2005 ~ Personal Finance and Money Management

Saturday, December 31, 2005

How Often Are Credit Reports Updated?

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Credit reports can be inaccurate, and not all creditors are timely in reporting changes. If you request a copy of your credit report and then find mistakes, you have the right to dispute any errors. It is important to have any inaccuracies on your credit report corrected so that you can maintain a good credit score.

Most financial institutions and creditors send an updated report to the major credit bureaus every 30 days. However, since a person can have several different lines of credit with due dates at different times throughout the month, updates may be sent electronically according to each creditor's reporting schedule.

The timeframe for when your credit score gets updated can vary according to how often a creditor sends a credit report to the credit bureau. Most credit reports are updated within a week or two after the creditor's billing cycle ends. Some smaller lenders only report every three months; therefore, it could take up to 90 days for a payoff to appear on your credit report.

The three major credit reporting bureaus--Equifax, Experian and TransUnion--update official credit reports quarterly. However, the information is actually revised minute by minute as these reporting agencies receive new reports from creditors. Under the Fair Credit Reporting Act (FCRA), consumers have the right to know the sources of the information contained in the report, as well as the names of any individuals who received a copy of their credit report within the last 12 months.

Credit reports are printed using abbreviations and codes that normally only lenders can interpret. The report requested by a consumer is formatted differently from the credit reports issued to lenders. Credit disclosures provided to consumers are easier to understand, whereas the information on an official credit report is set up to be read by a computer. This format is often confusing to a layperson.

The FCRA gives consumers the right to challenge any incorrect information appearing on a credit report. You can dispute the accuracy of a report if you feel it contains incorrect, false or incomplete information. If any information appearing on your report is older than seven years, you have the right to object to that as well. Address any questions you may have about information on your credit report by writing a letter to the credit bureau and sending it via certified mail. Include your social security number, birth date and contact information. If you challenge something on your credit report and the original creditor cannot verify the information by providing proof within 30 days, the credit bureau must delete that information from your credit report.

Once any corrections have been made to your credit report following a dispute, request an updated copy of the report. By law the credit bureau must provide you with a free credit report update. In addition, you can request that the credit bureau send an updated copy of your report to any banks or creditors who recently inquired about your credit status. A copy of the updated report should be provided to anyone who receives a report within the last six months prior to corrections being made.

Consumers may request one free copy of a credit report from each of the three major credit bureaus once each year, allowing them to examine their credit reports for mistakes. You can request either a single bureau credit report or a report comparing the information gathered by the three major credit bureaus.

What Does Apartment Eviction Mean to Credit?

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In the past, apartment evictions could make finding another dwelling difficult if not impossible and you would still owe the amount left on the lease, but in 2011 it can also affect your credit. Instead of reporting rental payment histories to the credit bureaus, landlords can do this much more cheaply by relaying rental payments through a consumer reporting agency. (ref 1)

The national credit bureaus do not report rental histories, because landlords can rarely afford the added expense, regulation and administrative duties that comes with credit reporting. An eviction can only appear on a report as a judgment if the landlord initiates litigation to pursue back rent, according to Maxine Sweet of Experian. Judgments affect credit for seven years and are one of the more serious items that can show up on a credit report.

Experian acquired the largest rental payment history database when it bought out RentBureau in 2010. Starting in 2011, Experian will incorporate positive rental data in the reports of borrowers. By 2012, Experian will include any type of information, such as missed payments and evictions. As of 2011 the other two major bureaus -- Equifax and TransUnion -- do not report rental payments unless the landlord subscribes to their report service, but the trend in the reporting industry is to add rental and utility payments as soon as possible.

Even if the credit bureaus do not report your rental data and the landlord chooses not to pursue a judgment, the eviction can negatively affect your tenant screening report. Landlords often pull both a credit check and a specialty report from a consumer report agency that just lists renting information, such as past evictions. An eviction on one of these reports is likely to make the landlord think twice about renting to you.

Go to your landlord for help instead of breaking the apartment lease. In the case where one roommate leaves and both are responsible for the bill, the landlord could assist in finding a new roommate to help with bills. You and the landlord could try to work out some an arrangement to avoid an eviction, such as a payment plan or working off some of the rent by doing odd jobs around the complex.

What Happens to My Credit Score When I Get Married?

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Getting married changes lives in many ways. For a couple looking to tie the knot, the impact of those two "I do's" on their credit scores needs to be considered. Whether you are marrying "up" to someone with a better credit score or "down" to someone whose financial history is less stellar than yours, it pays to know the ins and outs of credit scoring before making that long walk down the aisle.

According to the New York Times, "Generally speaking, the higher your score, the more money you can borrow and the less you'll pay for the loan." Credit scores are a weighted score that includes consumer debt and payment history data from credit bureau reports and creates a three-digit FICO score. Since lenders, auto insurance agents, and even employers use this score to assess credit worthiness, credit scores have a direct impact on the price paid for many items.

Your wedding certificate won't instantly raise or lower your credit score. As Maxine Stuart, Experian's public education expert points out, "Getting married does not cause your credit history to be combined with your new husband's." However, she goes on to warn that if your partner has a bad credit history, it could "impact your ability to get credit together."

Your first impulse as a newly married couple may be to combine debts. As Kiplinger.com's Erin Burt is quick to remind us, "if one of you brought debt into the marriage, it becomes a problem for both of you. You'll need to work together to come up with a plan to pay it off. However, you should never officially commingle your debt. Doing so could hurt the credit score of the other partner and make it difficult for one or both of you to get credit later."

When there is a difference in your credit histories, applying for new credit separately maybe be the more economical solution. If the partner with the better credit history has the income to support loan applications or car insurance requests, then solo applications may yield the better rate. For large purchases, like a new home, mortgage lenders will check both partners' credit scores. The mortgage rate and decision is weighted toward the partner with the worse credit history - meaning a higher interest rate or being turned down by the lender.

Taking steps to improve both partner's credit score will have long-term benefits. While all accounts held jointly impact both credit scores, many couples opt for individual accounts to maintain a separate credit history. Agreeing on a spending plan, making on-time payments a priority and paying down any old debt can boost credit scores--and ensure both of you reach your financial goals.

What Is a Credit Score & How Is It Determined?

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A credit score is a number assigned to you based on a formula developed by the Fair Isaac Company (FICO), and this number is used by creditors to help determine your creditworthiness. The credit score is based on a complex mathematical formula that involves several factors. A change in each factor can affect how other factors influence your score. However, information in several standard categories is used to calculate the FICO credit score. You can get an estimate of your credit score by plugging your information into a calculator provided on the MSN Money website.

Payment history accounts for about 35 percent of your credit score, according to to the MyFICO website. This means building a history of making timely payments on bills, including mortgage, rent, credit cards, car payments and other loans. A number of late or missed payments have a negative impact on your score, and having a credit account in collection is particularly damaging. Once an account has entered collections, it is on your credit report for seven years, even if you pay it off.

Amounts owed count for about 30 percent of your credit score. If you owe a lot of money, particularly if it is a large percentage of the credit available to you, this affects your credit score negatively. Lenders are concerned about extending credit to someone who is already overburdened by debt. The credit utilization ratio -- the percentage of your debt relative to your credit limit -- is a factor in this category as well. A high credit utilization ratio has a negative impact on your credit score. To improve your credit score, MSN Money writer Liz Pulliam Weston recommends paying down existing debt and reducing credit card balances to no more than 30 percent of your credit limit.

Length of credit history counts for about 15 percent of you score. You might think that operating on a cash basis and never using credit would give you a stellar score. However, lenders want to see that you know how to handle credit before extending it to you. If you don't have a credit history, lenders don't know how you'll handle credit. Sometimes you can add accounts -- such as cell phone bills -- to your credit report with the three reporting agencies, and that provides a little credit history. Obtaining a credit card and using it sparingly and paying off the balance also establishes credit.

New credit counts for about 10 percent of your score. If you open a lot of accounts or if creditors make a lot of inquiries about your credit as a result of numerous credit applications, it indicates to creditors you may be getting in over your head financially. If a number of inquiries are made in a short period about the same kind of loan, such as a mortgage or car loan, the credit reporting agencies typically count that as one inquiry, because many people shop around for the best loan rates. From a creditor's perspective, shopping for the best loan terms is an indication of a responsible borrower.

Types of credit used counts for about 10 percent of your score. There is good debt and bad debt. Good debt is money owed on things that will increase in value: mortgages, student loans and business loans. Installment loans from banks and credit unions as well as home equity loans are viewed as relatively good debt. Credit cards, retail credit cards and other unsecured loans or loans on items that depreciate quickly are seen as bad debt. The more your credit report reflects good debt, the more it improves your credit score.

What Is Tier One & Tier Two Credit?

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A change of 0.3 percent on your loan's interest rate can mean thousands of dollars in extra finance charges. Getting a better rate means moving up in the lender's credit score tier chart. If you want the best rates, you should aim to enter into the creditor's top one or two tiers.

Instead of tying interest rates to specific credit scores, most lenders break FICO scores into ranges and give anyone in a particular range the same interest rate. Tier one and two scores are "good" and "excellent" categories respectively, and anyone in them should receive the best possible rates, according to Kiplinger.

What scores tiers one and two encompass vary from lender to lender, but they tend to average out across the industry. Scores between 700 to 719 are usually considered tier two, while 720 and above are generally the top tier. FICO scores between 675 and 699 are average, with anything below 674 considered "subprime."

Although the difference in interest rates between tier one and two scores can be small, it will add up to huge savings on large loans with a long life. If, for instance, moving up from tier two to tier one saves $20 a month on a 30-year loan, this comes out to a total of $7,200.

The 2008 credit crisis ended the surplus of cheap credit during the early part of the decade, so lenders may require a 760 or above to enter the top tier. The fastest way to move up the ranks is to look for errors in your credit report and pay down as much of your existing debt as possible, suggests Liz Weston of MSN MoneyCentral.

How to Remove a Sallie Mae Account With a Zero or Transfer Balance

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If you have taken out student loans, chances are that you have dealt with Sallie Mae. The company offers financing to those who have private or federal loans. Sallie Mae can and will report your payments, or lack thereof, to the credit bureaus. These reports can affect your credit and are a factor when other companies are deciding if they want to give you credit. If you have transferred or paid off Sallie Mae accounts and need to remove them from your credit report, you can do so with a little credit know-how.

Instructions

Contact Sallie Mae. Talk to a customer service representative and let him know why you feel your account should be removed from your credit report. The representative will either forward you to a credit reporting specialist, or take your information and work on it himself. He may also request that you put your claim in writing and mail it in. If the information reported is incorrect, you have the legal right to dispute it. If the information is correct, Sallie Mae is not legally bound to remove it.

Request your credit file from all three credit bureaus. The credit bureaus are Experian, Transunion, and Equifax. Once you receive these reports, you can file a dispute online or by mail. The dispute will ask the credit bureaus to remove the information. The credit bureaus have 30 days from your request to investigate and come to a decision. If your Sallie Mae file has no negative information, such as late payments, the credit bureau will most likely remove the information.

Ask Sallie Mae to send you original copies of the loan that you signed. When you make this request, Sallie Mae legally has 30 days to return the information to you. If the company does not send the paperwork to you, it cannot legally prove you even have a loan. If that is the case, you can go back to the credit bureaus and explain to them that you do not have a loan with Sallie Mae. The credit bureau, without proof of a loan, is obligated to remove that infomation from your file.

Does Car Repossession Have to Go on Your Credit If You Pay & Get the Car Back in Two Days?

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You might be able to remove a car repossession from your credit if you quickly pay off the defaulted payments within a few days. However, the lender reporting a repossession probably isn't what causes your score to go down. You likely have several months of missed payments on the car loan at that point, as well as other accounts that have tarnished your credit report.

Whether a car repossession goes on your credit if you make a payment on it within two days depends on how fast the creditor sends data to the credit reporting bureaus. Lenders usually update once a month, so if you catch the lender before it sends off a batch of data, it might just report your repossession as a late payment.

If the lender decides that you can't or won't pay the auto loan or lease, you've probably already missed several months of payments. Although lenders can repossess a car if you miss a payment by a few days, they usually wait a month. Lenders often don't want to repossess cars, especially recreational vehicles, because their resale value might be low, according to Justin Harelik of Bankrate. A 30-day late payment can hurt your credit score by 110 points or more, and a 90-day late payment by 140 points or more --- almost as bad as a bankruptcy. The actual effect of a car possession depends on your score when the lender reports the account as delinquent. If you had an average score of 680, forced repossession of property takes about 85 to 105 points off of your score; fewer points are deducted for lower scores.

Even if a car repossession goes on your credit report, it only stays for seven years after the original delinquency. You can somewhat mitigate the effects of a car repossession by paying your other accounts on time and eliminating any other debt on the account. That way, the account has a note saying you paid the debt in full, which might give lenders a good impression even if you have a low credit score.

Talk to your lender if you think you might default on the loan. The lender could offer to change your contract to help you meet your obligation, such as pushing back the monthly payment due date. If you pay off the entire loan, get in writing how the lender plans to report the loan. Paying the entire balance off gives you the best chance for the lender to declare the entire account an error to the credit bureaus.

What Does a B-C-D House Credit Scoring Mean?

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The B, C or D credit grade is a classification of credit risk that is done on a sliding scale and applied to subprime mortgage borrowers. This classification has been commonly used to categorize borrowers to quote a rate and program for approval. This type of loan is an example of a nonconforming loan because it does not fit the guidelines set by the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corp. (FHLMC).

When someone was told that they fall into the credit risk category of B, C or D graded credit, this put them into a sub (below) prime rating classification. This sliding scale of risk was expressed in a breakdown of benefits and restrictions to the borrower as to a percentage of his appraised value, how much derogatory credit he had, and what his credit scores were. The following breakdown of each category is typical of what a subprime lender would allow for, however, since there was no uniform set of guidelines for subprime, this would vary from lender to lender.

The typical "B" graded borrower would have a mid score (out of three credit reports) of 620. He could have debt ratios (including the new house payment) as high as 50 percent of his gross monthly income. He could have some 30 day lates within the past 12 months even on his mortgage, but no 60-day lates. If he had a bankruptcy, it should have been discharged two to four year previous. This new loan could be as much as 85 percent of his appraised value. His income would have needed to be documented, although there were some "stated income" (unverified income) loans available for "B" borrowers.

The "C" graded borrower could have a mid score of 580, and his debt ratios could be as high as 55 percent of his gross monthly income. Due to the risk level, the income would need to be documented and verified.

He could have more derogatory credit than the "B" borrower, including some 60 day lates, even on his mortgage. The loan could go as high as 75 percent of the appraised value of his home. If there had been a bankruptcy, he had to be at least 12 to 24 months past the discharge date. In the event he had many 30 day lates consecutively, they were all considered as one. This is known as "rolling 30's."

The "D" borrower could have a mid credit score out of all three reports of 550. The loan amount might only go to 60 percent of the appraised value. He could have 60 day lates on his mortgage, but the loan could not be in foreclosure. He could have 90 day lates on other accounts, and if there had been a bankruptcy, he needed to be discharge at least one year. Any judgments against him needed to be paid from the loan closing.

The typical loan offered would be an adjustable rate mortgage (ARM) with a frozen period. They were called two-year fixed or three-year fixed loans. They would freeze the start rate for two or three years, then the loan would begin adjusting at the end of the frozen period. This loan usually had a prepayment penalty attached if it was paid off within the first two or three years. The beginning rate for the "B" borrower would be lower than for the "C" borrower, and the "D" borrower would be very high.

The benefit to the subprime borrower was that if he had equity in his home, and found himself in a position to need funds to pay off creditors, this refinance would put him back on his feet financially, and with two or three years of good payment history, he could refinance to a better loan. This didn't always happen.
The mortgage meltdown occurred as a result of so many foreclosures. This grading scale is no longer on the mortgage radar since there is no subprime lending available. If the borrower does not fit the guidelines for conventional (FNMA or FHLMC) lending, FHA or VA, there is little to offer him.

Is Checking Your Own Credit Score Good?

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Checking your own credit score helps to assure that you have the highest score possible. Credit reports can include inaccurate information that you need to correct. Additionally, checking your credit score may discover identity theft, which can cause significant harm to your credit and your finances. Even if the credit report proves to be completely accurate, review it periodically. This way, you can assess areas where you might improve your finances and spending to raise your score in the future.

Errors in your credit report can significantly affect your credit score and you should have them corrected. The credit bureaus must fix any verified mistakes after you submit a written request. Ideally, your request will include specifics to prove the report incorrect. Inaccurate reports of late payments, for example, are particularly harmful to your credit score and you should challenge them when found.

Knowing what your credit report includes will help you respond to any problems and repair your credit. A credit report provides a consolidated overview of your credit history -- good and bad. In addition to showing aspects of your credit you might need to fix, a review of your report may show strategies for increasing your credit score that have nothing to do with amounts owed. For example, it might be useful to charge a new purchase on an old credit card because it will keep the account active. Old, active accounts help to increase credit scores.

Credit reports can be very helpful in the discovery of identity theft. If charges appear on your report and they are not yours, it might be a clerical error, but it also could be someone stealing your identity. You should report these charges to the credit-reporting agencies and to the credit card company. Prompt reporting of suspected identity theft will help to reduce the risk to your credit score.

You can get a free copy of your credit report annually from each of the three credit bureaus through Annualcreditreport.com. Generally, a review of your credit report every 12 months should be sufficient. You can order copies of your report more often, though the agencies will charge a fee. Too many inquiries into your credit score can actually lower it. But annual checks should not materially affect your score, and the need to assure accuracy is significant.

The Best DIY Credit Repair

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Repairing your personal credit is the key to getting financing with banks and creditors. Different factors influence your score and giving your low score a boost calls for making smart credit decisions and fully comprehending the factors that affect your rating. Learn various do-it-yourself techniques to improve your low score.

Improve the way you pay your bills. Late payments or occasionally missing a payment may seem insignificant. However, lenders and creditors keep records of your payment history and they can report lateness to the credit bureaus, which ultimately lowers your score and affects future financing opportunities. Because payment history makes up 35 percent of your score, always submit payments to creditors on time.

While it's not easy to eliminate mortgage and auto loan debt quickly, you do have a measure of control over the amount of credit card debt you carry. Know that maxing out your accounts, exceeding the limit and keeping account balances close to the limit will negatively impact your personal score. Quite the contrary, showing self-control and keeping account balances to less than 30 percent of the credit limit will help improve your score.

Keep creditors and lenders aware of your financial hardship. Some consumers skip payments because they legitimately don't have the cash. If employment issues, injury or illness triggers cash flow problems, inform your creditors and ask for help to avoid harming your credit score. Creditors may permit a skip payment option or reduce your minimum payment to help you get through tough times. The sooner you communicate with creditors, the sooner you can work out a repayment plan to avoid collections and harassing phone calls.

Check your complete credit history at least once a year. This is one of the best ways to catch identity theft early and pinpoint mistakes made by your creditors. Some reporting mistakes can harm credit scores, but removing this information can quickly add points and help your efforts to repair your damage credit score. Reports are available annually from Annual Credit Report. There's no fee for annual reports and you can view your complete credit history online within minutes.

Definition of Credit Rating

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A credit rating is a number that describes your credit risk. It is based on information in your credit report at any given time. Credit ratings are calculated primarily by private companies called credit bureaus, or credit agencies. Credit ratings are also called credit scores.

Lenders use your credit rating to help decide whether to loan you money. It also affects the interest rate offered to you.

Credit ratings are calculated by using a complex mathematical formula that analyzes the information in your credit report. The formula most companies use to compute credit scores is called FICO, which refers to the Fair Isaac Corporation, the company that developed the credit rating formula and analysis system.

FICO credit ratings range from 300 to 850; the higher the score, the better. According to MyFICO.com, lenders generally consider a rating above 750 excellent, around 700 good, close to 650 fair and below 600 poor (see Resources).

FICO considers five categories of information to compute your credit rating. The categories and how much each contributes to your total score are: payment history (35 percent), amount of debt you have (30 percent), length of credit history (15 percent), new credit (10 percent) and types of credit in use (10 percent).

The average credit rating in the United States is 723, as stated on MyFICO.com (see Resources).

Monitoring Services With a Free Credit Report

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Credit monitoring services provide extra protection to your financial reputation. Generally, all credit monitoring services come with a free credit report and a free credit score, giving the companies behind these services the opportunity to give customers what they want -- and even some things they don't want.

The concept behind credit monitoring is allowing a company to review your credit report regularly and alert you if anything changes. For example, if you're signed up for credit monitoring, you'll get notifications every time an inquiry, a new account or a late payment posts to your credit report. This can help you to stay on top of potentially suspicious activity; it can also help if you're in the process of cleaning up your credit and want to stay on top of the credit bureaus.

Free credit monitoring doesn't exist anywhere in the U.S. This is a major reason why credit monitoring services include perks, such as credit scores and credit reports in their offers to prospective customers. The idea is that people can see first-hand what credit monitoring can do for them while simultaneously getting information that would be otherwise unavailable to them.

The major problem with most credit monitoring services is that they tend to be bait-and-switch operations that try to get you on a monthly subscription to a service you may not want. Once you get your score and report, the company is counting on you to forget to cancel your subscription, resulting in monthly charges to your credit card. Furthermore, the credit scores you receive aren't necessarily the most accurate since each site uses their own scoring model when calculating your credit score. The only way to get real value from your credit score is to see how one particular score changes over time, which would necessitate signing up for a credit monitoring service.

Although many credit monitoring services advertise free credit reports as perks for registering, you can actually get your credit report for free without giving out your credit card number or signing up for a free trial of a credit monitoring service. The Annual Credit Report website, set up by the three major credit bureaus Equifax, Experian and TransUnion, provides a free credit report once a year for all U.S. citizens. However, a credit score does not come with your free credit report, which can make it hard to understand what the report really says about your use and management of credit.

What If It's Been Over Eight Years and Bad Credit Is Still on Your Report?

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Credit scores are important to consumers and play a large role on a consumer's future financial future. Review your credit reports carefully to ensure everything is reported accurately. Bad credit must be reporting according to the Fair Credit Reporting Act. This includes creditors only reporting bad information for a maximum of seven years. Bad credit on your report more than eight years requires special attention.

Your credit report houses information on how you have handled your finances. The credit bureaus both raise and lower your credit score based on specific criteria such as: amount of credit, payment history, age of credit file, new credit, and types of credit. The lower your credit score is, you may be denied credit, limited in credit or pay higher monthly payments and interest. Bad credit can also result in denial of a job opportunity, renting an apartment and even insurance. It is important to review your credit report regularly to ensure bad credit is removed in a timely manner and that all of the information reporting on your credit report is complete and accurate.

Late payments, judgments, bankruptcies, collections, and repossessions are things that can be reported to your credit report by a creditor. All of these items will damage your credit score to varying degrees. Federal law, however, limits the amount of time a creditor can report negative information on your credit report. All debt, excluding bankruptcy, can only remain on your credit report for a period of seven years from the date of first delinquency. Review each item on your credit report to determine if the bad credit that has been reported for over eight years is related to a bankruptcy. Make a list of all entries on your credit report that are over eight years old but are not related to a bankruptcy.

Bankruptcy is the only debt that can remain on your credit report for more than seven years. Bankruptcy can remain on your credit report for up to 10 years. You must allow the 10 years to pass before you can dispute the bankruptcy, and ask the credit agencies to remove the bankruptcy from your credit report. Having these entries on your credit report, at the eight-year mark, is not an error and the entries will remain on your credit report.

The Fair Credit Reporting Act allows consumers to dispute any inaccurate reporting on credit reports. Any negative information on your credit report more than seven years old can be disputed and removed from your credit report, except for bankruptcies. To file a credit dispute for the bad credit entries still on your report after eight years, order a copy of your credit report, and either mail a letter to the credit agency, call the credit agency or complete a dispute online. Contact numbers, websites and addresses will be included on your credit report. The credit agency will initiate an investigation and has 30 days to correct any issues on your credit report.

How to Create a New Credit File Legally

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Your credit file is important. The information stored on your file is used by lenders to work out whether you are suitable for a line of credit. A poor credit file can mean getting declined for credit. Not having a credit file makes it difficult to get credit, as lenders have no historical information to help them make an informed decision. If you are new to credit, perhaps a college student, or have recently become a U.S. resident, you need to create a new credit file legally.

Instructions

Get a prepaid card to start creating a new credit file legally. Apply online. Its fast, easy and there are no credit checks. Acceptance is guaranteed, provided you can prove your identity. Many card issuers offer MasterCard and Visa cards. Joining fees and monthly management fees are charged. They vary so check the best option for your requirements. There is a charge for ATM withdrawals. Importantly, ensure the card you apply for provides credit building. This means that certain transactions made using the card, are reported to the credit building company, PRBC (Pay Rent, Build Credit Inc.).

Get a secured credit card: its a great way to create a new credit file legally. Apply online. All major banks offer these cards. Check websites to see the range of cards. Application is quick and simple. You need to make a deposit to open a secured card account. You will get a credit limit of up to two times your deposit. Interest is payable on any balance outstanding each month. If you pay the total amount due each month there are no interest charges. Payment history is reported to credit reporting bureaus.

Get a store card. Apply online or in the store. Interest charges on outstanding balances can be high but they are easier to get than a regular credit card. Pay the full balance each month and no interest is charged. Payment history is reported to the credit reporting bureaus and assists in creating a new credit file legally.

Set automatic monthly payments for your gas, electricity, water and telephone. Utility companies report to credit reference bureaus. Payments are recorded on your credit file.

How to Repair Your Bad Credit File

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Checking your credit score may reveal a low rating, and having a low rating makes it increasingly difficult to get approved for a mortgage or vehicle loan. Bad credit often results from poor budgeting and money habits. However, changing your spending habits and learning the ins and outs of credit scoring helps you improve a bad credit file and get the financing you need.

Instructions

Make larger payments to help pay off credit cards. Reduce credit card balances sooner with larger monthly payments. Pay more than the minimum and resolve to double or triple payments. If you owe $1,000, review your finances to see if you can make monthly $200 payments and pay off the debt in five to six months.

Stop applying for new credit cards and other types of credit. Too many credit inquiries are dangerous because they reduce your credit score. Shred preapproved credit card offers and only complete credit applications if necessary.

Discuss a debt settlement to pay off old delinquent account balances. Work to get old collection accounts deleted from your credit report. Take the initiative to locate old creditors and negotiate a payoff amount or debt settlement. Petition the creditor to update your credit report and report the debt as paid to help fix your credit file.

Fix a poor payment history. Build a better credit score with prompt monthly payments. A routine of late payments leaves a negative mark on your credit file. Break bad habits and start paying bills on time every month.

How Do You Get Your Credit Rating Updated As Quickly As Possible?

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People who are planning to apply for a loan may want to increase their credit scores quickly before submitting the application to help get a lower interest rate. Depending on your situation, you have a few options for how to get your credit rating updated as quickly as possible. Rapid rescoring can update your score within three days, but it works only for people who are applying for a mortgage and meet certain conditions. If you are not eligible for rapid rescoring, use other techniques to update your credit rating within a month.

Instructions

Obtain a copy of your credit report from the Annual Credit Report website (see Resources) and look over it for errors. An example of an error is a credit card account that states it is 90 days past due when you have paid all the bills on time.

Ask the lender you are working with if it can get rapid rescoring for you, which will usually be able to clear the error and update your rating within 72 hours.

Give your lender proof of the error, such as a letter from the creditor acknowledging the problem. If you do not currently have proof, the rapid rescoring service can sometimes obtain this information directly from the creditor.

Pay down as much credit card debt as possible to increase your credit score the next time the credit card company reports to the credit bureaus. According to Experian, credit card companies typically update the balance with the credit bureau at the end of the billing cycle, which will be within one month of when you make the payment.

Call your lender and ask for a goodwill adjustment if you have a late payment on your credit report. The lender might be willing to remove the late payment from your payment record, especially if you have otherwise been a good customer and paid your bills on time. Again, this will increase your credit score within one month.

Call the credit reporting bureaus if you find errors on your credit report and get information about what documentation you need to send and where to send it to have the error removed and update your score. This process usually takes at least one month.

Can an Authorized Credit Inquiry Be Removed?

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Credit inquiries usually do the least amount of damage to your credit rating, but more than six of them make you a high risk to lenders, so you want them off of your credit report. However, if you authorize a credit inquiry, it stays on your credit report for two years. You can remove an authorized credit inquiry, but this is the exception and not the rule.

You can remove an authorized credit inquiry by disputing the item with the credit-reporting bureaus. The bureaus must investigate the accuracy and verify the claim within 30 days. The key to this is verifying the data. A creditor must prove the accuracy of an item with evidence, such as a paper you signed consenting to a credit check. Without verification, the bureaus cannot report the inquiry.

Review each inquiry to ensure that you were the one who authorized it. You may have been the victim of identity theft, for instance. In this case you may need to involve the creditor as well as the credit bureau. Although you are supposed to contact the credit bureau about erroneous information on your credit report, creditors can update your report too, and going through the lender may expedite the process.

Fighting the bureaus over a legitimate credit inquiry may not be worth the time and effort. The credit bureaus have an automated dispute system, so unless the lender changes the data a dispute probably will result in a reaffirmation of the accuracy of the inquiry. While you can fight the bureaus further, such as by sending a letter, the dispute can take months. Because an inquiry only affects your credit rating for a year -- even though it stays on your report for two years -- by the time you resolve the dispute the inquiry may come close to dropping off of your credit report.

Ask lenders, or anyone providing a service, such as a cable company, if they will perform a credit check. As long as a company has your basic information, such as address and drivers license number, it can run a credit check. Try to limit the number of credit card applications, because they always count as an inquiry. Inquiries for auto loans and mortgages count as a single inquiry when you submit all applications within the rate-shopping window. The rate-shopping window closes within 45 days under the FICO scoring system at the time of publication, and 14 days under earlier versions, according to the Fair Isaac Corporation.

Does It Affect Your Credit Score to Use a Debt Counselor?

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Although people who go to a credit counselor often have bad credit, going through credit counseling does not affect your credit rating, and may help you improve your credit. The key to making credit counseling benefit your financial situation is to begin as early as possible. People often get nothing out of counseling because their situations are beyond repair.

Credit counseling affected consumer credit scores until the late 1980s, but as of 2011, the FICO scoring system does not factor credit counseling into a credit rating, according to Kimberly Lankford of "Kiplinger's Personal Finance." The credit reporting bureaus changed their opinions on credit counseling because many consumers go to credit counseling to prevent problems before they occur.

If credit counseling helps you improve your financial management skills, your credit score should see a boost from on-time payments and lower debt levels. One-third of consumers who go to a credit counselor never need to go back after a single session, according to Liz Weston of MSN Money Central. A credit counselor may even negotiate with your creditors to lower your interest rates or settle some of your debts.

There is a good chance that you're considering going to a credit counselor because you have poor credit. Some actions suggested by a credit counselor may damage your credit, even if they're better alternatives to constantly missing payments or ignoring debt. For instance, settling accounts for less than the full balance takes between 45 and 65 points off of a credit score of 680, according to Ellene Cannon of Bankrate.com.

Ideally, you want to go to a credit counselor well before you start missing payments, or your debts become unmanageable. If a credit counselor suggests a debt management plan, weigh the possible damage to your credit rating versus missed payments and delinquencies. Creditors may report an account as in a debt management plan, which appears as a notation on your credit report. Lenders may see a notation of debt management as a bad or good thing. In general, creditors would rather see someone make on-time payments to a settled account, rather than defaulting.

Can You Get an Auto Loan With New Credit?

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Auto loans are useful because most cars cost thousands of dollars and consumers tend to spread out the expense with several years of payments. You can get a car loan more easily with an established credit history than with new credit because banks and finance companies like to see an established pattern of how promptly you pay your obligations.

You have "new credit" when your accounts are less than a year or two old. An established credit history consists of credit cards and loans that date back several years and different account types that include revolving credit lines and installment loans. According to the MyFICO.com website, the length of time you have used credit is an important part of your score. It takes time for people who have just reached adulthood to build up their histories to a useful level.

You must have credit in order to get more accounts, according to information on MSNMoney.com. Vehicle loans are typically for several thousand dollars, so many lenders shy away from car buyers without several years of established credit. Such people face a challenge in building up their histories because other creditors look for previous account records, too, reports MSNMoney.com.

The MSNMoney.com website lists several options for people who are just starting out financially and want to build their credit histories so they qualify for auto loans. Secured credit card companies give people cards in exchange for a deposit that guarantees repayment. These cards are a common way to establish new credit because almost everyone qualifies for them, and banks usually switch them to a regular account after 12 to 24 months of good payment performance. Stores and gas stations may also extend credit to people without much history.

You can easily get an auto loan with new credit if you find a co-signer who has an excellent, established credit history. Your co-signer is equally responsible for repayment, according to information on Bankrate.com, and the car loan shows up on that person's credit report as well as yours. You hurt their good standing if you stop making making payments. Their credit is badly damaged if you default on the contract and let the car get repossessed, so only use a co-signer if you know you can handle the loan.

Lenders and dealers sometimes take advantage of car buyers with new credit. They charge high interest rates and include penalties for early repayment in their contracts so buyers cannot refinance the loans with another company at a better rate later. According to Edmunds.com, look for your own loan before shopping for autos. Get pre-approved with your current bank or credit union or check online car-financing websites.

What Is a Hard Hit in Your Credit Score?

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Your FICO credit score is a number from 300 to 850. Higher credit scores can qualify you for great rates on loans and credit cards. To maintain the best score, it's prudent to understand what a hard inquiry is and how it impacts your FICO credit score.

When you apply for credit, the lender will view your credit report. That places an inquiry on your credit report. This inquiry is considered a hard inquiry since it was done as a result of your applying for credit. Each time you apply for credit, a hard inquiry is placed on the report. This is different from a soft inquiry, such as when you check your own credit. Soft inquiries do not impact your credit score.

One hard inquiry may drop your score but it won't fall by much, according to MyFICO; however, several hard inquiries from different creditors within a short time may lower your credit score because FICO considers it risky behavior to apply for a lot of credit all at once. If you're comparing interest rates, as is the case when applying for a mortgage or auto loan, the FICO system considers that rate-shopping and the multiple inquiries will not count against you as long as they're done in close proximity to one another.

When a lender or credit issuer views your report and leaves an inquiry, it remains on your credit report for two years, although it only impacts your FICO credit score during the first year, according to MyFICO. However, whenever you apply for credit within those two years, the lender or credit issuer can see the hard inquiries on your report. The inquiries reveal to which creditors you have recently applied -- and for which credit products.

The Fair Credit Reporting Act limits who can see your credit report to those that have a permissible purpose, or valid reason, to do so. This applies to lenders when you apply for credit. There is an exception, however. The law allows credit issuers and insurers that you have not applied with to view your credit file for the purpose of extending to you firm offers of credit. These are soft inquiries but if you would rather not allow this type of access to your credit report, you can opt out at the OptOutPrescreen website, which allows you to opt out for five years or permanently.

How to Clear a Bad Credit Rating

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A bad credit rating makes it difficult, sometime impossible, to get a line of credit. Every lender checks your credit rating before deciding whether to approve your credit application. The more often you apply for credit and get declined, the more your credit rating declines. If this is happening to you, it's essential to act to clear your bad credit rating.

Instructions

Start to clear a bad credit rating by getting your credit reports online.

Get your credit history reports online to assess what you need to do to clear your bad credit rating. The reports are free, annually, from AnnualCreditReport.com. It's easy and quick: Reports can be viewed instantly so you can start the process to clear a bad credit rating fast.

Click on AnnualcreditReport.com in the Resources section. Select the state where you live. Click "Request Report." Complete the form. Enter the security details at the bottom of the form. Click "Submit." After your identity has been verified, follow the simple online directions. You reports are available to view instantly and you can start to clear a bad credit rating.

Errors on your credit report affect your credit rating: Get them corrected.

Check for errors on the reports. It's the fastest way to clear a bad credit rating. Contact your lender and the credit reference bureau. If they accept that there are errors, your report will be amended within two weeks. You have started to clear a bad credit rating.

Check for poor payment records. Late and missed payments affect your credit rating. Rectify by getting payments up to date. Ensure future payments are made on time. As soon as you have cleared arrears, your record will be updated. Three to four months of regular, on time, payments will restore your payment history.

Pay off any small outstanding loans. Once settled, they are recorded on your credit report as paid off. Any loans paid off in full help to improve your credit rating.

How Does Not Using a Credit Card Affect Your Credit Score?

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The way you manage your credit card accounts has a large impact on your credit score. It's not just the payments to your account that affect your credit score, though. Your credit score is based on several factors about your accounts.

By not using your credit cards, you can lower your credit card balances over time. This helps your credit score by raising the available balance. The percentages of your credit balances in use are called "utilization," and you want your utilization to be low. The formula that comes up with your credit score compares your current balances with the card's credit limit, so a low balance with a high credit limit is best.

The problem with not using a card is that after a while, the credit card company will close your account, and you will lose that balance-to-credit-limit ratio. This will actually lower your credit score.

You can keep your accounts open and your balances low, therefore keeping your credit score high, by making small purchases on your account every few months and paying the balance as soon as you receive your bill.

Does My Credit Score Decrease if I Close an Account?

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The Fair Isaac Corporation -- the company responsible for formulating and assigning FICO credit scores -- does not release its scoring blueprint. It does, however, provide consumers with information regarding the types of financial actions that can raise or lower a credit score. Closing a credit account, for example, does not improve a credit score, and can actually lower it.

If you have a high amount of revolving credit on your credit cards, closing an account could cause indirect harm to your credit score. While FICO does not penalize the action of closing the account, it will penalize you for using a high percentage of your available credit. An account closure means a loss of available credit, meaning the gap in your debt-to-credit ratio will get smaller. According to myFICO.com, you should aim to use no more than 35 percent of your available credit at all times.

When you close a credit account and pay it off, your creditor will stop reporting your payments to the credit bureau. According to Barry Paperno, a product support manager at FICO, your payment history on a closed account with no balance only remains on your credit report for 10 years. If the account is your oldest account, the closure could negatively affect your score a decade from now, because credit history makes up 35 percent of your FICO credit score.

Consumers who use multiple types of credit receive FICO score boosts. Fair Isaac Corporation ranks types of credit -- categorizing accounts by mortgages, auto loans, personal loans, bank credit cards and store credit cards. If by closing an account you effectively eliminate one of these types of credit from your credit report, your FICO score may decrease. The type of credit you use affects 10 percent of your credit score. The degree to which your score will lower depends on the type of credit account you cancel. For example, closing all of your store credit cards will inflict less damage to your score than closing your major bank credit cards.

Do not close any accounts with the sole intention of improving your credit score. Paperno says that closing an account will never improve your credit score -- no matter how poor your account history. Instead, improve your score by making timely payments, maintaining a low debt-to-credit ratio and diversifying the types of credit available to you.

Adverse Credit Information

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Adverse credit information is a major component of your credit rating, known as a FICO score. Different adverse reports remain on an individual's credit report for varying lengths of time; some are more damaging than others. Paying off debts may improve a credit report; however, certain negative information remains on a credit report even after debt has been paid.

Financial companies calculate payment histories on 30-, 60-, 90- or 180-day schedule. A payment is considered late if it is made more than 30 days after the original due date. The more late payments that appear on a credit report, the more adverse effects the payments have on a credit rating. Late payments remain on a credit report until paid, but a history of the late payments may remain long after that.

Charge-offs occur when a creditor gives up on attempting to collect a debt. Then the creditor turns it over to a collection agency that will try to collect the debt. Charge-offs, considered more negative than late payments, may remain on a credit report for up to seven years after they were first filed with the credit reporting bureau.

Even for consumers who make credit card and loan payments on time, a high debt ratio (the percentage of financial obligations in relation to income) can also adversely affect a credit score. Potential creditors view high debt ratios as a red flag for future credit problems. Credit reports show high debt ratios for as long as the circumstances exist. Cutting back on debt can improve debt ratio and, by extension, a FICO score.

Derogatory public records, such as bankruptcy and foreclosure, remain on a credit report for years after the fact. Bankruptcy can be reported for up to 10 years, even after being fully discharged. Foreclosures and other adverse public information, including tax liens, remain on an individual's credit report for up to seven years. Unpaid tax liens typically remain on a credit record forever.

Each credit reporting agency includes different items within their reports, which contributes to the possibility that the same person may have different credit scores with different agencies. While credit reports may be obtained for free, you have to pay a fee to a credit reporting agency or to a credit protection service to receive a FICO score.

What Does "Satisfied Judgment" Mean on Credit Report?

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Seeing "satisfied judgment" on a credit report is a Catch-22: You did the right thing by settling the matter, but it still damages your credit for years to come. Satisfied judgments are not always easy to prove, and sometimes you must file a lawsuit because a court reports the case as unsettled. Wait out the judgment and it will eventually vanish from your credit record.

"Satisfied judgment" on a credit report means you paid off a court-ordered settlement. This usually occurs when you have a account, such as a credit card balance, and the creditor takes you to court to gain the legal right to pursue your assets to repay the debt. Once you pay the balance, you must return to court and prove you paid the creditor. Usually, the credit bureaus automatically pick up a satisfied judgment, but it may take a few months to appear this way on your report.

Changing a judgment from unsatisfied to satisfied boosts your credit score, although any judgment hurts your score overall, according to Don Taylor of Bankrate. It also means the creditor can no longer go after your bank accounts or receive a wage garnishment. Some states allow a creditor to renew a judgment forever, so it is better that you took care of the matter instead of letting it affect your credit potentially for decades.

Once you get to the point that the judgment appears as satisfied, you cannot legally remove it. If you had dealt with the creditor before the judge issued an opinion, you possibly could have negotiated a dismissed judgment, which effectively nullifies the case. Since you paid the amount owed, you hold no leverage to remove the account.

You can remove a satisfied judgment if it belongs to someone else by disputing it with the credit bureaus. Alternatively, you could go back to the courthouse that held your trial and ask for an Order to Show Cause. Some judgments stipulate that the courts will dismiss record of your judgment if you pay it off. You could also dismiss the judgment if you were sued in error.

How to Repair My Credit File

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Credit bureaus maintain the credit files of every American citizen who has debt. It is impossible for everyone's information to be accurate. If you notice inaccuracies on your credit report, the Fair Credit Reporting Act (FCRA) gives you the right to dispute those inaccuracies. Errors usually occur when a company does not have adequate information on an individual and reports to the credit bureaus using only a name. Banks and credit card companies keep meticulous records, but collection agencies do not. Because of this, almost all inaccuracies will be negative. Negative notations damage your credit score. Repair your credit file by disputing inaccurate information and having it removed.

Instructions

Pull a copy of your credit report from all three credit bureaus and review it for inaccuracies. Not all of your credit reports will contain the same information, so it is vital that you review all of them. If you see any negative notations you do not recognize, you have the right to dispute them with both the company furnishing the information and the credit bureau reporting it.

Write a letter to the company furnishing the information requesting proof of the alleged debt. The Fair Debt Collection Practices Act (FDCPA) states that a company reporting negative debt must be able to provide proof of that debt. If it cannot, the debt must be removed from your credit report. If you are certain that the debt is not yours, you may forgo requesting proof in lieu of demanding the immediate removal of the notation from your credit report. Remind the company that reporting inaccurate information is against the FCRA and that you have the right to file a lawsuit if corrections are not made.

Send a letter to the credit bureau reporting the inaccurate information requesting the notation's immediate removal. Make clear the fact that the account never belonged to you and that you are requesting a full investigation. Include a copy of your credit report with the inaccurate information highlighted to expedite the investigation process.

Wait for a response from the credit bureau. Credit bureaus must respond to your request for an investigation within 30 days. If your credit file is changed as a result of the investigation, the credit bureau will include an updated copy of your credit report and a letter outlining the changes.

File a lawsuit against the furnisher of the information if the inaccuracy is not deleted. A credit bureau's refusal to delete information after an investigation means that the furnisher validated information to the credit bureau after being notified by you that the information was incorrect. This is against the law. You do not need an attorney to file a lawsuit. Most furnishers of negative notations would prefer to delete the notation rather than bother with sending a representative to your area to defend the company in a lawsuit. If filing the lawsuit does not cause the removal of the notation, the FDCPA entitles you to recover court costs, financial damages resulting from damage to your credit file, and punitive damages up to $1,000.

How Repo Hurts Your Credit & How to Fix it

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The Federal Trade Commission (FTC) warns consumers that a good credit rating is essential to qualify for loans, insurance and even some jobs. A top-notch credit score requires a good payment history on all bills. Sometimes vehicle owners miss payments, which puts them at risk for repossession and major credit rating harm.

A repossession is an action in which a bank or other lender seizes a car or other vehicle if a person stops making payments. The FTC explains that loan contracts typically contain a provision that allows seizure of the vehicle without any court action or advance warning.

The FTC advises that most states have laws granting repossessors the right to seize a vehicle at any time, without notice, once the owner defaults on the payments. They can even come on private property to do it, although they are usually barred from making physical threats, using force and committing a "breach of the peace." They must return any personal property that was in the vehicle.

Repossessions lower a person's credit rating, according to major credit score provider Fair Isaac Corporation (FICO). They represent a bill that the person was unable to pay, which makes other lenders reluctant to approve new applications. A repossessed vehicle appears on credit reports for seven years.

Banks sell repossessed vehicles and expect former owners to pay any difference between the sale price and outstanding loan balance. The FTC explains that they can sue for the money, further harming the former car owner's credit report. The burden of paying can make a person delinquent on other payments, which also lowers the credit score.

The FTC says that some lenders work with customers who call them before defaulting. They may allow a late payment or change the due date. Delinquent payments hurt the credit score, according to FICO, but not nearly as much as a repossession.

Once vehicles are reclaimed, the consumers can only fix their credit by being diligent with other accounts. FICO explains that it puts the most weight on on-time payments, so catch up any other late bills and make all future payments on time. Do not get new loans or charge cards unless absolutely necessary, to keep the total debt down. Creditors focus more on recent records, so they may overlook the repossession if it is at least a year in the past and all other accounts are in good standing.

Occasionally consumers can remove legitimate repossessions from their credit records. Any items with inaccuracies can be disputed, according to the FTC. Get TransUnion, Experian and Equifax credit report copies from annualcreditreport.com, which provides them annually free of charge, and scrutinize the repossession entries. There may be slight mistakes in dates or other details. Mail a complaint letter or fill out an online dispute form with all the credit bureaus. Divorcenet, a legal advice website, explains that the bureaus do not always investigate challenged information within the 30 days allowed by law, and creditors do not always respond to validation requests. If there is no investigation or validation, the repossession is erased.

What Does BQ1, BX1, and BU1 Mean on a Credit Report?

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When you read a credit report, the abbreviations "BQ1," "BX1" and "BU1" next to an account indicate which of the three major credit bureaus reported the information about the account. The bureaus are companies that collect information about consumers' credit histories and then sell that information to lenders and others wanting to check on those consumers' creditworthiness.

The three major credit bureaus are Experian, Equifax and TransUnion. Creditors send these companies information about their customers' credit accounts, including how long an account has been open, the maximum available credit on the account, the largest balance the customer has carried, any amounts past due and the customer's payment history. In particular, it's important to note how many payments have been 30, 60 or 90 days late.

The three bureaus use the information they collect to assemble credit reports. Each bureau gathers information separately, however, and when you order a report from one bureau, you get only the data it has collected. What appears on an Equifax report, for example, might not appear on a TransUnion or Experian report. Separate "pulling services" sell consolidated credit reports that combine information from all three bureaus. It's on these combined reports that you'll see abbreviations such as BQ1, BX1 and BU1.

A combined report lists all the accounts identified on the three bureaus' separate reports. Next to each account, it will identify which bureau---or bureaus---reported the account. Pulling services use different abbreviations to identify the three credit bureaus. But generally, if there's a "Q" in the abbreviation, it's referring to Equifax; an "X" refers to Experian; and a "U" refers to TransUnion. So "BQ1" next to an account would indicate the information is on the Equifax report, "BX1" would be from Experian and "BU1" would be from TransUnion.

The numbers in these abbreviations refer to the person whose name is on the specific account being reported. If the credit report is for one person, the number will be a "1." In some cases, a service will pull a combined report for more than one person. In these cases, the "1" will represent the first person listed on the report request, and the "2" represents the second person. If it's a joint application in which each person is equally responsible---for example, a married couple applying for a home or car loan---some services will use a "1" for both applicants, but use "B" and "C" to represent the "borrower" and "co-borrower." So BQ1, BX1 and BU1 represent reports from the three bureaus for the first name listed on a joint application---or the only name, if there's just one person.

When Do Items Fall Off Your Credit Report?

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Even if you have a poor credit history with numerous collections accounts and bankruptcies, you will eventually get a clean slate. When negative or positive items leave your credit report depends on the type of item. Some items can stay for a decade or more. Even if an item stays on a credit report, it might not effect you much -- or your FICO score.

Positive items fall off your credit report after 10 years. Most negative items, such as collections accounts and missed payments, leave your credit history after seven years. Notably exceptions include bankruptcies, which stay up to 10 years, and inquiries due to an application for credit stays for two years.

Note that the impact on your score by a negative report fades as time passes.

A few states differ regarding when items leave your credit history. In New York, judgments and collections accounts remain on your credit for five years after you pay off the account. California requires tax liens leave your credit report seven years after you resolve the issue and 10 years if left unresolved.

A collections account can reappear on your credit report well after the seven-year time limit. If the statute of limitations passes on a collections account, you can reaffirm your obligation to the debt by claiming or inquiring about it. This can happen by calling the collections agency to ask about the debt or making a payment on it. If the statute of limitations passes, you do not need to claim it. You will, however, have to inform the judge about the age of the debt in case of a lawsuit.

An item can fall off your credit report instantly if you dispute its validity and the credit bureaus agrees with you, according to the Federal Trade Commission. The credit bureau has 30 days to investigate your claim or you have the right to demand the item leave your report regardless of its veracity. You may have to provide documents that back up your claim. Also, resolve disputes before applying for new lines of credit.

What Is Tier 1 Plus in Credit Ratings?

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Sometimes, raising your credit score a bit has no effect on your interest rate, because lenders often rely on credit scoring brackets to set rates. Lenders typically establish four or five tiers, but some include an extra one for those with elite scores, called tier plus one. If your credit score falls into this tier, you always get the best rates and terms.

What scores fall under "tier one plus" depends on the lender or provider, because creditors themselves decide what rate to give borrowers. Most of the time, tier one or tier one plus scores are those greater than 760. When credit scores get this high, the probability of the borrower default is much less than 1 percent.

Only people in the "tier plus one" range get the best possible rate offered by the lender. The benefits of just a few tenths of a percent from getting into the elite tier are best seen on large loans with a long life. Just 1 percent on a mortgage with a $1,000 monthly payment, for example, would save tens of thousands of dollars over the course of a 30-year loan. Non-debt-related providers, such as insurers and cellphone carriers, can also give you discounts for having a very high credit score.

In 2010, lending standards are at their tightest in years, so a 760 may not cut it if you want to guarantee the best possible rate on all of your loans. To truly enter the elite, you must have a score higher than 800 -- something achieved by only 5.7 percent of all borrowers, according to Mint.com.

To gain an elite credit score requires not just paying bills on time, but also carefully managing your credit. To max out your variety of loans, for example, you should have two revolving accounts -- usually credit cards -- for every installment loan. You also need to get new credit while minimizing inquiries by adding your name to an account in good standing. Consumers should put at least a small amount of purchases on credit cards, but keep the amount of the limit they use to well below 35 percent.

Does Increasing Your Credit Limit Affect Your Credit Score?

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Increasing the limit on your credit account can positively or negatively impact your credit score. The credit utilization rate affects how an increased credit limit will impact the health of your credit score.

An increase in credit limit can raise a credit score if the debt-to-credit ratio, or credit utilization rate, remains under 30 percent. If a debt ratio is currently above 30 percent, increasing the limit of a credit card can lower the current debt ratio to 30 percent or less. The total debt ratio represents 30 percent of a credit score.

Increasing a credit limit along with the amount of actual debt can damage your credit score. For example, the account holder may have $300 in debt and $750 in available credit, which would be a debt ratio of 34 percent. If the account limit is increased to $1,600 and an additional $800 is charged, the debt ratio is now 69 percent, which can negatively impact a credit score.

Many credit card companies will not raise a credit limit unless the account has been open for at least six months, payments have been made on time and the card was used regularly.

Some companies will raise a limit automatically, or the account holder can inquire. Inquire about limit increases online or by phone.

Sometimes an account holder will close other credit accounts once the limit on one account has been raised. Closing other credit accounts can have a negative impact on your credit score. When approved for a credit increase, don't close other credit accounts.

Do Private Notes Affect a Credit Score?

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Your FICO credit score is one tool used by lenders to determine your creditworthiness. Your FICO score is a ranking based on information contained in your credit report. Your credit report contains information transmitted to the three major credit reporting bureaus -- Experion, TransUnion and Equifax. A private note, such as a loan from an individual rather than from a financial institution, may not affect your credit score at all.

There are five categories of data used to calculate your credit score. Each category carries of percentage value indicating its importance in the calculation. The five categories are payment history, amounts owed, length of credit history, new credit and types of credit used. All this information is fed through FICO's proprietary scoring formula to form your credit score. A private note could figure into several categories, including payments, amounts owed and types of credit. Not all creditors report their accounts to the credit bureaus, and if the person holding your private loan does not report it, it does not affect your score.

The two most important data types are payment history and amounts owed, which, together, make up 65 percent of your score. If you pay your debts on time, it has a positive effect on your credit score. If you made late payments in the past but have corrected that habit, your older payments count less than the newer ones, so paying your current bills on time will improve your score. Paying down your debt rather than moving it around, also helps your score. If your private note was reported to the credit bureaus, paying this on time should help your score. If it wasn't reported to the credit bureaus, it will have no effect.

New credit represents just 10 percent of your credit score and includes new accounts you have opened, number of recent credit inquiries, the time since your last account was opened and the type of accounts opened recently. If the lender with whom you have the private note checked your credit prior to issuing the loan, that constitutes an inquiry, and it will hurt your credit score slightly. It will also adversely your credit score slightly if the lender reports the loan itself because new credit affects your score. However, if the lender does not report the subsequent payments, the score will not be affected in the amounts owed and payments made categories. If the loan is reported, ensure the payments are credited.

If you took out the note with the intention of building your credit, you cannot self-report to the credit bureaus, but you can ask the lender to report it for you. If the loan is reported but payments are not, and the lender refuses to report them, you can file an error report with the three credit bureaus, provide proof of your payments and request that they correct your file.

Is My Spouse's Debt on My Credit Report?

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Your credit report contains your financial history, such as credit you have received and whether you've paid your loans and credit cards on time. When you get married, your financial situation may change depending on your spouse's prior financial activities, but your credit report and credit score will not be affected -- at least in the short term.

When you get married, your credit report does not automatically merge with your spouse's account. As a result, your credit score will not be negatively or positively impacted simply because you get married. Also, getting married does not automatically make you a joint user on your spouse's credit cards, and you do not automatically become a co-signer on loans your spouse has taken out.

If you and your spouse merge accounts to make them joint accounts, or if you take out new loans in both of your names, the account will appear on both your credit reports. For example, if you establish a joint credit card account, the account will appear on both credit reports. This can benefit you because both your credit score and your spouse's credit score will improve if you consistently make on-time payments. However, if a payment is missed on a joint credit card, both of your credit scores will suffer.

When you apply for a joint loan, lenders will check both credit reports, including both of your debt levels, to determine whether to issue a loan and how much interest to charge. Even though your credit report may be flawless, you may be denied a mortgage because of your spouse's high debt levels or poor credit score. According to Kiplinger, lenders often weigh the lower credit score more heavily, so a spouse with a bad credit report may limit your borrowing options.

If you opened joint accounts with your spouse while married but later divorced, the divorce will not automatically take your name off the accounts. For example, if you received a joint credit card and later got divorced, the account will remain in both your names unless the account is closed. If it remains open and your ex-spouse runs up significant debt on the card and fails to repay it, it will negatively impact your credit report, and you may be liable for the debt.

Car Insurance Credit Problems

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The vast majority of car insurance underwriters consider your credit history when approving you for an insurance plan and your premium, according to GMAC Insurance. Car insurers believe that your credit score reflects how risky you are as a person. Some lobbyists, however, claim that using credit checks in the insurance industry is a form of discrimination.

Car insurance companies usually give more weight to your credit score than your driving history, because credit scores have a direct relationship to the chances of the consumer filing a claim, according to the Insure website. Alternatively, if you have no driving history, a insurance provider might use your credit history as a reason to give you coverage.

On average, people with poor credit pay 20 to 50 percent more for insurance than those with excellent credit, according to BankRate. This occurs because as credit scores drop, so does your insurance score. Like your credit report, credit rating agencies have a proprietary formula to calculate risk to insurers.

Critics of credit checks in the insurance industry, such as Birny Birnbaum, executive director for the Center for Economic Justice, claim that Congress should outlaw this practice because credit scores assess financial risk, not driving risk. Also, because minorities are more likely to hurt from credit checks, it is a subtle form of racial bias. Insurance score formulas are secret, so nobody truly knows how much weight insurance companies give to a credit score.

Before shopping for insurance, check your own credit report -- you receive one free each year. As many as 80 percent of credit reports contain an error, so correcting this will raise your score immediately. If you find an error, you can request the credit agency notify all insurers that pulled your report in the past six months.

What Will a Credit Card Settlement Look Like on My Credit Report?

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A credit card settlement occurs when your credit card company allows you to pay less than you actually owe to satisfy your outstanding credit card balance. When you settle a debt, that fact will be noted on your credit report.

A debt that is settled rather than paid in full will update as "settled" on your credit report. Settled accounts look bad to lenders who pull your credit because they indicate that you may be unable to meet your full financial obligations in the future.

A credit card debt settlement will appear on your report for 7 years if you settled with the original creditor. If you settled with a collection agency after the fact, the settlement will appear for seven years from the day the original account first went 180 days without a payment being made.

A debt settlement can help you avoid late payments on a debt. At 35 percent of your credit score, late payment notations have a far greater negative effect on your credit than a credit card settlement.

Credit card companies are often unwilling to discuss settlement options with consumers who are current on their credit card payments because a good payment history indicates that an individual is not struggling financially.

When negotiating a credit card settlement, you can include in the terms of your agreement that your credit card account be updated as "paid" rather than "settled." This prevents any future lenders from being aware of the settlement when they view your credit report.

How Much Can Paying Off One Credit Card Raise Your Credit Score?

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Everyone who has ever used a credit card has a credit score. This score represents how reliable you are as a credit user. Your credit score is a function of multiple variables and circumstances. While determining exactly how much anyone's score will improve because of a single factor is difficult, your score will most likely improve with the more debt you pay off.

A credit score takes the information found on your credit report and uses it to come up with a number that represents your risk to creditors. While you are legally allowed to view your credit report every year, you are not afforded the same rights when it comes to credit scores. Companies that provide credit scores use proprietary formulas and calculations, and they do not generally reveal how they arrive at the scores. Therefore, it is not easy to determine exactly how much any single action will raise or lower your score.

One of the most commonly used credit score, the FICO score, is based on a number of different factors. These include the kinds of credit you currently use, how many new lines of credit you have, how long you've had each credit line, how much you owe on each and how often you've paid your bills on time. The single largest factor is your bill paying history, making up 35 percent of your score, while the amount of money you owe makes up 30 percent.

If you pay off a credit card, this definitely impacts the two most important factors. As long as you pay off a card on time, you not only improve your history of bill payments but also reduce the amount of money you owe. Either one can increase your credit score, and both together can have a greater impact. While there is no definite way to know how much your score will rise, Yahoo Finance reports that a maxed-out credit card can lower your score from 10 to 45 points, depending on your score. Conversely, paying your card off may raise your score by similar amounts.

While paying off any balance you have on your credit cards is great, some people then go on to cancel the credit card account completely. This can have a negative impact on your score. If, for example, you have an account that you've had for years and for which you've always made timely payments, this information is all positive and generally improves your score. If you then pay off a balance and cancel the card, your positive credit history no longer gets counted and can actually lower your score.

How Do Credit Reporting Agencies Get Information?

8:42 AM No comments

A credit report contains financial information about any secured and unsecured debts you have made payments on over the last seven to 10 years. Financial institutions use credit reports as a basis for determining whether to lend you money, how much to lend you and at what interest rate.

The information contained in your credit report is provided to the three major credit bureaus by your creditors. The credit bureaus then match the information provided by creditors with the information already on file from other creditors when reporting account information. Public government records are also a source of the information on your credit report.

Most derogatory information, such as collections and charge-offs, will appear in your credit report for seven years. A credit card account or line of credit that you keep open and make regular payments on will appear on your credit report until 10 years after the account is closed.

Accurate data reporting by the credit reporting agencies allows lenders to offer low interest rates to individuals who have demonstrated positive payment histories.

The Fair Credit Reporting Act grants consumers the right to dispute any information contained within their credit file that they suspect to be inaccurate. Each credit bureau then has 30 days in which to fully investigate the claim.

A consumer can file a lawsuit against any company that is reporting inaccurate information to credit bureaus, but only a state attorney general can initiate a lawsuit against a credit bureau for inaccurate reporting.

Saturday, December 31, 2005

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Wednesday, December 28, 2005

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Tuesday, December 27, 2005

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Sunday, December 25, 2005

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Saturday, December 24, 2005

How B, C, D Grading Worked

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Friday, December 23, 2005

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Thursday, December 22, 2005

Late Payments

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Tuesday, December 20, 2005

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Monday, December 19, 2005

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Saturday, December 17, 2005