How to Get My Credit Report in Canada

While there may be a cultural divide at times between the United States and Canada, the countries have one similarity: credit reports. Canada has the three credit bureaus of Experian, TransUnion and Equifax, just like the U.S. does. They also work the same way in providing your credit report for free, assuming you don't mind getting the report by snail mail. If you want to get an instant credit report by email, you'll have to pay a fee.

Instructions

Obtaining by Mail

1

Select two pieces of identification that prove who you are and have your signature on them. These could be your driver's license, birth certificate, a bill statement, a credit card or a card proving your citizenship of Canada.

2

Photocopy the front and back of the two pieces of ID.

3

Write an optional cover letter asking for your credit report. Place this in a safely-sealed, 8-by-11 envelope with the photocopies of your I.D.

4

Mail to one of these credit bureaus in Canada:

Experian Canada
150 King Street West, Suite 805
P.O. Box 68
Toronto, Ontario, Canada
M5H 1J9

TransUnion of Canada
Consumer Relations Center
P.O. Box 338, LCD 1
Hamilton, Ontario
L8L 7W2

Equifax
Consumer Relations Department
Box 190 Jean Talon Station
Montreal, Quebec
H1S 2Z2

5

Receive your report in the mail in a couple of weeks.

Obtaining Online

6

Fill out an online order form on TransUnion Canada's website to get your credit report almost instantly in your email box. The first page asks for your personal information, including your email and Social Insurance number (the equivalent of a Social Security number in the United States).

7

On the second page, add your credit card information to pay for your credit report. TransUnion Canada charges $14.95 as of 2010. A credit score is also available for $7.95 as of 2010.

8

Verify your ID on the third page. The fourth page will take you to a page to view products, though you'll be able to finalize your payment before then.

9

Wait a few minutes for an email from TransUnion and open it to view your credit report.

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How to Obtain a Credit History

Applying for financing and being denied due to no credit history is frustrating. You need credit to build a good credit history. However, some creditors won't issue credit to people with little or no credit. The key is knowing what types of loans to get with no credit. Several options are available to help you get credit and obtain a good history. And once you acquire credit, regularly checking your credit history by ordering your credit report is essential to ensuring accuracy and protecting your identity.

Instructions

Building a Credit History

1

Apply for a loan in your name. Talk with a local bank and ask about a small bank loan (no more than $500). Put down collateral to help you qualify such as car title or jewelry. Pay back the loan balance within a few months to add positive credit to your report.

2

Piggyback. Share a credit card with someone who has an established credit history such as a parent of sibling. Request that they add your name to their account.

3

Acquire a federal student loan. Federal student loans are available to people with no credit history. If considering higher education, take out a student loan to begin developing a good credit history.

4

Obtain a credit card. Secured credit cards have helped numerous people establish and re-establish credit. Put down a deposit ($300 to $500) and request a card from your bank or credit union.

5

Use credit cards responsibly. You have to use credit to build a credit history. Keep one credit card in your wallet or purse and use it for inexpensive items.

6

Pay off cards. Don't carry a balance. Pay off your balances every month.

7

Avoid high revolving debts. Set a personal limit on your credit card and stick with this limit to avoid high balances. For example, if you have a $1,000 limit, aim to keep your balance under $200.

Obtaining a Credit History Report

8

Use the Internet. According to the FTC, Annual Credit Report provides consumers with one free credit report a year from each of the bureaus. This is a central website setup by the three major credit bureaus. Visit the site to order and view your complete credit history online.

9

Call the toll-free number. If you don't have access to the Internet, order your free report via telephone. Call 877-322-8228.

10

Request reports by mail. Download a credit report request form from the FTC's website and mail the form to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

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Credit Repair Information

You may see ads promising to repair your credit for a fee. Although they may sound tempting, you can repair your credit yourself rather than pay someone else. You are entitled to a free copy of your credit report annually from TransUnion, Equifax and Experian, and you can use those reports to start the repair job, which involves challenging certain information on your report and managing your credit wisely.

Incorrect Items

You can dispute any incorrect items you find on your credit reports. The credit bureaus must remove these items if the company that reported the information cannot verify them. Every negative item that is removed because it is incorrect will raise your credit score.

In fact, the law requires credit bureaus to remove negative items that cannot be verified. Some items may not be incorrect, but they may be unverifiable for various reasons. For example, a creditor may go out of business or a bank may be taken over and not be able to find the necessary paperwork for proof. If you suspect that an item cannot be verified, disputing it can help repair your credit. However, if the company comes up with proof, it will remain on your credit report.

Payment History

Rebuilding a good payment history is an important part of rebuilding your credit. Although negative items typically remain on your credit report for seven years, the newer information carries more weight than the old. The longer you maintain a consistent history of paying your bills on time, the more attractive you look to potential creditors.

New Accounts

As you repair your credit, you may be tempted to open new credit accounts. This can help repair your credit if you do it carefully and responsibly. Your credit score is helped by having a variety of accounts, such as credit cards, installment loans and store accounts. However, your credit can be harmed by applying for too many new accounts all at once. Rebuild your credit through removing negative items and maintaining a perfect payment history for six months to a year. Apply for one account, and if your application is denied, wait several months before trying again. Having too many inquiries on your credit history will undermine your repair efforts.

Refinancing Loans

If you were able to get loans while your credit was bad, you may be paying extremely high interest rates. Try to negotiate unfavorable loan terms, and refinance the loan with another lender if your current company is unwilling to budge.

Renegotiating Credit Cards

You may have credit card issuers who raised your interest rates if you missed payments. Once your credit repair efforts have gone on for six months to a year, contact your credit card companies to see if they are willing to renegotiate the rate. Let them know you are willing to transfer the balance to another card with better terms if they refuse because your newly repaired credit will give you the option of opening other accounts.

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How to Boost Your Wife's Credit Score

Your credit score, or FICO score, is essential for opening accounts, borrowing money, getting low rates and sometimes being hired for a job. A credit score looks at your credit report to evaluate your financial health and responsibility with money with a single number from 350 to 850, with 850 being the best. Applying for joint accounts and loans with your wife can lead to a decline if your wife's score is low even if yours is high. You can boost your wife's credit score over a period of months and years through appropriate financial behavior.

Instructions

1

Request a copy of your wife's report and current credit score. View the report for any incorrect debts, accounts listed as open that should be closed, payments listed as late when you know they weren't, balances listed incorrectly or other errors. Report the errors as soon as possible so that the inaccuracies will be removed from her report.

2

Ask your wife to stop using credit cards or applying for new cards to freeze the ceiling of her existing debt where it is. Making monthly payments to loans and cards should bring debt levels down, but new spending can keep her debt to available credit ratio at a standstill.

3

Make payments to your wife's current creditors (loans, credit cards, etc.) before the due dates and in the minimum amount due or more. Set up bill-pay reminders to ensure the dates aren't forgotten or set up an auto-pay system either through the creditor or your bank's online banking. Catch up on any cards or loans that are behind as soon as possible.

4

Pay off debts as quickly as possible, either by paying them with cash saved in an account to make one final payment or making larger payments each month to pay the balance down faster. Resist the urge to transfer money from place to place because this doesn't pay down the balances. When possible, keep her card balances at 50 percent of the credit limit or less to avoid maxed-out cards.

5

Don't close credit cards she isn't using since this will decrease the amount of available credit she has, making her total debt ratio higher. Instead, leave unused, zero-balance credit cards open to show restraint and keep the credit history open. Request a credit limit decrease if she'll be tempted to spend more than the two of you can payoff within a two-to-three month period.

6

Request a copy of her report and score again after six months to a year of positive spending habits. Look for the score to increase over time and make sure all of the creditor and account information is now correct.

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How to Obtain a Free Credit Report & Score

It is important to regularly monitor your credit report and score. Your credit report helps you catch anyone who steals your identity. It will show you information for all of your accounts. Your credit score indicates the amount of risk you are to a lender. The higher your score the better interest rates you will qualify for. Checking your score will give you the opportunity to raise it before you apply for a mortgage or another loan.

Instructions

Credit Report

1

Go to AnnualCreditReport.com to obtain your free copy of your credit report. You are allowed to pull a free credit report once a year from each of the three credit bureaus. You can do all three at once or stagger them over the year to monitor your credit more closely.

2

Select your state in the drop-down box and then click "Request Report." This takes you to a form to fill out to prove you are the correct person. You need your Social Security number, your current address, your address for the last five years and your account information.

3

Click on the credit report you want. This takes you to another series of questions about your accounts and past addresses or names. Then the credit report opens up.

4

Make sure all your accounts are current and that you recognize each account. You can dispute discrepancies by contacting the credit bureau and the bank that reported the wrong information.

Credit Score

5

Visit creditkarma.com. This website provides a free credit score any time you want. You will receive credit card offers on the site which may lower your interest rates or help improve your score. You do not have to accept the offers.

6

Hit the "Get Started" button to move to a page where you fill out your address, your phone number and other information. Hit the "Submit" button.

7

Verify your identity by clicking the link the website emails you. Enter your Social Security number and check your credit score.

8

Raise your credit score by making on-time payments and reducing your debt-to-credit ratio. The more credit you have available the better it looks for your credit score.

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Can You Figure Out Your Credit Score From Your Credit Report?

Purchasing a FICO score can get expensive, because you need to buy one from each agency to know how lenders really view you as a risk. It also is not included in your free annual credit report. If you just want to know whether you are generally a good or bad risk and do not care about the specific score, you can estimate it for free.

Identification

Several FICO score estimators abound on the Internet, one even from the Fair Isaac Corporation itself -- designer of the FICO score. Jim Wang, financial expert and owner of Bargaineering claims that the score estimator gives a good gauge of where your credit falls. Since you receive one free credit report each year, you can probably get close to your actual FICO rating for free using data from that profile.

Benefits

An estimated FICO score might be just as good as one from the major credit bureaus, because lenders do not necessarily use the FICO score you can purchase from the major bureaus. Some creditors use an older version of the FICO scoring software, the VantageScore developed by the national credit agencies or come up with their own custom-tailored formula.

Disadvantage

Most FICO score estimators give a 50-point spread in which your credit score likely falls. This is a significant range, because you could have a range that falls between a good and excellent score. Since mortgage providers often set rates on your FICO score, going in with only an estimate could mean the difference of thousands of dollars during the course of the loan. Thus, you want to get as close as possible to your actual FICO score to determine if you need to bump it up before applying for a large loan.

Tip

In 2010, the Fair Isaac Corporation released an application for iPhone and iPad users to estimate their score, according to CreditNet. This app also links users to credit score educational material from FICO. Also, try to be as accurate as possible with an estimator, because you do not benefit from fudging on numbers.

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How to Challenge the credit bureaus

Credit bureaus exist for the purpose of being non-biased entities that report credit experiences of it's subscribers.
A subscriber is a creditor that supplies the payment history and account details of it's customers to the credit bureaus. The credit bureaus are required by law to investigate reported items that consumers dispute.

Instructions

1

Conduct an online search for the addresses to Equifax, Experian and TransUnion.
Perform a Search using Google, Yahoo or Msn to get the contact information and addresses to the three major credit bureaus.

2

Order a copy of your credit report from Equifax, Experian and TransUnion.
You will need a copy from all three credit bureaus to make sure that your information is correct.

3

Check your credit report for accuracy.
Your information will rarely match among credit bureaus. This is because credit reporting is not done in real time. In most cases, your creditors will know your balance as you use your credit card, however your information is not reported to the credit bureaus until the end of the month. Some subscribers report to only one or two credit bureaus.
Most subscribers now report to all three credit bureaus. When information varies, it causes your credit scores to be inconsistent.

4

Challenge information that is incorrect.
Write to each credit bureau that has errors on your credit report. It will typically take less than 30 days to receive a written response. When disputing information on your credit report, supply any proof that will help strengthen your case.

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What Information Do You Need to Run a Credit Check?

Anyone who extends credit to consumers and/or other businesses as well as those who are renting out space on a property will likely want to run a credit check on their prospects. This will reveal a lot about how financially responsible a person is and whether you would like to extend a line of credit to him. Running a credit check is fairly simple but the steps must be followed carefully.

Permission

You must always ask permission before checking someone's credit. It is against the law to check it without verbal or written consent. You may tell her verbally that you are running a credit check on her and if she says it is ok, you can move forward. Or, you can have him sign a contract stating his credit will be checked next to the words stating "subject to credit approval."

Personal Information

You must obtain personal information about the prospect including full name, address, previous addresses, phone number and job-related information. The most critical piece of information is the individual's Social Security number. You cannot look into someone's credit history without it.

Credit-Reporting Service

There are several online credit reporting providers that you can subscribe to for a nominal fee. Many offer a variety of services including single to unlimited credit checks depending on the monthly or annual fee. Many businesses and landlords use these services to get the seven-year credit history on a person. Any information subject to public records such as bankruptcies, evictions, reposessions, liens, and judgments will be visible.

Major Credit Bureaus

The three major credit bureaus: Experian, TransUnion and Equifax, all provide credit reports to businesses and landlords. In order to check a person's credit history, you may write a letter or make a request online at each bureau's website. You must identify who you are and why you are requesting the report. Then provide the person's personal information--most importantly, the full name, address and Social Security number.

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What Credit Card Raises Your Credit Score Faster?

Credit scores are dependent upon a number of factors that can be influenced by how you use your credit cards. The card itself will not be a magic bullet in increasing your score, though. How you use each particular card is the key.

Credit Scores

Credit scores are based upon several different factors, including: payment history, amounts owed, length of credit history, new credit and types of credit used. Any credit card that influences these factors positively can raise your score.

Payment History

One of the most important factors that can raise a credit score is a history of timely payments. Any credit card for which you make your payments on time, and do so repeatedly, will raise your credit score.

Length of Credit

Having a credit card for a long time can also boost your score, but only if you use it. A credit card you've had for years but haven't used is useless, and even making a small purchase and then paying the bill on time can raise your score immediately.

Balance Amount

How much a person uses the credit cards is one thing. How much of a balance accrued is another. Keeping too high a balance on your credit card can lower your score, while keeping your balance below 30 percent of the limit can be beneficial.

Number of Cards

While having too many credit cards may lower your credit score, having too few can do the same. Too few credit cards might not give creditors enough information about your credit habits, while too many can show you engage in risky credit behavior.

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How to Remove Negative Credit Letters

The Fair Credit Reporting Act gives you the right to challenge any negative information on your credit report. However, don't expect to magically erase charge-offs, collection accounts and judgment entries. If the information is inaccurate, it will be removed from your report within 30 days after you challenge it. If it's all true, it'll likely remain for the seven-year maximum required by law. However, there is one option for erasing negative information earlier.

Instructions

1

Get a copy of your credit report. Get the report for free from the website Annual Credit Report (see Resources). The site was established by the nationwide credit bureaus to offer free reports as required by federal law.

2

Identify the negative entries that you want removed.

3

Write a letter challenging all the negative entries that are inaccurate. Tell the credit bureau why the information is wrong and that it should be removed immediately. Mail the letter to the address on your credit report. You may also challenge the information online by visiting the websites for the credit bureaus (see Resources).

4

Remove other negative entries by negotiating with the creditor or debt collector. This process, called "pay for delete," works only when you still owe the debt. Contact the creditor or debt collector by finding the contact information on your credit report. Make an offer to pay the full balance in exchange for the negative information being removed from your credit report. The creditor has the authority to order the credit bureaus to delete the information. Although pay-for-delete is legal, not all creditors and debt collectors will agree to such an arrangement.

5

Challenge negative entries that have been listed on your account for more than seven years by writing a letter to the credit bureau of initiating a dispute online. By law, the bureaus must remove outdated information.

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How to Obtain Credit Reports Online

The Fair Credit Reporting Act requires that the major credit bureaus in the United States provide consumers, upon their request, one free credit report every 12 months. The three credit bureaus affected by this legislation are TransUnion, Experian and Equifax. You should check your credit report once per year to make sure the information it contains about your financial past is accurate. Though credit bureaus have safeguards, errors do occur, and should they go uncorrected, they can cost you extra money in interest or even prevent you from getting a loan or a job.

Instructions

1

Go to the annual credit report website (see resources). This is the only site recognized by the Federal Trade Commission as being able to issue your annual credit report.

2

Select your state of residence from the drop down menu on the left-hand side of the website and then click "Request Report."

3

Complete the required information, including your address, birthday and Social Security number. The website encrypts your information to protect your identify.

4

Select the credit bureaus you wish to request a credit report from after entering your information. Once you have selected the bureaus, you will be able to view your credit report online.

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How Can I Clear My Credit Report?

Credit reports contain comprehensive information regarding the way you have handled your past credit. Negative credit information remains on your credit report for a minimum of seven years. The more negative information you have on your credit report, the lower your credit score goes and the harder it is for you to obtain credit. While it is impossible to clear you entire credit report, there are ways to remove incorrect entries.

Ordering Credit Reports

The Federal Trade Commission established annualcreditreport.com as a central place for consumers to receive a free credit report each year. When ordering online, you will be required to answer a few questions regarding accounts on your credit report, and your credit report will be instantly displayed. Those who prefer to order the credit reports may call 1-877-322-8228. Allow 15 days to receive the credit reports. The three major credit agencies are TransUnion, Equifax and Experian. You can order one report from each of these agencies per year at no charge.

Reviewing Credit Reports

When you get your credit reports, review the reports closely for any errors. Federal law allows you to dispute accounts and have the information corrected or removed from your credit report. Each credit entry has multiple areas of information; even if all details of the account are correct but one, you can dispute the account. Pay close attention to dates, amounts, type of accounts, balances and late payments shown. Circle any error or any information you question. You do not have to prove an error; the creditor will be responsible for correcting the error.

Disputing Incorrect Entries

You may call the number shown on your credit report, sign in online to the credit bureau in question or mail the letter to the address listed on the credit report. When calling, be prepared to tell the agent what account is in question. When writing a letter, list the name of the account and the account number and explain the error. You do not have to give a long explanation. The explanations can be as simple as: This is not my account, the information displayed is not correct, the balances are wrong, the date listed is incorrect.

Reviewing Results

Once the credit bureau receives your dispute, the creditor is contacted and has 30 to 45 days to respond to the credit dispute. The credit bureau will update the new information provided by the creditor, but if the creditor fails to respond before the time limit, the credit bureau will remove the entire account from your credit report. A credit dispute using a report from annualcreditreport.com allows the creditors 45 days to respond to a dispute. A credit dispute using credit reports purchased from any other site or method gives the creditors only 30 days to respond.

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The Best Ways to Fix Bad Credit

If you are one of the many Americans suffering from bad credit in this economy, you need a legitimate, proven method to fix your credit. Although improving your credit might take some time, it is possible. You should not give up on improving your credit; begin by making minimum payments on time.

Raise Your Income

If you have bad credit, you can begin to fix it by pursuing a higher income. Pick up side jobs, and pursue that raise. When the credit bureaus calculate your credit score, they take into account what your income is. Having a higher income demonstrates that you have the ability to make payments on loans and mortgages. It also can help you begin to pay off your credit cards, which can help you improve your credit score, too. Make sure not to live more extravagantly when you have a higher income. Continue to live under the same budget you had before, and put more money towards your debt.

Use the Snowball Plan

Now that you have a larger income, make a plan to distribute your paycheck to each credit card company. According to Dave Ramsey's article, "Get out of Debt with the Debt Snowball Plan," paying off your smallest debt is ideal while you continue to make only the minimum payment on your other credit cards. Take the extra money that you would have spent on the other cards, and put it on your smallest debt. Eventually, you should pay off your smallest debt completely. Continue with your next smallest debt, and the next, until you have tackled all of your credit cards.

Never Miss a Payment

When you finish your snowballs, you might continue using your credit cards. Although using cash is ideal, having a credit card for major purchases will not be a problem until you start missing payments. Missing a payment creates penalty fees and might raise your interest rate, too. Avoid spending more than you can afford to each month to keep from missing payments. If you need to make a major purchase, calculate how much you can afford to spend each month to make the payments and factor in the interest rate that will be added to your bill. Then consider whether the item is worth buying.

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Line of Credit Effect on Credit Score

Lines of credit can change a person's credit score, either for the better or for worse. Lines of credit are forms of consumer credit, and thus they impact both your credit history and the credit scores based on them

Basics

A line of credit is an unsecured loan offered to a consumer at a specific amount and interest rate. These are most commonly offered by consumer credit institutions like banks and credit unions.

Credit Scores

Credit scores are a measure of a person's creditworthiness. A high score generally means the person is considered a safe debtor, while a low score represents a risky debtor.

Calculations

Credit scores are calculated using different factors, including: payment history, amount owed, length of credit history, new credit lines and the types of credit you have.

Positive Habits

Paying back the line of credit on time, having a variety of credit lines open and keeping your overall debt level low all tend to improve your credit score.

Negative Factors

Not paying bills on time, having too many open credit accounts and having too large a debt can all bring your credit score down. All of these factors can be influenced by your line of credit, especially if you already have a lot of credit cards, make late payments, or take on too much debt.

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What Do You Get on Your Credit Report?

A credit report allows you to check your credit history to make sure your report is accurate. Three credit reporting firms issue you a credit report. These firms are Equifax, Experian, and TransUnion. You can request a free credit report once each year from each of the companies. Your credit report will not include your credit score.

Identifying Information

Your credit report has a section that verifies your identity. This should include your name and the last four digits of your social security. You should verify that the information is correct. It can also list past addresses on your credit report. When you request a credit report online, you may need to provide information about past addresses and accounts to prove your identity.

Account Information and Payment History

Your credit report includes information on all of the accounts that are currently open and active. Generally, it will list the account type: revolving or credit card, mortgage, car loan or store loan. The report also lists the status as current or past due. It may also list the number of times you had late or missed payments. If the credit line is revolving it may say how much of the available credit you are currently using.

Closed or Old Accounts

The credit report also lists any accounts that are not in good standing, including accounts the creditor sent to collections or charged off. This can include more than just loan accounts. For example, if you were sent to collections for utility bills it can show up on your credit report. If you have medical debts they may also show up on your credit report. These accounts will state if they are still delinquent or if you paid them off or settled. An account that was delinquent, but you settled -- paid less than the amount originally owed -- will state settled rather than paid in full. If you closed the account was, but it remained in good standing the entire time it was open, the report will list it as closed in good standing.

Getting a Free Report

You can receive a free credit report from each of the three major agencies once per year through the Annualcreditreport.com website. You can obtain the reports all at once or get one every four months. When you check your credit report, look for information that is wrong, such as late payments that were on time or for accounts that you did not open. To dispute an incorrect item you must contact the bank or firm that reported it and ask them to fix it and then contact the credit bureau to request them to verify the information again.

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Does Your Credit Score Change When You Get Married?

Marriage is a union and each spouse must learn to take the good with the bad. Sometimes the "bad" is a poor credit score. A person's credit score is one of the critical factors banks and other financial institutions use when determining whether to loan someone money. Your spouse's credit rating could have an affect on yours, depending on how your finances are structured.

Marriage and Credit Scores

Couples often open joint bank accounts and make joint purchases when they marry. The joint accounts and joint debt could have an affect on each spouse's credit rating. According to Experian's website -- one of the three largest credit reporting bureaus in the United States -- joint accounts, or loans where a spouse is a cosigner, can affect the credit rating of both spouses. Additionally, in community property states, any debt acquired during the marriage -- even debt acquired by one spouse alone -- is considered marital property and thereby affects both spouse's credit rating.

Preserving Your Credit Score

Preserving your credit score from your spouse's credit score in community property states can be difficult since any debt acquired by either spouse can be reported on both spouse's credit report. As of 2011, only nine states are community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In other states, keeping separate accounts and avoiding jointly held debts or financial obligations can help preserve your credit score.

Other Factors Affecting Your Credit Score

In addition to your spouse's credit score potentially affecting your credit score, several other factors can potentially damage your score. Failure to repay debts, paying debts late, keeping high balances on credit cards, and obtaining new credit can negatively impact your credit score. If your spouse does anything to damage her credit score, those actions may also negatively impact your credit rating in community property states or with regard to jointly held accounts or obligations.

Improving Your Credit Score

Both spouses can take measures to improve their credit ratings. Paying bills on time and either paying off any credit balance or keeping low credit balances will help improve a credit rating. A couple that believes a spouse's credit will have an impact on the marriage's finances should consider speaking to a financial adviser and taking steps to improve credit to reduce any potential damage.

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Credit Repair Advice

Credit repair involves rebuilding your FICO score. You may need to repair your credit from a bankruptcy or foreclosure, which can stay on your credit report for up to 10 years. You may need to repair a credit history riddled with late payments. Regardless of your situation, credit repair can take time and effort.

Talk to your Creditors

If you are still a customer of your credit-card company, the first step in credit repair might be to talk to creditors. While creditors usually will not remove a record of debt settlement or default, they may be willing to remove late payments from your record if you have been paying on time recently. This can help your payment history, which makes up 35 percent of your score. Creditors may also be willing to raise your credit line if you are being responsible with debt now. If they are willing to do this without checking your credit, based on your relationship with them as a customer, it can improve your credit score by lowering your debt-to-credit ratio (the ratio that looks at how much of your available credit you actually use). Your debt-to-credit ratio makes up 30 percent of your score. If you are not comfortable talking to your creditors, or your creditors won't work with you, you may wish to get help from a not-for-profit (503 certified) credit-counseling agency. Make sure any credit counselor you work with is accredited by the National Association of Credit Counselors and/or another third-party accrediting body, and make sure you understand any fees the credit counselors will charge you. Credit counseling agencies, when responsible and legitimate companies, have experience negotiating with creditors and may be able to help you remove negative information from your credit report. However, be wary of any company that promises to remove negative information, as there are no guarantees.

Start Using Credit Responsibly

If you do not have a credit card due to your bad credit, obtain one. You may have to obtain a secured credit card, which means that you pay money upfront to "secure" the debt. Obtain only one new credit card: Opening too many cards can result in too many requests to see your credit report (inquiries), which makes up 10 percent of your score. If you already have a credit card, begin to use it. Make small purchases, and pay the balance in full at the end of each month. This can help you build a record of on-time payments, which makes up 35 percent of your score. You do not need to carry a balance to build credit--in fact, it is better not to carry a balance so your debt-to-credit ratio will be low.

Other Tips

If you are still carrying debt, pay it down or pay it off. This will help your debt-to-credit ratio. If you have paid off all your debt and are now using credit responsibly, the best thing you can do is wait. Over time, your credit score will improve with continued responsible behavior. Check your credit information periodically at Free Annual Credit Reports (it is free to pull one credit report each year from each of the three major credit bureaus), and check your credit score for free at Credit Karma daily to monitor improvements in your score. Make sure you do not start incurring new debt and using credit irresponsibly. Set and stick to a budget, and build an emergency fund so you can avoid using credit cards for emergencies. Finally, if you have a friend or family member with good credit, you may want to ask them to allow you to be an authorized signer on one of their accounts. This means that they add your name to a credit card they have. No credit check is performed on you, but the card shows up on your credit report. It can help increase the age of your accounts if an old account is added to your report. The average age of credit accounts makes up 15 percent of your score. It can also help improve your payment history if the new account has a history of on-time payments. Finally, if the new card has a low balance with a high credit line, this can affect your overall debt-to-credit ratio.

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How to Improve Credit After Bad Credit Drops Off

If you took out credit cards and did not pay your bills, you might have a serious problem with your credit score. It is important because it dictates the loans and credit that you can get, which might be important for buying a house or helping your children with their tuition. Focusing on improving your credit can make a significant difference in the loans and credit that lenders might offer you.

Instructions

1

Pay every bill on time. Hopefully, chances are slim that you have credit card bills to pay because you threw your cards away. Focus on getting your rent, electric, cell phone, television and hospital bills paid on time. Being in the position that you are in is a difficult situation. It can only change if you fix the problems that got you there. If you struggle to pay your bills, you might have an income problem. An income problem is different from a debt problem. It means that you need to find a method to increase your household income by taking up part time jobs, freelancing, or working online.

2

Stay stable. According to the Gen X Finance article "15 Ways to Establish and Improve Your Credit History and FICO Score," if you want to be approved for a loan or credit, demonstrating that you think rationally and stay committed to the choices you make can help you. Having a job for several years can show that you are dedicated to the lifestyle you live and want to keep up with your responsibilities. Try not to move frequently either. It can look flaky to creditors who want to see some stability in your life.

3

Pull your credit score once a year to see whether there are issues you need to resolve. For instance, according to the Bank Rate article "Bump Up Your Credit Score in a Hurry," sometimes credit reports include accounts that you do not have, payments reported late that you paid on time, or debts older than seven to 10 years that should have been taken off of your report. Cleaning up these problems is important because your credit score can influence the interest rate that your future loans and credit cards get. Having false information on your credit score might cost you money for no reason. The Federal Trade Commission reports that AnnualCreditReport.com is the only government authorized source for your credit report. Using the website to pull your credit score once a year can perhaps help your credit score stay free from negative information.

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The Impact of a Credit Score

If you're applying for a mortgage, auto, business or personal loan, you'll need a good credit score to both gain approval and to qualify for the lowest interest rates. That's why it's so important for borrowers to pay their bills on time, cut their debt levels and avoid bankruptcy. Life with a bad credit score can be a challenge today.

Qualifying

Higher foreclosure rates have made lenders skittish.

Many lenders will not give out loans to borrowers with credit scores below 620, according to financial Web site Bankrate.com. These borrowers are considered higher risks to default, a real fear today. Consider that one in every 417 U.S. housing units received a foreclosure filing in November of 2009, according to RealtyTrac.com, and it's easy to understand why lenders fear defaults today.

Higher Interest Rates

You'll have to pay more money if your credit score is bad.

Even if you do qualify for a loan with a bad credit score, you'll have to pay higher interest rates. Lenders charge bad-credit borrowers with higher rates as a way to protect themselves financially.

You'll Pay More

Expect to pay more of these each month with a bad credit score.

Being charged a higher interest rate because of a bad credit score can be significant. For instance, homeowners with a $200,000 30-year fixed-rate mortgage loan with an interest rate of 7 percent will pay $1,330.60 each month to their lender. The same homeowners with the same loan but with an interest rate of 5 percent, though, will pay $1,073.64 every month. That's $256.96 more every month, or $3,083.52 a year.

Good Scores Bring Benefits

A good credit score may equal less paperwork.

If you have a good credit score, not only will you qualify for lower interest rates, you also can take advantage of the incentives that lenders sometimes offer. For instance, if your credit score is high enough, you might be able to apply for a mortgage loan without having to fill out as much paperwork.

More Options

More lenders are willing to work with good-credit borrowers.

Borrowers with bad credit scores generally have fewer choices when it comes to obtaining auto, mortgage, business or personal loans. Fewer lenders, especially in trying economic times, are willing to lend money to risky borrowers. Those borrowers with high credit scores, though, will have their choice of lenders with whom to work.

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Effect of Balance Transfers on Credit Score

Balance transfers are one way to consolidate debt and lower interest payments. They can also affect several components that are used in determining your credit score. This score is an indication to lenders of how reliable you are and can have a huge impact on your long-term savings for large loans such as mortgages. Before transferring balances, evaluate how it will impact your credit score and determine if the savings are worth it.

Payment History

Approximately 35 percent of your Fair Isaac Corporation (FICO) score is based on your payment history. If you are making payments on credit cards with a high annual percentage rate (APR) and are struggling or unable to make the minimum payments on time, this has a negative impact on your score. Transferring the balance to a lower APR credit card that you are able to fulfill payments on will help your credit score and save on interest payments.

Debt-to-Credit Ratio

The amount of debt you carry in relation to your total credit available accounts for 30 percent of your FICO score. A debt-to-credit ratio is calculated by taking your total debt and dividing by your total available credit. For example, if you carry $1,000 of debt with a total credit limit of $10,000, your debt-to-credit ratio is 10 percent. It's good to keep this ratio between 10 to 30 percent.

Opening a new credit card to transfer an existing balance creates more available credit, which brings your debt-to-credit ratio down and helps your score. Keep in mind that the debt-to-credit ratio is looked at in total and by individual credit card, so maxing out one card by transferring your other card balances to it could hurt your score.

Length of Credit History

The length of your credit history accounts for 15 percent of your FICO score. This factor looks at the average age of your accounts. Opening a new card lowers the average age of your accounts and therefore lowers your credit score in the short term. While opening a new card to make a balance transfer can be a good idea the first time around, repeatedly opening cards and transferring balances will hurt your score.

Applying for Credit

About 10 percent of your score is based on the inquiries on your credit report. When you apply for a credit card or other type of loan, an inquiry is made by the lender to check your credit score. Multiple inquiries can hurt your score, because it gives the impression to lenders that you are looking for more credit because you are experiencing financial difficulty. Applying for multiple cards to make balance transfers can therefore harm your credit.

Balances Transfers Without Applying for a New Card

All these factors affect your credit score when you apply for a new card to make the balance transfer. However, if you transfer a balance from one card to a preexisting credit account that has a better APR, most of the components affecting your credit score will not change as a result. The impact on payment history is the same whether you use a new or preexisting credit card. Your overall debt-to-credit ratio will not change, though the ratio by accounts could cause a fluctuation in your score. The length of your credit history and inquiry portions of your credit score will not be affected. The risk of lowering your credit score by using a preexisting credit account is less than applying for a new card to make a balance transfer.

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Credit Report Score Factors

Even though your credit report score can vary between the three major credit reporting bureaus, most credit scoring models use the same information to determine your credit score. The weight each bureau attaches to specific types of credit information is the reason why your score can vary between bureaus. Credit scoring by the Fair Isaac Corporation, commonly referred to as a FICO score, is the most widely used by lenders.

Payments

Making on-time payments is most often the largest credit score factor. Your payment history comprises 35 percent of your total credit score. This is the highest percentage of any credit scoring factor. On-time payments to your credit accounts helps to build good credit and increase your credit score. Late or missed payments reflect a negative credit history and decrease your credit score. To maintain good credit, continue making on-time payments. If you want to increase your credit score, bring your late accounts current and make on-time payments each billing cycle.

Outstanding Balances

Your outstanding balances on your lines of credit can account for up to 30 percent of your total credit score. The higher your outstanding balances climb toward your credit limit, the more it will decrease your credit score. The closer to zero your outstanding balances stay, the more it will increase your score. The amount of credit outstanding is important to lenders because it allows them to see whether you are using your available credit responsibly.

Duration of Credit History

The amount of time you've had established credit is also an important factor in your credit score. Creditors want to see a history of responsible credit use as well as on-time payments. The longer you hold positive credit accounts, meaning you are responsible with your use of credit and you make on-time payments, the more it increases your score. Those with years of positive credit accounts look more favorable because they pose less of a default risk to lenders.

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How to Build Positive Credit

Consumers with bad credit pay more for everything, from high interest rates on loans to expensive auto insurance premiums. This often leads to a cycle of dependence on sub-prime products such as payday advances and high-interest auto loans, if you can qualify for a loan at all. You will break this cycle if you commit to giving your credit report a full "makeover," which requires a combination of perseverance, patience and time.

Instructions

1

Order copies of all three of your credit reports from Equifax, Experian and TransUnion and review them carefully. They are not identical, so an item that appears on one credit report may not appear on the others.

2

Make a "hit list." Prioritize, by date, the negative credit entries you found in Step 1, with the most recent bad debts at the top of your list. These items are doing the most damage to your credit, so they are the ones you should work to remove.

3

Contact the creditors on your "hit list" and offer to settle the debt---with the stipulation that you will only pay the debt if the creditor promises to remove the negative item from all three of your credit reports. Be firm about this, and insist on getting it in writing. If a creditor refuses to agree to your terms, ask to speak with a supervisor. If that doesn't work, call back another day.

4

Use the credit you have. "Insert" as much positive credit as you can into your credit history. Just as every delinquent payment becomes part of your credit history, so does every on-time payment. Charge only $10 a month on a card and pay it off; that's one more positive payment added to your report.

5

Get easy credit. Secured credit cards--lines of credit that are usually equal to a deposit in a savings account at the issuing bank--are a great way to insert positive credit into your reports. Nothing on your reports indicates that it is a secured card. Also shop around for small lines of credit with retailers such as Crown Jewelers, who do not pull your reports. The line of credit might be small, but it is yours for the asking.

6

Watch your reports like a hawk. Order new copies of your credit reports at least quarterly and check for errors. Make sure items that you have successfully deleted are, indeed, deleted. As you insert positive credit monthly and bad items begin falling off, you will see your credit score steadily rise.

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How to Boost Your Credit Score by Paying a Credit Card Balance Early

Approximately 30 percent of your credit score is based on the amounts you owe on all of your credit-related accounts. One factor is the ratio of the balance shown on your most recent credit card statement to the credit limit on the card. The lower the ratio, the higher your credit score will be. Improve your score by paying down a balance you carry before you have to or paying a large monthly bill early so the statement will show a low balance.

Instructions

1

Call the phone number on the back of your credit score to speak with a customer service representative.

2

Ask which day of the month the credit card company reports your account balance to the credit bureaus. Most companies report the amount on your last statement, but some report the balance partway through a billing cycle. Either way, you want your payment to be applied before this date each month so your credit report will show a lower balance.

3

Decide how much you can afford to pay on your credit card bill. The best option is to pay the balance in full so your credit report shows a balance of zero, or at least close to it if you make charges after sending the payment but before the account balance gets reported. If you can't pay the full amount owed, pay as much as you can afford each month rather than making just the minimum payment.

4

Log onto the online account for your credit card and make the payment about two business days before the credit reporting date, or send a payment by mail about a week before the date. Either of these methods should get the payment there on time to lower your balance before it gets reported to the credit bureaus.

5

Continue this process every month. Your credit card companies update your account balances monthly, and only the most recent month factors into your credit utilization. Therefore, you want your balance to be as low as possible each month on the day it is reported to the credit bureaus.

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When Do Credit Bureaus Update Their Information?

In reviewing credit reports many consumers wonder why the information in the report differs from their own financial records. The answer is usually timing, although sometimes there may be errors. While checking credit reports frequently for accuracy is recommended, understanding when the credit report is updated and the elements in the report that can be changed is also important. For example, paying off a loan after a series of late payments will not make the late payment history disappear from the credit report; however, the loan balance will be adjusted.

Credit Bureaus

The three credit reporting agencies, consisting of Experian, Equifax and TransUnion, obtain consumer information from credit card companies, banks and lenders. Creditors report consumer information to these agencies in exchange for fiscal performance reports on credit applicants. The three agencies are not affiliated with one another. They calculate credit scores differently, so you may have three different scores. Many lenders review all three agency scores when making credit decisions while some only look at one.

Opening New Accounts

Opening a new credit card account and getting a home or auto loan triggers an update to your credit file. The new lender sends the new account information to one or all of the credit bureaus. The information includes the lender's name, amount borrowed, current balance, type of account (fixed or revolving) and the current payment status. This new account typically appears on the credit report on the first month after the account is opened. Opening a new account or loan will lower a credit score slightly.

Timing of Updates

Creditors send account information to the credit bureaus around the end of the month for existing accounts. Statement closing dates dictate the timing of this transmission, so credit reports reflecting information that is a month old is possible. The information sent consists of current balances and late payment notices. If a change of address is submitted to the creditor by the consumer, the new address is passed to the credit bureaus as well. The credit bureaus update the credit reports within one week of receiving the information from creditors.

Other Factors

Credit reports typically do not reflect large fluctuations unless altered by foreclosures, bankruptcies or other large financial events. Staying current on payments and keeping balances low is the key to a high score. Over time the impact of late payments diminishes, which improves the score; however, the history remains on the report for seven years even after you have paid the debt. If you are trying to rebuild credit, ask if your new lender reports to all the credit agencies. Not all creditors report to the credit agencies, and some creditors only report to one or two. Find a credit card company that reports to all three agencies, and apply good credit habits to build a better credit score.

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Do Utilities Report to the Credit Bureaus?

An easy way to improve your consumer credit score is to establish a history of paying your utility bills on time and at the full amount requested. Your utility company is eligible to report bill payment history to the three major consumer credit bureaus, TransUnion, Equifax and Experian.

Identification

According to a consumer alert published by the Michigan Public Service Commission, "A utility company is a creditor eligible under federal guidelines to report bill payment histories of its customers to credit reporting agencies." However, not all utility companies exercise this right. Some only report utility credit history for those customers with delinquent accounts. Contact your local utility provider and ask about the company's policy regarding how it reports your bill payment history to the credit bureaus.

Time Frame

Like any other creditor, a utility company reports credit history either as activity occurs on an account or according to a pre-determined schedule, such as at the end or the first of the month. Utility companies have different practices regarding how and at what frequency payment information is provided to credit reporting agencies.

Benefit

The benefit of having your utility credit payment history appear on your consumer credit file is the boost it gives to your consumer credit score. Every time you make an on-time payment, your credit score improves. If, on the other hand, you miss payments or pay less than the required amount, your consumer credit score drops.

Warning

Failure to pay a delinquent utility bill could result in a collection account. Collection accounts remain on your consumer credit report for up to seven years and are reported as a potentially negative item. In addition to reporting a collection account on your consumer credit report, a utility company can also bring legal proceedings against you for unpaid bills. If a civil court judge rules against you, a judgment for the debt amount will appear on your consumer credit report for seven or more years depending on your state of residence.

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How to Build Credit Faster Without a Cosigner

Cosigners are helpful for building credit because they make it easier to qualify for credit cards and loans. People with poor credit scores or a short credit history can sometimes qualify for virtually any type of credit purchase with a cosigner -- even a new automobile or house. However, it is possible to build credit fast with without a cosigner. Building your credit without the help of a cosigner will offer a sense of personal satisfaction as you take complete responsibility for your finances and credit.

Instructions

1

Open two secured credit card accounts without the help of a cosigner. Banks and credit unions offer easy approval on MasterCard and Visa credit cards if you make a deposit into a savings account. The bank holds the money as collateral, with the amount on deposit usually becoming the credit limit on your credit card. Secured credit cards look and work the same as regular MasterCards and Visas. You can build your credit fast by using the cards for small purchases and paying off the balances each month. The bank will report activity on the cards to the major credit bureaus each month. Visit your bank or credit union to open a secured credit card, or check other banks, including banks advertising secured cards online.

2

Obtain a secured installment loan. Getting a secured installment loan from a bank is the same process as qualifying for a secured credit card. Make a deposit into a bank savings account for collateral and take out an installment loan with equal monthly payments for two years. Deposit the proceeds from the loan into the savings account and instruct the bank to draft the payment each month from the account. Each month the bank will update account activity to the credit bureaus.

3

Apply for a department store credit card and a gas station credit card. A good payment history on the secured cards and installment loan should make it easy to qualify for these cards. Use the cards for purchasing necessities and pay balances in full each month.

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Easiest Way to Improve My Credit Score

Examine your finances and credit history to determine the easiest way to improve your credit score. For example, people who aren't deeply in debt can raise their scores by using their credit cards, but people who have maxed out their credit limits should focus on paying down debts to raise their scores.

Payment History

According to the Experian credit reporting company, late payments have a major negative effect on consumers' credit scores. Therefore, the easiest way for late payers to improve their scores is by consistently making payments on all accounts on time. There are many types of credit-scoring models, but they usually base the majority of scoring on a person's payment history. For example, payment history makes up 35 percent of Fair Isaac Corp.'s FICO score, which is the largest percentage given to all factors that the score is based upon. The Experian website indicates that recent, on-time payments can raise your score because scoring reflects payment patterns over time, and more emphasis is placed upon recent information.

Credit Card Debt

People who have a lot of credit card debt can boost their scores by reducing or stopping their credit card usage for a while so they can pay down or pay off their balances. An MSN Money article titled "Raise Your Credit Score to 740" says consumers who keep their credit utilization in check can raise their scores. That essentially means you should regularly use as little of your available credit as possible. The article recommends that consumers use less than 30 percent of their credit card lines at all times to improve their credit scores. According to MyFICO.com, 30 percent of your FICO score is based on the amount of debt you have.

Credit History

The easiest way for people who aren't deeply in debt to raise their credit scores is by using their credit cards. The MSN Money article notes that credit scores show how well people have managed the credit lines and loans they already have, and that history is used to predict how they'll manage new accounts. Therefore, creditors and lenders can't be sure how responsible you'll be with a new credit or loan account if you haven't established a repayment history or you haven't used credit cards for a long period of time. People who stop using credit and loan accounts altogether eventually won't generate credit scores.

Considerations

The Experian website reminds consumers that the length of time it takes to improve a credit score varies, especially if consumers' credit reports have many negative notations. Late payments and other negative notations in your credit file affect your credit scores until they reach a certain age, although their impact lessens as you accumulate a more positive credit history. In any case, late payment information remains in credit files for seven years, bankruptcies stay in files for 10 years and unpaid tax liens remain for 15 years.

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FICO Score Credit Report Repair

Credit reports and credit scores give lenders insight into your credit patterns. Having a bad score often indicates you have credit issues and means you're less likely to get approved for new credit. Regardless of the contents of your credit report and your FICO score, you can fix a bad score and become a prime applicant if you put in the work needed.

Importance of Organization

Being disorganized can play a role in bad credit. Statements arrive in the mail, and if you're unorganized, you may forget to write down your due dates or make payments on time. Even if organization isn't your strongest skill, there are ways to ensure that creditors receive their payments by the due date. Opening statements and paying bills as soon as they arrive helps, as does switching to automated monthly payments and having money drafted from your bank account.

Repayment of Balances

Charging items on a credit card and not paying off the balance results in high debts, and high credit card balances hurt your FICO credit rating. Stop viewing credit as a means to acquire every material possession you desire. Practice saving money and then paying for items with cash. Use credit cards as a last resort, and only if you can pay off the new charge in a relatively short period. Start making higher payments each month to pay down balances.

Credit Report Updates

Not every creditor or lender regularly submits updates to the credit bureaus. What's more, creditors can send wrong information to the bureaus. And if this information is negative, your credit rating may drop. Stay on top of your credit report and take advantage of yearly free reports offered through annualcreditreport.com. If you notice outdated information on your report, contact creditors immediately and ask them to update your credit file and delete errors.

Post Bankruptcy

New credit is key to fixing credit after a bankruptcy. A bankruptcy removes your debt obligation. Reversing the effects of a bankruptcy involves reestablishing credit and making better decisions regarding the use of credit. A high interest rate credit card or secured credit card helps you rebuild credit fast. Banks can issue a secured credit card upon receiving a security deposit from you. Another option includes financing a car with a "no credit check" auto dealership.

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What Bills Report to Your Credit Report?

Some of the most important monthly bills, such as utility payments and rent, never appear on a consumer credit report. Credit reports only display information that reflects your ability to manage a loan or credit. Even if all of your bills do not appear on your credit reports from the three major bureaus -- EquiFax, TransUnion and Experian -- they can still factor into your financial profile.

Identification

The credit score used by most lenders only includes installment loans such as an auto loan and student loan and revolving credit like a credit card. Other contracts that work like a loan, such as a car lease, are often reported as a loan. Rent, utilities and bank accounts do not appear on your credit report.

Considerations

Any bill can appear on your credit report if you refuse to pay and the company has to report it to collections. Some libraries, for example, report overdue books as a delinquent debt because you borrow the material. Successful payments on nontraditional accounts do not boost your FICO score.

Alternative Credit Reports

Some credit rating agencies, such as American Credo, specialize in reporting nontraditional payments that typically do not appear on your consumer credit report. ChexSystem also collects information about your banking history and is widely used to approve applications for a bank account. Most lenders, however, base lending decisions on the standard FICO score.

Tip

Some alternative credit reporting agencies, such as Payment Reporting Builds Credit, require you to send in proof of payment of your cellphone, rent and utility bills. This may come with a charge. Alternatively, you can use nontraditional payments to build your credit score by paying them with a credit card. If you cannot get a traditional credit card, consider a collateral-based card known as a secured credit card.

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When Can a Debt Come Off My Credit Report?

Outstanding debt on a credit report is not always a bad thing, because you can usually wait until the credit bureaus no longer report it. However, you cannot escape all bad debts, so paying them could be a better alternative to having it dragging down your score for the rest of your life. You also have to watch out for creditors or collection agencies, because they may try to get you to claim an expired debt.

Identification

When a debt comes off your credit report depends on its status. A charge-off or account in collections stays on your report for seven years. Debts eliminated through Chapter 7 bankruptcy disappear as soon as you file bankruptcy, but the bankruptcy itself stays for 10 years, seven for a Chapter 13. Unpaid tax liens can remain forever, and judgments can be renewed indefinitely in some states but do not renew the credit reporting time limit.

Statute of Limitations

Charge-off and collection accounts fall off seven years from the date the original creditor declares it noncollectable forever, but you can renew the statute of limitations on a debt. This can happen by making a payment on the account after the statute of limitations passes or just acknowledging the debt is yours. Debts never go away, but the statute of limitations prevents any lawsuit, so most debts have an effective expiration date.

Considerations

As long as you keep making payments on a debt, it will not become delinquent and remain on your credit report for as long as you carry a balance. Even if you have a debt deemed noncollectable on your report, it becomes less important far before the seven-year reporting limit. Most negative items hold their greatest weight during the first two years after the incident and then take a backseat to newer information.

Tip

Review your credit report to ensure you actually owe the debts listed. The credit bureaus have been known to list debts from other people on an unrelated account. If you see an erroneously reported debt, dispute it with the credit bureaus. Assuming you win your case, the credit bureau will remove the debt from your report.

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Things You Need to Build Credit

To get credit, you need credit, but what if you don't have credit? While lenders want to see a credit history before they approve you for a loan or credit card, you can still secure certain types of loans and credit cards with no credit. That's fortunate for anyone who wants to build credit, because credit cards and loans are necessary credit-building tools.

Understanding Credit

Your credit worthiness is expressed as a credit score. A credit score ranges from 300 to 850, with 300 being the worst. However, anything below 620 is usually considered subprime, which means credit card companies and lenders are less likely to approve you for credit cards and loans. Your credit is adversely affected when you make late payments, open too many credit accounts at once and close credit cards. Conversely, your credit is positively affected when you make timely payments and have long-lasting credit accounts.

Bank Account

You can't establish any sort of credit with a bank account. However, you can only acquire what you need to build credit by having a bank account. Lenders and other financial institutions want to see that you have a bank account before approving you for anything. According to moneycentral.msn.com, lenders see bank accounts as signs of stability.

Credit Cards

Credit cards serve as valuable credit-building tools. If you have no credit history, you can apply for a credit card through your bank or apply for credit cards designed for people with bad credit or no credit at all. A credit card comes with a fixed amount of available credit. You can use that credit to make purchases. Once you pay off the amount you charged, you will see a positive change to your credit score. If you don't pay off the amount, then your credit score will go down. All credit cards come with interest rates. The national credit card interest rate is 16.86 percent as of January 15, 2011; you'll likely pay more than that if you have no credit history.

Loans

Loans, like credit cards, build -- or ruin -- your credit. The problem with getting approved for loans is that you usually need some sort of credit history to show the lender. Without any credit history, the lender can't assume that you'll pay the money back. A lack of credit doesn't mean you can't get approved, though. Many lenders will approve you for a loan if a co-signer signs the loan. A co-signer is a person with good credit whose signature tells the lender that he will assume responsibility should you fail to make the loan payments. Once you are approved for a loan, making the monthly payments is a necessity. If you are 30-days late, the lender will report you to the three main credit bureaus and your credit score will go down.

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How to Improve Your Company's Credit Rating

Similar to credit reporting on consumers, the credit status of businesses is also tracked. Information on your company is reported through its financial activities with banks, government records and suppliers. When applying to a new supplier for terms, or to a bank for a loan, your company's credit standing will be reviewed and it will determine if you get those Net 30 terms from the new supplier, where payment is due 30 days after product is sent instead of having to pre-pay, or that bank loan at a good rate.

Instructions

1

Order copies of your business' credit report from the Equifax, TransUnion and Experian websites. There will be a fee for this service.

2

Review the credit report. Check for incorrect information such as loans which have been paid but still show as having money due. Confirm that your major suppliers are reporting your timely payments to the credit agencies. If they are not, contact your supplier's business office and request that they report your good standing to the credit bureaus.

3

Contact the credit agency to fix any information you feel is not correct. Instructions on how to do this will be supplied with the copy of your credit report. At a minimum you will need to provide your company name, your company's tax ID number and supporting documentation, such as bank statements showing a loan has bee paid in full. Be sure to save the originals and only send copies.

4

Pay the company's bills well before the due date, allowing time for the payment to arrive in the mail and for the receiver to process it.

5

Use your company's collateral to obtain a secure bank loan. Make your payments in a responsible manner to demonstrate that your company is a good credit risk.

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How to Obtain a Credit Check

Regularly reviewing your credit report enables you to keep your credit rating up-to-date. Obtaining a credit check is easy, but should only be done occasionally. Getting a credit check means applying for a line of credit to see whether creditors deem you credit worthy. Your credit score will drop if you your credit file is checked too often.

Instructions

1

Use an existing credit card issuer to obtain a credit check. As you have a line of credit with them, the credit check will not be registered on your credit file. Too many credit checks can negatively affect your credit score. Log onto your card issuer's website. Enter your user name and password. Check to see if you can apply to increase your credit limit online. Try another card if you can't.

2

Click "Apply to increase credit limit." Obtain your credit check by completing the details requested. Make sure you have a valid reason. Do not request more than a 30 percent increase. Credit card companies usually limit each increase to 30 percent of your existing credit limit. Above this percentage, your request may be declined. This could be recorded on your credit file.

3

Click "Submit." Your details will be verified. Confirm your request. Your card issuer will either confirm that your credit limit has been increased, or refuse the request. If the increase is approved, your credit file is good. If declined, the company will tell you why it decided, based on your credit, to decline you. Alternately, you may also get your free credit history file from AnnualCreditReport.com (see Resources).

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Does Being Denied a Credit Card Hurt Your Credit?

If you apply for a credit card and get turned down, the good news is that the denial itself won't show up on your credit report or hurt your credit score. The bad news is that applying for the card in the first place can actually lower your credit score, though probably not by much. It depends on what else is in your credit history.

Significance

Credit reporting bureaus use complicated formulas that examine your credit history and assign you a number known as a FICO score, named after the Fair Isaac Corp., which developed the system. These scores range from 300 to 850; the higher your score, the more likely you are to be approved for new credit accounts, higher credit limits and lower interest rates. The Consumer Federation of America and Fair Isaac say most people score in the 600s and 700s.

Elements

The FICO score formula takes into account five categories of credit activity and gives different weight to each. According to Fair Isaac, your payment history is the biggest single factor, accounting for about 35 percent of your score. Your recent credit balances, including the portion of your available credit that you're using, make up about 30 percent. The length of your credit history is about 15 percent. The types of credit you use--say, car loans, mortgages and credit cards--account for about 10 percent. The final category is "new credit," which is about 10 percent of your score, and this is the category effected by credit card applications.

Applications

Every time you or anyone else looks at your credit report, it goes on your report as an "inquiry." An application for a credit card--regardless of whether it's approved or denied--triggers an inquiry. If you have a lot of application-related inquiries in a relatively short period of time, that can be a sign that you're in a financial hole, and your credit score may suffer for it. Fair Isaac says that for the average person, each new credit card application can shave about 5 points off a credit score; it may be more or less depending on other information in your history. Inquiries not related to credit applications--such as from an employer for a background check or a company hoping to sell you something--are not considered in the FICO score.

Denials

If your credit card application is approved, the new account shows up on your credit history and will be factored into the other categories that make up your score. If your application is denied, nothing further shows up on your history. The only sign of it is the inquiry.

Time Frame

The time frame that credit bureaus use when determining whether you have an excessive amount of inquiries depends, like so much else, on your overall history. But according to Bankrate.com, inquiries stay on your credit report for a maximum of two years, and only those in the past year can be factored into your credit score.

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How Does Paying Off Credit Cards Affect Your Credit Score

Your credit score and your credit report affect more than how easily you can get a credit card or a mortgage. Employers check the scores of job applicants and insurers check credit scores on their customers. Paying down your credit card bills and keeping them paid off goes a long way toward boosting your score. The specific improvement will vary depending on your payment history and the amount of kind of other debts you have.

Benefits

Paying down or paying off credit cards will have a better effect on your credit than paying off any other debt. Your credit score measures your utilization rate -- how much unused credit you have available -- and that rate gets worse the closer you get to your card limit. Your utilization rate and your total debt add up to 30 percent of your credit score; only your payment history has a bigger impact on your score.

Utilization

It may not be a good idea close your credit accounts once you pay them off. Closing accounts means less available credit, which reduces your utilization rate -- which lowers your score. Credit history counts for 15 percent of your score; if you close a 10 year old account and keep a five year old account, credit bureaus may react as if your history were five years shorter than it really is. If you have several accounts and a lot of history, however, that will affect your score less than if those two accounts were the only debt history you have.

Risks

The financial crunch of the early 21st century makes credit-card companies nervous: Even if you've never missed a payment, your card company still worries you might default. For that reason alone, the company might cut the limit on your card -- reducing your utilization rate -- or jack up the interest rate steeply. The easiest way to avoid this is to pay off your balance every month: A lower credit limit on a card that carries no balance won't hurt your score too much.

Timing

Credit bureaus check your card use at the end of each billing cycle. If you pay off your card each month, then max it out again, bureaus will assume that you're constantly at your credit limit and lower your score. To avoid this, pay off your card online a week or so before the bills go out: That way you'll have nothing on the card when the bureaus check your account.

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What Types of Loans Are Vantage Credit Scores Used For?

The Vantage score is a lesser-known, relatively new (originated in 2006) kind of credit score. It was created by the three main credit bureaus, Experian, Equifax and Transunion, as a way to offer creditors another way to view consumers aside from the more traditional and well-known FICO score. The Vantage score is calculated differently and the scores range from 501-990, which is also a different range than the more common FICO scores.

Uses

Vantage credit scores are not widely known and rarely used. Vantage credit scores have been created as an alternative to FICO scores and so can be used for any type of loan, including credit cards, mortgages, auto loans, store credit cards. However, most creditors do not utilize the option of pulling your Vantage score and prefer to evaluate your application for credit based upon your well-known and wider accepted FICO scores.

Scale

The higher the score and grade, the better credit you have under the Vantage credit scale and the less risk you pose to a creditor.
901 - 990: A
801 - 900: B
701 - 800: C
601 - 700: D
501 - 600: F

Auto Loans

The majority of loans that you can get that use the Vantage credit score fall into the auto loan category because a lot of dealerships like the option of being able to get more people into cars. This is possible because the Vantage Credit score uses a different formula that weighs different categories differently from a FICO score and so someone who may not be approved for an auto loan under their FICO score, may get approved with their Vantage score. Even though the highest percentage of companies that use the Vantage score falls in this category, it does not mean that a lot of auto dealers are using the Vantage score; just that of those who do, they fall into this category more than any other.

Mortgages

Vantage Score claims that three major mortgage lenders use the Vantage score to prove credit worthiness for loans, however the names of these lenders are not available.

Credit Cards

There are no known credit card companies that use Vantage scores to determine your credit worthiness for getting approved. They use one of your FICO scores or a risk score that they have created for you

Store Credit

The only known store card that uses the Vantage score is the department store Kohls, which uses it for all its retail card applications.

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How Does a Credit Bureau Collect Information About Consumers?

Credit Bureaus

Credit bureaus collect consumers information that is reported to them by creditors. Information such as a consumers address, phone number, age, employer, income and payment habits are reported by creditors to credit bureaus. Credit bureaus add the information reported to them to the consumers' credit file. Companies access a consumer's credit file to help determine how much of a credit risk the consumer is. A credit file helps a company predict if a consumer will likely pay debt or not by looking at the consumer's past payment history and employment history. Companies also look at a consumer's credit file to see how many open loans and how much debt the consumer is in. Generally, companies determine that a consumer whohas a high debt ratio compared to their income is a high risk. Consumers that are deemed high risk can have a difficult time obtaining loans.

Information Obtained from Credit Applications

When a consumer applies for credit with a company, the company reports information obtained from the consumer's application to the credit bureaus. A consumer's employer, length of employment, income, address and length of time at address are common pieces of information asked on a credit application that companies report to credit bureaus.

Information Obtained from Loans and Accounts

When a consumer obtains a loan or opens an account with a company, the company reports the amount of the loan as well as payment history. If the consumer is late on payments or defaults on the loan, the company adds a negative report on the consumer's credit file. If the consumer pays the loan payments on time and pays off the loan, the company adds a positive report to the consumer's credit file. Negative reports lower a consumer's credit score and decrease the likelihood of the consumer being able to obtain future loans. Positive reports increase a consumers credit score and increase the likelihood that the consumer will be able to get future loans. Consumers with low credit scores usually pay higher interest rates on loans if they can get a loan at all. Consumers with high credit scores usually can get lower interest rates on loans.

Evictions and Judgements

Court judgments against a consumer for an unpaid debt are reported to credit bureaus, as are court ordered evictions. Landlords usually check a prospective tenant's credit before renting a property. If a prospective tenant has an eviction on his credit file, it may be harder for him to get accepted as a renter. Along with the judgeent and eviction information, the amount of the debt will be listed on the credit file.

Bankruptcy

If a person files bankruptcy, the information is reported to the credit bureaus. The information includes the type of bankruptcy and which debts were included in the bankruptcy proceeding.

Bad Checks and Bank Accounts

Bad checks and bank accounts closed because of a negative balance are reported to check verification services. Check verification services are a type of credit bureau that banks and stores use. Banks use check verification services to help determine if they should offer banking services to a consumer. Consumers who have had their bank accounts closed because of a negative balance or for bounced checks can have a difficult time opening up bank accounts. Many stores will not accept checks from consumers who have a bad check report recorded with the check verifications services that reports

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How Do Collection Agencies Affect Your Credit Rating?

When you fail to make payments to a creditor for debts incurred, the creditors will often transfer this debt to a collection agency. This can have a variety of effects on your credit score.

Debt Transferred to a Collection Agency

Whenever you have debt transferred to a collection agency, your credit score will be adversely affected. This is because 30 percent of your credit score is based on your past payment history.

Reporting Information to the Major Credit Bureaus

If a debt is transferred to a collection agency, both the creditor and the collection agency is likely to file a report with the major credit bureaus. This almost assures that this debt will show up on your credit report.

Will Making Payments to the Collection Agency Improve your Score?

This depends on whether you have a zero or balanced trade line. Making payments on a zero trade line will not improve your credit score, while payments on a balanced trade line will.

Zero and Balanced Trade Lines

A zero trade line means that you no longer have a balance with the creditor. A balanced trade line means that you do have a balance with the creditor.

Decreases With Time

As time passes, the debts passed on to a collection agency will have a smaller effect on your credit score.

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