How to Recover After Bankruptcy & Foreclosure

Situations such as a bankruptcy or foreclosure can devastate your credit rating, and it can take years to recover from the damage. During this time, you'll likely experience a few loan denials or you may acquire higher interest rates on credit cards. While both situations are bothersome, bankruptcies and foreclosures do not last forever. Both remarks are deleted from your credit report within ten years (seven years for a foreclosure). Fortunately, you do not have to wait ten years to recover. There are ways to recover from a bankruptcy and foreclosure sooner.

Instructions

1

Practice good debt management with your existing debts. You do not have to include all your debts in a bankruptcy, and a foreclosure only wipes out your mortgage debt. Help your credit score by paying your remaining debts on time.

2

Submit an application for a small personal loan. Start fresh with a new line of credit. Use collateral such as your car title and apply for a secure loan with your bank or credit union. If necessary, use a co-signer to help you qualify. Managing this debt can help increase your credit rating.

3

Fix your credit with a secured credit card from your bank. Rebuild your credit history after filing bankruptcy with a secured credit card. Walk into any bank and ask for information on applying for an account. This requires opening a savings account with the institution and paying a security deposit.

4

Keep debt to a minimum. Pay off your new credit card charges every month to avoid accumulating a large balance. Having available credit on your credit cards raises your FICO score. Don't overextend yourself by opening several credit card accounts. Avoid overspending with credit by giving yourself a monthly spending limit.

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What Does Key Derogatory Mean on My Credit Report?

A key derogatory on your credit report is any account that has gone into collections. These entries have the potential to severely damage your credit rating and prevent you from being approved for credit and loans in the future.

Facts

Although "key derogatory" sounds as if the entry is of special importance, it is merely a classification used for collection debts. All collection accounts will be categorized as key derogatories.

Function

Derogatory entries on your credit report serve as a warning to future lenders that you have not been dependable with paying your debts on time in the past.

Time Frame

Derogatory accounts will remain on your credit record for seven years from the date the original debt was first classified as 180 days past due. Some collection agencies may remove derogatory accounts early in exchange for payment.

Significance

A key derogatory will only have a negative effect on your credit score if you owe more than $100 to the creditor. Old debts below this threshold are not taken into consideration when your credit score is calculated.

Considerations

Regardless of the amount of a derogatory debt on your credit report, some lenders, such as mortgage lenders, may require the debt to be paid before you will be eligible for a loan.

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Does Paying Off a Large Balance Affect Your Credit Score?

If you have several open accounts and a large chunk of money, you may wonder if you would be wise to pay off a large balance on an open account. The effect that paying off an account has on your credit score differs depending on whether you pay off a balance on a revolving account, such as a credit card, or on an installment account, such as a car or student loan. Paying off the balance on a revolving account is more likely to significantly raise your credit score. The best strategy to raise your score is to pay down the credit card that is closest to its limit.

Paying Off Large Balances

Part of your credit score is determined by taking the amount of credit for which you have been approved and comparing it with the amount of debt you actually have. For example, if you have a $5,000 limit on an account and you have borrowed $4,875, this adversely affects your credit score. If you pay off the balance on the account, the credit reporting agencies will see that even though you have credit you can take, you choose not to. This is an indicator of fiscal maturity and responsibility. Thus, your credit scores increase in these instances. A good rule is to never borrow more than 30 percent of your maximum allowance.

Keep Cards Open

Do not close your credit card accounts if you pay them off. As long as your account stays open, the company likely will continue to report to the credit bureaus that you have a large amount of available credit that you are not using. Consider using a credit card periodically for small purchases and pay them off immediately. This will cause the credit card company to continue to report your usage to the credit bureaus.

Pay on Time

Always pay your bills on time. If you put a large purchase on your credit card, pay it off as quickly as possible. Delinquent charges have a more adverse effect on your credit scores than having too much credit does. This is especially true of the bills you have that are reported to credit agencies. These include credit card bills, mortgage bills, auto loan bills and cable bills. Failing to pay a bill may cause the lender to send your account to a collection agency. Collections stay on your credit report for up to seven years.

Decide on Loans Quickly

Each time a potential lender pulls your credit score, the score has the potential to decrease a few points. Having your credit pulled several times could significantly decrease your score. If the scores were all pulled several times within two weeks, the credit bureaus do not look unfavorably on this, thus you can continue to maintain your credit score.

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How to Remove a Late Payment on a Student Loan

A portion of your credit score is calculated by how well you pay regularly scheduled payments. If you make a payment on any debt 30 days after the payment is due, you will receive a late payment notation on your credit report. Even one late payment can cause your credit score to drop. The Fair Credit Reporting Act requires that all information contained within consumer credit reports be accurate. If you notice a late payment notation for your student loan appearing on your credit report and you know you made your payment on time, you can take action to have the negative notation removed.

Instructions

1

Gather any documentation you have that proves your payment was made on time. This includes student loan bills identifying when the payment was due and any canceled checks or debit records documenting when the payment was withdrawn from your bank account.

2

Contact your student loan provider by telephone and explain the reporting error. Ask to be transferred to someone who can help rectify the situation and have the negative notation removed from your credit report. Customer service representatives will rarely be able to help you in this matter, and you should insist that you be transferred to a supervisor.

3

Explain to the individual you are transferred to that there is a late payment notation appearing on your credit report in error and you would like to have it removed. Tell the supervisor that you have documentation to prove that the payment was made and processed on time. Ask for the address of the department that handles reporting errors so you can mail your documentation.

4

Make copies of your banking documents and your credit report with the late payment notation highlighted. Also make a copy of your photo ID. Send these items with a letter detailing the problem to the mailing address provided to you by the supervisor. Also, send your documentation certified mail. This way, a representative will have to sign for your paperwork, and the signature card will be returned to you.

5

Give your student loan provider 30 days to respond. If a response is not received within that time frame, you may dispute the late payment notation with the credit bureaus.

6

Send each credit bureau currently reporting the late payment copies of all of your documentation and a letter outlining the steps you have taken to resolve the issue with the lender. Include a copy of the signature card proving that you notified the lender of the issue and received no response. By law, the credit bureaus have 30 days to investigate your dispute and make any necessary corrections.

7

Wait for a response from the credit bureaus. Within 30 days, you will receive notification of the results of the investigation and an updated copy of your credit report if any changes that were made resulted in a change to your credit score.

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Can a Collection Agency & the Original Credit Company Report You on Your Credit Report?

Your credit report and credit score help determine whether you will get approved for loans or credit cards, what credit limit you can have and what interest rate you will be charged. If you had an unpaid account in the past and the original lender sold that account to a collection agency, you likely have two black marks on your credit report. The original lender and the collection agency both can add information to your credit report. That information will remain on your credit report for years.

Bad Debts

If you go without paying your monthly bill for an extended period, the lender eventually will consider the debt uncollectible and designate it as a write-off or charge-off. Bankrate reports that the lender will typically close your account after 120 to 180 days of nonpayment. Once the lender closes the account, it will change the status on the account to a charge-off. A charge-off means you still owe the debt, but the lender believes the debt will not get paid. A charge-off will show up on your credit report.

Collection Agencies

Either the lender will use its internal collection services to try to collect on the debt, or it will sell the debt to a third-party collection agency. Once the collection agency obtains the debt, it will notify the credit bureaus. The credit bureaus will add the collection agency account to your credit report. The collection agency will contact you by phone or by mail to attempt to collect the debt.

Credit Reports

The original account and the collection agency account both can appear on your credit report. The original account will show several missed payments as well as the charge-off status. The collection agency account will show an open and unpaid collection. Both accounts represent negative credit entries on your credit report and will lower your credit score. Bankrate reports that both accounts can remain on your credit report for seven years.

Tips

You cannot remove an account from your credit report that legally belongs to you. However, you can reduce the negative effect a collection has on your credit score by paying the debt. Many collection agencies will work with you to settle the debt for a portion of what you owe. Before paying the collection agency, make sure it agrees to update your credit report to a paid status. When an agreement is reached, obtain written confirmation of the agreement from the collection agency before you send in payment.

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How to Improve a Credit Score in Canada

If you plan to get a mortgage, car loan or personal loan anytime in the future, it's essential to have a good credit score. Lenders use credit scores to decide whether to give you credit and the terms of that credit. Generally, a higher credit score will give you lower interest rates and more lending options. There are two major credit reporting bureaus in Canada: Equifax and TransUnion. If you have ever used credit, you will have a file with at least one of these agencies.

There are five main ways to improve your Canadian credit score. If you stick to all of them, your credit score will start to improve within months.

Instructions

1

Pay your bills on time, and pay them in full. The easiest way to improve your Canadian credit score is to always pay your bills on time. Aim to make at least the minimum payment on your credit cards or loans each month.

2

Keep your balances below your available credit. You should try to use as little of your credit as possible--no more than 30 percent. Never max out a credit card, as this will trigger a reduction in your credit score.

3

Avoid making too many applications for new credit. Every time you make a new application for credit, the credit reporting bureaus are notified. Making too many credit applications in a short time is considered a negative because it suggests that you may be in financial trouble. Requesting a credit report or credit score will not affect your credit.

4

Build credit wisely. The secret to a good credit score is not to avoid credit altogether. Build your credit with one or two credit cards or a small personal loan that you know you can pay off in full every month. Aim to show lenders that you can be trusted to handle credit responsibly.

5

Spot and correct errors in your credit report. Mistakes in your credit report do happen, and they can lower your credit score. Check your credit report carefully for any incorrect information. If you think you may be a victim of identity theft, contact the credit bureaus and your financial institution as quickly as possible. The sooner you identify the problem, the more likely it is that it can be fixed.

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How Are the Three Major Credit Bureaus Different?

Equifax, Experian and TransUnion are the three credit reporting agencies responsible for producing your credit report, which creditors use to determine whether or not to lend to you. The information these agencies produce is often similar, but may vary due to differences in the agencies themselves.

What's On Your Credit Report

Your credit report is essentially a record of the debts you owe and your history of repaying them. It lists every lender or creditor with whom you have an account, how long the account has existed, how much you owe and how much credit is available to you. It also shows how often you have paid late and what legal actions -- such as bankruptcy, foreclosures or lawsuits -- have resulted from the late payments. Credit reporting bureaus track each time you or a business requests to see your credit report, which may affect your credit score, and they keep track of the personal information you provide each time you apply for new credit.

Data Collection

Your Experian, TransUnion and Equifax credit scores may not be identical since these agencies collect different, though similar, information about you from lenders. For example, all three agencies might spell your name correctly in their reports, but only one might list your address correctly because the agency updates its information more thoroughly. Or, if a lender mistakenly notifies credit reporting agencies that you made a late payment but later attempts to correct the error, one or two of the agencies may still list a late payment in your report. To spot errors, order a free copy of your credit report every year through AnnualCreditReport.com, which the Federal Trade Commission endorses, and contact the agency that lists the error. This free report does not include your credit score.

Scoring Methods

In addition to gathering different information, each agency calculates your credit score in its own way. Equifax and TransUnion evaluate your payment history, debt-to-credit ratio and credit inquiries, according to My Credit Score, a website that answers consumer questions relating to credit scores. TransUnion calculates its scores in a similar way using its PLUS Score method, which offers information about your report such as how TransUnion calculated your score and how you can improve it.

Pricing

The agencies offer a similar product, but as different businesses, Equifax, Experian and TransUnion charge different prices for a copy of your credit report and score. As of 2011, Equifax allows you to check your Equifax credit report and score for $15.95, or your report and score from all three agencies for $39.95. Experian allows you to access your Experian report and score for seven days for $1, and for $14.95 per month after that unless you cancel the service. TransUnion lets you access your report and score for all three agencies free of charge for seven days, then for $14.95 a month if you don't cancel the service.

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How Much Will Closing a New Card Hurt My FICO Score?

Closing a credit card account may force you to curb your spending habits, but it is usually a poor decision if you want to raise your FICO score. Actually, closing a credit card account will likely lower your credit score. If you decide to close an account, failing to do it properly could hurt future applications for credit.

Misconception

Canceling a new credit card account, even one less than a day old, does not remove it from your credit report, according to the Motley Fool website. All revolving loans, and their positive and negative information, stay on your credit history for seven years. Closing a new account with a positive history just means you cannot further boost your scores by paying your bill on time.

Disadvantage

Closing a credit card account reduces your available credit, and if you have any outstanding principal, increases your debt utilization ratio. Debt utilization ratio refers to the portion of your available credit line that you use and counts for 30 percent of your FICO score.

Potential Benefit

Closing a new credit card could help your FICO score. The FICO formula penalizes consumers when they have more than seven revolving lines of credit, according to the Motley Fool. If you have a problem with spending and a large amount of debt, closing an account could help you focus on paying down your existing debt. This could eventually outweigh the hit to your debt utilization ratio.

Tip

If you close an account, make sure to ask the creditor to list it as closed by the account holder. Having a revolving line of credit closed by the lender appears poorly on a credit history, because it looks like the creditor decided you were a bad borrower. Keeping the card open for years to come will look good because lenders like to see someone who stays loyal to a company.

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How to Apply for the Best Secured-Loan Rate

A secured loan is a loan backed by collateral, such as a mortgage, automobile loan or secured credit card. The collateral can be taken by the bank or lender if you default on the loan. In the case of a secured credit card, money you have on deposit serves as collateral. The secured nature of loans often makes them easier to qualify for than unsecured loans. However, you must meet certain standards to qualify for the best rates on secured loans.

Instructions

1

Obtain a free copy of your credit report from AnnualCreditReport.com. This website was established by nationwide credit-reporting bureaus to offer free reports as required under the terms of the Fair Credit Reporting Act. Go to the website to view and print your report (see Resources). Then order your credit score separately, for a fee, by following instructions on the credit report. You're entitled to three free credit reports a year from AnnualCreditReport.com, but you must order your credit score for a fee, separately, each time.

2

Compare your credit score with generally accepted standards for outstanding credit. Privacy Rights Clearinghouse, a national nonprofit consumer-information company, says that scores of 720 or higher are generally considered excellent. That means you will likely need a score of at least 720 to get the best rates on a secured loan.

3

Apply for the secured loan if your credit score is at least 720. If it is not, create a plan for improving your credit. For help with credit repair, meet with a credit counselor. Consider counselors affiliated with a nonprofit such as Consumer Credit Counseling Services. Find a government-approved counselor by visiting the U.S. Department of Housing and Urban Development's website (see Resources). Apply for a secured loan after your credit has improved.

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How Long Does It Take to Raise Your Credit Score 100 Points?

There are many reasons why people would like to have a higher credit score and the good news is that there are many ways to try and raise your credit score by 100 points. The length of time that this change occurs can differ but is based upon the methods you use to raise it. Your FICO score (beacon score) can range from 300-850, also, please note that there are three scores available, via Experian, Equifax and TransUnion.

Payment History

Thirty-five percent of your score is based upon payment history, so every month that you make a payment on time is positive to your account. You receive bonus points every year that you continue paying your accounts on time. You will lose points if you have a late payment, collection account, charge-off, foreclosure or judgment placed on your report.

Utilization

Thirty percent of your score is based upon your utilization of credit. This is talking about the balances you have on each credit card. This is the fastest way to increase your credit score in a short amount of time. You get the maximum amount of points when your balance is 1 percent to 9 percent of your available credit line. The good news is you also gain points for every 10 percent you reduce your debt, so if you go from a balance of 80 percent of your credit line to 40 percent of your credit line, you will also gain points. The other important thing to note is that you should also only have balances on about half of your credit cards. You will get extra points if you pay off a card that leaves you with less cards carrying balances.

History

Fifteen percent of your score is from your established history. You receive points every year that you have a positive trade line open.

Inquiries

Ten percent of your score is based off of inquiries. Who has been checking your credit and how many people? If you have too many inquiries you will lose points in your scores. Inquires remain on your report for two years, however they stop deducting points for those inquiries after one year.

Mix of credit

Ten percent of your score is based upon the mix of credit that you have. This is referring to the different types of credit mortgages, car loans, credit cards, student loans, etc. If you only have one type of credit, you will gain points by diversifying your credit file and using another type of credit.

Timeline

Credit bureaus update your scores daily based upon the information that they are given by your creditor. Therefore, if you substantially pay down your debt, make sure you have a good mix of credit, pay on time and don't try to open too many new lines of credit at once, you can raise your score by 100 points in as little as a few days (depending on how often creditors update your files--many do it every month), to a few months, or to years if you don't have anything else to do aside from letting history set in.

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How to Cancel My Monthly TransUnion Credit Report

If you signed up for TransUnion's free 30-day credit report, you need to cancel the subscription before the 30 days are up, or else they are going to start billing you. You may also choose to cancel after a few months if you are no longer interested in receiving this service and monitoring your credit. To cancel your subscription to TransUnion, also known as TrueCredit, all you need to do is contact its customer service team and request a cancellation.

Instructions

1

Call TransCredit customer service toll-free at 800-493-2392.

2

Request cancellation. Tell the customer service representative that you would like to stop being billed and no longer receive your monthly credit report.

3

Call back to verify that your subscription has been canceled. You want to make sure you're not going to get billed again the next month.

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How Does Disability Affect Credit?

As many as 20 percent of citizens in the U.S. have some sort of disability, according to the World Bank. If you ever experience a disability, even just for a short period, you could wreck your credit score for years. Thus you should always prepare for the worst, because disability insurance coverage through an employer may not be enough to pay for your expenses.

Identification

Disability's most prominent effect on credit is the reduction in the ability of the borrower to pay his bills due to lost income. If your disability coverage fails to cover your monthly expenses and debt repayment obligations, your credit score will drop due to missed payments. Missed payments and delinquent debts hurt your credit score for seven years. When you have to declare bankruptcy, you score is damaged for up to 10 years. Unpaid tax debts can stay on your credit forever.

Considerations

Employers often offer short-term disability insurance or "sick leave. Also, states have workers compensation programs employers must use if they do not have private plans. In all, you generally need about 60 percent of your income to survive while on disability. When disability insurance covers your needs, it may not offer long-term benefits -- most insurance plans have a limit of three to five years.

Solutions

Apply for Social Security disability benefits immediately, because it might take several months before you receive your first benefits. Also, open up a bank account just for your SSDI benefits just in case you default on loans and the creditor gets a wage garnishment. Creditors cannot touch SSDI payments, but they might be able to go after an account that mixes several types of income with SSDI benefits. Taking out new lines of credit could be a wise move if you have a short-term disability and you have no other sources of income. New lines of credit ding your credit score but are a much better alternative to missing payments.

Warning

Check the tax rules on any of your disability benefits. The IRS taxes most employee-sponsored and government plans. A insurance plan that covers 60 percent of your previous income, for example, might have an effective reimbursement rate of 40 percent after taxes. Also, reveal all types of potential insurance benefits to any pertinent party so you do not collect more in disability benefits that your normal wage, which is considered fraud.

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Canceling Credit Cards and Credit Score

Any event involving your credit accounts can have an impact on your credit score. Closing a credit card normally has a negative impact on your credit score, assuming that your creditors report the card closure to the credit bureaus. However, many factors impact your credit score, so closing one card has more of an impact on someone who only has a few open credit accounts than someone with multiple accounts.

History

Credit reporting agencies calculate your average length of credit account history. If you have had several credit accounts open for a number of years, that suggests that you have maintained a good relationship with your creditors. If you have only have a few credit accounts open and you have not had any of your accounts open for more than a few months, that suggests that either you are an unknown quantity as a borrower or that past credit problems caused the closure of your other accounts. Consequently, people with a long average length of account history get higher credit scores and closing your credit card hurts your score.

Reporting

Lenders are not required to submit credit reports at a particular time, but typically most creditors submit updated reports to credit agencies at least once a month. The credit bureaus use this information to update your credit report, but your score does not update until the next time a creditor requests it. Therefore, if you close your credit card today and check your own score next week, you may not notice any difference.

Non-Reporting

Experian, Equifax and TransUnion are the three credit reporting agencies that operate in the U.S. However, lenders do not have to submit reports to all three of the agencies, and some lenders that specialize in lending to people with poor credit scores do not even submit reports to these agencies at all. Closing a credit card has no impact on your credit score unless a credit agency has a record of that credit account to begin with.

Other Considerations

Paying down your credit card but not actually closing it does help your credit score because it means you have lowered your outstanding debt balance, and creditor agencies view people with lower debt levels as lower risk borrowers. However, if you pay off a delinquent credit card account that has been sold to a collection agency, doing so does not have a huge impact on your credit score because the fact you were delinquent to begin with remains on your credit report for seven years. Additionally, credit cards are normally closed before being sent to collection agencies so your score already suffered from the card's closure and when you settle the balance owed you are settling the debt as opposed to closing the account.

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How to Improve a FICO Credit Score

Most people have applied for a car loan, mortgage or credit card at one time or another. And, as you probably know, part of the application process includes a review of your credit report. In addition to providing an overview of all your debts and financial obligations, your credit report also includes a FICO credit score. Although this numerical value may seem rather innocuous, it helps lenders determine whether you are eligible for credit and, if applicable, what interest rate you will receive. To increase your chances of receiving that loan or credit card you need, it's very important to maintain the highest FICO score possible.

Instructions

1

Review your credit report carefully before applying for a new loan or credit card. Make note of any errors or inaccurate information.

2

Make all of your bill payments on time. If you already have some that are past due, get caught up on them.

3

Contact your creditors to arrange payment plans if necessary. Once you inform your creditors of your situation, most will be willing to work with you to schedule a plan. You may even be able to negotiate a lower interest rate or reduce your balance.

4

Focus on paying down your debt. Get your credit cards below 50 percent of your limit; this alone can help boost your score by as much as 100 points.

5

Keep your accounts open. Even if you are able to pay the entire amount you owe, you should keep the account open with a zero balance.

6

Refrain from opening any new credit accounts. Until you have an acceptable score, you should not apply for any other types of credit or establish any new debts.

7

Pay off any accounts in collections. Before you do this, however, you should contact the creditor to negotiate payment. Make sure that, once you pay the balance in full, the account will be removed from your credit report. Otherwise, it will remain on your history for 7 years, regardless of whether or not it is paid.

8

Stop using your credit cards. Pay with cash or use a debit card to avoid racking up any new debt.

9

Create a budget. Evaluate your income and track your expenses so that you can set aside specified funds for bills, utilities and other necessary expenses. Avoid impulsive spending and other unnecessary costs.

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What Makes a Credit Score Bad?

Your credit score is determined using a software that weights different factors of your credit history. FICO scores are the most commonly used.

Scoring System

FICO scores can range from 300 to 800; the higher your score, the lower the credit risk to lenders. In general, any score of less than 600 is not great, but a score of less than 500 is considered high risk and will make it difficult for you to secure credit with reasonable terms.

Calculation

The FICO system utilizes a method that gives different weights to several facets of your credit history. These include payment history (35 percent of your score), amounts owed (30 percent), length of credit history (15 percent), types of credit (10 percent) and new credit (10 percent).

Payment History

Factors that will lower your score in this category include late payments, charge-offs, defaulting on accounts, repossessions and bankruptcies.

Amounts Owed

If you have a high debt-to-income ratio--you owe an amount that is large relative to your income--your score will be lower in this category.

Length of Credit History

The longer your (positive) credit history, the higher your credit score. If you have only a few months of credit history, even if it is a positive payment history, your score will be lower in this category.

Types of Credit

Having various types of accounts, including secured or unsecured credit, raises your score. If you have only revolving credit, which are generally credit card, your score in this category won't be good.

New Credit

This portion of your score considers your recent use of credit. If you recently opened multiple accounts at once or have a sudden increase in the number of credit inquires on your account, your score will be negatively impacted in this category.

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What Do I Consider My Credit Score if I Have None?

Some people pride themselves on having no credit score -- proudly declaring a score of "zero." Not having a credit score could be beneficial because you have no loans growing. However, you may have accounts that should go toward building your credit but the major credit bureaus either don't know about them or are not picking them up.

Identification

The credit reporting agencies do not rate consumers who have an empty credit profile or a limited credit history. In this case they just report something in the vein of "insufficient credit history." To have a credit score you must hold a loan that is reported to the three major credit bureaus. This is usually a credit card or installment loan, such as a student loan or mortgage.

Check For Accounts That Should Be Reported

If you have open accounts, keep paying them on time and wait for the agencies to list them -- this typically takes six months. Review your report for unlisted accounts. Some of your lenders may forget to report your history to the credit bureaus. Try to verify the account with the credit bureaus by sending in your monthly statements or ask the lender to update your file with the bureaus. If the lender does not subscribe to the credit reporting services, however, the agencies won't report the account.

Importance

Having a zero credit score may not be all bad. Taking on debt just to pay it back and get a credit history is a poor move. You essentially pay money to get a score and if you miss payments, you could up with a low score, which is worse than a nil score. On the other hand, expect to pay more for most services, such as cell phone service, insurance and deposits on utilities, without a good credit profile.

Tip

The bureaus have different information on you, which means you usually have a different score at each of the major agencies. If you have no information with any bureau, consider self-reporting payments to an alternative credit agency. For a monthly fee, the alternative agency verifies and reports nontraditional accounts, such as cell phones, to lenders. If you want a FICO score, you will need a revolving account, such as a credit card, or an installment account, like a student loan, for the agencies to calculate a score.

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What Can I Do if a Creditor Refuses to Remove Something on My Credit Report?

You may feel resentment when a creditor reports missed payments on your report, especially when other creditors allow you a longer grace period to pay a debt, but you probably can do nothing about a negative item. Unless the creditor reports false information, it can legally report something to the credit reporting bureaus.

Dispute Item

You can dispute anything on your credit report -- even legitimate items -- if you think the creditor cannot verify the accuracy of the data. For example, if a court loses record of your bankruptcy petition, you can dispute the item and the credit bureaus will have to remove the item from your report. Although the bureaus must investigate disputes within 30 days, they can take months to resolve complicated cases.

Suing the Creditor

If you really think the creditor cannot prove an item or believe the item to be false, but the creditor keeps reporting the erroneous data, you can sue the company. However, suing should be your last option because a lawsuit can take months or years to process and cost you thousands of dollars. Some consumers have set up websites or contacted news reporters to embarrass companies into correcting a falsely reported item. If you file a lawsuit, it will probably be for defamation of character.

Wait It Out

Most items, such as missed payments and collection accounts, disappear from your credit report within seven years, so if an item is close to falling off your report you may just want to wait. Credit inquiries affect your credit rating for only a year, and some items last longer than seven years. For example, bankruptcies usually stay for 10 years, and tax liens can remain forever. While you wait for an item to fall off your report, adding new positive accounts and eliminating debt eventually will make any negatives less important to your credit history.

Tip

Review your credit reports from all the national credit bureaus frequently, contact a creditor when you see a mistake and dispute the item with the credit bureaus. Ask the creditor to send you a universal data form if it agrees to update your report. A UDF is a document the creditor must file to a reporting bureau to update a person's credit history. If you feel the creditor or credit bureau reports erroneous information, you can file a complaint with the Federal Trade Commission, suggests Holden Lewis of Bankrate.com.

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How Long Can Items Stay on Your Credit Report?

Basics

There is a variety of different items that can be attached to your credit report. Once an item is attached to your account history, it will take at least seven years for the item to be removed from your credit report. Once the item is removed, your credit report score is increased. However, there are exceptions to the seven-year rule that govern the majority of items attached to your credit report.

How Long Items Can Stay on Your Credit Report: Part 1

The exceptions to the seven-year rule are described here. If you file for bankruptcy, the filing can be reported for 10 years. There is no time limit on the amount of time an item is on your account if it is involved in the application for a job that pays more than $20,000 per year. If you apply for life insurance or apply for credit in an amount at or above $50,000, there is no time limit on what items can be searched on your credit report. If an item exists because of the outcome of a judgment in the court of law, that item stays on your credit report for seven years or until the statute of limitations runs out on the law governing your case. In this case, the longer time is upheld. The information relating to a default on student loans is available for up to seven years. If the item is a tax lien, that item stays on your credit report for seven years after the entire lien amount is paid.

How Long Items Can Stay on Your Credit Report: Part 2

There are a few other things to remember when determining how long an item is going to stay on your credit report. The Statute of Limitations has no bearing on how long an item can stay on your credit report. At no point in legal documentation does it intersect. If you pay a collection notice that is on your credit report, it does not take the item more time to be removed from your report. The time that an item stays on your credit report is determined from either the last time you were late on a payment or the date when said item was sent to collections.

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How to Purchase a Credit Report

If you are in the middle of checking your credit accounts for corrections, you may need more than just a yearly view of your credit report. Waiting 12 months until the next time you check is fine when there is nothing strange going on with your credit. For those trying to clear up fraudulent accounts or for victims of identity theft, track your credit account more regularly with an online service.

Instructions

1

There are several reputable credit monitoring services to choose from online, and several more that will try to push more services on you than needed. The safest bet is to go through one of the three main credit monitoring bureaus: Equifax, TransUnion and Experian. Regardless of which one you use, all three credit reports will be available. For an example, go to the TransUnion credit monitoring website and click on the "Click Here" button in the center of the screen.

2

Fill in the personal information required on the next screen, and enter your credit card information to purchase the service.

3

Check on your credit report free for the 30-day trial period. After that, you will be charged $14.95 a month. This service will alert you to any changes in your credit reports within 24 hours, and you will have unlimited access to viewing your account.

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The Difference Between a Credit Report & Credit Score

In ads on TV, radio and the Internet and in newspapers, you hear and see announcements about credit reports and scores. It has become so constant that borrowers are getting the message that to buy and finance anything, they need to check their credit report and scores. You can check your credit report once per year for free by going to annualcreditreport.com. (see Resources). You can access your scores for a small charge. These are not one in the same, since scores are a result of what is in your credit report, but getting approved for new credit is largely dependent on your scores.

What's in Your Credit Report

Your credit report is a compilation of all of your accounts which you are making and have made payments on. These are consumer credit accounts such as credit cards, auto loans, bank loans and your mortgage. It will contain payment histories and will include late payments as far back as seven years, and will show any collections. Your credit report will show your home (or mailing) address, and where you work. It will have a public records area showing any judgments, liens and bankruptcies. Your reports are updated each time a creditor reports new or updated credit information.

What a Credit Score Is

Credit scores are created as a direct result of the information in your credit report. Scores have become important, since all lenders use credit scores to determine probability that you will default on a financial obligation. The higher the scores, the less likelihood of default. The information and balances in your credit report are assessed by a scoring model (software), which uses math algorithms to determine your scores. The Fair Isaac Corp. first created credit scores, thus you hear them referred to as FICO scores.

What Determines Your Score

Fair Isaac Corp. says credit scores are made up of five components:
1. Your payment history makes up 35 percent of your scores, which explains why a late payment is so devastating to your scores.
2. The amount of money you owe makes up 30 percent of your scores. Credit cards that sit near their maximum limit injure scores.
3. The length of your credit history makes up 15 percent of your scores. Keep and maintain older accounts such as credit cards.
4. The type of credit you use makes up 10 percent of your scores. Having a mix of types of accounts will help your scores rather than having several credit card accounts.
5. New credit makes up the last 10 percent of your scores. This covers inquiries and new accounts that have resulted from the inquiry, and type of credit recently established.

What Hurts Your Score

The biggest hit to credit scores is found in the reporting of late payments. You will be affected by this for up to a year, but the more time that passes, the less impact it will have as long as there are no more late payments. Pay all bills on time or early. The next big negative hit to scores is having high balances on loans, especially credit cards. Pay them down to 40 percent or less of the maximum credit line. The next biggest hit is the age of your accounts. New credit will not have the seasoned (aged) payment history of an old, well-maintained account. If you close out accounts, do not close out all of your old ones: the older ones are worth more to your score. If you are building credit, having a mix of types of credit will help scores more than having all of the same type of account (such as credit card accounts). If your report shows several inquiries, there may be a new account as a result. Any new credit will affect your scores until it is old enough to have a payment history. This usually takes about six months.

Your Rights

Because of the Fair Credit Reporting Act, the borrower has the opportunity (and is encouraged) to get his credit reports (and scores) before applying for credit, allowing him to dispute any accounts or information that he believes to be inaccurate, duplicated or outdated. This gives the borrower a proactive way to stay on top of what is being reported and improve his scores. The credit reporting agencies (CRA) must correct or delete inaccurate information. These reports must be given to a consumer free of cost once per year. Consumers have the right to view their credit scores as well, but there is a small cost for each of the three scores. Under this act, the consumer must be informed if any information in his file has been used against him. If he applied for credit and was turned down, he can send the denial letter to the bureaus and they must give him an updated report. Since credit reports contain private information, access must be limited to those who have a need, such as a bank where you have applied for credit or a landlord from whom you are trying to lease a property. Under any circumstances where credit is being pulled, the consumer's written permission is usually required.

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How to Obtain a Credit File in Australia

Getting a copy of your credit file in Australia is similar to obtaining information on yourself in most countries of the world. The credit bureaus Veda Advantage and Dun and Bradstreet report information on Australian consumers. Having an accurate credit file is important because it is a major factor in whether banks and finance companies will lend to applicants. Fortunately, there are ways to find out what information Australian credit bureaus keep under your name for free or a low price.

Instructions

1

Visit Veda Advantage's website (see Resources below) to request a copy of your Australia credit report. Files are kept only on those who have had some credit activity, such as those who have applied for a loan or received a credit card, in the last 7 years and are citizens or permanent residents of Australia. You have two choices on how to get your credit information--via postal mail for free or online for $29.95.

2

Click the "Order Online Now" button if you want to see your Veda Advantage credit report online within 1 business day. Fill out the required personal information, which includes your full name, current and past address, Australia driver's license number and date of birth. Pay your required fee with a credit card or by issuing a bank transfer or 1-900 number telephone call through the BPAY function. Your credit report can also be delivered by postal mail.

3

Write to Veda Advantage Public Access, P.O. Box 964, North Sydney, NSW 2059, to receive your free credit file copy within 10 business days of the company receiving your request. You will need to include your full name, date of birth, a copy of your Australia driver's license, a copy of a utility bill or bank statement, your current and past addresses, your current employer and the last institution at which you applied for credit. You will also need to include a daytime phone number and signature. You can request in your letter to receive your free credit report by email, but you would also need to include your email address for Veda Advantage to fulfill your request.

4

Visit Dun and Bradstreet Australia's website (see Resources below) and click "Order My Consumer Report" under Credit Reporting.

5

Download the Application for Consumer Credit Report, print it, and fill it out entirely. You will need to provide the same personal information required by Veda Advantage such as your Australia driver's license number. You can pay a $25 fee by credit card or cheque to receive your file within 1 business day, or get a free copy of your credit file by choosing to wait 10 business days.

6

Mail the completed form and enclose payment by cheque if you did not write a credit card number on the form. The form can be sent to Dun & Bradstreet (Australia), Public Access Centre, P.O. Box 7405, St Kilda Rd VIC 3004.

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Tips and Self-Help for Credit Repair

Credit repair is a business for some firms, but the Federal Trade Commission (FTC) explains that people can use the same tactics for self-help without paying exorbitant fees. A federal law called the Fair Credit Reporting Act (FCRA) sets forth rules for the credit bureaus that let you get rid of some harmful credit report entries, and the My FICO scoring education website spells out areas of concentration to repair your score.

Check Your Credit

You do not know the exact state of your credit until you review your reports with the TransUnion, Equifax and Experian credit bureaus. Lenders use these reports to assess you, and the FICO credit scoring firm and the bureaus themselves use it to determine your credit score numbers. The Federal Trade Commission website advises that the FCRA requires the bureaus to give you no-cost report copies once each year. They do this through an official website: annualcreditreport.com. You get charged for reports or must sign up for paid services like credit monitoring to get them free if you order them through the individual credit bureau websites, the FTC warns.

Fix Mistakes

Eight in 10 credit reports have mistakes involving dates and other data, according to Motley Fool money management website writer Dayana Yochim. Each error is a credit repair opportunity because the credit bureaus must erase disputed data if they do not confirm it with the appropriate creditor within 30 days of your complaint, according to FCRA provisions. Notify the bureaus of errors through the electronic forms on their websites. You will get responses in about 45 days, including updated reports showing that unconfirmed information is gone.

Keep Using Credit

Overuse of credit can get you into trouble, but you must charge things regularly to repair damaged credit records. Banks close accounts if you become seriously delinquent, which makes it hard to get new accounts for credit reestablishment. Bankrate financial site writer Pat Curry explains that you can put up a deposit to get a secured credit card. The bank then extends a credit line equivalent to your deposit. Your charges and payments are reported to TransUnion, Equifax and Experian, creating positive records if you handle the account well.

Pay On Time

Credit repair requires racking up a string of on-time payments on all your accounts, according to the My FICO site. Catch up any late credit card, loan or bill payments and send all future payments with plenty of time to spare so they do not get credited after the due date. Your bank may let you send funds electronically on a certain date to avoid mail delays.

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How Long Does a Charge-Off Stay on Credit Bureaus?

Having a clean credit report leads to lower interest rates, lower fees and more approvals for credit cards, lines of credit and loans. Unfortunately, many consumers face financial hardships and end up with blemishes on their credit report, such as charge-offs. A charge-off can cause future financial problems. According to Bankrate, charge-offs are the number one reason for credit denials.

What are Charge-offs?

After a consumer fails to make payments on his credit card for several months, the financial institution will write off the debt as a charge-off. Typically, this happens after 180 to 240 days, according to Bankrate. Once the institution decides to charge off the debt, they will close the account and list it as "charged off" on the consumer's credit report.

How Banks Handle Charge-offs

Listing an account as a charge-off does not absolve the debt owed to the creditor. After the creditor writes off the account as a charge-off they may either send it to their internal collections department or sell the account to a third-party debt collector. If the creditor uses their own collection department, they will continue to try to collect the debt themselves. If the creditor sells the account, the third-party debt collector will try to collect the debt from the consumer.

How Charge-offs Effect Your Credit Report

After the financial institution writes off the account, the credit bureaus will update your file to show the account as a charge-off that closed per the granter's request. If the creditor sells the account to a debt collection agency, they may also report the debt, giving you a second negative mark. This information will stay on your credit file for seven years plus 180 days from the date of the first non-payment, according to Bankrate.

How Charge-offs Affect Your Credit Score

Having a charge-off on your credit report will lower your credit score. If the account went to a third-party collection agency who reported it to the credit bureaus, it will lower your score even further. However, if the rest of your credit history is better, the effect of the charge-off will not be as detrimental. The effect will also lessen over time as the charge-off becomes older.

How to Handle a Charge-off

Your first step to handling a charge-off is calling the financial institution directly. You may still be able to pay the account with them directly. If you cannot work with the financial institution, negotiate a deal with the collection agency. Collection agencies often offer reduced settlement amounts to consumers. However, be sure to get any settlement in writing before paying on the debt.

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Help Fixing a Credit Report

Fixing a credit report can involve disputing errors and improving areas reported by your creditors and lenders. The reasons for fixing a negative credit report are plentiful. These include the ability to qualify for loans and acquire low rates on financing. Rather than live with negative information on your personal file, be proactive and fix your personal report.

Credit Report

Credit reports are documents that lenders and creditors review after receiving your application for a loan or credit card. Banks don't offer credit and loans without first confirming a good credit history. Because your personal report details your complete credit history, lenders evaluate this information and based on their findings, they decide if you're creditworthy. Every consumer with a credit account has a credit report, and lenders and creditors pull reports from one of three bureaus -- Experian, TransUnion or Equifax.

Report Request

Fixing a credit report will first involve reviewing your report to see what creditors are saying about you. There are several ways to get your personal report such as contacting the individual creditors and paying a fee. A free approach is using AnnualCreditReport.com. The three agencies are each required to provide you with one free credit report annually. AnnualCreditReport.com permits consumers to order their reports online and view their documents from one or all three bureaus in less than five minutes.

Disputes

One aspect of fixing a credit report is removing any error or mistake. Read each account entry on your report carefully and keep a pen handy to circle inaccuracies. Pay attention to signs of fraud, such as unfamiliar accounts on your report. There are multiple ways to dispute credit report errors. Use the provided link on the AnnualCreditReport website to file a complaint; or you can write the reporting credit bureau and ask it to investigate incorrect information on your report. Send a copy with disputed items circled and include a brief letter stating why you're disputing a specific account. If possible, include copies of additional documentation to support your claim such as payment records. According to the Federal Trade Commission, the reporting agency or bureaus must investigate questionable items within 30 days.

Collections and Charge-Offs

Fixing the way you manage your debts is another key to fixing your credit report. For example, if you frequently miss payments, creditors and lenders will report lateness or nonpayments on your personal file; and lateness can trigger collection accounts and charge-offs. Collections and charge-offs stay on credit reports for up to seven years and lower your credit scores. Paying off an old debt doesn't immediately remove the negative item from your report. But as a courtesy, some creditors and lenders will update credit reports and either remove collections and charge-offs from reports or update the report to read, "paid collection" or "paid charge-off," if you agree to pay off the balance.

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5 Steps Involved in Credit Management

Credit management is a critical part of taking good care of your financial health. Good credit will garner you superior credit offers, and ensure you get the best deal. This in turn will reduce interest payments and save you money. To get this beneficial circle started, follow these five steps to keep your credit in order.

Minimize Credit Applications

Applying for credit negatively affects your credit score; don't ask for it unless you need it. Each time you put in a credit application, like a request for a new credit card or even an increased limit on a card already in your possession, your credit score goes down, whether or not the request is granted. Keep requests to a minimum.

Maintain Credit Record

Get a hold of your credit record. Review it and remove incorrect, derogatory items. For example, maybe you paid a bill that is showing as outstanding, or perhaps a credit card noted that a payment was late that was in fact received on time. You can challenge these cases, and the firm that reported the item will have to justify it.

Pay on Time

This is critical. You must pay your credit bills by the proper date. Not doing so can hurt your credit significantly, impacting how much you pay for credit and even how much is available. The credit agencies and credit issuers are assessing how much of a risk it is going to be to loan you money. Late payments reflect poorly on the trustworthiness a creditor would like to see.

Use Credit Wisely

You must use credit to build credit. Taking out a small loan and paying it back on time, getting a credit card and using it occasionally are ways to build credit. Start small. Secured credit cards or departments stores can be good starter cards if the major companies are not interested in issuing you a card.

Keep Balances Low

According to FICO, a full 30 percent of a credit score is the amounts owed. They do not release their algorithms to the public, but you will have better credit if the amounts you owe are low. This keeps the total amount you owe as a percentage of total credit extended to you low as well -- a helpful factor. Also, should you have cards you do not use, it may be advantageous to keep the accounts open, even if inactive, as that keeps your total credit extended at a high level.

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How to Increase My Credit Score Today

A few tips that are followed by good credit habits will help increase my credit score and yours.

Instructions

1

Knowing my credit score.
Having an idea of where to begin will allow me to measure my credit score improvement.

2

Order a copy of my credit report.
My credit report will display information that creditors, employers and others have submitted. It's in my best interest to know that the data is correct. To stay updated, I order a copy of my credit report quarterly.

3

Request my credit score.
When ordering my credit report, I must request my credit score. A credit score is an added feature that will cost money in most cases. Even when requesting a free credit report by mail from Equifax, Experian, TransUnion or The Annual Credit Report Service, there is an additional fee for my credit score. My credit score is needed as much as my credit report, so I'll order both.

4

Review my credit report and credit score.
Upon receipt, my credit report and credit score will be checked for errors. Approximately 80% of all credit reports contain errors or information that's not up to date, so I'll check them very carefully.

5

Increase my credit score starting today.
Starting today my credit score will increase by following these tips:
* Knowing my credit score is a must.
* Ordering my credit score quarterly by using a credit monitoring service.
* Paying all of my revolving credit balances below 25% of their high credit limits.
* Keeping my inquiries to a minimum of 3 applications for new credit per 6 month period.
* Reading articles and information on credit scoring.
* Protecting my credit with identity theft protection.

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How to Put a Fraud Alert on Your Account

According to the Federal Trade Commission (FTC), as many as 9 million Americans suffer identity theft each year. Identity thieves steal your personal information--such as your Social Security or credit card number--to rack up charges on your credit cards, open a new credit card in your name, establish a phone or bank account in your name or even rent an apartment. Not only do identity thieves steal your money, but they also can seriously damage your credit rating. You can stop an identity thief from opening any more accounts in your name by putting a fraud alert on your credit reports.

Instructions

1

Place a fraud alert on your credit reports by contacting one of the three major credit reporting agencies: TransUnion (transunion.com), Equifax (equifax.com) or Experian (experian.com). The company you contact is required to contact the other two, which are then required to place the fraud alert on their reports.

2

Ask to place either an initial or an extended fraud alert on your credit reports. An initial fraud alert stays on your credit report for at least 90 days and requires potential creditors to use "reasonable policies and procedures" to verify your identity before issuing you credit. An extended fraud alert lasts seven years and requires potential creditors to contact you or meet with you in person before extending you credit. Both alerts may cause some delays when you're trying to access credit.

3

Order one free copy of your credit report from each of the three credit reporting agencies.

4

Review your credit reports. Make sure your name, address, Social Security number and employment information are correct. Check for any unexplained debts, inquiries from companies you have never contacted, or new accounts you haven't opened.

5

Correct any inaccuracies on your report by contacting the credit reporting agency. The Fair Credit Reporting Act requires the agency to block the fraudulent information from appearing on your report. Send the agency a copy of an Identity Theft Report and a letter explaining what is fraudulent.

6

Check your credit reports regularly for fraudulent activity for at least the first year after you experience identity theft.

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Should I Bother Correcting Incorrect Addresses on My Credit Report?

It is important to keep credit reports up to date and correct.

Correct the Address

Some financial experts say it is best to keep the credit report as up to date as possible, including current and previous addresses. According to the Federal Reserve Bank of San Francisco, lenders look at the credit report before loaning money or authorizing credit limits and need to see accurate information before making a decision.

Leave Incorrect Address

According to SelfCreditRepair.org, it is not necessary to correct an incorrect or misspelled address on a credit report unless it is a result of identity theft. Instead, focus on accounts and their status rather than name, employer or address.

Bottom Line

It is important to correct everything on your credit report, but start with those items that affect your score, then focus on correcting the smaller errors. Items to focus on correcting that affect your score include account late payments, charge-offs, collections, credit limits or negative information older than seven years.

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How to Figure Your Credit Score

It doesn't get any worse than this: Your car has taken its last breath and you need it to go to work. You find a new one, but the loan arranger at the dealership tells you you've been turned down for a loan, or will pay high interest, because of bad credit. You weren't aware of this problem because, like most people, you didn't check your credit score before you applied for that loan. In fact, you probably don't know how a credit score is figured, either. Here's some helpful information to help you determine yours.

Instructions

1

Know how reliably you pay your bills. Your payment history is the most important factor in determining your credit score, and accounts for more than 1/3 of what makes up your score. If your are continually late in making payments to your creditors, the credit bureaus will downgrade your rating depending on how late the payments are received. On the other hand, if you always pay your creditors on time, that fact will normally result in a higher score.

2

Determine how many credit cards you have and how much credit they make available to you. How you manage these accounts will weigh about 1/3 in arriving at your credit score. For instance, the credit-reporting services will consider that you do not manage your finances responsibly if you are continually maxed out on your cards or are dangerously close to your limits. As a rule, your outstanding balances should not exceed about 1/3 of the credit you have been granted. By keeping your credit-card balances low, you will have a higher credit score.

3

Understand that almost every institution in the U.S. that passes judgment on your creditworthiness relies on information from only three credit-reporting companies: Experian, Transunion and Equifax. Every year or two, ask each of them for their reports on you. First, they will give you your score--a strong indication of whether or not you will get your next loan, or if you will pay more interest because of a low rating. Furthermore, those reporting agencies do make mistakes, so it is always a good idea to advise them when your score has been impacted negatively by those mistakes. Finally, if your score is lower than you'd like, the reports will show you how to make improvements in how you manage credit.

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Does a Short Sale Ruin Credit?

Credit scores are not calculated on one specific item; the score is based on a compilation of many factors. Short sales show on your credit report as a home lost to creditors, but a short sale is a better alternative than foreclosure or bankruptcy. If you are concerned that a short sale will ruin your credit, consider the impact of the alternatives.

Definition

A short sale is the term for selling a home for less than the outstanding balance on the mortgage loan. Short sales must be approved by the current mortgage holder. Many lenders approve short sales in order to get the most return possible on a property; homeowners who resort to a short sale do so in lieu of a possible foreclosure or bankruptcy.

Reporting

The impact a short sale can have on a credit score depends on how the current mortgage lender reports the transaction to the three credit bureaus, Experian, TransUnion and Equifax. Most lenders report short sales as "settled," according to Experian. This means that the mortgage lender agreed to accept less than the outstanding balance.

Impact

Paying less than the outstanding balance on a mortgage loan will have a negative impact on the borrower's credit scores. Accounts classified as "settled" work to decrease a FICO score, but they are only part of the overall equation. FICO scores are calculated based on payment history, amounts outstanding, types of credit, new credit and credit history.

Calculations

Certain factors included in a credit score calculation carry more weight than others. Payment history accounts for 35 percent, and amounts outstanding make up 30 percent of the overall credit score. New credit and types of credit used make up 10 percent each, and your length of credit history is 15 percent. A short sale is part of the payment history calculation.

Conclusion

Short sales will have a negative effect on your credit score for seven years, but a short sale will not ruin your credit on its own. Negative items on your credit report have less emphasis over time. A short sale within the past six months will have a greater impact on your credit score than one from two years ago.

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Introduction to Consumer Credit

When you apply for a car, personal, business or mortgage loan, lenders rely on your credit score to determine whether to lend you money, and at what interest rate.

Credit Bureaus

Not using credit wisely can hurt your credit score.

Three national credit bureaus--TransUnion, Experian and Equifax--compile credit reports on consumers. If you miss payments, pay bills late or file for bankruptcy, it's on your credit report.

Credit Score

Before approving your auto loan, lenders will study your credit score.

Fair Isaac Corp., a California-based company, invented the credit score---usually referred to as a FICO score---based on the information in your three credit reports.

Negatives

Bankruptcy filings will dramatically hurt your credit.

Paying bills late or not at all and having too many open credit card accounts negatively affect your credit. Depending on the type, bankruptcy can lower your credit for 10 years, according to MSN Money. Having a large amount of revolving debt also hurts your credit.

Repairing Your Credit

Pay your shopping bills on time to boost your credit.

You can fix bad credit by paying your bills on time, lowering your debt and closing unneeded credit card accounts.

Expert Insight

Correcting errors on your credit report can save you money in the future.

Consumers can order one copy of each of the three credit reports every 12 months at no charge at AnnualCreditReport.com. If you find errors in your reports---such as a missed bill you know you paid on time--report the mistake in writing to the credit bureaus.

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