How to Get a Credit Report at No Charge

By law, you can view your credit report for free once per year from each of the major credit reporting agencies: Equifax, Experian and TransUnion. You should do this yearly to check the accounts listed on your credit reports to make sure there are no inaccuracies. There are several ways you can get your credit report and it will only take a few minutes of your time.

Instructions

1

Go to to AnnualCreditReport.com and fill out an application to view your credit report. Fill out your personal information and answer financial questions to confirm your identity and submit the form to view your report.

2

Call Experian at (888) 397-3742 or TransUnion at (800) 888-4213 to get your credit report for free. Equifax does not have a number you can call to obtain your credit report. When you call, give your personal information over the phone and verify your identity and the agency will mail your report.

3

Complete the Annual Credit Report request form and mail it in to receive your credit report from each agency in the mail. You only need to fill out this one form to receive your free credit reports and you will need Adobe Reader to view the form.

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How to Remove Sallie Mae from Your Credit Report

Consumers' credit reports are very important and can impact their chances of getting a loan, a credit card or even a job. Consumers have the right to inspect their credit reports and can have them changed. If Sallie Mae, or anyone else, has reported a false or erroneous credit item on your report, you need to know what options are available to you and what steps you have to take to protect your credit history.

Instructions

1

Know what your credit reports state. Before you can challenge or remove anything from a credit report, you first have to know what those reports contain. Every consumer can request a yearly free copy of their credit reports from the three credit reporting agencies: TransUnion, Equifax and Experian. You can also visit the Federal Trade Commission site set up for this purpose: http://www.ftc.gov/freereports. If you've already viewed your yearly free report, you can contact the credit reporting agencies or use a company that will collect them for you.

2

Look for inaccuracies. After receiving copies of your credit histories, inspect them for errors. If Sallie Mae, or any other party, has erroneously made a claim that appears on your report, you can dispute it. Make sure to check all three reports, as the information that appears on each of them is not always the same.

3

Dispute any mistakes. The Fair Credit Reporting Act (FCRA) allows consumers to dispute inaccuracies or errors on their credit reports. If Sallie Mae has reported an item you believe is in error, you can send them a letter and demand they contact the credit reporting agencies and have the error removed. Provide evidence to support your claim and follow up. If Sallie Mae refuses to have the item changed or removed, you can then contact the credit reporting agencies directly. Make the same demand to have the item changed or removed. They will have to investigate your claim and decide whether or not to comply.

4

Include a consumer statement. If neither Sallie Mae nor a credit reporting agency agrees to your demand to have the erroneous item removed or changed, you can insist that your credit histories include a consumer statement. This is a statement you can make explaining why you believe the item is wrong and anyone who looks at your credit history will be able to read it.

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How to Remove Credit History

Errors on credit histories happen. Equifax reports that it maintains the histories of over 200 million consumers with over two billion updates per month, with data being reported from over 15,000 sources such as lenders and credit card companies. Occasionally, consumers will find inaccurate data reported on their credit reports and often, history that should have been removed remains on the credit report after the allotted time period. Following the guideline below will enable the consumer to remove credit history from their credit report if the allotted time has passed.

Instructions

Steps to Remove Credit History

1

Contact the credit bureaus directly to request removal of inaccurate information. Send all copies supporting your dispute and ask for an investigation. The bureau has 30 days to investigate and verify it as inaccurate, which will remove the information, or accurate, which will keep the information on your credit report.

2

Write the information provider directly, asking them to verify the inaccuracy. After 30 days, send a demand letter, ordering them to remove the unverified information immediately. If the information provider cannot verify its accuracy, they are legally obliged to remove inaccurate data.

3

Write the credit bureaus directly when the reporting period for the history has passed. Many negative credit items do have a time period. Credit checks can be reported for two years, credit defaults can be reported for seven years, and bankruptcies can be reported for 10 years. However, for certain insurance plans, high-paying jobs background checks, or government positions, there is no time limit on how long data can be reported.

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How to Improve Your Bad Credit Score

If you have bad credit, you can improve your score with a little work. You credit score determines your ability to get approved for loans as well as the interest rates you may get on those loans and credit cards. Staying on top of your debt and getting your bills paid help improve your score, but it does take time.

Instructions

1

Get a free copy of your credit report. The national credit reporting agencies Experian, Equifax, and TransUnion are required to provide you with a free credit report every 12 months.

2

Review your credit reports. If you find any errors notify the credit reporting agency in writing. Detail the error and provide any supporting documentation you have and mail it to the credit reporting agency. The credit reporting agency has 300 days to investigate and respond to the error. If a correction is made all three credit reporting agencies will be notified.

3

Review your debt. Late payments can seriously damage your score, so make all of your payments on time. If you don't have enough money to cover these payments, call the creditor immediately and let them know your situation. They may be willing to work with you by allowing you to pay an interest only payment or to defer your payment until you are able to pay. This will avoid additional late fees and damage to your credit score. Pay off any debts that have gone to collection.

4

Keep your balances low on credit cards. Having a lot of outstanding debt can seriously damage your score.

5

Get help you need it. If you're having trouble paying off or managing your debt, speak to a credit counselor who may help you devise ways to pay your off the debt.

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How to Raise Your Credit Score 50 to 100 Points in 6 Months

If you have run into circumstances that led to a poor credit rating, it can be disheartening to realize it may take years to rebuild your credit. The good news is that it is very realistic to raise your credit score 50 to 100 points in six months. Even better, the steps you must take to get these short-term results will put you firmly on the road to fully rebuilding your credit in the long-term.

Instructions

1

Bring every one of your credit accounts up-to-date so you are paying them on time. Late payments won't drop off your credit history in six months, but the longer you stay current on payments, the less old late payments listed will count against you. In addition, this is the single most important factor in calculating a credit score. Late payments will make it very difficult raise your credit score.

2

Make arrangements to start paying back any debts that are in default or that have been charged off. Once you have started making payments, these problems won't reduce your credit score as much.

3

Avoid applying for new credit accounts or closing existing accounts. Excessive credit activity like this lowers a credit score, but only in the short-term. Previous applications for credit or account closings will drop off your credit history within a year.

4

Contact any lenders where you have a line of credit, including credit cards and home equity lines of credit. Reduce your line of credit as much as possible--that is, close to the amount you currently owe on the account. Eliminating this easy access to credit reduces your risk as a borrower immediately and so helps raise your credit score quickly.

5

Order copies of your credit history from each of the three major credit bureaus (Equifax, Experian, and TransUnion). Review your reports for errors and outdated information. If you find an error, follow the instructions that come with the report for filing a dispute and have the information corrected. Under the Fair Credit Reporting Act, you can get one free credit report from each credit bureau each year. You can obtain your free reports online from the FTC-authorized provider, AnnualCreditReports.com (see References) or by calling toll free 877-322-8228.

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Companies That Help Clean Up Credit

No magic formula exists to repair the effect of a bad payment history on your credit report. But there are companies that can help you understand the laws regulating credit reporting and how to use those laws to your advantage when dealing with negative entries on your credit report. As with any field, some companies are legitimate and others are not. It is up to you to decide if an organization can help you improve your credit score or if you are better off on your own.

The Facts

There is nothing that a credit repair company can do for you that you cannot do for yourself. No company possesses "inside knowledge" or secret tactics that work better than anything you can do on your own. In some cases, credit repair companies can hurt your score rather than improving it.

Methods

The most common method employed by credit repair organizations is to dispute your debts with credit bureaus. If you have more than a few negative entries on your credit history, most companies will dispute them all at once. Not only does this make any disputes from you appear suspicious to the credit bureaus, but your disputes are less likely to merit a thorough investigation. A much better method is to dispute each debt individually because the credit bureau is more likely investigate that issue thoroughly. Ask the credit repair company to outline their approach in writing so you can review it and make your decision accordingly.

Advantages

Credit repair can be a complicated process, and to be successful at removing negative entries an individual must be fully versed in all aspects of law as it relates to credit reporting and disputes. The work involved is often too much for an individual to do himself. In cases like these, a credit repair organization may be worth the expense.

Disadvantages

If your credit report dispute is done inaccurately it can have negative long-term effects, allowing credit bureaus to consider any future complaint frivolous and meaning that you won't be able to erase a negative incident from your history for seven years (see Resource 1). Many credit repair companies do not offer any training to their representatives, meaning the person trying to fix the situation could know less about the process than you. In addition, many credit repair companies are scams, so be sure to investigate the company you choose.

Misconceptions

While some financial planning websites will tell you that you cannot remove accurate negative information from your credit report, this simply is not the case. Once a dispute is filed, the legal burden of proof lies with the creditor reporting the debt. With the large volume of consumer accounts in collections, some creditors are unable or unwilling to validate your information. If this occurs, the debt must be removed whether it is legitimate or not.

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Explanation of Credit Reports & Scores

Determining the creditworthiness and potential risk of a credit applicant is the major function of a credit score. This three-digit number is a key factor for interest rate assignment and credit applicant approval. The score is dynamic and changes monthly and even weekly. Many factors support the assignment of a credit score, so consumers need to be aware how their financial actions impact their score. Obtaining a copy of the credit report is the first step in understanding credit and improving the score if needed.

FICO Score

FICO stands for Fair Issac Corp., the company responsible for creating the FICO score in the 1980s. The FICO score ranges between 300 and 850 points. Scores over 650 represent better creditworthiness in the eyes of lenders. Scores in the lower range indicate high risk and can lead to rejected credit applications or high interest rates. The FICO score consists of five parts; payment history, account balances, length of credit history, new credit and other factors (i.e. mix of credit types). The payment history carries the most weight, 35 percent of the FICO score, while new credit and credit mix each account for only 10 percent of the score.

Credit Reporting Agencies

The individual reporting agencies -- Equifax, Experian and TransUnion -- gather consumer information from credit card companies, banks and lenders. These agencies are for-profit companies and are not affiliated with the government, but they are regulated by the Fair Credit Reporting Act. The three agencies do not exchange credit information so it is important to contact each agency individually to report discrepancies Creditors agree to report consumer information to these agencies in exchange for obtaining information on consumers to assess credit. Each agency calculates credit scores differently so it is possible for a consumer to have three different scores. Most lenders consider all three scores when determining credit decisions, although some only look at one.

Implications

Having bad credit has major drawbacks financially. Home buyers with low credit scores often receive higher interest rates that translate to more money paid over the life of the loan. Utility companies often run a credit check on new applicants, and a low score might mean a higher deposit. Many utility companies do not require deposits from applicants with good credit scores. Missing just one or two payments can cause a drop of 30 points to a FICO score. Having maxed-out credit cards also affects a score negatively. Conversely, paying down credit cards and making on-time payments affect the score positively. Opening new lines of credit affects the score negatively as well, but to a lesser degree. Buying a home will bring the score down initially but over time maintaining the mortgage will add positive value to the credit file since this is usually the largest debt in the report.

Rebuilding Credit

The first step in rebuilding credit after a bankruptcy, foreclosure or other major credit-changing event is to obtain a copy of the credit report. Consumers are allowed one free credit report per year from each agency and can order them by calling 877-322-8228 or visiting annualcreditreport.com. Report any errors on the report immediately and pay bills on time. If possible, pay down credit cards.

Resources

Debt counseling services offer consumers help to conquer debt. Consumers work with counselors to establish budgets and negotiate better terms with creditors. Debt consolidation services allow consumers to pay one fee per month, but these services should be reviewed thoroughly before enrolling because it may be more cost beneficial to pay down the individual debts.

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Improving Credit Scores Through Credit Card Payments

Paying off credit card debt is one of the best ways to raise your credit score. However, if you have a lot of debt, just figuring out how to pay off your credit cards can be a daunting task. Paying off credit cards should be completed one step at a time, and as you continue to pay off your credit cards, you'll see your credit score rise over time, even as your debt eventually dwindles down to nothing.

Instructions

1

Gather all of your credit card bills together. Use them to figure out how much money you owe, and on what cards. If you have any questions about the amount you owe, contact the credit card company via the contact information on your statement.

2

Figure out a plan for paying off your debt. The best method to use is the snowball method. To use this method, choose either the card with the smallest balance, or the one with the largest interest rate. Send in a larger payment on this card until you pay it off, and pay the minimum balance on all your other cards. When the card you chose is paid off, combine that card's payment with the minimum payment on the next card. Every time you pay off a card, combine that card's payment with the next card's minimum payment, until all your cards are paid off.

3

Check your credit report after six weeks of making consistent credit card payments with the snowball method. Look at how much available credit you have versus how much debt you have, and make sure that all of your personal information is correct. If your information is incorrect or outdated, or you suspect fraudulent activity, call the credit bureaus immediately to correct it.

4

Continue to pay off your credit cards using the snowball method. As you pay each card off, cut it up, or put it away so you aren't tempted to use it. Don't cancel the credit card, as this can have a negative effect on your credit score.

5

Remember to check your credit score every six weeks to see your progress. As you pay down your credit cards and the amount of available credit expands, you will see your credit score improve dramatically.

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What Does the Middle Number of Your Credit Score Mean?

You can have excellent scores at two credit bureaus, but a terrible one with the last bureau can end up costing you hundreds more in interest charges. The U.S. has three national credit bureaus, so you have three credit scores. The middle number of your credit scores is often the most important for lending decisions.

Identification

The major bureaus report most of the same data, but fail to find out about accounts from time to time because lenders may not report the account or it slips through the cracks. This can give a consumer a huge range between all three of their scores from the credit bureaus. Lenders usually try to account for this variance by picking the middle of the three scores as the person's credit score.

Considerations

Most people have a 50-point difference between their highest and lowest scores, according to "Consumer Reports" in its August 2009 "Money Advisor" issue. When a consumer has a wide range, the lender might use a different method to account for the variation. This might mean taking the average of all the scores, an average of the highest scores or another system entirely.

Importance

The type of system your lender uses to account for variance in credit scores can have a huge impact of the cost of a loan. Creditors almost always set rates based on into what range the consumer's score falls. A 760 and above, for instance, is usually the top tier for any lender. If you had scores of 840, 700 and 600, the middle score of 700 puts you in the second best tier, but if the lender averages the top two, you fall into the highest tier.

Tip

Lenders vary on what system they use, so predicting how they manipulate scores is usually impossible. Thus the best thing you can do is make sure the bureaus report all of the same data if possible. The bureaus have slightly different reporting standards on some items. Experian, for example, reports unpaid tax liens for 15 years while the other bureaus list them until the borrowers settles the matter. Review your report for mistakes, such as missing positive accounts or delinquent debts you do not owe.

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Effect of Foreclosure on a Credit Rating

Credit ratings are a popular topic lately. The housing crisis forced many people to make extreme decisions that effected credit reports. Salvaging credit scores is important to many homeowners. Unfortunately one of the most negative impacts to a credit rating is foreclosure. Determining the impact of a foreclosure is not an exact science, however, it is possible to estimate the percentage decrease of a foreclosure.

Foreclosures

Foreclosures occur when homeowners can no longer keep up with the payments

Late payments, missed payments and defaults lead to a foreclosure. Banks try hard to avoid foreclosures and often work with homeowners to find other solutions. Foreclosures mean that a bank will have to take possession of a home and sell it, usually for below market price. In the event that the bank sells the home for less, they may attach a judgment to the homeowner for the shortfall. Foreclosures remain on a credit report for seven years. A foreclosure on a credit report is considered very negative and effects the chances of opening new credit accounts and obtaining better interest rates. Lenders will not finance another mortgage for at least two years or more after a foreclosure.

Credit Scores

Credit scores determine a consumer's potential risk

Credit scores determine everything from utility deposits to interest rates on car purchases. Scores from three national agencies (Equifax, TransUnion and Experian) make up the FICO score. These scores range from 300 to 850. Scores lower than 600 can mean higher interest rates or rejected credit applications. A foreclosure can cause a score to drop from 115 to 140 points. Bankruptcies cause the score to drop by up to 365 points. Late payments contribute to payment history, which makes up to 32 percent of a FICO score, so on-time payments are crucial to rebuilding credit.

Improving Credit Scores

A foreclosure on a credit report reflects less negatively than a bankruptcy, but it is still damaging. After a foreclosure, rebuilding credit becomes the main priority. Paying bills on time is the key to creating a healthy credit profile. Checking the credit report is important for the homeowner after a foreclosure. Review the report carefully and report errors immediately. Paying rent and credit accounts on time will build a solid credit history. The impact of the foreclosure will start to diminish over time. Having sound credit after the foreclosure shows creditors and lenders that the foreclosure was a onetime event.

Find Help

Be careful of credit-rebuilding scams that require upfront payment. Legitimate debt counselors exist, but you have to do the research. Never pay money to anyone who promises a quick credit fix. There are no quick fixes. Only a history of on-time credit payments will overcome a negative credit history. Debt consolidation is an available option for some. but a careful review of accounts needs to happen first. Contact account holders directly to negotiate lower interest rates and payment terms. Creditors are willing to work with account holders who put forth a good-faith effort.

Other Options

Before considering foreclosure, homeowners should exhaust all other measures. The Economic Stimulus Program offers many options to homeowners, such as short sales, refinancing and loan modification. Homeowners must reach out to lenders, before falling into foreclosure trouble, for loan modifications to improve the chance of rebuilding credit. If selecting a short sale instead of a foreclosure, the impact to credit will still be substantial but sometimes not as much as a foreclosure. In some cases, the drop is up to 130 points, but previous payment history plays a large role.

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Length of Time Debt Can Be Reported

If a creditor reports an issue on your credit report, it's important to know exactly how long that item will show on your credit history. Negative information can prevent you from accomplishing financial goals, such as securing a loan. Though it may take a while, all charges on your credit history must expire at some point in the future according to Fair Credit Reporting Act (FCRA) rules.

Negative Items on Credit Report

A negative item on a credit report is anything out of the ordinary that paints a negative picture of the borrower's status as a bill-paying consumer. Creditors, banks and service providers report information regarding the consumer's payment activity regularly, usually monthly. When the borrower retrieves his credit report, the agency commonly displays any negative information in a summary at the beginning so that the consumer can address those issues immediately.

Late Payments

A late payment is recorded on a credit history when the borrower pays a debt account more than 30 days late. Every additional 30 days another negative charge gets reported, including 60, 90 and 120 days. After that the creditor commonly lists the account in "charge-off" status. This information about late payments and charge-offs stays on the credit report for seven years.

Bankruptcies, Foreclosures, Liens

Another negative item that may appear on a consumer's credit report due to a debt is a bankruptcy. A chapter 13 bankruptcy stays on a consumer's report for seven years while chapter 7, 11 and 12 filings remain for 10 years. In the case of a foreclosure (failure to honor a mortgage agreement), that information remains on the report for at least seven years. Liens due to unpaid taxes stay on the report for 15 years.

Additional Information

Not all negative information listed on a credit history is correct. If you retrieve your report and notice a negative item that you do not recognize, you must dispute it with the credit reporting agency immediately. Also, though most negative information is supposed to drop off of your credit report after seven years, some creditors may try to extend or reset the listing if you contact them before the time expires. This is called "reaging" --- you can dispute this practice with the credit bureaus.

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Who Can Check Your Credit Report?

Your credit report contains sensitive information about your financial history. Lenders use this information to decide whether to approve you for a loan or credit card. Landlords look at it to decide whether you can make rent payments as a potential renter. Knowing who is allowed to view the report can help you understand if someone is viewing your information who shouldn't be.

Fair Credit Reporting Act

The Fair Credit Reporting Act lists who can access your credit report and for what reasons. Besides yourself, any person or organization that looks at your credit report must have a legitimate reason to do so. If a legitimate reason doesn't exist and your report is still accessed, the person or organization that does so faces fines and imprisonment up to a year.

Who Can Access

Lenders and merchants have reasons to look at a person's credit report. Because of this, they pay a membership fee to credit bureaus so that they can easily access a person's credit history. For the privilege of the easier access, the lender or merchant signs a contract that they will only access the credit histories of people they are considering for employment, credit or other legitimate reasons. Organizations that work with credit agencies include insurance companies, landlords, credit card companies, potential employers, law enforcement and mortgage companies.

Potential Employers

Potential employers are treated differently than other organizations when they want to view credit reports. Employers don't need to see the details of a credit report. They only need to know how a person manages debt and repays it to see if you are financially responsible. Because of this, when employers request a credit history, they receive only a modified version of the history.

Inquiries

Every time someone views your credit report, a "hard inquiry" is noted on your credit report. Even when you request a copy of your own credit report, an inquiry is recorded, though personal requests are listed as a "soft inquiry." The more hard inquiries that are made for your credit report because of an application you made, the lower your credit score will be. Each hard inquiry can reduce your credit score between one and five points.

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How Much Do Late Payments Affect a Credit Score?

Your credit score is a three-digit number that gives a simple indicator of your credit worthiness. It is used by lenders, financial institutions and insurance companies to make decisions about whether they wish to do business with you. Many things affect your credit score to varying degrees, including your payment history. Late payments lower your credit score and impair your ability to open credit cards, get loans and obtain insurance policies.

Types

There are several types of information that affect your credit score. Late payments are one of the most important factors, but according to FICO, the leading credit score company, the other considerations are: balances owed, length of your credit history, the types of credit accounts you have and how much new credit you have.

Effects

Each factor that goes into determining your credit score affects it by a certain degree. Late payments are the most important factor because your payment history accounts for 35 percent of your credit score. The next highest factor is your account balances, which count for 30 percent. The length of your credit history makes up 15 percent of your credit score, while the types of credit and amount of new credit each make up 10 percent. Based on this formula, your payment history accounts for more than one-third of your score, so frequently making late payments lowers your credit score significantly.

Factors

According to FICO, your payment history is made up up several factors. Late payments are a major part of your history, and the amount of the late payments, the type of accounts and how long they are overdue affect how much of an impact this information has on your credit score. Your payment history also includes accounts that have gone to collection agencies and any legal judgments against you.

Time Frame

Payment history always affects your credit score, but late payments lose some of their effect over time. Recent information weighs more heavily than items that may be several years old. If you are late in paying certain accounts but manage to get caught up, you will minimize the effects as long as you maintain an on-time payment history.

Warning

Credit bureaus can make mistakes in reporting your payment history. Your credit score is based on information obtained from the credit bureaus, so if they are reporting late payments incorrectly, it will bring your score down. You are entitled to a free copy of your credit report every year upon request from the three major credit reporting bureaus: Equifax, TransUnion and Experian. Check your reports annually and file a dispute if you notice any incorrect late payments. The bureaus must remove erroneous information, which will bring up your credit score.

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How to Fix a Ding on My Credit Score

Fixing a ding on your credit score may take time. There are several reasons for dings on a credit report, such as consistent late payments, delinquency and information that was erroneously put on the credit report. Paying your bills on time and paying off delinquent accounts will repair your credit. Disputing incorrect information can also help to improve your score and remove any dings on your credit report. It is important to check your credit report on a regular basis to make sure everything is accurate.

Instructions

1

Pull a free copy of your credit report. Contact the credit bureau for a copy or you can use annualcreditreport.com, which allows you to pull your reports once a year for free. There are three different credit agencies; you can pull them all at once or pull one every four months to monitor your credit more closely.

2

Look for delinquent accounts, late payments or inaccurate statements on your credit report. Each of these things can ding your credit score. Make sure you recognize each credit account listed on your credit report. If you do not recognize an account, contact the bank about the account.

3

Pay off all delinquent accounts in order to improve your credit score. You can often negotiate a lower payment amount with your creditors, but the account will show as settled instead of paid in full. This lowers your score a bit, but is better than having a delinquent account on your report.

4

Make your payments for all other loans on time. Creating a positive payment history over the next twelve months can remove any late payment reports you have had in the past. Unfortunately, the only way to fix a late payment report is to make your payments on time from now on.

5

Dispute any incorrect items on your credit report by contacting both the bank that reported the incorrect item and the credit bureau. Send a letter to the bank explaining the error and requesting that it be fixed. Calling the bank can speed up the process, but this needs to be taken care of in writing.

6

Send a letter to the credit agency and explain the problem, but if the bank does not fix the report, they will not remove the item from your credit report. Generally this letter is most effective a month after you have contacted the bank, since it will give the bank time to fix the error.

7

Keep a copy of all interactions between you, the bank and the credit agencies for any disputed claims.

8

Pull a copy of your credit report again to make sure you have repaired your score. Disputed items should be removed, delinquent accounts should be paid off and your payment history should show on-time payments.

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Does Your Credit Score Drop or Go Up When You Buy a House?

Getting a mortgage to buy a house affects your credit score in both positive and negative ways. Your score considers five major areas of your credit use, all of which the mortgage impacts. Overall, expect your score to drop slightly at first and bounce back as you make payments on your mortgage.

New Credit

The main area in which your score will drop is the new credit portion of your score, which is about 10 percent of your overall score. When you apply for your mortgage and the lender checks your credit, this credit inquiry appears on your report and slightly lowers your score. If multiple lenders check your credit, they will only count as one inquiry if they are in a time period of two weeks or less. After you get the mortgage, the presence of a new account on your credit report also lowers your credit score.

Types of Credit

Adding a mortgage to your credit report can improve your credit score by affecting the 10 percent of your score that considers the types of credit you have. The major distinction is between revolving credit, like credit cards, and installment credit, like mortgages, car loans and student loans. If you did not have any installment credit accounts before your mortgage, it should be especially helpful. Even if you had a different type of installment account, the mortgage will slightly improve your score in this area.

Amounts Owed

Borrowing money to buy a house significantly increases the amount of debt that appears on your credit report. About 30 percent of your score is based on the amounts you owe. However, your score does not only consider the raw amount, but also the relationship between what you owe to what you borrowed. A mortgage will hurt you in this area at first because you are adding a large debt and the balance is the same as what you borrowed. As you pay down your mortgage, your score will improve.

Payment History

Taking out a mortgage has no immediate effects on your payment history, which is 35 percent of your credit score, but it has potential to make or break you in the future. Paying your mortgage on time every month will cause your credit score to increase because you are making consistent large payments. On the other hand, if you miss a mortgage payment, your credit score will drop. If you fall way behind and the lender forecloses, this will seriously hurt the payment history portion of your score.

Length of Credit History

The last 15 percent of your credit score is based on the length of your credit history. Your score considers your overall length, which your mortgage should not affect, but also the average age of your accounts. Therefore, the mortgage will slightly lower your average account age at first, but then add to your length of credit history as you repay it over many years.

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About Credit Repair Companies

Credit repair companies claim that they can improve your credit rating score by deleting negative items, such as collection claims and bankruptcy judgments, from your credit report. Although legitimately removing inaccurate information from your credit report may improve your score, no quick solution exists for repairing damaged credit. A long-term credit repair plan involves paying your bills on time and managing your credit responsibly.

Function

Credit repair companies attempt to remove negative credit information from your report by disputing items through written request. In some cases, only one of the three credit reporting agencies may have a negative item on record. If a collection judgment was made in your favor, but never reported to a credit bureau, the item may still be shown on your report, and a credit repair agency will have it removed.

Contracts

The Credit Repair Organizations Act requires credit repair agencies to provide you with a copy of your federal and state consumer credit file rights. Your contract should include information like payment terms, service term length, service description and any written guarantees. Once you have signed the contract, the company can't start repairing your credit until at least three days have passed, which gives you time to cancel the contract without penalty.

Alternative Solution

You have the right to dispute any incorrect information on your credit report for free. If you choose to repair your credit on your own, you need to obtain copies of your credit report from TransUnion, Experian and Equifax. When submitting an appeal, you must provide documentation that shows why the information currently in your credit report is incorrect. The credit bureau then investigates the issue, and if it agrees with your appeal, it removes the negative information from your report.

Warning

You should not work with a credit repair company that asks that you pay a fee upfront, or guarantees that they can remove all negative information from your credit report, even if the negative information contains validity, according to the Federal Trade Commission. The FTC also recommends that you not work with a credit repair agency that discourages you from contacting a credit bureau directly.

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The Average Credit Score of Homebuyers

Lenders use a combination of factors to determine whether to approve or deny you for a home loan, including your credit score. Each lender may set its own credit score requirements, but knowing the average credit score among home buyers can help you assess your chances of obtaining a loan.

Ideal Credit Score

Credit scores range from 300 to 850. Though each lender has its own definition of what constitutes an ideal credit score, a score of 700 or higher significantly increases your chances of obtaining a mortgage loan. A score of at least 720 typically makes you a desirable loan candidate in lenders' eyes because they don't distinguish between a score of 720 and a score of, say, 830, according to Ray Martin, the financial advisor for CBS' "The Early Show." Only about 13 percent of people have credit scores of 800 or higher, though, so this is not typical among home buyers.

National Average

The average credit score in the United States is 692 as of 2011, meaning that most consumers have credit scores that are slightly lower than the ideal of 700 for obtaining a home loan. This average includes particularly low scores as well as particularly high scores, though, so it doesn't reflect the scores of most Americans; almost 60 percent of Americans have scores about 700, according to the Money-Zine financial planning guide. According to the Home Buying Institute, lenders are less likely to approve you for a mortgage loan if your credit score is below 620, so the average credit score for home buyers is likely between 620 and 850.

State Averages

Credit scores vary by region, so the national average may be higher or lower than the average in your state. For example, New Englanders have the highest credit scores in the nation as of 2011, with scores averaging 712. Residents in Oklahoma, Arkansas, Texas and Louisiana have average credit scores of 673, the lowest in the nation. Check your credit score against the average where you live using Experian's National Score Index. It can give you a clearer picture of what mortgage lenders in your area expect from loan candidates.

Helping Your Chances

Before you apply for a home loan, check your credit report and score to see where you stand. The three major credit reporting agencies, Equifax, TransUnion and Experian, each provide a free credit report once a year for everyone. You can get your score free for a seven-day trial of a credit-monitoring service or pay up to $39.95. If your score is below 700, pay off debts to reduce your debt-to-income ratio -- thereby increasing your credit score -- and avoid closing paid-off credit card accounts until after you obtain a home loan. Keeping an account open increases your available credit, making your credit-to-debt income more favorable to lenders. If your score is above 700 but below 720, take these same steps to make yourself even more appealing as a loan candidate.

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I Have Bad Credit: How Can I Fix It?

Bad credit can result from mismanagement of credit cards, bankruptcy, foreclosure or just not having any credit history. Although you cannot do anything to remove accurate negative information from your credit report before seven years have passed, or 10 in the case of bankruptcy, you can fix inaccurate information and start using credit responsibly going forward.

Correct Credit Report

If your bad credit is stemming from incorrect information on your credit report, dispute the errors to fix your credit. Identify errors by getting a free copy of your credit report from each credit bureau through the Annual Credit Report website. Initiate a dispute with each bureau that provided a credit report with inaccurate negative information. For example, if a collections agency is pursuing you to repay a debt that belongs to somebody else with the same name as you, dispute this account to get it off your credit report and boost your score.

Get a Credit Card

If your credit report contains accurate information, you will have to slowly boost your credit by putting positive information on your report. One of the best ways to do this is by using a credit card. If you do not have a card, apply for a secured credit card, which requires that you make a deposit with the lender to get an equal amount of available credit. These credit cards are designed for people who have made credit mistakes or who have not managed credit before.

Develop Positive Credit History

Focus on developing a consistent payment history on your credit cards and other obligations and keeping your debt low in relationship to your credit limits. MSN Money recommends using no more than 30 percent of your credit line at any given point in time. If you have a credit card on which you are using more than this, stop putting new purchases on the card and focus on paying more than the minimum until your balance is below 30 percent of the limit. Then spend lightly on the card and pay as much of the bill as you can each month to put positive credit history on your report.

Significance

If your credit score is bad, you will have trouble finding lenders who will approve your applications for credit cards and loans. You might not be able to get a mortgage, a car loan or a credit card, so you will have to pay for everything with cash and will likely be forced to rent or lease rather than buying large items. In addition, employers and insurance companies consider your credit score and can deny your applications or charge you higher rates if you have bad credit.

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The Right to Receive a Free Credit Report

The wise consumer knows what is in her credit report and makes it a habit to check the report at least once a year. Federal law guarantees every consumer the right to a free yearly inspection. Checking your credit report lets you know what your credit history looks like, as well as giving you the chance to correct any mistakes.

Right to Inspect

The federal Fair Credit Reporting act, or FCRA, guarantees every consumer the right to look at his three credit reports once each year without charge. The Federal Trade Commission has authorized one website, AnnualCreditReport.com, as the only government recognized site through which all consumers may obtain their reports every year.

Contact

If you're unable to get your report online, or prefer not to do so, you can also obtain them through other means. You can call 1-877-322-8228 to request your three reports, or send a written request to; Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. To get your reports by mail, you'll have to obtain and complete an Annual Credit Report Request, which you can get from FTC.gov.

Other Sites

While AnnualCreditReport.com is recognized by the FTC as the sole authorized website that offers free information, a slew of competitors tout their ability to provide consumers with "free" credit reports. While they often do this, it typically comes with a price, such as receiving your credit report for free but only if you sign up for a credit "monitoring" service or other such program.

Credit Scores

While the FCRA guarantees you the right to view your credit report every year, that right does not extend to credit scores. Companies that create credit scores use the information in your credit report but use their own calculations and formulas to determine your score. These scores are the property of each company that creates them. You can usually obtain your credit score by contacting the companies that create them, such as FICO, the company that calculates one of the most widely used scores.

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Seven Smart Steps to a Cleaner Credit Report

The cleaner your credit report, the higher your credit rating, and the better your chances of getting financing. Several factors contribute to a bad credit report such as poor habits and credit report mistakes. But with a proactive attitude, you can clean up your report and improve your score.

Check History

Cleaning up your credit report and boosting a low score first involves checking the contents of your report. Order a copy of your report online from Annual Credit Report. Have a marker or ink pen nearby, so that you can make a notation or circle entries on your report that need attention.

Credit Card Balances

Creditors are supposed to update your credit report regularly, which involves updating your balance on credit cards. Higher balances lower your credit score, whereas reducing or paying off credit accounts help improve your rating. If you recently paid off or paid down an account, check your report to make sure that your credit updated this information. If not, call the credit card company and ask them to update your report.

Late Payments

Creditors may erroneously report an account as late on your credit report, which also negatively impacts your credit score. Report the mistake to your creditor and ask them to remove this mistake from your report. A good payment record is crucial to building a good credit rating.

Inquiries

Credit checks harm your credit score, and having too many on your credit report shaves points off your rating. Stop applying for new credit accounts unless necessary. Shopping for a mortgage or auto loan are justifiable reasons for submitting a credit application. However, routinely applying for store credit in order to save 10 percent on a purchase can damage your rating.

Identity Theft

It's not impossible for someone to steal your identity and open an account in your name. They can do so with your name and Social Security number. Keeping your private information safe is key to protecting yourself. But if you become a victim, notifying the credit bureaus and creditors immediately is imperative to getting fraudulent accounts off your report.

Rapid Rescoring

Some consumers are unaware of a provision called rapid rescoring where creditors agree to update credit reports within three days. Applying for a mortgage or other loan may reveal credit report problems. However, a lender may approve your application if you can quickly correct the problem.

Co-signing

Co-signing is a potentially dangerous decision that can result in a lower credit score and negative information on your credit report. Before agreeing to co-sign a loan agreement for anyone, make sure that the person you're helping can make the loan payments. If not, you'll have to either make the payments or suffer the credit consequences.

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Credit Reports & Creditor Reporting Agencies

A few agencies collect information---lawfully---about your financial past and compile credit reports, any or all of which may play a large part in whether you may obtain credit because almost all lenders look at your credit history. Many companies may rate you as a credit risk, but only a few realistically matter. They all, however, report much of the same information, especially if you have missed any payments.

About the Agencies

In the United States, the major credit reporting agencies are Equifax, TransUnion and Experian. A fourth, Innovis, mainly sells business credit reports and as of 2011 is not truly ready for the consumer market. The "big three" report all of the same information, such as bankruptcies and collection accounts, but they do not share information, so their credit reports may contain widely different data.

Misconception

The credit reporting agencies have little to do with credit rating formulas. Lenders calculate a credit score using an algorithm invented by the Fair Isaac Corporation (FICO) and pay to access information on your report from the credit rating agencies to get your score. The credit rating agencies have proprietary formulas, but these were created with the help of FICO, so the agencies pay a royalty every time a consumer buys a score from one of the "big three." The major agencies do not judge even really bad information, such as a collection account, because the credit agencies do not make credit decisions.

Considerations

Almost all information on your credit report comes from your lender, such as the limit on your credit card, the balance on the account and personal data, like your address and employer. Reports are not infallible and mistakes happen, so you should pull your own report and dispute any errors with the credit agencies. Sometimes, it is quicker to ask the lender to correct an error with the agencies.

Tip

You may not need a credit report with the traditional consumer credit agencies. Fifty million people have no credit profile, according to Bills.com. Alternative credit reporting agencies allow you to self-report payments, such as rent and utilities, which normally do not appear on a traditional report. The larger agencies have toyed with the idea of including rent and utilities---FICO even has a specialty score for people with no data---but it is best to build a traditional score as of 2011.

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How to Remove Negative Authorized User Credit Reports

Getting added as an authorized user on another person's credit card account is a useful way to build your credit history and increase your access to credit without any legal obligation to repay the debt. The account on which you are an authorized user appears both on the owner's credit report and your credit report. However, if the credit card owner misses payments or maxes out the credit line, this can damage your credit score. When the authorized user account is hurting you more than it is helping you, remove it from your credit report.

Instructions

1

Ask the person who added you as an authorized user on the account to take you off. If the person complies, this is the simplest way to prevent the account from continuing to report to the credit bureaus.

2

Call the customer service phone number on the back of the credit card that you have. An authorized user credit card has the same number as the primary account holder's card, but the authorized user's name is printed on it. Explain to the representative that you would like to be removed from the account.

3

Dispute the account with the credit bureaus if the credit card company refuses to remove you as an authorized user. Because you did not open the account, you can dispute it as not belonging to you. File separate disputes with Experian, Equifax and TransUnion to have it removed from all three reports.

4

Check your credit report in about 45 days to confirm that the account on which you were an authorized user no longer appears on your report. If it is still there, repeat the process until you are successful.

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How to Figure Out FICO Score

Lenders use the FICO credit score to assess your credit risk. FICO stands for Fair, Isaac & Co., which markets the scoring system. A FICO score is between 300 and 850. Depending on the lender, a score of 680 to 700 and above is good while 620 to 580 or less is poor. You cannot calculate your FICO score precisely because the mathematical model is proprietary information and kept secret. But if you know the general structure of the FICO score (which is public knowledge) you can figure out scores well enough to identify problems and improve your credit rating.

Instructions

1

Look at your record of bill payments. This is the most important part of a FICO score and counts for 35 percent of the total. A rare late payment of a few days doesn't bring a FICO score down very much. But a single delinquency of 30 days or more can lower your score by 100 points.

2

Total the debts you owe. If a person owes too much for his or her income this counts off (this is 30 percent of the score). Debts are weighted differently, however. A home mortgage is usually the largest debt a person owes, but payments are a small percentage of the balance each month and the home is collateral. The FICO model takes this into account.

3

Evaluate the kind of debt you owe (other than a mortgage). The FICO system treats secured debt with low monthly payments as preferable to unsecured debt (such as personal loans with no collateral or excessive credit card debt). A good rule of thumb is to keep unsecured debt to a minimum. This counts for 10 percent of the total FICO score.

4

Look to see how often you have applied for credit or closed accounts in the past year. If you are constantly opening and closing accounts it counts against you (up to 10 percent of the total). There are legitimate reasons to apply for credit (or close old accounts), just don't do it too often.

5

Check your credit behavior for the past few years. Time is the final 15 percent of the FICO score. The two or three most recent years are weighted more heavily. But the longer you use credit responsibly, the more it will help raise your FICO score.

6

Take other factors into account. Certain events like bankruptcy or foreclosure can drastically lower a FICO score. In some ways this kind of problem is worse than any other because it must stay on your credit record for 7 to 10 years.

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Why Having Someone Check Your Credit Scores too Often Is Bad

Companies check credit reports and credit scores in response to loan and credit card applications. Your scores and credit records indicate whether you are reliable or likely to default on the debt. Many things affect your score, including these inquiries. The MyFICO credit scoring company warns that "hard inquiries," which occur because of applications rather than credit self-checks or marketing pre-screenings, hurt your credit rating because they make you look like a risky borrower.

Effects

Companies check your credit rating by pulling your score or reviewing you Experian, TransUnion and Equifax files whenever you apply for new accounts. Their inquiries get added to your credit reports and figure into credit score calculation, the MyFICO site explains. A single inquiry drops your credit score between zero and five points, but more credit checks pull it down farther. Six or more checks in close proximity peg you as a high risk for default because it makes you statistically eight times more likely to file for bankruptcy.

Considerations

You can get your credit reports and check your credit score as often as you wish without any negative results because self-checks fall into the "soft inquiry" category, the Lendingtree finance website advises. They are invisible to creditors and ignored by the FICO credit scoring formula. Also, banks and finance companies buy pre-screened information from Experian, TransUnion and Equifax. Their inquiries are visible to you but do not affect your score.

Loan Shopping

Loan shopping racks up a high number of inquiries when you fill out numerous applications for big loans like mortgages, student loans or new or used car financing. Normally this would harm your credit score, but MyFICO explains that its formula takes shopping into account. You only get penalized the equivalent of a single query as long as all the shopping-related inquiries happen within a 45-day period.

Reporting Time

Damage caused by too many inquiries and credit score requests eventually repairs itself. Equifax explains that this data only stays on your credit reports for 24 months, then gets purged. It no longer figures into your credit score or influences creditors once it is erased. You are allowed to dispute inquiries older than two years that still show up or data you do not recognize. The Federal Trade Commission (FTC) advises writing letters to the credit bureaus asking for removal of wrong or outdated information. You are allowed to check for mistakes yearly by getting free credit reports from annualcreditreport.com.

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What Is a Slow Pay on a Credit Report?

A slow pay is when you pay on one of your credit accounts later than the due date. Payments reaching a certain number of days late will appear on your credit report.

Significance

Creditors will report your account as a slow pay when you are 30 or more days late. Payments made late but less than 30 days late can only be viewed internally by the creditor; they dont appear on your credit file.

Considerations

According to CreditCards.com, a payment which is 30 days late can lower a credit score of 680 by 60 to 80 points. A credit score of 780 can be decreased anywhere from 90 to 110 points.

Effects

Credit scores are used by lenders to determine your level of risk. Scores range from 300 to 850. The higher your score, the better chance you have of receiving credit products with favorable terms.

Warning

The later your payments are, the more it hurts your credit score. A payment which is 60 days past due will have a significant impact on your score.

Time Frame

According to Experian.com, payments which are late by 30 to 180 days can remain on your credit file for seven years.

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How to Get a 780 Credit Score

There's no trick to getting a terrific credit score. Many people have lived most of their lives on credit and have paid it back when it was due. Those who have followed the rules are to be admired. Those who aspire to have 780 credit scores or higher should develop the same habits. Before long, they will see their credit score rise to levels to where they can secure all the credit they want or need.

Instructions

1

Bank your paycheck and buy as much as you can on your credit card. Then, at the end of the month after your credit card bills arrive, write a check to pay them off. You will benefit since each of those purchases is a loan, and the credit card issuers is obligated to inform the three credit agencies of all activity on the cards. And by paying off the cards---a fact also sent to the credit bureaus---you will prove to them that you are credit-worthy and, at some point, they probably will increase your credit limit. Of course, make sure you don't put more on credit than you can pay off. Most people with high credit scores don't use more than about 35 percent of the credit they are granted.

2

Put you debit card in a drawer. A credit card does the same things as a debit card; but each time you use it, you are taking a loan. When you use a debit card, you are simply using your own money. Once again, the credit card companies will inform the credit bureaus each time you use the card but your usage of a debit card will go unnoticed.

3

Systematically ask your credit card companies to raise your limit. You will have more freedom to make larger purchases on your card without lowering your credit score. Also, with a higher limit, you are likely to receive promotional offers from the credit card company.

4

Buy your home, don't rent it. You will be demonstrating to the credit bureaus that you are committed to pay a large portion of your income on a mortgage, which will result in a higher credit score. However, if you rent your home, the only time the credit bureaus is likely to hear from your landlord is when you are late. A new homeowner, after he makes several monthly payments on his mortgage, will see his credit score raised by as much as 50 points.

5

Resist the temptation to close a credit card account because you have been offered one at a lower interest rate. The credit bureaus look at how long you have successfully handled credit. If you have a history of paying off your balance on time, that will be lost if you were to close that account.

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How to Obtain a Credit Score From Experian

Lenders look at credit scores to help them decide whether you are a good candidate for a loan. Experian is one of the three major credit reporting agencies that produce credit scores. At Experians website you can obtain your credit score, examine your credit report and dispute any inaccuracies. The company also offers tips on improving your credit score.

Instructions

1

Visit Experians website (see Resources). The site offers several products that include credit scoring. At a minimum, you will need to order an Experian credit report with credit scoring. For a higher fee, you can order reports from all three credit reporting agencies with credit scores.

2

Fill in the credit report order form completely and accurately. Provide your Social Security number, date of birth and payment information.

3

After you click Submit Secure Order Form, answer the personal information questionnaire. To confirm your identity, these questions ask about past loans and previous residences. If you can't provide the correct answers for the identity check, you will not be able to obtain your credit report or score through the website. In this case, Experian will instruct you how to obtain your credit report and credit score by mail.

4

Click on the page link that will display your credit report and score. Go through the information section by section to confirm that the reporting information is correct. If you find inaccurate information, highlight the section, click Dispute This Item, provide the reason for your dispute and click Submit.

5

Keep your Experian login and password information safe. Provide Experian with a correct email address so the company can notify you of the results from its review of disputed items.

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What Is a Good Credit Report?

Your credit report serves as a record of past financial dealings that helps new creditors and lenders determine your eligibility for products and services. A good credit report benefits you by helping you qualify for low interest rates and credit cards with the greatest benefits. Other businesses that conduct credit checks, such as insurance companies, employers and landlords, will also view you more favorably if you carry a positive credit history.

Credit Score

Your credit score is a three-digit number that lets businesses quickly assess your creditworthiness. Each company's policies differ and while some companies check your credit score and also review your credit history, others determine your eligibility for goods and services based solely on your score. Your credit report and the information it contains determines your credit score. Although different credit scoring formulas exist, the FICO formula is the one used by most businesses. FICO scores range from 300 to 850. The higher your FICO score, the better your chances of obtaining credit and loans you apply for at the best rates.

Payment History

Your creditors report your debts to the reporting agencies and these accounts subsequently appear on your credit record. If the account requires you to submit regular payments, those payments also show up on your report. Each payment that you make on time helps boost your credit rating while late payments make you appear less reliable and hurt your credit. Because your payment history is 35 percent of your total credit score, paying creditors on time is imperative to maintaining a good credit report.

Credit Entries

The type of entries reflected on your report can influence whether or not you carry good credit or damaged credit. Credit card and loan accounts with a long history of timely payments benefit your credit rating. Judgments, bankruptcies, tax liens and collection accounts, however, are all derogatory entries that hurt your credit rating. A good credit report should reflect very little, if any, derogatory information. Derogatory entries lower your credit score and make you a higher business risk for lenders.

Credit History

Even if you have a high credit score and no negative entries on your report, a short credit history can prevent you from having the best credit report possible. Lenders want to see not only that you managed debt well in the recent past, but also want evidence proving that you have practiced positive debt management skills for an extended period. The longer your positive credit history, the greater the chance that you will continue paying your bills on time -- lowering the risk the creditor incurs when doing business with you.

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How to Restore Your Credit

If you have endured financial difficulties in the past, your credit report and score may have sustained damage. A low credit score can result in your being turned down for loans or lines of credit. Even if you are approved, bad credit will prevent you from being eligible for low interest rates. Take steps now to restore your damaged credit in order to save money and provide for a secure financial future.

Instructions

1

Pull your credit reports from all three credit bureaus, Experian, Equifax, and TransUnion and review them for errors. The credit bureaus maintain millions of company reports and credit reporting errors can and do occur. It is important to acquire credit reports from all three credit bureaus since not all companies report to the same credit bureau.

2

Contact any company you find on your credit report that is reporting inaccurate information. Explain that the account either does not belong to you or is being reported inaccurately. Ask what information you can provide in order to have the error corrected. In many cases, you will need to provide a picture I.D. and a copy of your credit report to the company to have the error corrected.

3

Send a letter to each credit bureau currently reporting the inaccurate information if the company refuses to correct it. Request that the credit bureaus conduct an investigation into the item. The Fair Credit Reporting Act states that all credit bureaus must comply with any customer request for an investigation. Each credit bureau has 30 days to investigate the item and either verify or remove it. You will be notified via mail of the results of the investigation.

4

Write a "goodwill letter" to any companies currently reporting late payments on your credit report. A goodwill letter is merely a statement acknowledging that while the late payment notations are correct, you have been a good customer, make your payments regularly, and would like the company to remove the negative notations from your credit file. Some companies do not acknowledge goodwill letters, but some will comply with your request. Your past payment history accounts for 35% of your credit score. The removal of late payment notations will cause your credit score to increase immediately.

5

Review your credit reports for any negative accounts that are over seven years old and do not appear in the "Public Records" section of your report. Any delinquent debts over seven years old that are not a matter of public record must be immediately removed from your report . Although the seven year reporting period for delinquent debt is a law, consumers often find that these debts are not removed by the credit bureaus in a timely manner. Contact the credit bureaus and report any debts that are beyond the reporting period yet still appearing on your credit report. The credit bureaus will remove these debts and your credit score will improve.

6

Change your financial behavior. Getting organized with your bills and payment schedules allows you to never miss a payment and thus not risk damaging your credit. The older negative notations are the less they affect your score. Avoid applying for new debt, pay everything you owe in a timely manner, and monitor your credit reports regularly for mistakes. Being responsible with your debts will gradually increase your creditworthiness and restore your credit.

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Does it Affect My Credit Score When a Credit Card Company Closes My Account?

When a credit card company closes your account, it can have a negative impact on your credit score. Fortunately, the decrease in your credit score may not be significant and, in most cases, is only temporary, according to Experian.com.

Credit Utilization

When a company closes a credit card due to inactivity, you will lose an account carrying a good "utilization ratio," which is your available credit versus the amount that you are using, explains Consumerist.com. Unfortunately, credit card companies may cancel your unused account.

Old Credit

Another factor used to calculate your credit score is the age of your accounts. MyFICO.com states that length of credit history accounts for 15 percent of your credit score. When credit card companies close old accounts, you lose a credit card carrying a long history.

Tips

If a card is canceled, compensate for the loss of credit by paying down the remaining credit cards. To prevent your credit card from being canceled, keep the account active by making small purchases. If the interest rate is high, pay the balance in full each month.

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What Do Banks Use to Check Credit Scores?

Before a bank allows a person to open an account or take out a loan, the bank will generally check the person's credit score. This is because whether the person is borrowing money or merely starting a check account, the bank can be placed in a position in which the individual owes it money. The bank can check the person's creditworthiness by providing information to credit reporting bureaus, which keep credit reports on most individuals.

Credit Scores

A person's credit score is a numerical indication of his creditworthiness. Banks, as well as other creditors, use this information to determine whether a person should be provided credit and, if so, at what rate of interest the person should receive on this credit, if interest is applied. A credit score is determined using the data that is contained within the individual's credit report, which is made up of information related to the person's lending history.

Credit Reports

Credit reports contain information related to loans that the person has taken out in the past or other instances in which the person has been extended credit in the form of a service. Credit reports are constantly updated and are available to creditors, such as banks, who purchase them from credit reporting bureaus. Only companies with a legitimate business interest in an individual can research an individual's credit report, as it is not public information.

Credit Reporting Bureaus

Banks can obtain credit reports and scores from credit reporting bureaus by providing information that identifies an individual. For example, when the individual approaches a bank about taking out a loan or starting an account, the bank will request the individual provide information about himself, such as his name and Social Security number. This information will then be relayed to credit reporting bureaus, which will provide the bank with the individual's credit score.

Loans

When a person applies for a loan from a bank, the bank will usually check not just check the borrower's credit score, but will use other information to determine the person's creditworthiness and the rate at which it is willing to issue the loan. For example, the bank may require that the person provide documents that indicate his current income as well as proof of any assets he has, as well as information on what he wishes to use the loan for.

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How to Find Your Canadian Credit Score

A credit score is a three-digit number assigned to you which serves as a picture of your financial reliability. It gives lenders a way to quickly evaluate the risks of extending credit to you. The credit score is calculated based on criteria, such as the amount of outstanding debt, your payment history, the length of your credit history, the number of recent credit inquires and the types of credit accounts you have.

Instructions

1

Visit one of the two credit reporting agencies for Canada. The agencies are Equifax Canada and Transunion Canada. In Canada, you can only obtain your credit score online.

2

Visit Equifax's website and click the "See My Credit Score" link in the left column and then click the red "Get Started" button at the bottom. As of 2011, the cost is CAD$23.95 and covers your credit report and your credit score. After payment, you can view your credit score and credit report online.

3

Visit Transunion's Credit profile website. Scroll down to the second gray box for the Transunion Credit profile package. As of 2011, the cost is CAD$14.95. Leave the "Credit Score" box checked. This costs an additional CAD$7.95. If you don't want to include Debt Analysis, uncheck the box. Click the "Order Now" button. Your credit report and credit score will then be available online.

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