How to Get Your Joint Credit Report

Numerous organizations regularly view your credit reports. Credit reporting bureaus record every time your report is accessed. Even buying car insurance creates a note on the report. It's important to know what inquiries have been made into your credit file and whether they should have been made.

Credit reporting bureaus maintain files on an individual basis. Joint lines of credit, such as home loans, are recorded on both credit files and are identical. To get details of your joint credit report, it's only necessary to get one copy.

Instructions

1

Visit AnnualCreditReport.com (see Resources) to get your joint credit report. It's easy and quick, and consumers are entitled to one free report each year. At this site you can get your reports from the three credit reporting bureaus: Experian, TransUnion and Equifax.

2

Select which state you live in from the drop-down box. Complete the application form accurately. Review the details before proceeding.

3

Enter the alphanumeric code in the box at the bottom of the page. Click "Continue." Check your details, then click "Submit." Your information will be verified and a password given. Click "Continue."

4

Create a password and password reminder. Follow the instructions. View your credit report, which contains joint credit details, online instantly.

5

The joint account holder should repeat Steps 1 to 4 to get her credit report. You can now compare the two to ensure that the information is the same. To ensure that all joint lines of credit are accurate and have identical information, get all three credit reports for both joint names. Report any errors directly to the credit reporting bureau (see Resources).

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When Filing Bankruptcy, What Falls Off a Credit Report?

The two main types of personal bankruptcy are Chapter 13 and Chapter 7. When you file for Chapter 13, you negotiate with your lenders to come up with a payment plan you can afford. None of your debt is erased -- it's simply restructured. When you file for Chapter 7, some (or all) of your debt is dismissed. In both cases, nothing is erased from your credit report.

Credit Reports

A credit report is a record of your borrowing and payment activity from the past seven years. It tells potential lenders how creditworthy you are. Every time you apply for credit, the lender will run a credit check to decide whether to lend to you and how much interest to charge. If you have a good, long-established credit history, you will find it easy to borrow money. If your credit history is less than perfect, you will find it difficult and expensive to get credit.

What Is in Your Credit Report

Your credit report contains all your credit accounts from the last seven years, both active accounts and ones that you've closes. This includes mortgages, personal loans, car leases, credit cards, store cards and other forms of debt. If you have medical debt that has been passed onto a collection agency, it will be in there, too. If a court ruled against you in a financial matter, it will be on the report. So will any liens on your house. Every credit report has the person's identifying information, including current and previous addresses, Social Security number, date of birth and driver's license number.

What Is Not in Your Credit Report

As the name says, a credit report is a record of credit given to you by lenders. Savings accounts and pension plans do not appear on your credit report. Nor do checking accounts, unless you've maxed out an overdraft and are in debt to the bank. There is no mention of your salary or other forms of income, though creditors will look at that, as well as at your credit report, when deciding whether to lend you money. If you have a criminal record, it won't be on your credit report, either.

Bankruptcy and Credit Reports

When you file for bankruptcy, nothing falls off your credit report. On the contrary, a record of you having filed for bankruptcy is added to your credit history. Chapter 13 bankruptcy will stay on your credit report for seven years, the same as other types of negative information. Chapter 7 is more serious. It will stay on your credit report for 10 years. It's impossible to get it removed before it expires, unless it's on there as a mistake. Bankruptcy will severely hurt your credit score for as long as it's on the report. However, if you stay out of debt, it will matter less as years go by.

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The Problem of Relying on Credit Scores

Credit scores probably played a part in the lending crisis in 2008 because some lenders put too much weight on them, according to Bob Sullivan of MSNBC. Credit scores can be a helpful and efficient tool to weed out bad borrowers, but cannot replace informal judgments of character and other standard lending practices.

Imperfections

The current credit scoring standard as of 2011 -- the Fair Isaac Corp. or FICO model -- cannot incorporate many accounts because the major credit bureaus don't report them. Rent, utilities and cell phones rarely show up on credit reports because of the prohibitive cost to the provider and state privacy laws that restrict the sharing of consumer information. A lender that relies almost entirely on credit scores misses a significant portion of a borrower's credit history.

Overreliance on Scores

The traditional underwriting process requires legwork, such as verifying a person's income and checking character references. Running a quick calculation can entice lenders by slashing approval time rates, especially when loan officers make a commission on each mortgage sold. Also, credit scores only quantify a person's willingness to repay, so relying too much on a score omits another important part of a loan application -- the ability to repay.

Variance in Scores

Most consumers have different scores from each of the three major credit bureaus because of variations in the formulas they use and mistakes in picking up accounts. A consumer, for example, might have a collection account that only one of the bureaus knows about. A collection account is a seriously negative item, so this hypothetical consumer could have a good score at the other two bureaus and a poor one at the bureau that knows about the collection account.

Unethical Practices

Crafty consumers can trick the bureaus into removing an item to artificially boost their creditworthiness. A cottage industry sprung up around fixing credit scores, sometimes with illegal tactics, during the 1990s. Customers, for instance, can dispute any negative item and get lucky if the bureaus cannot verify it in 30 days. Credit repair companies may advise a consumer to use a fake Social Security number to start a new credit history.

Benefit

Reliance on credit scoring during the housing bubble motivated change in the standard credit scoring model. In 2008, for example, the a FICO formula was created to prevent most fraudulent authorized accounts from building a person's credit score. In previous years, credit repair companies often sold authorized accounts to help people start a credit history or rebuild one, despite having no connection to the primary account holder.

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Can Disputing a Credit Report Hurt Your Score?

Credit reports need to be accurate because they can have a significant effect on a person's life. The Federal Trade Commission explains that they can influence getting a job, a home, a car loan and qualifying for affordable insurance. Federal law gives consumers the power to review their Experian, TransUnion and Equifax reports and dispute inaccuracies.

Definition

Credit report disputes are challenges to entries on a consumer's credit report. The Fair Credit Reporting Act is a federal law that gives everyone the right to review the reports annually for free through Annualcreditreport.com and to challenge certain items with each credit bureau. The bureaus must resolve these challenges within a certain amount of time and change their reports to reflect the disputed results.

Purpose

The main purpose of a credit report dispute is to fix mistakes that pull down a person's credit score. For example, someone with a perfect payment history might have delinquent payments showing up. Up to 25 percent of credit reports have harmful errors, according to Bob Sullivan of the MSNBC Red Tape Chronicles. Disputes are also commonly used for credit repair because any mistake is ripe for challenge. Dayana Yochim of the Motley Fool financial advice site explains that even misspellings can be disputed. Consumers who find small errors in negative items can get them removed with a dispute if the original creditor does not respond on the credit bureau investigation. This brings up the credit score.

Process

The FTC advises filing disputes through the mail, even though the three credit bureaus also allow them to be done online. The consumer writes letters to each bureau outlining the disputed items and the grounds for each challenge. The FTC recommends mailing them certified, with return receipts requested. The bureaus must reveal the results of their investigations within 30 days and send new credit report copies to show the mistaken items are gone.

Effects

Credit report disputes themselves do not affect a credit score. A person's score often goes up once the disputes are resolved, if the results cause the erasure of negative items, Yochim explains. Any disputed error that is not validated must be removed, which means it no longer figures into credit score calculation.

Warning

The FCRA lets the credit bureaus ignore disputes that are obviously frivolous. The items will not be removed and the credit score remains the same. A company can validate a bad credit item after it has been removed. It shows up on the credit reports again and brings down the credit score.

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How Long Will a Settlement Affect a FICO?

When a person finds himself with unmanageable debt, he will often choose to negotiate a settlement with his creditors rather than pay the full amount he owes. This will accomplish two things. First, it will keep the debt from growing and protect the creditor from additional collection actions. Secondly, it will stem the damage to his credit rating. However, settlements do generally negatively affect a person's credit report. According to U.S. law, settlements can remain on a report for up to seven years.

Credit Scores

A FICO score -- a measure of an individual's worthiness to receive credit, as measured by credit reporting agencies -- is calculated using information contained within an individual's own credit report. This report will contain records of all the loans that an individual has taken out, as well as how the individual paid them back. A failure to pay back a loan in a timely fashion will count against the individual and lower his score.

Settlements

Outstanding debts, particularly delinquent debts, pull down an individual's credit score. Settling these debts can often help improve a score by eliminating outstanding debts. However, any time an individual settles a loan for less than the amount he originally owed, a credit reporting agency will consider this to be a sign that the individual is at increased risk of defaulting on a loan and will lower his score accordingly; precisely how much it will be lowered will depend on the rest of his credit history and the amount written off by the lender.

Length of Time

According to U.S. law, negative information on an individual's credit report can only stay on the report for a maximum of seven years before it must be removed. This includes reports of debt settlements. Once a settlement has been removed from a credit report, it can longer affect a person's score. The only exception to this law is bankruptcies -- a variety of settlement -- which can be listed for up to 10 years.

Options

Although the presence of a settlement will hurt a person's credit score, a creditor is under no obligation to report a settled debt as a settlement to a credit reporting agency. In fact, a creditor could, if he chose, report the debt to the credit reporting agency as paid in full. This would help preserve the debtor's credit rating. As part of the debt settlement, some debtors demand that creditors report the settled debt as paid in full.

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How Quick Can a Credit Score Rise?

A person's credit score measures the probability that she will repay her loans. These scores range from 300 to 850, with 620 being the minimum "good credit" score. Your credit score can rise rapidly by following a few guidelines.

Time Frame

It is possible to see a significant rise in your credit score within three to six months, and a credit score can begin to rise in as little as one to two months.

Function

Debt-to-credit ratio is a large factor in your credit score. Generally, debt at 30 percent of your credit limit is considered ideal. Paying down your credit card balances will lead to a fast increase in your credit score.

Considerations

How fast your credit score will rise depends on your financial status. For instance, someone with a history of bankruptcy will need more time to reach a good credit score than a person with one charged-off account. Additionally, some financial institutions report to the credit bureaus sooner than others, so it may take more time to see certain negative items disappear from your credit report.

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Do It Yourself Bad Credit Repair After Bankruptcy

Re-establishing your credit after a bankruptcy is very much like building it up for the first time, but with an additional challenge. The bankruptcy will stay on your credit reports for seven to ten years so you must repair your credit well enough to offset the negative effect. You don't need to hire anyone for bad credit repair. No one can magically restore a good credit rating. You can do it yourself as long as you are prepared to be patient and manage your money and credit cards responsibly.

Instructions

1

Get a credit card and use it for small purchases each month. You will most likely have to get a secured account after your bankruptcy. It will be guaranteed by a bank deposit in the same amount as your credit limit. Secured cards are easy to get even if your credit rating is bad because the lender doesn't take any risk. It simply takes your deposit if you default on your payments.

2

Pay off your credit card balance in full every month and make sure your payments are received before the deadline. This establishes an on-time payment history, which is the single biggest factor in raising your credit score according to FICO, the biggest scoring company. It also shows you can use the card properly without running up too much debt or skipping payments. This will make you look more attractive to other creditors.

3

Apply for an installment loan to diversify your accounts. FICO gives you a higher score if you have a mix of revolving credit, like a credit card, and installment accounts like car or furniture loans. Furniture stores, appliance stores and other retailers may open an account for you if you put down a large deposit and have built up a good history with your secured card for several months.

4

Open an unsecured revolving credit account. You may have to start with a gasoline credit card rather than a Visa, MasterCard or other major brand as they are often easier to obtain when you've had some credit problems. Using it and paying it promptly will repair your credit enough to qualify for a regular card after about six to twelve months.

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How Did Credit Scoring Come About?

Credit scoring was invented by the Fair Isaac Corporation in 1958 to provide a quick, data-driven method for determining the credit worthiness of an individual or corporation. This innovation was only possible with the development of the computer and modern communications technology. As the technology and business model has advanced, credit scoring has become integral to the proper functioning of the consumer economy.

History

The Fair Isaac Corporation was founded in 1956 in order to provide solutions to businesses using mathematics and computer technology. At the time, a typical computer was large enough to fill a room, and nothing like credit scoring had yet been invented. Credit cards had been in use since the 1920s in various forms, with the first cards capable of being used at multiple merchants first coming into being in 1950.

Significance

Credit scoring was developed as a method for predicting consumer behavior based on sophisticated statistical models. In short, it compares one credit user's behavior to statistical averages in order to predict whether they will be a good candidate for an extension of credit. These statistical models only improve in overall accuracy as more people enter the system. This was difficult to accomplish in the early period of the history of credit scoring.

Features

Throughout the 1960s, Fair Isaac sought to sell their credit scoring system to individual lenders--banks, department stores, credit card companies and others. They essentially had to use direct sales tactics, as the technology was so new and computers so relatively rare that it was difficult for them to gain significant market penetration for years. In the earlier days of credit, most revolving credit accounts were given out by department stores to allow people to finance large purchases.

Effects

In 1972, Fair Isaac developed the first automated credit processing system and implemented it for use by the Wells Fargo Bank. This development made it possible for companies to extend credit safely and efficiently to as many consumers as possible, which further helped to make the use of credit cards nearly universal. In 1979, the company developed the numerical credit scoring system--FICO--that is so commonly used today. While it was not the first automated credit scoring system, it grew rapidly to become the market leader, boosted in the mid-1990s by the endorsement of FICO by Fannie May and Freddie Mac.

Benefits

Automated credit scoring has made it simple for credit bureaus of all kinds to increase the availability of credit dramatically thanks to the simple, automated system that currently underpins the consumer economy. As the economy has changed, so has the credit scoring system. It adjusts dynamically to changes in consumer behavior. In 2001, Equifax and Fair Isaac were the first credit report companies to allow consumers to access their own reports directly, with most of the major competitors following suit within the next two years. This helped consumers to learn more about how lenders viewed them as credit risks and to work to improve their score.

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What Is a Superior Credit Rating?

Your credit rating helps determine whether you're eligible for a loan or other forms of credit. It also helps lenders decide what terms to offer you. Consumers with superior or excellent credit ratings can expect to experience few difficulties in securing a loan or receiving the best available terms.

FICO Scores

One of the most commonly used credit scores is the FICO score, formulated by the Fair Isaac Corp. This score ranges from 300 to 850, with lower scores representing riskier borrowers and high scores representing reliable borrowers. Lenders use these scores to help determine if a borrower should receive a loan and what interest rates to offer. Each lender establishes its own criteria for loans, so what one lender considers excellent credit may be different from another lender,

Superior Scores

Only a small number of consumers are able to achieve the top FICO score of 850, but in general anyone with a score above about 780 has superior credit, according to The Credit Scoring Site. Once you score in the upper 700s or 800s, lenders generally consider you to be in the top tier of borrowers and give you the best rates available, regardless of your actual score. So, for example, once you have a 780 score, you'll get the same benefits as someone with an 830.

Good Scores

Having a superior credit score gives you the best chances of getting a loan, but even a good score will make getting a loan much easier. The Federal Citizen Information Center reports that lenders consider anyone with a credit score above 700 to be a safe borrower. Those with scores below 700 but above about 620 can usually still get a loan, while those with scores of 620 or below are considered risky borrowers and face the most difficulty in securing credit.

Effects

People with good or superior credit have a much easier time of getting a loan and usually get the most competitive interest rates available. For example, if a credit card issuer offers a card with interest rates of between 10 percent and 18 percent APR, only borrowers with good or superior credit usually get the 10 percent rate. The lower your credit score, the higher the rate you get.

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How Does a Credit Report Get Put Together?

What Is a Credit Report?

Your credit report contains important information for lenders who are considering taking you on as a borrower. It shows your credit history and how reliable you are at paying back what you owe. The report is also used to calculate your credit score. This score is what lenders will look at when they are deciding whether to lend you money and what interest rate to assign to a loan if they give you one. Smart consumers work hard to keep their credit scores high. Understanding how your credit report is put together is essential to keeping your score high.

What Information Is on the Credit Report?

Your credit report contains information from all lenders you have had in the past or present. Most lenders report to all three of the major bureaus, but some only report to one, which is why the credit reports can be slightly different. Your credit report contains a summary of your open and closed accounts, the balance and credit limit on each one, the type of account it is, your repayment history and your personal information, such as your name, address and Social Security number. It also contains information such as liens against your name and any bankruptcies you have declared. Finally, it includes information about inquiries made into your credit history.

How Credit Bureaus Get the Information

Any time you have credit, whether it be a loan, credit card or line of credit, it will show up on your credit report. Consumer reporting agencies, such as the three credit bureaus, Equifax, Experian and TransUnion, collect this information from your lenders. Each month lenders report new applications and payment histories for their customers to the credit bureaus. Information such as the type of account, your address and name as stated on the application, and your payment history are included in the information that the lenders pass on to the consumer reporting agencies. The credit bureaus also pull information about liens and bankruptcies from public records.

How Credit Scores Are Calculated

The information on your credit report affects you when lenders pull your history and look at your credit score, which are calculated using a specific formula and the information on the credit report. The most important factor that is considered when calculating a credit score is how well you pay back your bills, which accounts for 35 percent of your total score. Next in importance is your debt-to-credit limit ratio, or the amount you owe in proportion to the amount you can possibly borrow on your accounts. This is 30 percent of your score. The length of your credit history accounts for 15 percent of your score, and the mix of credit types is 10 percent of your score. Finally, the number of new credit applications you are filling out, which is indicated by the inquiries into your score, accounts for 10 percent of your score.

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How a Credit Card Write-off Hurts Your Credit

As soon as your credit card payment is late, the card provider will bombard you with calls and letters demanding that you submit payment immediately. If you refuse to pay off the card balance, the creditor will eventually write off the debt. Known as a "charge-off," this process does not exonerate you from your financial responsibility to pay the creditor. In addition, a credit card write-off carries severe consequences for your credit.

Missed Payment Damage

Each time you send a credit card payment 30 days or more after the due date, your credit card company reports the payment as missed to the credit bureaus. While this lowers your credit score, you can prevent a write-off by making periodic payments and bringing the account current. If you stop making payments altogether, however, you will incur a series of missed payment reports prior to the card provider writing off the balance you owe. The more missed payments your account reflects, the more your credit score suffers.

Closing the Account

When a credit card company writes off your debt, it simultaneously closes your account to new purchases. By closing your account, the company eliminates your available spending limit. Your credit utilization ratio -- the debt you carry compared to your spending limit -- increases when you lose your spending limit without paying off your outstanding debt. A higher credit utilization ratio lowers your credit rating.

Collection Accounts

Credit card companies cannot always convince consumers to pay their debts after a write-off. Thus, the company considers the account a loss and turns it over to a debt collection agency. Like credit card companies, debt collectors can file reports with the credit bureaus. Your defaulted credit card account will then appear as both a write-off and a collection account on your credit report. Collection accounts result in considerable credit damage.

Court Judgments

Credit card companies do not always sell defaulted accounts -- sometimes they sue the debtor. If the company succeeds in obtaining a judgment against you in court, the judgment becomes a matter of public record. As a financial public record, the judgment appears on your credit file. The Fair Credit Reporting Act notes that court judgments can show up on your credit history for seven years and sometimes longer, depending on your state's laws. Court judgments cause further damage to your credit score.

Potential Tax Lien

When your creditor writes off your debt on its taxes, the Internal Revenue Service expects you to pay taxes on the debt. When you file your taxes, you must include the creditor's deduction as income. If the credit card company or collection agency wrote off a substantial amount, this could leave you struggling to pay a tax debt to the IRS. If you do not promptly pay the IRS, the IRS will levy a tax lien against all property you own. This tax lien will also appear on your credit report. Like a court judgment, tax liens are derogatory public records. An unpaid tax lien can remain a negative feature of your credit file for up to 15 years.

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How to Remove an Unwanted Credit Bureau Report

Negative remarks on a credit bureau report can make obtaining a loan or other types of financing very difficult, so it is important to check for credit errors once or twice a year. Sometimes a credit report company is supplied with incorrect information, resulting in errors. Errors may be simple mistakes, such as having the wrong employer information, to more severe inaccuracies that show delinquency or default on payments. Fortunately, consumers can file a credit report dispute if supporting documents and an appropriate letter back up the claim.

Instructions

1

Gather documents to support your credit report dispute. Important documents should consist of payment statements and other financial records that pertain to the error.

2

Make copies of all relevant documents, as well as your credit report. Put your originals in a safe place. Highlight the credit report dispute or disputes with a yellow highlighter marker on the copy.

3

Write a letter to the credit report company that explains why the reporting is incorrect. Identify the type of item in the claim, such as a judgment, default or delinquency you are contesting. Make note in the body of your letter the exact information printed on the credit bureau report.

4

State why the information is incorrect. Include in your letter that you have supplied documents to back up your claim to resolve the matter. End your letter by stating that you are requesting that the information be removed from the credit bureau report.

5

Mail your letter, supporting documents and report to the credit report company by certified mail with the option of return receipt requested to ensure accuracy and proof of delivery.

6

Place the receipt with your original documents when it comes back in the mail.

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Ways to Improve a Credit Score Fast

When a borrower wishes to secure a new loan or take on additional debt, he should attempt to raise his credit score quickly to qualify for the lowest interest rate and best payment terms. The higher a borrower's credit score, the better the terms offered by the lending institution. A few simple changes can quickly raise a credit score.

Check Your Report for Errors

Through a free service such as AnnualCreditReport.com, a borrower should check all three credit reports (TransUnion, Equifax, and Experian) for errors, because the credit score is based on information in the reports. If there are errors, he should immediately contact the credit bureau through its website. Federal law requires the company to respond within 30 days. A free credit report typically does not include the actual credit score, which may be purchased for a fee.

Pay Down Lines of Credit

One part of a borrower's credit score is credit utilization. Lines of credit and credit cards with balances close to their limits---also called maxed-out credit---negatively impact a credit score. To quickly reduce this negative impact, a borrower should pay down lines of credit and credit card balances to less than 30 percent of the credit limit.

Pay Off Negative Items

Negative items including collections, judgments and liens weigh down a credit score and should be paid in full. Paying off these items does not remove them from the credit report, but it does lessen the impact on the score. Additionally, the borrower may be required to pay in full some of these items prior to closing on a new loan.

Avoid Late Payments

One of the best ways to bolster a credit score is always to make monthly payments on time. Automatic drafts from a checking account for each monthly bill will preclude delinquencies and late fees. All payments should be current prior to application for a loan.

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How to Get an 850 Credit Score

Credits scores can range from 300 to 850. It is possible to reach a score of 850, but it can take some time to improve your score. A good credit score is important because it will keep you from paying high interest rates on loans. A poor credit score might prevent you from finding employment. To get a perfect score of 850, you need to establish a positive payment history and to make sure your credit balance is not close to your credit limit.

Instructions

1

Get a copy of your credit report from the three credit bureaus: TransUnion, Experian, and Equifax. You can get a free credit report once a year from AnnualCreditReport.com. Look at your report to see whether it shows a history of late payments or going over the limit on any credit cards.

It is also important to review your credit report to make sure your identity hasn't been stolen.

2

Get your credit score from myFICO.com. There are three scores you can purchase, but "there's no need to pay for all three scores unless you are buying a mortgage," according to financial adviser Suze Orman. Knowing your score will show how far you are from 850.

3

Pay all your bills on time. This is crucial to getting a perfect credit score. Thirty-five percent of your credit score is based on your payment history. If you have a hard time remembering to pay your bills, try to set up an automatic bill pay every month with your bank account so that you never miss a payment.

4

Lower your overall debt. Your debt-to-credit limit ratio is a big factor in your credit score. If you have a total limit of $10,000 on all your credit cards and you currently owe $1,000, your debt-to-credit ratio is 10 percent. If you owe $2,000 and your credit limit is $10,000, your ratio is 20 percent.

The lower the ratio, the higher your credit score. The only way to decrease your ratio is by lowering your balance. Make it a mission to pay off your balance.

5

Avoid applying for a lot of credit at once. This can lower your credit score. Have two major credit cards and two store cards.

6

Establish a credit history. People who have perfect credit scores have a long credit history. The longer you can show that you can pay your bills on time every month and that you can keep your debt-to-credit ratio low, the higher your score will be.

7

Counter any negative items, such as collections, that are in your credit reports. If you have a collection on your account, take action to get it removed. Contact the credit bureaus and dispute any unwarranted items in your report. You can dispute negative or incorrect items online.

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Do I Need More Than One Credit Card to Get a Good Credit Score?

Logical reasoning might have you thinking that carrying multiple cards hurts your credit score, because available credit could get you into debt. Carrying a lone credit card could hold back your credit score, which might cost your more in finance charges in the long run. Limiting yourself to single credit card, however, may not preclude a high credit score.

Identification

The FICO scoring system is so complicated that not even the credit reporting bureaus truly know how anything affects it. If you have just one credit card and nothing else on your account, you may not have enough credit history to receive a rating or a high one. People with a good credit score tend to manage multiple loans of both varieties: installment and revolving.

Mix of Credit

Carrying just one card almost assuredly loses points in the "mix of credit" category of the FICO score. Borrowers should try for two revolving accounts for every installment loan, according to MintLife. On the other hand, you can overcome the limits of a single account by using it for many years, always paying on time and keeping a low balance.

The Safe Range

You want as many accounts with a perfect payment history as possible. Lenders rarely care about how many credit cards you have, only that you pay on time and keep a low balance. The FICO system does not penalize you for carrying too many credit cards until you acquire more than seven, according to the Motley Fool.

Tip

While the credit reporting bureaus give one free credit report each year, you typically must pay for your FICO scores from each agency. Free FICO score estimators can give you a good idea of your credit score. If you buy your scores and see they are low, consider adding a credit card, but slowly. Do not rush out and apply for several cards. The hard inquiries into your credit hurt your score and lenders may worry that you are in financial trouble with a rash of new cards.

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How to Know If I Have a Bad Credit Score

Even if you don't use credit cards, your credit score impacts your everyday life. Your credit report and score are pulled by potential employers, insurance agents, mortgage lenders and landlords. Having a bad score can cripple you financially as you pay more in interest, are denied for loans and lose potential jobs. Your credit score is a numerical representation of the information contained in your credit report. When you have a bad credit report, you have a bad credit score. Just how bad your credit score is depends on where you fall in the credit scales.

Instructions

1

Pull all four of your credit scores. You have two FICO scores based on your TransUnion and Equifax reports on MyFICO.com. You maintain a separate score on your Experian report based on its own information. TransUnion also provides its own Vantage Score, which is based on its proprietary formula. Most creditors use the FICO scores, but some use the separate Experian or TransUnion FAKO scores. You will have to pay for these reports. The price range is approximately $10 to $20. You have no legal right to free access to your credit score.

2

Compare your credit scores to the credit score scales. Excellent credit falls with in the range of 720 to 850. Scores from 660 to 719 are considered good, while scores of 620 to 660 are fair. Anything under 620 is called bad credit.

3

Review your credit score analysis to find ways to improve your credit score. Most credit reporting agencies provide an analysis of your credit score, including what factors are lowering your score and how to improve them. Take this advice to heart to start building your good credit history.

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Does a Balance Transfer Improve Your Credit Rating?

You can profit from a balance transfer, where you send a credit card balance to a new lender, because many companies offer a low or often zero percent introductory rate. You can also use this time of no interest to help improve your credit rating. A balance transfer alone, however, does not improve your credit rating and could backfire.

How a Balance Transfer Can Help

If you open a new account to conduct a balance transfer and keep your old one, you increase the amount of available credit and lower your credit utilization, according to Wallet Pop. Using more than 35 percent of your available credit begins to negatively impact your credit score. Additionally, you can use a balance transfer rate of zero percent as a time to pay off your debt free of interest payments.

Considerations

Check the terms and conditions before initiating a balance transfer. If you cannot pay off your debt within the promotional period, you could find your new interest rate makes debt repayment unmanageable. In addition, most credit card companies have provisions that take you off the teaser rate if you miss a payment.

Convenience

Using a balance transfer to consolidate multiple lines of credit could help reduce missed payments and your minimum charge when you only have one bill. Also, having multiple lines of credit, but only using one, looks better to lenders than the use of several credit cards.

Warning

Some credit card companies may offer a zero percent introductory offer, but put a three to five percent surcharge on your balance transfer, according to the Motley Fool site. Also, you may need a certain credit score to qualify for the teaser rate. If you play the balance transfer game too much, credit card companies will get wise to the fact that you are hopping from company to company, looking for teaser rates.

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Does Running Your Credit Affect Your FICO Score?

Whenever you fill out a loan or credit card application, the bank will pull a copy of your credit report and FICO score. Although other credit scoring models exist, the FICO score is the standard scoring model most lenders depend on. FICO scores provide lenders with a risk management tool for accepting new customers and assigning interest rates. A credit inquiry can impact your FICO score.

Facts

A credit inquiry occurs whenever the credit bureaus receive a request for a copy of your credit report. While you can make a credit inquiry on your own to monitor your credit history, the majority of inquiries come from lenders, current creditors, employers and insurance companies. Some types of credit inquiries can lower your FICO score.

Types

The credit bureaus recognize a credit inquiry as either a "hard" pull or a "soft" pull. Banks conduct hard pulls occur when you apply for new credit, a loan or even a new checking account. According to LendingTree.com, each hard pull costs your FICO score approximately five points. Soft pulls do not have an adverse affect on your credit score and occur when an employer or insurance company reviews your credit history. Credit checks you perform yourself are also soft pulls.

Benefits

While shopping around can help you get the best interest rate on a new loan, it also results in multiple hard pulls on your credit report. Fortunately, the FICO scoring formula treats all inquiries performed during a typical loan-shopping period as one inquiry. This prevents you from being penalized for searching out the lowest rates. FICO '08, which was released in early 2009, gives you 45 days in which to shop freely for a new loan.

Time Frame

Unlike other negative entries that damage your credit scores, credit inquiries remain a part of your history for a relatively short period of time -- two years at most. During this two-year time frame, lenders can view past inquiries on your credit report. Bankrate notes, however, that the FICO scoring formula takes a past inquiry into consideration only when calculating your FICO scores for the first year after the inquiry occurred.

Significance

Although some forms of credit inquiries can hurt your FICO score, the degree of damage usually isn't significant enough to merit not opening a new bank account or passing up a low-interest credit card. Because the FICO scoring model forgives only loan shopping, however, applying for multiple credit cards, store cards and bank accounts within a short period of time can prove considerably detrimental to your credit rating.

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How Can I View My Credit Score for Free?

The Federal Trade Commission has set up a website for you to access your credit report from all three national credit reporting companies (Equifax, TransUnion, and Experian) once a year. Unfortunately, as of September 2010, there is not a similar service in place for you to check your credit score with any of these companies. However, you can still check your credit score for free with no strings attached via two websites, or via other services through their free trial periods.

Instructions

1

Visit Credit Karma or Quizzle and follow the instructions to view your credit score for free. Note that it is always free, and you can log on to your account whenever you like, whenever you want to monitor your credit score. As of September 2010, Credit Karma and Quizzle were the only websites that perform this service with no strings attached. Nasdaq's Fabulous Freebies site notes that it's a real credit score, but not the FICO score that most lenders us--however, it will give you a good idea of where you stand.

2

Check sites such as TransUnion's Credit Score site and take advantage of their free credit score monitoring trial offers to view your credit scores from all three national reporting bureaus online.

3

Unsubscribe yourself from programs such as TransUnion's Credit Score monitoring program before the free trial period has elapsed. Note that this may require you to send a letter via surface mail or otherwise contact the credit monitoring service in order to discontinue service. Give yourself enough time to successfully cancel so that you are not charged any fees.

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How Soon Will My Credit Score Improve After My Debt Is Paid Off?

The amount you owe to each creditor accounts for 30 percent of your FICO score--the credit score used by lenders to determine your creditworthiness. Thus, incurring high debts hurts your credit score and paying down existing debts can improve your credit rating.

Significance

Paying down revolving debts, such as home equity lines of credit and credit cards, increases the difference between your existing balance and your spending limit. This is known as the "debt utilization ratio." The less you owe your creditors, the higher your debt utilization ratios and, subsequently, the higher your credit score.

Time Frame

Your credit score fluctuates whenever creditors report new information to the credit bureaus. As soon as your creditors report your payments, your credit scores will change. Some creditors update consumer accounts every 30 days while others update accounts every 60 or even 90 days. As soon as your creditor updates your account information, however, the credit bureaus will recalculate your new credit score.

Misconceptions

While paying off debts to most creditors can improve your credit rating, paying off debts owed to collection agencies does not improve your credit. Although a collection agency may promise to update the account to reflect its new "paid" status, this does not positively affect your credit score.

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How to Get a Free Background Check ... On Yourself

They don't call it the information age for nothing. There are dozens of organizations compiling information on you -- your earnings history, places where you lived, driving record, credit-worthiness, criminal history, aliases and maiden names, and so on.

Make sure your privacy is properly protected. Find out what 'they' know about that most special person in your life...you!

Instructions

1

**Check Your LexisNexis/Acurint Report**

LexisNexis probably has as much information in their databases as Google itself, but unlike Google, Lexis keeps things private, unless you pay for it.

Their Acurint reports are detailed personal histories with names, addresses, phone numbers, social security, relatives, employment, bankruptcies, and a lot more.

You are entitled to get a copy of your own Acruint report at no charge. You have to provide a lot of information to prove that you are, in fact, you (but LexisNexis says that they do not use the information provided for any other purpose, like expanding their data files).

Visit the LexisNexis Consumer Access page (listed in the Resources section) to request your personal records.

2

**Check Your Credit History**

At annualcreditreport.com, you can get a free copy of your credit report, prepared by the major credit history companies -- Experian, Equifax, and TransUnion.

You're entitled to one free copy a year.

3

**Get Your Teletrack Consumer Report**

Teletrack provides consumer history information to certain types of financing and loans, like payday loans, rent-to-own stores, and consumer financing from furniture stores, auto finance companies, and the like.

If you have been turned down for credit from a business like these, you can request a copy of your Teletrack file through their Consumers Report page at teletrack.com/consumers

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How to Get a Good Credit Score Fast

Do you need a good credit score fast? That all important FICO score you have heard financial gurus tout really is all that important. Landlords deny tenants a home, car dealers refuse to finance loans, banks refuse to hand out mortgages, and people with bad credit who get loans pay more to find them.

But if you need a good credit score fast, there is hope for you. You can only raise a credit score so much in a short amount of time, but here is how to max out your potential and keep your credit score heading up.

Instructions

1




PAY BILLS ON TIME (35% OF YOUR SCORE) AND GET GOODWILL IF YOU DON'T

You can't undo what you have already done, or can you? The best way to keep your credit score high is to pay bills on time, every time, without fail. If you miss bills and you have a spouse or partner, hand them off and see if they can do better. Sign up for online bill pay with your bank and make it automatic. Pay a week early on everything if you have to.

BUT.... What if you already missed bills, paid late, and suffer from a credit score tooth decay? You can get a filling, sort of. Make sure all of your bills are paid to date. Then contact the businesses whom you have been late with before in writing and ask for a good will adjustment to your credit. Cite recent faithful payments. Play on their heart strings and often you will get a bump in your credit fast.

2

LOWER YOUR DEBT TO CREDIT RATIO (30% OF YOUR CREDIT SCORE)

- Call your credit cards and ask for a higher limit. Request they report that limit to the credit company. Higher credit limit means you have less debt to credit ratio. For example if you regularly charge $1000 but you have a limit of $4000 on a credit card you have a 1 to 4 ratio. Get a $10,000 limit and all of the sudden you have a 1 to ten ratio. Huge bump!

- Pay off your cards a week early before the closing date of the bill. This makes your debt to credit ratio look even lower by increasing the gap between owed and available.

3

FIX ANYTHING THAT AIN'T RIGHT ON YOUR CREDIT SCORE.

Get on the phone and complain. Look at your free credit report from whichever agency you receive it from. Analyze every line and look for things that aren't true. If it simply says an account was closed but doesn't say 'closed by customer' call and get that changed. If there is a late payment mark that you have proof of paying on time by all means get on the phone! Call the credit company, call the vendor, and make it right. If a person you talk to at first isn't helpful, wait for a shift change and call again!

4




PULL OUT OLD CARDS AND CHARGE A FEW BUCKS TO RAISE YOUR CREDIT SCORE FAST.

Old accounts help your credit score (15% of score). But if you haven't been using them then they are not treated as a positive. Don't add much to them or you will hurt number 2. But do charge a couple bucks and get them active again. Make sure you pay them on time!

5

DON'T APPLY FOR NEW CREDIT LINES, UNLESS YOU HAVE LOTS OF TIME.

The last two categories mix of credit available (10%) and new credit applications (10%) fight each other. You can't diversify credit lines quickly without dinging your new credit application score. So unless you have six months to wait it out, sit tight on this category and make it up in others.

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What Piece of Information Is Most Important to Establish & Maintain Good Credit?

Consumers start credit files as soon as they apply for credit cards, retail accounts and loans. This information is picked up by credit bureaus, stored and sold to banks and other lenders. Many different factors go into a person's credit rating and influence whether credit applications are approved, according to FICO, the oldest and largest credit score company. Some of those factors are weighed more heavily than others.

Definition

Consumer credit histories are compiled in credit reports put together by three national bureaus, TransUnion, Experian and Equifax, according to the Federal Reserve Bank of San Francisco. They gather information on old and new loans and accounts, payment histories, court judgments on financial matters and other credit-related activities. Banks, loan companies and other financial institutions review these records when a person applies for a credit card, mortgage, loan or other account. Lenders are more likely to approve the request if the credit history is good.

Considerations

A consumer's payment history is the most important piece of information in the credit history, according to FICO. FICO calculates three-digit scores based on credit bureau records. Payment histories account for 35 percent of those scores. Lenders see payments as an indicator of the person's current financial status. On-time payments indicate someone who can handle their current obligations comfortably, while late or skipped payments are a warning sign.

Effects

Late or unmade payments are harmful on their own, but they often have ripple effects. Creditors often charge off accounts after payments are skipped for six months, according to financial columnist Liz Pulliam Weston. This adds another credit report blemish. Many car loan contracts let lenders repossess vehicles as soon as the loan goes into default, adding another negative entry, according to the Federal Trade Commission (FTC). Consumers who cannot handle their obligations may end up declaring bankruptcy when payments get too far behind.

Time Frame

Accounts that are paid as agreed show up on a consumer's credit reports indefinitely. Negative payment histories, and most other harmful information, stay on the records for seven years, according to the FTC. Bad entries stop affecting the credit rating when they are erased.

Warning

Late payments may erroneously show up on credit reports and affect the credit scores. Motley Fool finance site writer Dayana Yochim explains that there are errors in more than 80 percent of credit reports, and inaccurate payment information is the most common issue. The government-mandated annualcreditreport.com website provides no-cost credit reports for review every year. Consumers can dispute mistakes and force their removal if credit bureau investigations show the complaints are not valid.

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How Can I Get My Credit Rating?

Only about 31 percent of Americans know that credit scores rate your chance of defaulting on a loan, rather than knowledge of credit usage, according to the Consumer Federation of America. Getting your credit rating is an important first step to boosting your score. Credit scores, however, are usually not free.

Misconception

Lenders use the credit rating system developed by the Fair Isaac Corporation more than any other. Since 2009, consumers have not been able to purchase their true FICO score from the big three credit bureaus: Equifax, Experian and TransUnion. The major bureaus sell a score based on the FICO formula or a proprietary score they hope lenders will consider in loan applications. You want to make sure any score you get is a FICO score.

Trial Offers

Some companies offer your FICO score for free if you sign up for a trial service, such as credit monitoring. Even the major bureaus offer this type of deal. As long as you remember to cancel the service before the trial period ends, there is little danger. Otherwise, you must pay the annual fee that can exceed $100. Credit services may try to have you call a customer service instead of conveniently canceling online.

Other Possibilities

A few banks offer free credit monitoring to their customers. Some personal lending websites show you your FICO score after signing up and may offer bonus cash too. During the loan application process for a car or home, the lender will pull your credit report and may show it to you if you ask.

Tip

If you know the details of your loans and financial background, you can get a fairly accurate estimate of your FICO score by using an online score estimator (see Resources). You can pull your report from AnnualCreditReport for free to double-check your financial history.

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How Often Is a Credit Score Monitored?

How often a credit score is monitored is essentially up to the individual borrower. A credit report summarizes your borrowing and payment history, forming the basis of your credit score. Your credit score can affect your ability to obtain loans and receive favorable interest rates, as well as your chances of landing a job or leasing an apartment. Your credit score is reported as a three-digit number between 300 and 850, called your FICO (Fair Isaac Corporation) score.

Credit Bureaus

The three primary nationwide credit bureaus in the United States are Experian, Equifax and TransUnion. The Fair Isaac Corporation originated the FICO scoring method, and the three credit reporting agencies each use a variation of this method, which may account for the slight variances in your scores. The formulas used are designed to gauge a borrower's credit worthiness, by way of information received from creditors. Through monitoring of your credit score, you can catch major discrepancies that may indicate reporting errors in your credit history or fraudulent use of your credit accounts.

Free Report

You are entitled to receive--upon request--one free credit report from each of the main credit bureaus on a yearly basis at AnnualCreditReport.com. The free annual reports provide one way for you to monitor credit reporting activities in your credit history, but you will have to pay a fee to obtain your actual credit score. As of February 2011, the cost to obtain your score ranges from no cost (TransUnion's zendough.com website) to $15.95. Experian and Equifax also offer a three-credit-bureau package of your credit reports and scores for $39.95.

Identity Theft

If you have been a victim of identity theft in the past, you may feel the more often your credit score is monitored, the better. According to the Federal Trade Commission (FTC), "skilled identity thieves use a variety of ways to gain access to your personal information" and then use it to commit fraud and theft. How often your credit score is monitored can affect your ability to quickly identify fraudulent activity on your credit report. It takes an average of one year for an identity-theft victim to become aware of the crime.

Monitoring Services

With the prevalence of credit card fraud and identity theft, many companies, financial institutions and even the credit bureaus are offering credit monitoring services. Each of the three main credit bureaus offers a credit score monitoring service for a monthly fee. The services included range from unlimited access to your credit score to 24-hour email notification of significant changes in your credit activity and identity theft insurance. The cost ranges from $12.95 to $16.95 per month as of 2011, but TransUnion offers a free seven-day trial.

Considerations

There is some amount of disagreement as to the need for these services and whether the cost for such assistance is worthwhile. Of course there are always those who are willing to exploit consumer fears, and the credit monitoring industry is no different. You should be wary of some companies offering a "free" credit report that are actually signing you up for a monitoring service with a recurring monthly fee. Websites like FightIdentityTheft.com and Knowzy.com offer listings and ratings of credit monitoring services.

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Does Old Delinquent Debt Have Less Effect on a FICO Score?

Credit reports include all of a person's credit related activity, both good and bad. FICO credit scores are calculated based on the reports' contents. Everything is considered to an extent, but there are differences in the way new activity is weighed against older items, like delinquent debts dating several years back.

Definition

A FICO score is the most popular version of a credit score, a three digit number that affects whether a person's credit applications are approved and how much interest is charged, according to MSN Money. Scores above 720 are desirable, while those below 620 are labeled sub prime and cause problems with getting loans.

Factors

FICO explains that it calculates scores based on numerous factors, including delinquent accounts. Debt affects scores in several different ways, depending on whether it is only mildly delinquent or whether it is old enough to be charged off. Thirty-five percent of the overall score is influenced by debt, including payment history, charge-offs and collection accounts, repossessions and foreclosures.

Time Frame

The Federal Trade Commission states that credit reports list most delinquent debts for a seven-year period. Late payments morph into more serious delinquencies in about four to six months, when Bankrate Debt Adviser columnist Steve Bucci explains they are usually charged off. This action means the lender no longer considers them an asset, but it can still try to collect them or sell them to third-party debt collection firms. Charge-offs and collection accounts have a much worse effect on FICO scores than occasional late payments, and all delinquent debts have some influence for the whole seven year reporting time.

Considerations

Bucci explains that old delinquent debt loses much of its negative credit score influence over time. Lenders usually put the most importance on the most recent two years of credit history. A perfect payment history of at least 24 months shows that the consumer is serious about improving the credit history and raising the score. The old problems cause more trouble if recent activity is bad too because it is part of an overall trend that shows poor financial management skills.

Warning

People who are seeking mortgages or other large loans sometimes pay off old debts to improve the credit score. MSN Money writer Liz Pulliam Weston warns that this may actually hurt the score because it adds recent activity, and paid charge-offs are still viewed as negatives. Debts that are five years old or more do not affect credit records too heavily. They will drop off credit reports in two years or less, removing their influence completely, so it is often better to ignore them rather than pay them. The payment can cause them to stay on credit reports for another seven years because it creates a new account activity date.

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What Are Some Things You Can Do to Improve Poor Credit?

If you have a good credit profile, it is more likely that you will be able to obtain favorable financing terms from lenders and get approved for new credit when you need it. Unfortunately for many of us, our credit profiles are damaged due to poor credit habits or as the result of losing a job and not having the means to service debt obligations. However, it is possible to repair a poor credit profile, and that process can start today.

Pay Bills on Time

The most important thing you can do to improve your credit profile is to make all your payments on time. If you have a history of missing payments or letting your accounts fall into past-due status, that has to stop. Being on time with payments represents 35 percent of your overall credit score, and paying on time reflects positively. Additionally, more recent activity carries more weight than older activity. So even though you may have a late payment last month, getting back on track and paying on time this month will do you good. Over time, the older late payment marks will count less toward your credit score than the newer, on-time payments.

Establish New Credit Lines

You do not want to go out and open new credit accounts for the sake of opening accounts, but increasing your available credit and establishing different types of credit can help your credit score. Ask for a credit line increase on your open accounts. This will increase your overall available credit limit and provided you do not run up your card bills, will lower your debt utilization ratio -- the amount of outstanding debt you have in proportion to your total credit limit. Lower debt utilization ratios are looked at favorably by the reporting bureaus. Additionally, the reporting agencies like to see an array of credit accounts. For instance, having a car loan, mortgage and a credit card is better than only having three credit card accounts.

Spread Credit Around

It is OK to use your credit cards, but if you are in the habit of only using one card for all your purchases and you find yourself coming close to your maximum limit each month, you may be hurting your credit profile, even if you pay down your balance in full each month. Avoid using more than 50 percent of your available credit on a single account at any given time. Although your overall debt utilization may be in check since you have zero balances on other cards, the bureaus also look at individual account usage. If you only have a single credit card, pay down your balance during the course of the billing cycle to keep 50 percent or more of your available credit limit free.

Dispute Negative and Inaccurate Items

Request a copy of your full credit report showing the details from all three reporting bureaus. When you review your report, you may find negative items, such as delinquent payment comments or even collections that are negatively affecting your credit score. Provided it is inaccurate, you should dispute any negative item or request that it be removed from your report. Even if the item is correct, you can sometimes have success in getting it removed by simply requesting to do so. Eliminating even one negative item can mean significant upside to your credit score.

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How to Update Your Credit Report Fast

Having your credit up to date is essential, since negative or incorrect information can have a profound impact on your life. Negative credit can damage your ability to rent or purchase a home, obtain credit or insurance, open a bank account or even get a job. According to a study conducted by Public Interest Research Groups (PIRG), 79 percent of credit reports contain mistakes. Consider these steps to update your credit report in a timely manner.

Instructions

1

Obtain a current credit report by going online to AnnualCreditReport.com, the official site to access your credit reports from all three credit bureaus (Equifax, Experian and TransUnion). If you can't access your credit reports online, request them in writing by providing your name, current and former address, Social Security number, date of birth and signature.

Here are the addresses and websites of the three major credit-reporting agencies:

Equifax Inc.? ?
P.O. Box 740241 ?
Atlanta, GA 30374 ?
(888) 685-1111 ?
equifax.com??

TransUnion ?
2 Baldwin Place ?
P.O. Box 2000 ?
Chester, PA 19022 ?
(800) 888-4213 ?
transunion.com??

Experian? ?
P.O. Box 9595 ?
Allen, TX 75013 ?
(888) 397-3742 ?
experian.com

2

Check each credit report for errors or inaccuracies. For fast results, complete the dispute forms online or over the telephone (you must have a current credit report to do so). If you're unable to make updates or complete disputes online, write to each credit-reporting agency. No matter which option you choose, be sure to clearly explain your situation and request an investigation. Although not instant, youll have your updated credit report in about 30 days. Credit-reporting agencies have 30 days to contact creditors and verify your claims. After that time, the credit bureaus must inform you in writing of their findings and provide you with a new, free credit report if any changes were made.

3

Contact your creditors and request that erroneous credit information be corrected or updated on your credit report. Creditors might be able to report to the credit bureaus quicker than you can file disputes. Check with them about credit-reporting policies, and familiarize yourself with the Fair Credit Reporting Act so you know your rights.

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FICO Tutorial

FICO is the acronym for the Fair Isaac Corporation, a company that pioneered the practice of calculating credit scores. Though originally considered private, proprietary information, today consumers have the right to know the information in their credit reports, which is used to produce a credit score. Though there are several different types of credit scores, all the major variations are based on the FICO factors, so FICO score is typically synonymous with credit score.

Minimal Requirements

You will have a credit report in your name as long as three minimal requirements are met. If you are not listed as deceased and have at least one credit account open for at least six months and have not disputed the existence of the credit account within the past six months, you will have a credit report. Every time you or a lender requests your credit score, it is calculated anew from the information in your credit report.

Major Factors Affecting Your Score

The two major factors that determine your FICO score are your payment history and the amount owed. Payment history includes amount and number of late payments, the number of accounts currently past due, adverse public records, such as a bankruptcy filing or wage garnishment, and the time since any adverse history item. The amount owed refers to the number and types of accounts in which you're carrying balances, and the total outstanding debt. Together these two factors account for 65 percent of your credit score.

Other Factors

The remaining 35 percent of your FICO score is determined by the length of your credit history, the number of recently opened lines of credit or recent credit inquiries, and the types of credit. These factors help round out the picture of your credit worthiness. The longer you've responsibly managed your credit, the higher your score will likely be. Similarly, diversity in your credit, including a mix of long- and short-term secured and unsecured debts, also indicates responsibility. On the other hand, lots of new credit or inquiries suggests financial irresponsibility or desperation.

Fixing Errors

Under the Fair Credit Reporting Act, you have the right to dispute errors in your credit report. To do so, send a letter to the reporting agency reporting the error and clearly explain why the information is inaccurate. Include copies of any documentation you have supporting the existence of an error and request deletion or correction of the error as appropriate. When you dispute an item on your report in this way, the reporting agency is required by law to conduct an investigation within 30 days. If the item is truly in error, it must be corrected. Disputing an accurate statement in your report, however, will not improve your credit score.

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The Purpose of Credit Companies

Without credit reporting companies, you might not have been able to get a mortgage or credit card. The credit reporting companies are more of a repository for credit histories -- the actual scoring part belongs to another company.

Identification

Credit reporting started in the late 1800s because lenders needed a way to judge the willingness of a person to repay a debt. When a lender does not have hard data to judge the creditworthiness of a person, he must rely on instinct and judgment of character. Both of these can lead to bias and inaccurate credit ratings. While a creditor could collect data on borrower's himself, it is much cheaper for a third party to do this for lenders.

Credit Scoring

While credit reporting companies may offer solid data on a person's financial history, the national bureaus in the U.S. do not rate a customer's creditworthiness. Another company, the Fair Isaac Corporation, developed a formula in the late 1980s that predicts the chance of a person missing a payment. The FICO formula's factors are based on data reported by the national credit reporting bureaus. Without a report from the national credit bureaus, a formula to rate a person's creditworthiness would be useless.

Secondary Purpose

The credit reporting companies are becoming more than just a database for lenders because other service providers use these reports too. Employers, for instance, use the employment history on a credit report to check the accuracy of the employment time-line on an applicant's resume and rental car companies check reports when a person uses cash or a debit card for a rental. Landlords check credit histories for bankruptcies and evictions.

Tip

The national credit bureaus are privately held companies so they are out to make money. However, the federal government requires the bureaus to provide each consumer with a free credit report every year through AnnualCreditReport.com. Additional reports and reports access through any site other than AnnualCreditReport can come with a fee or require giving the company your credit card number.

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Do Credit Card Interest Rates Affect FICO Scores?

A FICO credit score is a three-digit number calculated by Fair Isaac Corp., or FICO, to quickly tell creditors whether a consumer is likely to be a good credit risk. FICO explains that it uses credit report information and a special formula to distill the number. Credit card data plays a big role in determining the score, but credit card interest rates are not considered.

Contents

A consumer's FICO score is based on various elements like account payment histories, balances, credit limits and credit history length. FICO considers the account types, activity and the ratio of amounts owed to available credit. The company does not factor credit card interest rates into its score calculations.

Effects

Credit card interest rates may indirectly affect a FICO score because of their impact on a consumer's overall finances. Motley Fool financial website columnist Dayana Yochim explains that rates can run as high as 32 percent annually, with interest calculated every month. Much of each payment goes toward the interest so the overall balance goes down very slowly for those who only pay the bare minimum on each statement. Their high debt load hurts their credit score, and they harm it even more if they start skipping payments because they cannot meet the minimums.

Considerations

Some consumers have higher than average credit card interest rates because of credit report blemishes. Major events like bankruptcies and repossessions harm a credit score, and FICO states that minor problems like past-due payments hurt it too. A low score means creditors often charge high interest on new credit card accounts to compensate themselves for the risk of working with subprime borrowers. Some card issuers raise interest rates on current accounts when consumers are late or skip a certain number of payments.

Solution

A request for a lower interest rate can be part of an overall FICO score-raising plan. Lisa Lazarony of the Bankrate financial website recommends contacting the credit card issuer's customer service department and simply asking for a better rate. Consumers with long-term accounts and a positive history have the best chance of getting their interest rates lowered. If they are successful, they will pay less interest each month so their balances will go down more quickly if they make the same payments. Their lower balances will help their FICO scores.

Warning

Do not ask for an interest rate reduction if you've had recent financial problems that show up on your credit reports, warns John Ulzheimer, CNBC contributor and president of consumer education for Credit.com. Card issuers often check your records before considering your request. They may give you worse terms instead of lowering your interest rate if they believe you are a risky customer.

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How to Increase Credit Score And Credit Report With These Tips

This article features tips to increase your credit score and credit report ratings.

Instructions

1

Increase your credit score step 1.

Order a free copy of your credit report by mail from Equifax. Conduct a search on Google, Yahoo, Msn or Ask to easily obtain their mailing address.

2

Increase your credit score step 2.

Order a free copy of your credit report by mail from Experian. Conduct a search on Google, Yahoo, Msn or Ask to easily obtain their mailing address.

3

Increase your credit score step 3.

Order a free copy of your credit report by mail from TransUnion. Conduct a search on Google, Yahoo, Msn or Ask to easily obtain their mailing address.

4

Increase your credit score step 4.

Upon receipt, review your credit reports to ensure accuracy. For information that you dispute, write to the respective credit bureaus and provide any information that will support your claim.

5

Increase your credit score step 5.

Pay all bills on time. When possible pay creditors before the statement date, this will help increase your credit score. Timely payments account for 35% of your credit score, so paying promptly can help increase your credit score.

6

Increase your credit score step 6.

Pay all revolving accounts to less than 25% of the high credit limit. Utilizing a small portion of your available credit is considered to be responsible, while high usage of your credit limit, maxing out your available credit or exceeding your credit limit is consider risky behavior by credit scoring models.

7

Increase your credit score step 7.

Refrain from inquiring for new credit. Try to limit your applications for new credit of any type to fewer than 3 every six months. This will show that you are not looking to open excessive credit obligations.

8

Increase your credit step 8.

After you have completed the above steps order a copy of your free credit report from the Annual Credit Report Service. They will provide one free credit report per year for free.

9

Increase your credit step 9.

Review your credit report for accuracy and contact the respective credit bureaus where you have items to dispute.

10

Increase your credit score step 10.

Read as much information as you can about increasing your credit score and your credit report. As you improve your credit score you'll be approved more often and save more money due to better interest rates.

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What Causes a Loan to Be Declined?

Two of the biggest problems for consumers who are denied credit is that they may accept their fate or keep applying for credit, an action that can further reduce their chances of receiving approval. Lenders look for consumers who can afford to repay a loan and who have a history of repaying their debt on time. Consumers have a better chance of qualifying for a loan if they have good credit and only borrow an amount that is appropriate for their income level.

Credit History

A poor credit history is a common reason for credit rejection. Lenders, especially credit card companies, automate the underwriting process by pulling the applicant's credit history from one or all three of the major credit reporting bureaus and using software to calculate credit risk. Negative items on credit reports, such as collection accounts and a high amount of outstanding debt, can cause a low credit rating that leads to rejection.

Income

A consumer can have a great credit rating, but face rejection because he does not have enough income to support the debt. Generally, a person should spend no more than 36 to 50 percent of his income on monthly expenses and debt. For instance, if an applicant earns $2,000 a month, he cannot afford a $1 million loan and will not approved by the lender.

Miscellaneous Factors

Lenders might look at dozens of factors on a loan application. The credit scoring model used by most lenders, for instance, has 36 factors that usually lower a person's credit rating. Creditors often make informal judgments about a person's demographic data too. For example, a spotty job history might mean the applicant could skip out on the loan or frequently moving can cause a bill to get lost.

Tips

Consumers should review their credit reports for free via the Annual Credit Report website and look at their reports from the perspective of a lender. Late payments, collection and charge-off accounts and too much debt are the most important items in a credit history. The applicant also needs to lead a more stable life and earn more. For instance, a person applying for a mortgage might ask for a raise before submitting his application. Lenders may expect applicants to work for the same employer for two years before applying for a loan. Because loan applications lower a consumer's credit rating, he should limit his requests for credit.

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How to Get Better Credit or Gain a Credit History

Money lenders--credit card companies, for example--pay close attention to an individual's credit history before lending. Your credit score, a number between 300 and 850, measures your responsibility in the money borrowing process. A higher credit score gives you a better chance of getting approved for loans and getting the best interest rates available. Your payment history will affect your credit history the most; late or missing payments drastically reduce your creditworthiness. The amount of debt you own also affects your credit. Keep in mind these two biggest factors in order to gain a sound credit history.

Instructions

1

Make at least the minimum payment on all your credit card and/or loan accounts before the due date.

2

Use credit cards responsibly; you should not live beyond your means. Plan your monthly budget with repaying credit card debt in mind.

3

Pay off your credit card debt; ideally you need to bring down the outstanding balance on each of your credit card account below 30 percent of the credit line.

4

Use your credit cards at least twice per month to avoid inactivity on your accounts. Otherwise,

the credit card company may close your account.

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Consumer Credit Report Definition

When you apply for a loan, credit card, cell phone, car insurance policy or to rent an apartment, a company typically checks your consumer credit report. This is a review of your bill-paying history and can help the business assess whether you are a good credit risk.

Types

In the United States, Equifax, Experian and TransUnion maintain consumer credit reports.

Time Frame

Positive accounts are normally reflected on your credit profile for 10 years, while most negative bill-paying habits, such as late credit card accounts, report for seven years.

Your Rights

If you are rejected for a service based on your consumer credit report, you have the right under the Fair Credit Reporting Act (FCRA) to get a free copy of the file the company used to make its decision.

Inaccurate Information

If something is wrong with your credit report, such as an address or an account that is not yours, you can dispute it with the reporting agency. This right is guaranteed under the FCRA.

Free Annual Credit Report

Under federal law, consumers can get one free credit report each year (even if you are not rejected for credit) from Equifax, Experian and TransUnion. Visit AnnualCreditReport.com to complete that process.

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Does Applying for a Credit Card Hurt My Credit?

Your credit score is used by lenders when they are determining whether to issue you credit. The most widely used score is the FICO score, which is calculated using the scoring algorithm developed by the Fair Isaac Corporation. Your credit score is based on your past debt management and attempts to predict how likely you are to default on a future debt obligation.

Function

When you apply for credit, most lenders want to check your credit score before deciding to offer you credit or not. As part of the application, you are usually required to give permission for the lender to pull your credit score. When a creditor does, an inquiry is noted on your credit report. The inquiry records who pulls your credit score and the date the score was pulled.

Effects

Each inquiry from an application for new credit on your credit report will decrease your credit score slightly because people who apply for more credit are typically at a higher risk of defaulting. According to the Fair Isaac Corporation, the amount of credit you have applied for recently makes up about 10 percent of your score. Each inquiry typically takes off about five points from your credit score, though the impact will be greater if you have a shorter credit history or several credit inquiries in a short period of time. There is no impact from inquiries made by employers, landlords or insurers.

Time Frame

Each credit inquiry remains on your credit score for two years. The further in the past an inquiry occurred, the lower the impact on your score. If you are applying for a mortgage, car loan or student loan, your score will be unaffected by inquiries for loans of that type in the past 30 days. For example, if you apply for a car loan and you had applied for two others last week, those other two inquiries will not affect your score. In the future, the scoring model treats all mortgages applied for in short period of time as only one inquiry and does same for car loans. For example, if you apply for five car loans in a week, even though all five will appear on your credit report, for the purposes of calculating your credit score, the scoring algorithm treats them as one inquiry.

Misconceptions

You can check your own credit score whenever you want without it affecting your credit score. In addition, if your credit report is checked without you initiating the check through an application, the inquiry will not appear on your report or affect your score when your score is pulled by other lenders. For example, if a credit card company pulls your credit score to pre-approve you for a card, the credit inquiry will not affect your score.

Benefits

Applying for new credit can sometimes help you improve your credit in the long run. If you have a limited credit history, though it may dock your score a few points to apply for a first or second credit card or loan, if you manage that source of credit responsibly, the overall effect will be to improve your credit score. Payment history counts for 35 percent of your credit score and inquiries only last for two years on your credit report so in the long run, using the credit responsibly is more important for maintaining a high credit score.

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Does Activating a New Credit Card Impact Your Credit Score?

Your FICO credit score ranges from 300 to 850 and can affect several areas of your life. Lenders and credit issuers check your credit before approving you for a loan or other credit products. Landlords look over your credit prior to accepting you as a tenant. In certain cases, employers view your credit before extending you a job offer. It's important to understand how activating a new credit card will impact your credit score.

Identification

Your FICO score is based upon the data within your credit report and contains five separate elements, according to MyFICO. Thirty percent of your score is the amount of debt you have, 35 percent reflects how you pay your bills, 10 percent measures the types of credit you have, 15 percent is the average length of your credit history and the final 10 percent reflects the amount of new credit you've recently applied for.

Significance

Activating a new credit card after you're approved does not impact your FICO credit score. What does affect your score is if you apply for a new credit card and are approved, that card issuer will report the card to the credit bureau. After a new credit card appears on your credit report, it impacts the length of your credit history. FICO takes the average of all your accounts and the longer your history, the better it is for your score. A new account shortens the average length of your history and may cause your score to drop. How much it drops depends upon the other items found in the report.

Consideration

Some credit card issuers send out pre-approved credit card offers that you did not apply for. Under the Fair Credit Reporting Act, lenders can access your credit without your express permission for the sole purpose of extending you firm offers of credit. These card offers do not affect your credit score unless you call in to accept the credit offer. If you do, the credit account will appear on your report and thus impact your score.

Warning

FICO considers how much new credit you have acquired recently when computing your score; this makes up to 10 percent. If you apply for several new accounts around the same time, FICO considers this risky behavior and it may lower your score. Also, each new account that appears on your credit report shortens your average credit length, which can further negatively impact your score, especially if you're a new credit user, according to MyFICO. Only apply for new credit when it's necessary.

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How Much Can a FICO Score Be Raised?

The FICO credit score system can be cruel -- you could try your entire life to achieve the perfect credit score and probably never get there, because points become increasingly harder to get as your score climbs. However, you can probably raise your score to anything up to the top score. How much you can raise your FICO score depends on where you are at now.

Highest Score

Technically, you can raise your score up to an 850 in the FICO system. Subtract your current FICO score and subtract it from 850 to find out how many more points you need. In all practicality, you probably won't see your FICO score rise above 800, because nobody knows the optimal values for all of the variables in the FICO algorithm. Even people who make it a life goal to get a perfect score usually do not get past the 820s or 830s, according to a March 2011 article on the online financial resource Wallet Pop.

Considerations

FICO scores rise the fastest when you have a low score and start the path to rebuilding your credit. If you have a score of 500, start a new account and pay every bill on time for several months, your score should inflate at a larger rate than somebody with a score of 700. Because of the secrecy of the FICO algorithm, you can only make generalizations about credit scoring and assume that good habits, such as paying debt, will increase a score -- sometimes they decrease a score.

Time Frame

Time is one of the most limiting factors in the FICO scoring model. Negative items stay for seven years, but Chapter 13 bankruptcy stays for 10 years and unpaid tax liens forever. The FICO algorithm treats negative marks during the first two years of their as the most serious items on a report. The worst negatives, such as foreclosure and bankruptcy, can affect a score heavily for several years until they leave the report. Until you get a highly negative account or item off your report, it may limit your score to somewhere in the low 700s.

Tip

Since you cannot predict anything in the FICO model on your own, spend your time improving your credit history and work on the areas that go into the FICO algorithm. The Fair Isaac Corporation, the company that created the algorithm, lists them on their website. If you have credit card debt, pay it off and use as little of your limits as possible. Never pay late and apply for credit sparingly -- the borrowers with the best scores usually have two or fewer hard credit checks each year.

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