December 2006 ~ Personal Finance and Money Management

Sunday, December 31, 2006

How to Find My FICO Score

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The FICO (Fair Isaacs Corp.) score is the score most lenders use in making an assessment about your suitability to grant a line of credit. Your FICO score can determine whether you get the credit you want. The higher the score the better positioned you are to get credit. Get your FICO score regularly. You cant get it free but it is easy to find your score: use the MyFICO website.

Instructions

Apply online at MyFICO.com (see Resources section). Click Get FICO Score. Choose to get your FICO score using scores from TransUnion, Equifax or both. The price is $15.95 for one or $30.90 for both, as of 2010. Click Continue.

Click Create Account to find your FICO score. A new window will open. Complete the application form accurately. Create your login name and password. Click Continue. Complete your payment details to find your FICO score. Click Continue. Review your application and payment details.

Click Submit. Your identity will be confirmed. Your payment will be authorized. Click Continue. Follow the online instructions. You will be given a link to click. Confirm your login name and password. Click Continue. Review your FICO score online instantly.

How Fast Can I Change My Credit Score?

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If you're looking to buy a house, take out a loan or get a credit card, the lender will check your credit score. The higher the score, the lower the risk for the lender and the cheaper the loan for you. If you're prudent, you can raise your credit score in as little as a few months. If you're reckless with your finances, you can damage your score in just a few weeks.

A credit score is a three-digit number, roughly between 300 and 800, that tells lenders whether you are creditworthy. Each time you borrow money, the lender reports your payment record to one or more credit bureaus. The credit bureas take this information and convert into a score. You don't have a single credit score. You have at least three. Each of the main credit bureaus -- Equifax, Experian and TransUnion -- calculates a slightly different credit score. These scores change to reflect your borrowing and repayment activity.

You cannot accurately calculate your own credit score. The credit bureaus use complex formulas that are a closely guarded secret. However, certain types of information go into the calculation. Approximately 35% of the score is made up of your repayment history. If you've missed a few payments or were late in making them, your score will suffer. Another 30% reflects your total debt. 15% is the length of your credit history, and 10% is any new credit applications. The remaining 10% is determined by various other factors, including types of credit.

You can get a free copy of all three credit reports once a year by going to AnnualCreditReport.com. This is the official website, authorized by the three credit bureaus. These free credit reports will give you an idea about the strength of your credit history, but they will not contain the actual scores. You can get the scores directly from the bureaus via their websites. You will have to pay a fee each time. If you are in the process of applying for a mortgage, you can also request the score from the lender.

The easiest way to raise your credit score is to maintain a good credit history. This means making payments on time. A late payment is almost as bad as a missed one. Make sure you pay at least the minimum payment each month. You can also raise your credit score by paying down your debts and by diversifying the types of credit you have (credit cards, store cards, mortgage, loans). Do not cancel all of your old credit cards once you have paid off the debt. Having older cards lengthens your credit history.

The quickest way to raise your credit score is to fix any errors that you find on your credit report. Even a small mistake can hurt your score. If you see something on your report that isn't right, file a dispute with the credit bureau on its official website. The bureau must investigate and get back to you within 30 days. If the bureau agrees with you, it will change the erroneous information. This can improve your score in as little as six weeks.

Lenders report to credit bureaus every one or two months. If you've been paying down your debt, your score should reflect this within two or three months. It takes longer to raise a score simply by keeping up with monthly repayments. However, if you are conscientious, you can still improve the score within a few months.

Student Loan Credit Problems

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Student loans can be a burden to pay back. Payments can be high, especially if you are a graduate who owes tens of thousands of dollars in student loans. If you've missed payments or defaulted on your loans, your credit score will be affected, possibly preventing you from getting other kinds of credit. There are many programs that can help you get your student loans into repayment status, which will help to rebuild your credit profile.

If you are unable to pay your student loans, you can ask your lender for a deferment. A deferment is where your lender agrees to not accept payments from you for a certain period of time. A common type of deferment is an in-school deferment, where you don't have to repay your loan as long as you are in school full time. While your student loans are in deferment, your credit score will not be negatively affected.

Income-based repayment (IBR) is a student loan repayment plan that caps your monthly payments to a percentage of your income. In some cases -- if your income isn't high enough -- your payment may be as low as zero. You can qualify for IBR if you have Stafford, Grad PLUS or consolidation loans from the Direct Loan or Federal Family Education Loan. However, you won't be able to get IBR if your loans are in default.

You may be able to have part or all of your student loans forgiven by the federal government if you perform volunteer work, military service or teach or practice medicine in high-need areas. For example, if you serve in the U.S. Army in a high-need area, you may be eligible to have up to $65,000 of your student loans forgiven or you can work as a teacher in a high-need area -- like an inner-city school -- and have a portion of your student loans paid off for every year you work.

If you have multiple student loans, you may find it difficult to keep track of all of your repayments. With a consolidation loan, you can send one check out to one lender and not have to worry about multiple payments. Once you have a consolidation loan, you can extend your repayment schedule to make your payments lower and more affordable. In order to find out which loan consolidation programs might be available to you, contact your lender.

What Key Factors Impact Your Credit Score?

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Key factors can negatively or positively impact your FICO credit score, affecting your ability to get a loan, rent an apartment or qualify for insurance. The number of accounts, payment history and types of credit cards you own help the Fair Isaac Company (FICO) determine your score and helps creditors assess your risk of defaulting on your payments. FICO scores range from a low 300 points to a high 850 points.To improve your credit score, the Federal Trade Commission suggests you pay your bills on time, review your credit report for errors and limit credit card use.

Pay all your bills on time. Payment history accounts for about 35 percent of your FICO score. Debts that have gone into collections, late payments on your credit cards, tax liens, foreclosures and bankruptcy show a pattern of poor financial management, mark you as a poor credit risk and can stay on your credit report for up to seven years. Bankruptcies remain on your credit report for up to 10 years, according to he Fair Isaac Company.

Limit your number of credit cards especially if you carry a lot of debt. About 30 percent of your credit score is affected by how much you owe compared to your credit limits. For example, if your credit limits total $5,000 and your debts are $2,000, your debt-to-limit ratio would be 40 percent, lowering your credit score. Keeping your debt-to-limit ratio below 20 percent will produce a higher score and look favorable to creditors.

Avoid applying for a loan if you were issued your first credit card two months ago. Your length of credit history takes time to build and accounts for about 15 percent of your credit score. A longer credit history yields a higher score. Those with "thin credit" will have lower scores and must prove their ability to pay to creditors. If you have filed for bankruptcy, it may take several years to rebuild your credit and improve your score.

Aim for a "healthy mix" of different types of credit, such as revolving accounts (credit cards) and a mortgage or car loan or installment type accounts. This can account for about 10 percent of your credit score and helps indicate your financial stability. Avoid owning too many high interest department store cards which can shave points off your credit score and signal to lenders you are a high credit risk .

Resist the urge to apply for several cards at once. A high number of credit inquiries in a short period of time can drop your score. On the other hand, if you comparison-shop for a certain type of credit such as for a car or home loan, it will not lower your score as long as you do so within a 15- to 30-day period.

Order your credit report. You are entitled to one free annual credit from each of the credit reporting agencies. Examine your report for areas you can improve which will increase your score. Look for errors in your report that you can dispute and remove from your credit report. The Federal Trade Commission offers several tips for improving your credit score and repairing your credit.

What Is an Average FICO Credit Score?

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Your FICO credit score is a number between 300 and 850 that credit reporting agencies assign to you based on your financial history, and which creditors use to assess you as a loan candidate. Even if your repayment history is favorable, a below-average score can hurt your chances of obtaining a loan.

About 58 percent of Americans have credit scores of at least 700, meaning most have relatively high credit scores. The national average is 692, according the Experian credit reporting agency. A creditor may consider your score low if it's below the national average, but other factors influence this decision.

What creditors consider a typical credit score may vary depending on where you live, according to Experian. New Englanders and people living in the west north central region of the country, for example, have the highest credit scores of any region, averaging 712 and 709, respectively. So though a score of 693 is higher than the national average, it's a relatively low score in these regions. Residents of the middle Atlantic average a slightly lower score of 702. Residents of the west south central region of the United States have the lowest credit scores on average at 673.

Creditors may set their own credit score requirements for loan applicants, so they may require you to have a higher credit score than the local or national average. In general, creditors prefer borrowers with scores of at least 700. Slightly above the national average, it indicates that you're a relatively safe investment. A score of 720 is the essentially same as a score of 820 in a creditor's eyes, so aim for at least a 720.

Your credit score doesn't just affect whether or not you get a loan. It can also determine the conditions of the loans creditors give you. A person with a score below 692, for example, is likely to pay higher interest rates on his loans than a person with a score of 720 or higher, who creditors are more prone to trust with lower interest rates. Fewer than 60 percent of Americans have scores above 700 and only 13 percent have scores above 800, so the average American doesn't obtain these favorable rates.

How to Report Fraud & Identity Theft

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Identity theft and fraud can devastate your financial standing. Criminals pose as you to open fraudulent accounts, then make as many charges as possible and run out on the bills while your credit reports take the hit. They also use your current credit cards and bank accounts if they can get the numbers. You may not even be aware that your identity is stolen or your accounts information is compromised until debt collectors call about unknown accounts or checks bounce and credit transactions are denied. Report the problem as soon as you find out to stop further damage.

Instructions

Call each of your credit card issuers and tell the agents your accounts may be compromised, the Federal Trade Commission (FTC) advises. Use the toll-free customer service line or fraud hot line number on your card or billing statement. The banks can change your account numbers so identity thieves cannot process charges through the old numbers.

Contact one of the three major credit reporting bureaus, explain that you are an identity theft victim and ask for a fraud alert and credit report copy. The FTC states that TransUnion, Experian and Equifax are required to cooperate in fraud cases, so the bureau you call will inform the other two about your alert request.

Read your credit reports carefully and call any unfamiliar banks or lenders to report the fraud. Identity thieves open accounts and have statements sent to different addresses so you are not aware of their existence. You will find such accounts on your credit reports, usually with high balances and delinquent payments. The issuers should remove them when you explain that you are a fraud victim and provide documentation, according to the FTC.

Fill out a police report about the identity theft and fraud, the FTC advises. You must give a copy to the credit bureaus if you wish to extend your fraud alerts from 90 days to seven years, according to the Utah Attorney General's Office. Credit card companies and other lenders may also want a copy before they remove suspicious charges or close fraudulent accounts.

Report any odd charges on your credit card statements. You may still see fraudulent transactions show up for a month or two after you report a fraud problem to your credit card companies. The FTC recommends disputing them immediately by calling the customer service number and asking for the appropriate fraud report form.

File a complaint with the FTC. It passes identity theft and fraud reports to relevant law enforcement offices and government agencies, which use the information to build cases against fraudsters.

Does Paying Off Student Loans Bring Your Credit Score Higher?

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With the price of tuition constantly on the rise, more and more people are taking out loans to pay for college. According to the American Council on Education, the average student graduates from a four-year private college with more than $17,000 worth of debt. The average master's student is $29,000 in debt, though it's not uncommon to owe much more. That much debt can drag down your credit score. Paying it off can help.

Student loans are different from other forms of unsecured debt. While they do count against you when your credit score is calculated, they are not as bad as other types of loans. They are, however, included in your total debt. Lenders look at your debt-to-income ratio when deciding whether or not to lend you money. Having a lot of student debt can make it harder and more expensive to get a mortgage or another type of credit.

Student loans are good for building up your credit history and raising your credit score. One of the most important factors in calculating your credit scores is your repayment history. It counts for more than total debt. If you are good at repaying what you've borrowed, lenders will want to lend you more. Thus, by keeping up with your student loan repayments, you are actually raising your credit score.

Paying off your student debt in full can raise your credit score. It will lower your overall debt and raise your debt-to-credit ratio. However, it will not make a huge difference to the score, since student debt wasn't hurting it that much to begin with. However, lenders take more than the score into account when deciding whether you are creditworthy. You may find it easier to borrow money with the same credit score and a lower debt-to-income ratio.

There are other ways to raise your credit score. If you have other forms of debt, pay them off before you pay off your student loan. Student loans are low-interest. Clear more expensive debt first, and make sure you make at least the minimum payment on everything. Check your credit report regularly to make sure there are no errors that could be hurting your score. You can get your report free of charge from annualcreditreport.com. If you spot something that is wrong or doesn't make sense, challenge it by filing a claim on the credit bureau's website. Fixing a mistake can raise your score in as little as 60 days.

Is a Vantage Score a FICO Score?

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Consumers have a new credit score to deal with that could be more consistent and accurate than the FICO model most people know: the VantageScore. As of 2011, the VantageScore is but a blip on the radar of most lenders and consumers, but could become as important as the FICO model. What might be confusing is that FICO and VantageScore use very similar algorithms and rating scales.

The VantageScore is not a FICO score, but it acts and looks similar to one with slight differences. The FICO model uses five main factors, while the VantageScore employs six. Some of the most important factors are the same in both models, such as payment history and amount of debt owed. The VantageScore ranges from 500 to 990, whereas the FICO model ranges from 300 to 850.

Despite giving comparable results, the VantageScore lags far behind the FICO model as far as usage. As of 2010, only about 6 percent of lenders used the VantageScore model, according to The Money Coach. The potential benefits of the VantageScore could lead to wider adoption in the future. FICO scores tend to vary by several dozen points between the bureaus because they each use a slightly different version of the FICO score---only the Fair Isaac Corporation sells true FICO scores. Since the three major reporting bureaus would use the same score, the VantageScore theoretically should reduce score variance.

The FICO model is so pervasive in the consumer credit industry that the terms "FICO score" and "credit score" are often used interchangeably. The new scoring range could make consumers believe they have worse credit than they really do. A 720, for instance, is an excellent score in the FICO model, but below average in the VantageScore system. Also, borrowers might not know which system a lender uses, leaving them unsure which score to buy if they want to check their credit.

While the VantageScore is rarely used, some of the biggest credit card issuers use it, so it might be worth it to pay attention to this model. In the VantageScore model, your credit used to credit available counts for 23 percent of your score---more than in the FICO system---so try to eliminate credit card debt or get your lender to raise your limit. In the FICO model, the amount of credit available does not matter, but it counts for 7 percent in the VantageScore system.

Ways to Find My Credit Score

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Your credit score influences many facets of your life. The interest rate on your home, the fees associated with your credit card and deposits paid to utility or cell phone companies are all based on your credit rating. You can obtain a copy of your credit score in many ways.

The three major credit bureaus allow you to view your credit score for a small fee. The features that come with viewing your score vary based on the type of product your purchase. For example, Experian offers the option of purchasing your credit score along with monitoring services that help you manage your score each month. When your score increases or decreases, you receive an alert by email detailing the reason your score changed. Monthly subscription fees apply to these services. Read the fine print before ordering your score to ensure you are making a one-time payment to view your score unless you are interested in additional products or services.

When purchasing a car or home, your credit score is pulled multiple times by lenders before your loan is approved. Many lenders, loan officers or mortgage brokers allow you to view your credit score when you are shopping for a loan. The score you view should reflect the same scores you would receive from the three major credit bureaus.

FICO scores are the most common type of credit score, but there are lenders that use Beacon or Emperia to gauge your credit worthiness. Beacon is the credit score created by Equifax and Emperia is by TransUnion while FICO is the industry standard, produced by Fair Isaac Corporation.

There are a range of free online credit score monitoring websites available to help you maintain access to your score. However, make sure you know where the information is coming from by reading the terms of the site. Ensure the information you receive is up to date and reflects your FICO score. If you are skeptical of free credit score resources, run a comparison by retrieving your score from a major credit bureau, then comparing it to the score obtained on the free site.

Your credit score is determined by information in your credit report. Though credit scores are not free, your credit report is, once a year. Get it from the Annual Credit Report website. You can also request a free report if you are denied credit, legal action is brought against you based on information in your report, you are on public assistance or you are unemployed. It is impossible to make changes to your score without knowing what's in your credit report.

How to Add Remarks to Credit Report

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In 2003, the Fair and Accurate Transactions Act (FACTA) amended the Fair Credit Reporting Act of 1970. The changes brought forth by FACTA primarily benefit consumers. Not only did consumers become entitled to a free copy of their credit reports every year, but also, a new provision was created. This provision allows consumers to add remarks--typically called a consumer statement--to their credit reports. You can use this opportunity to say almost anything; however, its primary purpose is to enable you to explain negative accounts or incidents of fraud.

Instructions

Obtain a copy of your credit report from all three bureaus; if your statement or remark is about a particular account, make sure you provide the statement to each bureau the account is reported to.

Type a short letter to each credit bureau. Include a section specifying the remarks or comments you want to add. Limit your remarks or comments to 100 words or less; this is the maximum each bureau will accept.

Obtain the address for each credit bureau. Visit each bureau's website to find the mailing address.

Wait a maximum of 30 days for a response. The bureaus should send you a confirmation once the remark or statement has been added to your credit report. If you have not heard back within 30 days, contact the bureau by telephone.

Can a Debt Consolidation Loan Improve My Credit Score?

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When your debt is piling up and you expect your credit score to sink, a debt consolidation loan may be a solution for some people. This type of loan is designed to combine your debts into one debt, so you can make affordable monthly payments. Besides making your debt payments more manageable by having only one loan payment, the interest rate on the debt consolidation loan typically is lower than than the interest rates for the various debts that are consolidated. The long-term goals are to keep your accounts current, lower your monthly payments and prevent your credit score from falling. That's not always the result in the short term, however.

When you use a debt consolidation loan to pay off other credit accounts, a new creditor is listed on your credit report, which may have a slight temporary negative impact on your credit score. However, this will not increase the total amount of debt on your report, which is a more significant factor. According to Lending Tree, your credit score should improve in the long run if you keep up to date on your new payments in a consolidation loan.

Your debt consolidation loan can hurt your credit score if you use a company that also negotiates with your creditors to reduce the amount you owe on your outstanding credit accounts. While this saves you money, it will be listed on your credit history as a failure to pay off your full balance. If your account debts are not paid while the amount owed is being negotiated, this also hurts your credit score.

The Federal Trade Commission cautions that while you may gain control of your debt with a debt consolidation loan, your home is often used as collateral with such a loan. If you miss payments on the loan, you could be in danger of losing your home. These loans may have some tax advantages that allow you to write off interest, but you may have to pay points on the loan that could negate that benefit.

Many businesses offer to help you solve your debt problems by negotiating with creditors or providing a consolidation loan. You should research the company before reaching any agreement to make sure it is legitimate and trustworthy and has your interests in mind, because its fees may be high and you will be providing personal information. Contact your local consumer protection agency or call the Better Business Bureau in the state in which the business is located to obtain information on the company.

Factors Affecting Credit History

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Knowing the factors affecting your credit history can help you make wise credit decisions and achieve a higher credit score. Your credit history affects your ability to get loans. In some cases, poor credit history can hurt your ability to land a job. Explore ways to improve your history and achieve the best credit rating possible.

An individual's payment pattern is a top factor affecting credit history. In fact, this one factor makes up 35 percent of credit scoring, and frequently paying credit cards and other loans late or missing these payments can destroy your credit history. Future lenders reviewing credit reports will take note of a poor payment history and possibly deny loan and credit applications.

Credit history is also influenced by the amount of outstanding debt carried by consumers. Owing money to creditors doesn't harm credit in itself. However, carrying large balances on credit cards (more than 30 percent of the credit limit) and maxing out accounts can take points off personal scores. When applying for future lines of credit, owing a lot of consumer debt can reduce purchasing power and lower approval odds.

It's imperative to keep older credit card accounts opened to keep a long, active credit history. Some consumers close or cancel credit card accounts to help manage their debt and control excessive spending. While this method does alleviate the temptation to acquire debt, canceling accounts can also shave years off the length of credit history and reduce personal ratings. Maintaining a good credit history involves keeping a high credit rating, and keeping older accounts open helps achieve this goal.

Recently opened accounts and credit checks or inquires also affect credit history. Occasionally applying for a new line of credit or submitting a credit application doesn't harm your credit history. But if you frequently apply for credit, this results in excess inquiries on your credit file, and this decision can lower your score and negatively impact your credit history.

Having various types of credit accounts can influence your credit by 10 percent. For this reason, it's practical to include a mixture of accounts on your credit file. You might carry one or two credit cards, and then apply for an auto loan or installment loan.

Can I Have My Bankruptcy Removed From My Credit Report if It's Been Eight Years?

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Bankruptcy can lower your credit rating by 240 points or more -- the FICO scoring scale only has a range of 550 points -- and stays on your credit report longer than most other items, according to Les Christie of CNN. You may be able to remove a bankruptcy from your credit history after eight years depending on the type of bankruptcy you file. However, the credit reporting time limit has almost ended at this point.

Your bankruptcy may automatically fall off your report after seven years. A Chapter 7 case stays on your credit report for 10 years, while a Chapter 13 stays seven years after you finish your repayment plan. Because repayment plans usually take three to five years, a Chapter 13 case usually stays the full 10 years, according to John Ulzheimer of Smart Credit.

You can remove a bankruptcy from your credit report after eight years in a few other circumstances. For example, you can always remove a bankruptcy when it is an error and someone else declared bankruptcy. A courthouse must keep record of the bankruptcy to prove it to the credit bureaus, so losing a file means you can dispute the bankruptcy and likely win the claim on account of the court not be able to verify the bankruptcy case.

Bankruptcy may not be all that bad for your credit rating, and you may see an increase in your credit score with a bankruptcy on record. By the time you file bankruptcy, you almost certainly already have an awful credit rating. You probably wiped out most of your debt in bankruptcy and the bureaus report all accounts included in the case as "BK" rather than reporting the late payments on the account. Also, the bureaus only compare you to other people with bankruptcies, so your credit history may look better now that you get to exclude consumers with excellent credit management skills, according to Aleksandra Todorova of Smart Money.

After eight years, a bankruptcy probably does not affect your credit score much as long as you have paid all of your debts on time and continue to use credit. Bankruptcies do the bulk of their damage within the first two years after you file, and then recede in importance with each passing month. Thus, it may cause you less time and resources to just wait out the remaining two years to remove the bankruptcy.

Debt Reporting

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Debt reporting takes place when a creditor reports your accounts and payment history to the credit bureaus. Most creditors report monthly, but some report less frequently. The credit bureaus place the information from the creditor onto your credit report. The information your credit report contains does not appear forever. You have a legal right to dispute inaccurate or outdated information that appears in your credit file.

When you apply for a credit card, make a mortgage payment, or seek financing for a new car, these financial transactions all appear on your credit report. Your credit report is a profile of how well you manage your debt. Lenders review your credit history to determine your eligibility for loans or lines of credit. When you are approved for a debt, your lender will make regular reports of your payments (or lack thereof). These reports constitute your payment history and contribute largely to your credit score.

Although several categories of debt exist, a debt can only impact your credit score as a positive or negative account. Unfortunately, positive and negative accounts do not affect your credit score equally. One negative account deducts more points from your score than one positive account adds. Because of this fact, it is vital that you pay your debts on time and regularly monitor your credit report for fraudulent activity.

The Fair Credit Reporting Act (FCRA) maintains guidelines that each credit bureau must follow when reporting debt. One of these guidelines is the amount of time a debt can remain on your credit report. Positive closed accounts help your overall score and may remain for ten years. Negative closed accounts and collection accounts are restricted to a reporting period of seven years. Foreclosures also only report for seven years. Unpaid judgments report for seven years as well unless they are renewed. A judgment that is repeatedly renewed may appear on your credit report for up to 20 years. Bankruptcies are removed after seven to ten years, depending on the type of bankruptcy filed. Older debts impact your score less than more recent debts.

Review your credit reports regularly for mistakes. If you find a mistake, you can dispute it to have it corrected. Send a letter explaining the inaccuracy and a copy of your credit report to the credit bureau that is reporting the information. Also send any added documentation that you have to support your claim. The FCRA grants the credit bureau 30 days to conduct an investigation of the supposed inaccuracy. After 30 days, you will receive a letter explaining what actions were taken by the credit bureau to remedy the situation. If changes were made to your credit report following the investigation, you will also receive an updated copy.

If you successfully petition for an inaccuracy to be removed from your credit report and it reappears, the creditor must be able to provide written proof that the debt belongs to you. Credit bureaus have neither the time nor the manpower to verify that each debt being reported is legitimate and original. The bulk of the responsibility for ascertaining that your credit report is accurate falls upon you. In addition, no debt can be reinserted after its reporting period has expired. Even if the debt is sold to a new company, that company may not make a notation concerning the debt on your credit report after the original reporting period. Whether or not the debt is yours is irrelevant once the reporting period is over. You can dispute reinserted debts with the credit bureaus to have them removed.

How to Achieve Your Dreams by Building a History of Good Credit

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Good credit is almost as important as what's in your bank account when it comes to achieving what you want in the world. Large purchases, such as property or a house, and even smaller purchases, such as a car, are largely dependent upon your financial standing with regard to credit available. There are many tricks to building a strong foundation of good credit. Strangely enough, not carrying any debt can actually hurt your credit score. Whatever your dreams may be, using credit responsibly to build a history of good credit can lead you to fulfilling them.

Instructions

Apply for a low-interest credit card if you don't have a credit card already. Look for promotional offers such as 0 percent interest for the first six or 12 months. Accept the lowest credit line at first. The company will probably extend only a little credit to you if you are a new user.

Create a budget for your monthly expenses. Do not count your credit line as actual money. Base your budget on your income. Make small regular purchases on your credit card, such as groceries or some low-expense utilities.

Pay off your credit card on which you've put only expenses that were already built into your budget. Pay your credit card down once a month. Allow your account to carry debt for a small amount of time, but always pay it off. This is one of the fastest ways to build a solid credit foundation.

Create a calender on which you can manage and chart your credit card payments. This is especially useful if you have more than one credit card. Avoid missing a payment as this will quickly compromise the stability of your credit standing. Keep your credit used to credit available low, as this is a major factor considered when computing your credit score.

Pay all bills on time. Add all monthly bill payments to the financial calendar you created to manage your credit card. Set up automatic payments with your bank account or your credit card to help ensure that payment deadlines are met monthly. Develop a history of on-time payments to signal to creditors that you are reliable and responsible. This history of regular payments will impact your credit score and your financial stability positively.

How to Get a Copy of Someone's Credit Report

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To get a copy of someone's credit report, you must have a legitimate business reason and the person's permission. Legitimate business reasons include lending money, issuing insurance and conducting a credit check for a potential employee or tenant. According to MSN Money, more than one in three employers check the employee's credit report before hiring.

Instructions

Request the permission of the person whose credit report you want to access. You should get this permission in writing for future reference because it is illegal to access someone's credit report without permission.

Request the required identifying information from the person. This information includes their full name, including their maiden name, if applicable, last two places she has lived, date of birth and Social Security number.

Purchase a credit report from at least one of the three major credit bureaus: Equifax, Experian and TransUnion. When you order the report, specify if you are ordering it as part of a background check because the report you receive will not have the person's date of birth or credit score.

Tell the person if any of the information in the credit report adversely affected your decision on their application. For example, if you decided not to rent your apartment to a person who had several delinquencies on her credit report, you would have to specify this information.

Does Opting Out of Prescreened Credit Cards Improve My FICO Score?

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Credit reporting agencies build your profile using a variety of quantitative and qualitative data. The agencies use a credit scoring model developed by Fair Isaac Corp., FICO, and provide these scores to help lenders ascertain the risk of default should they loan you money. FICO scores include weighted analysis of your payment history, the amounts you owe, length of credit history and types of credit used. According to the Federal Trade Commission, removing your name from prescreened lists, or "opting out," has no effect on your credit scores.

The prescreening practice is authorized under the Fair Credit Reporting Act (FCRA). A prescreened credit offer indicates that the finance company has conducted research about you and deems you ideal for the offer. The finance company does not view individual credit reports to make these offers, but rather obtains a list of candidates for prescreened offers based on information from credit reporting agencies.

You have several options for opting out of prescreened offers. You can opt out for five years, or permanently, by calling 888-567-8688 or visiting OptOutPrescreen.com. These are the only opt-out choices jointly authorized by the major agencies: Equifax, Experian, Innovis and TransUnion. If you choose the permanent option, you will receive a "Permanent Opt-Out Selection" form, which you must mail to confirm your request in writing. You can also write to each agency to have your name permanently removed from prescreened lists. Although the service typically processes your request within five days, it may take up to 60 days for you to stop receiving offers.

If you are not shopping for credit or insurance, prescreened offers can be annoying and can clutter your mailbox and email. These offers also can expose you to identity theft and invade your privacy, and if you accept the offers, you may be tempted to add to your debts. Conversely, if you are shopping for credit anyway, prescreened offers can help you select available products for which you are likely to receive approval. Insurers and lenders make these "firm" offers to you only if you meet certain criteria. They tailor their offers to your credit profile.

The time may come when you want to begin shopping for credit again and wish to place your name back on the prescreened lists. If you previously opted out of prescreened offers, you can opt in again -- even if you opted out "permanently." Call the opt-out number, visit OptOutPrescreen.com or contact the credit reporting agencies. If you never opted out in the first place, you do not need to complete an opt-in request.

How to Send Letters to Credit Agencies That Will Be Placed in Your File

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Lenders use your credit report to help them determine whether to give you a loan and at what interest rate. When you fill out an application to rent an apartment, apply for a job, want to take out insurance coverage or try to get credit, utilities or a cell phone, anyone with a legitimate business need can pull up your credit report. You may be shocked to learn, however, that 70 percent of credit reports contain errors, according to Bankrate.com. These errors could prevent you from getting credit or loans. You can correct this by sending a proper letter to the credit reporting agencies.

Instructions

Find out what is in your credit report. You can order one free annual report from all three credit reporting agencies: Trans Union, Experian and Equifax. Do this by going to www.annualcreditreport.com or by calling 1-877-322-8228. Ask for one from a different agency every four months to avoid any fees.

Locate any mistakes. Common mistakes you could find on your reports include purchases that you did not make or wrong purchase prices. Errors could also include a charge for a product you did not get, math errors, items where you question the data but need more information to evaluate it and payments listed as late that you made on time. If you find a mistake, report it to Equifax, Trans Union and Experian in writing.

Address your letter and put "Re: Credit report error" right under the address. Start by saying that you discovered a mistake on your credit report, and state your full name and Social Security number.

Enclose a copy of the credit report with the mistake highlighted. Briefly explain what the mistake is, and ask that they please investigate the matter with the creditor who made the mistake.

Include the best phone number where they can reach you. Sign the letter, and under your signature, type your name and address.

Make a copy to keep, and send the original by certified mail, with a return receipt requested.

You may ask the credit reporting agencies to send notices of any corrections to anyone who pulled up your report within the past six months. They can send your corrected copy to any firm where you applied for a job within the past two years.

Let the creditor in question know in writing that you disputed the claim with the reporting agencies. Include copies of documentation that proves your point.

Will a Cell Phone Plan Affect My Credit Score?

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Your cell phone plan does not generally affect your credit score because it is not a loan or revolving account like a credit card. You enter into a contract and make monthly payments for a service, just as you would for utilities like gas and electric. This information does not show up on your credit reports as long as you pay on time, but you score could be affected if your account goes delinquent.

Items only affect your credit score if they show up in your credit reports, since your score is based on your report data. Cell phone plans are considered as "alternative credit data," according to Bankrate columnist Steve Bucci, because they only get reported to the Experian, Equifax and TransUnion credit bureaus if your account goes past due. Cell phone providers turn delinquent bills over to collection agencies, which add the accounts to the customers' credit reports if they still refuse to pay.

A past-due cell phone bill that goes to a collection agency is a serious blemish on your credit score. The most important category in credit score formulas in your payment history, according to the Fair Isaac scoring company, because more than a third of your score is based on promptness of bill payment. Collection agency accounts are part of this category and pull down your score because they represent a seriously past-due obligation. The cell phone bill's exact effect depends on whether it is your only negative credit report item or whether you have many delinquent bills. But can cause difficulties in getting new credit. The past-due account remains in your records for seven years.

You can remove your delinquent cell phone account's credit score effects by getting the collection agency to erase it from your Experian, Equifax and TransUnion records. A debt collector's main goal is to get payment from you, not to ruin your credit score, so you have some leverage if you can pay the bill in full or make a lump sum settlement agreement. Offer the payment in exchange for removal of the collection account from your three credit reports, and ask for written confirmation of the deal if the debt collector agrees.

Your cell phone plan can affect your credit score, and your score also affects your ability to enter into a new cell phone contract. Cell phone service providers pull your credit reports to check your payment history on other accounts. Late payments, charge-offs and other negatives might keep you from getting a cell phone plan or force you to pay higher rates or put up a deposit, according to Erin Burt of "Kiplinger's."

What Will Your FICO Score Be After Filing Bankruptcy?

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Bankruptcy filings hit an all-time high -- nearly 1.6 million -- for the 12-month period ending September 2010, according to BankruptcyAction.com. Bankruptcy harms FICO scores more than anything else, because filing bankruptcy is the last resort when you cannot handle your debt. Nobody can say what your credit score will be after filing bankruptcy, but with work you can improve your score after bankruptcy.

The rest of your credit history will soften the harmful effects of a bankruptcy, but expect your FICO score to drop 100 points and possibly more if you had good credit, according to Consumer Credit Counseling Services. Bankruptcies also stay on your credit history longer than any other negative item -- 10 years.

In some instances, mostly for people who already have a severely damaged credit report, your score can be so low that bankruptcy can actually improve it, according to Smart Money. Bankruptcies replace your debt reporting and late payment history with "Included in Chapter 7 Bankruptcy" or "Included in Chapter 13 Wage Earner Plan." If you have a lot of accounts, a single bankruptcy will probably be better for your credit rating.

Even if you have a very poor score, you probably won't see much of an increase in your score, however. The benefits come in the long term because the FICO score compares you to other people with a bankruptcy, rather than to good borrowers.

Your credit score should be of secondary importance when deciding whether to file bankruptcy, suggests Smart Money. If you cannot meet your debt obligations, bankruptcy can give you a reset instead of constant payment issues. In some states you may have to sell off your assets before meeting bankruptcy filing requirements. Ideally, however, avoid bankruptcy at all costs.

You can bring your FICO score back into the excellent range within two years of filing bankruptcy. Start by making sure the credit report declares all accounts in the bankruptcy as included in your filing. You will likely have to rebuild your credit through a secured credit card -- a card that requires backing by an asset.

Does Your Credit Score Matter?

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Your credit score, or more accurately stated, your credit scores, have a tremendous impact on your finances and your life. These credit scores, as reported by the three major credit bureaus, TransUnion, Equifax and Experian, are viewed by companies when you apply for credit, open accounts and even apply for a job. Poor credit can limit the amount of money you can borrow and determine the interest rate and terms of your loans.

When you apply for a credit card, an auto loan or a home mortgage, one of the first orders of business is for your credit report to be run. Many companies use credit scores as a basic guideline for qualifying before they look at other information on your report. For an auto loan or smaller loan, only one of the three major reporting bureau scores may be used. For a mortgage, all three are used.

Credit scores, often called FICO scores, are derived from a formula created by Fair Isaac Corporation. Approximately 35 percent of your score is based on your payment history, 30 percent on how much you owe, 15 percent on the length of your credit history, 10 percent on new credit and the final 10 percent on other factors. On-time payments maintain higher scores, while factors such as late payments, foreclosure, bankruptcy and other negative issues reduce your credit score.

When considering how much your credit score matters, consider the impact your score has on the interest rate you pay for a mortgage. A borrower with good income from steady employment and a FICO score of 800, considered an excellent score, may qualify for a mortgage at the best available interest rate at the time. With a weaker score of 625, that borrower's rate may be 2.5 percent per year higher, costing a couple of hundred dollars more per month or thousands of dollars more per year.

Utility companies, cell phone carriers, auto insurance companies, potential landlords and potential employers all may be taking a look at your credit report before they move forward with you. Life can become an expensive proposition when you are faced with paying a heavy deposit just to open an account with the electric utility or water company. Not being accepted as a tenant because the landlord finds your credit unworthy can be frustrating, and you are likely to pay a higher rate for your auto insurance if your credit score is low because they consider it a measure of how risky you are for them to insure.

How to Compare FICO Scores

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Your FICO score is your link to seeing what creditors see. This is the core that lenders pull to approve or deny you for credit. Knowing your FICO score can provide with the advantage of being able to improve it. You can find errors and discrepancies in your reports and have them corrected, as well as watch as your score rises with each new account gained, each balance paid off and with each bad account that is erased due to age. Getting and comparing your FICO scores will help you improve your financial situations and obtain credit in the future.

Instructions

Go to the MyFICO website and purchase your Equifax and TransUnion FICO reports. Besides making a one-time purchase, you can also opt to subscribe to a monitoring service for each one of these reports that will allow you to receive one or more updates scores later. Individual reports are available for about $15 each, monitoring services for about $5 per month.

Check each section of your credit report to see how each of your scores may be affected. It is not usual for your scores to be exactly the same, and not uncommon for scores to be separated by 100 points or more. You may have an account that is not reporting to both credit firms or extra inquiries on one report compared to another.

Make note of any differences and try to get those changes applied to your other report if they are helpful. For example, if the loan you paid off six months ago shows a $0 balance on one report but a $900 balance on another report, contact your loan company or dispute the balance in order to get both reports to show the $0 balance. However, if one of your reports has a valid collection account reported on it, you will not want to add that to your other report.

Do Credit Checks Lower Your FICO Score?

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The three major credit bureaus, Equifax, TransUnion and Experian, use a complicated system to determine your overall credit report. The credit bureaus consider several factors, including how many times you apply for new credit. These applications, known as inquiries, may come from a variety of sources, not all of which count against you.

Anytime you apply for a new credit card, personal loan, auto loan or mortgage, the lender pulls your credit report, which results in an inquiry. The credit bureaus keep a record of all of your credit inquires on your credit report. Potential employers and landlords may also check your credit report. Several credit inquiries may cause your credit score to drop.

Certain credit inquiries, known as "hard" inquiries, show up on your credit report. Any time you apply for a new credit card, mortgage or loan, you will receive a credit inquiry mark on your report. You may also get a credit inquiry when you request a credit limit increase on your credit card. Typically, the credit card company will pull your credit report again to determine your eligibility for a credit limit increase.

Not all inquiries result in a new listing on your credit report. Checking your own credit does not affect your credit score. In some instances, applying with multiple financial institutions within a short time will only count as one inquiry on your credit report. For example, if you apply with several mortgage companies, auto loan companies, or student loan companies within a one-month period, the credit bureau views this as rate shopping and does not count every inquiry against you.

Credit inquiries have a small impact on your FICO score in comparison to other factors, such as payment history and overall debt. New credit applications make up only 10 percent of your credit score, according to Bankrate. Having several applications for credit cards and loan products in a short time, however, may make you seem a high risk to some creditors.

If credit inquiries that you did not authorize appear on your credit report, you have the right to dispute the information with the credit bureaus. The bureaus will research your claim and correct or remove the inquiry, typically within 30 days. You may find a list of credit inquiries on your credit report.

How to Dispute Credit Report Letters

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You usually don't know which credit bureau a lender will use to order your credit report when you apply for a loan or account. The Fair Credit Reporting Act (FCRA) requires the lender to reveal this information if your application is denied because of information contained in the report. You will receive a letter stating the reason you were turned down and contact information for the credit bureau. You may use this letter to make a dispute if you believe you were denied credit based on erroneous data.

Instructions

Follow the specific instructions in the letter to order a credit report from the credit bureau. It must give you a copy at no cost. Even if you've already gotten your FCRA-mandated free copy within the past 12 months through annualcreditreport.com., you are legally entitled to review the same information the lender received and used to make its decision.

Read through the credit report, looking for information tied into the reason your application was denied. For example, look at your payment history if the letter says you've had too many late payments on your existing accounts, or check your employment start date if it says your time on the job is too short. Scrutinize the information carefully for any mistakes.

Write your own letter to the credit bureau disputing every mistake you pinpointed. Give specific reasons and enclose copies of statements, payment receipts, pay stubs, bank records and any other proof to invalidate the errors. Free sample letters can be found at sites like FindLaw. The Federal Trade Commission recommends sending your letter certified so you have proof of the mailing date. The FCRA gives the credit bureau 30 days to check out your claims and send a response detailing any corrections.

Contact the creditor with whom you originally filled out the denied application and ask it to reconsider its decision once the credit bureau has removed or corrected the errors. The FCRA requires the bureau to send a corrected copy to the creditor that it can use to reconsider your request. However, it may not do so unless you touch base and specifically ask to have your application reviewed again.

How Does Guaranteeing a Loan Affect Your Credit Score?

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A loan guarantor is someone who promises to pay a loan if the primary borrower does not make the payments as promised. People with lower credit scores or no credit might ask a relative or friend to guarantee a loan so they will be approved for the loan or so they can get a lower interest rate. When you sign on as a loan guarantor, your name is put on the loan and, depending on how the terms are written, your credit score may be affected the same way it would be if you were the primary loan holder.

If the person you guaranteed the loan for pays as agreed, your credit score may benefit because each month the loan is paid as agreed may be recorded on your credit history as well as on the other person's credit history. Because payment history makes up 35 percent of your credit score, this can be beneficial. And if you haven't previously had an installment loan, your score might increase because 10 percent of your credit score is based on how many types of credit you have.

If the person does not make their payments on time, your credit report might indicate the late payments and your score would decrease accordingly. Your score may also be lowered by the additional debt that you appear to be taking on, because should the person default on the loan, you would be liable for paying it back, which could hinder your ability to repay any debts you have.

In addition to the potential to lower your credit score, when you are listed as a guarantor of a loan, most lenders consider that money you are liable for and will decrease the amount they would otherwise be willing to lend you.

How Often Should You View Your Credit Report?

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Even though checking your own credit report has no effect on your credit rating, viewing your credit history is one of the best things you can do to improve your creditworthiness. Consumers who pulled their credit report scored 9 percent higher on a financial literacy quiz, according to a 2011 Consumer Federation of America study. Ideally, you should view your report as often as possible.

Because a personal credit check does not affect your credit rating, you should view your credit report every day. For practical reasons and cost, you do not need to view your report daily. Instead, you should view your credit report each month and before someone pulls your report, such as when you plan to apply for credit, an apartment or look for a job.

At a bare minimum, you should check your credit report once a year. You receive one report each year from the three major credit reporting bureaus for free -- this does not include a numerical credit rating. The only way to get your reports for free are from Annual Credit Report. All other sites may try to charge you for a report or ask for your credit card information.

If you apply for credit and a lender rejects your application for credit reasons, it must inform you of this adverse action and offer a free credit report from the agency from which it pulled your report. You should review your credit history after any adverse action by a lender, because it likely means you have negative items in your credit history or an insufficient credit history.

Credit monitoring services let you view your credit history as many times as you want for a flat monthly fee. This can save you money in the long run if you like to check your credit history multiple times a month. If you do not want to spend on credit reports, you can spread your reports through the year by pulling one report from an agency every four months.

What Happens to My Credit Score If I Don't Pay a Credit Card?

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Damaging your credit score is about as bad as burning up all the cash in your wallet, according to CNN Money. If your credit score tanks, you are going to pay high interest rates if you can get a loan at all. Missing a credit card payment can do a lot of damage to your credit score.

Your credit score ranges from 300, which is the worst, to 850, which is the best. Many factors determine your credit score. Paying your bills on time, how much you owe on your bills and the length of time you have had credit are all factors.

The fastest and easiest way to lower you credit score is to skip payments on your bills or to become delinquent altogether. Your payment history comprises 35 percent of your credit score. If you fail to make the minimum payment on your credit card within 30 days of the due date, your credit score could plummet, says Craig Watts, spokesperson for Fair Isaac, on CNN Money. Fair Isaac, also called FICO, is the scoring model the credit reporting agencies use.

Your credit score falls faster than it rises. For example, if you had a high credit score, but missed a credit card payment, your score could drop 100 points. You can make up the 100 points, but it takes much longer to make them up than it took them to fall.

Some Steps to Raising Your Credit Score in 30 Days

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You should not plan to have great credit within a month if you have a poor credit history, but you might be able to see a significant change. Some factors in the FICO scoring formula, such as your length of credit history and payment history, take years to build, but you can deal with some factors immediately. Raising a score quickly is easiest when you have errors or outstanding debt as your main problem.

Removing erroneous mistakes on your credit report often is the easiest way to raise your credit score, because negative items far outweigh most positive data. The credit bureaus must provide one free credit report each year, and they all have online forms for the dispute process. Gather as much evidence as possible that supports your dispute before initiating it. Even errors that seem obvious may take months to prove, because the dispute process is mostly automated and the credit agencies try to avoid investigations by an employee.

Get as much debt as possible off of your credit report. Revolving account balances, such as those on credit cards, are the most offensive in credit scoring. Maxing out credit cards is a huge drag. Your score could see a 10 to 45 point boost by bringing the percent of your credit limit you use to less than 30 percent and hopefully 0. You could ask the lender to raise the limit on your card if you cannot pay down a significant portion of the balance.

Adding a new account to your credit profile could boost your score if you lack a revolving or installment account, because a mix of credit counts for 10 percent. This could backfire in some cases. The application for credit dings your score zero to five points and lowers the average age of your accounts. If the new account is an installment, the added debt burden probably knocks down your score for a few months.

Ironically, paying a collection account does little to help your score, except it takes outstanding debt off of your credit profile. If you decide to settle an account, at the very least get the creditor to state in writing that the account will be marked "paid as agreed," because a settled account does further damage. You can ask for the debt collector to delete the account, but do not expect this at all, especially when you make a partial payment.

How Long Will It Take to Repair Credit After Late Mortgage Payments?

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A single late payment on your mortgage or other credit account can lower your credit score by 50 points or more depending on your creditworthiness. It seems unfortunate that a one-time missed payment, perhaps even by accident, can have such long-lasting and detrimental impacts on your credit, but credit scores can also be rebuilt and improved over time.

Credit scores can change daily based on your outstanding balances, credit history and other factors. After a late payment, the best thing to do is to get back on track and resume making payments on time to lessen the credit score blow from your recent late payments. FICO bases a 35 percent of your credit score on your payment history. While this can work against you, it can also work in your favor as you continue to make on-time payments. Every on-time payment you make will help to repair your credit history. Not only will you have more on-time payments reflected on your report, but the older missed payment also will carry less weight than the more recent on-time payments.

Since it is often impossible to escape the lower credit score from even a single missed payment, if you want to improve your score, look at the other items FICO uses to calculate your score. Thirty percent of your score is based on the level of your outstanding balances in relation to your available credit. This is often referred to as debt utilization ratio, and the lower it is, the better it is for your credit score. Pay down balances or perhaps even open new credit accounts where appropriate. You may not be able to fully offset the negative impacts from your late payments, but you can focus on improving your credit in other places.

Depending on the circumstances related to your late payment, it may be worth speaking with your credit to try to get the late payment reference removed. Your creditor will not be able to falsify or arbitrarily remove the late payment comment, but if you can prove a payment was made on time, your creditor would likely remove the negative reporting item. This approach has a better chance of success if your late payment was an anomaly in an otherwise pristine payment history or the result of an error committed by your creditor.

The major credit reporting bureaus -- Equifax, Transunion and Experian -- have processes to dispute negative items on your credit report. If your creditor is not able to assist you, it may be worth the effort to dispute the late payment items. The dispute process is free and can take 30 or more days to complete, but it is possible the investigation conducted by the bureaus could work in your favor. If you can get even one credit report to remove a late payment or other negative item, you will see significant improvements in your credit score.

Delinquent items and late payment comments remain on your credit report for up to seven years. After that, the items will be removed from your report and will no longer be factored into your credit score. If the above efforts fail to have the desired improvement on your credit score, take solace in knowing the late payment items will eventually be removed, provided you remain in good standing on your other credit accounts.

Three Quick Tips on Fixing Bad Credit

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Although the best way to fix bad credit is to build a consistent payment history over a long period, you can also take steps to quickly improve your score. This can be helpful if you are getting ready to apply for a new loan or mortgage and want to increase your chances of being approved with a low interest rate.

If your bad credit is a result of mistakes on your credit report, dispute these mistakes to fix your credit. Obtain a copy of your credit report from each of the three credit bureaus through the Annual Credit Report website. Follow the procedures listed on the credit report to dispute errors by phone, mail or online. The credit bureau must investigate your dispute within 30 days and correct your credit report if it was an error.

If any of your accounts list a status on your credit report other than "paid as agreed," this is dragging down your credit score. Make payments to creditors or collection agencies to get up-to-date on all your obligations. Although the missed payments will still appear on your credit report, they will not affect your credit score as much as they did when you were past due when the score was generated.

Because 30 percent of your credit score looks at the amounts you owe, one way to improve your score quickly is to reduce these amounts. In particular, reduce your utilization ratio, which compares the amount you owe on credit cards to the card limits. Do this either by budgeting to make extra payments or by calling the credit card company and asking for a credit line increase. In addition, stop using your credit cards so you do not increase their balances.

You cannot legally remove accurate information from your credit report, so beware of any company that claims to be able to do so. The only exception is if the information is over seven years old, or over 10 years old for a bankruptcy. Although some credit repair companies legitimately help you improve your credit report, many of them are scams. The Federal Trade Commission recommends that you stay away from credit repair companies that make you pay upfront, recommend that you don't contact credit bureaus directly and don't tell you about what you can do for free.

How to Clear a Bad Debt Collection on Credit

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A bad debt reflected on your credit report can be removed, if it's erroneous. As noted by the Federal Reserve Board (FRB), just like your postal mail contains numerous mistakes in the spelling of your name or address, your credit report can contain likely error as well. Bad debts can show up on your credit reports due to many reasons, including out-of-date information, identity fraud, and simple error. If you want to clear a bad debt collection from your credit record, it must be in error and not a legitimate debt on which you defaulted.

Instructions

Acquire a copy of your credit report from the three major credit bureaus: Equifax, TransUnion, and Experian. The FRB notes that you're entitled to one free credit report every 12 years from each of these agencies. Your files can be requested over the Internet (www.annualcreditreport.com) or by telephoning or mailing a request to these companies.

Contact the credit bureau as soon as possible after finding a bad debt that's listed on your report in error. Credit bureaus will permit you to file a dispute online, but it's best to write the bureau directly to make sure that all of your communication is documented. Your letter should contain the following information: your name, address, and social security number; the item in your credit report that you are disputing; and the reason you are disputing the alleged bad debt. If you have supporting documents, include copies of those as well. Finally, ask the credit bureau to either correct or delete the item in error, as applicable.

Send your correspondence to the credit bureau(s) by certified mail, return receipt requested. Although this isn't absolutely necessary, using certified mail gives you verifiable proof that you attempted to rectify the situation.

Give the credit bureau(s) between 30 and 45 days to investigate the alleged bad debt. If the item in dispute is removed, the credit bureau must, at your request, send a copy of your corrected report to anyone you specify who has requested it in the last six months, or, in the case of an employer, the past two years.

If the credit bureau doesn't agree to clear the bad debt from your credit report, draft a statement of fewer than 100 words regarding the dispute and mail it to the credit bureau. It will be included in your file and in all future credit reports.

Can Bad Debt Be Removed From a Credit Report After Paying?

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The national credit reporting bureaus warn consumers that it takes years for the federal credit reporting time limit to expire on negative items in a credit history, but consumers can delete accounts after paying them. However, a pay for deletion is not possible in all scenarios. When a deletion is not an option, the best choice may be to reduce the importance of a bad debt.

Normally, the national credit reporting bureaus report written-down debt and collection accounts for seven years. Some debts, such as tax liens and levies, remain reportable indefinitely until the consumer pays the delinquent debt. However, paying bad debt can still help a credit score. Balances on collection accounts and civil judgments count against outstanding debt. The FICO scoring model, the most commonly used algorithm for credit scoring, gives a 30-percent weight to outstanding debt.

The Internal Revenue Service revised its policy on tax liens and levies in 2011. Now, when a taxpayer satisfies his debt to the IRS, the agency withdraws the tax lien or levy from the public record, which makes the lien or levy non-reportable to the credit reporting bureaus. The IRS only agrees to withdraw a lien when the taxpayer pays the debt in full. The national credit bureaus can report settled tax liens and levies for up to seven years. However, the IRS will remove a lien or levy when the taxpayer agrees to an installment plan that will eventually satisfy the debt.

The credit bureaus depend on creditors like banks and auto dealers for consumer data. Thus, a consumer can negotiate with a lender on how it will report the account to the credit bureaus. For example, a consumer may offer to repay a delinquent debt in full if the lender claims the account was an error. This tactic can work on any account, but lenders do not have to agree to delete record of the debt. Asking for a pay for deletion too early in negotiations can backfire too. For instance, the lender may surmise that the consumer has the ability to pay a debt in a pay for deletion scenario. The lender might file a lawsuit to obtain a garnishment of the debtor's bank account or wages without having to agree to delete the account history with the bureaus.

Even though you may not be able to remove a bad debt from your credit history, paying delinquent debt can still help your applications for credit. For instance, a creditor that manually reviews credit reports and sees a paid collection account considers that as adding to your trustworthiness as a borrower, because you voluntarily repaid the debt. You should also try to prevent bad debts in the first place. If you ever miss payments on an account, contact the lender about modifying the loan, such as setting up an installment agreement.

Experian Credit Score Explanation

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Experian, along with Equifax and Transunion, maintains and reports consumer credit reports and credit scores. Credit scores may also be referred to as FICO scores. Credit scores affect your ability to get a home loan, car loan and consumer credit cards. Utility companies and cell phone companies also sometimes review credit scores prior to providing service.

Creditors and loan companies use your credit score to determine if they will grant you credit or a loan. Experian assigns a letter grade to go along with credit scores. Scores above 901 receive an A, scores from 801 to 900 receive a B, scores from 701 to 800 receive a C, scores from 601 to 700 receive a D and scores 600 and below receive an F. Typically, consumer need to have scores in the C range or higher to get home loans.

The Experian credit score considers several factors when formulating the credit score. These factors include the total amount of debt owed, the type of accounts, the age of account, the number of late payments and the number of public records related to credit such as lawsuits for money owed to creditors and collection agencies. According to Experian, late payments tend to have the biggest impact on your credit score.

Credit scores do not consider personal financial factors such as yearly income, job history and job title. However, creditors and loan companies may take these factors into consider when determining credit worthiness. Also, many consumers may think that closing paid-off accounts would be a wise decision, but it's not. Leaving these accounts open with a zero balance improves the credit utilization ratio, which raises your credit score.

According to Experian, credit scores take into consideration the most recent information on your credit report. Thus, making changes now can positively improve your credit scores. Experian recommends that consumers pay their bill in a timely manner and keep credit card balances as low as possible.

To identify problems on your credit report, check your report often. Experian offers one annual free credit report per year; however, they require a fee for you to obtain your credit score.

How to Get an Original Creditor to Stop Reporting a Charged Off Account

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When an account is charged off, it is the equivalent of the creditor giving up on your ability to pay it back. The creditor sells the account to an outside collection agency at a reduced rate, figuring that something is better than nothing. The damage is two-fold -- you burn your bridge with the creditor in question, and you incur serious damage to your credit score. The impact of a charge-off can be felt for up to seven years, during which time all of your other creditors will be aware that you were unable to meet your obligations.

Instructions

Pay your debt. You stand no chance of getting your charge-off removed if the debt is still outstanding. Contact the collection agency to get the exact amount you owe, as you may owe additional collection fees. Obtain written proof that your debt is paid in full.

Contact the original creditor and notify it that the debt has been paid off. Ask the creditor if it would be willing to remove the charge-off from your credit file. You'll likely have to write a formal appeal letter; get the name and address of the person to contact.

Write a letter to the proper person within the creditor's hierarchy asking to change the status of your account from a paid charge-off to an account that is paid in full at the agreed-upon terms. Include reasons why you were unable to pay the first time around and why you feel the determination should be reversed. Await the creditor's response via mail.

Check your credit report to make sure the creditor's response is consistent with what is listed on the report. Even if your request to get the charge-off removed was denied, a paid charge-off is looked upon much more favorably than an unpaid one. If the necessary change isn't shown on your credit report, follow up with the creditor and ask why the change wasn't made.

Should I Dispute the Closed Accounts on My Credit Report?

7:25 AM No comments

Closed accounts on your credit report do not usually cause trouble unless they are reporting bad information. If this is the case, you need to get your side of the dispute out there or you will suffer the consequences of letting this go with reduced access to credit and higher borrowing costs.

The Credit Reporting industry in the United States is centered on three large companies: Equifax, Experian and Trans Union.

Each of these most probably have some form of a credit report on virtually every person in the United States with some form of credit card, loan or even just a collection.

This means the information on your report can have far-reaching consequences if it is incorrect.

You can find each of these companies with a quick internet search to their various web sites.

Congress has passed a law that allows each person with a credit report to request it free once a year to make sure the information contained on it is accurate.

Using the websites for the credit reporting companies, contact them and request a report From Each.

You will not know which of your credit granters reports to which reporting agency so it is best to get a report from all of them.

Once you get the reports you can review them for accuracy. There are many ways that incorrect information can find its way onto your report.

A supplier can confuse you with someone else.

They can mix up their reporting data between you and another customer.

If this has happened you have to get this fixed.

If you find wrong information you have to contact the credit reporting company and show proof that it is wrong.

If you closed an account and got a letter confirming you had a zero balance at closing, then send this to the reporting company and get the bad information off.

Also contact the company reporting to the credit reporting company that it is showing inaccurate information and tell the company you want it fixed and correspondence showing the change to the reporting companies.

What Does a Defaulted Federal Student Loan Do to Your Credit Rating?

2:21 AM No comments

Student loans carry low interest rates and have favorable terms, yet even with these benefits many people default on their student loans every year. Unlike other loans such as auto and home, federal student loans are not discharged in a bankruptcy so getting out from under a student loan is difficult. If you find yourself defaulting on a federal student loan you may find that your credit rating will decrease significantly.

On a credit report, student loans appear as an installment loan. While you are in school and the loans are not repayable, the credit report will reflect the payments as being in a deferred status. Once the deferment period ends, you are responsible for making monthly payments on time. After the ninth missed payment, your credit report will reflect the loan as being defaulted. Like any defaulted loan, the credit score will drop a couple of hundred points according to the Financial Web's site. It is important to note that your score will drop with each missed payment leading up to the default.

If you find you have trouble making your student loan payments, contact the agency that holds your loans as soon as possible. There are options for federal student loans that can assist you. One of the options is deferment which temporarily suspends payments due with no interest charges. To qualify for deferment, loan holders must have mitigating circumstances such as loss of employment or economic hardship. Another option is forbearance which also allows you to suspend payments however interest continues to be charged during this time and the qualification criteria is not as stringent as a deferment. You cannot be in a default status in order to request a deferment, however, you may qualify for forbearance if you are currently defaulted on your loans.

The U.S. Department of Education offers a Direct Consolidation Loan Program that consolidates all federal Stafford, Plus and other federal loans into one loan. The benefit to the loan holder is that they now have only one monthly payment to worry about. If a loan holder is having economic difficulty, consolidating the loans may help because interest rates are locked in and the monthly loan amount may be reduced due to the extension of the length of the loan.

If you find yourself in a default situation, contact the collection company servicing the loan to negotiate a repayment agreement. By entering into a repayment agreement, the default status no longer appears on the credit report, which will help your overall score. It is important to keep current on the payments once you enter into a repayment contract. Keeping current means no late payments either. Making your payments on time will make your loan eligible for repurchase by a lender.

Sunday, December 31, 2006

Instructions

Thursday, December 28, 2006

Definition

Calculating a Credit Score

Finding Out Your Credit Score

Raising Your Credit Score

Time Frame

Deferment

Income Based Repayment

Loan Forgiveness

Consolidation Loans

Payment History

Number of Accounts

Age of Accounts

Types of Credit

New Credit

Tips

Wednesday, December 27, 2006

Nationally

By Location

Creditor Requirements

Lowest Interest Rates

Tuesday, December 26, 2006

Instructions

Monday, December 25, 2006

Credit History and Student Debt

Using Your Student Loans to Raise Your Credit Score

Paying Off Your Student Debt

Raising Your Credit Score

Identification

Importance

Possible Confusion

Tip

Credit Bureaus

Installment Loan Shopping

Free Online Resources

Free Report

Sunday, December 24, 2006

Instructions

Friday, December 22, 2006

How the Loan Is Viewed

When a Loan Hurts Your Score

Using a Home as Collateral

Avoid Scams

Thursday, December 21, 2006

Payments to Creditors

Debts and Balances

Length of Credit

New Accounts

Credit Types

Wednesday, December 20, 2006

Identification

Removing Bankruptcy

Considerations

Tip

The Facts

Types

Time Frame

Disputes

Violations

Tuesday, December 19, 2006

Instructions

Instructions

Prescreened Offers

Opting Out

Considerations

Opting In

Saturday, December 16, 2006

Instructions

Reporting

Effect

Remedy

Considerations

Effects

Misconception

Considerations

Tip

Friday, December 15, 2006

As a Basic Guideline