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

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

Credit Score Calculations

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

Credit Score Factors

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

Credit Card Payments

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

Canceling an Account

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

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How Do Credit Reporting Agencies Get Information?

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

The Facts

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

Time Frame

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

Benefits

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

Inaccuracies

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

Considerations

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

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How to Earn a Credit Score

Having a good credit score is vital at a time when your credit score affects what types of credit cards you can get, what types of loans you qualify for and whether or not you can get a mortgage to buy a home. It can even affect what types of jobs you can get. And getting approved for credit isn't the only issue. Even after you're approved for credit, your score will determine how much interest you pay on loans; a low credit score could mean a loan that costs hundreds of thousands of dollars more than if the borrower had a good score.

Instructions

1

Open a bank account. Go to a local bank and apply for a checking and savings account if you don't already have them. Bank accounts won't directly go onto your credit report, but having established bank accounts will help you attain the other forms of credit necessary to build your credit score. Almost all credit applications ask for your banking information.

2

Apply for a credit card. Start searching for credit cards that you believe will suit your needs. Major credit cards like American Express along with bank-issued Visa and Mastercards are the most difficult to get, so you should initially avoid them until you achieve a high credit score. To start out, the best cards would be store cards such as Target or Best Buy, gas cards such as Shell or Exxon Mobile or other credit-card companies that cater to individuals first establishing credit, such as Capital One or HSBC Bank. To apply for a credit card, go to the card issuer's website.

3

Use your credit card to pay for routine purchases such as gas or groceries and make sure to pay the card on time every month. After about three to six months of paying the card on time each month, you should see your credit score rise. When your score goes above 650, you can then start applying for the major credit cards directly from the banks or even American Express or Discover.

4

Apply for an installment loan. It's important to have a mix of different types of credit on your credit report. This will raise your score even higher. Installment loans are the types of loans people get when they purchase a car or buy a house.

5

Get a co-signer. If you're having difficulty getting any of these types of credit, try again with a co-signer. A co-signer can be a family member, spouse, friend or anyone else who's willing to help you and has a good credit score. By using a co-signer, you will be applying for credit using this person's good score. As you pay on time, the positive payments will show up on your credit report and your score will rise. The only downside is that the co-signor is responsible for paying the money back if you fail to pay on time, and that will negatively affect both your credit reports.

6

Apply for a secured credit card. If you're unable to attain any of these lines of credit and you're also unable to get a co-signor, you can get a secured credit card. These are issued by banks and are guaranteed by an equal deposit on your part. To get a $500 secured credit card, you first have to deposit $500 into an interest-bearing savings account designated by the bank. Because the lender has a security deposit, there is little to no risk on its part, so almost anyone can get a secured credit card to establish credit.

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What Is Average Credit?

In the world of personal finance, everybody at one point or another needs to obtain loans to finance important purchases and further major life goals. As any good loan consumer knows, a higher credit score is a necessity in order to qualify for the highest credit limits and best loan conditions. However, in order to know if you have a good credit score, it helps to understand how your score stacks up against the average Joe and to have a basic understanding of how credit reporting works.

Definition

A credit score, properly called a FICO (Fair, Isaac and Company) score, is a single number representing an individual's financial trustworthiness, according to financial guru Suze Orman.

Score Range

FICO scores are, according to Orman, measured in points and range from 300 to 850.

Agencies

There are three major reporting agencies, which provide the credit data used in calculating FICO scores: Equifax, Experian and Trans Union.

Score Breakdown

FICO scores are determined based on the following factors: prompt repayment of debts (35 percent of the score), current debt (30 percent), the length of your credit history (15 percent), the kinds of credit you use (10 percent) and how much credit you have recently applied for (10 percent).

Average Credit

The average FICO score in the United States is 678, according to Experian.

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How Does a College Student Obtain a Credit Card?

College students sometimes have the worst borrowing habits, but universities often receive compensation by letting credit card companies come to campus to entice students to sign up for a card. The federal CARD Act of 2010 put up barriers between students and credit card companies to stem the flow of young people acquiring cards. Students can still obtain a card, but probably not without a cosigner.

CARD Act Changes

The CARD requires credit card companies to obtain verification of income to pay an unsecured line for anyone under 21. A student can also have a parent cosign an account. Since students usually have a low income or none at all, the credit card companies are expected to cater to the parents, probably citing credit cards as a necessity in case of an emergency.

Considerations

Banks make the ultimate decision on whether to offer a credit card to a person under 21. The CARD Act does not specify how much a student must make before he qualifies for a credit card, according to CNN. Technically, any amount of annual income could qualify a student for some type of credit, even just a few thousand dollars.

Other Options

Instead of cosigning on an account, a parent or legal guardian can add a college student as a authorized user. Authorized users build credit history and receive a card, but have no responsibility to pay the bill. The student may also probably qualify for a secured card. Since a secured account requires a deposit usually close to or equal to the credit limit, it may satisfy the income requirement of the CARD Act.

Warning

Students should avoid credit card offers through the mail, according to Scott Gramm of HelpSaveMyDollars.com. The CARD Act banned pre-approved offers, so the banks found a loophole through "professional cards." Professional cards allow the same tactics as the pre-CARD Act era, but are technically supposed to go only to small business owners. However, professional card offers often only require the borrower to claim he owns a business without any verification of this fact.

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Do Charge-offs Go Off Your Credit Report After Seven Years Even After You Filed Bankruptcy?

A charged-off account is one the original creditor has written off as a bad debt and sold to a collection agency. You still owe the debt, but to the collection agency rather than the company that originally lent you the money. Filing bankruptcy can wipe out your obligation to repay the charged-off debt, but the account still remains on your credit report after you file bankruptcy.

Duration on Report

A charged-off account stays on your credit report for about 7 1/2 years. This is approximately 180 days between your last payment and the lender charging off the account, plus seven years after it is charged off. Regardless of what happens after the account is charged off, it will stay on your credit report seven more years. Even if you pay off the account in full, the charge-off doesn't go anywhere.

Bankruptcy Effects

Including a charged-off account in your bankruptcy filing does not change anything about how long the charged-off account stays on your credit report. The bankruptcy does not reset any clocks on the account. The account will still fall off your credit report seven years from the date of the charge-off, not seven years from when you filed bankruptcy.

Bankruptcy Duration

The bankruptcy itself also appears on your credit report and adds another negative influence on your credit score. A Chapter 13 bankruptcy falls off of your credit report after seven years. If you filed Chapter 7 bankruptcy, it stays on your credit report for 10 years. Either way, the charged-off accounts will drop off your credit report before the bankruptcy does.

Tips

Even though there is nothing you can do to remove the charged-off accounts from your credit report, their effects on your score diminish over time. In addition, you can add positive credit information to your credit report to further improve your score. After filing bankruptcy, keep paying on any accounts that you did not get to include in your bankruptcy. For example, most student loans cannot be discharged through bankruptcy. If you do not have any accounts after bankruptcy, get at least one and start making regular payments on it. A secured credit card is a good place to start because you can usually qualify for one even after a bankruptcy.

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Should I Mail Letters to Dispute My Credit Report, or Do It Online?

While credit bureaus let consumers dispute credit report items via three methods -- online, mail or phone -- each of the options has their own benefits. Choosing the method best for you will depend on your situation. A person who needs results the fastest will find mailing letters takes longer while the person who needs proof of time, should consider mailing the dispute.

Evaluate

Evaluate why you are doing a credit dispute. This is important to determine the best method of disputing an item on your credit report. Conditions that are time sensitive are best filed over the phone or online. When filing a dispute online or by phone, the dispute is immediately put into motion and the 30-day clock begins to run down. The drawback to both of these methods of disputing is you do not have proof of your dispute or the time received. The credit bureaus are required to complete an investigation within 30 days -- without proof of your dispute, you are unable to enforce the 30-day time limit allowed by federal law.

Online

Your credit report will provide you with the website address of the credit bureau to initiate an online dispute. You will be required to enter the credit report number, your name and other identifying information as required by the credit agency. Depending on the credit bureau, you might be shown a copy of your credit report or you might have to fill in the information from your printed credit report you have on hand. Enter in the reason you are disputing each account and submit the dispute. You might receive an email confirming your dispute was received but this email might not have the details of the dispute. Depending on the credit bureau, you will receive your results of the dispute either by email or via mail.

Mail

Any time you are not in a time-sensitive situation or do not need your credit investigation completed as soon as possible, mailing the dispute is best as it provides you with the proof you will need to enforce the rules of credit disputing. The credit report will provide you with the mailing address to send your credit dispute. Type a letter including your name, address, credit report number, and the last four digits of your Social Security number. Include a copy of a bill or driver's license to prove your identity. You can black out the account number or driver's license number. The credit bureau is interested in ensuring that you are the person initiating a dispute. Include the account number and name of all accounts you are disputing, and include a brief reason why you are disputing the account. The reason can be brief and simple such as: incorrect information, not my account, not joint account.

Record Keeping

Mail the dispute letter by certified mail, which requires a return receipt. This will force the credit bureau to sign for the letter, and you will receive a card showing the signature and the date the letter was received. This is the date you begin the 30-day countdown. The Fair Credit Reporting Act requires the credit bureaus to remove any account that a creditor has not corrected within the 30 days allowed for the investigation. When disputing online or via phone, write down the date and time of the dispute, and if by phone, the name of the person you spoke to.

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How to Get Your Short Sale Removed

Short sales actually save lenders quite a bit of money over letting the loan foreclose, which makes the lender take possession, do the repairs and maintain the property before eventually selling it themselves. It's not uncommon to negotiate a good credit report with a bank or mortgage company while in the process of a short sale. Negotiations for a favorable credit score after the sale is completed remain an option for any who did not foresee their credit rating as an issue.

Instructions

1

Plan for your good credit report before arranging a short sale by making your lender agree to a favorable report as part of the deal for you to sell the property. You are saving the lender a considerable sum of money by selling the property even at a price below the loan value, which gives you some room to negotiate.

2

Ask for a letter from your lender stating their intention of reporting your credit after the sale. If you do not receive a letter agreeing to a report that sheds no negative light on your transaction, then send a letter demanding a favorable credit score as a condition of your sale of the home. This becomes your grounds to insist the report is fixed if you receive a less than favorable report on your credit score after selling.

3

Check the report on your credit after completing the short sale. The lender may have posted a "Paid and Settled" report, which is accurate after a short sale but does not look good on your credit rating. Contact the lender and ask for a report that does not subtract from your credit score, such as "unrated." Do not accept answers to this request stating that the company cannot change the report. Any credit report can be resubmitted, and someone at the company has the authority to do it.

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How to Remove a Bad Credit Rating

Your credit rating is usually a credit score. The three nationwide credit bureaus--TransUnion, Exeperian and Equifax--all issue independent credit scores based on information in your credit report. Credit scores range from a high of 850 down to 300, with 620 generally representing the cutoff for "good" credit. Scores just below 620 represent fair credit, while people with scores in the low 500s and below are considered to have bad credit. You cannot remove your bad credit score, but you can improve it.

Instructions

1

Review your credit report. Get a copy from Annual Credit Report, an Internet site sanctioned by the Federal Trade Commission to provide free reports under the Fair Credit Reporting Act.

2

Look for negative entries on your report that could be affecting your score. Highlight all accounts showing as more than 30 days past due, or as collection accounts or charge-offs. Charge-offs are debts you failed to pay and the creditor closed the account. Collection accounts are debts that were sold to debt collection agencies. Send in payments to bring your existing accounts current, and contact the debt collectors or creditors to pay charge-offs or collection accounts. Look for their contact information on the credit report.

3

Write letters to the credit bureaus to challenge any inaccuracies on your report. For example a charge-off may appear on your report even though you paid the account in full while it was active. Federal law requires the credit bureaus to correct such inaccuracies within about 30 days after you file a dispute. Write to the credit bureau at its address on the credit report or visit the website to enter a dispute online.

4

Pay your existing bills on time, month after month--the No. 1 key to raising your credit score.

5

Pay down your existing debt to less than 30 percent of the credit limits, a move that the website Bankrate says will also help increase your score. Using small amounts of your credit lines shows creditors that you are in control of your finances and not living on credit. Stay with the process of paying your bills on time, reducing your overall debt, and removing bad marks from your credit reports for 12 to 24 months. Successfully executing your plan in all three areas could result in your bad credit rating being replaced by a good one.

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Does Accepting a Lower Rate From a Credit Card Affect Your Credit Score?

Credit card companies all impose interest charges on their accounts. There is no standard interest rate. Each bank sets its own rate, and some customers pay more or less for the same type of credit card, based on their credit score. Interest is sometimes negotiable, with banks lowering their rates for good customers who request better terms. Better interest rates sometimes have ripple effects on your credit score.

Scoring Factors

Your credit score comes from things like your available revolving credit lines, the amounts you owe on loans and credit cards, whether you make payments on time and if you have ever had issues with collection agencies, car repossessions and bad debt write-offs, the Federal Reserve Bank of San Francisco explains. Your credit card limits, balances and payment histories appear on your reports, but not your interest rates. Interest has no direct effect on your score, but indirectly it can help or hurt you by how it affects your overall finances.

Positive Effects

High interest rates cost you more money if you do not pay your credit cards in full during every billing cycle. Interest charges are assessed monthly, the Federal Reserve Bank of San Francisco advises, and only part of your payments goes to reduce your balance. The rest pays for the interest. More of your funds go toward lowering your principal if your bank lowers your credit credit card interest rate. Less debt means a better score, so your credit rating improves as your balances go down more quickly.

Process

Banks do not voluntarily lower interest rates, but many respond to requests by good customers. You may qualify if you are a long-term credit card customer who rarely or never pays the account late. Call the toll-free number on the back of your card, get connected to a live agent, and ask for lower interest, Bankrate writer Lucy Lazarony recommends. Mention your good history and any competing offers you have received in the mail or noticed online. Call again a few weeks later if the agent does not give you a better rate.

Considerations

Your current credit card issuer might not lower your rate, but you might get better offers from competitors. Accepting a new account with a lower rate initially drops your score a bit because of the inquiry on your credit reports. The MyFICO scoring website advises that your score drops by five points or less for a credit check. Your score then rebounds because you have more available credit compared to what you owe. Transfer your existing balance to the new, lower interest card and leave the old account open to maintain that ratio.

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Does Ending a Credit Card Hurt Your Score?

Closing a credit card can hurt your credit score in a number of ways. It impacts your payment history and length of credit variables, which account for half of your FICO score, according to the website MyFICO. It also negatively affects your credit utilization ratio, which accounts for another 30 percent of your score.

FICO Importance

FICO, developed by the Fair Isaac Corporation, is the scoring model used as the basis of credit scoring computations from Equifax, Experian and TransUnion, the three major credit reporting bureaus. Lenders rely on one, two or all three reports when making loan decisions and setting loan rates and terms. MyFICO pointed out in a July 2006 mortgage loan rate table that a credit score from 720 to the maximum 850 typically netted a 30-year fixed loan rate of 6.78 percent. A score from 500 to 559 meant a rate of 9.29 percent. This could mean a difference of tens to hundreds of thousands of dollars difference in interest costs over the life of a mortgage.

Credit Utilization

Every time you use a credit account, open a new account or close an existing account, you impact the "amounts owed" category of your FICO score. This measures your percentage of available credit currently in use. It is important to lenders because they want to know if you are already debt-strapped when you apply for a loan. By cancelling a card, you remove that amount of available credit with no effect on your usage. This eliminates a zero percent utilization on that card and removes the card limit from your overall utilization calculation. This negatively impacts your score, with point value dependent on the actual limit.

History

When you cancel a card, your history of use stays with your credit report for seven years, according to The Motley Fool's Dayana Yochim. Thus, you get no benefit from cancelling a card to negate late payments and other negative marks against it. Perhaps worse, when you cancel a card with a long running history of responsible use, you eventually lose those benefits in the category that makes up 50 percent of your score. The longer your history with the card, the worse the impact.

Why People Cancel

People often cancel credit cards to consolidate debt, to avoid overspending or to avoid annual maintenance fees on unused cards. However, you need to consider the implications on your credit score when doing so. Even saving a few dollars on inactive fees provides little benefit compared to the potential of losing a fraction of a percentage point or more on major loans for homes and autos.

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Does Repairing Credit Boost a Credit Score?

Repairing your credit will boost your credit score. A credit score represents your credit worthiness. Begin establishing good credit and your score will begin to rise. As your credit information changes, your credit score will slowly increase.

Obtain Credit Report

Equifax, Experian and TransUnion each issue you a credit score based on the information provided from creditors. Compare all three reports. Contact the bureaus to dispute any inaccuracies.

Settle Old Debt

If you default on a loan or credit card, it will show in your credit report. To repair your credit, negotiate with the original creditor to make payment arrangements. Agree to pay the debt in exchange for removal from your credit report. Without a written agreement, the creditor can report the debt as paid, but the debt still will appear on your credit report.

Open New Lines of Credit

Obtain a credit card for people with bad credit or a secured credit card. Begin re-establishing your credit by paying the bills on-time. You also want to avoid charging the full balance available on the card. Within a month of timely payments, the credit card company will begin reporting to the credit bureaus.

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Does Carrying a Balance Improve Credit?

It may sound counter-intuitive, but carrying a balance on a credit card can improve your credit rating. However you do not need to carry a balance to build credit. Also, you do not pay finance charges when you pay off a balance monthly. You should avoid putting too much money on your credit card if you only want to keep it active to improve your credit rating.

Identification

You do not have to carry a balance to improve your credit rating. As long as you charge something to the card every few months the lender reports the account as active and the on-time payments build positive credit history. You can say carrying a balance builds credit too, but because paying off the bill by the due date still builds credit, it is unnecessary.

Considerations

The availability of credit always presents the danger of overspending or maxing out the card in case of an emergency. Debt load counts for 30 percent of your FICO score, so you want to limit use of any credit card to the bare minimum necessary. You also have to worry about credit utilization, or percent of credit limit used, which falls under the category of "amount owed."

Too Many Credit Cards

Sometimes you want a credit card to go inactive. Although you can never have too much available credit, more than seven active revolving accounts on your credit report lowers your score a few points, according to Dayana Yochim of The Motley Fool. On the other hand, once a credit card goes inactive, you lose the limit on the card and thus increase your credit utilization ratio.

Tip

If you have an account you just want to keep active, put a small charge, such as a cellphone bill, on it every month and pay it off immediately. Purchasing an item and paying it off over several months as long as you can meet the minimum payment is acceptable, but less ideal than paying the balance in full. You should also have an active installment account, such as a personal loan or mortgage, to diversify the types of credit you use.

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How to Improve Your Credit Score With Secured Bank Loans

Banks are reluctant to give unsecured loans to people with low credit scores because of the relatively high risk of default. They are more likely to grant a secured loan, which is backed by a bank account, certificate of deposit or property such as a car, boat or house. If the borrower defaults on a secured loan, the bank will seize the account or property, according to Dollar Bank, an online financial institution. You can improve a low credit score with secured bank loans if you handle them responsibly.

Instructions

1

Choose the type of collateral you will use to secure your bank loan. For example, you may wish to use an existing certificate of deposit or home equity or buy a new item like a car. Select your collateral carefully because the bank can seize it if you stop making your payments. You could potentially lose your home or transportation, as well as destroy your credit rating, because of a foreclosure or repossession.

2

Talk to a loan officer and fill out an application at the bank where you normally conduct your business. Banks are more likely to extend credit to regular customers, especially if your credit is spotty, and the collateral raises your chance of approval even further.

3

Set up automatic payments for your secured bank loan. FICO, the largest credit score provider, cites your payment history as the biggest influence on your score. It accounts for 35 percent of the total number. Automatic payments eliminate the risk of forgetting to mail a check by the due date or having it get lost in the mail. They let you quickly build up a string of on-time transactions.

4

Request your credit reports from annualcreditreport.com, the official site for free, no-obligation reports, according to the Federal Trade Commission (FTC). Your secured bank loan does not improve your credit score unless it is reported to the credit bureaus. Call the bank if the loan does not appear on your report and ask it pass along account details to the three credit bureaus, TransUnion, Equifax and Experian.

5

Make payments for the entire length of your secured bank loan. You need to build up a long-term records of prompt payments to raise your credit score. Your history accounts for 15 percent of your overall score, according to FICO. The loan also diversifies your credit use if you currently have credit cards. FICO explains that your score is higher if you have different account types.

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How a Secure Card Builds Your Credit

Bankrupt individuals and people with terrible credit have a way to obtain a credit card and rebuild their credit history: obtaining a secured credit card. While a secured credit card often reports to the bureaus like a credit card and functions like one, the secured line has very distinct features. Namely, you must "pay" for it.

Identification

The company that issues your secure credit card can report payment history on the account like any other credit card, although some lenders do not report to all the major bureaus. Secure cards have one main difference from a regular credit card: They require a deposit on the credit limit, sometimes several thousand dollars. The creditor holds the deposit in a separate account and only draws on it in case you default on the bill. Purchases draw on the credit limit.

Considerations

Secured cards offer far less risk than a normal credit card, which is backed by nothing, but issuers of secured cards always charge an annual fee and some even an application fee, because only desperate borrowers opt for a secured line. Expect a higher interest rate than an unsecured credit card and more unscrupulous lenders might require you to purchase other services, such as a monthly insurance policy, according to Bankrate.

Benefits

Banks rarely reject applications for a secured credit card because of the safety of the security deposit and the high rates they can charge. Once you show you can handle the responsibility of a secured card by paying every month, the issuer will probably offer to make the account a regular, unsecured card in 12 to 18 months or you will have a sufficiently high score to get one on your own.

Tip

Ask the issuer of a secured line whether or not he reports to all three major credit bureaus -- TransUnion, Experian and Equifax -- some smaller lenders may not report at all, which makes the secured line of little use. Also, shop around for cards that do not charge processing or application fees or any other unnecessary expense.

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How to Choose the Best Credit Monitoring Service

Knowing and understanding your credit report and scores is important since almost all financial decisions hinge on what yours says about you. It's important to know what your score and report says about you and to know when changes are made so that you can dispute them immediately if they are inaccurate. With identity theft on the rise, it's also important to keep an eye on your information so that you can stop a problem before it gets out of control. A credit monitoring service will allow you to do exactly that.

Instructions

1

Check with your credit card company. If you have credit cards, many times you can become a member of a credit monitoring service for just a few dollars a month through your card company. Talk to the companies that issue your cards to see what programs they offer. You can also research their offers online.

2

Check for daily monitoring of your file. When you choose a credit monitoring service, you want to make sure that it keeps track of your credit file on a daily basis and updates you via email of any changes to your report. This will allow you to deal with any issues immediately.

3

Make sure you get free credit scores. If possible, choose a company that will give you updated credit scores at least once each quarter. Some companies will even give you updates monthly, choose a frequency that's right for you -- you may not need to know your scores each month, but you do want to see how they change over time, so a minimum of four times a year is good. Be sure the report includes the scores from all three major credit bureaus, Equifax, Experian and TransUnion.

4

Check to see whether or not you have the ability to dispute your credit report through the service that you use. If you don't have the ability to dispute through the company that you are using, check for tools that will assist you with your disputes.

5

Look for a credit monitoring service with simulators. Many companies will give you the ability to see how different things will affect your credit score. This is important for you to know as it will allow you to see how lowering your debt or missing a payment will affect your overall score. This is an important tool to have.

6

Pay attention to price. Since many of the credit monitoring services offer the same suite of services, you'll want to pay attention to price. Compare a couple of different services and look for the one that offers the best monthly fee. A few dollars difference each month can add up to a large savings over time.

7

Check website security measures. Since you'll be giving this company access to your personal information, you'll want to check their security measures carefully. Read the site's privacy policy. Check to see what security measures they have in place to keep your information safe.

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How to Get a Credit Report Faxed to Me

Everyone is entitled to a free copy of their credit report once a year, but anyone can order their credit report at any time. The method in which you receive your report depends upon where you order your credit report from, how much you pay for it and how you request it. The three major credit reporting agencies --- Experian, Equifax and TransUnion --- will mail reports or allow you to view them online upon request. In order to have a report faxed to you, you must look at alternative means.

Instructions

1

Sign up with a credit monitoring agency. Most credit monitoring agencies will supply credit reports upon request to members by mail or email, but a few will also fax your report upon request. Expect to pay for this service. Check the Better Business Bureau website for complaints against any credit monitoring agency before you subscribe to it services.

2

Apply for a loan or other line of credit, and request that the loan officer fax you a copy of your credit report after he retrieves it. Inform the loan officer you require the report as part of negotiations to acquire the loan.

3

Verify the information on your credit report, and dispute any inaccuracies with the three credit reporting bureaus. Instructions on how to dispute the information for each agency are listed on each one's website as well as on the credit report received from each agency.

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Does It Hurt My Credit Score to Cancel a Credit Card That Carries Monthly Fees That I Don't Use?

Canceling a credit card typically does have a negative effect on your credit score because it reduces your debt utilization. However, you need to consider the potential benefits of canceling a card, including saving on maintenance fees, in comparison to the negative implications to your credit score when making a decision.

Credit Score Basics

Your credit score is an evaluation of your overall credit worthiness as an individual borrower. Your score is important to potential lenders when considering whether to loan you money and what rates and terms to set. Three major reporting bureaus provide credit scores that are used by lenders. Though each rating system is unique, they are all based on the FICO scoring model, names after its creator, the Fair Isaac Corp. Credit scores are influenced by a number of factors such as loan and payment history, debt utilization, types of credit and length of credit.

Debt Utilization

The reason your credit score is generally hurt when you cancel a card with a zero balance is that it reduces your debt utilization. According to the MyFICO breakdown of your credit score computation, about 30 percent comes from your use of credit relative to available credit. Debt utilization is the percentage of available credit currently in use. The lower your debt utilization, the better your score. If you cancel a card with zero balance and a $10,000 limit, for instance, you lose $10,000 of available credit, reducing your utilization.

Benefits of Canceling

In the scenario proposed in the question, you benefit from canceling your card because you no longer pay monthly fees. Many card providers charge monthly or annual fees for using the card. In his Bankrate.com article "Cancel a card, hurt your credit score," author Gregory Taggart also cites Craig Watts of the Fair Isaac Corp., who indicates that canceling cards is sometimes necessary to get your poor spending and credit habits under control.

Weighing the Options

Ultimately, deciding whether to cancel depends on credit card variables and your personal credit situation. Canceling a lower-balance card to avoid hefty fees is more sensible because you have less impact on your debt utilization. If your credit score is excellent and you have large available credit, losing a few thousand on a single card would have minimal impact. And, as Taggart noted, the benefits of improved credit habits may have more impact on your credit score than keeping a high-balance card to preserve a few credit score points.

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How to Find My Credit Score From My Credit Report

To the untrained eye, reading a credit report can be complex, but locating a credit score on your credit report is actually very easy. Unfortunately, not all credit reports include credit scores. Printed copies of credit reports can be confusing to read, but if you recently applied for a loan, requesting a printed report may allow you to see your credit score at no cost. While free credit reports available over the Internet can be easier to read, credit scores are only included with these reports if you choose to pay an extra fee.

Instructions

Finding a Score Online

1

Visit the website annualcreditreport.com to obtain a copy of your credit report. Although the site offers free credit reports once annually from each of the three major credit bureaus, these credit reports will only include your credit score if you are willing to pay an additional fee.

2

Before you can see your credit report, you will need to answer several security questions about your credit history to confirm your identity, by providing some basic information on previous accounts, open accounts or current balances on accounts.

3

When offered, select the option to obtain your credit score for an additional fee, and enter your credit card information for payment. Confirm that all of the personal information you provided is correct before clicking the button to purchase your credit score and credit report.

4

View your credit score at the top of the screen. It will include a breakdown that describes how the score was calculated, and how it compares to the average American consumer. The score will be displayed in bold type across the top of the screen--it's impossible to miss.

Finding a Score on Printed Reports

5

Apply for a loan with a local lender. It does not matter whether or not you will accept the loan--you can make this decision after a final credit decision is made by the lender.

6

File a formal request with your lender for a copy of the credit report used to render a credit decision on your loan application. You must wait until a final decision is made on your loan. It's faster to apply for a small personal loan--you may even get an instant decision.

7

Have the lender send your request to the credit bureau the lender used to obtain your credit report. This is a right given to all consumers following the passage of the Fair Credit Reporting Act.

8

Wait. It may take up to six weeks for the copy of your credit report to arrive at your home.

9

Review your credit report. The credit score will be printed at the top of the report, either on the right- or left-hand corner. It is a three-digit number, and may be preceded by the word "FICO."

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Statute of Limitations on Loan Defaults

The statute of limitations on a debt limits the amount of time a creditor can sue you to recover the funds you owe. It also limits the amount of time a default can stay on your credit report. These laws, designed to protect you from collections many years after you have defaulted, can be complex and vary by state and by type of debt.

Federal & State Debts

Federal debts, such as tax liens and judgements, typically expire after six to 10 years. This can depend on the type of contract you signed and the type of debt. If you do not pay your federal debts, the lien or judgment may remain on your credit score for seven years or more. Each state has its own laws regarding SOL on judgements and liens, and some do not use any SOL. You can look up laws regarding your state's SOL through legal resource libraries.

Private Time-Barred Debts

Private loans also undergo rules according to the SOL of each state. The SOL of your debt will, again, depend on the type of debt and contract you signed. For example, an open-end debt, such as a revolving credit line, the SOL starts when the first payment was due. However, some states do have special regulations on credit card debt. Another factor affecting the SOL for your debt is whether your contract included a Signed Under Seal provision; signed under seal simply means there was an embossment or wax seal present on the contract, further validating the official agreeement. This can extend the length of your debt beyond the normal SOL.

Student Debts

If you have defaulted on private student debts, the private loan SOL in your state will apply. For federal student debts, the government may not be subject to an SOL when collecting. Part of your Social Security benefit payments can continue to be withheld long after the SOL has expired for a federal debt. Therefore, federal student debt default is a very costly form of default; it is very difficult to have these debts forgiven under bankruptcy as well.

Help for Time-Barred Loans

If you are contacted by a lender regarding a loan you feel is past the SOL, you should contact your state consumer protection agency immediately. Before responding to any collections agency with payment or other form of notice, simply ask for a verification of their right to collect the debt. Do this in writing, and save a copy of your correspondence. A collections agency must respond to this request, and in the meantime you can research your rights with the consumer protection agency. If you make a payment on the loan, the statute of limitations may reset, so it is important to withhold payment until the debt has been verified.

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How to Check Your Credit in Ontario

Banks, landlords and potential employers may check your credit when deciding whether to offer you a loan, rent you an apartment or offer you a job. Canadians, including residents of Ontario, can check their own credit for free through one of Canada's two credit-reporting agencies: TransUnion Canada or Equifax Canada. You can receive a free credit report by making your request by phone or through the mail. Both agencies also offer fee-based instant online credit reports.

Instructions

TransUnion

1

Go to the TransUnion website. You can also request your free credit report over the phone by calling 1-800-663-9980.

2

Click on "Find out how to qualify for a free copy of your Consumer Disclosure".

3

Click on "Mail".

4

Download and print the Consumer Request form.

5

Complete the Consumer Request form. On this form, you must include your name, date of birth, address and previous address if you have been living at your current address for less than two years. Be sure to sign and date the form.

6

Photocopy two pieces of identification. You must include photocopies of two pieces of identification that include your name, date of birth, current address and signature. One of the pieces must be government issued, such as a driver's license or passport. Other acceptable identification includes utility bills or signed credit cards.

7

Mail your Consumer Request form to TransUnion. Mail your form, along with the photocopies of your identification to the TransUnion Consumer Relations Department at P.O. Box 338, LCD1, Hamilton, ON, L8L 7W2.

Equifax

8

Go to the Equifax website. You can also request your free credit report over the phone by calling 1-800-465-7166.

9

Click on "free credit file". This opens a new window with a printable Request to Obtain My Free Credit Report form.

10

Print the Request to Obtain My Free Credit Report form.

11

Complete the Request to Obtain My Free Credit Report form. You must include your name, current address, previous addresses for the past three years and the name and last four digits of a major credit card. Be sure to sign and date the form.

12

Photocopy two pieces of government issued identification. You must include photocopies of two pieces of government issued identification, such as a driver's license. If neither of your pieces of identification show your current address, you must include a copy of a document, such as a utility bill, that does.

13

Mail your Request to Obtain My Free Credit Report form to Equifax. Mail your completed Request to Obtain My Free Credit Report form, along with your photocopied identification, to Equifax National Consumer Relations at P.O. Box 190, Station Jean Talon, Montreal, QC, H1S 2Z2.

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How Long Does Settled Debt Stay on Your Credit Report?

Settling a debt might save you thousands of dollars on an account now, but it could cost you much more on future loans because it sticks to your report for years. However, most debts that get to the point that the creditor accepts a partial payment do not usually affect a credit score much, because of the likely numerous defaulted payments before the settlement.

Identification

Settled debts can stay on a credit report for up to 7.5 point years. The clock on the federal credit reporting time limit starts with the date of first major delinquency -- the date you miss you first miss a payment. Creditors have 180 days to collect a debt after the date of the first major delinquency and then the debt can stay on a report for seven years regardless of when you settle the account.

Effect

Surprisingly, settling a debt usually has almost no effect on your credit rating, according to Experian, one of the three major national credit reporting bureaus in the United States. Once you start missing several payments in a row, your score takes a dive, especially if you default on other accounts too. While settling an account might take a few points off of your score, it probably does not make much of a difference once you already have a score below 600 to 620.

Considerations

While you never want settled accounts or any other delinquent debt on your account, it may be better to resolve the debt now rather than let it bog down your finances and credit score in the future with constant missed payments. Settled and delinquent accounts do their most damage within the first 24 months of appearing on your credit report, so you can start the credit repair process sooner by quickly ending the debt. Also, you remove outstanding debt from your profile and prevent possible legal action in the future by settling a debt.

Warning

You probably can settle a debt on your own. Watch out for debt settlement companies that entice you with promises of removing an account if pay the debt settlement firm thousands of dollars in legal fees. Federal law lets creditors list accurate information, so the credit reporting bureaus will not delete anything as long as they can verify its accuracy. Some creditors and collection agencies agree to lie about a delinquent account and claim it was an "error" in return for a full or sometimes partial payment, but the national credit reporting firms do not promote the practice.

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Is It Possible to Remove Inquiries From My Credit Report?

Hard inquiries have such a small impact on your credit score that you might not even notice. More than six inquiries in a year makes you a high risk, even with no other negatives on your credit report, according to the Fair Isaac Corporation. Thus you should check your report for unauthorized inquiries and dispute them with the credit bureaus.

Identification

It is possible to remove inquiries from a credit report, but only if you never gave the creditor consent to run your credit report. The Fair Credit Reporting Act demands the credit reporting bureaus remove any falsely reported negative items, such as a credit inquiry. Dispute the inquiry through the agency's online dispute form or send a letter.

Considerations

While the credit bureaus can remove an unauthorized inquiry, Bargaineering suggests asking the creditor to remove it, because this usually gives faster results. In any letter to a creditor, include the details of the inquiry on the report, such as the date and name of the creditor and mention that the Fair Credit Reporting Act considers an unauthorized inquiry a violation. Ask the creditor to furnish any documents that gave him the right to pull your report, such as a release form you signed.

Reporting Time Limit

Inquiries naturally fall off your credit report two years after the posting date. However, they only affect your credit one year after the creditor requests a report. Also, creditors usually focus on credit inquiries within the last six months, according to Carreon and Associates. Too many very recent inquiries could scare a lender into thinking you might be desperate for credit, because you expect a financial catastrophe. (ref 1 and 4)

Tip

Soft inquiries do not affect your credit score, but they pose a threat to your score, because creditors use soft checks to "pre-approve" credit cards in the mail. Would-be thieves can intercept these, run up the limit and stick you with the bill. You can stop many soft checks by opting out of pre-screened offers via OptOutPrescreen.com. Other soft inquiries are usually due to account reviews and stay on your report for two years.

Tip

In the future ask lenders if they perform a hard inquiry before consenting to a credit check. If possible, try to limit inquiries to no more than one or two a year to keep them from becoming a problem.

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How Often Does a FICO Score Change?

If you use credit cards or have loans, you're probably interested in your FICO credit score. This number can either provide you access to affordable credit or doom you to a future of high interest rates. However, your FICO score is constantly changing, meaning the credit decisions you made yesterday can impact your FICO score today.

FICO Score Basics

Essentially, your FICO score is a snapshot of your financial history. The reason it changes so often is because you're constantly engaging in activity that affects your score. The FICO score formula is based on five major elements. Listed from the most important to least important, the factors that determine your credit score include your payment history, your amount of debt, the age of your accounts, the number of recent inquiries made into your credit file and your mix of credit products.

Negative Marks

Although it takes a long time to build a good credit history, you can severely damage your FICO score by making one or two errors. For example, according to the MyFICO website, your score can drop by 100 points or more by allowing payment for just one account to be more than 30 days past due. A bankruptcy can result in a 240-point reduction in your FICO score.

Impact of Recent Information

Most negative information, such as late payments and collection activity, stays on your credit report for seven years. However, as time passes, that information becomes less influential in determining your credit score. Instead, your most recent information is considered a better indicator of your financial risk. If you've had credit problems in the past, but you're building a solid history of on-time payments and sound financial management, your score will steadily improve. The negative factors are still on your report, but their negative impact may be negated by your improved credit management.

Inaccurate Information

According to Bankrate, nearly 80 percent of credit reports contained inaccurate information in 2004. Of this 80 percent, one out of every four had information that could significantly affect credit scores. If you believe your FICO score should be higher than it is, obtain a copy of your credit report and check for errors. You can order a free copy of your credit reports once each year through the AnnualCreditReport.com website. Your FICO score could be affected by errors that have nothing to do with your ability to manage credit. If you find errors in your credit file of any of the three main credit reporting bureaus -- Experian, TransUnion and Equifax -- you should file a dispute with that credit bureau to have those items removed. This not only cleans up your credit report, but it may result in a quick and easy improvement in your credit score.

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How to Get Late Fees Removed From a Credit Report

According to The Motley Fool, a single 90-day late payment can cause ongoing damage to your credit score. In the eyes of some creditors, a three-month late payment is akin to a tax lien, bankruptcy or a repossession. Simply bringing your account current by paying the outstanding balance will not remove the negative late fee or the red flags it leaves behind. Once you cross the 90-day-late payment mark, credit bureaus assume you may cross that line again. However, you can negotiate with your creditors to remove late fees from your credit report to raise your credit score.

Instructions

1

Contact your creditor and request a goodwill removal of the late fee. If you can show you experienced a period of financial hardship, but have a history of on-time payments prior to your late payment, some companies will remove late fees from your credit report. Gather financial documents such as income statements and a list of your expenses to illustrate that you went through a temporary period of financial hardship. If a medical emergency and subsequent hospital bills led to your late payment, creditors are more likely to honor the request based on your hardship.

2

Leverage your financial standing to negotiate the removal of late fees from your credit report. If you have a good credit score -- which, according to the Experian website, is a score of 700 or higher -- Entrepreneur writer Tanisha A. Sykes suggests you tell the company you will pay off the balance and close the account if late fees are not removed. Most companies won't risk losing a good customer, so it would rather remove the late fee than risk the chance of losing your business. Additionally, negotiate removal by signing up for automatic payments. Automatic payments not only help the company, but they ensure you won't miss any future payments.

3

Dispute the late payment entry with the major credit bureaus if the item is inaccurate. Claiming that an accurate entry is inaccurate can be considered fraud, but if you find any inaccuracies regarding the late payment reporting, you can dispute it for removal, according to the Federal Trade Commission's Facts for Consumers. Include with your dispute original copies of any documents that support your claim. Even simple inaccuracies, such as a wrong date or an inaccurate amount, are grounds for dispute. Creditors often have a difficult time verifying precise details of account histories, and if they are unable to verify the validity of the disputed item within 30 days, the negative entry must be removed. Check for inaccuracies by obtaining your credit report. You can obtain a free copy of your credit report from each of the three credit reporting bureaus -- Experian, TransUnion and Equifax -- once each year through AnnualCreditReport.com.

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How to Increase a Credit Score Without Credit Cards

Having a good credit score determines your ability to obtain credit. A good credit score also helps to obtain a good interest rate when applying for credit. Your credit history determines your credit score, and is detailed in your credit report. Often times, there are errors in your credit report which can negatively affect your credit score. You can increase your credit score without opening credit cards by obtaining and examining your credit report for inaccuracies.

Instructions

1

Obtain your credit report. U.S. citizens are allowed to obtain one free credit report from each of the three credit agencies (Equifax, Experian and TransUnion) once every 12 months (see Resources below).

2

Check your Credit Report for errors. Inspect each listing closely for discrepancies. Are the accounts listed as open and closed accurate? Are the dates correct? Are balances correct? Are the credit limits correct? Are accounts that are paid in full marked as such? Is the personal information correct? Do all the listings relate to you?

3

Dispute errors found. Report errors to the lender. Additionally, report errors to EACH of the three credit reporting agencies. Sending a letter to the agencies along with direct support from the creditor will be the most effective way to have the error removed. If you don't have hard copy support from the lender, just send a letter with the dispute to the credit reporting agency, which will then contact the creditor or lender.

4

Ask a lender to remove a one-time late payment off of your credit report. If you have had 12 months of on-time payments, the lender may give you a one time "goodwill" adjustment and remove the late payment notice from your account. If the lender agrees, ask the lender to re-age your account to improve your rating.

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How Does Closing a Credit Card Affect a Credit Report?

Credit reports and credit scores can seem mysterious, with their upticks and downswings responding to minute events in your credit history. But there's little mystery involved; most credit scores are based off a formula incorporating several known factors related to your use --- positive, negative or mixed --- of available credit. Learn how closing a credit card affects a credit report will help you determine whether this is a smart financial move for you.

Credit Scores

When people talk about credit reports, they're often concerned with the three-digit number known as a credit score. Credit scores don't appear on all credit reports, but they're a strong indicator of your ability to handle credit accounts. Low scores often indicate missed payments, high debt loads or debt-to-income ratios or accounts that have been turned over to collections. High scores frequently reflect on-time payments of more than the minimum required, low debt loads and lengthy, positive histories with lenders. The credit score is determined through a calculation that assigns 35 percent of your score to payment history, 30 percent to amounts owed, 15 percent to length of credit history, 10 percent to new credit and 10 percent to types of credit.

Quick Fix?

Closing a credit card isn't a quick fix to positively affect your credit report. In fact, rarely, if ever, does closing a credit card boost credit scores, according to MSN Money. Having too many accounts open can hurt your credit score, especially if they've been recently opened or include excessive amounts of revolving credit such as credit cards, which aren't counted as positively as installation loans like students loans, auto loans and home mortgages. But closing your credit card account can negatively affect a credit report if the account held a large, unused available balance contributing to an attractive ratio of used-to-unused credit.

Credit History

Some consumers worry that closing a credit card may negatively affect a credit report, thinking that their lengthy, positive credit history with that lender will disappear. This isn't the case. If your relationship with a credit card company extends back 20 years before closing the account, your credit report will reference that positive relationship for up to 10 years. Of course, the relationship won't continue to lengthen after the account has been closed, but if you've already amassed years of positive credit, this may not be a concern. However, closing a credit card account when your other credit cards have been open for just a few months can hurt your score, according to Bankrate.

Card Type

Credit cards frequently occur in two types: traditional credit cards and cards offered through department stores. Traditional credits cards are more heavily weighted and positively viewed compared with department store credit cards, so closing out a traditional card when all other cards came from department stores could hurt your account.

Identity Theft

Some consumers worry that large amounts of unused credit card balances might make them attractive targets for identity thieves. Rather than closing unused accounts, another option is to call the lender and request a lowered available balance.

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Does Inquiring About a Mortgage Hurt My Credit Score?

One of the first things a lender will do when you apply for a mortgage is to pull your credit score to see how you have handled debt in the past. Because you probably will submit multiple mortgage applications so you can compare rates, knowing how the inquiries will affect your credit score will help you better plan your mortgage application strategy.

What are Credit Inquiries?

Credit inquires refer to when you apply for new loans or lines of credit, including mortgages, refinancing and home equity lines of credit. When you apply and the lender pulls your credit score, the credit bureau notes an inquiry on your credit report. Each inquiry remains on your credit report for two years, though, according to the Fair Isaac Corporation (FICO), the leading credit scoring provider, it only affects your credit score for one year.

How Are Mortgage Inquiries Treated?

Credit scoring models treat inquiries resulting from mortgage applications differently than most other inquiries, such as credit cards or unsecured loans. Because the credit scoring algorithm expects people to shop around for a mortgage, it counts mortgages applied for in a short period of time as a single inquiry. The period of time, sometimes referred to as the "shopping window," ranges from 14 to 45 days, depending on which version of the FICO scoring model is used.

How Does it Affect the Score Lenders See?

When you apply for a mortgage, the credit scoring formula does not count mortgages that you have applied for in the past 30 days against your score. For example, if you applied for three mortgages in the past week and you apply for a fourth the next week, the other three mortgage applications would not affect your credit score. Therefore, you will have just as good a chance to get a low interest rate at the last bank you apply to as the first.

Considerations

Your applications for new credit account for 10 percent of your credit score, meaning 90 percent of your score comes from other factors. FICO breaks down the remaining portion of the score as 35 percent from your payment history, 30 percent from the amount of debt you have, 15 percent from the length of your credit history and 10 percent from the types of credit you use. Checking your credit report to remove any errors before applying for a mortgage can help improve your chances of getting a good interest rate.

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Does My Debit Card Affect My Credit?

Although they may look the same, a debit card (also called a check card) is actually quite different from a credit card. When credit bureaus such as TransUnion, Equifax and Experian calculate your credit score, whether or not you have and use a debit card typically has no bearing on the calculation. However, some exceptions can occur.

Debit vs. Credit

Because credit card companies provide the payment structure for debit cards, their logos usually appear on debit cards just as they appear on credit cards. However, these two types of cards are very different. When you use a credit card, the company from whom you are purchasing the good or service charges your credit card company. Your credit card company pays the seller and adds the value of what you bought to what you owe it. As you accrue a debt on your credit card account, the credit card company makes money by charging you interest on what you owe. However, with a debit card, no third party pays anything for you: the money you spend comes directly out of your checking account.

Available Credit

When credit bureaus calculate your credit score, they look at many different variables and pieces of information. One thing they look at is the amount of available credit you have versus the amount you are actually using. For instance, someone with a credit card that has a $5,000 limit but has only charged $150 worth of purchases on it will have a better credit score than someone who has maxed out his $5,000 credit card limit (assuming that all other variables between the two individuals are the same). In this way, your use of credit cards can affect your credit score. However, since debit cards have no such line of credit, the extent to which you use your debit card does not affect your credit score. Using your debit card frequently does not hurt your credit score, and refraining from using it does not help your credit score.

Late Payments

When you fail to make timely payments on credit cards, other lines of credit or loans, this will hurt your credit score. Since debit cards do not require any type of regular payment, you do not have to worry about such issues with debit cards. However, if you have set up automatic payments through your debit card, be careful. If a company tries to make an automatic withdrawal when you have insufficient funds in your account, the bank may decline the payment. If that happens, though the bank will not make a negative report to the credit bureaus, the company that tried to retrieve the automatic payment might. This will also happen if you close your debit card account and fail to transfer all automatic payments to a new account.

Overdrafts

Some banks simply decline debit card payments when you do not have sufficient funds in your account, while others allow the payments to go through and thus display your balance as a negative number. When this happens, banks usually assess an additional overdraft charge. Having an overdraft on your debit card account does not directly affect your credit score, but if it remains unpaid, the bank could let the debt go to a collections agency, in which case the overdraft will affect your credit score.

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How to Increase My FICO

Fair Issac and Company provides a credit scoring system to many different businesses. The FICO score is the same credit score used by a vast majority of lenders in the consumer credit market. You can improve your FICO scores through a variety of methods, with some giving you quick boosts to your score and others taking place over a longer period.

Instructions

1

Establish a variety of credit accounts. Account diversity raises your credit score slightly and is affected by the type of credit accounts that you have. Credit cards, store cards, installation loans and mortgages count as different types of loans for credit diversity scoring.

2

Reduce your revolving credit balances. Revolving credit utilization is calculated by the percentage of credit limits that you are using compared to your overall credit limit. If utilization is high, it can have a large effect on your credit score.

3

File a dispute with credit reporting agencies over any account you do not own, accounts with incorrect information and negative accounts older than seven years old. Accounts you do not own and seven year negatives can be removed through the dispute process. The credit reporting agencies provide phone, mail and online credit dispute options for consumers.

4

Pay off collection accounts that are accurate. Open collections can be looked upon unfavorably if a loan officer performs a manual review of the account. Open collections may also be periodically updated by the collection agency, making the collection appear as though it is a new collection. Some collectors may agree to a pay for delete arrangement, where you pay the collector the debt and the entry is removed from the credit report.

5

Pay your credit accounts on time. The average length of your credit accounts and overall credit history length is another major factor in FICO scoring. When you pay bills on time over a consistent period, you establish credit worthiness under the algorithm.

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