What Will Raise Your Credit Score the Most Points?

Credit scores are determined using a formula devised by the Fair Isaac Company, and the credit score used by most lenders is the FICO score. Information from your credit report is gathered and used to come up with the credit score. Credit scores play an important role in your financial future.

Credit Scores

Credit scores are used by lenders when evaluating you for potential credit. The credit score reflects how you have handled your credit accounts in the past. Credit scores comprise five factors: payment history, credit utilization, age of credit history, inquiries and new accounts. Two of these factors account for over 65 percent of your credit score. Your past payment history accounts for 35 percent of your credit score, but it takes time to change your past and improve your credit score. Your credit utilization accounts for 30 percent of your credit score, and working on this area of your credit score can cause an almost immediate rise in your credit score.

Importance of Credit Score

Credit scores do not only impact your ability to get future credit but also affect aspects of your life not related to loans or finances. Employers are using credit scores to evaluate employees as part of the job selection process; therefore, having a low credit score could cost you a potential job. Insurance companies often use credit scores to determine the premium you pay; a poor credit score can result in you paying a higher premium for the same insurance a person with good credit pays. In terms of financing or requesting a loan, a low credit score will often result in a higher interest rate, which then results in a higher monthly payment.

Raising Credit Scores

The quickest and most effective way to raise your credit score is to lower your credit utilization. Credit utilization refers to the amount of credit you have available and the amount of credit you are using. Your target should be to have all credit balances under 20 percent of the credit limit. For example, if you have $10,000 in credit card limits and your balances on the cards total $8,000, you are using 80 percent of your available credit, and your credit score is lowered due to this fact. The higher you charge up your credit cards, the lenders see you as a credit risk. In the example, lowering the balances until you owe less than $2,000 will raise your credit score as soon as the lender reports the new balance. Even if you cannot lower your credit utilization to under 20 percent, the lower you can get your balances, the more your credit score will improve -- 40 percent credit utilization is much better than 60 percent and will improve your credit score.

Other Factors in Credit Scoring

Additional factors that will help improve your credit score are paying on time and limiting new credit. Paying on time accounts for 35 percent of your credit score. The most damage to your score occurs in the first 24 months following a late payment. Pay every bill on time, for 24 months, and you will see your credit score begin to recover.

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How to Change Late Payment History on a Credit Report

Credit reporting agencies determine an individual's credit score from payment history, type of debt, length of account history, and the amount of revolving debt. Late payments contribute to a lower credit score and can prevent individuals from obtaining new credit or even employment. Creditors are responsible for providing the three major credit reporting agencies with accurate payment information. If the reported information is inaccurate, the credit bureaus and creditors are under legal obligation to remove it.

Instructions

1

Obtain copies of your credit report from the three major credit reporting agencies, Transunion, Equifax and Experian. Contact the agencies directly or use the services of an annual credit reporting service. Keep in mind that federal law dictates that a free copy of an individual's credit report on file with all three agencies must be provided free of charge at least once annually. You may also obtain a free copy if you have been denied credit or employment because of the report's information.

2

Examine each report separately and take note of any discrepancies. Check the credit report lists payments as current on each account. Write down any payments reported as 30 days late or more and find documentation that proves you sent the payments on time. Check to see what the credit reporting agency's dispute process is. Follow the steps in the dispute process, keeping in mind that some agencies have online forms that can be sent and others may need hard copies. Make note of any discrepancies in the payment information that each agency reports, as it is not always congruent.

3

Wait to receive the results of the dispute investigation. Within 30 days of filing a late payment dispute, you should receive notification from the credit reporting agency. Monitor the responses from all three agencies, since each one may report information differently. If the late payment information is found to be inaccurate, make sure that the agency states it corrected the discrepancy on the report. Read the dispute resolution letter to see what changes will be made. In the case of inaccurate late payments, the agency should state that it will change the report to current, on-time, or pays as agreed.

4

Obtain a new copy of your corrected credit reports from all three agencies. Make sure that the payment information is correct.

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Is it a Mandatory to Add Your Spouse to Your Auto Insurance?

Auto insurance is a requirement in most states. You either need comprehensive or basic liability to legally drive in some states while in others you need to provide proof of financial responsibility. It depends on the rules of your state's department of motor vehicles. If you're a married person, you may wonder if you also need to list your spouse on your auto insurance policy.

Is It Mandatory?

Though the rules may vary depending on the state and the insurance company, generally, one spouse's insurance policy does not necessarily have to show the other spouse's name. The person who drives and owns the car, as listed on the title and registration, is the party who must have his name listed on the corresponding policy. So if the title only shows one owner, that is the person who must be listed on the insurance policy. The policy name must match the name on the title so that the car owner can properly register it in the state.

Considerations

Even though the spouse does not always have to be listed expressly on the policy's declaration page, the insurance company may still ask for information about the spouse. The insurance company looks at the spouse's driving record when evaluating the policy and may include the spouse's name in the customer's file. If the spouse has a poor driving history, it could cause the insurance company to quote a higher premium rate. In fact, some insurance companies look at all household members when evaluating policy risk -- even if they are not listed as additional policy holders.

Additional Driver

The car owner can choose to list her spouse as an additional driver on a policy instead of as a co-policy holder in some cases. This is a common choice if the spouse does not own the car (in whole or part) but still drives the car at times. In case of an accident that occurs while the spouse is driving, the policy holder can feel free to file a claim with her insurance company .

Other Considerations

Even if the policy holder chooses not to list the spouse initially, he can usually add her name later if he chooses. For instance, if the spouse buys a car in the future and needs coverage, the policy holder can ask the insurance company to add her name and information about the new car to the existing policy. Combining two spouses onto one policy may offer savings compared to two separate policies.

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Reporting Fraud to the Credit Bureau

Reporting

It is important to report fraud to the major credit bureaus (Transunion, Experian, and Equifax), because fraudulent accounts can harm your credit score and impair your ability to open new accounts. Notify all three bureaus in writing, and ask them to place a fraud alert on your credit reports so no more fraudulent accounts can be opened (see Resources section).
Also ask them for copies of your credit reports so you can review them for any incorrect information related to the fraud. You are entitled to free copies of your reports as a fraud victim, and you can file disputes on any erroneous information so the bureaus can remove it.

Documentation

You will strengthen your case if you are able to provide documentation. Contact the police as soon as you discover that you're a fraud victim and fill out police reports. Get copies of these reports so you can provide them to the credit bureaus when you contact them to report the fraud.
Keep copies of any correspondence you have with credit card issuers and any other businesses involved in the fraud.

Folllow Up

Monitor your reports from the three credit bureaus to make sure that no additional fraudulent accounts show up. Request copies of your credit reports every month or two and go through them line by line. If you find any erroneous information, immediately report it to the credit bureaus and file a dispute so it can be removed.

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How do I Clear Things Off ChexSystems?

If a bank or credit union declines you when you attempt to open an account, you may need to review and dispute your ChexSystems consumer report. Much like the major credit reporting bureaus Equifax, TransUnion and Experian, ChexSystems gathers information about your financial activities and helps financial institutions verify your trustworthiness. ChexSystems deals exclusively with bank account information, such as overdrawn accounts and issues reports that may prevent you from opening new accounts with banks and credit unions.

Instructions

1

Visit the ChexSystems website to order your consumer report. The order form requires your first and last name, previous last name if applicable, Social Security number and mailing address. Fill out the form and click the "Submit" button at the bottom of the screen to order your report online. To order your report by fax, print and fill out the order form, then fax to 602-659-2197. ChexSystems also accepts orders by mail. Mail completed order forms to:

ChexSystems

Attn: Consumer Relations

7805 Hudson Road, Ste. 100

Woodbury, MN 55125

You can also order your ChexSystems report by calling 800-428-9623.

2

Dispute errors on your ChexSystems report using the ChexSystems Consumer Request for Reinvestigation form on the ChexSystems website. This form requires the consumer identification number on your consumer report, your name, Social Security number, driver's license number and address. You must also provide the account number for each inaccurate item on your consumer report and explain why you are disputing each item. Mail or fax your "Request for Reinvestigation" form to the address or fax number provided on the form.

3

Pay any accurately listed open accounts on your consumer report. Once you have paid an outstanding balance, the bank to which you owed the money must update your consumer report with a "paid in full" or "settled in full" status and date.

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How to Fix Bad Credit That Is 7 Years Old

Monitoring your credit reports is extremely important. Credit scores affect your ability to get credit, the interest rates offered on loans and even employment opportunities. Most negative reports from creditors remain on your record for seven years, though bankruptcies remain for 10 years. Don't assume that a negative item will automatically fall off your report after seven years, however. In a December 2008 Federal Trade Commission study, 31.3 percent of participants acknowledged credit report mistakes.

Instructions

Check Your Credit Report for Errors

1

Obtain a copy of your credit report. Equifax, Experian and TransUnion are the major credit bureaus. You are entitled to a free copy of your credit report every 12 months from each bureau. You are allowed a free copy if you have been recently turned down for credit, or if you have been rejected for a job because of your credit score. Visit the Annual Credit Report website listed in the resource section and request your credit report.

2

Check your report for errors, specifically looking for any negative reports that are 7 years old or more. Remember, bankruptcies stay on your report for 10 years. Negative reports regarding unpaid judgments may remain past the seven-year mark if the statute of limitations is longer than seven years.

3

Notify the appropriate credit bureaus, in writing, of errors. The Federal Trade Commission website has a sample dispute letter for reporting errors. Include a copy of your credit report and circle the items that are in error. Send your letter by certified mail, requesting a return receipt so you can verify when the credit bureau receives the letter.

4

Notify your creditor, in writing, of your dispute. Include copies of documents that support your claim. If your creditor reports the disputed item again, the creditor must include that you have disputed the claim.

Bolster Your Existing Credit

5

Make payments on time. Payment history is 35 percent of your credit score.

6

Pay down your current debt. The percentage of debt on your card affects your credit rating. Maxed out cards lower your credit score.

7

Apply for a secure card to establish credit history, but make your payments on time. Secured credit card companies report payments to credit bureaus, which helps you establish a payment history.

8

Limit the number of new accounts. Opening multiple accounts lowers your credit score.

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Positive Credit History

A positive credit history is a credit score or background that shows lenders or creditors a borrower's trustworthiness. A credit report with a positive credit history can result in better opportunities and chances for loans. Positive credit history may also result in better rates on loans. A good credit history shows a borrower is reliable and is a low risk for defaulting on a loan.

History

Credit reporting was introduced in the early 1900s with a group of merchants exchanging customer data. As early as the 1960s, according to the U.S. Federal Reserve, credit bureaus acknowledged that credit reporting was limited by a lack of technology. The 1970s and '80s saw the creation of technology that allowed credit bureaus to more easily exchange information.

Potential

Credit history is looked at by prospective employers. When applying for a job, an applicant might be asked for a Social Security number and permission for the company to do a background check. Background checks often include a credit check. A positive credit history is viewed as a sign of a responsible individual.

Signficance

In the United States, there are three major bureaus that gather information on consumer credit reports--Equifax, Experian and Trans Union. The history of a consumer's credit is determined by the types of credit owned, payment histories, legal judgments such as bankruptcies and outstanding balances. To maintain a positive credit history, avoid judgments, make timely payments and keep balances to a minimum.

Impact

Credit scoring is based on a three-digit number that ranges from 300 to 850. A positive credit history results in a higher score number, which generally conveys a monetarily trustworthy and credible person. Scores of 770 and above are desirable. Scores in the mid-600s and below can be viewed as poor. Consumers with a lower score usually qualify for subprime interest rates, which means they'll be charged more for borrowing, the Federal Reserve notes.

Effects

As credit history has evolved since its inception, credit scores affect different aspects of life from loan agreements to job opportunities to utility rates. Although a consumer with a positive credit history will have little to worry about, negative credit scores affect the rates consumers pay for utilities such as gas and electric. Similarly, though some states have outlawed the use of credit scores as a prerequisite for hiring, others simply mandate that employers first obtain permission.

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