Benefit of Credit Monitoring

Credit monitoring automatically picks up changes in your credit reports and warns you about them, a service you pay with a monthly or annual subscription. This service is offered by Equifax, Experian and TransUnion, which are the three main credit bureaus, and various banks and independent companies. Monitoring helps protect your credit rating by keeping you aware of what is being reported in your credit bureau files.

Description

Credit monitoring covers one, two or all three of your credit reports, depending on the particular service you choose. Your monitoring company watches for activity on the reports and alerts you to potentially suspicious changes, like new application inquiries and newly opened credit cards or loans. Prices and coverage details vary, depending on the service details, but they can run as high as $50 per month, according to the Wall Street Journal. Banks sometimes offer plans that are cheaper than the credit bureaus.

Benefits

Monitoring does not directly protect you from identity theft, according to Consumers Union, because it does not keep your data out of wrong hands or stop thieves from using it. The service alerts you to problems so you can add fraud alerts to your credit bureau files, notify lenders that opened fraudulent accounts in your name and dispute resultant negative information on your credit reports. The alerts prevent further damage to your credit rating because lenders take more care in processing applications under your name and Social Security number.

Considerations

Credit monitoring offers an extra layer of protection for consumers whose identities were stolen in the past and people who do business with companies that suffer security breaches, the Wall Street Journal advises. Fraud alerts placed after identity theft or a database breach expire in 90 days, according to Leslie Hunt of the Bankrate financial site, unless you ask for an extension and provide a police report with the request. Thieves can open accounts in your name once your initial alerts are over.

Alternative

You have a free alternative to credit monitoring, although it only allows you to check your credit reports at four month to one year intervals. The website AnnualCreditReport.com is federally mandated to give you one free report from each credit bureau every 12 months, the Federal Trade Commission explains. You can split the orders any way you wish, as long as you do not order twice from the same bureau within one year. For example, you can order all three reports together or get one in January, another in May and the last one in September. Examine the reports for suspicious activity.

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How to Raise a Low Credit Score

A low credit score can have a devastating effect when it comes to getting those important loans you need, such as home loans, college tuition and vehicle purchases. A short credit history, late payments and large revolving credit balances will keep your credit score low until you do something about them. Improve a low credit score by injecting some common sense credit behaviors into your financial get-well plan.

Instructions

1

Work on a strategy for paying your bills on time. Keep a spreadsheet of your bills and when they are due each month. Set up automatic payments from your electronic bank account to ensure you are current.

2

Pay down all revolving credit balancesbelow 30 percent of your total credit limitand work to keep them there. Constantly flirting with revolving credit limits tells a lender you could easily get in over your head.

3

Avoid closing old credit accounts so your lender can see that you have a long credit history.

4

Do not open new credit accounts all at once, as this shortens your credit history. Sometimes this occurs when people chase lower credit rates, transferring their old balances to new credit cards.

5

Pay on a variety of credit types rather than only revolving credit. Lenders like to see this varietycar loans, revolving credit and mortgageso that they know you can handle any type of credit challenge.

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The Best Way to Obtain Your Credit Score

Once a year, Americans are able to receive free credit reports from the three major credit-reporting agencies: TransUnion, Equifax and Experian. Being aware of all three credit reports gives you a greater understanding of where you stand in your ability to receive credit. It can also illuminate any mistakes or identity theft that may be inadvertently compromising your rating. These agencies sponsor a website where you can request all three reports at the same time, making ordering easy and fast.

Instructions

1

Point your Web browser to the Annual Credit Report website (see Resources).

2

Select your home state from the pull-down menu and click on "Request Report."

3

Type your personal information, such as name, address, date of birth and Social Security number, into the appropriate fields.

4

Type the security phrase and click on "Continue."

5

Click the boxes next to the names of the three reporting agencies to request the corresponding reports.

6

Click "Next" to be transferred to the site of the first agency. Enter the last four digits of your Social Security number to validate the request. Continue to validate the requests for the other two agencies. After finishing, you will be taken to the "Order Summary" page. Click "Submit" to be taken to the "Verification" page.

7

Answer the personal questions on the "Verification" page to prove your identity and click "Continue." On the next page your will be able to review and print your first report.

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How to Get a Free Credit Score That You Can View Online

A credit score affects your chances of qualifying for a loan or a credit card and obtaining both at good rates. This number is based on the contents of a credit report, which is a record of an individual's credit activities. While you are eligible for one free credit report per year, there is normally a fee to obtain a credit score. Fortunately, many websites provide visitors with free access to their scores when they sign up for a trial membership.

Instructions

1

Visit a website offering free credit scores. Such sites usually provide this service when visitors register for a free membership trial for a specified amount of time.

2

Register for membership. Information required for registration usually includes the member's name, address and date of birth. It is also necessary to provide a method of payment as a sign of commitment. The company will not charge your account unless you decide to retain membership after the trial period.

3

Click on the option to view your credit score and provide the personal information required. This will include your social security number. The score will appear on the following page. Save the page or print it for your records.

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What Is an I1 Credit Score?

Credit reports sometimes use a secret language to tell creditors about your trustworthiness as a borrower. The code "I1" is a good thing to have on your credit report and you should have it on all accounts to maximize your score. Accounts that go past I1 status need immediate attention.

Identification

Some lenders use codes to report the history of an account, instead using plain English, such as "pays as agreed." The status I1 refers to an installment account that has never been late, according to Credit Engine. The letter is shorthand for the type of loan. "R," for instance, would be a revolving loan, and "O," an open account. This is the best possible status for an account. Anything more means the payer has been late and I0 means the accounts is too new to rate.

Benefits

Under the Fair Isaac Corporation (FICO) credit scoring method, paying an account on time gives you more points than any other category. The Fair Isaac Corporation keeps their formula a secret, but they do reveal that payment history falls under a category worth 35 percent of the FICO score on their website.

Keeping I1 Status

The I1 status on your account means you are doing an excellent job of paying it off, but you cannot be too careful with your credit. Automatic bill payment can make paying off an installment loan, which has the same bill every month, more convenient than manually entering in a payment. Do not, however, forget a bill after setting it to automatic; make sure you get a confirmation of each payment.

Tip

Every credit rating agency will give you a different score, so review your report from the three major credit bureaus periodically. Most agencies are moving away from from status codes. If you see an account has a code of I2 or later, or has a note that you were previously late, review your payment history. You can challenge errors with the credit bureaus using their online dispute form.

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How Selling a House Affects Credit

Consumers often obtain loans to finance large purchases and buying a home can be one of the largest purchases a consumer makes. A mortgage loan will appear on your credit report and so will the credit history associated with that account. If you're selling your home, it's beneficial to understand how this action can affect your credit.

Debt

If you have a mortgage loan on your home, selling it will affect the level of debt present on your report. Part of your FICO score reflects yout total amount of debt. This is 30 percent of your score. When you sell your home and pay off the associated mortgage loan, this reduces your debt levels. The less debt you have on an installment loan versus the amount of the original loan demonstrates that you can manage credit well and this will raise your credit score, according to FICO. Of course if you don't have a mortgage loan, selling your home will not directly affect your credit.

Credit History

Mortgage loans usually have a loan term of several years, even decades. Consumers generally take out mortgage loans with a repayment period of 15 to 30 years. Your FICO score includes within its calculations the average length of your credit history, which is 15 percent of the score. The longer your credit history, the higher your FICO score. Once you pay off your mortgage loan, some lenders may cease reporting that loan to the bureaus. Under federal law, however, they can continue to report it for up to 10 years if the history of the account is good and up to seven years if the account has derogatory information. The removal of the account can shorten the average length of your credit history, which can lower your credit score and can be especially damaging to your credit if that account is the oldest account on your report.

Credit Type

FICO also looks at the mix of credit types found of your report. Credit mix refers to the different kinds of credit accounts, such as credit cards, mortgage loans, charge cards, student loans and store cards, among others. FICO likes to see a variety of credit types since this indicates that you can manage credit across different platforms. Credit mix is 10 percent of your score and the removal of the mortgage loan can reduce the variety of credit on the report and this may lower your score as well.

Payments

Until you sell your home, make sure you keep up with the mortgage payments. At 35 percent, the bulk of your FICO score is how well you pay your debts. Delinquency on those accounts can have a very damaging effect on your score. One 30-day late payment can drop your FICO score by as much as 45 points. A foreclosure can be even more devastating since it can lower your score by up to 160 points. That can be the difference between good credit and bad credit.

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How to Clear Fraud From Credit Reports

Credit fraud is a general term that refers to the unauthorized use of someone else's creditworthiness to purchase goods and services. It is estimated that losses from credit card fraud amount to as much as $500 million per year in the United States alone.

Two of the most common types of credit fraud are identity theft and credit card fraud. Identity theft occurs when your personal identity is assumed, without authority, to commit credit crimes. Credit card fraud occurs when unauthorized charges are made on your card accounts.

Instructions

1

Get copies of your credit reports from the three credit agencies--Experian, Equifax and TransUnion. Each agency will maintain a credit report for you.

2

Examine your report. Check for accounts that you never opened, charges from unfamiliar sources, or any strange charges on the statements. Review each account carefully. Check out inquiries about your credit. Verify information, such as your address, and ensure that it is accurate.

3

Document any suspected fraud. Once you have scrutinized your credit report, gather all of the documents pertaining to the suspected accounts. It is important that you have complete documentation on file for all of your legitimate transactions.

4

Notify the creditor. Once you believe that fraud exists, alert the creditor by telephone and in writing. Identify yourself as a victim and state that you would like to file a claim for fraud. Ask for their help and cooperation. Request that the activity be "frozen" on the suspected accounts.

You need to extend your full cooperation to the creditor so that you are not held responsible for the account. If it is credit card fraud, immediately advise your credit card company of the fraud discovery and cooperate with them to correct the anomaly. Most creditor companies will issue a replacement card with a different account number.

5

Notify the credit reporting agency. The Fair Credit Reporting Act requires that all of the reporting agencies provide all data to correct an error, if indeed an error is committed. You have to file a dispute on the identified fraud and support your claim with documents and information that will prove your contention.

6

Notify the police and the Federal Trade Commission about identity theft. If you suspect that someone is using your social security number or other information to get credit, report the matter to the authorities with jurisdiction in your area. A police report may be needed to convince the creditors that a fraud is being committed in your name. If you want enforcement, the Federal Trade Commission's identity theft division is the government agency that will initiate law enforcement action on identity theft cases.

7

Obtain an updated credit report. Get a fresh copy of your credit report a few months after you have made efforts to clean it up. If the disputed cases have disappeared, your credit report should reflect your true financial standing.

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