School Loans and Poor Credit History

If you don't have a good credit score, banks generally won't approve you for a loan. That holds true for student loans to an extent. Depending on what type of student loan you apply for, such as public or private, your credit score may not have any bearing whatsoever on your chances of getting approved.

Public Loans

Public student loans are backed by the federal government and include loans such as PLUS, Stafford and Perkins Loans. According to studentloans.gov, debt-to-income ratio, credit score and employment history have absolutely no effect on your loan application. Failure to repay the student loan, however, will result in a hit to your credit score. Public student loans and the amount of the loan are awarded based on either your finances or your parent's finances. Higher loan amounts are generally given to low-income families.

Private Loans

Private student loans are loans granted through a bank or financial institution. As with all types of borrowing through banks, your credit score is taken into account when you apply for a student loan. A poor credit score, which is usually regarded as anything below 620, will either result in the financial institution denying you the loan or giving you a higher interest rate. Student loans typically start out at higher interest rates than public loans. For example, a private loan usually starts out at a base interest rate plus the Wall Street Journal Prime rate, which fluctuates. The base rate depends on your credit score and could be as high as 7 percent or higher plus the Prime Rate. Public loans are flat rates. For example, a subsidized Stafford loan comes with an interest rate of 4.50 percent or an unsubsidized rate of 6.80 percent in 2011.

Cosigner or Collateral

If you have a poor credit score, you may be able to secure a private loan with either a cosigner or collateral. If you choose to have a cosigner, the cosigner must have good to excellent credit, which is normally anything from 620 to 720 or above. The closer the cosigner's credit score is to 720, the easier time a bank will have approving your loan. Collateral may or may not be an option, depending on what kind of collateral you have to put up. For example, using a $1,000 valued car as collateral for a $20,000 loan isn't going to get you very far. A house, on the other hand, will almost always secure the loan. If you don't pay the loan back, you stand to lose whatever you put up as collateral.

Choosing the Loan

Always try to secure a public student loan before you apply for a private loan. Public loans are always the better choice if you will receive the same or similar funding amount. If you find that the public student loan does not grant you enough funds, you can then apply for a private loan. If you know that you have a poor credit score, explain that to the financial institution and have a cosigner or collateral in mind.

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How to Add Favorable Information on a Credit Report

Having a great credit report is your ticket to getting low-interest loans and also getting approval for those loans more quickly and easily. Your credit FICO (which ranges from 300 to 850) score is something that banks and other lending institutions review very carefully to determine whether you are a good credit risk or not. An excellent FICO score is above 750 and an average score is in the high 600 range. Miss a few payments on your credit card or car and you'll see your FICO score quickly drop.
But if you have a low score due to having detrimental information on your credit report, don't despair. You can add favorable information to your credit report and you can take steps to increase your FICO score. Here are a few ways to add favorable information to your credit report.

Instructions

1

Fight back by disputing erroneous information on your credit report. The top three credit institutions (Experian, Equifax and TransUnion) receive information from your lending institutions regularly and they compile this information into your credit report. If one of these lending institutions reports that you were late on a payment---even by one day---your score could be adversely affected.
The Fair Credit Reporting Act states that you have the right to dispute information that you feel is being reported incorrectly on your credit file. If you received a low score and it was due to an error on the part of the lending institution, dispute this by contacting the three credit agencies and notifying them that you wish to dispute an error. The credit reporting companies will investigate your dispute and if they find in your favor, your score will reflect this.

2

Talk to the credit reporting agencies if you have a problem. Although you attempt to pay your bills on time; sometimes circumstances can cause a payment to be late. Sometimes they are just plain forgotten. If this is the case, write a letter to the three reporting agencies and explain why you were late. The agencies will keep a copy of your statement in your file and if someone reviews your file, they can access your letter and get your side of the story.

3

Make sure you pay your bills on time, all the time, to avoid an unfavorable credit report. One way to ensure that payments are made on time is to set up automated payments. Automatic payments will ensure that your payments are made even if circumstances keep you from making a payment on time.

4

Charge something on your credit card regularly. That's right---charging items on your credit card and paying them off each month will boost your credit rating giving you a favorable FICO score. Keep your oldest credit card open, because the lengths of accounts make a difference to creditors. Make sure you make your payments on time and, if possible, pay off the whole balance monthly to avoid interest payments.

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How to Improve a Credit Score by Adding Accounts

Your credit score is calculated by a variety of different factors. How long you have had credit, your payment history on your accounts and the types of debt you carry all contribute to your credit score. The two types of debt you need to balance in order to accrue the most points every month are revolving debt, such as credit cards, and installment debt, such as loans. The types of debt you carry on your credit report account for 10% of your credit score. If you do not currently have a good balance of revolving and installment debt, applying for a credit card or a loan can make up for the deficiency and boost your credit score.

Instructions

1

Check your credit report to see which types of debt are currently being reported. One installment debt is plenty, but while one credit card is enough, it is not the ideal. Two or three credit cards and one loan will provide you with the perfect balance of debt to build a good credit history and a score you can be proud of.

2

Apply for a credit card if you are lacking in revolving debt. Choose your card carefully. Some credit cards come with high interest rates and fees that you can easily avoid with a decent credit score. Only apply for credit cards when you are reasonably certain you will be approved. Each time you apply for credit, your credit report is pulled and reviewed by the lender. This leaves a credit inquiry on your report. Credit inquiries bring your score down slightly. Applying for numerous cards within a short time frame can damage your credit score.

3

Apply for a small personal loan from your bank if you need evidence of installment debt. If you have good credit, this should be a simple process. If, however, you are just starting out with your credit or have made credit mistakes in the past, you may need to provide the bank with extra incentive to approve your loan. Offering collateral by borrowing against funds you already have in the bank is one way of making yourself a lower risk. You can also boost the chances of your application being approved by enlisting the aid of a cosigner with established credit. Numerous credit inquiries for loans within a 30-day time period will not damage your credit score the way credit card applications will, so you may apply at several banks if you need to.

4

Wait at least four to six months for your new credit to become established. You may not see a significant increase in your credit score for several months, but paying all of your debts in a timely manner and carrying the proper balance of revolving and installment debt will benefit you. After 60 days you should begin to notice a steady increase in credit points. After six months, your new credit should be fully established, and your credit score will be much higher than it was when you began the process.

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How to Write to Request My Credit Rating

Knowing as much as you can about your credit is an important part of taking care of your personal finances. As a consumer, you are entitled by law to one copy of your credit report from each of the three major agencies (Equifax, Experian and TransUnion) per year. Take the opportunity to learn all you can about your credit rating. Few things are more stressful than dealing with a surprise on your credit history.

Instructions

1

Call ahead. Call the customer service department of the agency or agencies you will be writing to. Requirements for proof of identity vary between Equifax, Experian and TransUnion. Make sure that you know what documents to include for the agency you are requesting a credit rating from.

2

Be professional. Writing to request a credit rating should follow standard format and style for a business letter. Letters to credit agencies should be typed, not handwritten.

3

Identify your purpose. State that you are writing to obtain a credit report. But don't stop there. Explain why you are requesting the report at this time.

4

Reference the Fair Credit Reporting Act. Make sure that your first paragraph mentions that you are requesting a credit report in accordance with the Fair Credit Reporting Act.

5

Include personal information. Your letter to request your credit rating should include your full legal name, date of birth, Social Security number and current address at a bare minimum. It is also helpful to include all previous addresses for the last five years.

6

Enclose relevant documents. Equifax, Experian, and TransUnion operate under strict rules of confidentiality. It is important that you include photocopies of identifying documents, such as your drivers license and Social Security card. It may also be helpful to enclose a copy of a recent utility bill to prove identity and place of residence. Finally, if you have any documents related to your reason for requesting a credit rating, include copies of those documents as well. State in your letter what documents you have enclosed.

7

Request confidentiality. State explicitly that you do not want Equifax, Experian or TransUnion sharing your personal information with any other agency.

8

Include a phone number you can be reached. In the event that the credit agency cannot process your request with the information provided, a representative may need to contact you. Make communication easy by including a phone number where you can readily be reached.

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FICO Tips & Credit

The Fair Isaac Corporation's credit scoring formula uses consumers' credit information to award each individual a FICO score. Although not the only type of credit score available, FICO scores are the most widely used when determining an individual's creditworthiness. By maintaining a high FICO score, you can ensure that you remain eligible for lines of credit and loans you apply for.

Monitor Credit

Regularly monitoring your credit helps you catch and quickly resolve errors --- preventing lasting damage to your FICO score. Federal laws allows you to pull one free credit report each year. Because each credit bureau may have different information on file for you, however, it's important to monitor all three of your credit reports. You can purchase your credit reports from the credit bureaus themselves or from a third-party credit monitoring service.

Should you discover a mistake in your credit file, the Federal Trade Commission recommends notifying the credit bureaus of the error via telephone, online or by mail and asking for an investigation. You can also contest mistakes in your file with the company that originally reported the error.

Pay On Time

Paying your debts on time is one of the best ways to maintain a high FICO score. According to MSN Money, a single late payment to a credit card company can cost an individual with a FICO score of 780 up to 110 points, depending on his other credit information. Your payment history makes up 35 percent of your FICO score. Thus, it's imperative that you stay organized and always pay your creditors on time.

Pay Down Balances

If your FICO score needs a little boost, paying down your credit card and line of credit balances will increase your credit rating. The FICO formula calculates your score based on the supposed risk you present to creditors. By paying down your balances, you increase your available credit and, in doing so, demonstrate financial stability. The larger the gap between your spending limit and your balances, the better your FICO score.

Ask for Goodwill

Making mistakes is a trait of human nature. Unfortunately, these mistakes can lower your FICO score. If a late payment you made to a creditor or lender in the past is dragging down your scores, the late payment remains a part of your credit history for seven years --- unless you can have it removed early.

Some lenders will remove a single late payment on your credit record as a gesture of goodwill at your request. Goodwill requests are best made in writing. Your chances of obtaining removal are better if you have held the account for years or the late payment represents a single mistake nestled among a history of timely payments. Once the creditor removes the late payment from your credit report, your FICO score will increase.

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What Can I Do to Better My Credit?

Improving your credit is one of the smartest things you can do to help your financial well-being. Poor credit can cost a person tens of thousands of dollars in finance charges over the course of a lifetime. Some people with poor credit also have excessive debt, forcing them to make only the minimum payments on some accounts. That leads to years of debt. For example, Utah State University reports that it takes 15 years and 6 months to pay off a $3,000 credit card debt if you make minimum payments of $50, with an interest rate of 18.9 percent. Total finance charges for the 15-plus years: $6,279.85.

Improvement

The best way to improve credit is simply to pay bills on time -- month after month -- while keeping balances low on credit cards and other revolving debt. Over time, that consistency helps increase credit scores. Credit scores range from 350 to 850. Scores of 720 and up are excellent, and usually lead to the lowest interest rates available on credit cards and other loans. Scores below 620 are poor, and usually lead to higher interest rates.

Timing

It can take two to three years to significantly improve a credit score by paying bills on time and keeping balances low. However, Bankrate reports that people seeking faster improvement should immediately pay down current revolving debt balances as low as possible. Credit cards charged to their limit hurt credit scores. Creditors like seeing people with large credit limits but low balances, because that suggests sound financial management.

Reports

Correcting mistakes on credit reports also improves credit. The Fair Credit Reporting Act, a federal law, makes credit reports available for free through AnnualCreditReport.com. The site offers every consumer one free report from each of the three credit reporting agencies -- TransUnion, Equifax and TransUnion. Negative information on credit reports, such as late payments, charge-offs and collection accounts, causes poor credit scores. The Federal Trade Commission maintains negative information on credit reports can remain on file for seven years in most cases, and 10 years for bankruptcy. However, exceptions are possible if the information is incorrect or a debt collector or creditor voluntarily removes the information.

Repair

Some people seeking to better their credit ask creditors to remove a late payment or two as a courtesy, or they offer to pay an old charge-off or collection account in exchange for removal of the information. Clearing such information from your credit reports can lead to an immediate increase in your credit scores. Others improve credit by opening new accounts, such as credit cards or installment loans. They pay the new accounts on time every month and keep balances low on the revolving accounts.

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How Long Do Collection Records Appear on Credit Reports?

When you fail to pay a bill--whether it is a credit card account or a doctor's visit--the creditor will likely eventually turn your account over to a collection agency. These instances can negatively impact your credit report for seven years.

Time Frame

Collection accounts are usually noted on your credit reports for seven years from the date the original obligation was not met, according to the Fair Credit Reporting Act.

Misconceptions

Paying the collection account does not automatically remove the entry; it simply updates it as "paid." The account will still be reported for seven years from the original delinquency date.

Impact

Experian, one of the three major credit reporting agencies in the United States, notes that a collections entry is as "negative as it gets, short of bankruptcy."

Effects

Having a collections record can make it much more difficult to get future credit cards, car loans, personal loans and even some apartments or jobs.

Your Rights

A collection agency cannot harass you or it risks violating the Fair Debt Collection Practices Act. For example, the agency cannot call you before 8 a.m. or after 9 p.m.

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How do I Improve the Worst Credit Score?

There may be several reasons why your credit score is terrible. Missed or late payments are the main cause of a poor credit score. Your score also worsens if you exceed your credit limit. Every month lenders report your payment history to credit reference bureaus and your score is adjusted. Improving the worst credit score requires time and effort, but it's still achievable.

Instructions

1

Get your free credit report from AnnualCreditReport.com. The online procedure is simple and takes less than 20 minutes. You can view the report instantly. It doesn't show your credit score, but you will be able to see problem areas of the report that need fixed. Attending to these issues will result in an improved credit score.

2

Check your credit report carefully for errors and note them down. You will need to write to the credit reporting bureau and the lender to have inaccuracies fixed. The Federal Trade Commission has good advice at ftc.gov/ about correcting credit report errors. As soon as errors are rectified your credit score begins improving.

3

Review each line of credit on your report. Your payment history is next to each lender's name. Identify missed or late payments and note the amount needed to bring the accounts up to date. Arrange to pay the overdue amounts as soon as possible. Payments will be recorded on your credit file and improve your credit score.

4

Check if you have exceeded your limit on credit cards. If you have, make an immediate payment greater than the amount exceeded so you are back within your limit. Stay within your limit going forward to improve your credit score.

5

Analyze each credit card entry on your report and check the margins of available credit. Cards close to their limit get flagged by lenders. Keeping your credit card balances under about 60 percent of their limit improves your credit score.

6

Pay your contract cell phone bill on time. If you have a contract phone and you pay late, it is reported to the credit reference bureaus and affects your credit score. No report is sent if you pay on time.

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How Bad Credit Records Influence Employment

An employee background check may include access to your credit report. Employers use credit records to determine potential risks and reliability. Employers must have your written consent to access your credit records.

Hiring and Termination

Potential or current employers may use information on your credit report to deny employment or terminate you. If you have been denied employment or terminated due to information on your credit report, the employer must supply you with a notice stating the reason.

Advancement

You may be denied advancement opportunities with your employer if they use your credit history as a means to determine your reliability. As with the hiring process, if you were denied advancement due to your credit report, your employer must provide a disclosure stating credit records influenced the decision.

Considerations

Employers have the right to take adverse action concerning employment due to most information on a credit report. However, federal law prohibits employers from denying a job or terminating someone due to bankruptcy. In addition, some states limit the types of jobs for which a credit report can be used.

Warning

Your employer may recheck your credit records throughout your employment if you signed a separate paper giving consent.

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Why is it Easier to get a Store Credit Card?

Make a purchase at any many stores and the cashier may ask you if you want a credit card issued by the retailer. Most store cards are easy to qualify for and entice you to sign up by offering special offer available only to customers with a store credit card. Congress passed legislation in 2010 to make it harder for stores to offer credit accounts.

Profitability

Store credit cards usually have a very high annual interest rate not unlike a subprime credit card, according to The New York Times. When creditors can charge high interest, the account becomes immensely profitable, even when you factor in the high default rate. Most people who go for a store card are probably heavy credit card users, so the store can expect the borrower to rack up debt and maintain a balance.

Increased Sales

Apply for a retail card and the company almost always offers a very large discount on your first purchase and other benefits exclusive to customers with the store brand credit card. This increases sales and when the borrower puts the purchase on the card, raises the cost of the goods sold more if he does not pay off the charge within the grace period.

CARD Act Effects

The recession of 2008 and credit card reform with the CARD of 2010 makes getting a retail card harder. Balances on private-label cards dropped $114 billion to $94 billion between 2007 and 2009, according to First Data. As a result, retailers lowered limits in 2009. In 2010, Congress reduced regulation of the private-label credit card industry by allowing companies to estimate income. Thus, instead of requiring a W-2 or pay stub, the retailer can predict income based on the data in your credit report or some other statistical model.

Tip

Signing up for a retail card just for the discount is usually a poor idea, because many retailers offer the same discount for other, free services, such as giving your email to get the company newsletter, according to Bankrate.com. The low credit score requirement of these cards, however, makes them ideal for rebuilding credit history, because a traditional bank card is probably out of reach for someone with a tarnished credit record.

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What Is a Credit or FICO Score?

A credit score or FICO score is a number that measures a consumer's credit risk. The FICO score was developed by Fair Isaac Corporation and is the score most commonly used by lenders to help determine whether to approve a loan application. The three major credit reporting agencies each generates a credit score based on the model used to calculate the FICO score. High credit scores help consumers qualify for loans and credit cards, while low scores could prevent credit approval.

Uses

Banks, lenders and other creditors use a consumer's credit scores to help determine whether an individual qualifies for credit. The scores also influence the interest rate, loan terms and payment amount of a loan. Higher scores usually result in lower interest rates and payments. Having higher scores can save a consumer hundreds or thousands of dollars over the life of a loan. The scores can also affect a consumer's ability to rent an apartment and the amount of the security deposit required. A credit score is not the only factor a lender considers when determining whether to approve a credit application, but it is a significant factor.

How They're Calculated

Credit scores are calculated using information from a consumer's credit report. Several factors are included in the formula, including payment history, amount of credit owed, length of credit history, number of credit applications and the mix of types of credit. Each of the three credit reporting bureaus -- Experian, Equifax and TransUnion -- updates a consumer's credit report based on information from creditors. As a result, scores change frequently.

Score Range

FICO scores ranges from 300 to 850. The scores from the three credit reporting bureaus usually are similar, but can vary depending on different consumer data at each bureau. Lenders typically view scores above 700 as a low credit risk, while anything below 600 could result in a high interest rate or a denied credit application, according to the Consumer Federation of America website. A consumer can do a few things to raise his scores, such as paying bills on time, keeping low balances on credit cards and refraining from applying for and opening many credit accounts.

Where to Find Them

Credit reports and scores are available from each of the three credit bureaus. You are allowed to receive a free copy of your credit report from each of the three credit reporting bureaus once each year by going through the AnnualCreditReport.com website. You also can obtain credit reports and credit scores through the individual bureaus, although they typically charge fees. You should periodically review your credit report to check for accuracy and to monitor changes. While FICO scores are the most commonly used credit scores, other credit scores are used by some lenders and credit bureaus to measure risk. Lenders sometimes use an internally generated score that combines a FICO score with other consumer information.

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How to Report a Stolen ID to Credit Agencies

Millions of people have their identities stolen each year. If your identity is stolen, someone can open credit card accounts, take out loans or steal money from your checking or savings account. If you don't catch this early, your credit score could be affected, which will take time and hassle to correct. If you believe your identity has been stolen, you should contact one of the major credit-reporting agencies (TransUnion, Equifax or Experian) immediately.

Instructions

1

Call the fraud hotline for one of the major credit agencies. You can reach TransUnion at (800) 680-7289; Equifax at (800) 525-6285; and Experian at (888) 397-3742. You should only have to contact one agency, since the agency you call is required to let the other two agencies know.

2

Tell the representative that your identity has been stolen and that you want to place a fraud alert on your credit report. Give the details of how you became aware that your identity was stolen. You may have to verify personal and financial information to confirm your identity.

3

Ask the representative for the credit agency you call to send you a copy of your credit report so you can review everything. Make sure you're aware of any and all accounts that have been opened using your stolen identity.

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Can Credit Negatively Affect Getting a Job?

You've found your dream job only to realize you may never get it, not because you don't qualify, but because you took too many risks with your credit history. That's right---there are careers that, because of the demand for integrity and reliability inherent in the job, require a credit check before an applicant is hired.

Law Enforcement

Being in a position of authority, such as with the police department, means handling serious responsibility on a daily basis. This is why many police departments run a credit check before hiring new officers. The Sacramento Police Department recommends maintaining a clean credit record prior to applying for employment as an officer or, if your credit history is poor, at least show initiative in repairing your credit.

Dealing with Money

Employee theft accounts for a $30 billion loss to the retail industry, according to the The New York Times. Because of this, it makes sense that businesses that require employees to handle money run a credit check before taking on new hires. Industries that react negatively to poor credit history include banking, accounting and investing.

Protection and Integrity

Health care professions may also require an approved credit check before hiring new employees such as nurses, medical assistants and laboratory technologists. Those working in health care are responsible for the safety and well-being of the patients in their care. An employer checks an applicant's credit history as a way of evaluating that person's ability to be responsible and reliable.

What it Means for You

Employers aren't seeking to harm you by checking your credit, reports MSN Money. In a 2010 survey conducted by the Society for Human Resource Management, 54 percent of employers who run credit checks said they did so to prevent theft. If you have an explanation for the state of your credit history, and are trying to rectify it, present that to your potential employer. He may overlook your mistakes and give you a chance to prove yourself.

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What Would a Lien Do to a Credit Score?

Your credit score is a vitally important number because it influences lenders when they consider credit card and loan requests from you. FICO is the most widely used credit score company, but the TransUnion, Experian and Equifax credit reporting agencies all have their own versions. All scores are calculated with similar formulas, and liens affect the final number.

Definition

A lien happens when you do not pay a debt and the person or company to whom you owe money takes court action against you. A successful legal judgment lets the lender attach a lien to your house or other property. Sometimes this forces sale of the property to satisfy the judgment, but the lien usually stays in place until you want to sell it yourself, which forces you to pay the owed amount first. Court-ordered liens appear on your credit reports and are figured into credit score calculations by FICO and the three agencies.

Types

There are different types of liens, all related to unpaid bills. For example, a contractor who works on a house can get a judgment if the homeowner does not pay for the services. A mechanic can put a lien on a car if the vehicle's owner defaults on a repair bill. Government agencies like the Internal Revenue Service can put tax liens on property for unpaid debt.

Effects

Your credit score is based on many factors, like the number of accounts you currently have, the owed balances and your available credit. Your payment history on those accounts also strongly influence your score. A lien is always bad, but its exact effect depends on those other factors, according to the "Ask Bill" column on Bills.com. High debt and a poor payment record combine with a lien to bring your score into sub-prime territory. It will not be as low if all your current accounts are being paid on time and you keep your owed balances low.

Time Frame

Most unpaid bills and lien judgments are automatically removed from credit reports after seven years, but tax liens last much longer. Experian explains that unpaid tax liens stay on reports for 15 years, although they are erased once they are paid. They affect your credit scores for the entire reporting period, but their influence drops as they age. You can offset an old lien's effect by building good records with your newer accounts.

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Credit Rating Scores Explained

Credit rating scores are mysterious to many people. You may know that your credit score is a three-digit number that directly affects your ability to get credit cards and loans. However, you may not know how your credit score is actually calculated or if you can do anything to affect it. A credit-rating score isn't really as confusing as it seems. The factors that affect it are straightforward, and you have some control over most of them.

Definition

A credit score is a three-digit number that is compiled using information from a consumer's credit report. The most commonly used credit score is the FICO score, which is calculated based on a formula developed by Fair Isaac Corp. (FICO). Although the exact formula is proprietary, FICO gives general information on the factors it considers and their relative weight.

Use

A credit score is a quick indicator of your creditworthiness. It is used by mortgage lenders, credit card companies and financial institutions to make decisions on whether to give you a loan or allow you to open an account. Your FICO score also influences the interest rate you will pay. If you have a low score, lenders may penalize you by charging a higher interest rate to compensate them for a higher perceived risk.

Calculation

A credit score is calculated based on several factors. According to FICO, the most important factors are the consumer's payment history and the amounts he owes on his accounts. Together, these two factors make up 65 percent of the credit score. Other factors with a lesser influence include how long a consumer has had credit accounts, the types of loans and accounts he holds, and the number of recently opened accounts.

Range

The highest possible credit score under the FICO system is 850. Any score between 850 and 720 is considered to be excellent. Consumers within this range can readily get credit card accounts and loans at favorable interest rates. Scores between 719 and 600 still qualify for credit, although the terms may not be as favorable. Lower scores make it progressively more difficult to get credit and put consumers in a high-risk category where they must pay an interest penalty.

Influence

Consumers can influence their credit scores by focusing on the factors that have the most influence. Making on-time payments and maintaining a reasonable amount of credit are the two most important ways a person can improve his score. The on-time payments must be made consistently over a period of many months to have a noticeable effect.

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How Much Does a Bankruptcy Lower Your Credit Score?

A bankruptcy is a negative item. It appears as a public record on your credit report and will lower your credit score. How much it lowers your score depends upon the other credit factors present within your report.

Effects

Thirty-five percent of your FICO score reflects how well you pay your bills. A bankruptcy tells lenders that you were unable to meet your financial obligations. Once on your credit report, a bankruptcy can drop your score by 160 to 220 points, according to the Electronic Privacy Information Center.

Significance

A bankruptcy stays on your credit report for up to ten years and can devastate you credit score. A low credit score can make it hard for you to qualify for a loan and if you do qualify, it may be at a much higher interest rate.

Expert Insight

A bankruptcy can only remain on your report for a maximum of ten years, but the ramifications of it can follow you for much longer. According to financial expert Dave Ramsey, the applications of lenders and even employers may ask if you've filed for bankruptcy at any time in your life. If that answer is yes, some companies will not do business with you.

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What Is a Perfect Credit Score?

A perfect credit score is almost unknown. A rating of 800 is theoretically possible, but even many people who have never missed a credit payment, always paid their bills on time, never had an altercation with the law or even had an error on their report do not reach perfect credit after demonstrating exemplary behavior for years.

Significance

Credit scores generally stop mattering for most purposes after 775, but that doesn't stop many completion-obsessed people from struggling to bring their score up to those lofty heights. Its only real value is a badge of achievement and potentially a subject of conversation. Naturally, people are more likely to look at you cock-eyed if you bring up your perfect credit score in casual conversation. Even so, it's nice to be known as having a rock-solid credit reputation.

Function

What many people do not realize is that it becomes easier to drop in credit score as the score approaches 800. Even minor errors on the credit report can end up docking the score by 10 to 20 points or more and are hard to erase and recover from quickly. Of course, those losses won't matter much, but it is still a bit of an irritant if you have struggled to get a perfect credit score.

Features

The best way to get a perfect credit score is to pay off credit card balances in full each month, never miss a bill payment, have a good mix of debt--credit, student, auto and mortgage--and pay off large outstanding balances in a relatively short time frame. Credit bureaus like to see behavior like paying off mortgages in unusually short periods of time. Avoid taking out personal loans; generally, credit bureaus prefer it when people stick to revolving credit accounts and secured debt like mortgages and auto loans.

Effects

A perfect credit score is not as important as many people would think. For major loans, creditors take into account a wide variety of factors of which credit score plays a relatively small part. For a small business loan, for example, a lender is more interested in seeing credible evidence to demonstrate that the borrower will be able to generate a profit using the lent capital. A mortgage lender will not finance a $10 million mansion for a family who makes $100,000 a year, but has perfect credit.

Benefits

The primary benefit of having perfect or close-to-perfect credit is peace of mind and the ability to negotiate with lenders from a position of strength. A perfect credit score demonstrates a clear history of financial intelligence. It is the 4.0 grade average of personal finance. Another pleasant thing about it is that it takes away excuses that people who judge you based on credit rating (such as co-op boards) might otherwise be able to use. Perfect credit is objective evidence of a commitment to financial integrity, which is an asset that never stops appreciating.

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What Happens to Your Credit Report If You Pay Off a Loan?

When you pay off a loan, your credit score should go up. The correlation between these two items has to do with the way credit scores are calculated. Paying off a loan helps boost your payment history and lower your total debt, both of which will boost your score. However, there are a few scenarios when paying off a loan will not help your score.

Factors

Credit scores are calculated based on five primary factors: your payment history, the amount you owe, the length of your credit history, new credit you have obtained and the types of debts you possess. Because scores rely on all of these factors, one action can have a multi-faceted impact on your score. For example, paying off a loan will reduce the amount you owe and improve your payment history. However, it may limit the types of debts you possess, affecting you in a negative way.

Considerations

Paying off a loan should do far more good to your score than bad. However, there are particular negative consequences to consider when you pay off a loan according to a schedule different from your original contract. When you repay a loan early or late, your lender may lose a portion of the profit it was expecting. Rather than reporting your loan as successfully paid off, the lender may actually report the debt as closed in a manner unsatisfactory to the lender. This can actually lower your credit score.

Example

One example of unintended credit consequences arises with a consolidation loan. When you consolidate debts, you are actually paying off a handful of loans at once with a new loan. All of these loans will likely be prepaid, which means you could actually face a large drop in your credit score despite paying down a number of your debts. Since you still have a new consolidation loan, your total debts owed did not go down. This example shows how paying down a loan may actually harm your score.

Solution

Anytime you are preparing to pay off a debt, ask your lender for a payoff quote. If the quote contains any type of fiscal penalty, the lender is warning you the payment is coming in an untimely fashion. You may be charged an additional premium to pay the loan off at this time, and your score may go down. If you know you face a penalty, contact your lender to ask when you should repay your debt to avoid the penalty.

Expert Insight

Whether your credit will be impacted by paying off a loan depends on the terms of your original loan contract. For example, federal student loans can always be repaid early without consequence. Many mortgage contracts are also open-ended. Know your contract to determine whether you will be penalized.

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Can a Homeowners Association Report Late Payments to a Credit Agency?

The very same fees that go to keeping your neighborhood well kept could also cost you your home and ruin your credit score. In modern times, just about any fine, even homeowners association, HOA, can go to a debt collector and wind up on your credit report. It might be wise to pay HOA fees in any manner possible, because fines can triple the balance and accrue even after bankruptcy.

Identification

Homeowners associations can report late payments to the credit agencies, but this almost always occurs by selling the debt to a collections agency. Alternatively, the HOA can put a lien on a property in some states, which also becomes a matter of the public record. The major credit bureaus constantly hunt for public information like liens and agencies usually report accounts to the bureaus, so it should not be long before they find out about one.

Effect

A collection account is really awful for your credit score because fiscally responsible people do not let a debt go unpaid and/or budget properly to allow for their payment. You could also lose access to community facilities, such as the pool and gym, and the HOA might take you to court, which may result in a wage garnishment and fines in addition to the original balance. If an HOA goes to court, it almost always win.

Considerations

If you cannot pay HOA dues, you might be in trouble with your mortgage and seek bankruptcy protection. Keep in mind that the HOA can only go after dues from the legal owner of a property. Thus, if a bank forecloses on a home, you may still be responsible should the property fail to sell. Fees can accumulate after bankruptcy and further damage your credit if the HOA reports them to the bureaus or send it to collections.

Tip

The HOA might be willing to accept a payment plan. Most want to collect dues within six months, but you can shoot for a 12-month plan. The HOA probably won't settle for less than the full amount, because any lost fees mean the rest of the community picks up the tab.

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How Do I Legally See My Credit Report Once a Year?

Your credit score determines if you can qualify for a mortgage or car loan. It also determines the interest rates you'll pay; borrowers with higher credit scores will pay lower interest rates on their loans. You want to study your credit reports before applying for these loans. Fortunately, you won't have to pay anything to access your reports.

Once a year

Three national credit bureaus maintain credit reports on U.S. consumers: Equifax, Experian and TransUnion. Each of these reports may vary. Fortunately, you're allowed to receive your credit report at no charge once every 12 months from each of these bureaus.

To do this, visit the website AnnualCreditReport.com. This site, which is run by the three national credit bureaus, allows you to order your free reports online, by mail or by calling (877) 322-8228.

You can order reports from each of the three bureaus at the same time or you can request them at different times of the year.

What information will you need?

If you request your credit reports from AnnualCreditReport.com, you'll have to provide your name, mailing address, Social Security Number and birth date. If you moved during the last two years, you may also have to send in your previous mailing address.

Depending on what method you use, you'll receive your credit reports quickly. If you order your reports online from AnnualCreditReport.com, you'll receive them immediately. If you order them by phone, you should see the reports within 15 business days. If you order by mail, you'll receive your reports within 15 business days after AnnualCreditReport.com receives your request.

Avoid Other Sites

You should only order your credit reports from AnnualCreditReport.com. Outside companies may advertise that they can provide you free credit reports, but these offers sometimes come with consequences.

For instance, some companies may send you a free credit report, but might then use your credit card information to sign you up automatically for a fee-based credit-monitoring service. If you don't cancel this service, you'll receive a charge for it on your next credit-card statement.

To avoid this, work only with the three credit bureaus directly or with the composite site they run together, AnnualCreditReport.com.

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How to Write a 100-Word Statement for a Credit Report

A credit report is used by potential lenders when they decide whether to extend credit to you. The report alone does not have to be the last word in the decision. The Fair Credit Reporting Act requires credit reporting agencies to allow you to include a 100-word statement with your report. You can use this statement to dispute facts or to clarify information in your report.

Instructions

1

Check how many statements you can add to your report; the number varies among the three major credit reporting agencies. Experian allows you to add up to 10 statements to your report, while TransUnion allows you to include one statement of dispute and one consumer statement, and Equifax allows you to include just one statement.

2

Summarize the facts that you want to explain. Stick to the facts; don't offer opinions. Explain the situation factually, but don't make excuses. If you have had difficulties paying bills in the past, don't blame the bill collectors; take responsibility and show that you have taken steps to resolve these problems.

3

Include dates to and figures to make sure that your statement is as detailed and accurate as possible. This will help avoid any confusion on the reader's behalf and demonstrates that you are organized and professional.

4

Use conventional English. Don't include slang or abbreviations. You have limited space to work with, but avoid the urge to use sentence fragments or brief phrases; use complete sentences.

5

Check the spelling of your statement yourself and have someone else check it. Don't just rely on your software's spell check function.

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How Do I Get My Free Experian Credit Report and Monitoring Alert?

Keeping track of your credit is an essential part of presenting yourself in a positive light to potential employers, landlords, insurers and lenders, who may use this information to examine your money management habits and overall debt liability. Under federal law, all consumers are entitled to a free annual report from each of the three major credit reporting agencies. The Federal Trade Commission advises consumers to visit AnnualCreditReport.com, a government-sponsored website and the only source guaranteed to offer free credit reports without requiring consumers to buy products or pay for unwanted membership fees.

Instructions

1

Visit AnnualCreditReport.com. Make sure the website address is spelled correctly to prevent your browser from redirecting you to a different site. Select the state you live in.

2

Fill out the online form with your personal information, including name, date of birth, address and Social Security number. If you want, check the box to hide the first five digits of your Social Security number before moving on.

3

Select the reporting agency you want to receive a credit report from. You can choose Experian, Equifax, TransUnion or all three.

4

Provide the last four digits of your Social Security number to transfer to the reporting agency's website.

5

Choose either to continue directly to your free credit report or follow the directions to enroll in a trial membership for credit monitoring. If you opt for a trial membership, you will be prompted to enter payment information--for credit monitoring--before proceeding to the free credit report.

6

Verify your identity by answering the provided questions.

7

View and print your credit report. Write down the report number to access it online in future. You can also use the credit monitoring and credit score membership option at this stage.

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How to Read a Canadian Credit Score

The two Canadian credit reporting bureaus, Equifax Canada and TransUnion Canada, use a formula, based on many factors, to determine your credit score. Important factors include payment history, outstanding debts, type of credit (loans and credit cards) and credit reference inquiries. Get your scores from the credit reporting bureaus. Once you have your Canadian credit scores, you need to understand how to read them.

Instructions

1

Get a copy of your credit score from Equifax Canada and TransUnion Canada (see Resources). Apply online to get instant access to your Canadian credit score. Follow the online instructions and make your payment. Fees may change and may be different in certain provinces. Your details will be verified. You will receive login and password instructions.

2

Check your credit report for errors as these affect your Canadian credit score. Report errors to the credit reporting bureau to get them rectified (see Resources).

3

Check through the payment history and public record sections. These are the main two sections used to formulate your Canadian credit score.

4

Check your credit score. It ranges from 300 to 900. Each credit reference bureau uses slightly different models for scoring, but the results are similar. If your score is between 300 and 450 it is low and may result in difficulty getting credit. Scores between 450 and 600 are acceptable to lenders, but caution is exercised when you apply for credit. If your score is between 600 and 750 you are good for credit. This range is the average for most Canadian citizens. Scores above 750 are hard to achieve. You will need to have an exemplary credit record spanning many years.

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How do Jobs Affect a Credit Score?

Common sense might say that having a job affects your credit score, because without one you probably cannot pay bills. The credit bureaus do not care about your employment status, just about your ability to pay your debts. This might be the most important aspect of your financial profile.

Identification

During the 1960s, the credit reporting bureaus kept tabs on a consumer's employment status and might use a job or lack thereof to deny and approve credit. As of 2011, the credit scoring model does not account for salary or if the person has a job. Two mains reasons spurred this change. The bureaus cannot accurately find out about all of a person's jobs and salary and the Fair Credit Reporting Act makes it illegal to report income. How could, for example, the bureaus verify dividend income? Also, credit score models calculate a person's willingness to repay a debt, not if he has the ability to pay. Creditors would rather lend to a person making $20,000 a year who pays all of his bills than a millionaire who ignores debts.

Debt-to-Income Ratio

A job affects a ratio that usually takes precedence over a credit score: monthly debt to monthly income or debt-to-income ratio. When debt payments eat up more than 36 percent of your monthly income, most lenders do not believe that you can handle any more debt. Also, creditors usually review an employment history. If you do not claim a job or income, the lender may assume you have no way of paying a debt, even when you have a high credit score.

Considerations

Most lenders use the Fair Isaac Risk model as part of the loan application process, but some creditors use an alternative formula that factors in income, called an application-scoring model. The Fair Credit Reporting Act cannot stop a lender from incorporating income into a scoring model. You must include income on a credit application, so if the lender employs an application-scoring model there is no way to avoid an application score. Thus a raise or new job with a higher salary before shopping for a loan usually improves approval rates.

Tip

Hopping from job to job usually decreases your chances of receiving a loan, because a lender might consider you a flight risk or fear that you could have long periods of unemployment that cause missed payments. If you have no job, at least make the minimum payments on your accounts while looking for work and avoid adding new debt accounts to your profile. This will keep your credit history healthy so you can apply for new loans when you do get a job.

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How to Get a Free Credit Report Once a Year and Keep Your Score From Dropping

Keeping your credit score high is one of the keys to securing low interest rates on loans and keeping your monthly payments manageable. Your credit report contains data on all of your credit accounts, payment histories, collection accounts, credit inquiries and public records related to debt. You can look up your credit report regularly to monitor its contents, ensure that it is accurate and check up on how you are doing. Looking up your own credit report never causes your score to drop, but other credit-related actions can.

Instructions

Free Credit Report

1

Go to the Annual Credit Report website. This website is authorized by the government to provide the free credit reports to which you are entitled by law.

2

Select the state in which you live and fill out the personal information on the following form. You need to provide your full name, date of birth, Social Security number and current address to locate your credit report.

3

Select the credit bureau from which you would like to receive your report. You are entitled to one report per year per bureau. Therefore, you can get them all at once or stagger the requests to monitor your credit more frequently.

4

Follow the instructions to get each of the credit reports you request. You might need to answer additional personal questions to verify your identity. Use the link at the top of the page to return to AnnualCreditReport.com after getting each report so you can navigate to the next one.

Keep Score High

5

Look over your credit report for errors, such as accounts that do not belong to you or records of late payments that are inaccurate. Dispute any errors you find with the credit bureau that provided the report by following the instructions printed on the report.

6

Make all of your payments on time every month. Setting up automatic payments or payment reminders keeps you from forgetting them. Making and sticking to a budget can help you have money when you need it.

7

Use only a small percentage of your available credit on each of your credit cards. As your credit card balance approaches your credit limit, your score begins to drop. This is because you appear to be overextended, which makes you more of a credit risk, so your score adjusts to reflect the risk.

8

Apply for new credit only when you need it. Whenever a creditor checks your credit in response to an application, the creditor's name appears in the inquiries section of your report. Each inquiry drops your score slightly. Checking your own credit or having your credit checked for employment or another non-credit-related reason does not hurt your score.

9

Pay all bills, including those that don't usually report to the credit bureaus, such as medical and utility bills. If you are delinquent, they can sell the accounts to collection agencies, at which point they will seriously hurt your score.

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What Is the Value of a Credit Report?

Credit reports provide many benefits and lots of value to their users. A lender can save money by getting a credit report on customers who are less than creditworthy. The company might decide not to do business with those customers, potentially saving itself thousands of dollars.

Significance

A mortgage company or other lender can make a credit decision based on a credit report. It can refuse to do business with a potentially risky customer. This could save the company money later on down the line if it helps them to avoid a loss.

Credit Review

A credit card company periodically reviews creditor reports on its customers, after they have been approved for credit. A credit report can identify customers who situation has changed for the worse since they were extended credit. Credit card companies can react by shutting down lines of credits or even closing out an account.

Considerations

A consumer can get a free copy of her credit report once a year (see Resources section). This report is of value to her because she can check it to determine whether it contains errors. Negative items that shouldn't be there could lower her credit score, causing her to pay more for other credit services. She can ask that such errors be corrected.

Prevention/Solution

A landlord can identify a potential candidate who is not likely to pay his rent on time, based on his credit report. If a landlord has to start eviction proceedings after renting to a bad credit risk, that can be time-consuming as well costly.

Effects

A credit report is valuable to the extent that it saves a user money and time during the course of business activities.

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How to Get a Private Note on Your Credit Report

A simple phone call or letter sent by standard mail is all that's needed to add a private note to your credit report. You can add most anything relevant, including an explanation of why you have fallen behind on paying your bills. Your note will be available to anyone who pulls your credit report. Statements mailed to the three major credit bureaus are generally added to credit reports within five business days. Statements dictated to a representative on the phone can be added immediately once your identity is confirmed.

Instructions

1

Write your private note. It can be up to 200 words if you are a resident of Maine, and up to 100 words for all other states, according to the credit bureaus.

2

Mail your note to the credit reporting bureau of your choice, or all three. Or call TransUnion or Equifax to dictate your statement over the telephone. To speak to a representative with Experian, you must first purchase a copy of your credit report directly from Experian by phone, mail or through the website. Then you can call to add a statement using the reference number on your report.

3

To contact TransUnion, write or call:

TransUnion Consumer Solutions
P.O. Box 2000
Chester, PA 19022-2000
800-916-8800

4

To contact Equifax, write or call:

Equifax Consumer Services
P.O. Box 740256
Atlanta, GA 30374-0256
800-846-5279

5

To contact Experian, write or call:

Experian
P.O. Box 2104
Allen, TX, 75013.
1-888-397-3742

6

Wait about 10 days for your private note after mailing or calling. Then pull your credit report to confirm the note was placed on your file with the wording you intended. According to the Federal Trade Commission, you are entitled to one free copy of your credit report, from each of the three credit bureaus, once every 12 months. Go to the Annual Credit Reports website to order your free copies (see Resources).

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What Is the Highest Credit Score a Person Can Get?

You have a credit score if you ever borrowed money from a financial institution, opened a credit account or performed a similar credit-related activity. Credit bureaus use data from your credit reports, plug the information into proprietary formulas and calculate a three-digit number that summarizes your credit worthiness. A high score means you are likely to pay your obligations, according to the Consumer Federation of America, while a low number indicates default risk.

Range

The Consumer Federation of America advises that the credit score usually refers to the number calculated by Fair Isaac Corporation (FICO) and is often called a FICO score, although credit bureaus also have their own scores. The usual range is 300 to 850, so, technically, 850 is the highest possible score. Most people never achieve that number, with average scores falling in the 600s and 700s. MSN Money writer Liz Pulliam Weston warns that scores of 620 and below are subprime and make it difficult to get approval for credit. The credit bureaus may use slightly different data when determining credit scores, so your score may differ somewhat among the various providers.

Contributors

Five major areas contribute to your credit score, according to the MyFICO website. Your payment history (whether you pay bills on time) makes up 35 percent of your score, while your debt amount (how much money you owe) accounts for 30 percent. Fifteen percent is based on the length of time you have used credit, while account types and recent accounts each influence 10 percent of your score.

Review

The Fair Credit Reporting Act entitles you to obtain copies of your credit report every year at no cost, according to the Federal Trade Commission, but FICO and the credit bureaus are under no obligation to disclose your credit score for free. You can pay to obtain your credit score, or you can estimate it based on data in your credit reports. You can order your credit reports through annualcreditreport.com for free with no strings attached once every 12 months. Your credit score is high if there is little or no negative information on the credit reports of the three major credit bureaus--Equifax, TransUnion and Experian. Things such as late payments, high debts, little variety in account types and numerous credit application inquiries bring your credit score down.

Repair

Your credit score can be improved if it is lower than you would like. You probably cannot boost it to 850, but it only needs to be in the 700s to give you considerable borrowing power. Pulliam Weston advises paying off your credit card balances, or at least paying them down significantly, to raise your score. You should concentrate on paying by the due date, because payment history carries the most weight in the credit score formula, according to the MyFICO website.

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What Happens to a Credit Score After Bankruptcy?

Bankruptcy is generally the worst single item to have on your credit report. It is worse than foreclosure because the bankruptcy usually includes more accounts than the one mortgage in the foreclosure. If you are considering declaring bankruptcy because you cannot handle your bills, consider its effect on your credit score and make a plan for how to rebuild your credit.

Score Usually Drops

The exact change in your FICO credit score after you file bankruptcy depends largely on what your credit looked like before bankruptcy. For example, the FICO website estimates that someone with a credit score of 780 before bankruptcy could see the score drop as much as 240 points after bankruptcy. However, someone with a score of 680 before bankruptcy would not see as significant of a change, with the score likely dropping no more than 150 points. However, Smart Money points out that someone who had a very bad credit score due to many missed payments and high balances could see a slight rise in his credit score after bankruptcy because these accounts will no longer count as strongly against him.

Accounts Closed

After you file bankruptcy, all of the accounts included in the bankruptcy should appear on your credit report with a balance of zero and a notation that they were part of the bankruptcy. Check your credit report to ensure that accounts are reported accurately. The closed accounts affect your ability to boost your credit in the future because you will no longer be able to make payments on these debts and build a consistent payment history.

Time Frame

A bankruptcy remains on your credit report for seven years if it was Chapter 13, or 10 years if it was Chapter 7 or 11. During this time, the bankruptcy will continue to have a negative impact on your credit score, although the impact will lessen over time. If you are diligent to rebuild your credit, you could see a score in the low 700s after just a few years, according to Smart Money. Part of why this is possible is because people with bankruptcies are compared against one another when calculating credit scores. Therefore, if you do better than other people who have declared bankruptcy, you can end up with a better credit score.

Rebuild Credit

One of the most important steps to take after bankruptcy is to start managing credit again. If you had a student loan that was not discharged, make consistent payments on this to help your credit score. MSN Money recommends getting a secured credit card, using no more than 30 percent of your credit line each month and paying every bill in full to help rebuild credit. After one year of using a secured credit card, the lender will probably convert it to an unsecured card and refund the security deposit. Getting an auto loan or mortgage a few years after the bankruptcy and making consistent payments on those can also help rebuild credit.

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About Ranges of FICO Scores

FICO (Fair Isaac Corporation) credit scores are determined on the basis of a variety of factors. The prime objective of the FICO scoring system is to permit lenders to quickly assess the risk associated with lending to a prospective borrower. Thus, scores range on the basis of one's ability to manage personal finances, or even on the basis of inaccurate or misreported data.

How Scores are Analyzed

Three different credit reporting agencies report FICO credit scores to lenders when a prospective borrower attempts to apply for a loan: TransUnion, Equifax an Experian. Although these three agencies generally deal with similar data, sometimes information may be reported to one agency that is not shared with the other two agencies. Thus, FICO scores differ between them. For the sake of efficiency, the data these companies receive is processed by computers that use complex algorithms. Scores in the range of 700 or above are considered good credit risks, while 620 and below are poor risks.

Components of a FICO Score

A person's credit score is determined on the basis of five primary factors. A person's payment history affects 35 percent of his credit score. Making timely payments and avoiding outstanding balances will positively affect a FICO score. An additional 30 percent of every score relates to amount owed on open lines of credit. And 15 percent of the score relates to a person's length of credit history. Finally, the types of credit you have in use and any new credit you have applied for each separately account for 10 percent of your credit score.

Considerations

Your FICO score will plunge considerably if you habitually miss payments, or are frequently late to pay your bills. A record of financial irresponsibility is the last thing a lender wants to see in your FICO score. Even if you completely pay off a credit card or close a credit account, your history of credit management will not be erased.

Misconceptons

Just because you've handled your investments wisely in the past doesn't mean that a lender will want to bet the bank on you. For example, if you are a relatively new borrower who has recently paid off a signature loan for riding lawn mower, a lender is unlikely to approve you for a $400,000 home loan until you've augmented your credit history by applying for and repaying other loans of less considerable value. In the same way, if you are trying to apply for a car loan in the midst of a beleaguered national economy, the odds of receiving the loan will probably be less in your favor than in more robust economic times.

Benefits

While credit scores are perceived to be invasive or arbitrary by many borrowers, they are actually designed to benefit borrowers and lenders alike. Obviously, lenders prize credit scores since the information they provide can safeguard them from taking on bad credit risks. Additionally, credit reporting agencies are able to save lenders time by using computer algorithms to process hefty amounts of data. Ultimately, this benefits a borrower as well, by allowing him to receive a speedy response on his loan or credit applications.

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