handled your previous credit. Negative entries lower your credit score and damage your ability to obtain future credit. Credit reports should be reviewed once a year to check for any errors in reporting. Negative entries that are incorrectly reported can be disputed with the three credit bureaus: TransUnion, Equifax and Experian.

Instructions

Examine your credit report very carefully. Pay special attention to the negative accounts and look for any aspect of the account that is reporting incorrectly. According to the Federal Trade Commission (FTC), the Fair Credit Reporting Act (FCRA) gives consumers the right to dispute inaccurate items on credit reports.

Circle all incorrect items listed on the credit report. You can also dispute incorrect spellings of your name, date of birth, previous jobs or addresses.

Write a letter to the credit bureau. State that you have reviewed your credit report and are disputing some incorrect items. List each account with an error. End the letter by asking the credit bureau to correct the accounts. Send the letter to the address displayed within the credit report.

Wait for the credit bureau to conduct an investigation. The credit bureaus contacts the creditor and asks for the information to be verified or corrected. If the creditor fails to respond to the investigation within 30 days, the credit bureau will delete the entire negative account.

Does a Credit Limit Increase Help My Credit?

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Your credit limit is the maximum amount you can spend on your credit card at any given point in time. Once you have reached your limit, you have to pay down your balance before you can use the card again. When your credit limit is increased, this can help your credit score, but only if you don't actually use the extra credit.

The main way that increasing your credit limit can help your credit score is through your credit utilization. This ratio compares the balance on each credit card to the card's limit, in addition to comparing your overall credit card balances to your overall credit limits. The lower your utilization, the better. If you get a higher credit limit and keep your balance the same, your utilization will drop and your credit score will increase.

According to Liz Weston of MSN Money, using more than 30 percent of your available credit can hurt your credit score. Bringing your utilization below 30 percent will help you, and for the best score, your utilization should be under 10 percent. For example, if you have a balance of $1,800 on a card with a limit of $4,000, your utilization is 45 percent, which is not great. However, if you get a credit limit increase to $7,000, your utilization drops to only 26 percent, which is within the target range. To get your utilization to 10 percent, you would need to pay off $1,100 of your debt after the credit line increase. Getting down to 10 percent with the old credit limit would have required paying off $1,400.

In some cases, a credit limit increase will result in your credit score dropping. For example, if the credit card company runs a hard inquiry to check your credit before issuing the increase, this could hurt your score by about five points. In addition, if you use your credit limit increase to accumulate more debt, this increases the amount you owe and hurts your score. Additional debt increases your minimum payment. If you miss a payment because you cannot afford the higher amount, this will hurt your score, as well.

Many credit card companies periodically review all of their accounts and issue credit limit increases to customers who have used their cards responsibly. If you have not had an increase in your limit, you can call the customer service number on the back of your credit card and request an increase yourself. Point out how long you have been a customer and how responsible you have been in using your credit in the past. The credit card company might ask for your employment information and annual income to help decide whether your income can support the payments.

Definition of Credit Rating Agencies

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Credit reporting agencies compile information regarding consumer credit files, which are forwarded to the agencies by a number of lenders. The credit reporting agencies will forward this information to those same lenders for the purpose of determining credit worthiness. There are others who use information from credit reporting agencies as well.

Credit reporting agencies sell lists to companies that send out pre-approved credit and insurance offers to consumers.

Information from individual consumer credit files is updated by credit reporting agencies during the first week of every month.

Credit reporting agencies receive information from creditors via a secure HTTP connection. A creditor needs to be able to transmit information using a Metro 2 format.

Consumers can contact the credit reporting agencies once per year to get a free copy of their credit report (see Resources).

There are three major credit reporting agencies: Equifax, TransUnion and Experian.

When Do Credit Cards Update Information on Your Credit Report?

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Your credit report contains information your creditors pass along to the credit bureaus that manage your credit report files. Your credit score can change whenever your creditor sends a new piece of information, such as a payment received or a change in your account balance. These changes occur at different times for different accounts.

In most cases, each credit card company updates information on your credit report monthly. Companies do not all report on the same day of the month, so you need to call your credit card company to find out exactly when it updates the credit bureaus. If you have multiple credit cards, they will likely update at different times during the month, so your credit report will get updated information frequently.

Your credit report does not immediately reflect information on your credit card accounts that could change your score. Changes you make on your credit card accounts could take up to one month to appear on your credit report. Therefore, if you are trying to boost your score by paying down your credit card balance, the new low balance might not appear right away. Make the payment at least one month before you need the credit score increase, so the payment has time to get reported.

If you are applying for a mortgage and need a creditor to update your credit report sooner than it would ordinarily, one option is to pay for a rapid rescore. Only lenders can order rapid rescoring services, so you need to ask the lender you are working with whether you are a good candidate for rapid rescoring. In rapid rescoring, you pay to have a third-party company manually get the updated information from your creditor to the credit bureaus, which updates your report and score within days. In some cases, this update can make the difference in qualifying for a lower interest rate on a mortgage.

Information only appears on your credit report if your credit card company sends it, and not all types of credit cards report to the bureaus. For example, some secured credit cards, which are designed for people with bad credit, do not report to the credit bureaus or may only report to one of the three bureaus. In addition, only a few prepaid credit card companies report to credit bureaus. If you want to obtain a credit card to boost your credit score through responsible credit use, first ask the company whether it reports to credit bureaus.

Does Your Credit Rating Go Down If You Are Late on Paying a Utility Bill?

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Credit reports and credit scores are often ordered and viewed by potential lenders during the process of evaluating you for a loan. The information that creditors report to credit bureaus affects your credit score. You should be aware of which creditors you have that report to credit bureaus and how late payments can affect your credit score.

Credit reports are maintained by three major credit bureaus: TransUnion, Equifax and Experian. Creditors report information to the credit bureaus of which they are members. A creditor must join a credit bureau to be able to report your financial information. Some creditors will join all three credit bureaus, while other creditors may join only one or two. For this reason, each credit report will be slightly different with each credit bureau. Your reported payment history is a large component of your credit score.

Credit scores are calculated based on the information your creditors report. According to myfico.com, the largest portion of your credit score, 35 percent, is based on your payment history. The remaining factors are age of credit file, new accounts, credit balances and inquiries. Having late payments reported to your credit report can cause your credit score to go down. The lower your credit score, the harder it is to establish new credit.

Late payments and other information is generally reported to credit bureaus from credit card companies, mortgage companies and other financial lenders. Creditors, generally, report each month and include information such as balance, monthly payment, payment status and type of account. There are certain types of companies that, generally, do not report monthly payment status and will only report if an account is in default status.

Utility companies do not often report your monthly payment history; however, if you close the account with a balance owed, the company will report the negative status. For the utility companies who do report monthly, a late payment cannot be reported until it is 30 days late. By paying a payment a few days late, you are not at risk of being reported to the credit bureau. Your credit score will only drop if the utility company does report to the credit bureau and the payment is over 30 days late. To find out if your utility company reports to the credit bureau, contact the customer service number on your bill and ask if late payments are reported and, if so, to which credit bureaus.

What Is the Difference Between a FICO Score and Credit Report?

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Your credit report and FICO Score are used by a multitude of people. From potential creditors to perspective employers; many people require a credit check before conducting business with you. For this reason, it is important to ensure that the information featured on your credit report is accurate and up to date.

While both your credit report and your FICO Score are used to determine your credit-worthiness, they are very different in regards to the information shared. Your credit report offers a comprehensive history of your personal credit balances and identifying information, to ensure that you are not confused with another person with the same name. Your FICO Score, on the other hand, provides a snapshot of your overall credit report by assigning it a numeric score. The scores range from 300-850, with a higher number reflecting a more favorable credit history.

Your credit report is a file maintained by three different credit reporting agencies: Experian, Equifax, and TransUnion. These three agencies keep records on you for a rolling 10-year period. They have information used to identify you, such as your employment history, as well as your places of residence. In addition to identifying information, your credit report also contains information on existing loans, and other outstanding debts.

Your FICO Score is based on a mathematical formula created by the Fair Isaac Corporation. Though the exact formula is not readily accessible, it is based roughly on: outstanding debt, 30 percent; payment history, 35 percent; credit history (length and type), 25 percent; and new credit, 10 percent.

While this generally is the formula, when being considered by credit analysts certain aspects may be given more or less weight, depending on individual circumstances.

Other than identifying factors, your Credit Report features detailed information about your outstanding debt and available credit lines. Accompanying a list of your existing accounts is a breakdown of your balances, payment history and the length of time holding the account(s). According to The Dough Roller, there is also a list of the inquiries made to your account, as well as any public collections, such as delinquent medical bills.

While the information featured on all three credit reports should be roughly the same, they can have differing information, which is one reason to check your own credit at least once per year. The three major agencies all offer a numeric score based on the FICO Score, but the percentages may vary slightly, and each agency has renamed the FICO Score to differentiate one agency's score from another. Equifax calls it the Beacon Score, Experian has the Fair Isaac Risk Model, and TransUnion's numeric score is called the Empirica.

Should I Hire a Company to Improve My Credit Score?

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You might have seen an ad tempting you with a promise to clear your credit report in return for a few hundred or thousand dollars -- but this is almost always a scam. At the very least, they are overcharging you for a service you are often better off doing yourself. However, these companies are not always out to get you and might offer help you legitimately need.

The Federal Trade Commission, the agency tasked with acting as a consumer watchdog for U.S. citizens, warns consumers that many credit repair companies are scams. They could vanish in the middle of the night with any money you pay upfront. The company could also push you into blatantly illegal attempts to create a new credit profile or scam lenders. A common ploy is to have you create an employment ID number and use it to apply for credit. Worse, even if you use a fake Social Security number, the credit bureaus can still track you by your address and you may lose out on Social Security benefits.

A company can help you improve your score by doing legwork for you, such as finding errors in your report and dealing with the dispute process. Much like anyone can file their taxes for free, people still go to professionals because of their experience and expertise. If you have several errors or a particularly complex one, for example, it might be better to contract the dispute process to a credit repair company rather than spend what could be months and dozens of hours on it.

Creditors do not always abide by federal credit reporting laws and you may not have sufficient knowledge to catch errors that a credit repair company deals with on a frequent basis. A collection agency might report the wrong date on an account -- they can only report the delinquency as 180 days from the time you missed the first payment. This means the collection account stays on your report longer than it should. Someone versed in the Fair Credit Reporting Act would probably catch this and the boost in credit can far outweigh the cost of the repair service if it saves you money on a loan.

It is up to you to decide whether a credit repair company is worth the cost to assist you in credit repair or if you can go it alone. When shopping for a credit repair company, watch out for anyone asking for upfront fees or making outlandish guarantees, such as being able to eliminate any bankruptcy. This is always illegal. Any legitimate company will inform you of your rights and list their services and fees before making you pay or sign anything.

Does Co-Signing Build Credit?

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A co-signer on a loan or credit account is someone who agrees to be held jointly responsible for repaying the debt. Co-signing can be dangerous because you are legally liable to repay the debt. However, it can also help you build credit if the primary borrower manages the account well.

The lender reports all of the account information, including the payment history, on both the primary borrower and the co-signer's credit report. Usually, the co-signer has a good credit score and signs the agreement because the lender will not allow the primary borrower to get credit. However, in some cases, someone with good credit will allow you, as a friend or family member, to co-sign so the payment history will appear on your credit report as well.

The primary borrower on the co-signed loan or credit card is the one who usually receives the bills and is expected to make payments. By co-signing, you are entrusting your credit history to this person. If the person manages the account responsibly, it will help build your credit. If, on the other hand, the person pays late or runs up a high balance on the credit card, your credit score will decrease.

Your credit score considers five major areas, all of which a co-signed loan can affect. The most important way to build credit is to develop a consistent history of on-time payments, without collection accounts, bankruptcy or debt settlements. The amount you owe also affects your score, and paying down a balance and keeping a low ratio of debt to credit limit on credit cards both help this area. Having a long credit history and managing many different types of credit also helps your score, so getting added as a co-signer on a long-term loan of a type you haven't had before is helpful. Lastly, having new credit hurts your score, so you should not co-sign loans too frequently.

If you can't get credit on your own but feel like you are responsible and would like to start using and building credit, you should be the primary borrower. One way to do this is to get a secured credit card on your own by putting down a deposit. Another option is to have someone co-sign for you instead of you co-signing for someone else. When you are the primary borrower, you can be in charge of paying the bills on time and have a lot more control over what affects your credit score. As long as you pay on time and work to decrease the amount you owe, you will build up a good credit history.

Will Debt Consolidation Hurt or Help My Credit Rating?

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According to the Fair Isaac Corporation (FICO), debt consolidation does not affect your credit score, as you are not removing or adding debt, just transferring it. However, methods used to consolidate debt may affect your credit score and deter lenders.

While debt consolidation does not affect your credit score directly, transferring debt to a lower interest loan may reduce debt more quickly. Lowering overall debt aids your debt-to-credit ratio, thereby increasing your credit score.

Consolidation involving debt management plans may prevent lenders from offering you a loan if they see you as financially irresponsible. Your credit report may reflect enrollment in a debt management plan.

Closing accounts changes your debt ratio. If you transfer your debt from several revolving credit lines to one account and then close the initial lines, your credit score may drop.

If you make payments to a consolidation company and they pay your creditors, it may hurt your credit score if they are late with payments. Some companies intentionally let your payments become delinquent to negotiate better interest rates or lower the amount owed.

Steps to Achieve a Better Credit Score

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Your personal credit profile determines your ability to attain credit from a bank or other lending company. Credit scores are numbers between 350 and 800. The higher your personal credit rating, the easier it is to get a line of credit or a loan. You can achieve a better credit score. This involves learning smart ways to manage credit, and implementing what you learn into your daily life.

A low credit rating can result from overuse of credit cards and excessive debt. What you owe to your individual creditors account for 30 percent of your credit rating. Using less credit and more cash helps to lower debt and improves your rating. Instead of carrying credit cards, get into a habit of using cash for most purchases and pay for the items with your debit card. Debit cards tie into to your personal bank account, with funds automatically deducted with each swipe of your card. Make sure you have the cash available before using it.

Once you get out of the routine of pulling out your credit card for every purchase, start tackling your balances and pay off your debt. Using cash alleviates new charges. But to put a dent in your balances and remove debt, plan to make larger monthly payments to your creditors every month. Check your budget and see what you can afford. Start by doubling your minimum payments. As your finances improve, consistently add more money to each payment until the balance disappears. Paying off debt is a key to improving a credit score.

Achieve a better credit score with timely payments to your credit card companies and lenders of your mortgage and auto loans. Payments contribute largely to your credit score. Rebuilding a low score requires acknowledging your due dates and paying creditors before the cutoff time. Several methods can help to improve your payment history. For starters, don't wait until the last minute to mail payments. Use online payment services, or arrange for creditors to withdraw monthly payments automatically from your bank account.

As you build your score and improve your credit history, consider updating your credit report with a comment or information explaining the reason(s) for a low score. This method doesn't fix a bad credit score. However, if you need to buy a car or acquire a new line of credit, having this information on your credit report may convince a lender or creditor to approve your application. Did you lose your job, or experience an illness or injury that stopped you from working? If so, include these reasons in your comment to help you acquire financing.

Does Getting a Credit Card Improve Your Credit Score?

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If you want to build credit and achieve a better rating, you will have to use credit. The U.S. has more credit cards than people, so they are one of the most popular ways to use credit. Simply getting a credit card does not always improve your score and could wreck it if you are not careful.

Applying for any type of credit lowers your score. Each hard inquiry into your credit history dings you three to five points. If you are applying for several other types of loans, getting a credit card magnifies your risk to lenders because needing loans is equated with a higher risk of default, according to TransUnion's True Credit.

Ten percent of your FICO score comes from using multiple types of credit successfully, according to the Fair Isaac Corporation. Adding a credit card when you already have a revolving loan lowers your credit utilities ratio--how much credit you use compared to the amount available, which counts for 30 percent of your score.

Use your credit card sparingly, pay off your bill on time and you will improve your credit score even more. The FICO model weighs payment history the most: 35 percent of your score. If you have had credit problems in the past, using your credit card will help build your new credit--10 percent of your score.

A new account will reduce the average length of your credit history, which counts for 15 percent of your FICO score. You will have to use your credit card for the lender to report good payment history. If you have a low credit limit, you can easily use more than 35 percent of your credit limit--the highest utilization ratio found in people with good credit.

Credit cards, however, should boost your score if used properly and are often necessary to achieving the highest tier of score.

Free FICO Score Laws

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A 2011 survey by the Consumer Federation of America found that people who obtained their credit score were more knowledgeable about how credit scoring works than people who did not. You can obtain a free copy of your credit report, which provides the information used to calculate a credit score, but not the score itself. Typically, you cannot obtain your FICO credit score unless you pay for it.

As of 2011, there are no laws that require the national credit bureaus to furnish a free FICO score. The Fair Credit Reporting Act (FCRA) only requires that the three credit reporting bureaus -- Equifax, Experian and TransUnion -- supply you with your credit report, and a free copy of each of your three credit reports can be obtained once each year through the Annual Credit Report website. The FICO score is an algorithm owned by a private company that most lenders choose to use. Credit reports contain your private data, such as bank accounts, that scoring formulas use to calculate your score.

Members of Congress sometimes try to introduce legislation to require the bureaus to provide a free FICO score to consumers each year. The most recent attempt, as of March 2011, was an amendment to the FCRA by U.S. Senator Mark Udall of Colorado, according to Smart Money. A consultation to consumers was made in July of 2010 in the Dodd-Frank Wall Street Reform and Consumer Protection Act. Creditors, landlords and utility providers must reveal an applicant's FICO score if they reject an application because of a poor credit score.

As of 2011, the provisions of the Dodd-Frank act have only been proposed, so it is unclear exactly who will be required to provide consumers with a free score. Insurance companies, for example, often use a modified algorithm based on a credit score, and employers can reject an applicant based on his credit profile, but may not pull his score.

Lenders can give consumers a free FICO score during the application process, but only as a courtesy. You might be able to get a free FICO score when the Fair Isaac Corporation or the major bureaus have a promotion to get people to try a service. Also, FICO score estimators are available on the Internet, although they only provide a range in which your score is likely to fall.

How to Repair Credit in Canada

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Having a poor credit history can be a source of stress and shame for many. It can also prevent you from living the lifestyle you want. Repairing your credit isn't impossible and there are many things you can begin doing immediately to help relieve that stress.

Instructions

Obtain a credit report. Every Canadian is entitled to one free credit report per year. Your free credit report can be obtained (via Canada Post) from Equifax Canada and TransUnion Canada. Keep in mind that the free reports do not give your credit score. They simply provide you with an overview of your credit history. If you are interested in receiving your credit score and a more in-depth analysis of how lenders will view you as a borrower, you have the option to pay for an online credit report.

Report any errors. Errors sometimes appear on consumer credit reports. It is important to review your credit report and verify that all information is accurate. Your credit report includes an area to report discrepancies or dispute inaccurate information. If you have obtained your free credit report through the mail, you must fill out your report/dispute and then return it via postal mail.

Establish a plan. Develop a spending plan as well as a credit repair plan. This should include paying any outstanding/missed payments. This plan might also include visiting a credit counselor who may offer advice for your specific situation. Your plan also may include destroying your existing credit cards to prevent you from slipping further into debt. It is important to stop yourself from accruing more debt while repairing your credit.

Pay everything on time. Something as simple as a few late cell phone or cable bill payments can have a negative impact on your credit score and prevent you from being approved for new credit. Pay all bills at least five days prior to the posted payment date to allow for processing times. You may find it easier to set up automatic payment programs through your bank. Ask your bank how to set up automatic bill payments.

Carry a zero balance or low balance on all credit cards. The higher balance you carry on your card(s) the more it impacts your credit score. One of the quickest ways to improve your credit score is to lower your existing credit balances. If possible, pay all credit cards off in their full balance each month. This will help you avoid interest charges and it will also help you develop the habit of paying your debts immediately.

Avoid new credit. Stay away from new credit until you have paid off all or a large portion of your existing debt. This is to avoid high interest rates for high risk borrowers as well as it allows you to focus on paying debts and establishing appropriate spending habits. Keep in mind that applying for new credit can have a negative effect on your credit. Being declined new credit can also have a negative effect on your credit history so it is best to avoid new credit until you are able to be approved.

Re-establish yourself. After you have begun paying some of your debts off and limiting your spending, you may want to apply for new credit. If your credit history is considered high-risk, you may be declined new credit or have secured-credit options. Secured credit usually involves paying a deposit or prepaying the amount (or a percentage) on your new card. As a high-risk borrower you may find that you are charged a high interest rate and/or the credit limit you are approved for is quite low. Don't let this cause stress. Most companies will increase this limit as you prove your ability to successfully manage your credit.

Continue to monitor your progress. Once you have developed a conscious attitude on repairing and monitoring your credit, continue managing it responsibly. It is a good practice to obtain a copy of your credit report at least once a year to continue improving your credit.

The Importance of Credit Rating Agencies

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Credit rating agencies provide investors and debtors with important information regarding the creditworthiness of an individual, corporation, agency or even a sovereign government. The credit rating agencies help measure the quantitative and qualitative risks of these entities and allow investors to make wiser decisions by benefiting from the skills of professional risk assessment carried out by these agencies. The quantitative risk analysis carried out by credit rating agencies include comparison of certain financial ratios with chosen benchmarks and the qualitative analysis focuses on the management character, legal, political and economic environment in a jurisdiction.

Credit rating agencies help provide risk measures for various entities and make it easier for financial market participants to assess and understand the credit risk of the parties involved in the investing process. Individuals can get a credit score in order to be eligible for easy access to credit cards and other loans. Institutions can borrow money easily from banks without having to go through lengthy evaluations from each individual lender separately. Also corporations and governments can issue debt in the form of corporate bonds and treasuries to attract investors based on the credit ratings.

The credit ratings provided by popular rating agencies including Moodys, Standard & Poors and Fitch, have become a benchmark for regulation of financial markets. Legal policies require certain institutions to hold investment graded bonds. Bonds are classified to be investment graded based on their ratings by these agencies, any corporate bond with a rating higher than BBB is considered to be investment graded bond.

The credit ratings provided by these agencies are used by various banks and financial institutions in determining the risk premium they will charge on loans and corporate bonds. A poor credit rating implies a higher risk premium with an increase in the interest rate charged to corporations and individuals with a poor credit rating. Issuers with a good credit rating are able to raise funds at a lower interest rate.

The credit rating agencies provide improved efficiency in the credit markets and allow for more transparency in dealings. The ratings help monitor the credit soundness of various borrowers through a set of well-defined rules.

Most credit agencies use their own methodology for determining credit ratings, but since only a handful of popular credit rating providers exist, this adds a great deal of standardization in the rating process. The credit ratings of different borrowers can be easily compared using ratings provided by a credit rating company and the applications can be easily sorted.

Does Applying for a Loan and Not Getting It Affect Credit Score?

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Your credit score plays an important role in whether or not you get a loan. You actually have scores from three major credit bureaus -- Experian, Equifax and TransUnion. They consider similar factors in calculating your scores, including recent credit inquiries. If lenders have denied your loan applications, these recent inquiries count against your scores. Improve your chances for getting a loan next time by first improving the other factors against you.

Each application for credit causes a small negative impact on your score. According to Experian, the agency reports only credit card and loan applications to prospective creditors. Your employer's inquiry or your own does not impact your score in any way. In addition, the bureaus now minimize the effect of rate shopping in calculating their scores. As for loan denials, no credit bureau lists denials among the negative influences on your report -- only inquiries. However, repeated applications have an additive effect in increasing the number of inquiries against you. Credit bureaus and banks consider people who repeatedly try to borrow money a greater credit risk than those who do not.

Even though they count against you, loan applications are not usually a deciding factor. Normally other issues have more impact on your credit scores. For example, bankruptcies, large debts and late payments lower your scores. Using 35 percent or more of your available credit lowers your scores. According to Experian, having too much available credit or too many credit cards can also affect your score negatively. Only when your credit history is already shaky do loan applications have much impact.

Find out what is wrong with your credit so you can begin improving it. First, check your credit reports from the three major bureaus and examine them for errors. If you find paid-off accounts showing delinquent, or other false or outdated information, contact the bureau with proof and ask to have the error removed. Each of the three major bureaus provides online information on correcting errors in your credit report.

Liz Pulliam Weston of MSN Money says that continuing to use credit responsibly even while paying down debt will help your scores. Always pay on time. To avoid slip-ups, set up automatic transfers for as many bills as possible. Pay down your debt balances to keep your ratio of used-to-available credit below 35 percent, and lower is better. If your lender reduces the limit on a credit card, call and ask to have the old limit reinstated. Maintain a long and stable credit history by keeping older accounts open. Hold off on making loan applications until your scores improve.

Can I Remove Myself From a Credit Bureau?

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When a person takes out a loan or accrues debt, this information is often added to his credit report. A credit report is a dossier compiled by credit bureaus or credit reporting agencies and includes information used to determine credit ratings. A person cannot remove his credit report from a credit bureau -- it is the bureau's property -- but he does have certain related rights.

A credit report includes a variety of information related to a consumer's debt. The report will include all current and many past debts, as well as information about whether the person paid the debts back. The credit bureaus use formulas that process this information into a credit score. Credit bureaus consider these reports their property and the formulas used to determine credit scores to be proprietary information.

A person will have a valid interest in the contents of his credit report, as this report affects his credit score. A person's credit score is often used by lenders to determine whether they will lend to the individual and, if so, at what rate of interest. The higher a person's credit score, the less the person can expect to pay in interest payments on loans.

A consumer may wish to remove his credit report from a credit bureau, particularly if he has a bad score. However, credit bureaus are under no obligation to remove a credit report from their files. Individuals have no legal right to demand that a credit bureau change information about them or make their report unavailable to parties who have a legitimate business interest in viewing it.

While a person cannot compel a credit bureau to remove his report, he can choose to view it once a year for free. In addition, negative information about the person must be removed from the report after seven years and cannot count against the person's score. The only exception is a Chapter 7 bankruptcy, which can remain on a credit report for up to 10 years.

What Are Open Trades on a Credit Report?

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Trades or trade-lines listed on your credit report are currently active credit accounts. Your mortgage, car loan and credit card accounts all show up as trade-lines on your credit report. Credit reporting agencies base your credit score on data related to your current trade-line activity as well as records pertaining to closed accounts.

Your creditors make monthly reports to Equifax, Experian and TransUnion that detail your recent account activity including the amount of your last payment and the balance you owe. If you miss a monthly payment by more than 30 days, your creditors notify the credit bureaus, and the number of late payments you have had on each account appears on your report. When you close an account, the creditor stops reporting it to the credit bureaus and it no longer appears as an active trade-line on your report.

Beyond enabling creditors to see how well you manage your debt payments, trade-lines also have an impact on your credit score in terms of debt utilization. Your credit report shows both the amount you currently owe on each account and the maximum credit available to you from that creditor. If you utilize a high percentage of your available credit, it harms your score because high debt levels are synonymous with cash flow problems.

When you pay off an installment loan, the account terminates and no longer appears on your report, but when you pay off a revolving debt such as a credit card or equity line, the account stays open until you actually ask the creditor to close it. Your creditors continue to make monthly reports on open accounts even if you have a zero balance. If you keep credit cards open with a zero balance, you lower your overall credit utilization and this helps you to improve your credit score.

Closed accounts have an impact on your credit score if those accounts were not satisfactorily paid off. Events such as foreclosures stay on your credit report for up to seven years and negatively impact your credit score. If you overdraw your deposit account at your bank and refuse to settle the balance owed, your bank can report the account to the credit bureaus. This debt shows up on your report for up to seven years even though the account itself never appeared as a trade-line on your report while still open.

What Are the Benefits of Good Credit History?

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The time and effort spent to build a good credit history is worth the trouble. Any carelessness with debt management will be reflected on your credit report for lenders and employers to see for the next seven years. Having a good credit history will give you the security of knowing that you will never be turned down for a credit card or loan.

Your credit history determines your credit score.

Your credit history is a list that appears on your credit report. It details all of the creditors you have debts with. Each creditor is given a trade line on your report, which shows how long you have had the account and how timely your payments have been. The information in your credit history determines your credit score. A good credit history shows potential creditors that you can be trusted to make your payments.

When lenders review your credit history, they will not see a list of all the debts you have held. After seven years, an account will continue to appear on your report only if it is still active.

A good credit history will help you get low interest rates on loans.

When you apply for a credit card or loan, the lender will pull your credit report and review both your credit history and your overall score to determine what interest rate you are eligible for. A history of timely payments will make a lender much more willing to give you a low interest rate. Low interest rates save you money over time because you are being charged less on your loan or credit card purchases.

Many potential employers will pull your credit report when you apply for a job. By reviewing your credit history, they can see whether you are reliable in your agreements to pay your debts. In the eyes of an employer, if you are reliable with debt, you may demonstrate the same reliability on the job. If you are applying for a position in which you will be handling money, an employer will look at your credit history to determine whether you are carrying defaulted debts or are late on your payments to your creditors. Employees who are in need of extra money to pay debts are considered to be a theft risk and are much less likely to be hired. Your good credit history can be instrumental in helping you get the job you want.

Most banks will look at your credit history when you apply to open a checking account. A customer with a positive credit history is much less likely to incur fees. In the event that the customer does accrue fees, the bank feels secure that those fees will be paid promptly. A credit report that contains a history of defaulted debts shows a bank that the a person is irresponsible with money and a financial risk. When you apply to get financing through a bank or credit union, you are likely to be turned down if your credit history and credit score don't meet the bank's standards. Keeping a good credit history ensures that you can obtain financing for a home or car.

Who Are the Three Largest Credit Bureaus?

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Credit scores are intended to indicate how much of a risk an individual is when it comes to borrowing money. Our credit score determines what credit card offers we receive, whether we're approved for bank loans and how much interest we pay on our mortgage or car note. There are three major credit bureaus, each of which uses its own formula to calculate credit scores.

Equifax is the oldest and largest of the three major credit reporting companies, having been founded in 1899 as the Retail Credit Co. As of October 2010, Equifax boasts more than 7,000 employees in 14 countries, and maintains data on an incredible 400,000,000 individuals. Equifax also offers the "Credit Watch," "Victim Alert" and "Credit Lock" programs to help consumers protect their credit scores.

Experian was started by John Peace in 1980 and currently operates in 36 countries from its headquarters in Dublin, Ireland. Experian collects information on individuals, businesses, insurance, vehicles and "lifestyle" data such as age and interests. In addition to providing marketing services, Experian also provides decision analysis and operates FreeCreditReport. Experian reports itself as fully compliant with the Fair Credit Reporting Act and the Accurate Credit Transactions Act.

TransUnion began in 1968 under the name, The Union Tank Car Company. Today it operates in 24 countries with 250 offices in the United States. TransUnion supplies individual consumer credit reports, financial software and consumer analytical data to businesses worldwide. The company also offers "ID Fraud Watch" to protect users' credit history and provides users of the service with periodic credit reports.

How to Check a Person's Credit History

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Your credit history is checked when you apply for credit accounts, insurance, apartments and even some jobs. When you know what's on your credit report, you know exactly what to expect when you're going in with an application of any sort. You can also fix any problems on your credit report that arise from inaccurate information or identity theft. Landlords, creditors and other authorized businesses may request a credit report for an individual.

Instructions

Use your Internet browser to go to annualcreditreport.com.

Select your state from the drop down list provided and click "Request Report."

Fill out the provided form with your personally identifying information. You need to provide your name, Social Security number, address and any additional addresses in the last two years. Click "Continue."

Put a check mark next to each of the three credit reporting agencies that you wish to request a report from. These credit reporting agencies are the three most used for consumer credit. Click "Next" and follow the on-screen prompts at the individual reporting agency sites to view the report from that company. You can only request a report through this system once per year. If you need one more frequently than this, each credit reporting agency offers individual credit reports for a low price, as well as monthly credit monitoring services.

Give your prospective tenant or debtor an application form that requests the individual's name, address, Social Security number, date of birth and any previous addresses within the past two years.

Send this information to a tenant screening or credit screening third party company that handles credit checks for you, if you would like to outsource this service.

Request a credit report for an individual from the specific credit bureau report you are checking. Requirements to request an individual's credit report varies between the different credit reporting agencies. Some have specific services set up for landlords and businesses, while others may have an application process for requests.

How to Improve a Credit Rating With a Repair Service

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Everyone is capable of improving their credit rating in the same way that repair services do--by exercising their rights under the fair Credit Reporting Act (FCRA). You may not wish to take on this task because it can be time-consuming or you may prefer to let someone with expertise handle it. A good credit repair service can remove many negative listings through filing disputes, but the Federal Trade Commission (FTC) warns that you must work with a legitimate firm.

Instructions

Look up the Better Business Bureau (BBB) grade for any repair services you are considering. The company could have a letter grade of A, B, C, D or F. You will also see the number of complaints and their general nature. Beware of companies that do not have a BBB listing. They may be very new or they may have recently changed the company name to hide from prior complaints.

Contact the FTC and your state attorney general's office to see if any of the firms have been investigated in the past or are currently being scrutinized. These two entities sanction repair services that try to rip off consumers so they are often aware of whether a firm is engaging in questionable practices.

Narrow down your list, dropping any services that have excessive complaints against them, and ask the remaining firms to detail how they will improve your credit rating. Drop services that recommend illegal tactics like filing frivolous disputes against every negative item, even if there is no mistake, or getting an Employer Identification Number to replace your Social Security Number. You will be liable for the consequences of these acts.

Ask for a full disclosure of the repair service's fees, how long it will take to improve your credit rating and when it expects to be paid. The FTC explains that it is illegal to be asked for an up-front payment.

Choose the repair service that makes the most realistic promises and asks for an affordable fee that does not have to be paid until your credit rating has been improved. Ask the company to put everything in writing so it can legally be held to the agreement.

Review your credit reports from TransUnion, Equifax and Experian once the repair process is complete. The repair service has expertise in finding legitimate dispute reasons that you might miss on your own. Make sure that a significant number of negative items have been pulled from each report in accordance with the company's promises.

How to Raise My Credit Score for Free

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A person's credit score is very important. A good credit score enables a person to take out a loan to buy expensive items, such as a car or a house. A credit score can even affect a person's ability to be hired for a particular job. If your credit score is not good, you might be asking yourself, "How can I raise my credit score for free?" Fortunately, you can raise your credit score.

Instructions

Order a free copy of your credit report. You can obtain a free copy of your credit report annually, including your credit score. You can even access your credit score instantly online for free. However, you do need to enter your credit card number and then cancel a membership during the free trial period for an instant report from Experian.

Review your credit report. Determine if anyone is using your credit illegally (identity theft). If you see anything on your credit report that does not make sense, contact Experian immediately to find out what to do. Clearing up identity theft issues will raise your credit score.

Read over the suggestions that Experian makes on your credit report. Experian provides a section that explains which score factors are positively and negatively affecting your credit score. Follow those recommendations to raise your credit score.

Pay your bills on time. Late fees are not only annoying and expensive: They affect your credit score, too. Once you are 30 days or more late in paying a bill, your credit score is negatively affected. However, you will gradually raise your credit score (and avoid paying late fees) simply by paying your bills on time.

Close unused credit card accounts. Many people choose to stop using a credit card, but fail to close the account. Simply cutting up your credit card does not close your account. That account is still active and included as open on your credit report. If you have too many open credit card accounts, you will lower your credit score even with a zero balance on those accounts. You can close those accounts for free and raise your credit score.

Refrain from requesting more credit. Too many credit inquiries on your credit report may lower your credit score. If you have no inquiries on your credit report for a two-year period, lenders see you as less likely to open new accounts and fall behind on your payments, which will raise your credit score.

Keep a large cushion on your credit cards. Do not max out your credit cards. Instead, keep your balance low. The cushion shows that you are not likely to overextend yourself financially, which will raise your credit score.

Does a Collection on My Credit Report Automatically Get Me Denied?

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Lenders have various reasons for turning down credit applications. The Fair Isaac Corporation, which produces FICO credit scores, explains that high debt load, late payments, long-term delinquencies that lead to charged-off accounts, repossession and bankruptcies all play a role. Collection accounts are among the harmful items that can lead to denial when combined with other factors.

A collection is an unpaid account turned over to a collection agency by the original creditor. For example, a bank might charge off seriously delinquent credit card accounts and sell them to debt collectors at a discount. The collectors make a profit if they are able to coerce more money from the debtors than they paid for the accounts. Liz Pulliam Weston, a MSN Money website columnist, explains that delinquencies are usually charged off within six months.

Unpaid accounts show up on credit reports and stay there for seven years from the date of the first late payment. Privacy Rights Clearinghouse, a consumer privacy protection website, explains that collection agencies can add their own entries, resulting in two negative items. They must use the same date as the original creditors, not the date they took over the debts, so the collection accounts are erased at the same time.

Credit reports with collection accounts do not automatically cause denial of credit or loan applications. They do make it harder to open new accounts because they show a consumer did not fulfill repayment obligations. This could cause a rejected application or a loan offer with subprime terms like high interest and fees.

Collection accounts have an effect as long as they show up on credit reports, but they lose some of their power if everything else on the credit report is in good standing. They also have less impact as they age. Creditors focus most on recent activity, so building up a year or two of prompt payments and maintaining small account balances offsets collection accounts from several years ago.

Collections can sometimes be removed from credit reports by paying them off. They must be erased completely or payment does not help the credit rating. Paid collection accounts still look bad, and the bad report from the original creditor also remains. The Debt Steps financial website recommends negotiating removal of the collector entry and a change in status to "paid as agreed" from the original account holder as part of any payment agreement.

Collectors may not be able to properly validate some accounts. This gives consumers the ability to have them erased from credit reports. The Federal Trade Commission explains that any item containing a mistake can be disputed with the Experian, TransUnion and Equifax credit bureaus. Check collection items carefully as they might have a wrong date, balance or other small bit of data that makes them disputable. File a challenge through each credit bureau's website. They must clear the collections entries from their files if they cannot verify the information within 30 days.

How Fast Can I Raise my Credit Score?

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Your credit score is that magic number that can help you purchase your dream home or that flat-screen TV. Getting your credit score a few points higher could help you score better interest rates and even improve your job prospects. Boosting your credit score can be achieved in the short-term and long-term.

The timeliness of your payments, the amount of money you owe, the time span of your credit history, how much credit you have and the type of credit you possess all determine your credit score. A certain weighted percent is given to each of these factors, making some of them more important than others in the determination of your score. For instance, on-time payments constitute 30 percent of your score.

Of these factors, the ones to assist with raising your credit score the fastest are in the "amount owed" category and "new credit" section. Even if you can make no payments, call your credit card company and ask for a higher line of credit. Doing so makes your "debt-to-credit" ratio look more favorable and therefore boost your score. Similarly, getting a new credit card may also boost your score if you carry a low balance on the card. Also, to make a positive impact on the "length of credit history" section, Martha Maeda, author of "How to Legally Settle Your Credit Card Debt for Pennies on the Dollar" advises people to start making small purchases on inactive credit cards and paying them off every month. Furthermore, Maeda advises not closing any accounts since your credit score hinges on the longevity of your accounts.

One of the longest-lasting effects on your credit score is paying off debt. If your debt exceeds 50 percent of the loan's line of credit, hacking away at the balance will boost your score. Paying debt in a timely manner benefits the two sections "on-time payments" and "amounts owed"; combined, these two sections constitute 65 percent of your credit rating. Because the amount of your payments will depend on your income, the speed in which your score improves will vary. What you choose to pay off has implications for your score as well: For the fastest results, pay off any consumer debt before other types of "friendlier" debt such as student loans and mortgages.

The way to boost your score that takes the most amount of time is getting bad debt, judgments, bankruptcies and foreclosures removed from your credit report. Defaults on credit cards, for instance, negatively affect your score for at least seven years. Bankruptcies affect your score for 10 years. In cases like these, many years of time is the only remedy for improving your score. But positive information can remain on your credit report for as long as 30 years, according to Steve Bucci, author of "Credit Repair Kit for Dummies."

Does Requesting a Credit Report Hurt My Credit Rating?

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Checking your credit report is crucial to keeping an eye on your financial standing and protecting yourself from identity theft, and doing so will make no positive or negative impact on your credit score if you're doing it through the right avenues. From buying or renting a house to getting a job to acquiring new credit, many important decisions are based on your credit score. Educating yourself about which credit report requests will and will not affect your score will keep you from damaging your credit.

Looking at your own credit report is called a "self inquiry" and won't positively or negatively impact your credit score. According to financial columnist Teresa Dixon Murray, "Obviously, you're not checking your report to see whether you should lend yourself money. So it's not an official inquiry." The three credit agencies, Equifax, Experian and TransUnion, all allow you one free credit report per year under the Fair Credit Reporting Act. To check your credit report, you may go to each agency's website individually, or get a report through the AnnualCreditReport.com website run by the FTC.

If you request a credit check through another credit reporting company, it could count negatively against your score. The three credit bureaus and the government's official credit reporting website are the only places that can provide you with a risk-free credit report. The Federal Trade Commission warns against using other websites that offer "free credit reports," which may ask for other information or trick you into paying for ongoing services. According to the FTC, AnnualCreditReport.com and the three credit bureaus are the only organizations legally included in the Fair Credit Reporting Act.

Each time you apply for a new line of credit, an inquiry is made into your credit history and score. Although the negative impact is generally small, many third-party inquiries raise a red flag for lenders. According to Craig Watts, spokesman for Fair Isaac Corporation, "Statistically, a person whose credit report shows she has applied for new credit six or more times in the past 12 months is eight times more likely than other consumers to file for bankruptcy." By checking your own credit score through the individual bureaus or through the FTC's AnnualCreditReport.com website a few times a year, keeping your score up by paying bills on time and keeping balances low and limiting the number of accounts you open, inquiries for new credit will be worthwhile and not subject to rejection.

Under the Fair Credit Reporting Act, it is your responsibility and the responsibility of the credit bureaus to fix any errors that are on your credit report. If you see an error, you must inform the credit reporting agency in writing to request an investigation into the discrepancy. Once your issue has been investigated, the agency will send you a report of its findings. If the agency will not correct your dispute, you may ask for a statement about the issue to be included in future reports, but this service usually includes a fee.

Negative information can stay on your credit report for seven years, with information pertaining to bankruptcy listed for 10 years. This information is available to anyone who is legally entitled to view your report, including creditors, landlords and insurance agencies. Your employers may view your report if you grant them access.

How to Improve a Poor Credit Score to Get a Home Loan

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There is more to buying a house than having an acceptable credit score, but that's where many people start as they gauge their creditworthiness. Credit scores range from 300 to 850, according to Privacy Rights Clearinghouse, a nonprofit consumer information company. The agency reports that scores above 720 are excellent, with a 620 score often enough for standard mortgage approval. That doesn't mean people with lower scores are shut out of the housing market. In 2010, home loans insured by the Federal Housing Administration were available to people with credit scores as low as 500.

Instructions

Find out just how poor your credit score is by ordering your credit report and score through AnnualCreditReport.com (see Resources). Three major credit bureaus -- Experian, Equifax and TransUnion -- created the site to offer free reports as required by the Fair Credit Reporting Act. Follow the instructions included in your report to order your credit score separately, for a fee.

Compare your score to acceptable standards for buying a house. This will help you understand how much you must improve your credit score to qualify for a loan.

Review your credit report for problems that could be affecting your credit score, including excessive debt, late payments, errors and old credit card accounts assigned to debt collectors.

Make payments to bring all open accounts current. Pay down balances on credit cards and other revolving accounts. MSN Money reports that your balance on a revolving account should not exceed 30 percent of the credit line. Contact debt collectors to pay off delinquent debts, if necessary.

Pay your bills on time every month. That's one of the most important things you must do to improve your credit score, according to Privacy Rights Clearinghouse.

Order additional credit reports and scores as you monitor your progress. You're entitled to three free reports -- one from each of the credit bureaus -- every 12 months from AnnualCreditReport.com. However, you must pay for your credit score each time.

How to Fix Your Credit After Two 30 Day Late Payments

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Paying on time matters to creditors so much that it makes up 35 percent of your credit score. Multiple late payments can hurt as bad as bankruptcy, a collection, judgment, or repossession if it goes unpaid too long. In other words, a $45 monthly payment missed for over 30 days can matter as much as a $2,500 monthly payment simply because they are paid late. Fortunately, there are ways to minimize and repair the damage before it's too late.

Instructions

Investigate the problem by ordering a credit report from each of the three major bureaus (Equifax, Transunion, or Equifax). Check the late payments focusing on the dates and cross reference them with statements from your bank or credit union to determine if the payments were indeed late. It is not uncommon for creditors to make mistakes, especially if the payment was made barely late or just on time. If the payment was very close to being on time, the creditor may forgive the offense.

Contact the creditors where you have outstanding payments or have paid late. Explain your situation, apologize, and state reasons why the situation will not repeat itself. Request that the creditor remove the late payments from your record. Since the credit bureaus create your score from reports received from your creditors, this will improve your score significantly.

Improve your credit from now on by making every debt-related payment on time. This means a mortgage, credit cards, and even bills need to be paid with care if you want to convince lenders you are a dependable borrower. Do not cut yourself off from credit. Keeping lines of credit open is the only way to improve a credit score, so just getting debt free won't necessarily raise a score.

Hire a lawyer from a law firm that specializes in working with credit bureaus to delete negative items from credit reports. If your creditors are unwilling to work with you, then professional representation can often produce better results.

Does It Hurt My Credit Score to Close an Account if I Carry a Balance?

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Consumers have plenty of good reasons to close credit card accounts, including annual fees, increases in interest rates and trimming down on the number of cards to carry. In addition to thinking about these factors, you should also weigh the impact that closing a credit card can have on your credit score. Especially if the card has a balance, the move could seriously impact your score.

The main way that closing an account with a balance affects your score is through credit utilization. Your utilization is the ratio of your balance to your credit limit, both on each individual credit card and overall. For example, if you have a card with a balance of $2,500 and credit limit of $6,000, your utilization is about 42 percent. Higher utilization leads to lower credit scores. To avoid damaging your credit score, you should aim for utilization of about 30 percent or less.

When you close a credit card account with a balance, you still have to pay that off. The card will continue to affect your utilization for as long as it has a balance. The utilization on that card depends on how your credit card issuer reports the credit limit on a closed card. Some issuers continue to report the limit on the card before you closed it, which means that your utilization will decrease, and therefore help your score, as you pay down the balance on the closed card. On the other hand, some issuers reduce your credit limit as you pay down the balance. For example, if you close a card with a balance of $2,500, the issuer will reduce your limit to $2,500 as well. If you pay off $500 of that debt, the issuer will then reduce your limit to $2,000 to match your balance. Therefore, your card will show utilization of 100 percent until you totally pay it off, hurting your score that whole time.

Closing a credit card account, whether it has a balance or not, can affect your overall credit utilization ratio. Calculate your overall utilization by adding up all of your balances, including the one on the closed card, and dividing that by the sum of all your credit limits, including the closed card. As described above, the limit shown on the closed card will vary depending on the issuer as you pay off the balance. Regardless of how the issuer handles the limit while you still have a balance, the limit will drop to zero when you finish paying off the balance. If the card you closed had a high credit limit that was helping to lower your overall utilization, losing all of this available credit will increase your overall utilization.

You can close an account without hurting your score at all, but you must pay it off first. In addition, if the utilization on that particular card is lower than your overall utilization, you also need to pay down some of your other balances so your overall utilization does not increase when you lose the credit limit on the account you close. If for some reason you need to close an account with a balance, your score will probably drop. However, your score should bounce back as soon as you pay off the balance and reduce your utilization on your other cards.

How Can I Get My Official FICO Score?

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The credit scores used by creditors are developed and offered by the Fair Issac and Company website. The FICO website is where you get the official FICO credit score. You also get a copy of your credit report with the score so that you can see the factors affecting your number.

Instructions

Go to MyFICO.com.

Click "FICO Scores and Credit Report."

Click "Buy Now" under the "FICO Standard" section. This purchase gives you your official FICO score from TransUnion or Equifax.

Check the credit reporting agency whose report and score you wish to see. Click "Continue."

Enter the personal information on the first form and click "Continue." Look over the list of special offers, select any you are interested in, and uncheck any you are not. Click "Continue."

Enter your payment details and click "Continue." You are asked a series of questions to verify your identity. Answer these questions and click "Continue." You will be taken to your credit score and credit report. Click through the tabs on the report to investigate each section.

How to Repair a Credit Score Quickly

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When you are getting ready to apply for a loan or credit card, improving your credit score can help you qualify for a lower interest rate. This can go on to save you hundreds or even thousands of dollars in interest as you repay your debt. Although much of your credit history is based on long-term habits, there are a few things you can do to quickly repair your credit. Even with the fastest methods, however, it could take up to 60 days to see results.

Instructions

Order copies of all of your credit reports. If at least one year has passed since you last used the service, you can get them for free with no strings attached through AnnualCreditReport.com.

File an online dispute at each credit bureau for any errors you find on your credit reports. Errors might include accounts that do not take out, hard inquiries you did not initiate or missed payments listed when you actually paid on time.

Write to any creditor that has listed just one late payment for you and ask for a goodwill adjustment. Describe how you have been a long-time customer, have paid on time since then and would like your credit report changed to remove the late payment. It does not always work, but when it does it erases your past mistake.

Call each credit card company and ask for a credit limit increase. Part of your score is based on your credit utilization ratio, which is your statement balance divided by your credit limit. Increasing your limit will decrease your utilization and boost your credit score.

Pay down your credit card debt as much as possible. Rather than focusing entirely on the high-interest debt, spread out your efforts to try to reduce all of your credit card balances to no more than 30 percent of each card's limit. If you can get them below 10 percent, this is even best.

Use your credit cards lightly. Even if you pay down the balance after you get the bill, the statement balance is the one used for your utilization ratio.

Negotiate a settlement to pay off any collection accounts that appear on your credit report. As part of the agreement, insist that the collection agency remove the account from your credit report rather than just reporting it as paid.

Steps to a 720 Credit Score

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Your credit score will determine whether you will be approved for a mortgage loan, an education loan, car loan or many other forms of credit. If you are approved, the lower your credit score, the higher the rate you will pay to borrow that money. To reduce the percentage rate you are charged and increase your chances of approval, take steps to improve your credit rating.

For the active loans and line of credit that you have, make sure you are always on time paying those bills. Philip Tirone, a residential home financing expert and author of "7 Steps to a 720 Credit Score," says the best way to have a solid credit score is to have a healthy mix of credit and a solid payment history. "You have to prove to the bureaus you have the discipline to handle credit," he says. "The only way to do this is to have a proven track record." Create a payment system for yourself, such as paying bills as you receive them in the mail, or picking a date to write out checks. You can also use online bill pay and automatic drafts to ensure you pay the bills on time.

Aside from whether you make your payments on time, the amount of debt you incur will also impact your score. Keep your credit balances under 30 percent of your credit limit. If you have more debt than you can afford, it increases your chances of defaulting on the loans. The Fair Isaac Corporation (FICO), the company responsible for tabulating the most widely used credit score, advises consumers to "keep balances low on credit cards and other 'revolving credit.' High outstanding debt can affect a credit score."

Closing credit cards actually reduces the average age of your active accounts. Having older accounts with good payment history tells the credit bureaus that you are a better credit risk than someone who has a shorter credit history. The older your active accounts the better your credit score, as long as they are in good standing. FICO staff warns that "New accounts will lower your average account age, which will have a larger effect on your score if you don't have a lot of other credit information."

Having no credit history does nothing for your credit score. Keep at least one active installment loan on your credit report. Car loans can do wonders for your credit report as long as they are paid on time. Installment loans can boost your credit by as much as 100 or more points.

In this day of identity theft, it's not uncommon to find information reported on your credit report that doesn't belong to you. There could also be erroneous information on your report such as accounts that have been paid off, but are not listed as such. Contact the credit bureaus, in writing, to have errors removed from your credit report.

Instead of just paying off collection accounts, try to get them removed. Negotiate with the creditor to get a letter of deletion before paying a bill in collection. Paying off the collection account could re-age it and increase the length that it will be active on your report. This will negatively impact your score. Try to get it removed once it's been paid off.

How to Repair Credit History Report

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Your credit report is a prominent factor in a creditor's decision to approve or deny a loan or credit card. The report is a history of your credit activity and your credit rating is based on the report. It is possible to improve a credit report containing negative entries. It may take up to a year of responsible behavior to see positive results.

Instructions

Obtain a free credit report. The three credit reporting agencies, Equifax, TransUnion and Experian, must provide you with a free report once a year. You can obtain all three from AnnualCreditReport.com.

Ensure that the information in your report is accurate. Errors could range from a misspelled name to records of debts that you did not incur. The FTC advises that you write to the credit reporting agency to dispute any inaccurate entries. Send your letter with copies of supporting documents, if available. The bureau will investigate the issue within 30 days. Your credit score may improve after the inaccurate entries have been adjusted or removed.

Pay bills on time. Late payments will show up on your credit report, lower your credit score and reduce your appeal to potential creditors and employers. However, if you begin to make payments when they are due, your score will improve with time.

Make delinquent accounts current. By law, creditors must report accounts that are 30 days past the payment date. If you are having difficulty making the payments, call the creditor and arrange for lower payments or a more convenient payment date.

Avoid closing lines of credit in an effort to improve your score. Closing accounts will reduce the amount of credit available to you and your credit-debt ratio will be higher, which can hurt your score.

Keep old lines of credit. Older credit lines give you an older credit history. Closing an old credit line, even if you do not use it, will shorten your credit history and make your debts look worse.

Avoid opening several new lines of credit in a short period of time. Doing so will lower your credit score and creditors may interpret it as a desperate need for money.

What Do Credit Scores Impact?

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A credit score impacts every area of your financial life. The three-digit number ranging from 300 to 850 points reveals to creditors, insurance and finance companies how well you manage your money. Credit scores reflect information found in your credit report, such as your payment history and debt amount. Because a credit score impacts your ability to get additional credit, qualify for a loan or insurance and determines what interest rates you pay, the Federal Trade Commission suggests you learn your score.

Your credit score impacts your approval rate for new credit and the finance terms offered. A high credit score reflects a positive payment history, so card limits will be higher and interest rates offered will be lower. Those with low credit scores are often squeezed out from traditional credit card markets and limited to using secured credit cards, a type of card that requires a bank deposit for the amount of credit extended.

Credit scores impact your ability to secure a home or car loan. Although a lender considers other factors such as your income level and job stability for loan qualification, your credit score also influences the amount a bank is willing to lend you and on what terms. Higher credit scores qualify for lower rates and higher loan amounts. Conversely, if your credit score doesn't fall within a specific point range acceptable to the bank, you may fail to qualify for a loan.

Your credit score can impact your ability to qualify for some insurance plans, according to the Insurance Information Institute. Credit scores are used, along with age, gender, claims filed and driving record, to generate an insurance score, a number which helps an insurer select future policyholders and determine what rates they pay. A 2004 study by the Bureau of Business Research at the University of Texas found there is a correlation between a person's credit score and insurance risk. Those with lower scores statistically file more claims and so pay a higher premium than those with higher scores.

Find out your credit score before you apply for a loan, credit card or purchase an insurance policy. You can order your credit score for a fee from either the Fair Isaac Company or from one of the three credit bureaus, Experian, TransUnion or Equifax. In general, a score below 600 is poor and a good score is 750 points or higher. Eliminating debt and paying your bills on time can improve your score and result in higher credit limits and lower interest and insurance rates.

The Removal of a Collection Agency From a Credit Score

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If you receive your credit report and spot an account erroneously listed in collections, you have the right to have it corrected or removed. Accounts in collection should automatically disappear from a person's credit report after seven years, but if you want it removed before then, you will need a good argument along with proof that the inclusion of the collection agency is not justified. Having a collection agency removed from your credit report will not only require proof but your persistence in making certain it gets corrected.

Instructions

Get a copy of your credit report from each of the three major reporting agencies: Equifax, TransUnion and Experian. Call 877-322-8228, visit the AnnualCreditReport.com website or complete an Annual Credit Report Request form found on the Federal Trade Commission website and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Verify that a collection agency is listed on your report in error. Make certain you have a valid reason the collection notice should not be on your report. For instance, if the account does not belong to you or if it was paid in full before going to collections, you have valid arguments for disputing it and having it removed.

Write to the collection agency and dispute the account in question. Request that the account or collection notice be removed from your credit report. Include supporting documents, such as proof of payment, along with your letter. The collection agency's address should be listed on your credit report.

Contact the credit reporting agencies. You can dispute items on your credit report online or in writing through the postal mail. You will need the item number for the account in collections from the credit report for the specific credit reporting bureau you are contacting. Again, request that the account or collection notice be removed from your credit report and include supporting documents, such as proof of payment, along with your letter. The credit reporting agency's address for disputes should be listed on your credit report.

Follow up with the collection agency and credit reporting bureaus, and be persistent. Collection agencies will sometimes deny requests for removal, and the credit reporting agency can follow suit. If this happens, write the credit reporting agency again and request an appeal of its decision. Resend your supporting evidence. According to the Fair Credit Reporting Act, you are within your rights to have inaccurate information removed.

How to Get a TransUnion Credit Report by Mail

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Everyone is entitled to a free annual credit report from each of the credit reporting bureaus. Usually, you can access them online, but sometimes you'll have to write the company with additional information. This is how to get a TransUnion credit report by mail.

Instructions

Write a request to TransUnion to get your credit report by mail. There are times that you can get your credit report over the telephone or the internet. The address to write your request to is TransUnion, P.O. Box 1000, Chester, PA, 19022.

Pull out some pen and paper and write a letter to TransUnion that you want your credit report. In your request for a TransUnion credit report you must include the specific information to verify your identity. Make sure to include your first name, middle initial, and last name also including anything such as Junior or Senior plus your current mailing address and your previous mailing addresses for past two years including zip codes. To prove your current address send a copy of your Driver's License which will also prove your date of birth, but be sure to write your birth date on the request along with the rest of your information. Include in your request your current phone number as well as the name of your current employer.

You will need to include your social security number to get your credit report from TransUnion. You'll have to prove your social security number like your address by making a copy of something that shows your social security number on it which can be your Medicare card or a letter from the Social Security office. Do not send in originals. Make sure to sign your request.

Make a copy of your credit report request for your personal records. Affix the correct amount of postage to prevent your request from being sent back. Analyze your credit report carefully for errors once you receive it.

If you are concerned about your confidential information going through the mail then go to the post office and send the credit report request return receipt requested via priority mail. Once TransUnion receives your request it will be processed within four working days then they will send you your credit report which will hopefully arrive around six to eight days later.

How Much Will a Credit Score Rise With a Paid-Off Credit Card?

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How you use your credit card -- and the payments you make on it -- help determine your credit score. While paying off any credit card debt you incur is admirable, the amount that doing so impacts your credit score will vary. In certain situations, paying off your credit card may even prove detrimental to your credit rating.

You have more than one credit score. Not only do you have a separate credit score with each credit bureau, lenders use different credit scoring models when determining your ability to repay new credit cards and loans. Each credit scoring formula differs, but all use your credit report information when calculating your score.

Because everyone's past credit history varies, the impact that positive and negative entries have on credit scores also varies. Thus, there is no clear way to estimate how much your credit score will increase should you pay off your credit card debt.

The amount your credit score will increase after paying off your credit card depends in part on how much you owed. In general, the higher your credit card balance was before you paid off the account, the greater the impact on your credit score.

This is because the major credit scoring models, such as the FICO model, depend partially on a ratio of the amount you owe to your spending limit when determining your score. The distance between your balance and your spending limit represents your credit utilization rate. A high credit utilization rate hurts credit scores while a low one is beneficial. Thus, you'll see a greater positive change to your credit scores after paying off high balances.

One of the major mistakes consumers sometimes make after paying off their credit card accounts is closing the account altogether. While closing your credit card account rids you of the temptation to accrue more debt, doing so lowers your total credit utilization rate. When this occurs, your credit score will naturally drop. Avoid closing your credit card account after paying off your balance in order to preserve your good credit rating.

If paying off your credit card balance isn't an option, consider paying it down instead. Paying down your balance automatically lowers your credit utilization rate, increasing your scores. You gain the same benefits from carrying a particularly low balance as you would from paying off the account.

Provided you pay your credit card provider on time, the company may agree to increase your spending limit. Asking for a spending limit increase has the same effect as paying down your credit card balance because it decreases your credit utilization rate -- increasing your credit scores.

Credit Rating Calculation

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Your credit score is a three-digit number that has a significant affect on your ability to get credit cards, car loans and mortgages. Knowing what factors go into your credit score will help you manage your finances to maximize your score. The scores are calculated by the three major credit bureaus: Experian, Equifax and TransUnion.

The most common credit scoring algorithm is designed by the Fair Isaac Corporation, also known as the FICO score. When credit bureaus calculate your credit score, they take into consideration your payment history, amounts you owe, length of your credit history, how much new credit you've recently applied for and the types of credit you've used. Your payment history and amounts you owe are weighted most heavily while your new credit and types of credit are least weighted.

The credit score matters any time that you want to to get a new loan or line of credit. Instead of relying on personal knowledge of applicants, lenders simply look at the credit report and credit score to determine the creditworthiness of a borrower. If your score is too low, you will not be approved for loans and lines of credit. If you have a positive credit score, you will be able to get lower interest rates because you appear to be a better credit risk.

When you request your credit score from the three major credit bureaus, you may notice that not all three scores are equivalent. This is because the information that each bureau has about your financial history may vary slightly. For example, one credit card may report your payment history to Experian and TransUnion, but not to Equifax. While a different card appears on your Equifax and TransUnion reports, but not your Experian report. However, if you see significant differences, check carefully for errors on the report.

One of the best ways to improve your credit score is to pay down the amounts you owe, particularly the amount on revolving credit lines. However, since this may not be an option for everyone, there are other steps you can take such as minimizing the number of new applications for credit and keeping your older credit cards to maximize the length of your credit history. Also, dispute any errors with both your the credit bureau and the creditor.

Tuesday, July 31, 2007

Instructions

Monday, July 30, 2007

Credit Utilization

Ideal Utilization

Potential Consequences

Increasing Your Limits

Lists

Update

Transmission

Free Credit Report

Major Agencies

Tuesday, July 24, 2007

Time Frame

Significance

Rapid Rescoring

No Updates

Credit Reports

Credit Scores

Reporting Accounts

Utility Companies

Saturday, July 21, 2007

Basic Differences

Credit Report Basics

Your FICO Score

Details in Your Credit Report

Differences Between Credit Reporting Agencies

Thursday, July 19, 2007

Disadvantages

Benefits

Considerations

Tip

Co-Signing Basics

Primary Borrower Responsibilities

What Builds Credit?

Alternatives

Wednesday, July 18, 2007

Benefits

Disadvantages

Considerations

Warning

Credit vs. Debit Card

Monthly Payments

Late Payments vs. On Time Payments

Provide Explanations

Tuesday, July 17, 2007

Considerations

Benefits

Potential

Warning

Monday, July 16, 2007

Identification

Potential

Considerations

Tip

Sunday, July 15, 2007

Instructions

Saturday, July 14, 2007

Development of Financial Markets

Credit Rating Agencies Help Regulate Financial Markets

Estimation of Risk Premiums

Enhanced Transparency in the Credit Markets

Standardization of the Evaluation Process

Friday, July 13, 2007

Impact of Loan Applications

More Important Factors

Managing Your Reports

Managing Your Credit

Credit Reports

Credit Scores

Removal

Rights

Thursday, July 12, 2007

Credit Reports

Credit Utilization

Closed Accounts

Other Considerations

The Facts

Time Frame

Interest Rates