October 2009 ~ Personal Finance and Money Management

Friday, October 30, 2009

How to Read Aging History on Credit Reports

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Each person is entitled to an annual free report on his credit from each of the three main credit-reporting agencies: Experian, TransUnion and Equifax. Information about identifying information, credit history, public records and credit inquiries is included in the report of each agency. Although each of the three covers the same basic areas, their report formats differ. The information contained in the reports also varies based upon whether the creditor reports information to a particular agency. An important area to review is the aging history for each account found in the credit history section.

Instructions

Turn to the section of the credit report labeled "Credit Items" or "Accounts in Good Standing." Accounts that fall under either of these sections might contain information about payment history.

Identify the "Account History" field in the middle section of each account.

Read the statement in the "Account History." The statement lists every payment that was not made on time, and the number of days it was past due (using 30-day increments), as of the date the creditor provided information to the credit reporting agency. The length of the history period will vary by creditor, but it's generally the same length of time the account has been open.

Turn to the section of the credit report labeled "Adverse Accounts" or "Satisfactory Accounts." Accounts that fall under either of these sections can contain information about payment history.

Identify the series of boxes with a month indicated underneath at the bottom of the account.

Read the symbol in the box corresponding to a month. Each box will have a code in it. "OK" means the loan was current that month. If the payment was 30 days late that month, the box will contain "30." The same format is used to denote payments that were 60, 90 and 120 days late. The box will have an X if the payment status is unknown, and N/A if the status is not applicable. The number of boxes shown will vary by creditor, but it generally corresponds to the length of time the account has been open. A key is included in the "Account Information" tab.

Turn to the section of the credit report with "Account Information." Accounts are placed under various subheadings depending upon type (mortgage account, revolving accounting, installment account.)

Identify the "Payment History" table at the bottom of the account. The table lists every month in a year for the last seven years.

Read the symbol in the box corresponding to a month. Each box has a code in it. A dot means the loan was current that month. If the payment was 30 days late in a given month, the box will contain "30." The same format is used to denote payments that were 60, 90, 120, 150 and 180 days late. Other codes include CA for collection account, "F for foreclosure and CO for charge-off. The payment history key is included in the credit report.

Does an Apartment Guarantor Affect Credit?

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Qualifying for an apartment on your own can be difficult, especially if you have a limited credit history or have recently started a new job. A guarantor, or cosigner, can help you qualify for the apartment of your dreams. While having a guarantor does not impact your credit, it you fail to uphold your lease agreement, both you and your cosigner's credit may suffer.

Guarantors are usually parents or other relatives but may be any person who is financially able and willing to vouch for your qualifications as a tenant. By cosigning on your lease, a guarantor is legally agreeing to pay your debts if you, the primary account holder, fail to do so. If you do not meet a leasing agent's qualifications, your guarantor must. Excellent credit and proof of financial stability are basic requires for a potential cosigner.

Due to an increase in the prevalence of credit fraud, the Fair Isaac Corp., which assigns credit scores based on a consumer's determined creditworthiness, has changed its policy regarding guarantors. In the past, people with a credit guarantor would be able to piggyback, or receive authorization to the credit card account of their guarantor, as well as an immediate improvement in their credit score. In an attempt to reduce this type of fraud, Fair Isaac no longer looks at cosigner's credit scores when determining a consumer's credit rating.

In large urban areas, where the competition for housing can be stiff, leasing agents often require guarantors to meet strict requirements. In New York City, guarantors for otherwise unqualified applicants may be required to make 80 to 100 times the monthly rent in annual salary and provide bank statements, investment records, and other financial proof of their reliability. Failing to uphold your rental agreement could result in your cosigner being held financially liable for thousands of dollars, which could negatively impact his credit score.

Family members may be willing to cosign on your lease, but you may want to consider carefully before allowing them to do so. If you lose your job or become sick or injured, you may no longer be able to pay your rent, making your cosigner liable for payment. Likewise, since both your names would be on the lease, your credit as well as his could be impacted if the debt goes to collection or legal action is taken against you. Seeking a guarantor through a private agency may be a better alternative.

How to Increase My Credit Score With a Merchant Line of Credit

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A merchant line of credit is an additional credit line used for business or corporate financial purposes. Because a merchant line of credit acts like a regular line of credit, a merchant line of credit and business credit card have the potential to affect both your personal credit score and your business's credit score (i.e., PayDex, the numerical credit score assigned to businesses by credit bureaus).

Instructions

Understand how a merchant line of credit interacts with your personal credit score. A merchant line of credit will not directly affect your personal credit score, though it will affect your business's credit score (PayDex). However, adding a merchant line of credit to your financial portfolio can strengthen (but not raise) your personal credit score by adding an additional level of measurement that financial institutions will see when reviewing your personal credit history.

Apply for a merchant line of credit by opening a business credit card with the financial institution of your choice. When you apply for a merchant line of credit, the financial institution will run a credit check on your personal credit score because your business will have no credit history under its own name. Thus, only apply to banks or financial institutions that will accept your application based on your personal credit score.

Consider opening a Data Universal Numbering System (DUNS) account. Your DUNS account number is a nine-digit identification code used to track businesses and is recognized by most major world governments. Many retailers, such as Viking or ULine, require a DUNS account number before your business can open a merchant line of credit with them.

Manage your merchant line of credit appropriately. Pay your business bills on time, especially to retailers that utilize your DUNS number and thereby report your financial standings directly to the D&B (the organization that manages business credit scores and the PayDex).

Maintain activity on all merchant lines of credit and business credit cards. Failing to utilize your merchant line of credit regularly will cause your business's credit score to fall.

Does Cashing a Bad Check Affect Your Credit Score?

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It may not be as embarrassing as actually writing a bad check, but cashing a bad check may cause headaches, especially when the original check writer fails to make good on the draft. In most states, the person who cashes the check is responsible for it, and depending on the severity of the situation, the person who cashed a bad check could end up with a debt judgment that appears on his credit record.

Although the laws of each state differ, most states, with minor variation, adhere to the model uniform commercial code. The UCC, in general, assigns responsibility for a negotiable instrument to each person who is a "holder in due course" -- that is, a person who is entitled to the proceeds of the instrument. When a person writes a check to another person, and the recipient intends to cash it, the organization that negotiates the check can only take action on the person who cashed it. It's up to the person who cashed it to take action against the check's maker.

The UCC grants exceptions for "restricted endorsements" -- that is, a condition that is applied above the signature of the person endorsing (or signing) the back of the check. For example, if a person wrote "without recourse" above his signature, the person who cashed the check is legally barred from taking action against the person who signed it. Most banks and commercial check-cashing establishments will not cash a check with a restricted endorsement.

If Bob wrote Sally a personal check for $200, and Sally had it cashed at the service counter of her local supermarket, then the supermarket will contact Sally if Bob's check bounces. The market will not contact Bob. Sally will have to reimburse the supermarket for its loss -- including any applicable fees -- and then Sally will need to be reimbursed by Bob for her loss. She could also refer the matter to the local prosecutor.

If a person is unable to make good on the bad check that she cashed, the bank or company that negotiated the check can either sue her or send her to collections. In this case, a derogatory record will appear on her credit report -- either the collection account or a civil judgment. At this point, the person who cashed the bad check has a credit hit. However, it takes months before a bad-check dispute would get to this level, so if the person who cashed the check is diligent about making good on the bad check, she usually can avoid a negative credit record.

People with unresolved bad checks, whether they cashed them or wrote them, could be listed in check acceptance databases like Chexsystems and find that they cannot write or cash checks with certain retailers until the negative record is cleared up. This is technically not a credit record, but placement on a national bad-check registry can affect a person's ability to pay with a check for future transactions.

How to Dispute Late Charges Reported to Credit Bureaus

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The Fair Credit Reporting Act (FCRA) allows you to dispute incorrect entries on your credit report. Military Money says the credit bureaus make mistakes frequently, as do the companies that report your financial information. This could include incorrectly reported late charges, which will bring your credit score down. You can dispute these charges and force the credit bureaus to remove them if they are truly in error.

Instructions

Determine which credit bureaus are listing the last payments. Equifax, Experian and TransUnion each compile their own credit reports, and the information can differ. The three bureaus must each give you a free credit report on request every 12 months. The Federal Trade Commission says to order the reports through the annualcreditreport.com website or call (877) 322-8228.

Determine whether the information is incorrect and what is wrong with it. You can only dispute late charges if they are being reported in error or if there is some other inaccuracy on the item. Otherwise the credit bureaus will label it a frivolous dispute and refuse to investigate it.

File a dispute with any of the credit bureaus that are reported the late charges incorrectly. Use their online forms and specify your reasons for believing the information is wrong. Valld reasons include payment dates, amounts, account number, balance on the account, credit line, high balance and virtually anything else that is being reported as part of the item.

File a dispute with the company reporting the late charges if the credit bureaus rule against you. The bureaus have 30 days to investigate your complaint. They must remove the late charge information if they cannot confirm it. They can leave it on your reports if they believe its validity has been proven. You can contact the original creditor yourself, according to Military Money. Ask them to stop reporting the late charges if they cannot provide supporting documentation or other proof of validity.

Does Getting a New Credit Card Raise Your Credit?

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Building credit is essential if you are interested in obtaining financing and attractive interest rates in the future. To build up a credit profile, many people open credit card accounts. While opening a card account may not directly affect your score by a certain number of points, it can help increase your score indirectly.

One way that opening a credit card account could potentially affect your credit score is by altering your credit utilization ratio. This ratio is a measure that looks at how much open credit you have in relation to the amount of debt. When you have balances below 30 percent of the credit amount you have available, this reflects positively on you. By opening a new account, you could get a more favorable ratio, which would increase your score.

Simply opening a credit card account may not help you build your credit score that much. At the same time, opening a credit card account can help you because it gives you the ability to make regular purchases with it. If you make small purchases with your credit card and then pay off the balance each month, you can help build your score. The most important factor when calculating your credit score is your payment history. If you make your payments on time every month, this can significantly boost your score.

Even though opening a new credit card could potentially help your credit score in some situations, it can also work as a detriment to your score. According to the credit-reporting bureau Experian, having too many cards with large balances or having too much credit available can hurt your credit score. This means that at a certain point, opening another credit card could be bad for your score. If you rack up large balances on your card, it will definitely hurt your score.

Instead of opening only credit card accounts, you can get some additional types of credit to help boost your credit score. According to the financial information website Bankrate, having several different types of credit in your credit mix is beneficial to your score. For example, if you have an installment loan, such as a car loan or student loans, in addition to your credit card accounts, this can work in your favor. Focusing too much on credit card accounts could work against you.

How Lines of Credit Affect Your Credit Score

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Maintaining a high credit score requires finding the right balance between credit and debt. Having lines of credit, such as credit cards, is a way to establish credit. Various factors determine a credit score. Raising a credit score involves more than just making timely payments. Depending on how it is managed, the line of credit has a positive or negative affect on a credit score.

Most creditors report customer information to credit bureaus on a monthly basis. Payment history impacts a credit score the most, accounting for 35 percent of a total credit score. Bills paid on time will have a positive affect on a credit score. If payments are consistently late, the credit score will drop.

Credit utilization accounts for 30 percent of a credit score. Credit utilization is the balance compared to the total amount of available credit. A line of credit that has reached the limit can drag down a credit score. Ideally, lines of credit should carry low balances and high credit limits. People should pay balances in full each month to increase their credit score.

An established account typically has a more positive effect on a credit score than a newer account. The length of time an account is open is 15 percent of a credit score. A person can raise her credit score by keeping her oldest accounts in good standing. Maintaining a lengthy history with a credit account shows lenders the customer's ability to meet her financial commitments.

Consumers often do not realize the importance of having a mix of credit lines. This type of credit is 10 percent of a credit score. People should aim for a combination of credit that includes credit cards, installment loans and secured debt.

Applying for too many credit cards can lower a score. Credit inquiries account for 10 percent of a credit score. Applications for credit initiated by the consumer are considered "hard pull" inquiries. When a person obtain's her own credit report, it is classified as a "soft pull" inquiry, which does not lower the credit score. Consumers are encouraged to monitor their credit report annually.

Quick Ways to Get a Credit Score to 700

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A good credit score can make the difference in being approved for a loan. Even if you have had circumstances that have caused your credit score to decrease, there are steps that you can follow to raise it to 700.

If you need a loan, you could applying for a secured loan at your bank and by making payments on time, you will raise your credit score. Open a savings account and deposit a secured amount into the account, maybe $500 to $600. After you have opened the savings account, apply for the secured loan. Link the loan to the savings account. If you fail to make the payments, the bank will use the savings account to pay the loan. Regardless of your credit history, many banks approve these types of loan because they have the savings account as collateral.

You can improve your credit score by being an authorized user on the credit card account of someone else who has good credit. If you can convince a friend or family member to add you to their credit card account as a joint account holder, your credit report will show their credit card account. If they pay their account on time, it will improve your credit score.

Paying your bills on time will help you reach your credit score goal of 700. Paying a bill late even one time can affect your credit score and cause the rating to decrease. If you have problems remembering to pay your bills on time, try using an automatic bill-paying program. Many banks offer these services for free and it eliminates the hassle of you trying to remember to pay.

How to Delete Inquiries in a Credit Report Dispute Letter

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The Fair Credit Reporting Act requires creditors to report complete and accurate information to the three credit bureaus: TransUnion, Equifax and Experian. The Federal Trade Commission requires the three credit bureaus to provide a consumer with a free copy of his credit report each year. Any consumer who finds inaccurate information has the legal right to dispute this, and if the creditor cannot verify the information or does not correct it, the account is removed from your credit file. A dispute is often handled by writing a dispute letter.

Instructions

Review your credit report, and circle or highlight the credit inquiries that you did not authorize and wish to dispute. A credit inquiry is listed on your credit report each time a potential lender requests your credit report. You can include any additional incorrect information found on your credit report in the same dispute letter.

Write a brief letter explaining that you have found inquiries that you did not authorize in your credit report and would like the inquiries removed. List each inquiry, and include the name of the creditor and date of inquiry.

Locate the dispute address listed in the credit report. Mail the letter to this address. Mailing the letter "certified, return receipt requested," provides you with the date the letter was accepted and proof of receipt.

Allow 40 days for the credit bureau to investigate and mail you a response. Redispute if necessary.

Ways to Rebuild a FICO Score

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FICO scores are the most commonly used credit score by banks and other lenders in determining how creditworthy a borrower is. The higher the score, the less likely the borrower is to default on a loan, which makes the borrower a greater credit risk. Banks are more likely to accept applications for loans from people with higher scores and offer them lower interest rates. If you have a low score, it will take time but you can rebuild your FICO score.

Your payment history accounts for the largest portion of your credit score at 35 percent. While there is nothing you can do about your past payments, you can start ensuring that in the future you make your payments on time. Most credit information remains on your report for seven years except personal bankruptcy, which stays on for 10 years, so eventually your poor credit can be erased if you do not continue to leave a trail of late payments or defaults. Also, your recent credit information is weighed more heavily than in the past, so your score will start to improve as soon as you start making your payments.

Closing accounts that you have had delinquencies or other negative information from will not remove that information from your credit score. Closing accounts that you no longer use might actually hurt your credit score. Part of your credit score is based on the ratio between how much credit you have available to use and the amount of credit you are actually using. Obviously, paying down the debt to reduce this ratio is the best option. However, if you close accounts you are fighting your attempts to lower this ratio because you are decreasing your available credit. For example, if you have two credit cards, each with a credit limit of $1,500, your total available credit is $3,000. Assume you only use one and carry a balance of $1,000 on it, you are using 33 percent of your available credit. If you close the other card, you would only have $1,500 in available credit and your percentage of credit use would jump to 67 percent.

Each time a lender checks your credit report the inquiry is recorded and your credit score takes a small drop. If you are applying for a number of credit cards in a short period of time, you appear desperate to lenders who become less likely to give you loans. If you do not have a very long credit history, only apply for new credit when you need it. There are two types of applications that can circumvent this rule: when you apply for a car loan or a mortgage. As long as your applications for either type of loan all occur within a short time of each other, they will all be counted as one inquiry for the purposes of calculating your credit score.

How to Remove Bad Credit After 7 Years

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Negative credit accounts, such as charge-off accounts or collections, have a limited amount of time that they can appear on your credit report. After seven years, most negative accounts are automatically deleted from your credit report, according to the Federal Trade Commission. Certain types of accounts take longer to drop off of your report, such as bankruptcies or judgments, which take 10 years. If the old negative accounts do not fall off of your report after the seven-year mark, you can dispute the account to get it removed -- unless it's a negative account, which is reported for 10 years. Dispute negative credit accounts directly with credit reporting agencies reporting the negative account. TransUnion, Experian and Equifax, the three primary credit bureaus, offer an online dispute process for removal of negative information.

Instructions

Open your Internet browser and navigate to TransUnion's credit dispute center.

Log in to your TransUnion account. If you have ever used TransUnion's credit monitoring, credit report request, or free annual credit report request features, you will already have a TransUnion account. Otherwise, click "First Time, Click Here?" and register for a useraccount.

Click the "Credit Report" tab. Choose "Report Inaccuracy." Click "Submit Dispute." Scroll through the list of accounts and click "Request Investigation." Choose the reason for investigation as "Account too old." Click "Submit" to submit the item for investigation.

Open your Web browser and navigate to Experian's online dispute Web page.

Order a credit report from Experian. You can use any of the credit report options from the Experian page, but the company does require a recent report from the last 90 days to start your dispute. You can get a free copy of your Experian credit report if you are denied credit or if you have not yet requested your free annual credit report.

Click "Yes, I have a credit report number" if you have a recent Experian credit report or click "Log in" to use your credit monitoring account.

Enter your report number, state, social security number and zip code in the fields provided. Check all boxes below these fields and click "Submit."

Click "potentially negative" items. Click the name of the item that needs to be removed from your credit report. Click "Dispute this item." Choose "Other Reason" and type that the negative account is older than seven years and needs to be removed from your report. Click "Submit Your Dispute."

Open your browser and navigate to Equifax's online dispute page.

Input your 10-digit credit report number if you have a recent credit report from Equifax. Enter your name, social security number, birth date, address, your last address if you moved within the past two years and your email address. Enter the security code and click "Submit." Answer the identification questions to confirm your identity. Click "Submit."

Click "Start a new dispute."

Click "Negative Information" in the sidebar of your credit report from Equifax.

Click "Dispute this item" next to the item that is older than seven years. Type that the account is past its reporting date in the text box. Click "Add Dispute."

How Frequently are Credit Scores Updated?

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Most people have heard of a credit score. They know there is a "magic number" that can affect their ability to get a loan or mortgage and the terms they will be offered if they are approved. However, they may not know how often this number is updated. Credit scores are fluid and change frequently because they are based on your financial information. That changes rapidly as you make or skip payment, open new accounts and do other activities. You can influence your credit score by some extent if you know how this works.

Your credit score is a three-digit number that acts as an indicator of your credit worthiness. It is calculated via a formula that uses information on your credit reports. The most commonly used credit score formula was developed by Fair Isaac Corporation. It is known as the FICO score. Experian uses the FICO score, while TransUnion uses Empirica and Equifax uses Beacon.

A credit score is very significant because it can affect your ability to open credit card accounts or get other types of loans, such as car loans, personal loans and mortgages. It may also be considered by insurers and employers. If you have a low credit score, you may be unable to get credit. If you do, you will most likely pay a higher interest rate. A low score can also cost you a job or insurance policy approval. Your score can vary from month to month, so it may be high enough to qualify for a good interest rate one month, but negative information can bring it down by the following month and put you in a higher risk category.

Your credit score is influenced by a number of different factors, all of which are related to your financial history and current accounts and debt level. According to FICO, the factors with the most influence are your payment history for credit accounts and the amount you owe to your various credits. The number of accounts you have and your lines of credit also play a role. If you are late with your payments or open a signficant number of accounts in a short period of time, your credit score will be negatively affected very quickly.

Because the factors that affect your credit score can change so rapidly, the score is calculated every time someone requests it. However, your credit score is usually updated on a monthly basis so your score will not change over the course of a month even if it is requested by multiple parties. Once that time frame has passed and new information is placed on your credit report, your credit score will reflect it the next time it is requested. This is true for both positive and negative information.

Your credit score is only as accurate as the information on your credit report. You are entitled to one free copy of your report from each of the three major credit bureaus upon request every year. Get copies of your report and review them thoroughly for accuracy, especially if you plan to be applying for credit soon. Dispute any incorrect negative items, as they must be removed if the credit bureau cannot verify their accuracy. Once they are removed, it will have an immediate positive effect on your credit score because they will not longer influence it when it is calculated.

How to Put Rental History on a Credit Report

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A potential tenant's credit report is an important tool in determining how much risk you are taking in renting to them. Many property owners require a clean credit report for all of their tenants. If you own a property that you rent out, adding rental history to a tenant's credit report can be an incentive for them to rent from you or a deterrent from making late payments.

Instructions

Keep detailed records of your contracts and transactions with your tenant. This includes the rental lease, any lease addendums and payment receipts. You may be asked to provide proof of your business relationship and these materials can help you do that.

Go directly to the source and report right to a credit bureau. You must pay a membership fee to do this, be able to report on at least a hundred credit accounts each year and be able to format the information for electronic reporting. Although this option allows you to put good and bad credit information on a tenant's credit report, it is meant for the property owner who has many properties or at least 100 rental properties.

Use a credit reporting service if you only need to report a few accounts each year. A credit reporting service will take your information and report to the credit bureau for you. This option also allows you to add positive and negative information to the tenant's credit report, but does not require the membership that the credit bureau does. They also tend to charge a flat fee per credit account instead of a yearly membership fee.

Report a delinquent credit account to the credit bureau using a collection agency. One benefit in using a collection agency is that it will also handle any collection attempts for the debt. The agency has its own membership with a credit bureau and reports to a tenant's credit report on your behalf. Just remember that this is only an option with delinquent accounts and the collection agency will charge you a percentage of debt collected. This can be expensive if you are owed a lot of rent.

Does Breaking a Cell Phone Contract Affect Your Credit Score?

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Breaking a cell phone contract only affects your credit score if the carrier files a report with any of the three credit reporting agencies. TransUnion, Equifax and Experian compile consumer information given to them by creditors and consumers, as well as information found in public records. Your credit score is a mathematical calculation of the negative and positive information contained in the credit report.

Not every cell phone carrier reports monthly account payments to the credit bureaus. If your cell phone carrier reports payment status, breaking the cell phone contract early without complying with the contract terms may negatively affect your credit score. The debt balance of a broken contract may also be turned over to a collection agency. Fees and interest may also be added to the outstanding amount due on the contract. Both the cell phone carrier and the debt collector have the right to report the status of the account as a negative entry to the three credit reporting agencies.

The Fair Credit Reporting Act allows the three credit bureaus to list negative entries on your credit report for up to seven years. Negative entries, such as breaking a cell phone contract, affect the payment history portion of your credit score. Payment history has the largest impact on your overall score, accounting for 35 percent of the total. The second area of your score that breaking a contract can affect is the outstanding debt portion. Outstanding debt, or the ratio between available credit and total debt, accounts for 30 percent of your score. Breaking the contract can increase the outstanding debt while reducing the available credit.

Breaking a cell phone contract may not affect your credit score if you comply with the terms of the contract. For example, if the contract states that you can terminate under certain conditions, comply and the company has no valid reason to report your account as a negative entry to the credit bureaus. Conditions for breaking the contract early may include fees, returning equipment and paying for any services used.

Whenever a consumer signs a cell phone contract, he must receive a copy of the agreement. Most major cell phone carriers also have a copy of their contract available online. Check the fine print to determine what options are open to you if you need to break the contract. If the contract is not available to you, call the carrier and discuss your options with customer service. Its possible that you can break the contract without difficulty and avoid a negative entry on your credit report.

What Is an Alternative to a Credit Report?

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A credit report details the credit actions of an individual in the past, so that current lenders can get a good idea of the potential borrower's risk and trustworthiness. Credit reports do not record every credit account ever opened by the borrower -- there is typically a cutoff date so the report only lists credit extending back seven years. But within this limit the report provides detailed information that helps lenders make decision about how to offer credit and what interest rates to charge. Some borrowers with less-than-healthy credit are eager to find alternatives to using their credit report.

The issue of using a credit report is easily sidestepped if borrowers simply switch to paying with cash instead. Of course, the cash strategy does require concessions. Buyers must keep to a strict budget to save up for larger purchases, and cash purchases are not particularly feasible for items with price tags above several thousand dollars.

A single credit report may contain negative information, but if a borrower believes that one report does not detail his financial position accurately, he can try to convince a lender to check with one of the other credit bureaus. Or, if the lender has the resources, it can check other factors including the borrower's current income and assets. Sometimes a high income can be more important than a good credit report in the eyes of a lender.

Credit scores are derived from credit reports, but can also be thought of as a useful alternative. Many creditors will look only at a credit score to make quick decisions about lending. This can help borrowers who have a high score but whose full credit report may detail past actions that would affect lender perceptions negatively. The different credit rating agencies each issue their own credit scores, which may vary depending on the formulas used to create them. Thus, a borrower's score from one agency may be higher than the score from another.

Payment-based reports and scores use alternative financial factors instead of credit to help create a credit score. The Payment Reporting Builds Credit score is one of these alternatives. It takes into account such things as child care payments and utility payments so that people with little credit or bad credit can still qualify for loans.

Why Does a Teen Need to Start a Credit Score?

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One key component of a person's financial life is his credit score, a three-digit number ranging from 300 to 850 that consumer lenders use to approve or deny applications for loans or credit cards. Teenagers and young people generally do not consider finances, preferring to focus on school, social activities and other aspects of life. Nevertheless, establishing a good credit score as a teen carries many advantages.

Many students rely on loans to pay for the costs of attending college or university. Although college students do not need an established credit history to qualify for low-interest federal loans, such as Stafford and Perkins Loans, they do need already-established financial histories and good credit scores to qualify for private student loans. Having the option to take out private loans is important for students attending expensive colleges, because the government limits students to borrowing a maximum $5,500 per semester in federal loans.

Employers, including those hiring for entry-level positions typically filled by teens or college students, often check applicants' credit scores before making hiring decisions. A poor or nonexistent credit history could prevent a young person from getting his first job. For this reason, building a good credit score as a teen gives a person an advantage when looking for a part-time or entry-level job or internship position.

After graduating from high school or college, many individuals obtain loans to purchase cars and homes. Although these events are years away for most teens, a person's credit history is a long-term consideration. Credit cards and loans contribute to a person's credit score for as long as they are active, while negative credit information, such as collection accounts and late bill payments, stay on a person's credit report for seven years. Building a solid credit score as a teenager gives a person a head start on his adult financial life.

A student credit card is one way for a teenager to begin building a positive credit history. Student cards function much like their standard counterparts, except they typically carry lower credit limits and allow parents to view transactions. Additionally, the federal CARD Act states that teenagers -- or anyone under 21 -- need an adult co-signer or proof of sufficient income before opening a credit card. Most student credit cards report to the credit bureaus on a monthly basis, allowing teens without prior credit histories to begin building positive credit. To get a good credit score effect by using a student card, an individual must use no more than 30 percent of her available credit and pay the balance off every month.

How to Request a Credit Report by Mail

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A credit report is the key to understanding and improving your credit rating. It lists addresses of residences, car loans, mortgages, credit cards, late payments and bills not paid off. Each of these affects an individual's ability to successfully apply for loans, credit cards and even apartments. These reports offer a roadmap to improving credit scores. Federal law requires each of the three credit rating companies, Equifax, Experian, and TransUnion, to provide one credit report annually without cost, upon request.

Instructions

Go to the annual credit report website. This is the official website to request a free credit report from the three credit report companies: Experian, Equifax, and TransUnion. Similarly named websites offer the same service for a fee.

Click on the "request your report through the mail" tab. It will open a new page where you can download the form required to request a credit report. This form is in pdf format.

Fill out the form. Each company is required by law to provide one credit report free of charge per calendar year. You can choose to have one, two or all three reports sent to you. Checking the same company's report later in the same year will incur a fee, however.

Mail the form to:

Annual Credit Report Request Service

Box 105281

Atlanta, GA 30348-5281

The form will be processed and mailed within 15 days of arrival. It can take two to three weeks for delivery.

What Can Cause Someone's Credit Report to Be Blocked or Frozen?

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A credit freeze, also known as a credit block or security freeze, happens when someone tells a credit reporting agency to stop releasing information about his credit report. Only consumers can order a credit freeze, and only on their own credit reports. Credit freeze laws differ between states, so talk to an attorney in your area if you need advice about blocking your credit information.

There are three companies that every consumer should know about: Equifax, Experian and TransUnion. These companies collect information and maintain credit reports on every person who has ever used any form of credit. This information is valuable, and by controlling who sees it, a consumer prevents others from using this information to her detriment.

When you apply for new credit, such as a a new loan or credit card, your lender checks your credit report to determine what kind of borrower you are. If you've frozen your credit reports, the lender cannot discover that information. When this happens, the lender will not be able to grant your application regardless of your credit history. When you contact a credit reporting agency and order it to freeze your credit report, this effectively prevents you from opening new credit lines. However, the freeze is not permanent, and you can later have it removed.

A credit freeze stops your ability to get new forms of credit, but that isn't necessarily a bad thing. If, for example, you suspect you have been the victim of identity theft and that someone else is using your personal information to take out loans in your name, a credit freeze prevents further attempts and prevents further damage to your credit report. Credit freezes also prevent others from using your credit cards, and if you know you don't want to get a loan, this tactic can prevent identity theft in the first place.

The laws that govern security freezes differ between states, and not all states have laws that guarantee you the right to freeze your reports. However, the three credit reporting agencies allow voluntary credit freezes. To do this, you have to contact the agency whose report you wish to freeze, either over the phone, in writing or online. You must typically pay a small fee to freeze your reports or to later unfreeze it.

Is Credit Affected by Repossessed Vehicles?

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Vehicle repossessions cause problems by taking away a person's transportation, which may be needed to get to school, a workplace or other important destinations. There is also a major, long-lasting impact on the person's credit records. Lenders view repossessions as negative and weigh them with other factors in credit decisions.

A vehicle repossession is an action in which a car loan company claims the vehicle because the debtor defaulted on the payment contract. Carreon and Associates, a law firm focusing on credit issues, explains that most contracts are violated when a payment is late or skipped. Some lenders agree to accept late payments, but most states allow them to take the vehicle if they wish. Most state laws let repossessors take cars at any time of day without notice from almost any location, including private property.

A repossession brings down a person's credit score significantly because it shows the consumer was unable to meet a major financial obligation. The effect is worse if the person does not have several other accounts in good standing to offset the repossession. FICO, the biggest credit score company, explains that delinquent payments leading up to the incident also hurt credit records. A person whose vehicle was reclaimed by the lender may have a hard time getting other loans and credit cards and may be denied by insurers. FICO recommends paying down other account balances and making every payment by the due date to negate some of the repossession's effects.

A vehicle repossession stays on a person's credit reports for seven years, according to Carreon and Associates. During that period, it is visible by anyone who reviews the report and can be considered in credit, insurance and employment decisions, the Federal Trade Commission (FTC) advises. Its impact is negated by recent good credit records as time passes.

A car owner can get a repossessed vehicle back by paying the full amount of the loan, plus reasonable expenses, before it is resold. It then shows as a paid account on credit reports, although the prior delinquent payments are still there and still negatively affect the credit report. Some creditors let consumers redeem their cars by catching up on payments, but they are not required to do so, Carreon and Associates explains.

A consumer can stop a repossession by filing bankruptcy because the court grants a "stay" that forces lenders to cease collection efforts, but the bankruptcy itself is devastating to credit records.

Some consumers get repossessions erased from their credit records prior to the seven-year reporting period because of inaccuracies. The FTC explains that the federal Fair Credit Reporting Act lets people dispute any mistakes on their reports. Lenders and repossessors often make errors in their records that get reflected on credit reports, according to Carreon and Associates. Any consumer who finds such errors can dispute them with the credit reporting bureaus: Equifax, Experian and TransUnion. The credit bureaus must erase the repossession if the lender cannot provide correct information or ignores the inquiry altogether. This eliminates its credit effects.

Can a Collection Agency Legally Delete Paid Accounts?

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Although the major credit reporting bureaus don't like to widely publicize this fact, a collection agency can legally delete a paid account, called a "pay for deletion." However, a pay for deletion probably does not help your credit much. In some cases, attempting a pay for deletion is worse than just paying the debt.

A collection agency can delete an account. The debt collector can write the credit bureaus and state that the account was listed in error. Most collection agencies usually only agree to this arrangement when you pay the debt in full. Offering to pay a portion of the balance can still garner a "pay for deletion," but your chances of success go down as you pay less than the entire balance.

Even if you successfully negotiate a pay for deletion, it may not make a difference to your credit rating. Deletion of the collection account does not remove record of the original account. Missed payments and notation of a charge-off on the original account still negatively affect your credit rating. Only deletion of the account from the original creditor eliminates it from your record.

Demanding a deletion in return for payment can put you in a worse position that paying the account as requested. For example, if you ask for a deletion before negotiating a settlement, the debt collector may deduce that your credit rating is a high priority to you or that you have the money to pay the entire debt. It may then refuse to settle the debt and sue you or use the request for deletion as leverage for a higher settlement or payment in full.

If you negotiate any kind of deal with a collection agency, get it in writing and have someone from the company sign it, according to Brigitte Yuille of Bankrate.com. Verbal agreements are a legitimate contract, but very hard to prove. Ideally, you should offer payment to the original creditor, but larger banks and companies probably won't agree to a pay for deletion scenario because of administrative red tape required to approve such an agreement.

Building a Credit Score After Bankruptcy

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A bankruptcy is a federal court proceeding where the assets of a debtor are liquidated and the debtor is relieved of further liability. It is listed on your credit report and is perceived as a negative to prospective lenders. According to Fair Isaac, inventors of the FICO credit-scoring model, FICO scores range from 300 up to 850. A bankruptcy can lower your score by as much as 365 points. Repairing your score will require the reestablishment of your credit.

Instructions

Order your credit score. You can do this at the websites of the three major bureaus, Experian, Equifax or TransUnion, or at www.myfico.com. This will give you a starting point to measure your progress over time.

Apply for a secured credit card from a major bank. The amount of your initial deposit will determine your credit line, and you will not be able to charge above the amount of your deposit. Banks usually upgrade secured credit cards to unsecured within 12 to 18 months and then return your deposit to you, including interest.

Charge a small amount on your new, unsecured card, but keep the balance low. How much debt you carry accounts for 30 percent of your FICO score. Going over the credit limit on a credit card will lower your score.

Pay bills on time and in full each month. Thirty-five percent of your FICO score measures how well you pay your bills. On-time payments will gradually raise your score, since FICO gives more weight to recent activity. Late payments will ruin any progress you're trying to make.

Order a new copy of your credit report one month after your first payment is made. The Fair and Accurate Credit Transaction Act (FACTA) gives you the right to order one free credit report each year from Equifax, Experian and TransUnion. You can order reports by mail, phone or online at the bureau's website.

Check the "accounts section" on your report to ascertain if the bank reported your new account correctly. Look at the credit limit, balance and payment status. Also, verify that all accounts included in the bankruptcy are listed as such.

Dispute any inaccurate information with the credit bureau. Errors may lower your score. The FCRA requires that only accurate information appear on a credit report and gives you the right to dispute erroneous data. You can file a dispute online at the bureau's website, by mail or phone.

Apply for a second secured card six months after opening the first one. This will enhance your credit score since 10 percent of your FICO score reflects new credit; however, don't apply for more than one card at a time. Fifteen percent of your FICO score measures the length of a credit history. Each new account shortens that history and, thus, can lower your score.

Continue to manage both cards well by keeping balances low and making on-time payments. In a year, check your credit score again to measure your progress and track improvement.

What Makes Up Your Insurance Score?

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When shopping for insurance, the rates that insurance companies charge you can be drastically impacted by your credit history. Your insurance score is a numerical representation of your credit history that is calculated by insurance companies. Your score comprises several important pieces of information in regards to your credit history.

Your insurance score is very similar to your credit score that is calculated by credit bureaus. While this score is similar, it is not the same score that the credit bureaus use. An insurance score is a score that is calculated based on information in your credit report. This number is a way to summarize the information in your credit report. Insurance companies use this score because low credit scores tend to correlate with a higher volume of claims.

When calculating your credit score, the insurance companies look at several parts of your credit history. While many factors are in play, two areas have the most weight when calculating your score. The biggest factor is your payment history or previous credit performance. This one factor makes up 40 percent of your insurance score. The second biggest factor in calculating your credit score is your amount of current indebtedness. This makes up 30 percent of your insurance score.

Besides those two main factors, the insurance companies also look at a few of the factors. For example, the credit mix that you have also plays a role. This is a term used to describe having several different types of credit. The length of your credit history is also another factor that has some weight. This looks at how long you have had your oldest credit account open. Your pursuit of new credit also factors into the score.

Even though the insurance company does look at several factors when calculating your insurance score, some information is not included and does not apply. For instance, your age and your salary are two factors that are not evaluated in an insurance score. Your race, color or ethnicity will also not play a role. If you are in some type of credit counseling program, this information will also not be included in your insurance score. When an employer makes an inquiry into your credit report, this will also not count against you.

How to Erase Old Information in Your Credit Reports

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If you have information on your credit report that is more than seven years old and 10 in the case of bankruptcies, you can request the credit bureaus remove the information. Before you begin the process of removing old information from your credit report, first consider whether it's necessary. Of course, you want to remove any old negative information, but usually, it's a good idea to keep old positive information on your reports. The reason why is because even though the information is older, lenders still look at these accounts as a measure of your creditworthiness.

Instructions

Order you credit reports. You can do this by phone or online. See Resources for the three major credit bureaus website addresses.

Mark the information. Carefully go over all three of your credit reports and mark the old information you want to remove.

Write a letter or request for removal. Include the name of the creditor, account numbers and the reason why you are requesting the removal. Visitdebt-n-credit.com for a sample letter.

Check your credit reports. Requests to remove old information from your credit report cant take up to 30 days to complete. After this time, check your credit reports to make sure the accounts you requested for removal are gone.

Is There a No-Obligation Free Credit Score?

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You are entitled to a free credit report each year from all three major credit bureaus, but unless you pay for it, you are still in dark about your risk rating on the FICO scale -- the most popular credit score in the United States. While the credit bureaus and the Fair Isaac Corporation sometimes offer free credit scores, they are often conditional. In 2011, you may be able to get a risk-free credit score, but there is no guarantee.)

The credit bureaus and Fair Isaac sometimes offer a free credit score when you try out one of their services. However, this almost always entails giving them your credit card number. While the trial usually costs nothing, you risk forgetting to cancel the membership. Credit scoring companies bank on customers either liking the service or letting the charges run to make a profit on free scores.

Lenders usually perform a credit check whenever you request credit. If you are in the office when the creditor runs your report, he can show you a score and your report on his screen. This is one of the worst ways to get a free, no-obligation credit score, because you want to see your score and know if you should start rebuilding it before you start the credit application process.

In 2011, Congress approved the Dodd-Frank Wall Street Reform bill. A small provision in this legislation -- Section 1100F -- requires lenders to reveal a borrower's credit score when the lender rejects the applicant for credit or service based on data in his credit file. As of April 2011, the final regulations on the bill are pending, so nobody knows which lenders will have to furnish a score, because some creditors use credit reports for decision making but also other data in their credit risk models, such as insurance companies and driving records.

Consumers sometimes believe the credit bureaus are government entities, because they are referred to as "national credit bureaus." The term "national" comes from the fact that they are the only ones that serve lenders and consumers across the U.S. Thus you cannot use the Freedom of Information Act, which requires some federal agencies to reveal secret data, to obtain a score.

Your bank might offer free credit scores. However, most banks do not publicize this fact, so you might have to contact your banks' customer service department to find out if they offer this perk.

How Is the FICO Score Calculated?

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There are five components that determine the FICO score. The most important is a consumer's record of on-time bill payment, which counts for 35 percent. A payment that is more than 30 days late is especially damaging and may lower a FICO score by up to 100 points. The total amount of debt compared to income is next, accounting for 30 percent of the score, and the length of a person's credit history comes next at 15 percent. The recent past is weighted heavily, so a good credit record for the past 2 years will usually give you a good score on this part. Another 10 percent is based on the type of debt. Excessive unsecured debt, such as too many credit cards, counts heavily here; secured debt, such as mortgages, is superior. The final component is often misunderstood. Constantly opening and closing credit accounts can take off up to 10 percent. However, occasionally doing so is not damaging to your credit. You should keep some accounts open so you can maintain a record of timely payments, but you don't need to keep every account you open forever.

There are several factors that can affect how a FICO score is calculated. Tax liens, foreclosures and court judgments for nonpayment of debt hurt a credit score. Defaults on loans, especially student loans, also lower a FICO credit score. Bankruptcy works a little differently. It's not good to have a bankruptcy on your credit history, but when a person declares bankruptcy, the damage to the FICO score is usually offset by the fact that much of the information in the credit history is wiped. Consequently, the FICO score usually does not fall much lower than it already was. In addition, the Fair, Isaac, & Co. model compares future credit behavior to that of other people who have declared bankruptcy, not to the general population. This means good handling of credit following a bankruptcy can rebuild a moderately good score in a couple of years.

Everyone is legally entitled to a free copy of his credit report from each of the three major credit bureaus once a year, but these reports do not include your credit score. To get your credit score, you have to pay a fee to the credit reporting company or a third-party vendor, though you can use free online software to estimate it. Despite what you may see advertised, the Federal Trade Commission authorizes only one source for free credit reports, AnnualCreditReports.com. You can go to the FTC site or directly to AnnualCreditReports.com using the links below, or call (877) 322-8228 to order a free copy of your credit report.

What Is the Best Way to Repair a Credit Report?

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Credit reports are important to nearly everyone, regardless of financial situation. Obtaining auto loans, financing a home or paying for a college education can require a positive credit report. Many other items, such as auto insurance rates, utility deposits and job searches, can be affected by a negative credit report, resulting in higher payments or lost employment opportunities. Consumers have the ability to correct or repair negative information on their credit report by various means.

As dictated by the Free File Disclosure Rule of the Fair and Accurate Credit Transactions Act (FACT Act), consumers are entitled to a free copy of their credit report every 12 months, upon request. Each of the major reporting entities, Equifax, Experian and TransUnion, is covered by this act. Review a current copy of your credit report to analyze details and identify possible errors or items that need to be updated.

Correcting errors, missing or outdated information in your credit report can help improve your overall credit score. Common items to be reviewed should include current address, employer and historical information. Correcting this type of information is not usually difficult, because it comes directly from the consumer. Resolving errors involving incorrect late payments, credit balances, errant accounts or other issues must be submitted to the credit reporting agency in writing. By law, the agency must investigate the claim, make appropriate adjustments and provide you with an updated copy of your report when completed. In most cases, this process must be completed within 30 days.

For valid accounts with negative information, consider communicating with the creditor to inquire about possible resolutions that may help improve your score. In some cases, the creditor may be willing to rework your debt, delay payments, erase late payment records or allow you an extension on the debt. Communicating with debtors shows a willingness to work out an equitable resolution and can help improve relations. Corrections to your credit report that are originated by the creditor don't require any investigation or waiting period on the part of the credit reporting agency.

One of the most basic factors in determining a credit score is your debt-to-income ratio. In simple terms, this is a determination of how much money you make, how much you owe and how much you can afford to make the payments. If your debt payments require most of your income, your score will fall. Paying off debt will improve your ratio and positively affect your score. Converting credit card debt to long-term, low-interest debt can reduce monthly expenses and help your score.

In the event of bankruptcy or other negative event, your credit report may only contain older, terminated accounts. Negative credit reports with no active, current accounts will be difficult to improve. While you may not qualify for a major credit card, consider a department store card, local furniture store financing or on-site auto financing. These accounts can show up on your report as new credit and help improve your overall average. Before establishing any new account, ask the creditor if they report your account to any of the major reporting agencies.

Don't expect an immediate change in your credit report, as many items will take time to correct or improve. Improving your score will occur slowly as you make current payments and build new credit. By law, negative items such as late payments and bankruptcy can only be included for a limited time.

Where Can I Get a Free Credit Report & Not Have to Sign Anything?

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Many websites advertise free credit reports. Unfortunately, most of these free credit reports have a catch that renders then not "free" at all. All consumers, however, are entitled to one free credit report each year under the Fair Credit Reporting Act without having to sign anything or risk falling victim to an Internet scam.

By visiting AnnualCreditReport.com, you can access a free copy of your credit report from Experian, Equifax and TransUnion without having to provide either a signature or a credit card number.

AnnualCreditReport.com is the only website approved by the U.S. government to provide consumers with their free annual reports.

If you dispute any information contained in your credit report and your dispute results in the information being modified, the credit bureau with which you filed the dispute is obligated by law to provide you with a free copy of your credit report--without your signature.

Signing a document permitting a lender to pull your credit only entitles you to a free copy of your credit report if the lender denies your application for credit or a loan.

Beware of any websites other than government-approved sites that claim to provide you with a copy of your free credit report with no strings attached. Some of these sites are attempting to steal your personal information.

FICO Score History

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FICO has served as the most popular and trusted credit scoring model since the middle of the 20th century. The name FICO is derived from the developer of the scoring model, Fair Isaac & Company, Inc. The basic FICO scoring system is the basis for credit reporting models used by the three standard credit reporting bureaus in the United States.

The FICO storing model was developed during the 1950s. According to the Daily Interest website's account of FICO history, mortgage businesses have been somewhat skeptical about the accuracy and useful of FICO scores since the early days. However, many other types of creditors and some non-credit businesses like insurance companies have been using FICO scores to gauge a consumer's credit worthiness since the 1950s.

When you go to a lender and seek financing, they typically inform you that they are going to check your credit score. Some creditors subscribe to one credit reporting bureau, while others gather scores from all three of the major credit reporting bureaus. Mortgage lenders usually use multiple scores to gauge your credit worthiness. The three major reporting bureaus are: (Equifax) Beacon, (Experian) Experian/FICO and (TransUnion) Empirica. Each of these credit reporting bureaus uses a modified version of the original FICO scoring model to fit their particular score reports.

A large number of niche factors are used to calculate your FICO score. Expecting consumers to have awareness of each specific FICO scoring component is impractical. However, each of the specific FICO scoring elements is broken down into five basic categories, indicates the MyFICO website's "What's in your FICO score." These categories include your payment history, amounts owed, credit history length, new credit and types of credit used. In general, your consistency in making on-time loan payments and have a low credit utilization ratio are key scoring considerations. Credit utilization is your percentage of available credit in use.

FICO remains a prominent influence in your ability to get affordable credit as of 2011. FICO scores range from 350 to 850, with most experts noting an excellent rating of 775 and above. This gives you the best opportunity to get your optimum financing rates and terms. The reporting bureaus continue to evaluate the accuracy of their scoring models in interpreting your credit worthiness. Daily Interest notes that Equifax, for interest, worked in the early 21st century to improve the influence of negative marks on people based on the number of times their credit is checked.

A Credit Check When Opening a Bank Account

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Banking history almost never affects credit history because there is a separate reporting system for that, but opening an account could require a credit check. Credit checks are usually an insignificant item on a report, but several small ones can do terrible damage and even prevent approval for a loan. Thus, consumers should find out about credit check policies of a bank before opening an account.

Financial institutions often use credit checks to ascertain the creditworthiness of anyone applying for an account, because checking and savings can be overdrawn and become a loan, according to Marcie Geffner of Bankrate. If a bank performs a credit check, it usually shows up as a hard inquiry, which counts for zero to five points. It is possible for the check to be a "soft" inquiry, but this is rare.

The act of applying for a bank account might not be the root cause of a bank's credit check, but options you choose when opening it. Banks may perform a credit check when you opt for overdraft protection, because this technically involves a small loan to buffer your account against overdrawing. Accounts with a debit card are increasingly accompanied by a credit check in 2011 because accounts can be overdrawn on those, too.

As a single item, credit checks barely even register and some people never notice their impact. Borrowers with low scores tend to lose zero or one point. Only good scores get the full brunt of the five points a check can cause. However, six to eight credit checks in one year can become a serious problem for anyone. Lenders may reject an application for too many checks, because opening too many accounts at once could strain a person's finances or ability to manage bills.

You should always keep tabs on your bank account to prevent it from going over its available balance, but you can avoid overdraft protection by linking a checking and savings account. This, however, still puts you at risk from overdraft fees unless you have overdraft protection. The only way to know for sure if opening an account or opting in for overdraft protection hurts your credit is to ask the bank if doing so requires a hard credit check.

About Reporting Late Payments to Credit Bureaus

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Maintaining a good credit score is an important aspect of your financial well-being. Credit scores will determine your ability to get loans and insurance policies at favorable rates, and can even impact your chances of landing a new job. Late payments to your creditors are reported to the credit agencies and may have a significant impact on your credit scores.

Most late payments will not be reported to any of the three major credit reporting agencies until the payment is more than 30 days past due. The credit reporting agencies also keep track of payments that are 60, 90 and 120 days past due. The longer you delay in making the payment, the more will be the impact on your credit score.

Any late payment reported to the credit reporting agencies will remain on the report for seven years. One late payment will not necessarily destroy a credit score. The more recent the late payment, the more impact it will have on the overall scores. Having frequent late payments or having severely delinquent accounts (90 days or more past due) will have a highly negative impact on credit scores.

According to the Fair Credit Reporting Act, the three major credit reporting agencies allow consumers to gain free access to their credit reports once every 12 months. Consumers should take advantage of this to review the report's accuracy. The free credit report describes the payment history for each account held for the consumer but does not provide the credit scores themselves. The scores may be purchased, however, when you obtain the report.

In some cases, late payments may have been erroneously reported. To dispute a late payment, gather proof that the payment in question was made on time. This proof may include canceled checks, receipts or other documents. Provide copies of the proof--not the originals--to each credit reporting agency together with a letter detailing the items that are being disputed. The credit reporting agencies will complete an investigation and must provide feedback from the finding within 30 days. If the investigation is unsuccessful in removing the error, contact the creditor directly and provide them with the proof in an effort to remove the erroneous information from the credit report. As a last resort, contact consumer credit agencies in your state or local government.

When Do Derogatory Items Fall Off an Experian Credit Report?

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Any individual's credit report is assembled by financial services companies called credit reporting agencies. These reports detail the loans a person has taken out and are used to form their credit score. Although credit reporting agencies, including Experian, are private companies, the information they place on these reports is regulated by federal law. Most negative items must be taken off after seven years.

According to federal law, the information that credit reporting companies include in a credit report must be accurate. This is because credit reports are a primary means by which lenders measure an individual's credit worthiness. This will directly affect whether an individual can receive a loan and the loan's rate of interest. All credit reporting agencies use slightly different formulas to determine what information is included on a credit report and how it affects a person's score.

Experian, along with TransUnion and Equifax, is one of three main credit reporting agencies. As with the other two, Experian keeps its criteria for listing information on a credit report secret. This means that the exact date when Experian will remove negative information from a credit report is unknown. However, Experian must abide by federal laws, which regulate how long a negative piece of information can drag down a credit score.

Under U.S. law, the longest period of time that a negative item -- one that causes a person's credit score to fall -- can be listed in a credit report is seven years. After seven years, the item must be removed and can no longer count against the person. If an item is not removed after seven years, the individual has a right to demand the credit reporting agency do so.

The only exception to the 7-year rule for negative information is a chapter 7 bankruptcy. Although chapter 13 bankruptcies, which entail a reorganization of the debtor's finances, expire after seven years, chapter 7 bankruptcies, in which the debtor may have some of his assets liquidated, can last up 10 years. Experian may choose to delist the bankruptcy before that time has elapsed.

Help Fixing My Own Credit

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Your credit score affects your ability to qualify for loans, insurance, apartment leases and in some cases, employment. Factors such as your payment history, how long you've had credit and your credit balances contribute to your credit rating. Although you can't legally remove accurate negative information from your credit report, you can take other steps to improve your credit rating.

Before you can improve your credit score, you need to know exactly what's on your credit report. If you have a credit history, three credit reporting companies maintain a credit file on you. You're entitled to one free credit report from each of the three agencies once every 12 months. You can order all three reports at the same time or stagger them throughout the year. To receive a free copy of your credit report, visit annualcreditreport.com or call 877-322-8228. You're also entitled to obtain your credit score from any of the three credit agencies, for a fee.

Negative information on your credit report that impacts your credit rating may include late payments, judgments or liens against you, bankruptcy and maxed out credit cards. Other factors potentially contributing to a low score may include a short credit history, multiple credit applications and the number of open credit accounts in your name. Records of late payments stay on your credit report for seven years, while bankruptcy can remain on your report for 10 years. Unpaid judgments appear on your credit report seven years or longer, depending on the statute of limitations, according to the Federal Trade Commission. The statute of limitations for judgments varies by state, with some states allowing unpaid domestic judgments to be renewed indefinitely.

When you receive your credit report, check for any inaccuracies that could affect your credit. If you find errors, notify the credit reporting agency in writing of your dispute, providing details about the inaccuracy, including the account number and why you think it's incorrect. Notify the creditor that provided the information in question, noting your dispute with the negative report. If an investigation finds the information to be inaccurate, the credit reporting agency will remove it from your file. If the dispute goes unresolved, the FTC advises that you can request your dispute to be noted in your credit file.

Make timely payments starting today. Start paying down outstanding credit card debt. Even if you pay creditors on time, your credit score is affected by how much of your available credit you're using. As your outstanding balances go down, your credit score will improve because your debt accounts for 30 percent of your score. Refrain from applying for new credit while you're trying to improve your credit score because multiple loan inquiries can negatively affect your credit rating. Your payment history accounts for 35 percent of your credit score, so late payments will negatively affect your score for seven years. However, if you start paying your bills on time, your credit score will improve because items that are currently past due weigh more heavily on your score. You'll see an improvement in your credit rating in as little as six months if you continue to make timely payments and pay down debt.

Consumer Reports says that paying off your smallest credit balances first can help you improve your credit score by increasing the number of open accounts with a zero balance. This approach calls for you to make minimum payments on all your credit accounts except the one with the least balance. Pay as much over the minimum as you can afford until you have the smallest debt paid off, then move on to pay down the next smallest debt.

Does Getting Prequalified at Many Places Hurt Your Credit?

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Receiving dozens of preapproved or prequalified offers may not affect your credit score at all. But you may end up hurting your score in the future if you take a company up on its offer. Prequalified offers may increase your risk of identity theft, which can annihilate your credit score. Also, preapproved and prequalified offers do not necessarily mean you qualify for an account.

Preapproved credit cards do not hurt your credit score because the company offering the line of credit did not receive your consent to run a credit check. However, if you accept a preapproved credit offer, the credit card company will run a hard credit check, which damages your score between 1 and 5 points. A preapproved credit card is not a firm offer, only an indication that the company believes you will meet the lender's requirements for an account.

Some banks prequalify you for a loan, which means the bank agrees to lend you money before you decide on which house or car to buy. Prequalified loans hurt your credit score because the lender runs a hard check. Fortunately, a single credit inquiry has almost no noticeable impact on your creditworthiness, unless you have more than six within a year.

The Fair Isaac Corporation risk model gives borrowers a break on auto, mortgage and student loan applications. Depending on which version of the FICO formula the lender uses, applications within a certain window of time count collectively as a single credit inquiry. In the FICO 08 model, the latest version in 2011, the rate-shopping window lasts for 45 days after you submit your first application.

If you do not want prescreened offers, you can opt out of mailings from members of the Direct Marketing Association via Opt Out Prescreen. This may help avoid identity theft, because a thief might intercept your preapproved offers and direct the credit card to his address. For prequalified offers, try to send in applications in one day. The credit bureaus do not offer rate-shopping on credit card accounts.

Does Getting Denied for Auto Financing Affect Your Credit?

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Having your application for credit denied, whether its for a new credit card or for a large purchase such as a car or home, is frustrating and disheartening. While not having the funds you need can be a challenge, you may also worry about the denials effect on your overall credit. Fortunately, if your auto loan application is denied, it has a limited impact on your credit report and score.

When you apply any type of new credit, including auto financing, and the lender declines to extend financing, only the fact that you applied for the credit appears on your report, not the outcome of the request. Credit reports only contain information about inquiries into your history and accounts that you actually open. Thus, if you apply for a car loan and the application is declined, the report will only show that the bank or dealership looked at your credit, also known as a hard inquiry. The fact that you did not receive auto financing will not affect your other accounts.

Applying for auto financing, whether you receive the credit or not, can influence your credit score. Several factors, including your payment history, amount of available credit, the length of your credit history and the number of inquiries into your report influence your credit, or FICO, score. Seeking new credit, particularly if you already have a low score, can drop your overall score by as much as five points, because according to the credit bureau Experian, those who have multiple inquiries into their credit over a short period are more likely to have trouble managing their finances and meeting their obligations.

If your application for auto financing is denied by one source, you may seek credit from someone else. The good news is that if you apply with multiple dealerships within a few weeks, the multiple inquiries will only count as one hard inquiry into your credit, and you only lose a few points overall, rather than several points for each inquiry. Credit reporting agencies realize that consumers often rate shop to find the best terms for their auto financing, and as a result, will have their credit report viewed by multiple sources. The bad news is that if youre denied credit from one dealership, theres an increased chance that youll be denied by other dealerships as well, since its the negative information in your credit report that caused your application to be declined.

When youre denied for any type of credit, the lender is required by law to provide you with information about where they acquired your credit report and the reasons that they refused credit. You are entitled to a free copy of the credit report they used, and you should take advantage of that offer to confirm that there arent errors in your report that are harming your credit. If you discover errors in the report, you can dispute them and try to improve your overall score. If the report is accurate, the denial letter you receive will give you an idea of the areas you need to work on to improve your credit and chances of getting financing in the future.

How to Improve My Credit From Medium Risk to Medium to Low Risk

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Your credit rating is based upon your credit score. The higher your credit score, the better your rating and the lower your risk. Lenders looking at a loan application are concerned with your past credit history, especially your track record with regard to making payments on time. Cleaning up your credit report and practicing good money management are two ways to improve your credit from medium risk to medium to low risk.

Instructions

Check your credit report. Using a site such as AnnualCreditReport.com will allow you to see your report as a whole, but not your credit score. To see your credit score, you will have to pay a fee. In both instances, you will be asked to provide your full legal name, date of birth, social security number and credit card information to verify your identity.

Analyze your credit report. Immediately report any errors using the website you used to get your credit report. Select the erroneous item and dispute it by clicking the "dispute" button and list the reason for the dispute. Credit bureaus are required to respond via email within 30 days of your request.

Look at any credit card or line of credit debt. Pay down those balances to 30 percent of their limit to lower the negative impact on your score.

Pay off, in full, any judgments, liens or collections listed on your credit report. This may or may not raise your score, but it will show lenders your willingness to pay debts owed.

Pay all debts, especially your mortgage, on time to avoid 30-, 60-, or 90-day late payments listed on your account. This action alone will go the longest way to maintaining good credit.

How to Build Credit Faster

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There are ways to build credit from scratch. Since some credit card companies and lenders are leery to extend credit to first-timers, building a credit score fast requires knowing where to look. Whether you're a teenager starting out or you're recovering from a bankruptcy, it's possible to obtain a good rating in a short amount of time.

Instructions

Check your credit report. Your personal credit report reveals your past and present history. Order a free annual copy from www.annualcreditreport.com and inspect it for mistakes such as unfamiliar negative accounts, which can reduce your score. Dispute errors by writing to the credit bureaus.

Obtain a bank checking or savings account. Visit a bank branch and open an account. Inquire about minimum deposit requirements.

Begin saving for a security deposit. Set aside between $300 and $500 to be used toward a security deposit on a credit card. Plan to spend additional money on other fees in your secured account such as a one-time setup fee and an annual fee. Fees vary by lender.

Complete an application for a secured credit card. Local and national banks offer secured cards to those with no credit history or bad credit. Submit your application along with the appropriate amount for the deposit.

Attempt to get an unsecured credit card. College students can qualify for a credit card with no credit history. Check out announcement or bulletin boards on campus and pick up an application for a student credit card, which generally requires a bank account and employment.

Take advantage of retail credit cards. Major credit cards are tricky to obtain with little credit history. Complete an application for a retail charge account to begin building your credit history.

How Does Credit Collection Ruin a Credit Rating?

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If you leave a credit card debt unpaid, the credit card company will send the account first to its in-house collection department and then to a third-party collection agency. Collection accounts appear on your credit report and, depending on the other information contained within your credit records, can ruin your good credit history.

In-house collection departments are owned by the credit card company. When a credit card company transfers your unpaid balance to an in-house collection department, it doesn't appear on your credit report. The missed payments leading up to your account being sent to collections, however, have a considerable adverse impact on your scores.

According to the Fair Isaac Corp.'s credit scoring criteria, the payments you make to your creditors have a more significant impact on your credit rating than any other factor. Thus, the more payments you miss, the further your credit score falls.

If the in-house collection department is unsuccessful recovering your unpaid balance, the company charges off the delinquent account. A charge-off does not mean that you no longer owe the debt. A charge-off signifies that the company would rather claim your debt as a business loss than continue spending time and resources to recover it.

Charge-offs appear on your credit report within the original credit card trade line. A charge-off remains on your credit report for seven years and has a negative effect on your credit scores.

Third-party debt collectors, such as collection agencies, routinely purchase charged-off credit card accounts. After purchasing your account, the collection agency adds its own separate trade line to your credit report. Collection agency trade lines are always derogatory.

The credit damage you will incur from having a collection account appear within your credit history varies depending on the other information reflected in your credit records. In general, the higher your credit score was before the collection agency added its account, the more damage it will do. Collection accounts can remain within your file for seven years from the date the original creditor charged-off the account.

The credit bureaus do not maintain credit reports as a service to consumers. Credit reports are a business service intended to assist lenders in evaluating applicants' risk level. Over time, older notations impact your credit score to a lesser degree -- but evidence of your defaulted debt appears within your report for the full reporting period. Thus, lenders will see evidence of your past mistakes managing your debt on your credit report and take this data into consideration -- regardless of how much your credit score has improved in the interim.

Tips on Removing Items From Your Credit Report

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Your reports from the TransUnion, Equifax and Experian credit bureaus hold significant power because they influence decisions by banks and other lenders, insurers and even employers. You have some power over your reports because the Fair Credit Reporting Act (FCRA) spells out circumstances under which you can get items removed from them, according to the Federal Trade Commission (FTC). Improve your credit score by erasing every negative entry possible.

The FCRA empowers you to challenge any mistake on your credit reports, no matter how small, as long as your claim is legitimate, according to the Credit Infocenter credit repair site. You can dispute negative items with minor errors like misspelled company names, incorrect addresses, dates or amounts. They must be erased completely if the creditors do not respond to the credit bureau's verification attempts; otherwise, they are corrected.

The credit bureaus encourage consumers to dispute incorrect credit report items online, but the FTC recommends sending a postal letter instead. This gives you the opportunity to enclose documentation verifying your dispute. For example, the bureaus might be listing certain credit card payments as delinquent when you have statements or canceled checks proving they were applied on time. Scan or photocopy your proof and mail it to the bureau with your detailed letter.

Delinquent items can only stay on your credit reports for seven years from the original late payment date, according to Lew Sichelman of the "Wall Street Journal." This does not change even if the account is later sold to a debt collector. Check dates on old negative items to see if they should be removed. Challenge any that are past the seven-year reporting date.

You never know when a mistake might appear on your credit reports because lenders and financial institutions constantly provide updates to TransUnion, Equifax and Experian. The FTC states that the FCRA lets you get one free report yearly from each bureau through annualcreditreport.com. Spread out your ability to find and remove mistakes by ordering one report every four months, the California Office of Privacy Protection recommends.

Make sure every account that appears on your credit report actually belongs to you. Bureaus sometimes mix up records, and the FTC warns that identity thieves open accounts with stolen information. Your first sign that your identity is compromised may be fraudulent accounts on your reports. They can be removed through a dispute, and you should also notify the account issuers and place fraud alerts on your credit reports.

Friday, October 30, 2009

Instructions

Experian

TransUnion

Equifax

Thursday, October 29, 2009

Guarantor

FICO

Urban Rentals

Considerations

Wednesday, October 28, 2009

Instructions

Responsible Parties

Restricted Endorsements

Normal Recourse Scenario

Potential Consequences

Check Acceptance

Instructions

Tuesday, October 27, 2009

Credit Utilization Ratio

Regular Card Use

Dangers

Credit Mix

Sunday, October 25, 2009

Payment History

Credit Utilization

Length of Credit History

Type of Credit

Credit Inquiries

Secured Loan

Borrow Credit

Timely Bill Paying

Instructions

Start Making Payments on Time

Leave Unused Accounts Open

Minimize Inquiries on Your Credit Report

Saturday, October 24, 2009

Instructions

TransUnion

Experian

Equifax

Wednesday, October 21, 2009

Explanation

Significance

Factors

Timeframe

Accuracy

Tuesday, October 20, 2009

Instructions

Monday, October 19, 2009

Cell Phone Carriers

Credit Score

Contract Terms

Options

Not Using Credit

Other Credit Information

Credit Scores

Payment-Based Reports

Sunday, October 18, 2009

Student Loans

Job Prospects

Preparing for the Future

Considerations

Instructions

Credit Reports

Credit Freezes

Effects

Methods

Definition

Effects

Time Frame

Prevention

Considerations

Thursday, October 15, 2009

Identification

Effectiveness

Danger

Tip

Wednesday, October 14, 2009

Instructions