Where Can a Person Get a Completely Free FICO Score?

You can get your FICO credit score free by signing up for subscription credit monitoring services. However, your score is only free if you cancel your subscription before the end of the free trial period.

Sources

Experian, Equifax and TransUnion are the three main credit reporting agencies that offer subscription services that include free FICO scores. The myFICO.com website also offers a monitoring service with a free score.

Cautions

Read the fine print to find out when the free trial ends and remember to cancel before that time. Credit agencies also offer their own brands of credit score, so make sure you'll receive a FICO credit score.

Estimate

You can get a free FICO credit score estimate at Bankrate.com. After answering 10 questions about your credit history and current balances, the estimator gives you a range within which your actual score may fall.

Significance

Banks and credit card companies use your score to determine how creditworthy you are. The higher your score, the lower the interest rate banks may offer you on your mortgage or other loans.

Features

Your credit score measures your payment history, new credit, types of credit you use and level of debt. In general, payment history and the amount of money owed are the biggest influences on the score.

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The Amount of Time it Takes to Raise Credit Scores

No one can say precisely how long it takes to raise credit scores because every situation is different. People with lots of negative information on their credit reports may need more time to raise credit scores than someone with fewer blemishes. Generally, it takes 12 to 24 months to significantly improve scores. During that time it is important to pay all bills on time while paying down balances on revolving accounts such as credit cards.

Credit Reports

Credit scores are three-digit numbers ranging from 350 to 850, and are influenced by information listed on credit reports. The more positive the information, the higher the credit score. Negative information leads to poor credit scores, with a score of 620 generally recognized as a baseline for good credit. Scores of 720 or higher are considered excellent and lead to the most attractive interest rates on credit cards and loans.

Credit Repair

Removing negative information from credit reports sometimes boosts credit scores in as little as 30 days. Negative information added to credit reports hurts credit scores most when first added, with the impact lessening over time, according to the Federal Trade Commission. Some people try to accelerate the process by having negative information removed from their reports. However, that isn't easy. Technically, negative information that is accurate cannot be removed from reports until it expires, although there are certain exceptions.

Pay-for-Delete

Creditors and debt collectors placing information on credit reports are allowed to make changes to the information -- or even delete it. Some debt collectors may agree to delete a delinquent debt if full payment is made. That's called "pay-for-delete," but not all debt collectors cooperate. Credit card companies occasionally will delete a late payment for a longtime customer whose payment arrived after the deadline. This also potentially improves credit scores within a month.

For-profit Firms

So-called credit repair firms claim they specialize in removing information from credit reports. However, the Federal Trade Commission strongly urges people to avoid the firms because of abuses, large up-front fees and poor service. The FCC maintains that people should manage their own credit repair.

Slow and Steady

Payment history and debt levels account for 65 percent of the credit score. This means an excellent credit score is impossible unless bills are paid on time and debts are low. The credit scoring model rewards people who have large credit limits but low balances. People improving their credit should pay down revolving debt to no more than 10 percent of the credit limit. That means someone with a $1,000 credit limit should carry a balance of no more than $100. Many people with credit scores in the 700s pay off balances each month.

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How Much Will Your Credit Score Increase If You Pay All of Your Credit Balances?

Credit scores play a big role in your finances. It is important to keep in touch with the credit scoring model and to determine what methods you can take to raise your credit score or keep your credit score at a healthy range. Paying down debt is a smart way to improve your credit score.

Credit Score

A credit score is a three-digit number that informs potential lenders of your past financial history. The better you have handled your previous credit, the higher your credit score will be. A low credit score can prevent you from getting credit, getting a job, renting a home or getting favorable terms in loans.

Credit Score Components

There are five components to a credit score: age of credit history, payment history, amount of credit being used, new credit and credit inquiries. A full 30 percent of your credit score is determined by the amount of credit you are utilizing. Credit utilization is the amount of credit you have charged in relation to the amount of credit you have available. Credit utilization is the only area of your credit score that you can change almost immediately. Going on a spending spree and maxing out your credit cards will result in your credit score dropping, while paying down your balances will usually raise your credit score.

Revolving Credit

Revolving credit is credit that comes with a limit, but you can pay down the balance and charge additional items on the account. Credit cards are examples of revolving credit. Store credit at a furniture store is also often revolving credit if you are given a credit line that can be used at anytime rather than a fixed loan for the exact amount of the furniture purchase. Revolving credit is the type of credit you want to pay down to increase your credit score. Your goal should be to reduce the balances to 30 percent and under 20 percent if possible.

How Much of an Increase

Every person's credit report is unique to his financial history. A credit score is also composed of multiple components, so it is impossible to give a blanket statement on how much a credit score will rise with paying off credit. A general rule is to remember that 30 percent of the credit score is determined by credit utilization. A person who has maxed out credit cards and lowers all card balances to under 20 percent will see a large increase in credit scores. A person who has balances of about 50 percent of his credit limit and reduces the balances to 30 percent will see a rise in credit score but not as drastic as the previous person. There are many factors involved, but the bottom line is lowering your revolving credit balances to under 20 percent of your credit limit will without a doubt increase your credit score if your previous balances were above 30 percent of credit limit. Lowering your credit utilization from 20 percent to 5 percent will not result in much, if any credit score increase, because having balances under 20 percent of your credit limit is the ideal range.

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How Does Applying for a Mortgage Affect a Credit Report?

Effect on Credit Report

Applying for a mortgage, especially the first time, can be scary. Going into debt for a large investment may be a good choice, but it can still affect your credit for years to come. Many lenders insist on immaculate credit before approving a loan, causing many consumers to pause before applying for credit elsewhere if a mortgage falls through.

Asking for the loan can affect your credit report. It is considered a "hard pull" inquiry, whereas a "soft pull"--your report being checked by you or an employer--does not show up. But apply for the mortgage; the final results should not cause anxiety.

Applying For Numerous Mortgages

The consumer wants to show the highest score possible to get the best loan available, usually 630 and above. When a potential lender pulls your credit report, it creates an "inquiry," which lowers your score, usually less than 5 points. However, if all mortgage credit requests are completed within 45 days, they are "bundled" together, rather than individually. So at the worst, your score should be affected only by 5 points or less.

Shopping Around

If you suddenly make numerous credit requests, that usually affects your credit score negatively. However, the system is improving--credit scores currently reflect if a consumer is merely looking for the best rate available, and count them as one score (the bundling again), or completely ignore numerous inquiries. This is something you can explain to a mortgage lender, should the topic come up.

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Time Limit on Credit Information

Although it is an unwise tactic for credit repair, you can wait out almost anything on a credit report. Federal law governs how long the major credit reporting bureaus can report negative data, but the credit bureaus sometimes give customers a reprieve sooner. At the other end of the spectrum, the credit bureaus can ignore all time limits in some situations.

The Seven-Year Limit

The majority of negative items have a seven-year reporting limit. This includes missed payments, collection accounts, charge-offs, debt settlement and foreclosure. Inquiries only stay for two years and affect credit scores in the FICO formula for one year. A few items last longer than seven years. Bankruptcy can stay for 10 years and unpaid tax liens forever, because the government does not want to let people off the hook for cheating the government out of money. The agencies can freely lower the time limit. Experian, for example, reports unpaid tax liens for 15 years, while Equifax and TransUnion report it indefinitely.

Positive Information

Technically, the credit bureaus can report positive items, such as a punctual payment, indefinitely, according to "Credit Repair Kit For Dummies" by Steve Bucci. The credit agencies generally report positive data as long as you keep an account active, so positive data might stay on your report the rest of your life. Once you close an account, however, the credit bureaus usually take it off your report within 10 years.

The Exception

The Fair Credit Reporting Act allows one exception to the federal credit reporting rules: the agencies can report anything if the borrower applies for credit or a life insurance policy in excess of $150,000 or for a job that pays more than $75,000 annually. However, as of 2011, the national credit agencies do not enforce this provision of FCRA. Also, judgments can stay longer than seven years if state law allows it, and state laws amend the report limits for some items. In California, for example, the bureaus can only report unpaid tax liens for 10 years.

Misconception

Once a collection account or judgment appears on your report and the reporting time limit passes, it cannot reappear on your file, according to Carreon and Associates. Also, the clock on defaulted accounts starts with the date of the original delinquency, not when the creditors writes off the debt or the last missed payment.

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How to Erase Credit Inquiries Quickly

Credit scores are a numerical representation of a person's credit worthiness. The exact score is weighted by a number of factors, including the number of revolving accounts, payment history, account balances and the number of credit inquiries made on a consumer.

If you're trying to build or rebuild your credit, one of the ways to start is by limiting the number of credit inquiries on your credit report. A large number of inquiries can have a slightly negative effect on your credit score and can show potential lenders that you're looking to take on more debt than you can manage.

If you already have a large number of inquiries on your credit report, it's likely that you want to get rid of those inquiries. The only tried-and-true way to erase the inquiries is to wait until they age off your report after a few years. However, you can ask the credit-reporting agencies to remove the credit inquiries as a goodwill measure.

Instructions

1

Send a goodwill letter to the big three credit bureaus: Experian, TransUnion and Equifax. They are separate companies, so you'll have to send each request separately. The best way is to write a letter for each inquiry that you want removed. Explain that you are in the process of rebuilding your credit and would appreciate it if they removed the erroneous inquiry. Or, if you didn't approve the credit inquiry, then dispute it with the credit reporting agencies as "not mine." Let them know that they are required to investigate your dispute under the Federal Credit Reporting Act and notify you of the findings of their investigation.

Be sure to include your full name, Social Security Number and the credit inquiry in question to help them identify you. At the end, ask the credit-reporting agency to make the change within a reasonable amount of time (such as two weeks to one month) and ask them to send you a response with an updated credit report.

2

Send each mailing as a certified, return-receipt letter through the U.S. Postal Service. This method provides you proof that each letter was sent and arrived at the intended address.

3

Follow up if you don't hear back within a reasonable period of time. It might take more than one request, but eventually you'll receive a report with the credit inquiries removed or they'll ask for more information to help them in their investigation and decision.

4

Work on improving you credit score in other ways. Credit inquiries mean little in the formula that determines your credit score. Instead, establish credit accounts and loans that you pay on time every month (and pay off credit card balances in full each month, if possible.) Over time, the credit inquiries will fall off your report and your credit score will rise to its fullest potential.

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Credit Rating Score Range

Knowing your credit score allows you to understand what lenders see when looking at your credit application. But simply knowing the number is not helpful. You need to know what the number indicates by learning about the credit score ranges and the impact they have on your ability to get a loan or credit card.

Scoring Systems

The credit score lenders most commonly check is the FICO score. The FICO score ranges from 300 to 850, with 850 being ideal. Some reporting agencies use the VantageScore system. The three credit reporting bureaus developed VantageScore to help consumers understand their credit scores and keep the scores uniform. It uses letters similar to academic grades to rate your credit. The scores range from 501 to 990. Scores in the 500s are considered F scores, with scores in the 900s considered A scores. If you order your score directly from one of the credit bureaus, it may be the VantageScore, but your lender will most likely order your FICO score when considering your credit application.

Good Scores

In the VantageScore system, an A score is ideal, with a B also being a good score. A FICO score of 760 or higher is considered an excellent credit rating. Each lender will have its own idea of what qualifies for the best possible rates, but in general, keeping your score above 760 or in the A range puts you in a good credit position. A score of 700 to 759 is also good, but Bankrate.com indicates it may earn you slightly higher interest rates on a mortgage.

Poor Scores

Each lender will have its own idea of what level disqualifies an individual from getting a loan product, but a VantageScore of D or F can be problematic. Similarly, a FICO score below 600 makes getting a loan challenging. If you are able to qualify for a loan, expect interest rates to be high. The Consumer Federation of America indicates that a mortgage applicant with a score of 580 will pay 8.5 percent in a market where someone with a score above 700 pays 5.5 percent. This is a 3 percent increase, which adds up to $2,400 a year on a $100,000 mortgage. For credit cards, expect high interest rates and low spending limits.

Average Scores

According to Experian, the average FICO score for an American is 693. This falls just below the good range, but is not in the high-risk range. A FICO score just below 700 translates into fair rates on a mortgage, but rates that are slightly higher than those with higher credit. Most individuals with a score in this range can qualify for the loans and credit cards they need.

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Does Checking a FICO Score Affect My Credit Report?

Anyone who has been investigating getting a mortgage or refinancing an existing home is familiar with the FICO score. This three-digit score is what lenders use to determine whether an applicant is a good credit risk. A number of factors can influence exactly how high or how low a person's FICO score is, including inquiries into creditworthiness, as well as having too many credit accounts.

History

FICO scores were created by Fair Isaac Corp. and were designed for each of the three major credit reporting agencies --- Experian, TransUnion and Equifax. FICO scores got a lot of press when people started to apply for home mortgages during the housing bubble of the early 2000s, but they were in use as far back as the 1950s. They arsed by credit card companies, as well as store merchants, banks and insurance companies.

Factors

FICO scores are based on the amount of debt that an individual has accumulated, and if an applicant is trying to get another credit card, the FICO algorithm will lower the score. For example, if a credit card company has been examining a FICO score because the individual has applied for a credit card, that can drop the FICO score. The actual algorithms used to develop a FICO score are copyrighted and are not known by either the general public or even by financial professionals. On the other hand, if an individual checks her own FICO score, that will not affect the FICO score.

Features

The range of scores available from FICO is from 300 to 850. The lower the score, the more of a credit risk a candidate is considered. If a credit card company requests a copy of someone's credit report because of an application, the FICO score can get lowered. But, if a credit card company requests a copy of the credit report to send out "pre-approval" marketing material, the FICO score will not be lowered for that "soft pull" of the credit report, because the consumer is not seeking additional credit in that instance.

Misconceptions

When it comes to FICO scores, some misconceptions are prevalent. One of the most common misconceptions is that closing an account can help raise a FICO score. This is actually false. The FICO score is based upon the available credit in relation to credit being used. When an account is closed, less credit is available, which makes the ratio of credit used to credit available higher. For a higher FICO score, the best option is to keep all credit accounts open but with low balances.

Future

In 2010, a new FICO score was introduced --- the FICO 8. This particular scoring method is designed specifically for real estate. It is designed to analyze factors to better determine the mortgage repayment risks, according to the company.

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How to Establish Credit After a Bankruptcy

A bankruptcy remains on your credit report for up to 10 years, but that does not mean that you will not be able to borrow money at all for those 10 years. You can begin rebuilding your credit the day your bankruptcy goes through, and if you are diligent you will be able to use credit again shortly. Best of all, you don't have to pay a credit repair company or financial adviser to successfully reestablish your credit.

Instructions

1

Make a budget so you are sure to be able to make any remaining debt payments on time every month. Some debts are not discharged in bankruptcy, so if you still have student loans or even a mortgage, you need to keep paying it to avoid further damaging your credit score.

2

Get a free copy of each of your credit reports through the Annual Credit Report website about 40 days after you have filed for bankruptcy.

3

Look over each credit report and check that all of the accounts that were included in your bankruptcy are listed that way on your credit report. They should not be open and past due, but rather closed as part of a bankruptcy.

4

Dispute all errors you find on the credit reports by following the credit bureau's instructions for filing a dispute. Do not proceed until your credit report is accurate.

5

Apply for a secured credit card, which is a credit card that requires a deposit, usually of about $500. Look for a card with a low annual fee and low application fee.

6

Use your credit card regularly, but never allow the balance to exceed 30 percent of your credit limit. Because your limit is so low, you will probably only be able to charge about $100 per month.

7

Pay your secured credit card bill in full every month. This demonstrates financial responsibility and begins putting good information on your credit report.

8

Ask your bank or credit union about taking out an installment loan secured by a Certificate of Deposit (CD). Like with a secured credit card, the bank does not require perfect credit because it holds your deposit as collateral. If you get the loan, put the money in an account and use it to pay the bill on time every month.

9

Check your credit report again after a year has passed. If everything looks good, you could ask your credit card company to refund your deposit and convert your card to an unsecured one. You could also apply for another credit card to continue adding positive credit history.

10

Apply for a mortgage or car loan, if needed, at least two years after you have filed bankruptcy. Pay it for a couple of years and then refinance it for a lower rate after your credit score has improved further.

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Implications of Having Either a Positive or Negative Credit History

Credit history is a record of how and when debts are repaid. This history is factored to calculate credit scores and assess credit risk, and the implications of a positive or negative history can follow a person for seven years or more. Depending on the promptness and completeness of payment, payment history has an impact on future credit opportunities.

Credit Scores

A credit score is a numeric representation of one's credit history. Scores can range from excellent at 800 to poor at 400 and below. A credit score number is a moving target, and every recorded instance of credit history has an impact. Poor credit history can gradually reduce a credit score, especially when multiple accounts are negative for a long time period. Maintaining a good credit history keeps a higher credit score, and new instances of positive history will stabilize or improve the score.

Credit Worthiness

Credit history is reviewed before a lender will extend new credit to a consumer. A good credit history can result in lower interest rates and higher lines of credit because the risk of non-payment is minimal. People with past credit problems or no credit history are seen as a greater risk for lenders, and that risk is balanced with lower credit limits and higher interest rates. Credit is often refused to those with a very bad credit history.

Insurance Rates

Auto insurance companies use credit history and credit scores to gauge risk. Many insurers believe that, unlike a motor vehicle record, personal payment history is a more accurate predictor of a person's habits and responsibility level. According to the Property Casualty Insurers Association of America, people with low credit scores are more likely to file insurance claims.

Utility Companies

Utility companies often use credit history as a guideline for charging deposits. Although monthly utility bills are not reported to the credit reporting agencies, credit history is a good indicator of whether utility bills may become delinquent or remain unpaid, and the companies use this advance deposit to cover their potential losses. People with poor credit history usually need to pay higher deposits, while those with spotless credit may not require any deposit.

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How to Merge a Credit Report

Credit reporting agencies gather information on the way you have handled your previous financial accounts. Lenders use this information to evaluate you for possible loans. In some cases, a credit file may split causing your credit history to be split into two files. When a potential lender pulls your credit file, he will not have an accurate picture and will only see some of your past credit history. A split file can happen with a large file, following name changes, repeated credit inquiries and other situations. If you have a split file, it is important to have the credit files merged to ensure your credit history is complete and accurate.

Instructions

By Phone

1

Contact the credit reporting agency in which you have a split credit file. Look for the phone number on the credit report. Follow the prompts to file a credit dispute.

2

Explain to the representative that you discovered a split credit file and need to merge the credit files. Be prepared to verify your identity by giving your name, Social Security number, address, and possibly answer one or two questions regarding accounts in your credit file. The representative will ask you for the information on why your credit file is split.

3

Review the correspondence mailed to you following the credit reporting agency's investigation of your split credit file. You should receive the letter within 40 to 45 days of your credit dispute. If your credit file has not be successfully merged, repeat the process.

Mail a Letter

4

Write a letter to the credit reporting agency. Explain that you have discovered a split credit file and need the credit file merged. Give them your name, Social Security number, address, and date of birth. Include a copy of your driver's license or a utility bill in your name. These items are used to verify your identity. A credit reporting agency will not alter a credit report or initiate an investigation unless satisfied the person requesting the action is the same person on the credit report.

5

List the details as to why you believe your credit file is split. If you have supporting evidence, mail copies with your dispute letters. Mail the letter, certified return receipt, to the address listed on the credit report. Upon receipt the credit reporting agency will begin an investigation into the split credit file.

6

Review any documentation you receive as a result of the investigation. If the credit reporting agency did not merge the credit files, repeat the process and explain this is your second attempt to correct the split files.

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How to Repair a Credit History

If your credit history is in shambles, it can mean expensive car insurance premiums, high interest rates and increased difficulty when trying to obtain credit. Credit blemishes occur for a variety of reasons, including late payments, high debts and past bankruptcies. While some of these can stay on a credit report for many years, none is permanent. Bad credit can be repaired by taking a few basic steps.

Instructions

1

Obtain a copy of your credit report from each of the three major credit bureaus. The federal government entitles every U.S. citizen to one free copy of his or her credit report each calendar year. If it has been less than a year since you last viewed your credit report, you may have to buy a copy. However, if you have recently applied for credit and were denied, you are entitled to another copy of your credit report, regardless of the amount of time since you last viewed it.

2

Make a list of each item on your credit report that is incorrect. This could include the amount of time you have lived at your current or previous address, your current income or even false reports of account defaults and late payments.

3

File a dispute with any credit bureau that produces an inaccurate credit report. A dispute form will be included with each copy of your credit report. Be prepared to offer any supporting documents, receipts, check stubs or financial information to disprove the errors. The credit bureau is required by law to investigate each inaccuracy within 30 days.

4

Reduce your debts and maintain regular, on-time payments to your creditors. If monthly payment minimums and interest rates make on-time payments seem impossible, consider applying for a debt consolidation loan. Be sure to pay off any collections on your report, and stop making additional purchases on credit. Aim to pay off at least 50 percent of your debts as quickly as possible.

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What Happens to Your Credit When You Move to Another Country?

Your credit report and credit score determine whether a lender is willing to extend new credit to you. When you move to another country, you probably need to make many purchases right away, from buying a home and car to getting basic furniture and items for your home. Unfortunately, you might have a hard time establishing credit immediately after your move.

No Transfer

Your credit report is country-specific. The credit reporting laws and practices vary widely from one country to another and the credit bureaus that gather information are country-specific. Therefore, information that was on your credit report in the country where you lived does not automatically transfer to your new credit report in the country you move to. Instead, you get a blank credit report in your name at the bureaus that report credit in your new location.

Possible Consideration

Depending on where you move, creditors in your new country might be able and willing to consider your international credit report when extending credit. The credit bureaus in the United States also do business overseas, so if they have an office in the country where you move, the lender could at least access and consider your report as a supplemental reference when evaluating your application. However, lenders are not obligated to consider your credit report from your home country.

Establishing New Credit

Start small when you need to get credit after you move to a new country. Apply for just one credit card and use it regularly to start developing credit history. You also might be able to get an installment loan at a relatively high interest rate and refinance it later after you have established a positive credit history. In some countries where the cost of living is low, credit is not widely available, in which case you will need to get by in the beginning without opening any credit accounts.

Things to Consider

If your move is only temporary, you should make every effort to maintain your credit score in your home country while you are living abroad. Part of your credit score considers your average age of accounts, so your score will be much better if you keep at least some of your credit-related accounts open and active than if you close them all and open new ones when you return. One of the easiest ways to do this is to use your credit cards occasionally for online purchases.

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FICO Score Vs. Plus Score

FICO and PLUS scores are two standards credit bureaus use to measure your creditworthiness. Financial institutions, lenders and creditors provide information about your bill and debt payments, and the bureaus compile the information into a score.

Function

Your credit score is one of the most important factors lenders consider in deciding whether to extend you a loan or line of credit. Your credit score also is key in determining your interest rate.

Factors

Your FICO and PLUS scores are calculated from your payment history, length of credit, how much you have borrowed, how much credit you've applied for and what types of credit you have used.

Identification

The Fair Isaac Corp. developed the algorithm for the FICO score. PLUS--plan, live, understand, succeed--was developed as an alternative to FICO for the Experian credit bureau.

Significance

The FICO score is the more common of the two, as it is used by all three credit bureaus.

Range

Your PLUS score will be between 330 and 830, while your FICO score will range from 350 to 850. Lenders usually offer the best terms to people with FICO credit scores above 720. They rarely base lending decisions on the PLUS score.

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Books on Raising Your Credit Score

When you apply for a credit card, loan, housing and even utilities, you can expect to have your credit score reviewed. A low credit score can result in high interest rates or a denial of services. Because your credit score is based on the information reflected on your credit report, you can raise your credit score by altering that information. There are multiple books on the market that can help you understand how credit scoring works and how to repair your credit in order to raise your score.

"Your Credit Score, Your Money & What's at Stake"

Authored by Liz Pulliam Weston, a writer for MSN Money, "Your Credit Score, Your Money & What's at Stake," published in February 2009 by FT Press, will help you understand your credit score and why it is so important. She strips away the myths surrounding credit scores and credit repair to give the reader easy-to-understand instructions on how to remedy a low score. In addition, Weston includes a section on the Rapid Rescoring process, which can help readers boost their credit scores in as little as 72 hours.

"Dirty Little Secrets: What the Credit Bureaus Won't Tell You"

This book by Jason Rich outlines how your credit score is calculated and the methods used by the credit bureaus to verify consumer disputes. Published in July 2006 by Entrepreneur Press, "Dirty Little Secrets: What the Credit Bureaus Won't Tell You" advises readers of the best way to begin the credit repair process without falling into the trap of "frivolous" credit disputes that are not investigated by the credit bureaus.

"Credit Repair Kit for Dummies"

Steve Bucci's "Credit Repair Kit for Dummies," published in December 2005 by John Wiley & Sons, contains numerous plans for consumers to get out of debt, seek help from credit counselors, manage different types of debt and avoid bankruptcy. By using the strategies presented in the book to create a financial plan, individuals can learn how to better manage their debts and raise their credit scores.

"The Road to 850: Proven Strategies for Increasing Your Credit Score"

"The Road to 850: Proven Strategies for Increasing Your Credit Score" by Al Bingham is a comprehensive analysis of the credit industry and the scoring system that determines your risk level to lenders. Published in March 2007 by CP Publishing, the book was endorsed in 2009 by the American Financial Counseling, Planning and Education Association. The strategies outlined in this book are perfectly legal ways for the average consumer to boost his credit score within a short time frame by understanding how credit is scored and manipulating his debts to get the highest possible score from the credit bureaus. The book also provides warnings about the small things that can damage your credit score and how to avoid them.

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How Does a Credit Score Impact Your Ability to Get Credit?

Credit scores help lenders assess the risk of lending money to loan applicants. Many different scoring systems exist, but they all use the borrower's credit history to predict the likelihood of repayment, based on the past behavior of borrowers with similar profiles. Credit scores are one of the most important factors when a lender makes a decision to reject or approve an applicant, and they also affect the rates and terms that lenders will offer.

Importance

Most lenders look carefully at your credit report when you apply for a loan or line of credit. Your credit score reflects the amount of risk you pose to the lender. Low scores indicate a high risk of default, and high scores indicate a good chance of repayment. If you don't have a good credit score, you will usually have a hard time getting credit. If you do get a loan, it's likely to have a higher than average interest rate. If your score is very low, you may not be able to get credit at all. Before the 1970s, standardized credit scores essentially didn't exist, and lenders had to rely on personal judgment when assessing credit risks. Today, credit scores reflect detailed statistical data from borrowers with a similar financial background, and are accordingly far more consistent.

Other Factors

Although credit scores are an important part of the equation when lenders appraise credit applications, they are usually secondary to an analysis of the applicant's overall financial situation. Initially, lenders use credit scores to weed out applicants are who are statistically likely to miss payments or default. After weeding out such customers, lenders conduct a more thorough investigation of the applicant's financial status and risk factors. This is known as "underwriting," and includes setting an interest rate based on the applicant's income, employment history, credit score and other factors.

Favorable Scores

Most lenders have a cutoff score for high-risk applicants, as well as a minimum eligibility score for the best interest rate. Different agencies generate different credit scores, but according to the widely used FICO scoring system, which ranges from 300 to 850, any score above 700 is likely to qualify for a prime-rate loan. In the wake of the 2008 financial crisis, favorable credit scores have become more important than ever. Lenders tend to be much less willing to approve borrowers who have low scores, or no credit history at all.

Tips

The factors that comprise your credit score include payment history (35 percent), debt obligations (30 percent), length of credit history (15 percent), new credit accounts and type of credit (10 percent each). Improving each of these areas will help you get the best credit score. Make at least a minimum payment on your debts each month; if you have extra income, shift it to the debt with the highest interest rate to boost your payment history and reduce the amount you owe. Responsible use of various kinds of credit (e.g., a credit card, a retail card and a mortgage loan) generally helps your score. It's a good idea to have at least one credit card, but only charge a small amount to it and pay the bill in full each month. You should also try to limit applications for credit, because new accounts tend to lower your score and reduce the average length of your credit history.

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How to Build Your Credit for Free

If you have ever had a bank account, credit card or loan, you also have a credit report. Credit reports are issued by three major credit bureaus and help lenders, insurers, utilities and employers determine your eligibility for their services. The scores are based on a number of factors which are weighted differently in each bureau's scoring methodology. Building your credit doesn't have to cost you anything, provided you pay off your balances on time.

Instructions

Instructions

1

Open checking and savings accounts. If you don't have bank accounts, open them. Bank accounts show potential lenders a sense of stability and financial responsibility. Bank accounts are also one of the only ways a minor can start building credit.

2

Pay your bills on time. One missed or late payment can stay on your credit report for up to seven years, so take whatever precautions are necessary so that you are never delinquent. Many banks offer free on-line bill pay which can be set up to send payments automatically to each of your payees by each payment's due date. If you have the financial stability to do so and an account at a bank that offers this service, set up bill pay to ensure your payments are always sent on time.

3

Pay off balances in full each month. While having a credit card is an important factor in building credit, you don't have to carry a balance for it to count toward your credit score. Paying off your cards each month will help you stay ahead of the common credit pitfalls and help you avoid paying interest. If you must carry a balance due to financial strain, carry no more than 30 percent of your total available credit in balances each month, although less is better.

4

Sign up for one or two store credit cards as they are easy ways to help you build credit. Store cards have more relaxed lending standards than major credit cards and can help you improve your credit by making smart purchases and timely payments every month.

5

Request a copy of your credit report. You are entitled to one free credit report each year from each of the three credit bureaus. Space these out and order one every four months each year. Review these reports carefully for any mistakes. You can dispute mistakes with each bureau and have them removed from your record. One mistake could cost you plenty of money in the form of higher interest rates on loans and credit cards, so carefully review your three credit reports.

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Credit Repair Systems

In today's world, your credit score is more important than ever. Keeping a clean credit profile can make a huge difference in your life; as such, there is now a plethora of resources available to help you repair your credit and keep it clean for the future. However, not all of these methods are created equal.

Importance of Credit

The importance of your credit score goes way beyond the peace of mind of having good credit. A good credit score can unlock the path to a totally different life. With a blemish-free credit history, you can enjoy the best interest rates and most lucrative credit offers. With poor credit, you'll pay much more for any financed item. Furthermore, you run the risk of not being able to land a new job or an apartment because your credit history may indicate that you're unreliable and irresponsible.

Doing It Yourself

If your credit history is less than perfect, you may be able to help yourself. The first thing you should do is order your credit report from annualcreditreport.com (see Resources), which provides one free credit report per year from each of the three major bureaus. Once you have your report, circle any inaccuracies you find and submit a copy of the report, with supporting documentation to prove your case, to the credit bureau. The bureau will investigate the issue; if it agrees with you, the item will be removed from your credit file and your score should improve as a result.

Credit Repair Companies

Repairing your own credit is far from impossible, but many people lack the time and expertise necessary to do a thorough job. Credit repair companies do the same things you'd do on your own, but you'll benefit from their experience in handling disputes with the credit bureaus. With a better knowledge of the credit laws and what gets the credit card companies to act, you may have a better chance of success if you go with a credit repair company. You can then use the time saved to develop a plan to help avoid credit troubles in the future.

Credit Monitoring Services

Though credit monitoring services are synonymous with bait-and-switch trial offers, they can actually help you to repair your credit. Real-time notifications of suspicious activity on your credit accounts can help you thwart problems before they destroy your credit, and unlimited access to your credit report enables you to track your score over time. Bureau-sponsored credit monitoring programs also allow you to dispute negative items online; if you're not a member, you can still dispute items, but you'll need a current credit report to do so from the bureau in question to do so.

Reasonable Expectations

It can be very tempting to dispute every negative mark on your credit report or sign up with a credit repair service with the hope that your entire record will be wiped clean. However, this is not possible. Repairing your credit will only remove inaccurate information from your credit file. If your credit is damaged for legitimate reasons, that negative information cannot be removed. Your only recourse is to manage your credit responsibly going forward and build a solid credit history, which will diminish the impact of your previous missteps.

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What Is a Credit Reference Agency?

A credit reference agency, also known as a credit reporting agency serves a variety of functions. These agencies collect credit history data from creditors about individual consumers. The three main credit reporting agencies are TransUnion, Equifax, and Experian. Information on your credit file can remain in place for a number of years and can vary with the type of credit information reported.

Establishing Credit

Your credit file is established as soon as you apply for credit with a creditor and they key in information to retrieve your credit file from a credit reporting agency. You fill out a credit application that includes your name, address, date of birth, Social Security number, place of employment and personal references. As soon as the creditor keys in your personal information a credit file is established and that creditor's inquiry becomes a part of your credit file. An inquiry is a code assigned to each creditor to show that they have inquired about your credit report. When you are approved for credit, your credit history starts when you begin to repay your debt.

FICO Score

Once you have established a credit file or credit report, you receive a FICO score or credit score. Lenders will contact one of the three major credit reporting agencies to receive your credit report before they make a decision to lend you money. They will look at your FICO score, which ranges from 300 to 850, when they are trying to determine your eligibility for credit. The higher your score, the better chance you have of receiving a lower rate of interest on a particular credit product.

Significance

There are five factors which influence your FICO score: your pay history, amount of debt, type of accounts, length of your credit file and new accounts. Approximately 35 percent of your credit score is determined by how you pay your debts and 35 percent is the largest percent allocated to any category.

Trade Lines

When you are approved for credit with an individual creditor, it will report your credit history to the credit reporting agencies. It may report to one, two or even all three agencies but it depends on the creditor. The information is reported in the form of trade lines. A trade line includes all of the information about a particular creditor, including the name of the creditor, balance, credit limit, date last paid and how many times you are late. The trade line will also include the type of account, such as secured or unsecured.

Time Frame

Any type of derogatory information such as bankruptcy, foreclosure, judgments, liens and collection accounts are also reported to a credit reporting agency. This information can remain on your credit file for seven to 10 years. After seven or 10 years has passed, this information should drop from your credit file.

Free Report

If you want a free copy of your credit report, go to http://www.annualcreditreport.com. A free copy is available once a year from all three credit reporting agencies.

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How Much Will My Credit Drop if I Close Accounts After Paying Them Off?

There's no telling for sure how much your credit will drop if you close accounts that you have paid off. Every person's credit score is determined by a number of variables including payment history, length of credit history, amounts owed, new credit and types of credit. Closing an account may affect one or more of these variables negatively and cause your credit score to go down, but it may also be in your best interest to close accounts if the fees are too high or if you won't be shopping for a loan soon.

Payment History

You may be hesitant to close an account because you fear losing your payment history; however, even after you pay off a credit card and close the account, your payment history may still be available on your file for at least 10 years. Whether open or closed, an account will be a factor in determining your credit score as long as it remains on your credit report.

Amounts Owed

The second biggest hike to your credit score comes from paying down account balances. Approximately 30 percent of your credit score is calculated based on the amount you owe on your credit cards and the total amount of credit you have available. If you have just paid off some credit cards, you will have decreased the ratio of amounts owed to available credit, and thus increased your credit score. Closing accounts with no balances will most likely negatively affect your credit score.

Length of Credit History

Your length of credit history accounts for approximately 15 percent of your credit score. If you close accounts that you have had for a long time your score may go down. Your score is also likely to go down if you opened a lot of new accounts recently but decide to close some of your older accounts.

Type of Credit

A portion of your credit score comes from your having different types of credit, and if you eliminate one form of credit from the mix your score may go down. If you have a choice between closing a bank or department store card, choose the department store card. Your credit score will suffer less if you close a department store card than if you close a bank card unless your department store card has the longest history and you only acquired your other cards recently.

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Can a Creditor Report to Credit Bureaus More Than Once a Month?

While people sometimes believe credit reporting agencies wield the power in the credit scoring industry, the agencies are dependent on creditors to provide information about their accounts. Lenders can send new data to the bureaus at their leisure, although most of them send in batches of information at regular intervals.

Identification

Theoretically, a lender can report to the credit bureaus as many times as he wants during the month. In reality, this is not practical or useful, because the lender is unlikely to have new information to report. Most creditors give a borrower 30 days to pay his monthly installment or bill, so they tend to report to the creditor bureaus every month or so.

Considerations

Even if your lender does update accounts multiple times a month, this does not mean your credit report will reflect that new data as the month goes on. The credit bureaus try to keep their files as current as possible, but technical limitations usually result in accounts being updated every 90 days -- 30 days at the soonest -- according to the Bills website.

Forcing an Update

The only way to get an account updated and listed on your report in the same month is to use a rapid re-scoring service. This service, however, only works when you have a false negative item you need corrected. Also, only lenders, such as mortgage providers and banks, can access a re-scoring service. This costs between $25 and $50 per item, but can save you hundreds if you need to apply for a loan soon.

Tip

If you have new information to report, you can ask your lender to update your account with the credit bureaus, suggests the Bankrate website. Some lenders may simply forget to contact the credit bureaus. Alternatively, you can present receipts of payment to new lenders if the data does not show up on your report. The lender must consider receipts and canceled checks under Section 202.6 (b)(6) of the Equal Credit Opportunity Act.

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Credit Score Explanations

A credit score is based on a statistical profile that determines, in theory, how likely you, as a borrower, are to default on a loan. The higher the score, the less risk that you pose to the lender. Credit scoring was first developed by the Fair Isaac Corp., who created the proprietary formula used to calculate the risk-based credit score.

Reasons for a Credit Score

Credit scores are useful to a lender because the score provides a standard by which it can quickly evaluate a borrower. Credit scores only consider information in your credit report, and do not take into account other information that is not relevant to your creditworthiness. One type of credit score is called the FICO score, named after the creator of the scoring model. Former E-loan president Joe Kennedy said, "The FICO score is the single best summary score of one's creditworthiness."

Credit Score Factors

Your credit score is designed to take into account all of your credit report information, but it gives more weight to some information when calculating the score. Past payment history is one of the most important factors in the score, with how you use credit being close behind. If you carry balances on your cards that are more than 30 percent of your available credit, your score will suffer because that is considered poor use. The age of your credit file and how often you apply for new credit, as well as the types of credit you carry are also considered in your score.

What Is a Good Score?

Each individual lender will have different ideas about what is an acceptable credit score based on their own underwriting requirements and the interest rates on the loan, with higher-risk customers paying a higher interest rate. Generally speaking, a score of 750 to the maximum 850 is considered to be a prime score, and should qualify you for the best interest rates. Scores below 660 are considered subprime, and generally do not qualify for the best loan rates and terms. Score requirements may also vary depending on the type of credit that you are applying for.

Benefits in Knowing Your Score

In the past, the FICO score was kept secret from consumers, much like the formula used to calculate the score still is not published. In the early 2000s, companies began to release credit scores to people, even allowing them to purchase subscriptions that monitored their credit score for changes. When you are aware of your score, and the information that determines it, you can make financial decisions that will improve your score over time.

Credit Score Problems

Your credit score does not take into account many factors that contribute to your overall financial health. Net worth is an important indicator of how well you are doing financially, but is not a factor in the FICO score. Income, as well as debt to income ratio are also not considered. Many consumers are overly concerned with their FICO score as a measure of their financial success, and make financial decisions based solely on that score, rather than taking into account other factors that may be more important.

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Define Credit Rating

A credit rating, or score, is what lenders examine to determine creditworthiness. The score largely determines whether a creditor will extend credit or lend a person money. Credit scores influence interest rates and overall terms of credit and loans. Some employers check credit scores of prospective employees. Landlords frequently run credit checks on possible tenants.

Reporting Agencies

A credit score is sometimes known as a FICO score. FICO is an acronym for the Fair Isaac Credit Organization, a pioneer in the credit-reporting field dating to the 1950s. FICO is the most-used model in computing credit scores. Three credit-reporting agencies gather data about credit practices: Equifax, Experian and TransUnion. Credit score calculations are not an exact science, which accounts for discrepancies in the agencies tabulations.

Credit Utilization

Factors such as the ratio of available credit versus the amount of credit expended help determine a credit score. This key ratio comprises about one-third of the score.

Magnitude and History

The extent and duration of available lines of credit, along with their specific nature--credit cards, mortgage, auto loan, for example--account for another one-third of a credit score. A lengthy track record of prudently managing credit increases a credit score.

Payment Record

The final one-third of the credit score calculation considers payment delinquencies: late and missed payments. Other matters that affect scores include numbers of credit checks, which often indicate applications for more credit, and frequent changes of address.

FICO Range

FICO scores range from 300 to 900. The higher the score, the more likely a person will get favorable credit terms. A credit rating of 650 or better is considered good. Credit scores below 500 are deemed very high risk for lenders. If a FICO score is in this lower stratum, a person may still qualify for certain forms of credit, such as a credit card, but the terms and interest rates will reflect the higher risk.

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Can an Annual Credit Report Be Disputed?

A credit report provides a snapshot of your life -- where you live, how you spend your money and how you pay your bills. The challenge for you is that everyone, from landlords to potential employers, may access your credit report for a peek at your life. There's no need to panic if your find mistakes and misrepresentations on your report. There is a process in place to help you dispute those errors.

Federal Fair Credit Reporting Act

The Federal Fair Credit Reporting Act was designed to protect you from inaccurate information on your credit report. Because of this act, independent credit reporting companies have no right to retain that information once they've been informed. An amendment to the act says each of the three nationwide consumer credit reporting agencies --- Equifax, Experian and TransUnion --- must provide you with a free copy of your credit report, at your request, every 12 months.

Examine Your Report

Examine your credit report from the three major credit bureaus carefully. Circle any information that is inaccurate, such as credit that never belonged to you. Also circle incomplete information. This may include a creditor that failed to report a debt as paid in full. Even if there is information included on your credit report that you're simply not sure of, demand the credit bureau verifies it. If it is unable to, it must delete it from your report.

Inaccurate Information

You may find that the information on each credit report is different and that there are different mistakes on each report. You should write a letter to any agency with an inaccurate report. Send the letter by certified mail with a return receipt requested. The receipt will be returned to you, giving you proof of when the agency received your letter. Make a copy of the credit report and letter for your records.

Letter

Your letter should include the date, your name and address. Send it to the complaint department of the credit bureau. State your case simply. Tell them that you are writing to dispute information. List which pieces of information you are disputing and why you disagree with each item. Enclose copies of any supporting documents, such as court documents and cancelled checks. Ask them to look into the matter and to either correct or delete each item as soon as possible.

Investigation

The credit reporting agency must verify the accuracy of each disputed item within 30 days and provide you a written notice of its findings within five days after the completion of its investigation. If credit agencies do not remove inaccurate information, you may need to consult with an attorney.

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Does Having Your Name on a Mortgage Deed Affect Your Credit?

Owning a home has no affect on your credit. Financing a home, however, does have a significant impact on your credit. Just because your name is on the deed to the home does not mean the credit bureaus will even know about it, because they do not check public records for home ownership. It is possible to have your name on the deed of a home with a mortgage and not be on the mortgage note.

Deed vs. Note

A deed is simply a document filed with the county, which tells the county who owns the property. When the county assesses the property taxes, they will send the property tax bill to the people listed on the deed. When the owners or the purchasers of a home obtain a mortgage, the mortgage company requires the homeowners to sign a promissory note. Mortgage companies often record these notes with the county so that they may foreclose on the home if the homeowners stop making the required mortgage payments.

Credit Reports

Credit reports do not actively look for information other than from public records showing liens, judgments, bankruptcy and foreclosure. Creditors, including mortgage companies, contact the three different credit bureaus and report the payment history of their loans. Creditors are not required to contact the credit bureaus. It may choose to contact only one, two or all three of the credit bureaus. The credit reporting agencies then compile this information onto a single document called a credit report.

Credit Bureaus

The three major credit bureaus are Experian, Equifax and Transunion. These three credit bureaus provide the majority of credit information in the United States. These credit reports may be accessed by several different companies, and not always just because you apply for a loan. Some companies pull credit reports on potential employees and even some insurance companies use credit information when determining insurance premium rates. The credit bureaus charge companies who want to access the person's credit report.

Credit Laws

There are laws that protect consumers from wrongfully reported credit items. These laws allow every person in the United States to obtain a free copy of their credit report each year. Annualcreditreport.com is the government-mandated web site where you may request a free copy of your credit reports online. If you find their items that are miss reported, Federal law provides you may request in writing removal of the wrong information. The credit bureaus that have 30-days to prove the information is accurate or remove it from your credit report.

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How to Get the Credit Bureau to Delete Information

Credit reporting bureaus make it their business to sell your credit history to companies you do business with. Sometimes the information the bureaus report is outdated or incorrect. If you have discovered that there is incorrect information on your credit report, the Fair Credit Reporting Act states that you have a right to dispute this information and have it removed.

Instructions

1

Visit annualcreditreport.com to request a free copy of your credit report from each of the three major reporting bureaus: Experian, TransUnion and Equifax.

2

Review your reports for outdated or incorrect information. Circle those items, and make several copies of the incorrect reports.

3

Write a letter of dispute to each bureau reporting the disputed information, explaining what items you are challenging and why. The letter also should state the outcome you would like see take place. For example, do you want the information completely removed from your report, or does the information just need to be corrected? You also have the option of submitting your dispute online via the bureau's online dispute form, or you may telephone the bureau directly: Equifax (800)685-1111, Experian (888)397-3742, TransUnion (800)888-4213.

4

Attach a copy of your credit report to each letter of dispute. This should not be your original report, which should be kept for your own records.

5

Attach copies of documents that support your dispute. For example, you can send copies of receipts or court documents showing payments that have been made to the account in question.

6

Give the credit reporting bureau 30 days to investigate the items you are disputing. The bureau will contact the creditor that reported the information to verify whether your dispute is legitimate. If the bureau has not completed its investigation within 30 days, by law, it is obligated to delete the information from your report. If your dispute is determined to be invalid, you can request that the bureau place a copy of your dispute on your credit report so that those requesting your report will see that you have disputed the matter.

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