How Does Third Party Intervention Impact Your Credit Score?

3.2 million people called the National Foundation for Credit Counseling for debt management help in 2010. Third-party intervention for debtors usually results in the customer improving his credit score, but some people can see a drop in their scores just by using such services. Ultimately, third-party intervention can do little to help a credit score or a debt situation if the debtor does not make enough money or has an unsustainable budget.

Identification

Third-party intervention for debt management often means a credit counseling service. This type of organization charges a monthly fee, sometimes up to $140, to negotiate lower interest rates and monthly payments on behalf of the debtor. This will not affect your credit score, according to the BCS Alliance.

History

In 1989, when credit scoring become commonplace in the lending industry, having credit counseling service on your report would lower your score. By 1998, the FICO formula dropped the negative impact of credit counseling on scores because more people in counseling entered before debt spiraled out of control.

Potential for Damage

Instead of the debt management company, it is the creditors who could damage your score while in counseling, according to Kiplinger. A lender may report an account as not "paid as agreed" if your management plan constitutes of reduced payments or interest that brings the monthly installments lower than those called for in the original schedule. The severity of the damage depends on how good your score was before counseling

Debt Settlement

An alternative to credit counseling is a professional debt negotiator, called a debt settlement company. A debt settlement company works with a debtor and could settle an account for as little as 20 cents on the dollar. This almost always results in a negative item on your credit report that notes the account was settled for less than the original balance.

Warning

The Better Business Bureau highly recommends consumers avoid credit repair services that guarantee to repair credit or want an advance fee. No company can raise a score with 100 percent certainty, and any knowledge they have is widely available for free.

Tip

You can probably draft your own debt management plan without the help of a counseling agency. Start by eliminating frivolous spending and focus on the debt with the highest interest and work your way down. You can refinance your own debt, shifting a balance with a high interest rate to an account with a smaller one. You can call your lender's customer service line yourself and ask for a interest rate reduction or a restructured payment plan.

Read More

What Affects Your Credit Score Negatively?

Your credit score weighs information from your credit report from five main categories. There are a few actions in each category that will negatively affect your credit score. If you are planning to apply for new credit soon, keep your score high by avoiding these actions.

Payment History

Because your payment history makes up 35 percent of your credit score, actions in this category have the most potential to negatively affect your credit score. The worst one is declaring bankruptcy, which can suddenly drop your score by more than 200 points. Settling debts for less than you owe, as occurs in foreclosure or settling a credit card debt, also damages your credit score. Lastly, each late payment and collections account on your credit report negatively affects your credit score.

Amount of Debt

About 30 percent of your credit score is based on the amount you owe on each of the accounts on your credit report. If you borrow more money, the amount you owe will increase and your credit score will decrease. One special area to pay attention to is your revolving credit utilization. Your credit score drops as you use a higher percentage of each credit line. Maxing out one credit card can drop your score by up to 45 points, according to Fair Isaac Corp.

Length of History

Having a short credit history negatively affects your credit score. This is because 15 percent of your score considers how long you have been managing credit. If you have a longer credit history, you have likely developed more skills with managing money and paying bills than someone with a short credit history. Therefore, if you have just begun using credit, this affects your score negatively. In addition, if an old credit account drops off your credit report, this also might hurt your score a little bit.

Types of Credit

About 10 percent of your credit score considers the variety of types of credit you manage. The two major types are installment loans, which involve borrowing money all at once and paying it back with equal monthly payments, and credit lines, which allow you to continually borrow and pay back varying sums of money. If you lack one of these two major types of credit on your report, this will negatively affect your score. In addition, if you have too many accounts of a specific type, such as store credit cards, this could also hurt your score.

Recent Credit

Applying for and opening credit accounts hurts your credit score for a short time. About 10 percent of your score considers your new accounts, in particular, how many you have compared to old accounts and how recently the new accounts were opened. Therefore, each time you open a new account, it will hurt your credit score a little bit. In addition, each time you submit a credit application that triggers a credit check, that will hurt your score as well. This is because people who apply for lots of credit tend to be in financial trouble and are more likely to default on payments.

Read More

Can I Request That Negative Information Be Removed From My Credit Report?

Negative information on your credit report can hinder your chances of securing financing on large purchases and qualifying for loans, or make it harder for you to rent an apartment. While legitimate negative information will stay on your credit report for several years, depending on the default type, you can ask credit bureaus to remove erroneous negative information from your report.

Reporting Credit Bureaus

Even though you can order a credit report from one source, information provided by three separate credit bureaus make up this report: TransUnion, Experian and Equifax. If you find an error on the credit report that causes you to have a negative score, or you are a victim of identity theft, contact the credit bureau that shows the error, not all three bureaus. Errors that affect your credit report negatively can include claims that you went over a spending limit on a credit card, debt payment defaults, late payments and lines of credit that you did not open that resulted from identity theft.

Contacting Credit Bureaus

If you find negative information on a credit report that you want to dispute, you can file a claim through the respective credit bureau's website by filling out an online dispute form. The Federal Trade Commission recommends on its website that you write a letter to the respective credit bureau to make it aware of the negative information that you found and want to dispute. However, before you contact a credit bureau, the FTC recommends you make a list of all the negative information you wish to dispute, starting with the oldest error. According to the FTC, it can take up to a month for a credit bureau to begin an investigation regarding a dispute.

Written Requests

When you write a letter to a credit bureau, let the bureau know that you found false negative information on your credit report. Explain that you want the negative information removed and that you want to file a dispute. In the letter, list the accounts that have the negative information, the dates of the errors and a description of each error found. It is a good idea to enclose documents that support your claims and let the bureau know about the included paperwork when you write the letter, along with a copy of your credit report. In addition to mentioning the documents in the body of the letter, write "Enclosures:" a few spaces below your signature, followed by a list of the documents you provided.

Support Documents

Including support documents with your written request helps prove that you have just cause to file a claim. Documents that can help support your claim include bills, canceled checks, bank statements, and in the case of identity theft, police reports. Do not send the original versions of your support documents. Instead, provide the credit bureau with a copy of your credit reports and supporting documents. On the copy of your credit report, use a highlighter to indicate the negative information you want removed. Then, use a highlighter to mark the areas on your support documents that prove that a negative credit event did not occur.

Read More

What Is a Fair Credit Rating?

According to the Federal Trade Commission, the Fair Credit Reporting Act (FCRA) "promotes the accuracy, fairness and privacy of information in the files of the nation's credit reporting companies." While the importance of maintaining a satisfactory credit rating is clear, it is also law that the reporting agencies report your information fairly and without bias to their customers. The FTC holds reporting agencies accountable for this task through FCRA.

Function

A credit rating is an evaluation of an entity's ability to fulfill its financial commitments based on its previous dealings such as billing, payment and debt history. The entity can be you, an organization or even a country. Credit ratings show credit worthiness for purposes of loans, mortgages, employment and even eligibility for government licenses. Credit ratings must be fair and accurate representations and should conform to the rules laid down by the Fair Credit Reporting Act.

Types

A credit reporting agency, or credit bureau, issues your credit rating via a credit report. There are two types of credit reports: a consumer credit report and an investigative report. A consumer report contains information regarding financial activities such as bank accounts, existing and loans, mortgages and credit usage. An investigative credit report contains information based on personal interviews and includes information such as criminal history, life style and reputation. Credit agencies are careful to verify the accuracy of the information they provide, but you must also verify the information in your file to protect yourself.

Rights

The Fair Credit Reporting Act lays down certain rules to ensure the presentation of accurate information and the right to privacy. For example, you have the right to a full disclosure of your credit report and credit score. You also have the right to dispute, remove or correct any incomplete, unverified or inaccurate information. You are further entitled to know when entities deny your applications based on information in your credit report.

Considerations

Always arm yourself with knowledge of FCRA when applying for and using credit, and even when applying for employment or buying insurance. If creditor denies your credit application, for example, under the Equal Credit Opportunity Act, the creditor must give a valid reason for denying your application. If the credit reporting agency violates FCRA rules and treats you unfairly because of this violation, you may sue the credit reporting agency for violations of the FCRA; you may receive compensation for damages and your attorney's fees if you win. Report all violations to the Federal Trade Commission.

Warning

The Fair Credit Reporting Act allows credit reporting agencies to display negative information, including lawsuits, on your consumer credit report. Agencies can display such information for as long as seven years. Credit agencies can report information regarding bankruptcies for up to ten years and can display criminal convictions indefinitely. Entities with a "legitimate business need" as defined by the FCRA can gain access to your credit file. Legitimate business need includes extension of credit, employment or even issuing bank accounts and extending home utility services.

Read More

Inaccurate Information on My Credit Bureau Report

Credit bureaus compile credit reports on individuals. These reports help banks and financial organizations determine the credit risk of a borrower. According to the Federal Trade Commission, your credit report determines whether or not you qualify for a loan and the interest rate on a loan. Sometimes, companies report inaccurate information to a credit bureau. Individuals have a right to fix these discrepancies under the Fair Credit Reporting Act.

Warning

Sometimes creditors make errors or identify thieves gain access to your personal information. Some people do not realize inaccurate information is on their credit report until they are denied employment or a loan. Under federal law, Americans have a right to receive a credit report within 60 days of receiving a job or loan rejection based upon their credit history. The business must provide the name, phone number and address of the credit reporting company.

Considerations

Under federal law, individuals have a right to a free credit report on an annual basis from each of the three major credit bureaus: Experian, TransUnion and Equifax. Consumers may order these free reports online in order to investigate any discrepancies in their credit history. People in Colorado, Georgia, Maine, Maryland, New Jersey and Vermont have unlimited access to credit reports with no fees.

Dispute

After finding errors in a credit report, you should write a letter to the credit bureau detailing why the information on the report is inaccurate. Include copies of documents that prove your claim. You should send the letter "return receipt request," to have proof that the letter arrived at the bureau. Credit bureaus may not charge a fee in order to resolve inaccurate information in a report.

Time Frame

According to the FTC, credit reporting companies must respond to any consumer requests within 30 days, except in the instance of frivolous claims. Resolving inaccurate information in a credit report may take some time, especially if you have to send letters back and forth with the bureau to prove your case. Credit reporting agencies will automatically remove any information from a credit report after seven years.

Resolution

If a single credit reporting company fixes an error in your credit report, it must send notices of the correction to the other credit bureaus at your request. If the reporting company decides to not correct the information, you can choose to have a note about the dispute added your credit file.

Read More

Does Applying for a Personal Loan Affect Your Credit Score?

Sometimes, life throws us curveballs and we need cash to take care of them. Whether it's an unexpected car repair, a tuition bill or some other emergency, a personal loan can give you the financial boost you need to meet your needs. Like any other type of loan, a personal loan has to be repaid and opening the account does affect your credit.

Credit Score Calculation

A credit score, also known as your FICO score, is a snapshot of the information in your credit report. Credit bureaus calculate the score based on the amount of money you owe, your payment history, the length of your credit history, how much new credit your have and the types of credit you have. Each category is weighted -- your payment history and the amount you owe influence your score more than the number of new accounts you have. Your score changes over time based on how you use credit.

Applying for a Loan

When you apply for a personal loan, the lender will most likely check your credit by reviewing a credit report from one of the three major credit bureaus. The credit bureau then adds that credit check to the report as an inquiry, which generally lowers your credit score by a few points. A credit inquiry only reduces the overall score by a few points for most people, according to the MyFICO website, run by the agency that calculates credit scores. However, if you already have a poor credit score, a short credit history or only a few accounts, the overall effect on your credit score will be greater.

Taking a Loan

While applying for a personal loan has a small effect on your credit score, if you accept the loan, the amount you borrow and your payment history on the account will have a greater impact on the overall score. Taking out a personal loan increases the amount of money you owe and changes your overall debt-to-income ratio. The greater that ratio, the lower your score and the less likely you are to get new credit. Repaying the loan on time and according to the terms of the lender prevents you from losing more points on your credit score and in time will help you add points due to your excellent payment history.

Multiple Inquiries

When it comes to your credit score, applying for a personal loan is different than applying for mortgages, auto loans or student loans. Many people apply for home, auto or school loans from multiple companies so they can compare loan rates. This practice of rate shopping does not generally affect your credit score, as FICO treats multiple inquiries of the same type that occur within 30 days as one inquiry. This does not apply to personal loans, though. If you are comparing personal loan interest rates and terms, get the information before you apply for the loan instead of applying for multiple loans. You'll lose points on your score with each application and inquiry.

Read More

How Can I Get My Experian FICO Score Online?

Your credit score plays a significant role any time you want to apply for new credit such as a credit card, car loan, personal loan or mortgage. The better your credit score, the more likely a lender is to approve your loan and give you favorable terms, such as a low interest rate. Before you apply for a major loan, such as a mortgage, you should check your credit report and score. Experian is one of three major credit bureaus in the United States that lenders check.

Instructions

1

Go to the Experian website to purchase your score.

2

Enter your name, email and current address. If you have moved within the last six months, you will be required to submit your prior address to verify your identity. When finished, click "Submit and Continue."

3

Create a username and password so you can log on to view your credit score. You must also enter your phone number and Social Security number. Finally, you must enter your credit card information so Experian can bill you when you submit your order. Once you submit your order, you will be able to view your score and report online.

Read More

How to Challenge a Credit Report

You don't have any direct input on what goes into your credit report. The information is based on your financial choices and actions. The credit bureaus do not double-check it for accuracy, and up to 25 percent of reports have harmful errors, warns Bob Tedeschi of the "New York Times." The Federal Trade Commission notes that the Fair Credit Reporting Act gives you a chance to find and challenge inaccuracies through a dispute process.

Instructions

1

Order credit reports from Equifax, Experian and TransUnion through the online form or phone number on annualcreditreport.com. The FCRA forces the three bureaus to give you a free report annually if you get it through that official site.

2

Read through each individual report and note anything that needs to be challenged. Each report may each contain different information because the credit bureaus collect and compile their data independently. One may have a mistake even though the others report the same account information correctly.

3

Collect and copy any documents that back up your challenge for each mistake. You don't have to include proof with your dispute as long as you have valid grounds, but it strengthens your challenge. Appropriate documents include bank statements, credit card statements, loan documents and receipts.

4

Write out your challenges in a letter to each bureau. Enumerate every mistake and explain the correct information. Make a copy of your reports and attach them to the appropriate letters. Highlight and number each questionable item and cross reference them in your letters so the bureaus can easily understand your challenges. Ask the bureaus to complete their investigations, remove or fix challenged items and give you the results within 30 days. You are entitled to this by the FCRA.

5

Send your letters and documentation through certified mail, the FTC advises, and note the date each bureau receives its correspondence. Use the current mailing address on the TransUnion, Experian and Equifax websites. Write a reminder on your calendar to follow up with each one in 30 days if you do not get a response.

6

Compare current copies of your credit reports with each bureau's investigation results. They must give you new reports free when you make a challenge. Make sure the mistakes have been corrected or erased.

Read More

Credit Rating Procedures & Guidelines

Companies and organizations that are members of credit reporting agencies submit consumer information every month regarding the credit accounts that their customers have established. They also submit public record items such as tax liens, judgments and bankruptcies.

Membership

To submit information to a credit reporting agency, you must be a member. Companies that want to join must fill out an application and pay the fees associated with membership.

Trade Lines

The information submitted to a credit reporting agency is called a trade line. A trade line includes all of a customer's credit history with a creditor including the name of the creditor, account balance, date opened, date last paid, type of account, credit rating and the credit limit.

Credit Reporting

An account must be 30 days past due to be reported late with one of the credit reporting agencies. If you have a payment due with a credit card company on March 1 and you don't make the payment until April 2, it is 30 days late and will be reported to the credit bureaus.

Effects

Late payments can reduce your credit score. If your credit score is 680, a payment that is 30 days late can lower your score 60 to 80 points. A credit score of 780 can be lowered 90 to 110 points, according to the CreditCards.com.

Time Frame

Any type of bad credit such as collection accounts, foreclosures, judgments and repossessions must be deleted from your credit file after seven years. A bankruptcy can remain for 10 years, according to the Credit Info Center.

Credit Reporting Agencies

The three credit reporting agencies are Transunion, Equifax and Experian. You can dispute items in writing by contacting the agency reporting the derogatory information. Once a year, you can get a free copy of your credit report from the website Annual Credit Report.

Read More

Can I Freeze My Credit?

When you freeze your credit report, this makes it unavailable for lenders so they cannot issue new credit in your name. This can be an effective guard against credit-related identity theft for previous victims or people who think they might be at risk. The credit bureaus allow anybody to place a credit freeze for any reason.

Benefits

A security freeze blocks lenders from being able to view your credit report. Therefore, most lenders will choose to not open a new credit file in your name because they cannot access your credit history. This prevents identity thieves from obtaining credit using your name. You will not have to deal with closing fraudulent accounts and removing the accounts from your credit report, which can provide peace of mind.

How to Freeze

You must initiate a credit freeze with each of the three major credit bureaus. Experian, TransUnion and Equifax all have online systems set up for consumers to freeze their credit. However, if you are a victim of identity theft, the bureau might require you to initiate the freeze by mail and send a copy of your police report documenting the identity theft. This makes you eligible for any free protection in your state for identity theft victims. The credit bureau's online system will provide details on how to proceed if you need to freeze your credit by mail.

Cost

Many states have laws that waive all fees for identity theft victims. If you do not have documentation of identity theft, you will likely need to pay a fee of about $10 at each credit bureau to place, temporarily lift or permanently end the credit freeze. The cost varies by state, with some allowing free credit freezes for everybody and others charging up to $20 for parts of the process. Some states give discounts to senior citizens.

Considerations

Although a credit freeze makes it difficult for identity thieves to obtain credit, it also complicates the process for you. If you want to open a new credit account, you will have to temporarily lift the credit freeze so the lender can check your credit. This process can take a few days, which could force you to delay a purchase. In addition, you might have to lift the credit freeze so an employer, landlord or utility company can check your credit. If your state charges for lifting the freeze, this can get expensive over time.

Read More

Does My Credit Go Down Every Time I Check It?

Every time a creditor runs a report on your credit to review an application, your score goes down a bit. Not all inquiries lower your credit score. Checking your own credit history does not count against you and is advised because it can help you fix any weak spots in your financial management.

Inquiries

Checking your own credit score won't hurt your score, according to Liz Weston of MSN Money Central. The credit agencies consider looking at your credit report a soft inquiry. Soft inquiries do not involve seeking a line of credit. Other types of soft inquiries include employment background checks and checks by utility companies.

Misconception

Third-party credit monitoring services also do not count against you, according to Experian. The major credit rating agencies consider pulls by a monitoring service a soft inquiry. Lenders will never see soft pulls by either you or a third-party service.

Tip

If you do apply for credit, the BCS Alliance suggests sending in all applications within the same week. As of 2010, the FICO scoring model counts all inquiries for the same type of loan as a single inquiry within a 14-day period.

Warning

Pre-approved credit offers you receive in the mail use a soft inquiry into your credit history and do hurt your score, according to the Privacy Rights Clearinghouse. If you accept a pre-approved offer, the credit inquiry will count against you if the creditor investigates you further. Keep in mind that even a hard inquiry only dings your score slightly---no more than five points for a lone inquiry.

Read More

What Does Your VantageScore Credit Score Mean?

In addition to the FICO score, people now must deal with the newer VantageScore. In 2007, the major credit bureaus combined forces to create the VantageScore, which purports to have greater accuracy and to rate consumers more fairly than the FICO model. As of 2010, however, the VantageScore has yet to break the dominance of the FICO formula in its usage by lenders.

Considerations

Credit scores are meant to rank people based on their ability to pay back a debt as compared to other people in a similar financial situation. The major credit rating companies, however, developed the VantageScore mostly as a way to stop paying royalties to the Fair Isaac Corporation, which developed the FICO score formula. Every time a credit bureau runs your score, it has pay money to the FICO for the use of its secret formula.

Features

The VantageScore is very similar to the FICO model. The main difference lies in the claim that the VantageScore can standardize scores from different databases. The major credit bureaus do not share information, which can lead to large variation in scores for the same consumer. Also, the makers of the VantageScore say it can create more separation between bad and good risks. Lenders are always looking for ways to avoid consumers who are likely to default on their loans.

Benefits to the Consumer

Not everything about the VantageScore benefits the lender. The VantageScore could be easier for consumers to understand. The current FICO model gives a number, but does not necessarily explain what it means. The VantageScore system breaks scores down into A, B, C, D or F brackets, with "A" being the best and "F" the worst. The VantageScore model also rates those with a limited history more fairly than the FICO model, which could mean people with a thin credit profile have better access to credit.

Importance

The VantageScore has made little impact on the credit scoring market. As of 2009, the VantageScore achieved market penetration of just 5.7 percent, with almost none of that coming from the Fair Isaac Corporation, according to the CreditScoring website. The credit markets like predictability, so it could be years before lenders and investors bother with the VantageScore. As of 2010, the VantageScore is not used by any mortgage lender; however, all of the top five credit card issuers use it, according to Fox Business.

Read More

Why Do Credit Scores Vary From Place to Place?

A credit score measures the likelihood that a person will repay her debt. The three major credit bureaus issue credit scores for consumers. Individuals often find that their credit score differs greatly among the credit bureaus.

Function

Each credit reporting agency uses a different algorithm to determine a person's credit score, according to Mortgage Fit. These systems assign different point values to items on your credit report, which result in a different score.

Types

In addition to true credit scores, the credit bureaus issue "educational scores," which are scores that give a general estimate of a person's credit rating. These scores can be significantly lower or higher than a person's true credit rating, according to USA Today.

Considerations

Lending agencies use true credit ratings rather than educational scores to determine a person's creditworthiness. As of September 2010, consumers are entitled to view their true credit score for free at least once a year.

Read More

Does Having Money in a Brokerage Account Help Your Credit Score?

Many people open a brokerage account to invest in their futures, and they may think that smart move boosts their credit scores. However, assets wont improve your credit numbers, say experts from FICO, the company that sets the credit scores most lenders evaluate. That doesnt mean a brokerage account is useless when you apply for a loan. But if you really want to shine come application time, burnish your credit credentials with a few other financial moves.

The Credit Score Scale

Your credit score helps determine your borrowing terms. A credit score of 750 or more gets you the lowest interest rates on loans and credit cards. With a score of 710 to 749, you qualify for good but not the best deals on interest charges. At 650 to 709, loan approval is a snap, though interest rates rise. Finding decent loan terms is tougher with a score of 580 to 649. If you score below 580, lenders will either deny you credit or charge you high, subprime rates.

Behind Your Score

FICO lists five areas that generate your number. Those factors measure how youve handled credit, rather than how many assets you claim. At 35 percent of your score, payment history is the biggest determinant. Late payments, delinquencies and collection actions all drag down payment history. The amount you owe to creditors makes up 30 percent of your credit score. The length of your credit history is behind 15 percent of your score. The longer youve had credit accounts, the better your score looks. New credit, which includes the number of just-opened accounts and recent credit inquiries, is 10 percent of your score. Banks look unfavorably on a rash of new credit lines. Finally, types of credit compose 10 percent of your score. Lenders prefer borrowers who can manage all kinds of debt, from installment loans on cars to revolving balances on credit cards.

What Doesn't Count

Just as brokerage account balances dont matter in your credit score, neither do your marital status, your age, your salary or your employment history. Interest rates charged on credit cards or paid through brokerage or banking accounts wont affect your credit score, either, according to FICO. And its a myth that all credit checks ding your score. Credit checks from you, your employer, lenders reviewing existing accounts and banks offering preapproved credit cards dont weigh on your credit score.

When Brokerage Accounts Matter

Your credit score is just one factor in a lenders decision to grant a loan. The U.S. Department of Housing and Urban Development advises prospective borrowers to submit printed details of assets when they apply for a mortgage. That includes current statements on accounts containing bonds and stocks, as well as copies of checking and savings account statements for the last six months. The documents help lenders determine whether a borrower could cover the mortgage if he loses his job or experiences other unexpected budget setbacks. FICO says lenders also want to know your salary, occupation and employment history.

Improve Your Credit Score

If your brokerage account wont boost your credit score, several other factors will. Make all payments on time. Set up payment reminders and switch to automatic withdrawals to cut back on late payments. Slash existing debt to avoid bumping against credit limits. Keep balances below 35 percent of limits. Avoid opening several new accounts at once. Obtain your free, annual credit report. Comb the report for mistakes and contact creditors to fix errors. FICO recommends that consumers steer clear of companies or agencies that promise quick credit-score fixes for a fee. Improving your score requires responsibly managing credit for a year or more.

Read More

Ways to Get a Credit Score Without a Credit Card

Credit bureaus such as TransUnion, Equifax and Experian collect consumer payment information from creditors and assign a credit score that gauges creditworthiness. Many types of credit come into play, and those who choose not to deal with credit cards have a range of alternatives to establish a solid credit score.

Mortgage and Home Equity Loans

A home is often the most valuable asset held by consumers. Banks and mortgage finance companies report payment histories on home loans monthly, so an individual or couple who choose to avoid credit cards can build a high score by making the mortgage payment on time each month. They may also take out second mortgages or open credit lines based on the home's equity, the payments on which also are reported.

Vehicle Loans

The most common type of vehicle loan is for a car, but banks and finance companies offer loans for ATVs, boats, RVs and snowmobiles. Those payments also are reported. Given that they are secured loans in which creditors can repossess the vehicles for nonpayment, owners may be more inclined to pay them before unsecured creditors, but those histories are still a reliable indicator of financial resources and responsibility.

Bank Loans

Credit cards are not the only source of bank credit. Among the broad array of products they offer are credit lines, secured and unsecured loans, business financing and joint accounts. Each of these represents a prime way to establish a credit score. From the reporting standpoint, they serve much the same purpose as credit cards and are useful barometers of creditworthiness.

Utilities

Because utilities such as oil heat and electricity are billed after consumption, their suppliers are considered creditors per federal guidelines and can report their customers' monthly payment histories to the credit bureaus. A critical factor in building a strong overall credit score is to make these payments on time. Although some utilities only report past-due accounts, their absence on a credit report is nonetheless revealing and represents a positive factor.

Read More

What Is My Credit Score Number?

Lenders, landlords and other prospective creditors can reference your credit score to help determine if you're a credit risk. Fair, Isaac and Company --- now called FICO --- invented the credit scoring system that has become the industry standard. Five categories of information are combined and calculated to determine your FICO score, including your payment history, new credit, how much you owe, how old your credit is and how much credit you've used.

History

FICO invented the credit score in the 1950s. FICO is a California-based decision management company that analyzes data and creates models to help businesses predict consumer behavior. Other types of credit scores exist, invented by different companies, but the FICO score has become the industry's measure of choice for determining a person's credit risk. All three United States consumer credit bureaus---TransUnion, Experian and Equifax---use FICO's analytical model to calculate a credit score for every credit report they handle. Because different items may be listed on your different credit reports, you have three separate credit scores.

Creditors

Banks, credit card companies, mortgage lenders, insurance companies, employers, vehicle financing companies and landlords can look at one or more of your credit scores before doing business with you. If the prospective lender decides your score is too low, your interest rate on a loan could be higher or your loan request could be denied altogether. If an employer or landlord decides your score is too low, you could be denied a job or an apartment. Of course, your credit score might not be the sole factor a prospective creditor considers before deciding on your application.

Managing Your Score

Improving your score before applying for credit can give you more room to negotiate. Personal finance advisor Suze Orman suggests that people with scores above 760 will get the best rates, while those with scores below about 620 will pay more. Unlike your credit reports, which you're entitled to get for free once per year, you'll likely have to pay up to $15 to see your FICO score from each major credit bureau. Paying debts on time, having inaccurate credit report information removed, limiting the amount of credit you apply for and using credit wisely are ways to improve your credit score.

Warnings

Beware of television and Internet offers that promise to raise or improve your credit score for a fee. Your credit report details history, which won't change with quick-fix efforts. Credit problems have less of an effect on your credit score as time passes. Paying your bills on deadline and acquiring new credit slowly and responsibly over time are proven ways to establish better credit history and improve your credit score.

Read More

Credit Report Summary

The summary section on your credit report usually offers the quickest way to determine your general riskiness as a borrower and prevent the credit bureaus from reporting erroneous information. However, not all credit report summaries contain the same data, so you always want to thoroughly scan your entire report before assuming you have a good profile.

Identification

Credit report summaries list the most pertinent information in your credit profile -- usually any potentially negative items and open accounts, according to True Credit. The major bureaus have their own particular formats, and any other service that pulls your report, such as a credit monitoring service, may have another variant on the summary section.

Considerations

Some of the credit bureaus include all information about your accounts in the summary, such as the name of the lender, the balance and if you were ever late on a payment. Thus, the summary could be your biggest section. When you pull a triple credit report -- a report from all three major bureaus at once -- the summary probably won't have enough room for details on your accounts.

Use

Your credit report summary section probably lists the negative items in your report. If you have any, immediately review the account that contains the negative information. Negative items are the only thing that can damage your score, and the agencies or a creditor may list a bad mark in error. If you see a mistake, dispute it immediately along with copies of any documents to support your claim.

Tip

A 3-in-1 credit report may have a more abridged summary than a single report, but it can help you spot errors more easily by giving you summaries side by side. Do not forget the rest of your report, because it may contain information vital to your creditworthiness. Inquiries, for instance, usually fall under their own section and can hurt if you have too many hard requests for credit. Personal information can lower your chances at loan approval, such as when the agencies list you changing jobs every few months.

Read More

How to Clear Credit Inquiries

When you apply for credit, an inquiry will appear on the bottom of your credit report. The inquiry will include the name and address of the creditor. An inquiry can lower your credit score. Credit scores are used by lenders to determine your credit worthiness. Sometimes an unauthorized inquiry will appear on your credit file. You can request that these be removed. Inquiries will remain on your credit file for two years and then drop off automatically. Too many inquiries send a warning to creditors that you may be trying to get approved for too much credit.

Instructions

1

Review your credit report to see if there are any unauthorized inquiries. You should look at a copy of your credit report issued from all three credit reporting agencies, which include TransUnion, Equifax and Experian. An address for the inquiries will appear only on Experian, according to the Illinois attorney general. If there are inquiries without creditor addresses (TransUnion and Equifax) on the other reports, you will need to match those inquiries with the ones on Experian to get an address.

2

Determine if there are inquiries that appear on TransUnion and Equifax but don't appear on Experian. If the names of creditors appear without addresses, you can get a phone listing by calling information. Call the creditor to get an address. Make a note of any inquiries you did not authorize.

3

Contact the creditors that made unauthorized inquiries on your credit report. Send a registered letter or certified mail to all creditors that left an inquiry on your credit file. The letter should include your name, address, Social Security number and the date of the inquiry. Ask the creditors to send proof that you gave them permission to review your credit report. If proof cannot be furnished, ask the creditor to remove the inquiry, according to the Illinois attorney general.

Read More

How to Get a Copy Of Your Credit Report That Is Actually Free

Your credit report contains all of the data that goes into calculating your credit score. Therefore, by looking at your credit report, you can identify negative items that are dragging down your score and work to improve in these areas. Numerous websites offer free credit reports, many of which require you to add yourself to a mailing list or sign up for a free trial of a credit monitoring service that will bill you if you do not cancel the service soon enough. Only one website is authorized to provide your free government-mandated credit report with no strings attached.

Instructions

1

Navigate to the Annual Credit Report website at www.annualcreditreport.com. This is the government-authorized website.

2

Select the state in which you currently live from the drop-down menu and click on the button to request your credit report.

3

Type in the personal information required to locate your credit report. This includes your name, date of birth, Social Security number, current address and other recent addresses.

4

Select the credit bureaus from which you would like to get your free report. Three different companies, Equifax, Experian and TransUnion, each maintain a credit report for you. The reports are usually similar, but are not guaranteed to be identical. You are allowed one report from each bureau per year, so you can get them all at once or stagger the requests to monitor your credit more frequently.

5

Click on the link to be securely redirected to the website of the bureau providing your credit report.

6

Answer the security questions the website poses. Typically, you will have to identify some personal information on your credit report from a multiple-choice list.

7

Click on the link to return to the Annual Credit Report website and get your report from the next bureau, if applicable.

Read More

The Importance of Credit Scores

Your credit score is one of the first things a lender looks at when you apply for credit. Credit scores help lenders determine how financially responsible you are, as well as whether or not you are likely to default on a loan. Whether you apply for a credit card, mortgage or car loan, your credit score will determine whether you get approved, as well as at what interest rate and loan amount. The higher your credit score, the better.

Credit Scores

Credit scores are calculated using your employment status, payment history, debt amount, inquiries and any bankruptcies or foreclosures. They range from about 330 to 850 with anything over about 720 considered as being good.

Interest

A good or excellent credit score will nab you lower interest rates, as well as zero interest credit cards. A good credit score can potentially save you thousands of dollars in loan interest fees.

Loan Amounts

A positive credit history, employment status and credit score means that you can get approved for higher loan amounts or credit card limits. This is particularly significant when applying for a home loan.

Reducing Current Interest Rates

If you currently have a high interest rate, improving your credit score will improve your chances of renegotiating for a lower interest rate.

Having a Low Credit Score

Having a low credit score will likely disqualify you from getting a home or car loan. If you are approved, you will likely have high and costly interest rates.

How to Improve Your Credit Score

Paying your bills on time, having low debt and paying your credit card balance off each month will help you increase your credit score.

Read More

What Does an I Mean on a Credit Report?

An I is one of the most important things you can have on your credit report. You probably cannot have a great credit score without one. Not all credit agencies use alphanumeric codes on their reports, though. Some use plain English, so do not panic if you credit report contains no I's. You can get an added boost of an I by having it in proper proportion with R's, which are revolving accounts, such as credit cards.

Identification

An I on a credit report refers to an installment loan. This type of credit account has a set schedule for when you must pay back the debt, usually a consistent monthly bill over a number of years. The I will also come with another number or letter. The combination I2, for example, means you were 60 days late at least once in the history of the account.

Importance

A tenth of your FICO score comes from using several types of loans, according to the Fair Isaac Corporation. Without having an installment loan on your report, you might prevent your score from entering the upper tier. How much installment debt and the number of payments you have left fall under the "amounts owed" category worth 30 percent.

Misconception

For an installment account to boost your credit report, you must have an account with a balance left. Once you make the last payment on an installment loan, the FICO credit scoring model essentially ignores it for scoring purposes, but the account remains viewable on your report for 10 years, according to the website Credit Net.

Tip

Having two revolving accounts to every installment usually maxes out the "mix of credit" category on the FICO score, according to MintLife. Before you take out a loan with the purpose of getting the "right" mix, consider if you can afford the loan and any other debt obligations. Applying for a new loan to boost your score could backfire if debts already make up more than 36 percent of your income.

Read More

Divorce and Credit Ratings

Like many consumers, you may have heard horror stories from other individuals about how getting divorced destroyed their credit ratings. Divorce itself doesn't hurt your credit. Rather, your credit suffers when your ex-spouse stops making payments on accounts that were awarded to him in the divorce but still appear on your credit report. You and your spouse can protect your credit ratings as much as possible during divorce by properly dividing your shared assets.

Liability

During a divorce, a judge will assign responsibility for any undivided assets to either you or your spouse. This does not, however, absolve either of you from being liable for payment. In addition, the account appears on both of your credit reports. Unlike you and your soon-to-be ex, your creditors are not bound by your divorce decree and can pursue either of you for payment. After your divorce is final, your ex-spouse's failure to make timely payments on accounts that remain in both of your names will damage your credit rating.

Dividing Assets

The Federal Trade Commission recommends properly dividing assets during divorce. For example, by paying off and closing joint credit card accounts or selling real estate you and your ex-spouse owe a joint mortgage on, you eliminate the debt and the chances that your ex-spouse's irresponsible behavior could negatively impact your credit history.

Credit Scoring

The Fair Isaac Corporation notes that 15 percent of your credit score depends on the length of your credit history, determined by the age of your oldest account. If your oldest account was a joint debt that you shared with your ex-spouse, closing the account will shorten your credit history and impair your credit score.

Your credit rating suffers less, however, from closing old accounts than if your ex-spouse were to default on a credit card that remained in both of your names or lose jointly-owned real estate to foreclosure. If your credit score drops after closing joint accounts, you can rebuild your credit rating by obtaining debt in your name only and managing that debt responsibly.

Credit Damage

A single mistake your ex-spouse makes with a joint debt--such as missing a credit card payment--can remain a part of your credit history for seven years. In addition, if you shared a mortgage, you remain tied to the account until your ex pays off the loan--leaving you subject to potential credit damage for years, sometimes decades, after the divorce was finalized.

Because creditors can pursue either of you for the debt, you could find yourself facing a lawsuit for repayment of a debt the divorce court decreed your ex-spouse was responsible for. Should you lose the lawsuit, the court records the judgment which subsequently appears on your credit report. Judgments are derogatory and, according to the Fair Credit Reporting Act, can appear within your file for longer than the seven year reporting period assigned to most negative credit entries, depending on your state. Eliminating your joint debt obligations during divorce is crucial to avoiding credit-damaging consequences.

Read More

How Does a Person Better Their Credit Score?

Your credit score is a very important way that lenders, employers and even landlords can determine whether you are financially responsible or not. It makes sense that you would want to do all you can to make it better. Getting a better credit score sometimes happens quickly, like when you pay off a high credit card balance, but more often, it happens slowly and takes a few months or years of consistent effort .

Pay Your Bills on Time

Your payment history plays a big part in determining your credit score. In fact, it is the most important factor in determining your score, making up 35 percent of your total score, according to the University of Illinois. Pay all your bills promptly, and over time you should see an increase in your credit score. Setting up automatic payments either through the credit card company's website, or through your bank, will also help you avoid late payments.

Reduce Your Overall Balance

Another good way to increase your credit score is by paying down your credit card balance. Your credit score decreases when you have a total balance that is close to your overall credit limit, and reduces when you have a lower balance when compared to your credit limit. Keeping the balance on all your cards within 30 percent of your total credit limit will help improve your score. Also, maxing out a card or charging a lot on one card even when you have other cards empty will have a negative impact on your score. To improve your score, distribute the debt among all your cards, or, even better, pay down the debt completely.

Keep Credit Inquiries to a Minimum

Many people don't realize the effect of credit inquiries, or even how often companies or lenders perform them. To better your credit score, don't apply for credit unless you intend to use it. Be vigilant about when and how often your credit is being pulled so that you can curb unnecessary inquiries.

Use Your Credit Cards Often

Inactivity can hurt your credit score, or keep it from improving, even if you have paid your balance in full and are otherwise a responsible borrower. When your card is inactive, you do not have the chance of showing financial responsibility. Also, you risk getting the card closed by the credit card company and having your overall available credit reduced, which makes a dent in your credit score. To better your score consider putting a monthly bill on your credit card and paying it off in full at the end of the month.

Read More

Types of Credit Rating Agencies

Obtaining and maintaining good credit is important. Credit, whether good or bad, follows you in all aspects of life. In certain cases, credit has the ability to not only affect borrowing in the future, but it can also affect employment. So, it is imperative to keep track of your credit history. Credit reporting agencies also help companies to evaluate possible credit risks as well as rewards. Today, technology makes it easy to keep up with credit standing with immediate online access. In the United States there are three credit rating agencies available to individual and businesses: TransUnion, Equifax and Experian. Monitoring all three on a consistent basis is very important, because all your accounts do not report to all three agencies.

TransUnion

When you are buying a new car, automotive companies look thoroughly at your credit history.

TransUnion is a credit monitoring and management company with more than 40 years of experience. Using analytics and consumer and commercial data collection, TransUnion's key areas of expertise as a credit rating agency are: automotive, collections, communications, financial services, retail, insurance and health care. TransUnion keeps credit records on more than 500 million people worldwide. Other than just rating consumer credit, in 2002 TransUnion also included services to help protect and improve the credit of individuals. TransUnion has its headquarters in Chicago.

Equifax

Credit cards have the potential to seriously affect your credit score.

As the oldest credit rating agency, Equifax has assisted consumers with monitoring their credit scores, protecting their identity and managing debt for more than 100 years. Also using consumer and commercial data and advanced analytics to report credit history, Equifax basically offers the exact services as its other counterparts. Equifax is based in Atlanta and is a publicly traded company.

Experian

Managing your credit history can protect against identity theft.

Experian markets itself as an agency that helps individuals monitor their credit while educating and offering credit advice. Experian offers services for protecting against identity theft, while helping retailers with debt collection. Experian is the youngest of the three credit-reporting agencies, having been formed by a merger of British and U.S. companies in 1996. It is also the only one with its headquarters outside the U.S.

Read More

Tips on Improving Credit Scores and Your Credit Report

Your credit score ranges between 300 and 850 and determines your eligibility for new credit. Lenders, insurance companies, landlords and employers may all pull and review your credit reports. The better your debt management skills, the higher you can expect your credit scores to be. There are actions you can take, however, to boost your credit scores and increase your chances of being approved for low interest rates.

Dispute Inaccuracies

A survey by the U.S. Public Interest Research Group reveals that 79 percent of all consumer credit reports contain errors of some kind with 25 percent of those errors being significant enough to result in a denial of credit. The Fair Credit Reporting Act gives all consumers the right to contest credit report errors.

If you suspect that your credit report may contain errors, you have the right to request a free copy of your credit report every 12 months. If you find any inaccuracies, you can report the mistakes to the credit bureaus by phone, mail or online. Each credit bureau is legally required to investigate your report and, if any information appears on your credit file in error, correct the report.

Pay Down Credit Cards

The amount you owe on each of your credit cards compared to your available spending limit is your debt utilization ratio. This ratio has an impact on your overall credit score. Using all of your available credit sends the message that you are having financial difficulties, whether or not this is actually the case. It also negatively impacts your score. By paying down your credit cards, you can increase your debt utilization ratio and improve your credit score.

Check For Obsolete Items

Most common negative credit report entries aren't allowed to hang around and damage your scores forever. Late payments, credit card charge-offs and collection accounts may remain on your file only for seven years and six months. If you notice obsolete entries on your credit report that are dragging down your score, report them to the credit bureau for immediate removal.

Keep Old Accounts Open

It's tempting to close out old credit card accounts after paying them off, but it doesn't help you credit score. The FICO credit scoring model considers the length of your credit history an important factor when calculating your credit score. By closing old accounts, you shorten your credit history and hurt your score. In addition, closing old credit accounts lowers your debt utilization ratio, which is also detrimental to your credit. Some credit card companies will close your account if you don't regularly use your card, so make small purchases on your oldest credit account periodically to protect it from closure.

Read More

Beacon Score Factors

A Beacon score is a three-digit number used by Equifax to rate a consumer's creditworthiness. Without a Beacon score (or a credit score from one of the other major credit bureaus), mortgage lenders, auto lenders and credit card issuers may not accept your application. They need to assess your credit score to determine your likelihood of paying back the funds. Different factors determine your Beacon score, and maintaining a high rating calls for knowing how credit scoring works.

Debt Balances

The amount you owe on credit cards and loans accounts for approximately 30 percent of your Beacon score. With this said, the more you owe, the lower your credit rating. Auto loans, mortgages and student loans don't have a huge negative impact on your credit score. On the other hand, owing thousands of dollars on a credit card or having maxed out credit cards or lines of credit can reduce your Beacon score.

Payment Habits

Being responsible and paying your credit cards and loans on time can help you maintain a satisfactory Beacon score. Like your balances, your payment history has a major impact on your credit rating. Missing your payments or developing a routine of sending late payments can slowly decrease your Beacon score, prompting lenders to deny your future credit applications or charge a higher rate on loans and credit cards.

Credit Inquiries

Credit accounts are necessary to build a good credit history, and there's nothing wrong with opening new credit files. However, constantly applying for credit cards or loans can hurt your Beacon score because each credit application or inquiry takes points off your credit rating.

Length of Credit

Individuals with long credit histories tend to have a higher Beacon score than someone who recently applied for first-time credit. For this reason, closing an older account can lower your Beacon score because it shortens your credit history. Because length of credit history accounts for 15 percent of credit scores, consumers wishing to get rid of a few credit cards ought to cancel their newest card first, or keep their accounts opened and destroy the card to avoid temptation.

Read More

What Happens to Your Credit Score If You Turn in Your Car Back to the Bank?

An involuntary repossession occurs when the bank comes to pick up a car. When you turn your car into a bank, that's called a voluntary repossession. They both have the same negative impact on your credit score.

Effects

How you pay your debts accounts for 35 percent of your FICO credit score. A repossession means you did not pay your auto loan debt, and, once it appears on your credit report, it will lower your credit score. How much your score drops depends on the other items contained within your report.

Significance

A repossession remains on your credit report for seven years. If you try to finance another vehicle, lenders may not approve you with a repossession on your report. Subprime lenders -- those that cater to consumers with poor credit -- may approve you for an auto loan, but it may be at a very high interest rate so proceed with caution.

Warning

Just because you return a car to the bank does not relinquish you of the legal obligation to repay the debt. The lender will sell the car to recoup some of its loss. The lender will then come after you for the difference between what the car sells for and the amount of the outstanding loan. This is called deficiency. If you can't pay it, the lender can sue you to collect this amount and obtain a judgment against you.

Read More

Trans Risk Score Vs. FICO

Although Fair Isaac Company, or FICO, and TransUnion TransRisk scores are both referred to as "credit scores," there are some key differences between the two. Although they both measure creditworthiness, the importance of these scores differ significantly.

FICO

FICO scores are the official measure of credit risk and were used by 90 percent of lending institutions and banks as of July 2010, according to Score. FICO scores, which range from 300 to 850, average a reading of your scores from TransUnion, Equifax and Experian, the three credit bureaus.

TransRisk

The TransRisk score is an unofficial "credit score" that consumers can purchase from TransUnion. TransRisk is a type of "educational score," and has no relation to your actual credit score, according to Score.

Considerations

Companies consider only the FICO score when making credit decisions. Your TransRisk score may or may not be close to the actual value of your FICO score. You should use TransRisk only as a general guide and not as a replacement for your actual FICO score.

Read More

Can Two Monthly Payments Raise a Credit Score?

You can save hundred dollars on debt servicing by breaking up your payments into two smaller ones or just adding another payment of some value to the minimum. This tactic, however, could end up costing you money and works best on credit cards, but all loans can benefit. Either way, your score can likely benefit from that extra payment.

Identification

Making more than one payment doesn't benefit your score any more than your regularly scheduled payment, because the FICO score model only cares that you make at least the minimum payment each month, according to Experian, one of the largest credit bureaus in the U.S. This, however, means you will pay more than the minimum, accelerate your debt repayment schedule and reduce your total debt obligation. FICO scores factor in the amount of debt you use compared to your revolving credit line; this can make up 30 percent of your overall score. No what type of loan you have, lenders like to some as little debt as possible.

Considerations

For this plan to work, your two payments must add up to at least the minimum payment amount. As long as your two payments make the minimum, you can prevent significant potential damage to your score, because you guarantee that you will never have a late payment.

Financial Benefits

Credit cards charge interest each day you carry a balance. Paying earlier in the month cuts off some of those interest charges. Take, for instance, a scenario where you have a minimum payment of $100 and break it up into two payments every two weeks. After the first two weeks, you have $50 less on the balance accruing interest. Lower finance charges will give you extra income to pay off debt faster, giving you more money to reduce debt and your credit utilization.

Tip

Making multiple payments is best used in conjunction with online bill paying, because you can set your account to make payments every 14 days. Review your bank and credit card guidelines on multiple payments. Some will charge a penalty for multiple payments on the same bill, especially if you make more than two payments per month.

Read More

Can a Bank Report You if You Owe Money on a Checking Account?

If you owe money for a bounced check, you might feel lucky to know that it will not affect your credit history unless you avoid repaying the debt. The financial institution won't report the delinquency to the credit bureaus, but someone else can should the bank sell off the account or file a lawsuit. Thus it is better to settle the matter as soon as possible.

Identification

Banking history, such as writing a check or owning different types of accounts, has almost nothing to do with a person's willingness to repay a debt, so the credit bureaus do not report banking history on a person's credit file. Instead, an overdraft can appear on a credit report as a collection account, but only if the bank sells it to a debt collector, according to Marcie Geffner of Fox Business.

Considerations

The bank does not have to sell the debt to a collection agency; instead it might pursue legal action for accounts where the unpaid balance outweighs the legal costs. A court case is likely to result in a public judgment, which damages your credit report, because the bureaus will probably find out about it. If a collection agency buys the debt, it too can pursue a judgment, which the bureaus can report.

ChexSystems Report

Most financial institutions report banking history to a company that is similar to the national credit bureaus: ChexSystems. Negative items such as bounced checks, fraudulent accounts and overdrafts go on a ChexSystems report for five years. Banks can reject a person's application to open account for just one item on her ChexSystems report. While bank accounts do not affect credit, a bank might close an account because of mismanagement of the account. Most lenders require at least one bank account for a loan or line of credit.

Tip

You can avoid overdrafting and bouncing checks by always keeping tabs on your checking account balance. Also, link your savings account to your checking account for added protection -- the bank will draw on the savings in case of an overdraft. If you do not have a savings account, most banks offer overdraft protection. Overdraft protection usually requires a credit check, which dings your credit score a few points, but this is insignificant compared to what a collection account or judgment can do to a credit score.

Read More

How to Establish Credit at 18

There are various methods to help you establish a credit history, and turning 18 is the best time to begin building your personal rating. Obtaining first-time credit can prove challenging. Even so, multiple lenders are eager to help you get your foot in the door. They offer credit to people with no credit history or bad credit, which gives you the opportunity to demonstrate creditworthiness and acquire A+ credit.

Instructions

1

Set up a bank account. Select a local branch or credit union and open a checking or savings account.

2

Seek employment. Obtaining a credit approval requires steady employment. Find a job and stay with the same employer for at least three to six months.

3

Consider student credit cards. If attending college, apply for a student credit card. Pick up an application from your college or university.

4

Open a secured credit card account with your bank. Obtain credit with no credit history at 18 by applying for a prepaid or secured credit card.

5

Consider an auto loan. Finance a reasonably priced used or new automobile to begin establishing credit. Use a co-signer if necessary to improve your approval odds.

6

Use the piggyback method. Attach your name and social security number to your parents' credit card to start building a credit history.

7

Practice good habits. Increase your credit rating by exercising good credit habits. Pay your bills on time and keep a low credit card balance.

Read More

How to Obtain My Free Credit Report

Maintaining a good credit score is important for consumers. Companies look at your credit report when you apply for a car or home loan and even when you submit an application for new utility service. According to the Federal Trade Commission, there are three credit reporting agencies--Equifax, TransUnion and Experian. If you want to check your credit report for any of the credit bureaus, you're entitled to a free report every year.

Instructions

1

Decide how you want to receive your free credit report. As of 2010, you can receive your credit report via the Internet or mail. If you want your credit report mailed to you, call 877-322-8228. According to the Federal Trade Commission, you can also print a copy of the credit report request form (see Resources) and mail it to the following address:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348

2

Visit the Annual Credit Report website. The Federal Trade Commission advises that the site is the only one that doesn't charge you to view your credit report. Click in the box labeled "Start Here" and select your state. Choose "Request Report."

3

Fill out the application. You'll need to include your full name and addresses you've lived at in the last two years. In addition, the Annual Credit Report website asks for your Social Security number and date of birth, so avoid accessing your free credit report on a public computer. Make sure the information you entered on the application is correct; then click "Continue."

4

Choose the report you want to see by clicking in the box beside the agency's name. You have the option of viewing your credit report from all three credit reporting agencies or selecting one bureau at a time. Select "Next" to be taken to the website of the bureau of your choice. Press "Continue" to view your free report.

Read More

How Much Do Student Loans Hurt a Credit Score?

About two-thirds of all undergraduates graduated with some amount of debt in 2008. Those with debt had an average burden of $23,186, according to FinAid. Having a large student loan debt seems like it would harm a credit score, but it does not; it could even boost your score. Like all things in the credit world, this may not hold true, however; there are several factors that could make you too risky to lenders if you have student loans.

Impact on Credit Score

Student loans do not automatically hurt a credit score. They have less of an impact on scores than revolving loans, such as credit card debts. This phenomenon occurs because revolving loans affect credit utilization -- how much of your available credit you use compared to your limit -- while installments do not. Make prompt payments on your installment and your score should increase. On the other hand, if you miss payments, your credit score will decline. For most students, school loans make up the bulk of their credit profile, so a good payment history is vital.

Income Factor

No matter how good your credit score is, your income must cover your debt service and living expenses. If, for example, you want to get a mortgage, lenders will consider your student loans. Usually they will not approve a mortgage loan unless your total monthly debt payment falls below 36 percent of your monthly income -- including the mortgage, according to Janet Bodnar at Kiplinger.

Cosigning a Loan

Parents who cosign a student's loan also bear the responsibility of that debt and its status with the lender. That means if the student fails to make a payment on time, the negative information will go on both reports. This will also factor into debt-to-income calculations for both cosigners.

Tips

Call your lender as soon as you have problems or see a potential problem with making your monthly student loan payment. Lenders are often willing to at least grant forbearance -- where you only make interest payments for a temporary period. When you receive any disposable income, such as a tax refund check, put as much of that as possible towards your loan to pay it off faster. One caveat: if you have other debts with a higher interest rate, pay those off first.

Read More