How to Earn a Credit Score

Having a good credit score is vital at a time when your credit score affects what types of credit cards you can get, what types of loans you qualify for and whether or not you can get a mortgage to buy a home. It can even affect what types of jobs you can get. And getting approved for credit isn't the only issue. Even after you're approved for credit, your score will determine how much interest you pay on loans; a low credit score could mean a loan that costs hundreds of thousands of dollars more than if the borrower had a good score.

Instructions

1

Open a bank account. Go to a local bank and apply for a checking and savings account if you don't already have them. Bank accounts won't directly go onto your credit report, but having established bank accounts will help you attain the other forms of credit necessary to build your credit score. Almost all credit applications ask for your banking information.

2

Apply for a credit card. Start searching for credit cards that you believe will suit your needs. Major credit cards like American Express along with bank-issued Visa and Mastercards are the most difficult to get, so you should initially avoid them until you achieve a high credit score. To start out, the best cards would be store cards such as Target or Best Buy, gas cards such as Shell or Exxon Mobile or other credit-card companies that cater to individuals first establishing credit, such as Capital One or HSBC Bank. To apply for a credit card, go to the card issuer's website.

3

Use your credit card to pay for routine purchases such as gas or groceries and make sure to pay the card on time every month. After about three to six months of paying the card on time each month, you should see your credit score rise. When your score goes above 650, you can then start applying for the major credit cards directly from the banks or even American Express or Discover.

4

Apply for an installment loan. It's important to have a mix of different types of credit on your credit report. This will raise your score even higher. Installment loans are the types of loans people get when they purchase a car or buy a house.

5

Get a co-signer. If you're having difficulty getting any of these types of credit, try again with a co-signer. A co-signer can be a family member, spouse, friend or anyone else who's willing to help you and has a good credit score. By using a co-signer, you will be applying for credit using this person's good score. As you pay on time, the positive payments will show up on your credit report and your score will rise. The only downside is that the co-signor is responsible for paying the money back if you fail to pay on time, and that will negatively affect both your credit reports.

6

Apply for a secured credit card. If you're unable to attain any of these lines of credit and you're also unable to get a co-signor, you can get a secured credit card. These are issued by banks and are guaranteed by an equal deposit on your part. To get a $500 secured credit card, you first have to deposit $500 into an interest-bearing savings account designated by the bank. Because the lender has a security deposit, there is little to no risk on its part, so almost anyone can get a secured credit card to establish credit.

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What Is Average Credit?

In the world of personal finance, everybody at one point or another needs to obtain loans to finance important purchases and further major life goals. As any good loan consumer knows, a higher credit score is a necessity in order to qualify for the highest credit limits and best loan conditions. However, in order to know if you have a good credit score, it helps to understand how your score stacks up against the average Joe and to have a basic understanding of how credit reporting works.

Definition

A credit score, properly called a FICO (Fair, Isaac and Company) score, is a single number representing an individual's financial trustworthiness, according to financial guru Suze Orman.

Score Range

FICO scores are, according to Orman, measured in points and range from 300 to 850.

Agencies

There are three major reporting agencies, which provide the credit data used in calculating FICO scores: Equifax, Experian and Trans Union.

Score Breakdown

FICO scores are determined based on the following factors: prompt repayment of debts (35 percent of the score), current debt (30 percent), the length of your credit history (15 percent), the kinds of credit you use (10 percent) and how much credit you have recently applied for (10 percent).

Average Credit

The average FICO score in the United States is 678, according to Experian.

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How Does a College Student Obtain a Credit Card?

College students sometimes have the worst borrowing habits, but universities often receive compensation by letting credit card companies come to campus to entice students to sign up for a card. The federal CARD Act of 2010 put up barriers between students and credit card companies to stem the flow of young people acquiring cards. Students can still obtain a card, but probably not without a cosigner.

CARD Act Changes

The CARD requires credit card companies to obtain verification of income to pay an unsecured line for anyone under 21. A student can also have a parent cosign an account. Since students usually have a low income or none at all, the credit card companies are expected to cater to the parents, probably citing credit cards as a necessity in case of an emergency.

Considerations

Banks make the ultimate decision on whether to offer a credit card to a person under 21. The CARD Act does not specify how much a student must make before he qualifies for a credit card, according to CNN. Technically, any amount of annual income could qualify a student for some type of credit, even just a few thousand dollars.

Other Options

Instead of cosigning on an account, a parent or legal guardian can add a college student as a authorized user. Authorized users build credit history and receive a card, but have no responsibility to pay the bill. The student may also probably qualify for a secured card. Since a secured account requires a deposit usually close to or equal to the credit limit, it may satisfy the income requirement of the CARD Act.

Warning

Students should avoid credit card offers through the mail, according to Scott Gramm of HelpSaveMyDollars.com. The CARD Act banned pre-approved offers, so the banks found a loophole through "professional cards." Professional cards allow the same tactics as the pre-CARD Act era, but are technically supposed to go only to small business owners. However, professional card offers often only require the borrower to claim he owns a business without any verification of this fact.

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Do Charge-offs Go Off Your Credit Report After Seven Years Even After You Filed Bankruptcy?

A charged-off account is one the original creditor has written off as a bad debt and sold to a collection agency. You still owe the debt, but to the collection agency rather than the company that originally lent you the money. Filing bankruptcy can wipe out your obligation to repay the charged-off debt, but the account still remains on your credit report after you file bankruptcy.

Duration on Report

A charged-off account stays on your credit report for about 7 1/2 years. This is approximately 180 days between your last payment and the lender charging off the account, plus seven years after it is charged off. Regardless of what happens after the account is charged off, it will stay on your credit report seven more years. Even if you pay off the account in full, the charge-off doesn't go anywhere.

Bankruptcy Effects

Including a charged-off account in your bankruptcy filing does not change anything about how long the charged-off account stays on your credit report. The bankruptcy does not reset any clocks on the account. The account will still fall off your credit report seven years from the date of the charge-off, not seven years from when you filed bankruptcy.

Bankruptcy Duration

The bankruptcy itself also appears on your credit report and adds another negative influence on your credit score. A Chapter 13 bankruptcy falls off of your credit report after seven years. If you filed Chapter 7 bankruptcy, it stays on your credit report for 10 years. Either way, the charged-off accounts will drop off your credit report before the bankruptcy does.

Tips

Even though there is nothing you can do to remove the charged-off accounts from your credit report, their effects on your score diminish over time. In addition, you can add positive credit information to your credit report to further improve your score. After filing bankruptcy, keep paying on any accounts that you did not get to include in your bankruptcy. For example, most student loans cannot be discharged through bankruptcy. If you do not have any accounts after bankruptcy, get at least one and start making regular payments on it. A secured credit card is a good place to start because you can usually qualify for one even after a bankruptcy.

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Should I Mail Letters to Dispute My Credit Report, or Do It Online?

While credit bureaus let consumers dispute credit report items via three methods -- online, mail or phone -- each of the options has their own benefits. Choosing the method best for you will depend on your situation. A person who needs results the fastest will find mailing letters takes longer while the person who needs proof of time, should consider mailing the dispute.

Evaluate

Evaluate why you are doing a credit dispute. This is important to determine the best method of disputing an item on your credit report. Conditions that are time sensitive are best filed over the phone or online. When filing a dispute online or by phone, the dispute is immediately put into motion and the 30-day clock begins to run down. The drawback to both of these methods of disputing is you do not have proof of your dispute or the time received. The credit bureaus are required to complete an investigation within 30 days -- without proof of your dispute, you are unable to enforce the 30-day time limit allowed by federal law.

Online

Your credit report will provide you with the website address of the credit bureau to initiate an online dispute. You will be required to enter the credit report number, your name and other identifying information as required by the credit agency. Depending on the credit bureau, you might be shown a copy of your credit report or you might have to fill in the information from your printed credit report you have on hand. Enter in the reason you are disputing each account and submit the dispute. You might receive an email confirming your dispute was received but this email might not have the details of the dispute. Depending on the credit bureau, you will receive your results of the dispute either by email or via mail.

Mail

Any time you are not in a time-sensitive situation or do not need your credit investigation completed as soon as possible, mailing the dispute is best as it provides you with the proof you will need to enforce the rules of credit disputing. The credit report will provide you with the mailing address to send your credit dispute. Type a letter including your name, address, credit report number, and the last four digits of your Social Security number. Include a copy of a bill or driver's license to prove your identity. You can black out the account number or driver's license number. The credit bureau is interested in ensuring that you are the person initiating a dispute. Include the account number and name of all accounts you are disputing, and include a brief reason why you are disputing the account. The reason can be brief and simple such as: incorrect information, not my account, not joint account.

Record Keeping

Mail the dispute letter by certified mail, which requires a return receipt. This will force the credit bureau to sign for the letter, and you will receive a card showing the signature and the date the letter was received. This is the date you begin the 30-day countdown. The Fair Credit Reporting Act requires the credit bureaus to remove any account that a creditor has not corrected within the 30 days allowed for the investigation. When disputing online or via phone, write down the date and time of the dispute, and if by phone, the name of the person you spoke to.

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How to Get Your Short Sale Removed

Short sales actually save lenders quite a bit of money over letting the loan foreclose, which makes the lender take possession, do the repairs and maintain the property before eventually selling it themselves. It's not uncommon to negotiate a good credit report with a bank or mortgage company while in the process of a short sale. Negotiations for a favorable credit score after the sale is completed remain an option for any who did not foresee their credit rating as an issue.

Instructions

1

Plan for your good credit report before arranging a short sale by making your lender agree to a favorable report as part of the deal for you to sell the property. You are saving the lender a considerable sum of money by selling the property even at a price below the loan value, which gives you some room to negotiate.

2

Ask for a letter from your lender stating their intention of reporting your credit after the sale. If you do not receive a letter agreeing to a report that sheds no negative light on your transaction, then send a letter demanding a favorable credit score as a condition of your sale of the home. This becomes your grounds to insist the report is fixed if you receive a less than favorable report on your credit score after selling.

3

Check the report on your credit after completing the short sale. The lender may have posted a "Paid and Settled" report, which is accurate after a short sale but does not look good on your credit rating. Contact the lender and ask for a report that does not subtract from your credit score, such as "unrated." Do not accept answers to this request stating that the company cannot change the report. Any credit report can be resubmitted, and someone at the company has the authority to do it.

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How to Remove a Bad Credit Rating

Your credit rating is usually a credit score. The three nationwide credit bureaus--TransUnion, Exeperian and Equifax--all issue independent credit scores based on information in your credit report. Credit scores range from a high of 850 down to 300, with 620 generally representing the cutoff for "good" credit. Scores just below 620 represent fair credit, while people with scores in the low 500s and below are considered to have bad credit. You cannot remove your bad credit score, but you can improve it.

Instructions

1

Review your credit report. Get a copy from Annual Credit Report, an Internet site sanctioned by the Federal Trade Commission to provide free reports under the Fair Credit Reporting Act.

2

Look for negative entries on your report that could be affecting your score. Highlight all accounts showing as more than 30 days past due, or as collection accounts or charge-offs. Charge-offs are debts you failed to pay and the creditor closed the account. Collection accounts are debts that were sold to debt collection agencies. Send in payments to bring your existing accounts current, and contact the debt collectors or creditors to pay charge-offs or collection accounts. Look for their contact information on the credit report.

3

Write letters to the credit bureaus to challenge any inaccuracies on your report. For example a charge-off may appear on your report even though you paid the account in full while it was active. Federal law requires the credit bureaus to correct such inaccuracies within about 30 days after you file a dispute. Write to the credit bureau at its address on the credit report or visit the website to enter a dispute online.

4

Pay your existing bills on time, month after month--the No. 1 key to raising your credit score.

5

Pay down your existing debt to less than 30 percent of the credit limits, a move that the website Bankrate says will also help increase your score. Using small amounts of your credit lines shows creditors that you are in control of your finances and not living on credit. Stay with the process of paying your bills on time, reducing your overall debt, and removing bad marks from your credit reports for 12 to 24 months. Successfully executing your plan in all three areas could result in your bad credit rating being replaced by a good one.

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