Is an Online Credit Report or a Mailed Credit Report Safer?

With Internet crime on the rise---the Federal Bureau of Investigation's Internet Crime Complaint Center reached the 2 million-complaint mark in 2010---consumers have legitimate reasons be concerned about the safety of pulling a credit report online. This fear, however, is unfounded. Except in a few rare cases, online credit reports are almost the safest way to receive one.

Identification

Online credit checks are the safest way to request a report, according to Experian, one of the major credit bureaus in the U.S. The major credit bureaus all use secure servers that encrypt data as does the Annual Credit Report website, which provides every consumer in the U.S. a free credit report from each of the three major credit bureaus annually. Mailed reports, on the other hand, are usually much easier to compromise. The mailman, for example, could accidentally deliver it to the wrong address or a thief might steal it from a mailbox.

Considerations

It only makes sense to order a report via mail when the consumer's identifying information is different from that in the bureau's database or the customer cannot pass a verification test. The bureaus require customers to answer questions about their financial background to verify their identity, such as how much the consumer pays in monthly debt charges. If the customer cannot answer this information he must verify his identity by mail.

Considerations

A major part of identity fraud involves a human intercepting a person's private data. A common email scam, for instance, involves the fraudster sending out messages purporting to come from the consumer's financial institution. Online reports transfer almost instantly and even if a thief were to intercept the encrypted communication in that small time frame he would need special software to decode it.

Tip

Customers that run a report through someone other than the major credit bureaus or Annual Credit Report should research the security of the site. Secured websites have an address that starts with "https" and a lock icon at the bottom of the browser, warns PrivacyMatters.com. Also, reputable companies have a clearly stated privacy policy that includes actions the consumer can take if he feels the company uses his data in violation of the privacy agreement.

Read More

What Is an Experian Plus Score?

When you apply for a loan, credit card or other form of credit, the lender invariably "runs your credit." What the lender finds out helps determine whether to approve your application and, if approved, what terms, such as interest rate, will apply to your account. The Experian Plus Score is one of several credit scores that lenders can use to aid their decision.

Types

Largely because there are so many different types of them, credit scores trigger great confusion among consumers. The most widely used score, according to Smart Money magazine, is the FICO score, devised by the Fair Issac Corp. Your FICO score is a measure of your creditworthiness, based on the data contained in your TransUnion and Equifax credit reports. The Experian Plus Score, used by some lenders, is developed by Experian, the third major credit bureau. Experian, along with TransUnion and Equifax, developed the Vantage Score--which, reports Kimberly Lankford, an editor at Kiplinger's Personal Finance, aims to compete with the FICO score.

Function

While some lenders, though it is unclear exactly how many, use the Experian Plus Score to make credit decisions, Experian positions its score as a way to educate and empower consumers. At its website, Experian notes that the company developed the Plus Score to help individuals better understand their credit and how it impacts them. Experians contend that it is "user-friendly" and "consumer-focused."

The Score

Experian says the formula it uses to come up with its Plus Score is based on information from a consumer's credit report, "using a similar formula to those used by lenders." Experian says the score ranges from 330 to 830. A higher score is associated with a lower credit risk and vice versa.

National Score Index

Experian publishes data it calls the "National Score Index," based on its Plus Score. At its website, the credit bureau allows users to compare Plus Scores at several levels of analysis. Input your ZIP code to see how Experian Plus Scores and other credit statistics compiled by Experian compare between your area, state, region and the nation. For instance, the average Experian Plus Score in Chicago's 60611 ZIP code, according to population sample drawn by Experian, is 696. This compares to the Illinois average of 699, the "East North Central Region" average of 698 and the U.S. average of 692.

Expert Insight

Maxine Sweet, who answers credit-related questions at Experian's website, thinks you should not pay too much attention to the number that is your credit score. Rather, Sweet believes you should focus on where you rank in relation to other consumers in terms of credit risk. Analyze the factors that bring your credit score down, she suggests. Reporting agencies usually provide a list of these factors when you buy a credit score--any one of them--online. Adequately address these factors, advises Sweet, and you have the best chance of improving your creditworthiness.

Read More

How to Improve Credit Score Due to Identity Theft

Identity theft can drastically harm your credit score. A near-perfect 800 score can fall into the 500s very easily thanks to identity theft. You can take action if your identity has been stolen. While the best solution is to guard your identity so that you will not have to resort to these methods, you can improve your credit after identity theft.

Instructions

1

Notify Equifax, Experian andTransUnion (the three major credit bureaus) of the identity theft in writing.

Equifax
P.O. Box 740250
Atlanta, GA 30374
888-766-0008

Experian
PO Box 9532
Allen TX, 75013
888-EXPERIAN

TransUnion
P.O. Box 6790
Fullerton, CA 92834
800-680-7289

Make sure you send a notification of the identity theft to each major bureau. While each bureau will inform the others, it a good idea to proactively contact all three, given the sensitivity and time-critical nature of identity theft.

2

Place a security freeze on your accounts. After you have notified the credit bureaus of the identity theft, you can freeze your credit report so that you will be notified before any significant changes to your credit report occur.

3

Notify the Federal Trade Commission (FTC) of the identity theft. This will allow you to defend your credit score by forcing new accounts opened by the criminal to be shut down.

4

If the criminal has used your credit card, thus harming your credit score, you can improve your credit score by notifying the card's issuing bank of the identity theft. After you issue a fraud report, it will remove the fraudulent activity.

5

Tell collection agencies of the pending identity theft issue if they attempt to collect bills related to the fraudulent activity. This will prevent your credit score from dropping further as a result of the identity theft.

Read More

Free Yearly Credit Rating

A credit report is an official record of an individual's credit history. These reports include information on a person's mortgage loans, credit cards, automotive payments and student debt, as well as negative financial history such as foreclosures, bankruptcies and accounts in collections. The three major credit bureaus -- TransUnion, Experian and Equifax -- use the data on a person's credit report to determine her "credit rating," a three-digit number which helps lenders decide a person's creditworthiness. Federal law entitles all U.S. residents to an annual free copy of their credit reports from each of the three credit bureaus.

Order Online

One way for individuals to order their free yearly credit reports is to visit Annual Credit Report, the official credit report ordering website. On this website, individuals enter their home states, then fill in their personal information including their names, addresses and Social Security numbers, into the official order form. People may instantly view their credit reports from all three credit bureaus from the Annual Credit Report website.

Order by Telephone

Individuals who would prefer not to order online may order their credit reports by calling 1-877-322-8228, the official annual credit report order hotline. Persons calling the official hotline must provide detailed personal information, including their names, addresses and Social Security numbers. Individuals who order their free yearly credit reports by telephone will receive reports from all three credit bureaus within 15 days, according to the Federal Trade Commission.

Order by Mail

Consumers also have the option of ordering their free yearly credit reports by sending an official Annual Credit Report request form to the Annual Credit Report Request Service. Individuals must fill out the form completely, and will need access to personal information, including their Social Security numbers, dates of birth, addresses and full names. Similar to ordering by telephone, individuals who order their yearly credit reports by mail will receive their reports from all three credit bureaus within 15 days.

Considerations

Instead of ordering credit reports from all three bureaus at once, individuals can choose to order credit reports from just one or two agencies. The Federal Trade Commission says many individuals choose to stagger their credit report orders over a 12-month period, which allows them to get pictures of how their credit profiles change over time. Additionally, free yearly credit reports do not include information on individuals' credit ratings. People wishing to know their credit ratings must pay fees to order them from each of the three credit bureaus.

Read More

The Importance of a Credit Rating

A credit rating is a measure of how much of a risk it would be to lend money to a person, business of other entity. Your credit rating directly affects your ability to borrow money. In addition, it may be used to determine your reliability as an employee or tenant.

Credit Scores

For individuals, your credit rating is summed up in a credit score, or FICO score. Scores range from 300 to 850; the better the credit rating, the higher the score.

Interest Rates

The better your credit rating, the lower the interest rate you're likely to pay on borrowed money---everything from a mortgage or a car loan to the rate on your credit cards. If your rating is bad enough, however, you may be denied credit entirely.

Background Checks

Employers and landlords often perform credit checks before hiring or renting to a person. A history of late or missed payments suggests that potential employee or tenant could be unreliable and create problems down the road.

Explanations

Credit reporting agencies allow you to include a letter in your file explaining negative entries in your credit history. Such letters won't improve your credit rating, but they may influence the way lenders look at that rating.

Other Entities

For companies and governments, credit ratings are summed up in a debt rating, which measures the risk on bonds issued by that entity. The scores range from D (in default) to AAA (the best), and the higher the rating, the lower the interest rate that the issuer has to pay to investors.

Read More

If You Pay Off the Debt Collectors, Will Your Credit Score Go Up?

Debt collectors can make life miserable for people who owe old bills. The Fair Debt Collection Practices Act forbids them from certain tactics, like making false threats or using obscene language, but they can verbally apply pressure. Collection accounts also lower a consumer's credit score, making it hard to get new credit at competitive interest rates. Paying off collection accounts raises the score under certain circumstances.

Definition

Every person who uses credit has a credit score from FICO and the three credit reporting agencies. All are three-digit numbers calculated from credit report information, according MyFICO.com. Lenders use them to assess if applicants are likely to pay back new accounts as agreed. Good data like long-term accounts with low balances and timely payment histories support a high score. High debt, erratic payments and charged-off accounts that were sold to debt collectors pull down the number and make it harder to get more credit.

Considerations

According to MSNMoney.com, lenders sometimes insist that applicants pay off old collection accounts before they grant credit. This requirement is especially common for large loans like mortgages. The loan is not granted until the old obligations are cleared up.

Process

Debt collectors buy old accounts at steep discounts, so they frequently accept less than the actual amount owed. They still earn a profit because they paid so little for the account. Consumers can use this to their advantage by negotiating lower settlements in exchange for having the debts erased from their credit reports. Collectors are more likely to agree to a discount when offered a lump sum rather than a payment plan.

Warning

Do not pay a bill until the debt collection puts the agreement in writing. The document should include the amount of the settlement, a promise that it will be accepted as payment in full for the debt and an agreement to remove the credit report entry when payment is made. Credit scores can still go down if a person pays an old debt and the collector does not remove it. The debts only loose their effect when they are removed.

Time Frame

Old credit card bills and other accounts can only stay in a person's credit history for seven years, according to the Federal Trade Commission. The time frame starts as soon as the account becomes delinquent, and it does not restart if the account is eventually turned over to a debt collector. Old debts do not affect credit scores very heavily if a consumer concentrated on keeping newer accounts in good standing. Accounts that are at least five years old may not be worth paying off if they are not impeding the ability to get more credit, since they will disappear within a couple of years.

Read More

How Long Should Delinquent Credit Stay on a Credit Report?

The Basics

A credit report is an official record of all your credit-related actions over a specific period of time. On your credit report is a list of checking and savings accounts, credit cards, loans, and other things of this nature. Also reported on your credit report is any delinquent credit you may have. Your credit report is used by lenders to determine whether or not they want to give you new lines of credit, and the information contained in it is taken into very careful consideration when those decisions are made.

Collections

Generally speaking, if you are three to four months late paying a bill or loan, a record of your delinquency is sent to a collections agency. While a late payment can appear on your credit report after 30 days, going 90 to 120 days is when it starts to be considered "Delinquent Credit." These organizations specialize in getting people to pay back money they owe that they have stopped making payments on. Delinquent credit stays on your credit report for seven years. This is the same amount of time a simple late payment stays on your credit report. This will have a negative effect on your credit rating which will result in applications for things like loans and credit cards being denied.

Charge Off

After extended periods of time collection agencies can offer you what is called a "Charge Off." This is when they agree to allow you to pay less than you owe to settle your debt. Just like with delinquent credit, a charge off remains on your credit report for seven years. Charge offs are a red flag for potential money lenders as not only does it show you were delinquent on credit payments for an extended period of time, but it also shows that your previous lender did not recoup all of their money.

Read More

How to Fix Credit & Negotiate With Creditors to Improve Your FICO Score

Your FICO score is what lenders and creditors look at when deciding whether or not to lend you money or extend additional credit. The higher your FICO score, the better your chances for getting additional credit. You can increase your FICO score by keeping track of your credit, fixing credit errors and negotiating with creditors to remove the error and improve your FICO score. Although the process is not difficult to do, it does take time, organization and patience.

Instructions

1

Get a copy of your credit report to find out what needs fixing. The first step to fixing your credit and negotiating with creditors is knowing exactly what's on your credit report. Go to AnnualCreditReport.com and request a free credit report from the three major credit reporting bureaus, Experian, Trans Union and Equifax.

2

Review your credit report for errors. According to a study done in 2004 by the National Association of State PIRGs, 79 percent of the respondents reported errors on their credit report. Some errors were serious enough to cause the creditor to deny credit. Negative errors on your credit report affect your FICO score. Therefore, you must review your credit report before contacting the creditors. Look for things like incorrect credit limits, erroneous late or missed payments, unwarranted charge offs or any other entry that hurts your FICO score.

3

Accumulate documentation to back up your findings. Once you find errors in your credit report, you'll need to have backup documentation as ammunition to prove to the creditor that the information is incorrect. Gather documents such as bank statements, money order receipts, loan satisfaction letters or any other documents that supports your position.

4

Contact the creditor to begin the negotiation process. The best way to contact them is either by mail or via their website. By starting the negotiation process in writing, you are better able to provide the necessary backup documentation. It gives a step-by-step paper trail that is hard to refute. If you're sending a letter to the creditor, be sure to include the account number, name, date of error and detailed information. If you elect to use their website, make sure to convert all of your backup documentats into an electronic format and save it as either a .PDF, .TXT or even a Word document.

5

Follow up with the credit company until the error is corrected. You must be diligent and keep following up until it is resolved. You won't see an improvement in your FICO score until the negative error is corrected.

Read More

How to Manage My Credit Score

Your credit score affects your ability to secure an auto loan or mortgage and may even interfere with securing a job. According to MSN Money, as of 2010 more than 30 million people in the United States had credit score issues making it difficult to get loans with reasonable interest rates. Take a few steps to manage your own credit score and boost your rating to avoid these issues.

Instructions

1

Order a credit report. According to the Federal Trade Commission (FTC), as a consumer you are entitled to a free credit report once every 12 months from each of the three major credit bureaus, Equifax, Experian and TransUnion. You can order these reports online. Review each report carefully. If there are inaccuracies, such as late payments or accounts that you don't own, file a dispute with the reporting agency.

2

Make payments on time. Timely payments make up a large chunk of the credit score, according to MSN Money. Set up automatic payments with your financial institution's online banking program. With time, your credit score should experience a boost.

3

Keep credit card balances low. Balances that exceed 30 percent of the total limit on a card will drag down your credit score. For example, if your credit limit is $10,000 and your balance is $4,000, or 40 percent, your credit score is suffering. If possible, pay off balances at the end of the month.

4

Avoid closing out old credit cards. Once a credit card is paid off, most consumers want to close out the account. However, according to MSN Money, this does not help your credit rating. Instead, leave the accounts open. This shows the credit bureaus that you have restraint, which boosts your credit rating.

Read More

How to Find Interest Rates Based on Your Credit Score

Your credit score describes your credit risk, and lenders ranging from car loan lenders to credit card companies check your credit score before offering you a line of credit or a loan. A higher credit score means you're a lower risk, and you can receive a higher credit limit and lower interest rates. The three main credit bureaus---Equifax, TransUnion and Experian---use slightly different criteria, and most lenders do not offer a precise credit score to interest rate conversion. However, there are general ranges that can help you figure out what lenders are likely to offer for an interest rate.

Instructions

1

Order a credit report, which includes your credit score. You're allowed one free credit report a year from all three credit bureaus, and it makes sense to get them all at once from a website such as AnnualCreditReport (see Reference). Fill in your Social Security number and other identifying information and you'll get a report online within minutes. If you've already ordered the annual free report, you can use your earlier credit score, although if you think it's changed it's probably worth the $20 to $25 to learn your new information.

2

Match your credit score against any information on your desired lender's website. Here are some general examples. For a typical 30-year fixed mortgage, a credit score of 720-850 (low risk) means you'll pay around 6 percent interest, while a credit score of 620-674 means around 8 percent, according to MSN Money. Over 30 years that can be a difference of $50,000 to $200,000, depending on the original size of the loan. Below 620, you probably will not qualify for a mortgage.

For credit cards, if your credit score is above 750, your interest rates could be as low as 8 to 11 percent, but if it's lower than 650 it could be as high as 22 percent, according to MSN Money.

3

Focus on improving your credit score by paying bills on time, keeping low balances on credit cards and not applying for more than one or two credit cards per year, especially if your credit score could mean the request will be denied. Monitoring your credit score at least once a year will help you stay on track and decide how to best manage your money.

Read More

What Is a Credit Profile?

A credit profile is complete listing of all your credit information. Your credit profile starts when you first apply for credit. When a creditor approves you for credit, it updates the credit reporting agencies regarding your credit account.

Significance

Your credit profile will include all of the creditors that you have credit with. There will be a record of how you pay them, as well as the balances and credit rating.

Identification

Your credit profile will have information that identifies you, such as your name, Social Security number, date of birth, address and your employment.

Public Record

Public record items are found on your credit profile as well. Any tax liens or judgments will appear at the bottom of your credit report.

Credit Inquiries

Inquiries will appear when someone takes a look at your credit file. An inquiry can remain on a credit profile for about two years.

Types

There are soft inquiries and hard inquiries. Soft inquiries appear when someone, such as a potential employer, pulls your credit report for purposes other than extending you credit. Hard inquiries appear when you apply for credit with various lenders.

Considerations

Your credit profile can change from day to day and month to month. When creditors update your credit report, with new account information and history, your profile changes.

Read More

How to Find Out When Specific Items Are Due to Drop Off My Credit Report

Your credit report is a reflection of your payment history, so make sure it represents an accurate picture. Creditors often incorrectly report delinquent accounts, which can make the date your negative payment history drops off your credit report incorrect as well. In mere minutes, you can find out when delinquencies will drop off your credit reports.

Instructions

1

Get your most current credit report through AnnualCreditReport.com, the official site to obtain your free online credit reports from the three nationwide credit reporting agencies: Equifax, Experian and TransUnion. Print your reports from each of the credit bureaus. Check your credit reports for accuracy and identity theft.

2

Call or write each credit bureau if you cannot access your report online. Provide your personal information (name, addresses and employers for the past five years, Social Security number, date of birth) and other required information. Never send original documentation and keep copies of all correspondence.

Equifax Inc.? ?
P.O. Box 740241 ?
Atlanta, GA 30374 ?
(888) 685-1111 ?
equifax.com
??
TransUnion ?
2 Baldwin Place ?
P.O. Box 2000 ?
Chester, PA 19022 ?
(800) 888-4213 ?
transunion.com
??
Experian? ?
P.O. Box 9595 ?
Allen, TX 75013 ?
(888) 397-3742 ?
experian.com

3

Go to ftc.gov to familiarize yourself with the Fair Credit Reporting Act (FCRA), which outlines exactly when credit-reporting agencies must delete delinquent records. According to statute 605 of the FCRA, bankruptcies remain on your credit reports for 10 years. All other delinquent accounts (including civil suits, judgments, liens and collections) remain on your credit reports for 7 years. Credit inquiries usually stay on your credit reports for 2 years.

Read More

How to Understand Credit Report Codes

It's good to get your credit reports regularly. You can check for errors and see areas where your credit rating could be improved, but you need to understand your credit report and the codes. There are three credit reporting bureaus: Experian, Equifax and TransUnion. The general format for each credit report is similar, but the credit codes and scoring methods are different. Understanding your credit report codes will enable you to monitor change each time you get a report.

Instructions

1

Get your credit reports and scores for all three credit reporting bureaus to understand your credit report codes. You can get your credit reports free once a year from AnnualCreditReport.com, but your free reports don't show your credit score.

2

Check through your report to get a basic understanding of the sections. The first few sections summarize your personal details, employment information and an overview of your credit history.

3

Check the payment history section (usually section 9). This is where you need to understand the credit report codes. Your payment history code has a letter and a number. The numbers are from 0 to 9 where 0 indicates up-to-date payments and 9, collection or bankruptcy. Numbers 1 through 6 show the number of days a payment is late. Thirty days has a code of 1 while 180 days has a code of 6. It is slightly different on a TransUnion report with the number 2 representing 30 days late and 7 180 days late.

4

Check the letters that are shown. Experian use C, Equifax use * (TransUnion uses the numbers 0 or 1) to indicate your account is good. Other letters range from G, meaning collection, to K, meaning repossession. H is foreclosure and J, voluntary surrender. Ideally your credit code for each line of credit should be C0, *0 or simply 0 or 1 for TransUnion.

5

Review the credit-score section. You will usually find it in section 5 of the report. Three different models are used for scoring: Experian uses FICO (Fair Isaac Corp.), TransUnion uses Empirica, and Equifax uses Beacon. The score range is similar for all three and is between 300 and 850. A score below 450 is considered to be low and may create problems when applying for credit. Scores greater than 650 are considered good.

6

Read the other sections so you have a complete understanding of your credit report. All are self-explanatory.

Read More

Do Secured Credit Cards Improve My Credit Score?

People who have low credit scores may pursue a number of strategies to rebuild their score. Many of those with poor credit scores cannot obtain a regular credit card, because they are considered a high credit risk and are more likely to default on payments. However, these people may be eligible for a secured credit card. Used properly, this card can help the person's credit score improve.

Credit Reports

A person's credit score is derived from all the credit-related activity documented by credit reporting agencies and published in their credit report. This includes all records of lines of credit, both secured and unsecured, that an individual takes out. If the person demonstrates he can pay back money he borrows without defaulting, his credit score gradually increases over time.

Secured Credit Cards

A secured credit card is backed by some form of collateral. Usually, money deposited in a person's bank account provides the collateral for a secured credit card. If the person fails to pay off the card's debts on time, the company that issued the card can take money out of his account to cover the required payment. Secured credit cards generally are used only by people who cannot obtain credit cards not secured by collateral.

Differences

The main difference between a secured credit card and a normal, unsecured credit card is that the secured credit card attaches collateral to the borrowed funds. The credit limit on a secured card is equal to the amount of money deposited in the account. Unsecured credit cards are backed only by the customer's promise that he will make payments on time. As a result, credit card companies often are unwilling to issue unsecured credit cards to people with low credit scores.

Considerations

Use of secured credit cards will improve a person's credit score only if he makes timely payments on purchases made with the card. If the person fails to make the required monthly payment on time, causing the credit card company to withdraw money from his account, his credit score will decline further. However, if the card is used responsibly, the person's score will improve, which may allow him to qualify for an unsecured credit card.

Read More

Does a Credit Check Affect Credit Score?

A credit score can move up or down based on a number of factors. For instance, a late payment or sharp increase in a credit card balance could cause the score to decline. Reducing debt balances or correcting incorrect data could cause an increase. Many consumers also wonder how a simple credit check, whether by a creditor or themselves, might affect their credit score.

Understanding a Credit Score

A credit score is like a grade in school, only instead of grading you on your performance in a class, it is based on how you manage your finances. The Fair Isaac Corporation (FICO) uses five pieces of information to determine the score. It is based on the payment history, debts due, age of accounts, new credit accounts and the various types of credit accounts (such as installment loans or credit cards) in use.

Hard Checks

When you apply for new credit and the bank pulls up your credit history that is called a hard credit check. A hard credit inquiry can negatively affect a credit score --- especially if you have a series of these hard inquiries in a short period of time. Having many hard checks shows that you've been applying for many different new credit accounts at once, which is a red flag to potential creditors.

Checkups

From time to time existing creditors may pull your credit report to see how you're managing your overall financial affairs. They use this information to make decisions about the ongoing status of your account. This type of inquiry is called a soft check. While this type of check does show on the credit report for your information, it does not affect the credit score.

Pulling Your Own Credit

One other common credit check occurs when you decide to check your own credit report. You can check your credit report for free each year, when a bank denies credit or at any other time by purchasing it from one of the credit bureaus. When you do so, this is also considered a soft check and does not affect your credit score.

Read More

Things That Affect Your Credit Rating

Your credit rating, more commonly referred to as your credit score, is derived from a formula created by the Fair Isaac Corporation or FICO. Your FICO score falls somewhere in the range of 300 to 850 and is comprised of a rated formula that takes several factors into account simultaneously -- each weighted differently.

Payment History

Your payment history on your credit accounts -- credit cards, loans and mortgages -- makes up about 35 percent of your credit rating. Late payments on accounts are reported to the credit bureaus (TransUnion, Experian and Equifax) after 30 days of nonpayment. Even one payment will affect your credit score; multiple missed payments, collection accounts and adverse public records will have a severely detrimental impact on your credit rating.

Amounts Owed

The amount of your outstanding debt makes up another 30 percent of your credit score. Your owed amount takes into account your total balances, ratios of debt to available credit and your total number of accounts. Having high balances on revolving accounts like credit cards will lower your score, while low balance-to-credit ratio can help your score.

Length of Credit History

Your credit history length makes up 15 percent of your credit rating and takes into account the total length of time you've had credit accounts or loans, along with the time since your last credit activity. Young people just starting out with credit will be more affected by this factor than someone with 30 to 40 years of credit history.

Amount of New Credit

Amount of new credit comprises 10 percent of your score and takes into account the number of new accounts you open, new credit applications you file and the amount of time since your last credit inquiries. Applying for many accounts in a short period of time is not wise -- it can negatively impact your score because it appears that you're attempting to overextend yourself with credit.

Types of Credit Used

Types of credit used makes up the remaining 10 percent of your credit rating. This section weighs accounts depending on their type -- credit card, loan, student loan, mortgages, etc. It's wise to have a mix of accounts to maximize the benefits of this credit score factor.

Read More

Security Clearance and My Credit History

There are different levels of security clearances that allow people access to confidential government or military information. Getting a clearance is often a long process that includes a credit check. Because of varied circumstances, it's difficult to determine how people's credit histories affect their chances for receiving security clearances.

Effects

The Institute for Intergovernmental Research (IIR) is a nonprofit organization in the United States that focuses on law enforcement and homeland security issues. An IIR document on FBI security clearances notes that a poor credit history and other financial problems may not prevent someone from getting a security clearance if the financial issues aren't considered to be significant. Yet the document doesn't list issues that would lead to denying someone a security clearance. It does indicate that an applicant may be required to resolve credit issues before a clearance is approved.

Function

The Defense Security Service conducts security-clearance investigations for the U.S. Department of Defense. An article posted on The Washington Post website titled "Getting a Security Clearance" notes the agency views the investigation process as an assessment of a person's "loyalty, character, trustworthiness and reliability." Therefore, credit checks are part of the agency's security-clearance investigation to determine whether a person has handled financial obligations responsibly.

Theories

A CBS News report notes that a study released by Sheldon Cohen, a Virginia attorney who specializes in security cases, links an increase in the number of denied security clearances for government workers and contractors with the rise in home foreclosures. Cohen examined foreclosure cases from 2006 through 2010. According to the CBS News report, people who are seeking security clearances and facing foreclosure or other financial problems are considered vulnerable to accepting money in exchange for revealing national secrets.

Considerations

An Army Times article titled "Foreclosure May Affect More Than Your Credit Score" cites comments from unidentified U.S. military officials on foreclosures. One official acknowledges that foreclosures may affect security clearances for military personnel. However, the official says a "pattern of behavior" is considered when judging a person's financial situation and clearance. For example, officials would examine whether someone is making a sincere effort to repay debt rather than allowing debt problems to linger.

Process

The Army Times also indicates that U.S. military officials say security clearances are considered on a case-by-case basis. As a result, there are no set limits used for credit scores or debt-to-income ratios when determining whether to approve clearances. Service members also can dispute information in credit reports because credit checks may turn up inaccurate financial data.

Read More

How to Understand Equifax Beacon Credit Scores

FICO 08 is a formula used to help the Fair Isaac Corporation calculate your credit score. FICO 08 looks at your payment history, the amount you owe, the length of your credit history, any new credit you have, and the types of credit youve used. Compiling all this information, the Fair Isaac Corporation is able to calculate your FICO 08 credit score. The credit monitoring company Equifax can provide you with your Beacon credit score. Once you understand Equifax Beacon credit scores, you see that your Beacon credit score is the same as your FICO 08 credit score.

Instructions

1

Determine your Equifax Beacon credit score based on five categories. About 35% of your score depends on payment history and 30% of your score depends on amounts owed. The length of your credit history determines 15% of your Equifax Beacon credit score, and the remaining 20% splits between new credit and the types of credit used.

2

Monitor your payment history, one of the most important elements to your credit score. The payment history category on your Equifax Beacon credit score reflects payments you make on specific accounts such as credit cards, a mortgage, or retail accounts. Any payment delinquency you have will show up in your payment history.

3

Track the amount of money you owe and compare that to your Equifax Beacon credit score. Creditors look at the amount you owe on all of your accounts and the number of accounts you have with balances to help determine your Equifax Beacon credit score.

4

Consider your credit score. Equifax Beacon credit scores run on a scale from 300 to 850. A higher number means a better credit score.

5

Avoid too much new credit, which includes recent credit inquiries and recently opened accounts. Too much new credit can negatively affect your Equifax Beacon credit score.

6

Understand the importance of the length of your credit history. Your Equifax Beacon credit score reflects the amount of time since you opened credit accounts and the amount of time passed since account activity.

7

Remember the types of credit you have. Experts consider the types of accounts you have, such as retail accounts, a mortgage, and credit cards, to determine your credit score.

8

Know the benefits of a higher credit score. Most people have Equifax Beacon credit scores between 600 and 800. If you have a credit score that is 720 or higher, lenders may reward you with a larger line of credit or favorable interest rates.

Read More

Do Cell Phone Bills Affect Your Credit?

Your credit report is a document that details your history with various forms of credit. Any time you incur a debt or pay a bill, even for your cell phone, this information can go on your credit report. If you fail to pay your cell phone bills on time or default on your phone agreement, this will negatively impact your credit report.

Credit Report

All consumers who use any form of credit have a credit report that details how that consumer has behaved in the past. Creditors use your credit report to determine your credit score, a number that shows the creditor how good a borrower you are. If you have a good credit report, with no late payments or past negatives, you'll have a strong credit score and will be more likely to get new credit. If you have a bad credit score, your chances are not as good.

Lots of Negative, Little Positive

When you enter into a cell phone contract or monthly plan, you enter into a debtor-creditor relationship with the cell phone company. Some cell phone companies report your monthly payment activity to the companies that maintain the credit report information, but others do not, according to Carrie Davis of SpendonLife.com. For those that don't report regular activity, the only time your cell phone payments get reported are when you are late paying a bill.

Credit Checks

Your cell phone plan may affect your credit score even before you get approved. Whenever you apply for cell phone plan, the cell phone company typically looks at your credit report to see how you've used credit in the past. Known as a credit inquiry, this inquiry gets recorded on your report and can lower your score. However, any negative impact is typically minimal and does not have a lasting effect.

Options

Some cell phone users may be better suited by using a prepaid or pay-as-you-go cell phone plan, especially if they have difficulty making monthly payments regularly. Using a pay-as-you-go card allows you to still have a cell phone but prevents the cell phone company from negatively affecting your credit report. However, pay-as-you-go plans typically charge more for cell phone use than monthly plans, so this option may not be good for you if you use your phone often.

Read More

Financial Help for People With Poor Credit

Bad credit scores can be financially daunting, as they affect many areas of life, from the ability to get a fair loan rate to the ability to find housing or even a job. Sadly, unscrupulous companies often capitalize on those with poor credit. If you are struggling with bad credit, learn what help is available, and which programs you should avoid.

Personal Loans

Personal loans may be available if you have a lower-than-average credit score, but be careful. People with bad credit are preyed upon by lenders who recognize an opportunity to charge sky-high interest rates. If you need a loan, watch out for those that specifically target people with bad credit. You will find these have extremely high interest rates. In particular, avoid payday or title loans, which the Consumer's Union states have average APRs of more than 485 percent. Talk to your bank first about your options. If your credit is too low to get a traditional loan, take the time to improve it before applying for credit.

Government Help

The government does not offer direct help to people with bad credit, but some government programs can help those with lower credit scores get financial services they would not otherwise qualify to receive. For instance, government-backed loan products such as the FHA, VA and USDA home loans focus less strongly on credit because the lender has the government's guarantee if the borrower defaults on the loan. Similarly, government student loans, like the Stafford Loan, are not offered based on credit score.

Self Help

The best financial help for bad credit is the help you provide yourself. Rebuilding your credit takes time, but it is not impossible. The first step is to start paying your bills on time every single month. If you are not in the habit of doing this, you will need to set up a budget and pursue automatic payment options that force you to make the payments on time. Then, check your credit history for any errors and have them corrected. Finally, start paying down your debts to lower your debt-to-income ratio. When paying down debts, start with accounts that are closest to the credit limit, because the ratio of current debt to available debt also affects your credit score.

Credit Counseling

Credit counseling services can help people with bad credit start making the right financial choices through education and accountability. Some of these programs also offer debt management programs, which can help you get your spending and debt back on track. When choosing a credit counseling service, the Federal Trade Commission recommends looking for an agency that is willing to send free information about itself and its services before asking for any of your information, and that will offer counseling services without debt management for those who do not want the additional help.

Read More

What Is the Declaration of a Credit Report?

Many people believe that credit reports set your credit score or determine whether or not you can get a loan. However, while credit reports are used to make these determinations, it is not what a credit report declares. Credit reports are a listing of your credit history, including accounts, credit limits, overdue amounts and other information relating to your use of credit.

What Reporting Agencies Do

Credit reporting agencies aren't in the business to make a determination of credit worthiness. They are information gatherers. They collect the information, which is then available to lenders, landlords, service providers and others to use on deciding whether to extend you credit. The information is collected from lenders, public records and collection items. The service that credit reporting agencies provide allows you to get credit quickly at a fair rate.

Information Included

Your personal information, such as your name, address, Social Security number, birth date and a list of past and present employers, is part of the report. It allows credit information to be filed with the correct person, but it can also show whether you jump from job to job, keeping each for a short time. Most of the report is your credit history, a listing of the credit accounts you have opened in your name and the accounts' details, such as credit limits, dates opened, balances and whether you make your payments on time. Closed or inactive accounts will stay on your report for seven to 11 years after they are closed (depending on how they were paid). A listing of the number of inquiries made into your account for the previous two years will be listed, and any public records information that might affect credit, such as bankruptcies, overdue child support and liens, will also be included. These are the things a credit report declares.

What Is Not Included

Bank accounts, investments, old bankruptcies and old debt collections are not listed. Also, personal information that could lead to bias, such as gender, religion and ethnicity, are not part of the report. Medical history and criminal history are not included either. You also will not find anything declaring whether you should be given credit or not.

Who Can View Your Report

Someone must have a valid reason to view your credit report. Potential lenders, landlords and insurance companies have reasons to view your report because they need to see if it presents them with any red flags as to why you should not be given credit. Because it is only a report and not a declaration of credit worthiness, different organizations may reach different conclusions about what the same report tells them. Besides an organization with a permissible reason for viewing your report, you can grant written permission to someone to view your report.

Read More

Can My I Fix My Credit Myself After Filing for Bankruptcy?

After filing bankruptcy, you can fix your credit yourself and get approved for new credit at a lower rate. Some people resort to hiring credit repair companies after a bankruptcy. But instead of paying a monthly fee to help restore your credit, learn ways to improve a low score on your own.

Retain Older Accounts

People filing bankruptcy don't have to include all their outstanding debts in the case. Some choose to retain auto loans and mortgage loans, wherein they agree to satisfy these debts as agreed. Keeping one or more of your existing debts can put you on the path towards repairing credit. These creditors will continue to update your credit report on a monthly basis. And as long as you never skip a payment and pay on time, they'll report positive information that slowly improves your score after bankruptcy.

Open New Accounts

When including all your debts in a bankruptcy, opening a new account is key to repairing credit. You need credit accounts in good standing to fix your bad credit history. Accounts available to people after a bankruptcy include high-interest rate credit cards, secured credit cards and bad credit auto loans. Explore these options and apply for the account that's right for you. Talk to your bank about credit card offers for people with bad credit. Plan to pay extra fees with these accounts such as an annual fee, setup fee or monthly service fee.

Timeliness

Acquiring a new account after bankruptcy isn't enough to fix your credit score. Proper account management helps raise your score. This include organizing your debts and monthly payments, and always paying these accounts on time. Timeliness makes up 35 percent of your credit score. Missing payments or sending late payments causes additional damage and impedes efforts to improve your score.

Debt Management

Paying off credit card balances each month, or keeping balances below 30 percent of the credit limit has a major impact on scoring. Like payment history or timeliness, the amount owed to creditors makes up 30 percent of scoring. Consumers who max out their credit cards increase their risk of having to file bankruptcy again in the future, plus higher debts cause additional damage to credit scores.

Read More

What Information Do I Need to Run My Credit for a Home Loan?

Running a credit check on yourself is not always simple because you may need information that you have lost, forgotten or do not know. Most people, however, probably already know the information needed to run a personal credit check off the top of their head. If you do this to prepare for a home loan, watch out for more than just your listed accounts.

Identification

Obtaining a free credit report via Annual Credit Report--the central website for the national bureaus to provide free reports--requires consumers to furnish their legal name, Social Security number and previous address if they have lived at their current address for less than two years. Once you choose which agency you want a report from, you answer a few questions to validate your identity, such as the amount of the current monthly payment on some of your loans.

Free Check

Free credit reports do not entitle you to see your FICO score. During the loan application process, however, creditors usually run a check, and some may show you your score. Watch out who you give your driver's license to; it usually contains all the information necessary to run a credit report. Auto dealers sometimes run a hard inquiry, which hurts your score a few points.

What You Should Look For

Besides reviewing your report for late payments and a high score (if you purchase your FICO score), calculate the debts listed on your report and compare this number with your income. Lenders care just as much about debt-to-income ratio--which should be 36 percent or less for a mortgage--as they do a credit score, according to Bankrate.com. Reports also list employment history and previous addresses, so moving around a lot could influence a lender's decision if you bounce around a lot.

Tip

If you forget data, such as monthly debt payment, your lender or bank probably has a statement somewhere in its website in your account. Finding a previous mailing address might be as easy as digging up old mail or letterhead with an address on it. The mortgage provider can run a check with your basic private information, but he may require lots of paperwork to prove your income, such as W-2s from previous years.

Read More

How To Repair Or Remove Credit Report History

A credit report tracks an individual's history of paying debt obligations. Late payments, high credit card balances and inaccurate information could be dragging down your credit score. Over 30 million people in the United States struggle with credit issues that make securing financing difficult, according to MSN Money. Repairing or removing poor credit history can help boost your credit score.

Instructions

1

Review your credit report. According to the Federal Trade Commission (FTC), consumers are entitled to a free credit report from each bureau (Equifax, TransUnion and Experian) annually. Order a free credit report online from AnnualCreditReport.com. Review the reports carefully, noting inaccuracies such as accounts you don't own or late payments that are inaccurate.

2

Remove incorrect information. Inaccurate information can be removed by completing a dispute form with the appropriate credit bureau. The credit bureaus offers dispute forms on their website. Be prepared to provide documentation. For example, consumers disputing late payments should furnish copies of cashed checks or bank statements that show the payment was received on time. Credit bureaus typically respond to claims within 45 business days. Approved disputes are removed from the credit report.

3

Lower credit card balances. Credit card balances that exceed 30 percent of your credit limit drag down credit scores. For example, if you have a $10,000 credit limit and carry a $4,000 balance, this is 40 percent of your available credit (which drags down your credit score). Paying off credit cards could help repair credit.

4

Pay debt obligations on time. Timely payments make up a big piece of your credit score, according to MSN Money. If timely payments have been a challenge in the past, set up automatic payments through your bank. This can be accomplished through your financial institution's online banking feature.

5

Settle accounts in collections. When repairing credit, collections should be a top priority. Contact collectors and set up realistic payment options. Paying these debt obligations on time will help repair your credit over time.

Read More

Getting Stuff Off Your Credit Report When it Is Paid Off

Your credit report is becoming increasingly important for things such as car loans, health insurance rates and landing a job. If you are trying to pay off credit card debt and delinquent collections, it will not always come off your credit report. To try and get items completely removed, you will need to go through a number of key steps.

Checking Credit Reports

Get a free copy of your credit report from Experian, Transunion and Equifax through Annual Credit Report.com. Consider also paying to enroll in one of the monthly credit-tracking services that provide you with a new report each month from all three agencies. Services include True Credit, Identity Guard and TrustedID. Check your reports; if you find errors, dispute them. Also check to see what your reports say about your different accounts, including any you have paid off or are considering paying off.

Paying Off Credit Cards

Some items can be removed and some cannot. If you have a current credit card or one in default that has not yet been charged off and sold to a collections agency, you will have a difficult time having an item removed. When you pay the balance in full, the credit card company will update your report with a "paid" or "paid collection." Your report will also update showing the history of your payments to the company. Even if you close the account, it will continue to show on your credit report for up to seven years.

Removing Collection Items

It is possible to get items relating to collection agency debt removed from your report. To do so, contact the agency and request a "pay for deletion" letter stating that the item will be removed from all three reporting agencies upon payment in full. After you make the payment, the item should be removed from your report within 30 to 45 days. If it is still there after that time, start a dispute with the credit reporting agency and send proof of payment as well as a copy of the deletion letter.

Removing Charged-Off Items

Credit companies and banks will typically charge off an item when they have not received payment from you for many months. This debt is then sold to another company which will try to collect on it. It is typically difficult to get a charge-off removed as you technically don't owe anything to your original credit card company after it has sold your account. You will first need to pay off the debt through the collection agency and get the item deleted. You can contact the original debt holder to request removal of this item and offer proof of payment, but the company has little motivation to remove an item for which it has already been paid by a third-party collection agency. Be careful, as well, in choosing to contact the original debt holder as doing so will update the date of the item on your report and could potentially lower your credit score.

Read More

Does It Hurt My Credit if I Make Deals With Creditors?

Making a deal with your creditors may damage your credit rating, but this probably is less harmful than keeping the status quo if you cannot meet your monthly debt payments. The only way to be sure that a deal with a creditor has no effect on your credit rating is pay the bill in full when due.

Identification

Whether a deal with a creditor can affect your credit rating depends on whether the deal results in you paying less than the monthly payment. A lender reporting anything less than "pays as agreed" results in a drop of 125 points or more on a FICO credit rating of 780, according to Ellen Cannon of Bankrate. Lower scores take less of a hit, because they have fewer points to lose. For example, a score of 680 loses between 45 to 65 after a debt settlement.

Considerations

You can make deals with a creditor that allow you to pay as agreed and avoid missed default. For instance, you can ask the creditor to defer payments, which means you do not pay anything on the loan for a certain amount of time, or forbearance, which only requires you to pay finance charges. If you go to a credit counselor, you can make one payment to the counselor under a debt management plan and have the counselor then pay your creditor. Lenders may report account in a debt management plan as "pays as agreed" even when the lender has to lower the interest rate.

Benefits

Any deal that avoids missed payments tends to improve your credit over the long run. A 90-day missed payment, for example, takes between 70 and 85 points off of a FICO credit rating of 680, according to Les Christie of CNN. You may also avoid the worst thing that can happen to your credit history: bankruptcy.

Tip

A settled account does the most damage when it is the only negative item on a credit report. Also, settled accounts often have a marginal effect on a credit rating, because lenders often only agree to a deal with a consumer defaults on his monthly payment. Thus, most of the damage occurs before the settlement. In any case, talk to your lender about options to avoid default and how they affect your credit rating. Also, consult a credit counselor, preferably one from a nonprofit organization like the National Foundation for Credit Counseling, about your options. For example, the counselor may help you rework your budget to limit unnecessary expenses and divert that money to debt payments.

Read More

What Hurts Your Credit Score?

Knowing the factors that hurt your credit score can put you on the path to a better credit rating. Low scores often result in credit rejections and higher interest rates on loans. In addition, some insurance companies increase premiums if you have a low credit score. You can educate yourself on factors that influence credit scoring, and you can take steps to maintain a good rating.

Bad Payment History

A bad payment history results if you make payments late or miss monthly payments to bill collectors and creditors. Because payment history accounts for 35 percent of you credit score, timely payments are a major aspect in maintaining a high credit rating.

Credit Card Balances

Smart credit habits include keeping debt under control. Credit utilization, which is the amount of debt you carry relative to your credit limit, is a factor in credit scoring. Therefore, maxed out credit cards and high account balances hurt your credit score. According to MSN Money, a credit utilization ratio of less than 30 percent is considered good. You can improve your credit score by keeping your debt and credit utilization ratio to a minimum.

Credit Applications

Applying for too many lines of credit can reduce your credit score and make it difficult for you to obtain new credit. Creditors check your credit when you apply for credit, and excessive credit inquiries by creditors can signal desperation from a lender or creditor's viewpoint.

Canceling Accounts

Canceling credit card accounts sometimes can hurt your credit score. The length of your credit history makes up 15 percent of your credit score. Older credit card accounts help build your credit score, and canceling or closing an older account can decrease your credit history and lower your score. Canceling a credit card also decreases the total amount of credit available to you, which, in turn, increases your credit utilization ratio. A high credit utilization ratio typically reduces your credit score. If you choose to cancel a credit card account, start with your newest account.

Co-signing

Co-signing for another person's loan helps the other person establish a credit history. However, if that person defaults or stop making payments, your credit score may suffer. Make sure you understand the co-signing agreement before signing your name, and only co-sign for a loan if you're prepared to make monthly payments if the primary account holder defaults.

Read More

How to Fix Bad Credit Quickly

There are some things you can do today to fix bad credit. These methods will raise your score a bit, but if you want to see real results and greatly increase your score, it will take a bit more effort and time.

Instructions

1

You will need to access your credit report. You can find many resources online that will provide your credit file for free, and you can't effectively fix bad credit without having this information.

2

Take a look at your current credit cards and figure out what your debt ratio is. This is your balance as it relates to your credit limit. For example, if you have a credit card with a $10,000 credit limit and you currently have a $5,000 balance - that's a 50% debt ratio. Ideally you want your debt ratio to be below 35% for each card. You can fix bad credit just by transferring balances or paying off some of this debt.

3

Whether or not you pay your bills on time has the biggest effect on your credit score. If you have a habit of making late payments, set up automatic bill pay online. You'll quickly see a small improvement in your score just by changing your behavior to fix bad credit.

4

Analyze your credit report for any errors that don't belong there. Don't sweat the small stuff, such as a misspelling of a previous street address, but look for items that might be hurting your score. One credit report can list different information than the others, so be sure to closely review all 3 credit reports.

5

Keep your accounts open! Many people recommend closing credit cards, but that will not fix bad credit. A big part of your credit score is based upon your credit history. Aged accounts are good.

Read More

How Long Does it Take to Renew Your Credit Score?

Your credit score will drop within a relatively short period of time if you stop making payments on your credit cards and loans. Unfortunately, the process for renewing your credit score can take much longer. There are ways you can make immediate improvements, but it generally takes years to restore your credit score completely. The process takes a combination of making payments on time and waiting for negative items to drop off after a certain number of years.

Disputes

Disputing negative items on your credit report can renew your credit score immediately because they can remove negative items that are bringing your score down. Get a copy of your credit report from the three credit bureaus, Equifax, TransUnion and Experian, which are all required to give you one free copy each year. Look for negative items that may be incorrect or unverifiable and file a dispute for those items. If the credit bureau cannot verify them, they must be removed. This will have a quick and positive impact on your credit score.

Payment History

According to FICO, your payment history accounts for 35 percent of your credit score. Every time you make a late payment it has a negative impact, even if your prior history is good. In order to renew your credit score, the Wallet Pop finance site says you must make on-time payments for a period of three years. If there are no other problems, such as judgments or other items that could have a negative impact, Wallet Pop says your score should go above 650.

Debt Level

Your debt level affects your credit score, even if your payment history is good. Ideally, Wallet Pop says to keep the level down to 10 to 20 percent of your total available credit. If you can maintain that level for four years, and there are no other negative factors, you may be able to get your credit score over 700 by the end of that four-year period.

Negative Information

Most negative information must be removed from your credit report after seven years. This includes delinquent accounts, charge-offs and late payments. You should review your credit reports to make sure old items are removed after the seven-year period. If they are not, file a dispute with the bureaus to force their removal.

Bankruptcy

A bankruptcy will affect your credit score for seven to 10 years, depending on the type of bankruptcy you file and the terms of the settlement. However, the effect lessens as time goes on. While you cannot actively do anything about the bankruptcy itself, you can rebuild a good payment history. This will gradually renew your credit score despite the bankruptcy.

Read More

Five Steps to Eliminating Credit Card Debt

In April 2009, President Obama reported that 78 percent of American families held at least one credit card, and 44 percent of them carried a balance on it. Of those who had credit card debt, the average balance was $7,300. If you're struggling with such debt, several steps and strategies can help you to start eliminating the debt to free up your finances.

Stop Using Your Cards

When you're trying to pay down your credit card debt, don't continue to add to the problem. Only use your credit cards in emergencies. To reduce the temptation of using your credit cards, take them out of your wallet. Some people may find it helpful to place the cards in a container full of water and freeze it, or they may hand them to a trusted family member or friend.

Get a Better Rate

If you have a relatively good credit score, you may be eligible to apply for a new credit card. If possible, open a new account that has a low to no interest rate on balance transfers. Transfer your other credit card debt to this new card. The low interest rate generally only lasts for six months to a year, but it can buy you time while you pay down your principal instead of paying down the interest. In the long run, this can drastically cut your credit card debt. If you can't apply for a new credit card, simply calling the credit card company and asking for a lower interest rate might net you considerable savings over the months to help you pay down your debt faster.

Cut Your Expenses

Many people underestimate how much money they can save, and thus how much money they have available to pay down their debt. The longer it takes to pay down your debt, the more the interest will pile up and the more you'll pay in the end. In a 2006 article in "Kiplinger" financial magazine, financial consultant Howard Dvorkin said most people have 15 to 20 percent of "fat" on their budget they can cut and use for debt repayment. Reduce all discretionary spending as much as possible.

Strategize Your Repayment

Eliminating your credit card debt isn't only about paying down your cards, but doing so in a way that maximizes your return and eliminates the debt the quickest. Financial adviser Suze Orman, in a January 2009 article on Oprah website, recommends lining up your cards from the highest interest rates to the lowest interest rates. If possible, pay the minimum payment on each card to avoid excess fees and interest. Then, focus on paying off the card with the highest interest rate. Once that's paid off, work your way to the card with the next highest interest rate.

Negotiate a Settlement

Sometimes the credit card debt can be too overwhelming for someone to handle. If that's the case, a debt settlement may help, according to a September 2010 report in "Smart Money" magazine. If your credit card company offers you a settlement opportunity, the magazine suggests working with a bankruptcy attorney to determine whether settlement is the best option for you. It should only be used as a last resort for eliminating credit card debt, because it can hurt your credit score.

Read More

Credit Check Tips

A credit score is used by a lender and certain other service providers to assess the credit risk associated with an individual. Generally, the higher the score, the lower the risk associated with the individual. The score is derived from a complex mathematical formula that evaluates information on a credit file. Your credit score is checked by lenders, insurance companies, some employers and leasing companies before making a decision on a credit request, employment or lease application.

Credit Reports and Monitoring

Visit the websites of the three major credit-reporting agencies, Equifax, TransUnion and Experian. On their respective websites, individuals can have instant online access to their credit report and dispute incorrect credit report information online. Monitor the activity on your credit profile by signing up for credit monitoring with these agencies, pulling your free annual credit report or pulling your credit report on a regular schedule. These agencies offer services that allow you to sign up for email alerts on critical changes to your credit, perform personal analysis of your credit and debt and freeze your credit report to restrict future inquires.

Understanding Your Score

Credit scores range between 300 and 850 with most scores falling between 600 and 750 points. Having a high credit score does not guarantee credit nor does having a low credit score rule out credit. The score is used as an indicator, coupled with other factors, which lenders and insurers use to predict credit risk. Efforts can be made to improve your score by paying down your debts, resolving any delinquencies, clearing out any improperly reported items and paying your bills on time. U. S. law prohibits credit-scoring formulas from considering your race, color, religion, national origin, sex or marital status.

Costs of Low Credit Score

Approximately 90 percent of the largest banks use your credit score for credit decisions. An individual with a low credit score may be able to obtain financing for a mortgage; however, it will come at a high cost because of higher interest rates. A low credit score can also result in higher insurance premiums. Many property and casualty insurers use information collected from credit reporting agencies, such as your driving record, credit and claims history, to offer you the most appropriate rate.

Impact of Inquiries

When you apply for credit, you trigger an inquiry on your credit report. Inquiries you initiate as part of a credit request have a small impact on your credit score while an inquiry to obtain your credit score should not have any impact. Furthermore, inquiries initiated for the purposes of preapproved credit offers do not have any impact on your credit score. During a rate-shopping period where a potential homebuyer is shopping mortgage rates, there is an allotted 30 to 45 day shopping window that limits the impact of the multiple credit inquires.

Read More

Does Having a Home Increase My Credit Score?

Owning your own home is part of the American dream and a laudatory accomplishment, but probably does little for your credit history. Having your own home might not matter to credit scoring models at all unless you took out a mortgage. If you do have a mortgage, rushing to pay it off is unnecessary and probably an unwise use of money.

Identification

Having a home has zero effect on your credit score if you owe no money on it, such as when you pay cash. The credit bureaus do not factor in assets when calculating credit risk, because credit scores only rate a person's willingness to repay a debt. A mortgage can increase your credit score when you pay your installment plan on time. Taking out a mortgage actually lowers your credit score initially, because of the large debt load and the credit check likely required by the lender.

Benefits

To get a truly great credit score you must have at least one installment loan, based on the Fair Isaac risk model. Also, a mortgage tends to be very a long loan, so it also increases the average age of your account and lengthens your credit history by decades at the completion of the payment schedule. Assuming you never miss a payment, years of good credit history and finally paying off the debt should boost your credit score.

Considerations

Mortgages tend to improve credit scores at a far lower rate than revolving lines of credit, such as a credit card from a major lender. Installment debts, such as a mortgage, are typically backed by property, so borrowers must repay at least some of the loan or the lender can repossess the property. Unsecured debts, such as a credit account, are a better indicator of handling credit, because the account is unsecured and credit available again after paying the balance.

Tip

Avoid applying for new lines of credit right after you sign the paperwork for a mortgage. Credit inquiries close to the opening of a mortgage account make you look desperate to make up for a financial shortfall. In general, you should not apply for more than one or two accounts a year to keep your score as high as possible. Once you pay off the mortgage, you will improve your chances at another mortgage in the future, because lenders often weigh past mortgage accounts more heavily than other data.

Read More

What Is the Best Way to Get a Credit Rating?

There's no law that requires adults to maintain a credit rating. However, anyone who plans on financing a car or buying a home ought to consider the importance of having good credit and take steps to develop a credit history. Several tactics are available to help you get a credit rating. And numerous lenders and banks are prepared to help you along the way.

Instructions

1

Request credit from a department store or gas station to begin establishing credit. Check into store and gas credit cards. Major credit card issuers generally approve applicants with a prior credit history.

2

Start with a secured card. Pay a $500 deposit and initial setup fee and obtain a secured credit card with your bank.

3

Build a rating with student accounts. College students can take advantage of easy approvals offered by companies that offer student credit cards. Look for applications on your campus and online.

4

Get a "no credit" car loan. Research auto dealers to find a company that approves buyers with no credit history. These "fresh start" or "first time" loans have higher rates, but they provide the opportunity to establish a credit rating.

5

Increase your rating with on-time payments. Gradually raise your credit and build a strong credit rating by paying your bills on time.

6

Pay balances in full. Satisfy your outstanding debts each month to avoid accumulating debt and to keep a high credit score.

Read More