Does a Credit Card with No Balance Help a Credit Score?

Your credit score affects your ability to get loans and favorable interest rates. A credit card with no balance can help improve your credit score, so consider the benefits of keeping it that way.

Payment History

Your payment history accounts for 35 percent of your FICO score, the most widely used credit score. A credit card with no balance remains on your credit history, even until seven years after you close it, according to the Motley Fool, so unused cards do contribute to good credit.

Credit Ratio

The credit limit of your card with no charges can improve your score when added to the limits of cards with higher balances. The Motley Fool recommends your total credit card debt not exceed 30 percent of your credit limit. For example, if you only have one card with a $2,000 credit limit and charge $1,000, your debt ratio is 50 percent. With a second, unused credit card with a $2,000 limit, your ratio drops to 25 percent.

Account Age

A longer average account age increases your credit score. Fifteen percent of your credit score depends on how long you've had credit, so keeping an old card open, even if you rarely use it, improves your score, according to MyFICO.

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How Does a Business Credit Card Affect Your Credit Score?

A business credit card is a tool that helps a company cover its basic expenses. It is a common financing option, similar to a commercial line of credit, loan or investor funds. When you apply for a business credit card, the application requests your personal information in addition to business data. You should investigate how the business credit card account could affect your credit score.

About Credit Scores

A credit score measures your trustworthiness as a credit risk and helps banks decide whether they want to extend you a business credit card. It applies to both individuals and businesses. A credit score based on a personal credit report ranges from 300 to 850. Businesses also have credit scores in some cases, which range from zero to 100. The score is based on information reported to business credit reporting agencies about each company.

Does It Affect Personal Credit?

The activities involving a business credit card could affect the owner or representative's personal credit score. The responsible party listed on the account must provide his personal Social Security number, name and address to the business creditor. Business creditors usually report business credit card information to the responsible party's personal credit history if the account goes into default. Some creditors also may start reporting business debt on personal reports regularly.

Employee Cards

In some cases, an employer may offer a business credit card to his employee. The creditor may ask for personal information about the employee. In this case, it is also possible for the actions of the business to negatively affect the employee's personal credit history. If you're concerned about the risk, instead of accepting an employee card, you can inform the employer that you will use your own personal card and submit paperwork for reimbursement.

Suggestions

Knowing that a business credit card has the potential to affect your personal credit history makes it important to maintain the account responsibly if you choose to use the card. Pay your bills on time and in full each month. Whenever possible, pay off each business credit card debt transaction soon after submitting the charge, allowing you to maintain a zero balance on the account.

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How Does Renting an Apartment Affect Your Credit Score?

Renting an apartment does not affect your credit score. Most landlords dont report any information at all to the credit reporting agencies about their tenants.

Significance

When you rent an apartment, the leasing agent will do a background check. They will also take a look at your credit report. Whenever your credit report is accessed, when you apply for credit, it will leave a credit inquiry. A credit inquiry can lower your score less than five points.

Considerations

If you dont pay your rent, the landlord could evict you. The case could wind up in court and you could get sued because of the amount you owe on your lease agreement. If the landlord gets a judgment against you, it can show up on your credit report. This will lower your credit score.

Effects

Most leasing offices are not members of the credit bureau. Therefore, they dont report information to the credit reporting agency. If they have to turn your information over to a collection agency, your information can be reported to the credit reporting agencies by that collection agency.

Time Frame

All derogatory information reported to your credit file, such as a court judgment in favor of your landlord, will stay on file for a period of seven years. Once this time has passed, the derogatory information should be removed automatically.

Warning

If your credit is bad, it can prevent you from renting an apartment. If you have to apply at three apartment complexes, all three will take a look at your credit score, which will result in three credit inquiries.

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Does Owing Child Support Affect Credit?

While alimony or child support is not a traditional trade line, it can still affect your credit. Seeing the terms "child support" or "alimony" on a credit report usually negatively affects your credit rating, because it indicates you are seriously behind on your child support. If you cannot make payments, you should contact a pertinent party immediately to preserve your credit rating and to avoid a lawsuit.

Identification

Owing child support can affect your credit rating, but it depends on how long you have owed money and sometimes how much. State child support agencies report delinquent payments to the credit reporting bureaus when you owe more than $1,000. The state may file a lawsuit or send the account to a collections agency when you have delinquent bills for more than 180 days, according to LegalMatch.

Effect

A child support judgment or delinquent alimony account stays on your credit history for seven years and can affect your FICO credit rating by over 100 points, especially when you have a high rating -- around a 780 and above -- according to Maxine Sweet of Experian. Also, lenders can ask about child support obligations when you fill out future loan applications. Too many debt obligations compared your monthly income may disqualify you from a loan.

Paying the Balance

Once you pay the child support arrears, the account still appears on your credit report, but with a balance of $0. If the child support debt went to a collection agency, the credit bureaus must remove the account once you successfully pay the balance due. You can also remove child support arrears from your credit history when it is listed as an error.

Tip

If you fall behind on payments or it appears that you might, return to the judge that handled your case or contact the custodian, suggests Michele Kimball of Divorce360. You might convince the judge to lower your payments, especially when you cannot afford your monthly alimony bill or have a temporary hardship like unemployment.

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How to Quickly Rebuld Credit Score After Short Sale

While a short sale can be devastating to your credit, it is not as damaging as foreclosure and/or bankruptcy. Recovering from the impact of a short sale isn't easy but it is possible to reestablish a positive credit history and boost your credit score in a fairly short amount of time. There are several steps you can take to quickly rebuild your credit after a short sale.

Instructions

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Obtain a secured credit card or secured loan. A secured credit card or loan is one that is backed by collateral that you provide. Do not confuse prepaid debit cards with secured credit cards. A secured credit card is issued by a bank and is reported to the credit bureaus, whereas a prepaid debit card is not.

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Use your new credit wisely. With a secured credit card, your limit should be low, no more than a few hundred dollars at most. Use your card regularly but only charge as much as you can afford to pay in full each month. Keep your applications for new credit to a minimum and do not incur large amounts of new debt.

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Establish a positive rental history. If you've gone through a short sale, generally, you will not be able to qualify for most mortgage loans for at least two years. During this time, you will want to establish a good rental history to help build up your credit. Ask if your landlord reports regularly to the credit bureaus, as this will help you in establishing your rental history.

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Pay all your bills on time. Even one late or missed payment can cause your credit score to drop as much as 100 points, so paying bills on time is crucial. If you have not yet learned how to budget, now is the time to do so. Learning how to budget will not only help you to pay your bills on time but it will also help you to better manage your finances overall.

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Monitor your credit report regularly and dispute negative information. Verify that your accounts are being reported properly and look carefully for errors or incorrect information. If you find something you feel to be inaccurate, take steps to dispute it with the proper credit reporting bureau.

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Will My Credit Score Increase When Bankrupty Is Removed?

Bankruptcy gets rid of your financial obligations, but at a high cost to your credit rating. The Privacy Rights Clearinghouse explains that court actions such as judgments and bankruptcies factor into your payment history, which is a big part of your score. Most bad entries on your credit reports, including bankruptcy, eventually get erased and stop pulling your score down.

Removal

Your bankruptcy gets removed from your TransUnion, Equifax and Experian credit reports after 10 years. The removal process is automatic, and your credit score goes up afterward because bankruptcies hurt credit scores. Chapter 7 and chapter 13 bankruptcies are the most common consumer filings, and both are blemishes on your reports. The FTC explains that Chapter 7 means liquidating all assets and getting out of all bills, while Chapter 13 involves a partial payment plan and retention of many assets.

Confirmation

Check your credit reports at the 10-year mark and file disputes with the credit bureaus if your bankruptcy is still in their files. AnnualCreditReport.com gives out free reports once per year from TransUnion, Equifax and Experian. The three bureaus allow online disputes on their individual websites if your bankruptcy still shows up after the allowable decade. The Fair Credit Reporting Acts forces them to investigate the mistake and erase the outdated information.

Damage Control

Your credit score can be raised while bankruptcy is on your record if you focus on the other factors that have a big effect on your credit score. Your payment dates and the amount of debt you carry are both major factors, according to the MyFICO credit scoring website. Get a secured credit card soon after your bankruptcy, use it sparingly and pay every payment before the deadline to raise your score. Pat Curry of Bankrate.com explains that people with low credit scores qualify for secured cards because the cards require a monetary deposit for collateral.

Considerations

Bankruptcy is not always a huge detriment to your credit score. It usually lowers the number, but its effect is minimal if your credit is already badly damaged. Smart Money writer Aleksandra Todorova advises that sometimes bankruptcy actually pushes your score up because it removes long-term delinquencies, charge-offs and other harmful data. The scoring companies compare you to others in similar financial circumstances, which also helps your rating. Your slate is not cleaned, even when bad items are removed, because the bankruptcy itself still looks bad to lenders.

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How Can I Remove a Judgment That Is Paid Off From My Credit Report?

A civil judgment is a public record reflecting a judge's decision against the defendant in a lawsuit. Civil judgments represent the amount that the court determines the defendant owes to the plaintiff and appear on the defendant's credit report. Paying off a judgment helps you avoid legal consequences, such as a property lien or wage garnishment, but doing so does not guarantee that the credit bureaus will remove the judgment from your credit record.

Paying the Judgment

The credit bureaus list judgments on consumer credit reports because the it serves as evidence that the defendant did not pay his debts responsibly -- leaving his creditor with no choice but to seek legal recourse. A history of irresponsibility with debt makes you a high risk for lenders. The judgment remains on your credit report after you pay it because paying off the debt does not erase the fact that your creditor was forced to sue you -- information other lenders deserve to take into consideration before extending credit to you or approving your loan application. Judgments -- whether paid or unpaid -- adversely affect your credit rating.

Timeframe

The length of time a civil judgment remains on your credit file depends upon the length of time your state permits creditors to secure payment of the original debt using the judgment. An exception to this rule occurs only if your state gives creditors less than seven years to enforce a judgment. In this case, the Fair Credit Reporting Act mandates that the judgment remain for a minimum of seven years.

Disputes

Paying a debt -- even one reflected by a judgment -- isn't an admission of guilt. Thus, you can still dispute the judgment's validity with the credit bureaus. If the court does not verify the judgment's accuracy during the credit bureaus' dispute investigations, each credit bureau will remove the paid judgment from your credit record. Remember, disputes are reserved for legitimate errors -- not valid items that simply damage your credit scores. If any feature of your paid judgment appears inaccurately on your credit report, such as the amount you owed or paid, you can dispute the error and possibly have it removed.

Considerations

Consumers have the right to re-open the original case and contest the grounds under which the creditor received a judgment. If successful, the court "vacates" the judgment and it vanishes from the consumer's credit report. If you already paid and satisfied your judgment, however, you lose this option.

If you cannot have the judgment legally removed from your credit repot, that does not necessarily mean that your credit rating will remain low until the reporting period on the item expires. Paid judgments hurt your scores less over time -- even if they still remain a feature of your credit history.

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Debt Settlement's Effect Upon Your Credit Scores

Paying off your delinquent accounts is commendable and lenders will see your efforts to absolve old account balances when reviewing your credit records. Unfortunately, debt settlement is a negative entry on your credit report. Debt settlement -- and the circumstances surrounding it -- negatively impact your credit rating in a variety of ways.

Late Payments

If your creditor accepts your settlement offer while your account is still current, you will suffer less credit damage than if the creditor refuses to accept a settlement until your account is seriously delinquent. Unfortunately, creditors have little incentive to accept a settlement unless the risk exists that you will not pay the debt at all. Thus, if its a settlement you're after, you'll probably have to let your account fall into default before the creditor will negotiate with you.

The downside to this is that each month when your payment does not arrive, the creditor reports the delinquency to the credit bureaus. Each late payment notation further drives down your credit score. By the time the creditor accepts a settlement -- if it negotiates with you at all -- your credit rating will be considerably less than it was before you stopped making regular payments.

Old Debts

Settling an old debt may make you feel better, but doing so adversely impacts your scores. The more recent an entry is on your credit report, the more effect it has on your credit score. Although paying off an old debt will not hurt you, settling an old debt causes the account trade line on your credit report to update. Because the settlement -- a negative event -- is a recent entry, your credit score suffers as a result of settling old, unpaid debts.

Collection Accounts

Consumers who settle debts with their creditors do so under the assumption that the creditor will forgive the remaining balance they owe. Unfortunately, this does not always occur. Unless you sign a settlement agreement with the company in which the creditor agrees not to sell the remaining debt you owe, it can sell the post-settlement balance to a collection agency. Collection accounts on your credit report are inherently derogatory. If you settle a debt and your creditor sends the remaining balance to a collection agency, the resulting collection account on your credit report will lower your credit score.

Impact Over Time

Because the amount of time since a creditor reported a negative entry is a factor that helps determine your credit score, your score will gradually increase as time passes after a debt settlement. According to the Fair Credit Reporting Act, all delinquent or settled commercial debts you owe will vanish from your credit history after seven years and 180 days. Once the settlement no longer appears on your credit report, it can no longer adversely affect your scores.

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The Best Reporting Company for Credit Scores

Your credit score is a number between 300 and 800 that gives lenders a quick assessment of how likely you are to repay your loan. Potential employers also use credit scores during the hiring process. It is good to know your credit score.

Credit Report vs Credit Score

Your credit report is a history of all your credit and how promptly you paid your bills. Your credit score is not automatically included with your credit report; you must order it separately.

Annual Credit Report

Consumers are allowed by law to receive one copy of your credit report each year for free from www.AnnualCreditReport.com. This same service offers your credit score for a one time fee of $7.95. It is the best company to get your credit score.

No Monthly Fees

Many other companies offer your credit score to you as part of a more comprehensive credit monitoring service. If all you need is your score, this is not necessary and you're overpaying.

Avoid Scams

There are some websites that offer free credit reports or credit scores that are not free. Some of these sites are phishing sites trying to get your personal information. It is best to request your credit score only from major credit reporting companies or annualcreditreport.com.

Effect

Contrary to popular belief, ordering your own credit score does not impact your credit history.

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Tips on Maintaining a Good Credit Rating

Credit ratings aren't awarded; they're earned. A credit score, or credit rating, determines whether you qualify for a loan, credit card or service, and often, the terms of that loan are based on your credit rating. Lenders use that number to estimate your ability to repay the debt. Maintaining a solid credit rating requires making regular payments, communicating with your creditors and checking your credit report annually.

Money Management

Credit ratings aren't based only on your credit card use, but also on your payment history with car loans, mortgages and even medical bills. But credit card usage and payments are most often associated with a credit rating.

Carrying too many credit cards, even if you don't use them frequently, can damage your credit rating. It's not always easy to turn down the almost-daily invitations you receive in the mail--low-interest rate cards, free gifts, no-transfer fees--but try.

As for the cards you already have, work to lower your credit card debt by making more than the minimum monthly payment. The interest on a $1,000 purchase, for example, takes more than seven years to pay off if you make only the minimum payment. That amounts to an additional $800 in interest. If possible, pay the entire balance each month.

You can also get your credit card usage under control by using them only in emergencies, as swiping a credit card is the equivalent of taking out a loan every time you use it. Besides credit cards, pay attention to monthly bills. Whether you use automatic draft or a detailed calendar, bills should be paid on time to avoid negative marks on your credit rating.

If you have loans, pay them first each month, avoiding unnecessary expenses like dining out. You'll see the loan amounts decrease more quickly and your credit rating will remain intact.

Damage Control

A debt doesn't disappear because the creditor has stopped sending notices.The reality is the bill may have been turned over to a collection agency. And once that's happened, the bad debt will find its way to your credit report. Your best bet in avoiding damage to your credit rating is to call the collector and try to work something out instead of ignoring the phone or the mail. Communication and a good faith effort may prevent a charge-off, or negative mark, on your credit report.

Check Your Credit & Take Action

Be diligent about checking your credit rating. Check your credit report at least once each year. The Public Interest Research Group (PIRG) claims that one out of every four credit reports contains errors. Your first order of business should be to get those negative marks off your report. Consumers are allowed by law to obtain a free credit report each year--one from each of the three major credit reporting agencies: TransUnion, Experian and Equifax. To download a copy of your report, visit www.annualcreditreport.com. Or you can call (877) 322-8228 to request a copy to be sent via mail. The three agencies might not all contain the same information. Therefore, consumers should check a different agency every four months to confirm that errors are being corrected and that new problems aren't surfacing.

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How to Boost Credit Scores Easily

At a time when credit is hard to get, it is imperative that you always have your credit score in the best shape possible. There are several ways that you can boost your score with little effort. By following the few simple steps below you will find that your score will improve over the next 30-60 days.

Instructions

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1. Do not apply for any new credit. Anytime that you apply for your credit, your credit score drops. If you apply for credit more than three times is a thirty day period your score will drop by several points. Credit reporting agencies see an influx of credit requests as a sign of desperation, and they will lower your score accordingly.

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2. Opt out of any free credit offers. When you are "pre-approved" these companies pull your credit report prior to sending you any information. This again is seen as a request for credit and your score will drop. Since the credit reporting agency does not know if you will accept the pre-approved card, they automatically drop your score for a short period.

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3. Pay everything on time. Each time you make a payment on an account on time you will raise your score. By paying a little extra on the account will also boost your score. If you pay too much though, your score will stagnate or lower. Credit reporting agencies see overpayments as a breach in contract and score accordingly.

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4. Review your credit report for inaccuracies. These inaccuracies can include a wrong address, mis-spelling of your name or even the wrong middle initial. You must dispute any of these items because the credit bureaus see alternate spellings and addresses as a person trying to get credit under an alias. This will tank your score. Of course, you must review all your accounts for accurate reporting and to make sure there are no false accounts.

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5. Guard your identity. If someone assumes your name or creates an account on your identity you will have a very hard time regaining the credit score you deserve.

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You can obtain your free credit report and score by visiting http://creditreportviewer.com or following the link in the resource section below!

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How to Get in Touch With a Credit Reporting Agency

You can get in touch with the three national credit bureaus--Equifax, TransUnion and Experian--through standard mail, the telephone and online. If you're looking to order a copy of your credit report, skip the bureaus and visit Annual Credit Report (see Resources). That's a website set up by the credit bureaus to offer free copies of your credit report, as required under the Fair Credit Reporting Act. Contact the credit bureaus directly for other reasons including challenging inaccurate information on your reports or reporting identity theft.

Instructions

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Call or write TransUnion or visit the website:

TransUnion Consumer Solutions

P.O. Box 2000

Chester, PA 19022-2000

800-916-8800

transunion.com

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Call or write Equifax or visit the website:

Equifax Consumer Services

P.O. Box 740256

Atlanta, GA 30374-0256

800-846-5279

equifax.com

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Call or write Experian or visit the website:

Experian

P.O. Box 2104

Allen, TX, 75013

888-397-3742

experian.com

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The Best Way to Fix Your Credit Score

Your credit score can keep you from purchasing a home, car or even opening a checking account. To get your credit back on track, you will need to examine what is on your credit report. Obtaining a credit report will help you determine if the credit is accurate, and what steps you need to take to reverse the debt, so you can fix your credit score.

Ordering & Examining Your Credit Report

To repair your credit score, you must first know what your score is, and what is on your credit. That's why it is necessary to order a copy of your credit report and carefully review everything listed on the report. There are three credit reporting agencies, therefore you will want to have a copy of each of the three credit reports, because the reports do not all list the same debts or creditors. To order your credit report, you may contact the credit agencies and pay for one, everyone is entitled to one free copy a year, or if you have been denied credit, you may request a copy of your credit report from the reporting agency.

Disputes

When you have received your credit report, make sure you go over it accurately and thoroughly. If there are any mistakes listed on your credit report, you will need to dispute the charges. The creditors may be reporting an inaccurate amount of debt, or the debt may have been paid, but is still showing up on your credit report. For these instances, disputing any debts that should not be listed will help your credit score if the debts are inaccurate. You should document all disputes, so you have proof that you do not agree with the debts listed on your credit report.

Pay And Dissolve Debt

Once you have determined what debts are accurate, you will want to dissolve those debts immediately. You may do so by calling the creditor and arranging a payment plan or arrangement that will allow you to bring the account to a good standing. Some creditors will lower the required payment amount for a percentage off. Once the debt has been paid under the terms the creditor has agreed to, the debt will be removed from your credit report, and your credit score will go back up.

Stabalize Credit

To improve or fix your credit score, you will need to stabilize your credit. You can do this by paying your current lines of credit on time, and this will reflect a positive payment history on your credit report. Do not overextend yourself, because you can end up back in debt like before, and your credit score will drop again.

File Bankruptcy

Another way to fix your credit would be by filing for bankruptcy. There are rules and criteria that must be met before your debt is discharged. In the case your petition is granted, and creditors do not challenge your claims, the debt will be removed from your credit report. However, this will not automatically raise your credit score, but you may be offered credit in the future after the bankruptcy has discharged.

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Can We Actually Fix Credit?

Some consumers accept their bad credit and put forth little effort to improve their score. Consequences of bad credit include higher interest rates on loans, credit rejections and even increased insurance premiums. Credit doesn't improve overnight, rather, it's a gradual process. But with effort, consumers can fix their credit score and qualify for the best loan programs.

Payment Habits

Myfico.com explains the importance of timely bill payments, which involves avoiding late or missed payments. Payment habits contribute to 35 percent of credit scoring, which makes this aspect a crucial factor in maintaining a good credit score. Fixing bad payment habits might involve organizing statements as they arrive in the mail. Schedule payment dates in advance by writing due dates on a calender, or paying bills as they arrive can alleviate lateness and help fix credit scores.

Credit Card Balances

Credit cards serve a useful purpose, but unfortunately, some consumers can't control themselves and they acquire excessive debt buying unnecessary items. The amount owed on credit cards and other debts influence credit scores by 30 percent. In conjunction with paying bills on time, fixing credit and maintaining a high score involves controlling debt and keeping balances on credit cards to a minimum. Tips to help get rid of high debts include paying more than the minimum, paying off credit card balances in full each month and saving up for purchases instead of taking out loans or using credit cards.

Keep Accounts Open

The length of credit history also factors into credit scoring. Credit history starts the moment a consumer opens their first account, and this might include opening a credit card account. Older credit card accounts add years to credit history, which has a 15 percent influence on credit ratings. Closing or canceling an older account can reduce the length of one's credit history by years, and this move can hurt their credit rating. Keep accounts open, and occasionally use credit cards to keep the account active. Make a small purchase and then pay off the balance in full to avoid debt.

Dispute Reporting Errors

No one's immune to credit report issues, and creditors and lenders do occasionally make reporting errors. These can include reporting another person's negative information on your personal file (collections, late payments, liens). Identifying errors quickly and getting these issues resolved involves reviewing your credit report periodically. Order a free copy of your report from Annual Credit Report at least once a year, and consider signing up for credit report monitoring to lower your risk of becoming an identity theft victim.

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I'm Being Sued: How Will This Affect My Credit?

If getting sued doesn't cause enough to worry about, apart from the legal fees and time involved, you should be aware that a lawsuit may also impact your credit score. While not all lawsuits impact your score, they can significantly lower your credit score. If you need help with a lawsuit or understanding how the lawsuit might affect your credit, contact an attorney in your area for legal advice.

Credit Reports

The three companies that maintain consumer credit reports: Experian, TransUnion and Equifax, collect information from creditors about each individual lender. Whenever you engage in a transaction involving credit, such as taking out a credit card or applying for a lease, this information can wind up on your credit report. These companies use this information to create credit scores that represent how good or bad a consumer has handled credit in the past.

Lawsuits

A lawsuit is a civil legal action brought about when one person or organization, called a plaintiff, asks a court to award damages because it claims that another person, called a defendant, has caused the plaintiff injury or damages. Civil lawsuits range from small claims cases involving low-dollar amounts to massive class-action lawsuits involving thousands of people and billions of dollars. In general, only lawsuits that involve you and your creditors will impact your credit report.

Debt Lawsuits

The most common type of lawsuit that impacts your credit comes when a creditor sue you for an unpaid debt. If, for example, you fall behind on your mortgage payments and your lender forecloses on your home, this impacts your credit report because it involves your ability to pay your creditors. How much a lawsuit affects your credit score varies based on different factors such as the company calculating the score, but Yahoo Finance reports that if, for example, you have a foreclosure on your credit report, you could see your score lower by between 85 and 160 points.

Other Lawsuits

Even if you don't default on your loans and are not sued by your creditors, your credit score can still be affected by a civil lawsuit. If, for example, you get sued in small claims court by your landlord and your landlord wins, the landlord wins a judgment against you. The landlord then becomes a judgment creditor, and that judgment can get listed on your credit report and impact your credit score.

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Advantages & Disadvantages of Credit Scores

An individual's credit score is a three-digit number that attempts to compile all of the information about how that person has managed credit. Credit bureaus gather data about the person's credit accounts, money-related court records, credit applications and payment history. Gathering the data and converting it into a credit score can be advantageous or disadvantageous to the borrower in several areas.

Expedite Credit Decisions

Credit scores are advantageous for lenders who need to make credit decisions quickly. A lender likes to know as much as possible about how good of a borrower the applicant will be. A credit score encapsulates a lot of data in just one number so the lender can, at a glance, determine approximately how much of a risk the borrower is. It would take much longer for the lender to research the borrower's history directly with other lenders. This expedited process decreases the cost of borrowing and makes credit more widely available.

Determine Interest Rate

Lenders use potential borrowers' credit scores to determine what interest rates to charge. This can be either an advantage or a disadvantage, depending on whether the borrower's score is above or below average. People with good credit scores are rewarded for their good borrowing habits with a lower interest rate. On the other hand, people who have bad credit scores will pay for it as they have to pay a higher interest rate on all of the money they borrow.

Compile Long-Term Data

A credit score compiles information about all of the borrower's open accounts, plus positive information about accounts that have been closed for less than 10 years and all negative information from the past seven years. This can help or hurt an individual. It is advantageous for someone who has managed credit well over the long term because one mistake usually does not have a disastrous effect because so much positive information outweighs it. On the other hand, someone who has managed credit poorly and is trying to turn his financial condition around will have to spend a few years managing credit well before the score accurately reflects his new habits rather than the old ones.

Doesn't Reflect Unusual Situations

Many factors can affect a borrower's credit score, and in some cases, the credit score does not reflect a borrower's responsibility with credit. For example, if a couple is on the verge of a nasty divorce, one spouse might purposefully run up a joint credit card balance or fail to pay bills just to ruin the other person's credit. Or someone might have had to pay for expensive unexpected medical treatments that made it impossible to keep up with bills, even though the borrower would have been fine if the medical treatments had not been needed. Individuals can add a short explanation to their credit files, but lenders do not always consider such explanations.

Require Additonal Monitoring

Credit reports are not always accurate. Individuals often end up with accounts on their reports that do not belong to them or inaccurate reports of late payments. Although credit bureaus allow individuals to dispute information, the process is not instant and in some cases, the dispute does not turn out in the individual's favor. Keeping a credit report free of errors is just one more thing for individuals to worry about.

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How Can I Get My FICO Score?

Lenders use your FICO score to determine the risk involved in doing business with you, since this three-digit number (which generally ranges from 300 to 850) reflects your overall credit history. Credit card companies, banks, landlords and prospective employers may all view your FICO score when assessing your application for a credit line, apartment or job. Poor credit scores can mean being passed over for other candidates with a stronger credit history. Reviewing your FICO score is an effective way to identify incorrect information or accounts that must be repaid in full to regain points. You can get your FICO score through a number of avenues.

FICO Score

Your FICO score is composed of several factors. One component is your credit portfolio; lenders like to see a mixture of installment loans (such as student loans and home mortgages) and revolving credit (such as credit cards) but in general, installment loans are viewed more positively than revolving accounts. Your score also reflects length of history with lenders: Having longstanding relationships with lenders is viewed positively while recently opening numerous new credit card accounts reflects poorly. Other factors include your debt-to-income ratio and payment history.

Direct Purchase

The most direct way to get your FICO score is through purchase. Visit the myFICO.com website and prepare to enter credit card information to receive your score. After your payment is processed, you will be able to instantly view your credit score. Consumers have multiple FICO scores because of the varying ways credit information is reported to the three credit bureaus (Experian, TransUnion and Equifax), and it's possible to purchase more than one at a time. In 2011, consumers can purchase their FICO TransUnion and FICO Equifax scores for a total of $39.90, or $19.95 each.

Annual Credit Report

Another way to get your FICO credit score is to pay a fee to access the score when reviewing your annual credit report. Federal law requires the credit bureaus to furnish a free copy of a person's credit report each year, at consumer request. You may request the free annual credit report online within the official Annual Credit Report.com website, and then enter credit card information to receive your FICO score.

Credit Monitoring

Some financial services companies offer a free look at your FICO credit score if you sign up for a trial period of their product; for example, credit monitoring. This workaround helps you view your score for free, but if you forget to cancel the trial membership, you'll wind up paying monthly fees for the service.

Estimates

If you don't need a exact score, myFICO.com offers estimates for consumers willing to enter their financial information in response to questions such as how many credit cards you have, how much time has passed since you took out your first loan and the total balance of all of your loans, including auto loans, credit cards and home loans. The estimate won't be exact but can paint a general picture of what lenders may view when accessing your credit score.

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Credit Repair & Monitoring

Monitoring your credit history and keeping a close eye on your report is just as important as maintaining a good credit rating. Credit ratings factor into loan approvals and interest rates and the information on your personal report affects credit scoring. Anyone interested in a building a strong credit profile should review their file periodically and practice good financial habits.

Self Check-ups

Checking your own credit report is one way to monitor your report and improve your credit score. Because the information on your report plays a role in your score, watching your report carefully for signs of fraudulent activity or creditor mistakes helps keep your report in good shape. Annual Credit Report is the authorized online resource for free credit reports. Request a free report so you have access to all three of your reports from the three credit bureaus. You can order one free report yearly.

Credit Report Monitoring

Because Annual Credit Report only allows one free request a year, consider signing up for a credit report monitoring service that tracks your credit activity for as long as you're a member. Someone can get a hold of personal information and apply for credit in your name. With a monitoring service, you will receive e-mail notifications if someone submits a credit application using your name and Social Security number.

Payment History and Debts

Repairing your credit involves knowing what factors into your credit score and making improvements in these areas. According to Myfico.com, your payment record makes up 35 percent of your rating, whereas your debts make up another 30 percent of your rating. Improving these two factors can significantly increase your present credit rating. Start paying bills on time and devise a plan to bring down balances on credit cards.

Other Factors that Influence Credit

Payment history and the amount you owe aren't the only two factors in credit scoring. Factors such as length of credit history, types of credit and credit inquiries also influence your score. There's no easy fix for a short credit history (15 percent of credit score) and improving your credit in this area calls for keeping older accounts open and allowing time to pass. With regards to credit inquiries (10 percent of credit score), keep credit applications to a minimum. Don't apply for retail charge cards or loans unless necessary. For example, if you only have one type of credit, branching out and acquiring another type of credit can help your score because diversifying credit makes up 10 percent of your credit score.

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How to Apply for Credit Cards Without Hurting Your Credit Score

Applying for credit cards shouldn't hurt your credit score by more than just a few points--as long as you don't overdue it. Each time you apply for a card your credit will be checked by the card company, resulting in a credit inquiry. The fewer inquiries on your report the better, according to the website myFICO. Applying for multiple credit cards all at once, or even over the course of a year could significantly hurt your credit score as it creates a perception that you're loading up for a spending spree or taking on more credit than you can afford.

Instructions

1

Get a copy of your credit report. Reviewing your credit status will help you avoid applying for cards that you aren't qualified for. Order your credit report for free from the website Annual Credit Report (see Resources). View and print your report from the website or see instructions on the homepage to order by telephone or mail. The Annual Credit Report site was created by the three nationwide credit bureaus to offer free credit reports as required by the Fair Credit Reporting Act.

2

Order your credit score separately for a nominal fee by following instructions included with the report you receive through Annual Credit Report. You will be able to order your score directly from any of the three nationwide credit bureaus. Knowing your score is important as you seek to create as few credit inquiries as possible. For example, if your credit score is less than 620--generally the cutoff for "good" credit--you may be better off applying for department store or gas station cards than a full-featured bank credit card.

3

Compare credit cards by reviewing marketing materials from your bank or credit union, or online at credit card comparison websites (see Resources). Note any minimum qualifications, such as household income levels.

4

Apply for a single card. Wait several months--or longer--to apply for another. MyFICO says a single credit inquiry will hurt your score by less than five points. Thus, a drop in score of one or two points is really insignificant.

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Credit Reporting Time Limit

When you have negative items on your credit report, you may have problems opening new accounts and getting loans. Your bad credit might also keep you from getting insurance or a job. Not all items have such a severe impact. For example, too many inquiries by lenders can bring down your credit score, but not nearly as much as late payments, court judgments or bankruptcy. Fortunately, almost all negative items will drop off your report within a specified time limit.

Inquiries

When you apply for a credit card, loan or other credit account, most financial institutions will review your credit report. Their inquiries will show up on your report for two years from the date each inquiry occurred.

Late Payments

Late payments will remain on your credit report for seven years. According to Bad Credit Advisor, this period starts with the month in which the payment was originally due. If you pay late several times on the same account, each late payment will drop off your report in its individual time frame.

Collection Accounts

No matter when an account is purchased by a collection agency or given to the agency, it will still fall off your credit report in seven years from the original delinquency date. A credit agency cannot legally restart the clock just because the debt is now in its hands. Some may try, but you can file a dispute with the credit bureaus to have the information removed.

Charge-offs

Charge-offs are balances that the lender has deemed uncollectable. The time limit for reporting of charge-offs is seven years, starting on the original delinquency date plus 180 days. Even though a charge-off has been written off by the original lender, it may be sold to a collection agency. This will not automatically start the clock again.

Foreclosures, Suits and Judgments

When you lose your home to foreclosure, it will appear on your credit report for seven years. Lawsuits and judgments will normally stay on your credit report for seven years, too. However, if your state has a shorter statute of limitations, this information will be removed within that period rather than the full seven-year period.

Bankruptcy

A Chapter 7 bankruptcy remains on your credit report for 10 years from the date it was filed or the date of the bankruptcy decree. A Chapter 13 bankruptcy will drop off your credit report in seven years if you pay it as agreed. If you do not, it will stay on your record for 10 years.

Student Loans and Tax Liens

If you don't pay your federal student loan, it can stay on your credit report forever. If you pay it off, the time limit becomes seven years. Unpaid tax liens can also stay on your report indefinitely. If you pay your lien, it will be removed seven years after your payoff.

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How Do Settlements Reflect on a Credit Report?

Anyone facing a mountain of debt should seriously consider settling their debts. When you settle a debt, the amount you pay is substantially lower than the original balance. Some creditors will accept offers of 50 percent of the outstanding balance and in some cases the percentage can be 30 percent or 40 percent. The amount you can negotiate for depends on your relation with the creditor. The down side of debt settlement is that it adversely affects your credit report for some time.

Paid Settlement

When you settle a debt, your credit report will indicate that the account has been settled or it will say paid settlement. This information will serve to lower your credit score. The amount your score is lowered will vary from borrower to borrower. Derogatory information, such as this, remains on your credit file for seven years. When seven years has elapsed, the bad credit should drop off your file automatically, otherwise you can send a letter of dispute to the credit reporting agency.

Charge-Offs

Sometimes debts are charged off as bad debts before they are settled. When you settle a charged-off account, it can reflect as a paid charge-off or it could show up as a paid settlement. After you have settled your debts, other creditors will see that you had financial difficulty in the past and most likely they won't approve you for credit. When debts are charged off and settled, your credit score will decrease even more.

90 Day Account

Most creditors will not agree to settle your debts until they are 90 days past due. Any debts 90 days old at the time of settlement will not reduce your credit score significantly. The 90-day accounts have already decreased your score substantially. Establishing new credit after the settlement can significantly help your credit score. You must pay consistently on time to reap the benefits.

Written Agreement

When you are about to negotiate a debt settlement, keep in mind that your credit rating can be included as part of the negotiation. Let your creditors know that you would like to have the derogatory information removed from your credit file, upon payment, or have a favorable rating reported. Some creditors will agree to these terms and conditions and others will not. If you get a creditor to agree, make sure everything is in writing. Store your written settlement agreement with your other important papers.

Future Credit

In the future when you apply for credit, any creditors will most likely deny your credit request except those charging high interest rates and an excessive amount of fees. This is how they lower their risk of doing business with you. Once you are approved for a high interest rate credit card, continue to make timely payments and eventually you will be able to receive a credit card with favorable terms.

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How to Fix Negative Credit Reports

Negative information on your credit report could make it difficult for you to buy a house, a car or even take out a small loan. The negative information can remain on your credit report for at least seven years, but that may not be quite as bad as it seems. Your score is only one thing creditors review when considering you for credit. Most also will review how you have paid your bills over the past 12-24 months, and a steady string of on-time payments is the best way to improve your credit and offset any negative information.

Instructions

1

Order a free copy of your credit report. Use the website Annual Credit Report (see Resources, below), which was set up by the credit bureaus to issue free credit reports as required by federal law. Click on "Request Report" on the home page to order or call 877-322-8228.

2

Refer to your credit report as you make a list of all your negative information. Include all accounts listed as past due, charged-off or in collections. Make payments to bring open, but delinquent, accounts current. If you don't have the money, contact your creditors about so-called hardship plans that could temporarily reduce your minimum monthly payments and interest rates while you catch up.

3

Contact creditors or debt collectors about old accounts that have been charged off. Offer to settle the accounts for less than the full amount owed--a common tactic called debt settlement. Debt collectors will sometimes settle old accounts for half the original balance or even less, according to a Jan. 2, 2009 story in The New York Times. Also ask the debt collector to delete the negative information from your report as a condition of payment. The debt collector may not agree, but it won't hurt to ask.

4

Audit the rest of your credit report for inaccuracies. The Fair Credit Reporting Act gives you the right to challenge all information on your credit report--even negative information that you know is correct. This loophole could provide you with another opportunity to fix your negative information. According to the fair credit act, credit bureaus must confirm the accuracy of anything you challenge within 30 days after receiving notice from you. By law, the information must be removed if the credit bureau cannot confirm its accuracy before the deadline expires. Dispute the information by writing a letter and mailing it to the credit bureau at its address listed on your credit report. Include your name, address, and Social Security number. List the account numbers for the negative information that you are disputing and provide a reason. You can claim that you never paid the account late or provide another reason for your dispute. Ask the credit bureau to delete the negative information upon completion of its investigation. The credit bureau will send you a letter regarding its findings in about 30 days.

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About Improving Credit

Bad credit or no credit history makes it harder for you to obtain loans. And even if a lender approves your loan application, a bad credit history often results in a higher interest rate and monthly payment. But fortunately, there are ways to quickly improve a low credit score and obtain the best rate on auto loans, mortgage loans and other types of loans. Regardless of whether you've experienced a foreclosure, bankruptcy or repossession, you can increase a low score and establish a good credit history.

New Lines of Credit

If you don't have a line of credit due to bankruptcy or no credit history, opening a new line of credit can help improve your credit score. There are many ways to obtain a new line of credit. Contact your local bank and inquire about secured credit cards. These cards are purposed to help people with bad credit and no credit history and require a security deposit. Even so, approvals are guaranteed. Also, many auto lenders feature bad credit auto loans designed to help applicants with bad credit to restore their credit.

Timely Payments

Skipping a payment or making late payments reduces your credit score. Making on-time payments (every month) adds points to your FICO score, and this is a surefire way to maintain a decent credit rating. Pay attention to due dates; and if necessary, enroll in an automatic billpay program to avoid late payments.

Debt-to-Income Ratio

Regardless of whether you pay your bills on time each month, having a high debt-to-income ratio can decrease your credit score. If possible, pay off your credit card balances every month. If this isn't possible, keep credit card balances below 25% of your credit limit. Therefore, if your credit limit is $1,000, do not exceed $250. Requesting an interest rate reduction and doubling or tripling your monthly payments can help you pay off your debts sooner.

Check Your Credit Report

Order a copy of your credit report once or twice a year to check for inaccurate remarks and unfamiliar accounts. Credit report errors can reduce your FICO score and make it difficult for you to obtain a home loan or auto loan. Request a copy of your report from Annual Credit Report (see Resources), and thoroughly examine the report for errors. Contact the original creditor and the credit bureaus to report any errors.

Credit Piggybacking

Ask someone with a good credit history (spouse, sibling or parent) to put your name on one of their accounts. Often referred to as piggybacking, adding your name to someone's credit account is another way to quickly improve your credit score. In turn, you benefit every time they make a payment or pay off the account. Although you're not the primary account holder, the credit account will appear on your credit report. Your score will increase as long as this person maintains a good payment history with the creditor.

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Can Credit Checks Affect Your Credit Score?

Credit checks are inquires into a credit report by either an individual, business or employer. Individuals seeking to improve their scores will check their reports often to ensure that correct information is being recorded. Many individuals sometimes wonder if all of this checking will affect the score. This depends on who is performing the inquiry.

Types of Inquiries

Inquiries come in two forms, soft and hard. Soft inquiries do not involve requests for credit. When you check your credit report, it is a soft inquiry. Hard inquiries are done when someone is applying for a new line of credit. If you apply for a car loan, the lender performs a hard inquiry. A hard inquiry can be done only with your permission.

Who is Checking My Report?

Car dealers, banks and insurance companies do hard inquiries when you sign a credit application giving them permission to do so. Soft inquires, on the other hand, are sometimes performed by credit card companies or other potential creditors for pre-approval offers. Landlords and employers may perform soft inquiries on your credit report to determine your financial acumen. Only businesses or individuals with a specific business reason can pull a copy of your credit report. If you want to limit the number of pre-approval inquiries made to your credit report, contact the credit reporting agencies to request removal from marketing distributions.

Credit Inquiry Effect on FICO Score

The good news is that you can make as many soft inquiries as you would like without affecting your score. This means that those who are monitoring their scores on a regular basis do not have to worry. Hard inquiries are another matter. They lower the score slightly, although not by much. Inquiries only count for about 10 percent of the overall score, so an inquiry or two over the course of a year will not hurt it. If you are house hunting or car shopping, be aware that credit agencies count multiple inquiries occurring in a 14-day span as one inquiry. Though hard credit checks have a lowering effect on the score, individuals rarely are turned down for credit due to multiple inquiries on their credit report.

Your Credit Report

If you are asking yourself why hard credit checks are viewed negatively, it is because potential creditors want to make sure you are able to repay your debts. Too many credit applications in a short period of time could signal the start of some financial problems. Inquiries appear on the bottom of your credit report as a record entry. Inquiries only appear on the credit agency report that is pulled. For example, inquiries to Experian will not appear on a TransUnion credit report. Inquiries will remain on your credit report for up to two years from the time they were pulled. Soft inquiries may fall off after one year. Many creditors disregard inquiries more than six months old.

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How to Clean a Credit Report for Free After Bankruptcy

What many people do not realize is that you actually can clean your credit report after having a bankruptcy. Many times you can actually raise your score significantly even before the bankruptcy falls off of your credit report, which can take up to 10 years. It may take a little trial and error, but you can clean up your credit report after a bankruptcy and get your financial future back on track in a lot less time.

Instructions

1

Obtain a current copy of your credit report. You may not even have looked at your credit report since the bankruptcy, and there may be mistakes or errors on your credit report that you do not even know about. To get a copy of your credit reports for free every year, go online to annualcreditreport.com and request copies. You can view them online, and print them out right at home.

2

Check your current credit report for any errors. You credit report may be brought down not only from your bankruptcy, but from errors made by your creditors. If you find any errors on your credit report, you can dispute the charges with the credit reporting agency that the report came from. This can be done online by filling out an inquiry, or even mailing them a letter explaining the dispute.

3

Work with collection agencies, if any, to work out payment plans to get out of debt faster. If you have any past debt that was not declared on the bankruptcy, talk to the creditors or collection agencies and work out a payment plan that works for you to get the debt cleared. Make sure that it is something that you can afford.

4

Obtain a small loan to start rebuilding your credit. Even if it is a small auto loan or personal loan, you want to start rebuilding your credit so that your score will increase after the bankruptcy. Be prepared to expect that you will need either a co-signer or expect to pay a higher interest rate.

5

Request a secure credit card. Since you will probably not qualify for a unsecured traditional credit card, a secure card will allow you to start building your credit. Check for a company that charges low fees and reports to all three credit reporting agencies: Experian, TransUnion and Equifax. This will help your credit increase with usage.

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How to Dispute a Credit Card Opened in Your Name

When a credit card is opened in your name -- and you are not responsible for opening it -- the potential for problems can be far-reaching. Each credit card in your name goes onto your credit report. The credit report shows any payment delinquencies that an identity thief creates with the stolen information. The credit report also plays a significant role in your ability to apply for a home loan, a car loan, apply to purchase insurance, and even apply for a new job. As a result, any credit problems that you have not created, need to be addressed immediately. Disputing a credit card opened in your name requires several steps that are necessary to put your credit back on track and remove any information that is the result of identity theft.

Instructions

1

Request a free copy of your credit report. The Federal Trade Commission (FTC) recommends that consumers request their credit report from AnnualCreditReport.com. This report is entirely free and also links the credit reporting from the other three primary credit report companies in the U.S. Among these three (Equifax, Experian, and TransUnion), consumers can usually request a free copy of their credit report once in a 12-month period. Requesting a copy of the credit report from these companies more than once in a twelve-month period might incur a small fee.

2

Contact the consumer reporting company to let them know of the identity theft. The FTC advises that consumers contact the credit reporting company in writing to explain that a credit card has been opened fraudulently and request clearly that the information be corrected on the credit report. Be sure to include photocopies (but never originals) of any documentation to prove that identity theft has occurred. This might include information proving that you were not in the location where a fraudulent purchase was made. It is important keep a copy of the letter and any information that you send the credit reporting company and to send it via certified mail. By law the credit reporting company must begin the process of addressing the claim of identity theft within 30 days.

3

Contact the credit card company to let them know of the identity theft. Check to see if the credit card company provides a specific address for directing disputes (many do), and send another letter explaining what has occurred and requesting that the credit card be closed or your name be removed in connection with it. Again, be sure to include photocopies (not originals) of any documentation to support your dispute, and send the information via certified mail. The credit card company is also responsible for reporting the dispute to the consumer reporting company.

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Free Credit Score Analysis

The responsibility of analyzing your credit report falls largely on your shoulders, but you can seek credit counseling to help you manage your debts. However, don't wait for a loan denial to know your credit score. Federal law entitles you to a free copy of your credit report every 12 months. Credit scores range from 300 to 850. Generally, if your credit is below 600, you are considered a higher credit risk.

Credit Report

Your credit report chronicles all aspects of your financial history beginning with your very first credit account. It also includes places you've lived, jobs that you held, names or aliases that you might have used and any public records, such as judgments and liens. When analyzing your credit report, it is important to take note of all negative items that are dragging down your credit score. Delinquencies, defaults, judgments and bankruptcies can kill your score. As you go line-by-line, identify any items that are false, inaccurate or incomplete which you can later dispute.

Getting Your Credit Report

Following the enactment of the Fair and Accurate Credit Transactions Act, the credit rating agencies created a website, annualcreditreport.com, so that consumers can have access their credit reports each year. Visitors to the website create an account and answer several security questions before gaining access to their credit report from Equifax, Experian and TransUnion. You are also entitled to a free copy of your credit report if a lender denies you credit. The lender must notify you regarding which credit rating agency it used to make its decision.

Correcting Errors

The Fair Credit Reporting Act promotes accuracy and privacy of information contained in consumer credit reports. According to the FRCA, the credit reporting agencies and the company or organization that provided credit information about you are responsible for correcting any errors in your credit report. If you find inaccuracies in your credit report, contact the CRA and the lender that supplied the information in writing. Your dispute letter should include copies of supporting documentation. The CRA has 30 days to investigate and must forward any information provided by you to the lender that supplied the information. You are entitled to a free copy of your credit report if your dispute results in a change. And, upon your request, the CRA must send notice of corrections to anyone who received your report within the last six months.

Rebuilding Credit

Take a proactive approach to rebuild your credit. Paying off debts, paying on time and using credit wisely are all actions that improve your credit score. According to FICO, creator of the widely-used FICO score, payment history and outstanding debts account for 65 percent of your total credit score. If you take on new credit such as a credit card, make small purchases than can be paid off quickly. If you want to avoid traditional credit cards, you can apply for a secured credit card that basically ties your credit limit to a cash account. If you are eliminating debts, start off with higher interest rate accounts.

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Do All Bankruptcies Affect Your Credit?

Declaring bankruptcy always affects your credit, even if your withdraw your case, but not all bankruptcies affect your credit in the same way. Although bankruptcy is the worst item you can have on your credit report, it may not affect your credit rating much. In some cases, a bankruptcy can boost your credit rating -- at least temporarily.

Identification

Whether you file Chapter 7 or 13, a bankruptcy case always affects your credit rating because the credit reporting bureaus search public records for bankruptcies. Voluntarily dismissing your bankruptcy case affects your credit rating too because you had to consider filing in the first place. Chapter 13 bankruptcy only stays on your report seven years after you complete your payment plan and Chapter 7 cases always stay for 10 years. Chapter 13 cases tend to stay the full 10 years because most cases take three to five years to complete.

Effect

Bankruptcy usually lowers your credit rating, but some consumers see a boost to their score because of a bankruptcy case. This occurs because bankruptcy eliminates the history and balances on included accounts -- except for secured debts -- so a single bankruptcy might impact your rating less than years of missed payments and delinquent debt. At the very least, bankruptcy may not lower your score by the 240 points or more damage it does to elite scores, because you already likely have a terrible rating before you file bankruptcy, according to Aleksandra Todorova of Smart Money.

Avoiding Bankruptcy

Go to a credit counselor from one of the major nonprofit credit counseling organizations, such as the National Foundation for Credit Counseling. You have to attend credit counseling to file bankruptcy anyway. The counselor may have options for you to avoid a bankruptcy. For example, the counselor may suggest you settle debts with creditors for a fraction of the balance or the counselor may try to negotiate a single payment to all creditors.

Tip

Once you complete your bankruptcy case, start rebuilding your credit. Begin by assessing your budget and whether it can meet your debt obligations and monthly expenses. If you do not have a savings account, try to put at least $500 in an emergency fund, suggests Liz Weston of MSN Money Central. You need to use credit again to build a good credit rating. You can almost always acquire a secured credit card by putting a security deposit on the credit limit, and the bank may offer an unsecured line after a year or so of no missed payments.

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What Is a Fast Way to Get Your Credit Score Higher?

FICO scores range between 300 and 900, says Bankrate.com. Consumers with the highest scores receive good rates and terms on different types of finance packages. Numerous factors play a role in a low FICO score. And sadly, many consumers don't value the importance of a high score, or know how to maintain a good rating. Keeping your credit rating in good shape isn't impossible. The key is responsibility and recognizing habits that bring down your score.

Instructions

1

Pay loans, credit cards and other bills before the due date. Procrastination or waiting until the last minute to pay bills can result in a late arrival and a lower credit rating. Get into a routine of paying bills shortly after receiving the statement.

2

Learn how to manage debts. Accumulating credit card debt and maxing out your credit cards damages your FICO score. Use credit wisely and pay your balances in full each month to keep your debts low.

3

Check your credit report. Head off future credit problems by reviewing your personal credit report at least once a year for mistakes. Mistakenly, creditors can add someone's negative information to your report, which can drive down your FICO score. Order free reports from Annual Credit Report.

4

Ask for a credit limit increase. High credit card balances reduces your available credit on your credit cards, which lowers your credit rating. Widen the gap by requesting a credit limit increase from your credit card issuer. Available credit has a positive effect on credit scoring.

5

Open a credit account. You need credit to build a good FICO score. If you don't have a credit history, or if you have a low score due to a short credit history, open one or two additional credit accounts such as secured credit card from your bank.

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What Does Simulator FICO Stand For?

Your FICO score is a three-digit number that ranges from a low of 300 to a high of 850. It is based on the information located in your credit report. The number isn't static, and changes as the data in your credit report changes. A FICO Score Simulator can help you understand how these changes affect your credit score.

Identification

Your FICO score has five distinct factors to it. Within the score, 35 percent of it reflects how well you pay your bills. Another 30 percent measures how much debt you currently have. Fifteen percent is your average credit history. Ten percent is the amount of new credit you've applied for lately, and the remaining 10 percent considers the mix of credit types present on your report. All five factors are included in the calculation of your score.

Significance

Since your FICO score is based on distinct factors, the FICO Score Simulator is a proprietary online tool from MyFICO.com that shows you how a change to any of the scoring factors affects your FICO score overall. The simulator allows you to run different scenarios by changing one or more elements of your current score to see if that change will cause your score to rise, fall or remain the same. You can see how your score will improve if you pay off all of your debt, for example, or how your score changes by adding a new credit line.

Considerations

The simulator is a virtual change. It does not change your actual score, but simply acts as a guide to help you make decisions that will improve your score. The simulator is a tool that is included when you purchase one of the FICO products sold at MyFICO.com. Regardless of which product you chose to buy, the FICO Score Simulator is the same tool; therefore, if you want to have access to the tool, you should purchase whatever product works best for your current situation.

Warning

Not all credit scores are the same. There are websites online that both sell and give away credit scores. Keep in mind that these scores are not FICO scores, which are the scores used most by lenders, according to MyFICO. This is important because if you rely on a score that isn't a FICO score, you may think your score is higher, or lower, than it actually is under the FICO scoring model. You can only get your TransUnion FICO score at MyFICO.com or TransUnion.com, and you can only get your Equifax FICO score at MyFICO.com or Equifax.com. Experian stopped making its FICO score available to consumers in 2009, although they still make it available to lenders and other creditors, according to Bankrate.

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How to Repair and Rebuild My Credit Score

Quickly repairing or rebuilding your credit score opens the door to better interest rates on auto loans, mortgages and your credit cards. Different factors can lower your credit rating, such as a bankruptcy, foreclosure or poor habits. However, with responsible changes, you can repair and rebuild your credit score.

Instructions

1

Lengthen your credit history to help repair your score. Few credit accounts and a short credit history often result in a lower score. Find someone with a lengthy, good credit history and put your name on one of their older credit cards as an authorized user. This account will then appear on your credit report and help your score.

2

Organize monthly statements as they arrive and pay early to improve payment history. A habit of paying your bills before they're due can improve your credit rating and help you get financing in the future.

3

Use cash instead of credit cards to make purchases. An occasional purchase with a credit card is okay. Do not get into the habit of paying for everything with credit, especially if you're unable to pay off the balance each month.

4

Address credit report issues. Do not disregard errors or mistakes on your credit file. Get your report each year (through the website Annual Credit Report) and notify creditors of any mistakes. An unknown account listed on your report and outdated information can bring down your score.

5

Boost credit with rapid rescoring. If you need a quick credit score increase to qualify for a loan, talk to your creditor about rapid rescoring. If there's an error on your report, or if you decide to pay off a high balance credit card, you can pay your creditor a $50 fee, wherein they agree to update your credit report within three days.

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Consumer Rights to Annual Free Credit Reports

Many consumers worry about falling victim to identity theft and the potential damage to their credit scores. Vigilant consumers use their credit reports to identify suspicious behavior. The Fair Credit Reporting Act allows every consumer access to free copies of their credit report each year.

Credit Report

The credit bureaus maintain records of each consumer's credit activities. This includes a listing of each credit account held by the consumer during the past seven years, a summary of the payment history on each account (including past due payments), the balance due on each account, a list of judgments, liens or bankruptcies against the consumer and a list of inquiries into the credit report. Potential lenders review the credit report for bankruptcies, judgments, liens, late payments and high balances when determining whether to issue credit.

Credit Bureaus

Three credit bureaus monitor credit and maintain consumer records -- Equifax, Experian and TransUnion. Generally, the credit bureaus include the same information on their credit reports. Some variations occur, because a creditor may report activity to one or two credit bureaus, but not all three.

Requesting The Credit Report

Under federal law, each consumer can request a free copy of his credit report each year. The website AnnualCreditReport.com is the only website authorized to do so. Consumers may also call 1-877-322-8228, or they may print out a form from the Federal Trade Commission website and mail it in.

Quantity Of Free Credit Reports

Consumers may request a free credit report from each credit bureau annually. With three credit bureaus, the consumer may receive three credit reports each year. The consumer requests each credit report individually and can spread out the timing of each request. In essence, this allows the consumer to receive a free credit report every four months.

Monitor Credit

After the consumer receives her free credit report, she should review each account listed on the report. If any account is misrepresented, she should follow up with the creditor to correct the information that was reported. If the consumer detects inaccurate information on the credit report, he can file a dispute with the credit bureau, which must investigate the validity of disputed information.

Warning

Several websites lure consumers by offering free credit reports. These websites require the consumer to subscribe to and pay for a service to receive the free credit report. Consumers are not required to purchase anything to receive their free credit report. If a website denies a consumer access to her credit report without a purchase, the consumer is on the wrong website.

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Does Being Rejected for a Credit Increase Affect Your Credit?

Being improved by your credit card company for a credit limit increase improves your credit score by boosting the ratio of credit used to credit available, but a rejection could lower your credit score. On the flip side, an approval for a credit limit increase can lower your score too. The actual effect of a credit increase request depends on how your creditor authorizes credit limit increases.

Identification

A rejection for credit or approval for a limit increase can hurt your credit score if the company performs a credit check. When a company requests your credit history on your behalf, the Fair Isaac Corp. scoring system reduces your score between zero and five points regardless of an approval or denial, according to Leslie McFadden of Bankrate.com.

Considerations

While a rejection does not hurt you beyond the credit inquiry, you lose out on lowering your credit utilization ratio, or the portion of your credit limit you use. Maxing out a credit card can lower your score by 45 points or more if you have an elite score -- a FICO rating above 780. However, asking for a higher limit because you want to add debt to your account probably would lower your credit rating.

Potential

If the rejection for a credit limit increase motivates you to put in more applications, your credit rating will take a further dive because of the extra inquiries. Also, constant rejections for credit may lower your self-esteem. This could cause you to stop trying to tackle debt problems and make payments on time to boost your credit rating.

Tip

If a company offers to increase your credit limit without your consent, the increase does not negatively affect your credit. If you need to ask your credit card company for a credit limit increase, also query the company about its credit check policy. If the limit increase requires a credit check, you may want to wait until the company offers a limit on their own accord, or improve your credit history before allowing a credit check.

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Pupose of a Credit Report

The credit report is a file that credit reporting agencies maintain about financial consumers in the United States. This report is tracked under a person's name and Social Security number. Creditors use a credit report to make decisions about a consumer. That's why it's important to monitor your credit report and ensure that information reported by creditors is correct.

Collecting Information

A consumer reporting agency (CRA) is a company that gathers information about consumers and sells that information to creditors. A CRA makes money by charging a fee for releasing a copy of a consumer credit report to the business or individual requesting the information.

Credit Decisions

A creditor uses a consumer credit report to decide if it's worth the financial risk to lend money to that consumer. For instance, a car dealer requests a credit report from a CRA to assist a potential car buyer. The dealer serves as the go-between, negotiating with banks and other lenders on the consumer's behalf. If the credit report is poor, including problems like late payments and delinquent accounts, it will be hard to find a lender to issue a loan and the consumer might not be able to buy a vehicle.

Types of Information

A credit report tells creditors, employers, landlords and other authorized persons information about your credit history. Be aware of what kind of information a credit report contains so you know what kinds of decisions these parties might make about you. A CRA shows how a consumer has performed regarding past accounts, including borrowing, charging and repayment activities.

Credit Accounts and Public Records

A credit report provides a glimpse of a person's financial history with specifics. For credit accounts a person has held, including mortgages, auto loans, student loans, store credit and credit cards, a credit report shows the loan type, the date the account was opened, loan total or credit limit, cosigners and pattern of payments. Public records include information such as tax liens, bankruptcies and judgments filed against a consumer. If you have problems in these areas, it will be harder to get credit.

Credit Scoring

A creditor might not request a full credit report, but instead it might request a credit score from one of the three reporting agencies--Transunion, Experian or Equifax. Your credit score is based on five criteria -- payment history, outstanding debt, length of credit history, recent credit inquiries and types of credit in use, according to Realtor.com. A credit score might be all that a creditor, such as an auto lender, needs to know to decide whether you qualify for a loan.

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Does the Repossession of a Camping Trailer Hurt My Credit?

Buying a camping trailer can provide you with family enjoyment and a place to get away from the elements. If you purchase one and it eventually gets repossessed, it can damage your credit score. Any time you do not live up to your end of a credit agreement, it will hurt your score.

Repossession

Regardless of whether you purchase a car, a recreational vehicle or a trailer, having it repossessed will be damaging to your credit. This is because you signed a document when you bought the trailer that said you would repay the debt. If you stop making payments and do not make any effort to fix the problem, the lending company will have no choice but to repossess your trailer. When this happens, it will be reported to the credit bureaus.

Duration

Once a repossession shows up on your credit report, it can do damage for several years. In fact, a repossession will remain on your credit report for seven years. During that time, lenders can see the repossession and will be less likely to give you credit when you need it. As the repossession gets older, it will start to have less of a negative impact on your credit score overall. After the seven years have passed, it will be removed.

Voluntary vs. Involuntary

When you are faced with the reality that you can no longer afford your camping trailer payment, you may have the idea to voluntarily allow the lending company to take it back. While this could speed the process up, it will not help salvage your credit score. In the eyes of the credit bureaus, a voluntary repossession is just as bad as an involuntary one. The only way that it could be less damaging is that it will result in fewer missed payments.

Fixing the Damage

If you have your camping trailer repossessed, you can still recover from the damage. While it will damage your credit temporarily, it will not keep you from getting credit forever. If you start to use what credit you have left responsibly and paying your bills on time, you can start to build your credit score back up. Paying down balances on other credit accounts and making small purchases with your credit can help to boost your score.

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