The Quickest Way to Get Your Credit Score Up

Having a low credit score will affect your ability to obtain credit cards, car loans and home mortgages. Employers and landlords check credit scores to find out if you are financially responsible. Low credit scores are a result of paying bills late, home foreclosure, bankruptcy, overextended credit cards or other financial problems that have occurred. Credit scores range from 300 to 850. A good score is 740 or above. You can get your credit score up relatively quickly.

Instructions

1

Check your credit card report for free once a year from each of the major credit bureaus; Equifax, TransUnion and Experian. Get a free credit report online from these companies at www.AnnualCreditReport.com or call 877-322-8228. These companies will supply a free credit history, but they may charge a small fee for you to obtain your credit score. Check your score and credit history. Read carefully all of the information on the report. Dispute any errors that you find and fix them by sending a letter to the credit reporting bureau.

2

Pay all of your bills on time. Set up automatic payment plans so you do not miss a payment. Utility companies and phone companies report late payments to the credit card bureaus.

3

Pay down any revolving credit card balances that you have. Start with the cards that are close to their credit limit.

4

Avoid having large balances on your cards, even if you pay them off each month. Keep the amount of purchases made to a credit card to 25 percent to 30 percent of the cards available limit. Ask to have the credit limit raised if you are always near the limit. That will make it look like you are not maxing out your card each month.

5

Create a longer credit history by using your oldest cards every month. Place small amounts of credit purchases on your cards each month.

6

Reduce the amount of your balance that is seen by the credit bureaus. Pay your balance or monthly payment before it is due so that your statement looks smaller when it is reported.

7

Limit the amount of new credit cards you open. Do not apply for credit cards that you do not need. Avoid opening new credit cards at department stores. Do not close out old credit card accounts. This makes your credit history look shorter and the credit limit smaller.

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How to Clean Up Credit Fast

Cleaning up your credit can provide a sense of accomplishment. Most people don't want to deal with bad credit. A low score can result in credit denials, with it becoming impossible to find a good rate and terms on finance packages. A better credit score is realistic. But before you can clean up your rating, you need to know what affects credit scoring.

Instructions

1

Work with creditors to remove wrong information from your credit report. Check your credit report once or twice a year. Make a note of incorrect information, and call your creditors to correct the inaccuracies. Removing errors can quickly clean up your credit.

2

Organize your debts. Place all your monthly statements inside a file folder, and make a notation of your due dates to avoid missing a payment. If you miss a payment, ask your credit card company to forgive the lateness to help clean up your credit.

3

Pay early. Don't wait until your due date to make payments. If you have the money, pay within a day or two of receiving the statement to improve your credit rating.

4

Use any extra money to pay down credit card balances. Rather than using extra cash to dine out, shop or vacation, make personal sacrifices and put that money toward your outstanding debts. Eliminating or lowering your debts helps improve your credit faster.

5

Address old accounts. Paying collection and judgment accounts, and asking creditors to delete this information from your credit report, can quickly raise your score.

6

Utilize rapid rescoring. It takes time for credit reports to reflect corrected errors and paidoff accounts. With rapid rescoring, creditors immediately update your report, and your credit score can increase within days. There's a fee for quick rescoring (about $50).

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Reasons to Dispute Credit

The three major credit bureaus (Transunion, Experian, and Equifax) maintain consumer credit reports containing information on a person's outstanding accounts, her bill payment history, employment, certain court judgments and a variety of demographic information. Sometimes these reports can contain erroneous information. This can happen for a variety of reasons, from identity theft to a simple clerical error. Whatever the cause of the problem, an issue on your credit report can still have a negative impact on your credit rating. Fortunately you can file a dispute to get the information removed. Disputes are typically filed for a variety of reasons.

Identity Theft

When you are the victim of identity theft, the thief will often open as many credit cards and other accounts as possible in your name. Your credit rating will be hurt when he doesn't pay the bills because the delinquencies will show up on your credit reports. If your identity is ever stolen, you should monitor all three credit reports and dispute incorrect items immediately. Be prepared to send police reports and other documentation to back up the dispute. You should also place a fraud alert on your reports, and you may wish to temporarily freeze your credit to make sure the thief cannot open any more fraudulent accounts.

Divorce

Your divorce decree may spell out the bills for which you and your former spouse each take responsibility, but that doesn't always keep your ex-spouse's accounts from staying on your credit report. If his credit cards and other accounts are showing up on your credit report, you can file a dispute and use your divorce decree as documentation. This will prevent his late or unpaid accounts from bringing down your credit rating.

Errors

Credit bureaus are not infallible. They often make errors, reporting accounts on your credit report that do not belong to you or including erroneous information. Some of that information, such as late payments or judgments, can bring down your credit score if it is not removed. Under the law, you are entitled to get a free copy of your credit report from each of the three major bureaus so you can review it for these errors. Review it annually and file a dispute on any incorrect items. The bureaus must remove them if they cannot be verified.

Outdated Information

Even if you have negative information on your credit report that really belongs to you, it can only be reported for a certain length of time. This varies based on the type of information and your state of residence, but items like bankruptcies and foreclosures typically must be removed after seven to ten years. If you have these types of items on your credit reports and the reporting period has ended, dispute the items and demand that they be taken off your records. This can give your credit score a significant boost.

Uncertainty

Sometimes you may just feel that information is not quite accurate or that the company reporting it will not be able to back it up or will not bother to respond to the dispute. If they do not respond to the credit bureau's inquiry or offer any proof, the item will be permanently removed. If you are reasonably certain this will happen, you can file a dispute on the information.

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How to Clear a Delinquency

When you are unable to pay your credit card bills, or any other bills, your account goes into a delinquent state. Delinquency will lower your credit score and may affect your ability to obtain loans. If you do not clear a delinquency from your account within a specified time period set forth by the creditor, your account may be sent to a collection agency.

Instructions

1

Pay off your delinquent account(s). This is the first step in removing a delinquent account from your credit report. If you are unsure of the past-due amount, contact the customer service department of the company you owe. If you do not have the money to pay off the past-due amount in full, ask for a payment plan. Most companies are willing to work with customers who wish to pay off a debt. Lenders prefer to have the debtor pay off the owed amount without handing the account over to collections, as a collection agency only pays them a small percentage of the total debt owed.

2

Write a letter of goodwill to the lender, or creditor, requesting the company remove the delinquency from your credit report once the outstanding balance has been paid off. In the letter, explain the circumstances that caused you to become late on payments and that you have paid off your overdue balance. The lender may act upon this request and manually remove the delinquency from your credit report.

3

If your account is in collections, contact the collection agency to arrange a payment plan to pay off the delinquent amount in return for the delinquency being removed from your credit report. Most collection agencies will agree to this proposal, as long as you are able to pay off the account. In some cases, you may be able to negotiate the total amount owed down from the original balance.

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How to Obtain a Free Credit Profile Number

The three major credit reporting agencies in the United States -- TransUnion, Equifax and Experian -- put credit profile numbers on each credit report you request from the companies. This number is used to reference accounts and other report information, especially if you are disputing a credit account with one of the reporting agencies. A credit profile number is not your credit score. Instead, it's an internal number that the credit reporting agencies use in order to reference the specific credit report you pulled. You can request a free credit report once per year if you need to get a credit profile number.

Instructions

1

Start your Web browser and go to annualcreditreport.com. Annual Credit Report is a central site run by Experian, Equifax and TransUnion that provides you with the free annual credit report you are entitled to by law from each credit reporting agency.

2

Use the drop down menu to select your state and click "Request Report."

3

Enter your personal information, such as your name and social security number, into the provided field. You also need your addresses from the past two years for identity verification.

4

Click "Continue." Put a check in the box next to the three credit reporting agencies on this page, unless you only wish to check a specific credit report. Click "Next" two times to land on the first credit report. The credit report number is listed in the personal information section on the report, next to your name, address and any previous addresses. The credit profile number is all numbers, and should be labeled as your report number. Choose "Next" to continue on to the next report and credit profile number.

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How to Rebuild Credit After Bankrutpcy

Facing financial turmoil, many consumers turn to bankruptcy to get control of their finances. After filing bankruptcy, you might feel like it's impossible to rebuild credit. According to Smart Money, however, the damage to your credit report might not be as bad as you think. Focusing on the areas that make the largest impact on your credit score will get you on track to rebuilding credit.

Instructions

1

Apply for secured credit. According to MSN Money, you have to use credit to build credit. The problem with bankruptcy, however, is lenders may be reluctant to extend credit. A secured credit card, which is offered by most credit card companies, is the solution. You will need to put down a deposit. However, after 18 to 24 months the company may convert the account to an unsecured card.

2

Review your credit report. After bankruptcy is finalized, accounts that show as overdue on your credit report should be labeled as "included in bankruptcy." If this doesn't happen, your credit score can take a hit. If you find accounts that aren't labeled correctly, contact the reporting bureau. Complete a dispute form and include copies of your bankruptcy papers.

3

Use credit cards for the purpose of rebuilding credit. High credit balances have a negative impact on your credit rating. Use your secured credit card to build credit, and pay off the card each month.

4

Secure an installment loan. Credit bureaus like to see consumers using both revolving credit (credit cards or home equity lines) and installment credit (like auto loans or personal loans). Consider applying for a small personal loan and pay back the loan quickly.

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Is It Legal for a Bank to Remove a Derogatory Item From a Credit Report?

Customers who delve into the specifics of credit reporting probably know that lenders, such as banks, control the majority of the information reported by the major credit agencies. This also means banks can remove negative items at will. Banks and other lenders are unlikely to remove negative items out of the kindness of their heart, but it is possible.

Identification

Banks can legally remove a negative item, but the credit bureaus probably do not support this action if the negative is legitimate. However, a bank might change a late payment to "paid as agreed" for a valued customer who has a long history with the company. Customers should not expect this because you never know when or which bank will agree to this.

Considerations

Removing a derogatory item or account from a credit report is a common tactic used by attorneys when negotiating a debt settlement. Most consumers pay less than the original balance when the creditor agrees to a debt settlement, but offering to pay the full balance in return for deleting the delinquent account could entice the lender. Again, this is never a guarantee, and such a tactic might backfire. Dangling a full payment lets the lender know that the consumer has the resources to pay the balance, which the creditor might recover through a lawsuit.

Late Fee vs. Derogatory Report

Lending institutions sometimes give customers a gift they might not notice. This often happens when a customer pays his bill a month late, but the creditor reports the account as never late. Instead, the creditor charges a late fee. Customers should never assume that banks will do this, even if the bank "forgot" to report a late payment in the past.

Tip

The only way to guarantee that a bank removes a negative item is when it makes an error in an update. Federal law requires credit bureaus and creditors to report accurate information and investigate any claim by the consumer of a mistake. The first step to disputing a mistake is using an online form from one of the agencies or sending a certified letter stating the error and a request to correct it, along with identifying information and copies of documents to prove your case. You could go to the bank itself and give it the same dispute package.

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How Good Must a Cosigner's Credit Be?

You can earn a comfortable income, carry few debts and have all of your paperwork in order, but if you have a poor credit history your lender is likely to deny your loan application. Consumers with damaged credit aren't the only ones who have trouble getting loans approved. Young individuals who haven't had time to build a credit history also face obstacles when applying for loans and credit cards. If you have a co-signer with positive credit apply with you, however, the lender is more likely to approve your application.

Lender Requirments

Just as the approval requirements for a loan vary by lender, so too do the credit requirements for co-signers. For example, Citigroup, a financial services corporation, rejects any co-signers whose credit reports reflect past credit card charge-offs, bankruptcies, liens, judgments or late payments. Asking your lender ahead of time what its co-signer requirements are helps you avoid choosing a co-signer who doesn't meet your lender's qualifications.

Credit Scores

A co-signer with a credit score of 720 or higher will meet almost any lender's score requirements. This is because lenders group individuals with credit scores above 720 in the same risk bracket with individuals who carry scores above 800.

If your co-signer wants to check his credit score before submitting the application, he must purchase his FICO scores, since FICO scores are the scores most lenders pull. While the credit bureaus offer to sell consumers their credit scores, the credit scores marketed through the credit bureaus are calculated using the VantageScore system and aren't the same credit scores that lenders pull.

Income Requirements

A co-signer's credit rating isn't the only factor your lender will consider when processing your loan application. The lender will also request that you co-signer provide proof of income and information about her current financial obligations. Your lender must evaluate the co-signer's financial stability to ensure that, should you stop paying your loan, your co-signer has the necessary disposable income to take over your payments.

Considerations

If your co-signer meets your lender's qualifications and the lender approves the loan, it will report the account to the credit bureaus and the entry will appear on both your credit report and your co-signer's. Paying on time is imperative. Making a single payment 30 days late won't devastate an already damaged credit score, but your co-signer's credit would suffer considerably. The higher your credit score is, the more points a negative entry will cost you. For example, if your co-signer carries a credit rating of 780, a single missed loan payment could drop his score over 100 points.

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How Much Do Past Medical Bills Affect Credit Score?

Medical debt is a growing problem in America. A 2009 CNN Health report notes that, from 2001 to 2007, the number of individuals filing bankruptcy due to medical debt rose from 46 percent to 62 percent. If you have outstanding medical debt, the accounts can appear on your credit report and tarnish your good credit for many years to come.

Credit Reporting

Common consumer debts such as credit card accounts, mortgages and auto loans can all have either a negative or positive effect on your credit score depending on whether or not you pay the debt on time. Medical bills, however, do not positively affect your credit. If a medical bill appears on your credit report, its impact is derogatory.

Because health care providers are not in the business of lending to consumers, they have no reason to maintain reporting contracts with the credit bureaus. Medical debts only appear on your credit report once they become collection accounts. Collection accounts are always negative and lower your credit scores.

Negative Impact

Estimating how much an unpaid medical bill will adversely affect your credit score is impossible due to the fact that credit scoring formulas are kept secret by the companies that own them. In addition, the degree to which any given item affects your credit as a whole depends on the other entries within your credit record. For example, if two individuals both receive a medical collection for $500 from the same collection agency, one consumer's credit may suffer by only 50 points while the other individual could lose over 100 points.

The Exception

Unpaid medical debts cause your credit score to decrease not because the debts are medical in nature but because they are collection accounts. An exception to this rule exists for small debts.

If the unpaid medical bill that appears on your credit file reflects a debt less than $100, your credit score will remain unaffected. This is because the FICO '08 scoring model---current as of April 2011---ignores any collection account for less than $100 when tabulating scores. While your credit score remain the same, the collection will still appear on your credit report and is still visible to lenders.

Time Frame

When the credit bureaus remove medical collections from your file, those accounts no longer have any effect on your credit rating. The Fair Credit Reporting Act requires that each of the three major credit bureaus delete collection accounts after seven years. If the collection account appears on your credit report for longer than seven years, you have the right to dispute the notation as obsolete with each credit bureau in order to have it removed from your record.

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How Long Can Medical Bills Stay on Your Credit Score?

"The New York Times" reported in a December 2010 article by Walecia Konrad that hospitals and doctors rarely report bills to credit reporting bureaus but frequently turn unpaid bills over to collections agencies within a few months. Once a collection agency has the bill, the agency can, and often does, report the bill as delinquent to a credit bureau. Delinquent accounts stay on your credit report for seven years, which is how long they will affect your credit score.

Credit Scores

A delinquent medical bill appears on your credit report once a creditor reports it. Credit bureaus and lenders use the activity found in your credit report to compute a credit score. In other words, the bill does not appear in your credit score, but by appearing on your report, it affects your score. The purpose of the credit score is to summarize your risk as a borrower in a number, allowing potential lenders to compare potential borrowers easily.

Time

Most negative entries remain on your credit report for seven years, including all delinquent bills or accounts in collections. However, the financial information website Bankrate notes that recent information affects your score more than old information. As a result, medical bills drag down your score less and less as time goes by.

Removing Entries

Bankrate warns that erroneous information regarding accounts and charges occasionally end up on individuals' credit reports. Bankrate recommends requesting credit reports regularly and disputing any erroneous charges, which include debts you never incurred or bills you paid but appear on the report as delinquent. You can receive a free copy of your credit report once each year through AnnualCreditReport.com. from each of the three major credit bureaus -- Equfax, Experian and TransUnion. Credit bureaus must investigate disputes, but you must have the documentation to prove that the account is not yours or is not delinquent.

Preventing Negative Reports

"The New York Times" recommends making an extra effort to stay in the loop regarding your medical bills. It reports that doctors, hospitals and insurance companies do not do a comprehensive job at keeping patients updated on the state of their accounts and are quick to turn unpaid bills over to collections agencies, which may report smaller bills to credit agencies without notifying the patient. "The New York Times" recommends staying in contact with billing departments until a bill is paid by you or your insurance provider and requesting that bills not be sent to collections. Once a bill goes to collections, the report advises calling the collections agency, stating that you will pay the bill if it is removed from your credit report and paying as fast as possible.

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How to Force Credit Reporting Agencies to Remove Debt Buyer's Inquiries

Every time you sign up for a credit card, apply for a loan, or grant a potential employer the right to look into your credit, your credit report may reflect this in the form of credit inquiries. These inquiries show a creditor who is looking into your credit. Having too many of these inquiries, or the wrong kind, can negatively affect your credit score. If you want to remove an inquiry, there are specific steps you need to take.

Instructions

Instructions

1

Know what your credit report says. To remove credit inquiries from your credit report, you'll have to know what is on the report. Request credit reports from the three main credit reporting agencies: Equifax, Experian and TransUnion. Always get all three reports, as each credit reporting agency can have different information that can affect your ability to get credit. You are entitled to receive free copies of your credit reports every year, but if you've already received copies in the last year, you'll have to pay for new ones.

2

Inspect the reports. After receiving your credit reports, determine how many inquiries appear. Generally, your credit score will not be seriously affected by inquiries unless you have several of them. A single credit inquiry, for most people, will lower a credit rating by 5 points, and creditors will usually ignore inquiries that are older than 6 months. Having several inquiries at once, however, may be more serious, and challenging them could significantly boost your credit score. If you have numerous inquiries appearing on the same report, look at them more closely and inspect them for errors.

3

Determine if any inquiries are unauthorized. In order for an inquiry to be counted on your credit report, it has to be specifically authorized by you. If any of the inquiries appear that they might not be legitimate, you can write the inquirer and demand proof that the inquiries were explicitly authorized. If they are unable to prove they had authority, you can demand that they contact the credit reporting agency (CRA) and have the inquiry removed. If they refuse, you can contact the CRA yourself and demand they remove the unauthorized inquiry. Make sure you include all relevant information and documents to prove your claim.

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Can Credit Repair Services Help Raise a Credit Score?

Your credit score is important when trying to attain the best interest rates on mortgages or credit cards, or for when you need to gain new credit. If you have errors on your credit report, or past blemishes, get them fixed so that your credit score is accurate. A credit repair service won't necessarily be able to raise your credit score, however.

Credit Errors

Your credit can be repaired if there are errors on your credit report, as credit bureaus are obliged to remove any errors, old debts and correct any mistakes, but they can't remove legitimate claims.

Misconceptions

Most credit repair services charge a fee for checking your credit report and making recommendations on what to do to get rid of the blemishes. This is something you can often do on your own for free or for very little cost, and credit counselors can usually tell you how to do it yourself.

Benefits

If you fix your credit report, your credit score might improve a little depending on the error or the type of information that was removed, but it doesn't build a credit history which is important to building your credit score. Therefore, the differences between your credit score before and after fixing the errors might vary depending on your situation.

Warning

Credit repair services can only tell you what to do to remove the blemishes and errors. Avoid any credit repair service that offers a loan to improve your credit score through credit building.

Considerations

If your credit report has blemishes that are not errors, contact those lenders, using advice from a trusted credit counselor if needed, to help rectify the dispute and get those items removed for an even better credit score.

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Can a Charge Card Affect Your Credit Score?

Charge cards let you pay with plastic but must be paid off each month. Paying your charge card balance in full every month as agreed can have a positive effect on your credit score over time.

Definition

While a charge card looks similar to a credit card, there are some important differences in the way they work. With few exceptions, charge cards do not allow you to carry a balance over time. Instead, you must pay your entire bill each month. Charge cards usually don't have a credit limit, either.

Credit Score Impact

According to FICO, one of the major credit score companies, fully 30 percent of your credit score is determined by the amount of money you owe to creditors, particularly in proportion to the amount of credit that is available to you. With a charge card, you aren't carrying a balance from month to month, so you aren't increasing your debt in proportion to your available credit. This can have a positive effect on your credit score, although perhaps not as positive as routinely paying off a credit card with a revolving balance.

Warning

Charge card companies report late or missed payments to credit bureaus, which then show up as delinquencies on your credit report. Late payments, even just one or two, can hurt your credit score.

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Five Steps to Stop Identity Theft

Identity theft can potentially lead to financial devastation for its victims. Once an identity thief obtains your personal information, he can use it to open new lines of credit in your name, access your bank account, or secure goods and services at your expense. If you're concerned about the security of your personal information, taking five key steps can reduce your exposure.

Review Your Information

In some cases, it can take weeks or months for a victim of identity theft to discover that fraudulent activity has taken place. Regularly reviewing your financial information allows you to spot suspicious activity and stop it in its tracks. Check your bank and credit card statements each month for unusual transactions. Obtain copies of your credit report regularly to check for new accounts or excessive inquiries into your credit history.

Protect Your Identity Online

The widespread availability of information on the Internet makes anyone who regularly surfs the web a target for identity theft. One of the most common identity theft tactics is to send a "phishing" email to potential targets. These emails vary in content but their goal is ultimately to convince you to provide your personal information to the email's sender. Protect yourself online by avoiding suspicious emails, choosing intricate passwords for all of your online accounts and avoiding websites that do not use a secure connection.

Shred Your Documents

If you throw bank statements, credit card statements or other personal documents in the trash without shredding them, you're making it easier for an identity thief to grab your information. Invest in a crosscut shredder and shred your personal documents. Better yet, sign up for paperless statements. Doing so helps the environment and reduces your risk.

Freeze Your Credit

A credit freeze allows you to restrict access to the information contained in your credit report. Freezing your credit permits only select individuals to view your credit information, making it much more difficult for identity thieves to open new accounts in your name. The laws regarding credit freezes vary from state to state but generally, a credit freeze restricts your information to those creditors you already do business with, potential employers, landlords and insurance agents.

Protect Your Children

Children are an easy target for identity thieves because fraudulent activity is more likely to go unnoticed until the child reaches adult age and attempts to get credit in her own name. If your child is receiving mail in their name, specifically offers for credit, this is a red flag that their information has been stolen. Protect your child's Social Security number, obtain copies of their credit report regularly and monitor their online activity to reduce their risk.

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How to Dispute Inquiries on My Credit Report

The number of inquiries into your credit report may not seem like a big deal, but it affects your credit score. If you have too many inquiries in a short amount of time, your credit score will be lowered, because it indicates that you might be searching for loans or gathering credit lines from many sources. If you have concerns about an inquiry on your credit report, you should dispute the inquiry to protect your credit.

Instructions

1

Obtain copies of your credit report. You can request free copies of your credit report once a year from each of the three reporting agencies: Equifax, Experian and Transunion (see Resources).

2

Determine whether you initiated the inquiry. Review each inquiry carefully, paying close attention to whether you authorized the inquiry. For instance, you may see authorized inquiries, such as credit card applications or loan requests, but you may also find some unauthorized inquiries, such as promotional inquires.

3

Contact each company that made an unauthorized hard inquiry. Write the company a letter explaining that its inquiry was unauthorized and that you want the inquiry removed (see Resources). If the company believes you authorized the inquiry, ask for written proof.

4

Get confirmation. Your letter to the company that made the inquiry should include a request for written confirmation that the inquiry was removed from your credit report, but you also should verify it yourself. Request credit reports from all three credit bureaus again, and if the inquiry is still listed, contact the company and strongly request further action.

5

If the credit bureau is at fault for not removing the inquiry, file a dispute with the bureau and send documentation that the inquiry should be removed (see Resources).

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Why Is Paying Off My Auto Loan Negative on My Credit?

It might sound counter-intuitive, but paying off a car loan early could actually lower your credit score. This quirk in the credit scoring system can occur when you have too few active accounts or do not have other installment loans. However, you can never predict anything in the FICO scoring method, so consider the other benefits of paying off an auto loan, such as the money you save in the long run.

Why It Might Lower Your Score

Paying off an auto loan is never a negative, but it can actually have a negative effect on a credit score, because the FICO model does not factor in installment loans in the "mix of credit" category. Mix of credit is worth 10 percent of a FICO score. To get the most points, you should have several credit cards and a few installment loans. If this auto loan is your only active installment account, the lack of credit variety could outweigh any positive history on the account.

Considerations

Though paying an auto early could have a negative effect on your score, lenders might not care. If you have a clean credit history, they will only see positive accounts that were never late, which might outweigh any potential score drop. As long as your car loan agreement does not charge prepayment penalty fees, you save hundreds of dollars in interest charges.

Should Apply for an Installment Loan to Boost Credit?

Whether or not you should apply for an installment loan with the sole purpose of boosting your credit depends on what you plan to do with your credit score. If you have bad credit and need as many points as possible, an installment loan brings back to good credit faster, according to Liz Weston of MSN Money Central. Should you still have good credit even without an installment loan, taking one out could be a waste of money and hurt your credit. Applying for credit dings your score a few points as does taking on any new debt.

Tip

CreditNet reports that paying off a car loan could drop a score by 50 to 60 points. This can easily drop you out of the top tier of credit scores. If you plan on taking out a loan any time soon, such as a mortgage, it might be wise to apply while you still have the auto loan on record when you have a score over 760. However, factor in your debt-to-income and keep it as low as possible. Lenders usually want to see a DTI between 20 and 35 percent or lower before issuing a loan, even for borrowers with great credit.

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Information on Dispute Letters to Credit Bureaus

Not everyones credit reports reflect accurate information. A U.S. Public Interest Research Group survey revealed that 79 percent of all consumer credit files contained errors. Approximately one-fourth of the individuals surveyed possessed credit reports that contained errors severe enough to result in a denial of credit. You can attempt to correct the errors you find in your credit report through credit bureau dispute letters.

Significance

The Fair Credit Reporting Act allows all individuals one free copy of their credit report each year to review for mistakes. Should you find an error while reviewing your credit records, you have the right to dispute the mistake either by writing a letter to the credit bureaus or notifying them of the inaccuracy online or by phone. Writing a letter, however, allows you to provide each reporting agency with documentation supporting your assertion that your credit information is inaccurate.

Facts

The Federal Trade Commission recommends that you circle the errors you wish to dispute on your credit report and then make copies of the report and any documents you have proving that the information is being reporting incorrectly. Your dispute letter should contain a full explanation of your dispute along with whether you want the credit bureaus to correct the error or remove it from your credit file in its entirety. Send your documents to the credit bureaus via certified mail to ensure that they arrive at their intended destination.

Considerations

There are three major credit bureaus: TransUnion, Experian, and Equifax. Because some creditors report to all three but some do not, each of your credit reports may contain different accounts and errors. Therefore, do not assume that each of your credit reports reflects identical mistakes. Check each of your credit files before you mail dispute letters to all three reporting agencies.

Effects

Once a reporting agency receives your dispute letter, it will send an inquiry about the error to the creditor that originally reported the information. If the creditor agrees that the entry is a mistake, the credit bureau will correct the mistake on your report. If the creditor validates the information as accurate, the error will remain. Regardless of the action the credit bureau takes, it will notify you of the outcome of the investigation within 30 days. If the creditor validates the entry, you possess the legal right to dispute the information directly with the creditor.

Warning

If the credit bureaus determine that flawed information within your report is true and accurate following your dispute, they retain the right to determine subsequent disputes of the same error as frivolous. Should this occur, the credit bureaus are no longer required to investigate any further claims of inaccuracy that you make about the error.

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How Much Does Your Credit Score Go Up When You Pay Off a Bad Credit Card Account?

Paying a delinquent credit card could boost your credit score or eat up precious resources that could go to paying more immediate bills and not help your score at all. Once the account goes to collections, there is little you can do for your credit score. Anything before this situation and paying may help you out.

How Late Is It?

Credit card companies must write down bad accounts as a loss if you do not pay for six months. If this six-month limit has yet to pass, then paying it off boosts your score -- now and in the next few months. First, you eliminate credit card debt and raise your credit utilization ratio, a proportion of credit limit used to your available limit. You also avoid a more serious charge: a charge-off or collections account. Also, you can build positive payment history on the card again after becoming current.

Effect of a Charge Off or Collections

Once an account turns into a charge-off or is sent to a collections agency, paying it off has almost no impact on your score. Your score might improve a little by paying a charge-off, because you eliminate some debt from your credit report. However, the negative account stays on your report for seven years and likely negates any gains, according to Bankrate.

Considerations

Some of your lenders may look at your credit report and consider more than just your FICO score calculation. If a lender sees a paid charge-off or collections account, he may develop a higher opinion of your character because you paid off an old debt instead of ignoring it. Stricter creditors may even require all applicants to pay old bad accounts.

Tip

Settling on the credit card account for less than the amount owed hurts your credit score, sometimes by as much as 125 points, according to Bankrate. This happens because the creditor or debt collector will list the account as "paid, but settled." If you already have poor credit, it might be worth settling for pennies on the deal for a smaller hit to your credit score, because lowers scores take a lesser beating. You might be able to get the collection agency to delete the account for payment, but this rarely happens and usually only with smaller lenders. If you can get an account deleted, try to do so with the original creditor, because it removes a charge-off and a collections account, while a debt collector can remove only the collections account.

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How to Lower a High Balance on a Credit Report

Lowering a high balance on a credit report can help improve your FICO rating. Creditors send notifications to the bureaus each month, and with these notifications, creditors update your balance on credit cards and loans. High balances decrease your score because the more debts you owe, the higher your debt-to-income ratio. You can combat this issue and lower balances on your credit report.

Instructions

1

Double check the accuracy of reports. A creditor or lender may fail to update your report and report a higher balance after you've paid down or paid off an account. Obtain your report from Annual Credit Report and check the balance of each listed account. If creditors inaccurately list an account, contact the creditor and ask it to update your record.

2

Decrease the amount you owe to help bring down balances. If possible, write a check to completely get rid of a credit card balance or smaller loan, or at least pay down the debt with higher minimums. Creditors will update your record to reflect a lower account balance.

3

Re-evaluate your credit report. Creditors and lenders usually update reports on a monthly basis. Wait at least 30 days after paying off or paying down an account and then request another copy of your credit report from the bureaus. Review the newly reported balances for accuracy.

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How to Improve Credit Score Immediately

A low credit score can impact your ability to obtain a home loan, auto loan or credit card. For this reason, many consumers look for ways to improve their credit. And if you're looking to finance an item in the near future, you're likely interested in boosting your credit score within a relatively short period. Fortunately, there are tactics to immediately raise your FICO score.

Instructions

1

Get your credit report. Before creating a plan to raise a low credit score, order a copy of your credit report. This is how you'll learn your exact credit score. Visit Annual Credit Report and request a copy of your report and personal score.

2

Pay off your credit cards. Carrying a high credit card balance reduces your score. To improve your credit score immediately, get rid of your credit card debt. If you're unable to eliminate the debt, pay down the balance. Keep credit card balances below 50 percent of your limit.

3

Start paying your bills on time. Some people habitually skip payments or submit late payments. To quickly improve a low score, pay your bills on time each month. Sign up for automatic billpay if you have difficulty keeping track of due dates.

4

Resolve credit report errors. Unfamiliar accounts and reporting errors can appear on your credit report. These remarks reduce your score. Write a dispute letter and report all inaccuracies to the credit bureaus. By law, the bureaus have to investigate complaints, and fix reporting errors.

5

Settle judgment and collection accounts. Credit judgments and collections accounts can damage your credit rating. And since these remarks remain on your report for up to 7 years, it can be difficult to obtain credit. Contact original creditors or collection agencies. Make plans to pay off the balances.

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What Impacts FICO Scores the Most?

A FICO score, instituted and maintained by the Fair Isaac Corp., is the most widely used barometer of an individual's creditworthiness. Banks, mortgage brokers, automobile lenders and other creditors use this score to determine whether and how much to lend, as well as how much interest to charge. Consumers should access their reports at least once each year to keep abreast of changes and to correct any errors that may negatively impact their score.

Length of Credit History

Creditors like to see lengthy histories, which have proven to be accurate indicators of future payment patterns. A credit report lists accounts going back at least 10 years, and reveals late payments, account status and monthly payment history. Consumers who have histories going back just one or two years are not in a position to project payment patterns years into the future, a situation that lenders well recognize.

Credit Utilization

Consumers may juggle accounts and do whatever they can to remain current, but if their credit card, loan and mortgage balances run right up near the total loan amount or credit line, this represents a red flag to creditors. The question then becomes why someone needs access to so much credit, which leaves little margin for flexibility in case health or employment problems arise.

Payment Record

Even if consumers have assets and steady jobs, they may not always be diligent or responsible enough to pay on time each month. Creditors value the pristine behavior of paying every month on all accounts, which lowers their own costs for follow-ups and collections. People who switch jobs often or who do not have the proverbial rainy-day fund can easily fall behind with payments, a circumstance that creditors are eager to avoid.

Inquiries

Too many inquiries can indicate that a consumer is desperate for credit, which can quickly lead to becoming overextended. The exception is when shopping for a mortgage or automobile loan, which creditors understand has more to do with getting the best rates and terms than trying to buy several houses or cars at once. The credit reporting agencies take this into account, so if many inquiries come from a similar loan source within a 30-day period, scores will not be negatively impacted.

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How to Rebuild Your Credit Rating & Score

Maintaining a good credit score is vital for access to loans and good credit terms. After a financial setback such as late payments, collections, bankruptcy or foreclosure, it is very important to get back on a solid footing with your credit. The ideal scenario for rebuilding your credit depends on your individual situation, but there are steps everyone can take to strengthen their credit rating and improve their score.

Instructions

1

Procure a copy of your credit report and review it for any errors or inaccurate reporting. You are legally entitled to a free copy of your credit report every year. Go to government-sponsored www.annualcreditreport.com to request yours.

2

Dispute any inconsistencies with the three credit reporting agencies---Equifax, Experian and TransUnion. Be sure to accompany any dispute claims with documented proof, such as payoff letters, account statements or bankruptcy papers.

3

Get current on any late accounts and pay your bills on time. When your credit has taken a major hit, it is easy to give up, but this is the time for you to be especially vigilant. Creditors understand that people go through difficulties and make mistakes but want to see that you have learned from your experience and are making responsible credit decisions.

4

Pay off high card balances. Your credit utilization--the amount of credit you are using compared to your available credit limit--and the total amount of your balances count for about 30 percent of your credit score, according to the Federal Citizen Information Center. Reducing both of these numbers will help to boost your score.

5

Avoid opening any new credit accounts unless your creditors have closed all of your existing accounts. If you do open a new account to reestablish some open credit, use it regularly for small amounts and pay the account off in full at the end of the month. This will save you on interest payments and will show a positive pattern of credit use.

6

Negotiate repayment terms on any open collections with the current creditor, who may not be the same entity that originally held the account. If you set terms, get them in writing and stick to them to stop further damage to your score. A creditor cannot continue to negatively report on you if you remain current on your agreement.

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How to Start Credit Without a Cosigner

You need a credit history to qualify for loans, credit cards and other accounts. Banks and companies use your past performance to evaluate you for new credit. It is tricky to start your credit history because you have no track record. You can get a family member to co-sign for you, but this isn't necessary. There are ways to establish a credit file on your own.

Instructions

1

Open a checking or savings account at a bank or credit union, the Money Matters financial website recommends. This shows creditors you are fiscally responsible because you have money to save or are able to manage your spending with checks.

2

Apply for a branded gas company or store credit card rather than a Visa, MasterCard, Discover or American Express card. Gas companies and retailers are usually more willing to take a chance on a young person than the major credit card issuers, Money Matters explains.

3

Use your gas card or store account for six months to a year. Make small purchases and send in your payment immediately. FICO, the largest credit score company, explains that your repayment history accounts for more than a third of your score. Every on-time payment makes you more attractive to major credit card issuers.

4

Apply for a Visa or MasterCard once you've used your gas or store card for six to 12 months. Do this with your current bank or credit union if it offers credit cards. You have a better chance of being approved if you have an established relationship with the issuer.

5

Use your Visa or MasterCard responsibly. Other lenders want to see activity on your credit report so you must make regular transactions. Don't overspend because FICO warns late payments will seriously damage your credit score. Missteps are especially dangerous when you're just starting out because your file won't have a positive history to offset negative items.

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Does the Deletion of a Collection Account Affect Your Credit Score?

No one wants to see a collection account marring their credit report, as collection accounts lower your credit rating and pose a red flag for lenders who review your credit history. While collection accounts are detrimental, they do not remain a part of your credit profile indefinitely -- forever causing you trouble when you apply for loans and credit cards. The credit bureaus eventually delete your collection records, and this deletion has an impact on your credit score.

Reporting Period

Collection accounts, like all information on consumer credit reports, have a set reporting period beyond which the credit bureaus must delete the data. The Fair Credit Reporting Act sets the reporting period for all collections at no more than seven years. The reporting period starts 180 days after your last payment to the original creditor -- not on the date the collection agency first receives your account or the date the collection agency originally reports the account to each credit bureau. Nothing you do can inadvertently extend the reporting period.

Collection Account Deletion

Although the credit bureaus delete collection accounts after seven years, some individuals have success having those derogatory listings removed early by either disputing them with the credit bureaus or directly with the collection agencies reporting them. Federal law gives all individuals the right to dispute incorrect information they find within their credit histories. Thus, if a collection account on your credit report does not belong to you, contains errors, or appears on file after the reporting period for the account has expired, you can file a dispute with the credit bureaus either by mail, by phone or online and request that the listing be removed from your report.

Credit Scores

All of the information on your credit report contributes to your credit score, and collection accounts are no exception. Because everyones credit report differs, there is no way to estimate how deeply a collection account will hurt you when it first appears on your credit file or how much your credit will improve when the credit bureaus delete the entry. You can, however, expect your credit to markedly improve when a collection account is finally removed from your report.

Rebuilding Your Credit

You dont have to wait for the credit bureaus to delete past collection accounts to improve your credit rating. Whether you pay your current creditors on time has a greater impact on your scores than any other information on your report. Thus, you can slowly rebuild your credit by always paying your debts in a timely manner. If you carry credit cards, maintaining a low balance on your credit card accounts will also help you rebuild your credit rating until the credit bureaus remove old collection accounts from your credit record.

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Equifax Credit Rating Definitions

An Equifax credit rating estimates the creditworthiness of an individual based on financial history, assets or liabilities.

Credit History

Details about your credit accounts including date it was opened, balance, credit limit or punctuality of
payments are all included.

FICO

FICO, or Fair Isaac Corporation, produces a credit score of 350-850 and is used by potential lenders that help determine interest rates and consumers' likelihood of receiving loans.

Algorithm

An in-depth mathematical model used by Equifax to yield a credit rating that uses payment history, public records, length of credit history, new accounts, and inquiries in determining the rating.

Length of Credit History

Longer credit history can positively affect your credit history as it legitimizes your credit rating.

Risk

Credit rating estimates the risk a company will have by lending an amount of money or offering
a type of service.

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How to Fix Credit Rating After Bankruptcy

Applying for and managing credit helps you build a good credit score. But sometimes, consumers use credit irresponsibly and bad habits can bring on a bankruptcy. A bankruptcy can give you a fresh start, and oftentimes, you're no longer responsible for past debts. Recovering from a bankruptcy involves acquiring new lines of credit to help improve your low credit score. Regrettably, getting credit after bankruptcy is easier said than done.

Instructions

1

Save between $300 and $500 and use this money to apply for a secured credit card. Pick up an application from your bank or credit union for a secured credit card. Pay the required security deposit and application fee.

2

Pay any loans not included in the bankruptcy. You have the option of excluding an auto loan, mortgage or student loan from a bankruptcy. Start anew and make these payments on time each month to begin restoring your credit after a bankruptcy. Consider automated monthly payments to avoid forgetting or missing a payment.

3

Learn how to manage debt better. Avoid repeating past mistakes by creating a monthly spending budget and allotting a certain amount for non-essentials such as recreation, entertainment and shopping. Stay in budget and only use a credit card if you have cash to pay off the charge.

4

Upgrade your car and get an auto loan to help improve your score. Auto loans are available to people with recent bankruptcies. Check around town and research bad credit auto dealership and lenders. Apply for a bad credit auto loan and maintain a good payment history to improve your credit rating.

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How to Inform Credit Reporting Agencies of a Divorce

Notifying each of the three consumer reporting bureaus of a divorce is important for several reasons. First, if your ex-spouse doesn't comply with the conditions set forth during a divorce and stops paying a jointly held credit card account, you are both held responsible for the delinquent debt obligation. Not only that, but your credit report and score may suffer if the delinquent bill is left unpaid for several billing cycles. Remove any opportunity for delinquencies or nonpayments to be reported on your credit file by closing jointly held accounts and updating your credit reports with the change.

Instructions

1

Obtain a copy of your credit report. If you have not already requested a free copy of your credit report from the Annual Credit Report's website, do so; however, keep in mind that you won't be able to make another request for one full year. TransUnion, Equifax and Experian--the three U.S. consumer reporting bureaus--offer credit report as well as credit report and score products. Charges apply.

2

Identify the accounts you jointly held with your spouse on your credit report. Look for your name and your spouse's name under each jointly held account. Note the name of the creditor along with the account number and issue date.

3

Place a consumer statement on each of your credit reports. Placing a consumer statement on your credit reports notifies creditors of your divorce status, which is necessary in the interim period during which your reports are being updated. Note the issue date of your divorce decree and explain that you are in the process of closing jointly held accounts.

4

Contact each of the three consumer reporting bureaus by mail. Notify each bureau of your divorce and provide supporting documents such as a divorce decree.

5

Make arrangements with your ex-spouse to repay the lines of credit using the assets from the marriage and close all joint accounts, which you can do only through your creditor.

6

Check your credit report in a few months to make sure that each account is listed as "paid in full" and that the notification regarding your divorce is noted.

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Effects on the Credit Score of Canceling Credit Cards

Credit scores help potential lenders assess the risk of lending you money. Your credit score reflects your payment patterns, placing the most emphasis on recent information. The overall amount of your debt is also reflected in your credit score. Canceling credit cards can have a negative or positive effect on your credit score, depending on specific credit score factors.

Too Many Credit Cards

If the risk factor section of your credit score analysis indicates that you have too many credit cards, then canceling one or more cards that you do not use should not have a negative impact on your credit score. The risk factor statement "too many credit cards" means that the number of open credit card accounts is negatively affecting your credit score.

Utilization Rate

Consumers who have high balances on a few credit cards can hurt their credit score when they close any credit card accounts. Closing one of a few high balance accounts increases the utilization rate, or balance-to-limit ratio. A high utilization rate can indicate credit risk to a potential lender. Calculate your utilization rate by dividing the total combined balance on all of your credit cards by the total combined balance of your credit card limits. If you still have a significant amount of open credit, then the effects of canceling a credit card on your credit score will be minimal.

Credit Score Factors

Credit score factors are the elements that contribute to your overall credit score. The types of accounts listed on your credit report, your total amount of debt, the age of the accounts listed and the number of late payments are the primary elements that affect the calculation of your credit score. Understand all of the factors that contribute to your score if you wish to improve it. For example, payment history accounts for 35 percent of the total calculation of your credit score, length of credit history accounts for 15 percent and outstanding debt accounts for 30 percent. Canceling a credit card that you've had for a long time and which has a strong payment history can impact your score more than increasing your utilization rate. Canceling one credit card can impact your score for a short time, typically up to six months.

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Does Signing Up for a Credit Card Affect Your Credit Score?

Failing to pay your bills on time and high balances on revolving accounts aren't the only events that can lower your credit score. Applying for new credit accounts, such as credit cards, can harm your credit score before you even use them. Lenders use credit inquiries as an indicator of a potential customer's credit risk, and six or more inquiries usually spells high risks for potential lenders, according to MyFICO.

What is a Credit Score Inquiry?

Whenever a creditor or potential creditor obtains a copy of your credit report, credit bureaus record each request as a credit inquiry and they appear at the end of your credit report. Sometimes you may see inquiries listed that you haven't initiated or from businesses you aren't familiar with, but the inquiries that matter are the ones that result from applications for new credit.

Types of Credit Score Inquiries

Credit inquiries consist of two categories, soft inquiries and hard inquiries. Soft inquiries result from requests you make for copies of your credit report, requests from lenders for "pre-approved" offers, employment and tenant screening or requests from your existing creditors. Potential creditors can't see your soft inquiries, and these inquiries do not affect your credit rating. Hard inquiries result from requests you initiate yourself, such as credit card applications. These inquiries factor into the formula used to calculate credit scores because the number of hard inquiries on an individual's credit score tends to correlate with their credit risk. Consequently, applying for too many credit cards can hurt your credit score under certain circumstances.

Impact of Credit Card Applications

The impact of applying for credit cards varies for every person based on their specific credit rating. Applying for a credit card falls under the new credit applications portion of the FICO-scoring model, which accounts for 10 percent of your credit score according to Bankrate. An individual with an average or above credit rating could expect a less than five-point reduction from their score with a single credit inquiry, according to MyFICO. Inquiries tend to pose the greatest impact for individuals with few revolving accounts, a brief credit history or high balances on existing accounts.

Considerations

If your credit rating is less than stellar, apply for new credit cards only when necessary. When you submit applications for new credit cards, restrict your application period to a 14-day span. Fortunately, the FICO-scoring model compensates for consumers shopping around for the best credit offer and counts multiple hard inquiries within a 14-day span as a single inquiry. If you're concerned about the effect of existing inquiries, most creditors ignore them once they reach the six-month mark and all hard inquiries come off your report within two years, according to the Illinois Attorney General's Office.

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What Is the Best Way to Fix an Account in Collections to Increase a Credit Score?

Unpaid debts that end up held by collection departments or third-party collection agencies hurt your credit score because they indicate that you cannot be trusted to meet your financial obligations. If you cannot restore the original account's standing as "current," removing the collection notation from your credit report is the only way to remedy the damage it does to your credit score.

In-house Collections

When you stop making payments to a creditor, it forwards your account to its in-house collection department. Not all creditors have collection departments, but if yours does, the fact that your account is in collections will not appear on your credit report. The lack of a collection account on your credit report, however, does not mean that your credit score is not suffering. Missing payments to your creditors tarnishes your credit rating. The best way to fix an account held by an in-house collections department is by paying the account in full and bringing your account back into good standing with the creditor.

Collection Agencies

If you see a collection account on your credit report, you can rest assured that a third-party collection agency purchased your unpaid debt. The only way to fix a collection agency's report is by having the collection account deleted from your credit history. Sometimes collection agencies will voluntarily delete collection accounts if the debtor agrees to pay off the debt. Paying off the debt without first negotiating with the company to have it removed, however, will not positively affect your credit rating.

Reporting Period

Regardless of whether an in-house collection department or third-party agency owns your debt, the Fair Credit Reporting Act (FCRA) states that the debt cannot remain on your credit report for longer than seven years after you defaulted on the original account. If you discover a collection account in your credit history that exceeds the reporting period allowed by law, you can improve your credit score by reporting the obsolete account to the credit bureaus for removal.

Account Disputes

Collection accounts for debts you do not owe have no business on your credit report. Unfortunately, credit reporting errors are not uncommon. A 2004 study performed by the U.S. Public Interest Research Group found that 79 percent of consumer credit reports contain incorrect information. If the collection account on your credit report does not belong to you or you do not recognize it, dispute the account's presence on your credit record with the credit bureaus. A federal law provides the credit bureaus with 30 days to investigate and, if the creditor cannot validate the account, the credit bureaus delete it from your report---improving your credit score.

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