Who Reports to Credit Bureaus?

The credit bureaus are the companies that maintain and update your credit report. They receive regular reports of debts and your payment history on those debts from your creditors and use that information to update your credit file.

Revolving Debt

All creditors with which you carry revolving debt usually make regular reports to the credit bureaus. Revolving debts are lines of credit and credit cards.

Installment Debt

Creditors to which you owe installment debts such as mortgage loans, personal loans and vehicle loans all report to the credit bureaus.

Public Records

The courts will report many public records that exist about you to the credit bureaus for inclusion on your credit report. You can expect to see evictions, judgments and bankruptcies all appear on your credit file.

U.S. Government

The U.S. government reports all federal student loans and any unpaid taxes you owe to the credit bureaus.

Delinquencies

Companies such as utility companies and cell phone providers typically do not report positive accounts to the credit bureaus. Once your debt becomes delinquent, however, the debt will almost certainly be reported.

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Is it Possible to Get a Good Interest Rate With a Low Credit Score?

Lenders use your credit score to determine your level of risk. The lower your credit score, the higher your rate of interest. With a low credit score, you will not be able to get a good interest rate.

Significance

When you apply for a loan, whether it's a mortgage, auto loan or credit card, the lender will take a look at your credit report. That information will help determine the interest rate you receive. Your credit score will be a key factor used when deciding the rate you receive.

Effects

If you receive a high interest rate because of your credit score, you may be able to get a lower interest by refinancing later when your credit score has improved.

Warning

To improve your credit score, you need to make all of your payments on time and make sure you don't accumulate too much credit card debt. If you use more than 30 percent of all your available credit, your credit score will start to decline.

Credit Score Range

Your credit score can range from 300 to 850. If you have a score below 620, most lenders will not approve you for a mortgage loan.

Considerations

According to MYFICO.com someone with a FICO score (credit score) in the range of 740-850 will receive an interest rate of 7.770% and a monthly payment of $471 based on a home equity loan for $50,000. A FICO score of 620 to 639 will have a monthly payment of $603 and an interest rate of 12.095% for the same loan. These figures are based on national averages. FICO scores are credit scores, and they were developed by the Fair Isaac Corporation.

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How to Decode Equifax

According to the Federal Deposit Insurance Corporation (FDIC), Equifax is one of the three major providers of consumer and business credit reports in the United States. User-friendly online interfaces make ordering your credit report a snap. However, ordering your credit report is simpler than reading the report itself. Equifax uses a system to record and report your credit history, and understanding what each code means can be tricky. However, learning how to read your credit report will help you understand your current financial situation and what steps you need to take to improve it.

Instructions

1

Order your free annual credit report from Equifax or AnnualCreditReport.com, the central site set up as a service for consumers (see the Resources section).

2

Review your personal information on the report, once you receive it. This is the first section of your report and reflects the most basic information about you, such as your name, any names that may have been associated to you in the past, your current address and the past three addresses on file for you, your current and two previous employers as well as your current position. The presentation of this information is straightforward.

3

Review the Public Records section. This is the section of the report that reflects any judgments, liens or bankruptcies that have been recorded. The information is presented in chronological order and will reflect the date that the record was filed, the date it was resolved, the court in which it was heard and the outcome of the case. It's best for your credit rating if this section is blank, explains to Bankrate.com.

4

Review the Tradelines section. This is the section that most people relate to their credit report and, potentially, the most complex to decode. This section lists all of your current and past credit accounts. Each account will list such items as the names of your creditors, your current balance, your highest balance, when the account was opened and whether or not you are paying your account on time. Delinquent accounts are in categories according to the amount past due, such as 30, 60, 90 or 120 days. Other classifications include "charge-off," "repossession" or "transferred."

5

Review the Inquires section. This section will let you know who has requested a copy of your credit report. There are two types of credit inquires: those in conjunction with an offer or promotion that are initiated without your direct consent and those requested by a lender or other service provider as part of an application process that you initiated. According to Bankrate.com, most inquiries are ignored, unless there are many initiated by you over a long period of time.

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FICO Score Analysis

The FICO credit scoring system uses a proprietary mathematical algorithm to translate credit report information into a three-digit number. The score ranges from a low of 300 to a high of 850; the higher the number, the better the score. Your score may differ from one credit bureau to the next, because each bureau may have different credit information in its database.

Scoring Factors

Your FICO credit score relates directly to the information in your credit report. How well you pay your bills accounts for 35 percent of your score. How much debt you have accounts for another 30 percent. Fifteen percent of the score comes from the length of your credit history. The type of credit mix you have determines 10 percent, and the final 10 percent measures the amount of new credit for which you recently applied.

Creditworthiness

How you handle your credit accounts determines whether you will have a high or low score. According to MyFico, paying your bills on time increases your credit score. This single factor accounts for the bulk of your FICO score. Late payments, charge-offs, repossessions and other derogatory items will lower your score. For example, a 30-day late payment can reduce your score by as much as 45 points, while a bankruptcy will send it plummeting by as much as 240 points.

Accurate Reporting

Because your FICO score derives from the data in your credit report, it's imperative that the information in the report be as accurate as possible. Under the Fair Credit Reporting Act (FCRA), bureaus must remove erroneous data from credit reports. If your report contains errors, correcting those errors is one step toward improving your score, according to Bankrate. The FCRA gives you the right to file a dispute with the bureau in order to have errors corrected or removed. The bureau has 30 days to investigate your claims and make corrections. You can file a dispute online at the bureau's website, or by phone or mail using the number or address on your credit report.

Time Limits

If you have poor credit, bear in mind that it's not permanent. Your FICO score changes as the data in your report change. The FCRA limits the amount of time a negative item may appear on a credit report to seven years, with a few notable exceptions. Chapter 7 and 11 bankruptcies both remain on a report for up to 10 years, as do dismissed or non-discharged Chapter 12 and 13 bankruptcies. Unpaid tax liens remain for up to 10 years in California, and indefinitely in other states.

Warning

Be wary of credit repair companies that promise to raise your credit score for a fee. Their claims that they can repair your credit may be fraudulent, according to the Federal Trade Commission. The FCRA does not require credit bureaus to remove accurate accounts from credit reports. Also, the FCRA gives you the right to dispute errors on your own for free.

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Is Your Credit Score Affected by Open Card Accounts?

Credit scores are figured by a byzantine formula that mystifies most consumers. One of the most confusing aspects of credit scoring is how credit scores react to credit card activity. Everything from opening a new card to closing an old account can result in dings to your credit score. Treat open accounts with care, or your credit score could fall.

Making Payments

It may seem obvious, but making payments on open credit card accounts on which you are carrying a balance affects your credit score more than anything else. If you're carrying debt on an open account and miss a payment, expect your score to fall. Consistent late payments, or late payments to more than one card, are a recipe for credit score disaster. No surprise, then, that making payments on time and in full each month is the best thing you can do for your credit score.

Credit Limits

Lenders who use your credit score to determine whether you are creditworthy like to see that you're not overextending yourself by carrying high debt on other loans and credit card accounts. For that reason, the closer your credit card balance is to your credit limit, the more your credit score is affected. Aim to keep your balances at 30 percent or less of your credit line to keep open card accounts from adversely affecting your credit score.

Adding New Accounts

The credit card accounts you already have open aren't the only the only accounts with the potential to harm your credit score -- new accounts can also cause you problems. Each time you open a new credit card account, your credit score takes a ding, because you are accessing more credit. When you make a large purchase that puts the card balance near the credit limit, or transfer balances, the damage is compounded. Open new accounts only when necessary, and undo damage done by these accounts by keeping your balances low and paying on time.

Closing Existing Accounts

One of the most bizarre quirks of credit scoring is the effect that closing an open credit card account, even one in good standing, can have on your score. Closing an open account, even to switch to a card with better rates or lower fees, can take points off your credit score because you have less credit available to you and the balances on your other cards will show as a larger percentage of credit used. The good news is, your score will rebound quickly as long as you make timely payments on other credit accounts.

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How Are Credit Score Points Calculated?

Your Creditworthiness

Your credit score serves as your first impression to a lender, as that three-digit number describes your level of risk. The score is calculated by putting the information found in your credit report into a mathematical algorithm or formula that leads to a three-digit number ranging anywhere from 300 to 850. The lower the credit score, the higher your level of risk, and vice versa for a high credit score.

The FICO Scoring System

There are numerous credit-scoring systems. However, the system most commonly used by the three major credit bureaus is the FICO scoring system. The original FICO scoring system was created in 1958, and the acronym stands for the Fair Isaac Corporation. Even though Equifax, Experian and TransUnion, (the three major credit bureaus) all use a credit scoring system created by FICO, each agency calls it by a different name. For example: TransUnion uses Empirica, Equifax uses Beacon Score, and Experian uses the Fair Isaac Risk Model. (See "Resources.")

Categories

Five major categories are used to calculate your credit score. The first is your payment history, and it makes up 35 percent of your score. The second category accounts for 30 percent, and it's your credit-to-debt ratio, or utilization. For example, if you have a credit card with a $2,000 limit, and you charged $1,000, your credit-to-debt ratio would be 50 percent, because you have used half of your available credit. The third category is your credit history, which counts for 15 percent. The last two categories account for 10 percent apiece. One is the different types of credit that you have, and the last category is any new credit or credit inquiries.

Credit Scale

Credit scales range from 300 to 850, so every consumer can be provided a score. According to the Fair Isaac Corporation, a credit score ranging from 720 to 850 is considered very good and will get you very low interest rates with your lender. However, most consumers fall between 600 and 800. (See "Resources.")

Remodel

A more unified scoring system, Vantage Score, was created in March 2006 by the three major credit reporting agencies, Experian, Equifax and TransUnion, as a way to simplify the standardized scoring system. In the past, the three credit bureaus have been criticized for providing significantly different scores for the same consumer, meaning that each system scored the same borrower differently. The new system attempts to alleviate that problem by providing more consistency. It has not caught on as well as the agencies hoped, but it is available for borrowers and lenders.

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Will Closing a Credit Card With a Balance Affect My Credit Score?

Two of the top things that can affect your credit score negatively and are big credit mistakes include not paying the minimum amount due every month and closing a credit card, especially one with a balance. You will not increase your credit score by closing your credit cards, so put them back in your wallet and pay off those balances.

Credit Card Balance

When you close any credit card you no longer have available credit from that card. But when you close a credit card with a balance and no longer have available credit, it shows up on your credit report as if you maxed out your credit card.

When you have available credit that you aren't using, you're less risky when you apply for loans or other credit cards and your credit score goes up. For example, if you have a credit card with a $5,000 limit and you've racked up $2,500 worth of credit on it, you're utilization is at 50 percent. If you have a second credit card with a $5,000 limit with no current charges, then your utilization is at 25 percent. If you close either of those credit cards, your utilization will go up and your credit score will go down.

Credit Report

Most of your credit accounts are wiped off of your credit report if there is no activity for seven years. However, your credit card accounts will not be erased if you keep them open. According to credit.com, when you close the account, your date of last activity starts and the credit account will eventually be permanently removed from your credit reports.

You may wonder why it matters that your account stays open. You don't want your good credit history to disappear, so continue to make your monthly payments to pay off your balance and keep the account open. The more good history on the report, the better your credit score, which is also known as FICO score. If this is your oldest credit card, one with the longest history, you should keep it open.

Use the Card

If you keep the account open but never use the card, the credit card company could end up closing your account. Once you've paid off the balance, ensure that your account doesn't get closed by paying for groceries every week on one of your credit cards and paying off the bill as soon as you receive it, so you're not paying interest on your groceries.

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Does Closing My Bank Accounts Affect My Credit?

Creditors, lenders, financial institutions, service providers and employers view your consumer credit score, which is based on the information documented on your consumer credit report. A bank account is a separate entity from a credit account, therefore, it is not reported on your consumer credit report.

Identification

Closing a bank account will not affect your consumer credit score; however, closing a line of credit will. Your oldest credit accounts make up 15 percent of your consumer credit score. Closing a line of credit will reduce your credit score. Allow your oldest lines of credit to remain open and active to boost your consumer credit score.

Other Affecting Factors

Other factors that affect your consumer credit score include payment history (which accounts for 35 percent of your consumer credit score), amount of debt (which accounts for 30 percent of your consumer credit score), variety of credit (which accounts for 10 percent of your consumer credit score), and frequency of new credit (which accounts for 10 percent of your consumer credit score).

Opening a new Bank Account Considerations

Some banks pull your consumer credit reports when determining if you qualify to open a new bank account. The bank must notify you beforehand and you must give written or verbal authorization. If the bank denies your checking account application, it must provide written notification of the reason(s) for the denial. Having multiple inquiries on your consumer credit report will cause a drop in your consumer credit score.

Credit Reports

Only credit accounts, public records, inquiries and personal information appear on a consumer credit report, not a bank account. If you fail to bring a delinquent balance current, the bank can report the information to your consumer credit file, which may hurt your consumer credit score.

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How to Check a Canadian Credit Rating

It's important to check your Canadian credit rating regularly to keep you up to date with what has been recorded on your credit file. You can correct any errors and see which areas of the report need improving. Disclosure reports by mail are free but do not include your credit score. A fee is charged for getting your credit rating online. All lenders use the services of credit reference agencies to check the suitability of applicants requiring credit. The higher your credit score, the greater your chances of getting credit at a low interest rate.There are two agencies in Canada where you can purchase your credit rating; Equifax Canada and TransUnion Canada.

Instructions

1

Apply online. Getting your Canadian credit rating is simple, fast and can be viewed as soon as your details have been verified and the fee has been paid. There are two credit reference agencies--see the links in the resources section. Click on either of the links then click "See My Credit Score" or "First Time?", depending on which agency you have chosen.

2

Follow the on line steps. Complete all the details accurately. Errors will result in you being unable to view your report. Click "Continue," review your order and enter your payment details. You will need to enter a username and password.
All major credit and debit cards are accepted. Equifax charge C$23.95, TransUnion C$22.90. Fees may change and may be different in certain provinces. Both agencies provide a credit report and a credit rating.

3

Click "Continue," your details will be verified and payment taken. The login screen will appear. Enter your username and password and you will be able to view your credit rating and report immediately.

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Does a FICO Score Go Down With a Mortgage?

FICO scores are credit scores that are based on five categories: payment history, amounts owed, length of credit, new credit applications and types of credit used. Though there is no set amount by which a credit score rises or falls when a mortgage is used, how it affects the five factors can give you an idea of how it will affect your score.

Payment History

A mortgage is one more opportunity for you to show that you are able to consistently make your monthly payments on time. If you do so, your score will increase. However, if you miss payments or are foreclosed on, your credit score will drop.

Amount of Credit Owed

Your credit score will be negatively affected by the large amount of money that is added to your balances owed when you take out a mortgage.

Length of Credit

As you pay off your mortgage, your credit history will lengthen, increasing this section of the score. However, if you do not make payments as agreed, your credit history will be filled with negative information.

Applications for New Credit

By having several lenders request your credit score, as would happen if you applied for multiple mortgages, your credit may suffer because of the number of inquiries on your credit report. However, FICO takes into account that people shop around for a mortgage by counting all mortgage inquiries made in close proximity to each other as one inquiry.

Types of Credit Used

If you have not had a mortgages before, this section if your score will increase because you have diversified your use of credit. Using multiple types of credit makes you look like a better credit risk to lenders.

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How to Increase a Credit Score With Tradelines

An insufficient credit history or a limited number of tradelines could prevent you from achieving a stellar credit score. A young adult who has one credit card may increase her credit score by obtaining additional tradelines, or accounts. A tradeline or field of information is displayed on your credit report for each of your creditors. Your creditors will report data about your account history to credit bureaus. Reported information is displayed on tradelines for revolving and installment accounts.

Instructions

1

Check your current credit score by visiting the TransUnion, Experian or Equifax websites. Select a single bureau or tri-merged credit report and the option for ordering your credit score. Input your personal data and pay the required fee to receive your credit report and credit score online.

2

Apply for major credit cards such as MasterCard, Visa and Discover. Obtain three to four credit cards to increase your number of tradelines.

3

Transfer your credit-card balances to replace your current accounts for more attractive offers. Refrain from accepting credit-card offers with exorbitant interest rates and fees. Refuse additional offers after you obtain four credit cards. Maintain four credit cards to generate a payment history for multiple tradelines and to help increase your credit score.

4

Use the credit cards you obtain. Pay your credit-card balances in full each month. Limit your credit-card charges to a maximum of 30 percent of your high credit limits.

5

Pay your creditors on time. Increase your credit score and credit rating as your payment experiences are reported for each tradeline.

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Requirements for a 750 Credit Score

The FICO score is named for the Fair Isaac Corporation, a California firm behind the development of the credit scoring system. By assigning a value to a person's credit history, lenders can have a fast and accurate way of predicting the risk involved in providing that individual a loan.

Pay on Time

Pay all of your bills on time. The largest negative effects to your FICO score are from delinquent payments.

Keep Debt Low

The FICO score takes into account how much available credit is actually in use. If you are near or at the credit limit on your credit cards, you will be considered a greater loan risk than someone who keeps their credit debt low. Try to maintain your credit card debt at less than 10 percent of available credit.

Old Credit Cards

Do not close out old credit card accounts, especially if you are not using them. Two positive effects to your FICO score are long-term available debt and a small debt-to-available-debt ratio. That old, unused credit card account works for you in both ways.

New Credit Cards

The more times you request a new credit card, the more negative dings to your FICO score. Decline that offer for a new store credit card that saves you 20 percent on only today's purchases.

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Effects of Chapter 7 Bankruptcy on Credit

Chapter 7 bankruptcy is the last ditch effort by a debtor to resolve his debt problems, but it is usually not as bad on credit as some people would believe. Of all types of bankruptcy, Chapter 7 is probably the best because it allows one to discharge debt. While not an ideal option, Chapter 7 can be the best alternative to living paycheck-to-paycheck.

Effect on Credit Score

A Chapter 7 bankruptcy could bring your credit score down as many as 240 points or as few as 130, according to CNN. High credit scores, those in the 700s, will suffer the most damage because they have more credit to lose. Low scores in the 600s and below will probably see damage in the low end of this range. The FICO score formula used by most lenders, however, has so many variables that you cannot pinpoint the precise amount of points a bankruptcy will cost you.

Considerations

Although filing bankruptcy is never good for your credit, you will probably become more creditworthy once you emerge from a Chapter 7 proceeding than you were before. Chapter 7 wipes out --- called a discharge --- unsecured debt. The fact you need to file bankruptcy probably means you already have several missed payments and possibly some collections accounts. Also, discharging debt could be better than constant missed payments and years of financial problems. A creditor may see you as a good risk if receive a "clean slate."

Time Frame

No item stays on a credit report forever. Bankruptcies, Chapter 7 or 13, stay on longer than almost any other item: 10 years after the filing date of your Chapter 7. Once this time is up the credit bureaus cannot legally report it, and you can dispute the item with the credit bureaus if you still see on your report. Chapter 7 will usually remain on your report for 10 years even if you voluntarily withdraw your case.

Tip

It is possible to regain credit after a Chapter 7 or any other bankruptcy within two to four years. The key is to use credit again unless you feel you truly cannot handle it. Secured credit cards are a popular choice for rebuilding credit because they only require a security deposit on the credit limit. You could also cosign on a loan with somebody who has good credit.

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My Credit Card Company Has Been Misreporting

Credit report mistakes can drain hundreds of points off a credit score, and fixing them is not always simple, because the credit dispute system is mostly automated. Going to a credit bureau should be the first step to disputing an error, but involving the credit card company could be necessary. In some cases, a lawsuit is in order.

Dispute it with the Credit Bureaus

Dispute the errors with the credit bureaus as soon as possible. The mistake might be as simple as an incorrectly formatted update from the creditor, so the credit agency can resolve the problem relatively quickly. Consumers should still include copies of documents that back up their claim. Sending in a certified letter along with identifying information, such as a copy of a driver's license, and an explanation of the which items you dispute is the best way get a response, according to the Federal Trade Commission.

Go to the Credit Card Company

While the credit bureaus report credit histories for the world to see, going to the creditor often hastens the pace of a dispute and gets better results. The credit agencies only report what lenders tell them, so if there is an error on the creditor's end, the bureaus will continue reporting the same data. Speaking directly to the credit card company and offering evidence of a mistake might be the best route in this situation, and you may not have to write a dispute letter, according to Leslie McFadden of Bankrate.com.

Considerations

Either way, consumers should always file a dispute with the credit bureaus. Only when a consumer disputes an item with the credit bureaus does he receive his full rights to an accurate report under the Fair Credit Reporting Act. The agencies, for example, must complete an investigation into any dispute within 30 days, while the credit card company can take as long as it needs.

Potential Lawsuit

When the credit bureaus and credit card company continue to report an item the consumer believes to be false, she could go with a lawsuit. Lawsuits should be the last option, because it is the most expensive and time consuming. However, when dealing with anything that could tarnish a reputation, consumers should always have the threat of a lawsuit in the back of their mind. Thus it is good practice to document any interaction with a creditor or agency as soon as it happens.

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Debt Management and Credit-to-Debt Ratio

A person's credit score is a measurement by credit reporting bureaus of the person's relative creditworthiness. This score is important because it will help determine a person's eligibility for loans, as well as the interest rates that he can receive on the loans. A person's credit-to-debt ratio is one of the factors that determine this score.

Credit-to-Debt Ratio

A credit-to-debt ratio is the ratio of a person's total available credit---such as the credit available to him on lines of credit---to the amount of current outstanding debt. According to the Fair Isaac Corporation, which helped formulate the modern credit score, a person's score will generally rise if this ratio is higher, as it means the person is not approaching their debt ceiling.

Credit Score

The exact amount that a high credit-to-debt ratio will raise a person's score depends on a number of different factors, including the rest of the person's credit history. Typically, a person's debt takes up no more than 30 percent of the total amount of credit available to him.

Taking Out New Loans

If a person's credit score is too low, then this can complicate debt management, as the person will not qualify for low interest rates on loans. If a person cannot take out new credit at low interest rates, then it may make it harder for him to pay off his debts, as he will have to make larger monthly interest payments. If he does not pay his debts on time, his score will drop.

Defaulting on Debts

If a person defaults on a debt, he will typically be hit with fees and potentially a higher, punitive interest rate. When this happens on a credit card, the interest rate applied to the person's entire outstanding debt is raised. This means that the person may have greater difficult managing his debts, his interest rates are higher and he may not qualify for new, low-interest loans.

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How to Access Your One-Time Credit Report

A stellar credit rating improves your financial health -- and understanding the information contained in your credit file has an impact on your finances. Keeping up with your credit rating and the information contained in your file is important. Armed with this information, you can prevent fraud and identity theft and negotiate the best interest rates for important purchases. The Fair Credit Reporting Act, or FCRA, requires that each national credit reporting agency provide consumers with one free report annually, and the agencies provide one venue to request your reports.

Instructions

Online

1

Go to the Annual Credit Report website (see Resources).

2

Select your state from the drop-down menu and click "Request Report."

3

Enter your information. The online form requests your name, address, Social Security number and date of birth. Click "Continue."

4

Click the checkbox for each company from which you would like to receive your report. You can select Equifax, Experian and TransUnion. Click "Next."

5

Click "Next" again and enter the information requested from each agency. Each agency may request verification details, such as information from your credit file, to confirm your identity. Complete the process and view each report online.

Mail or Telephone

6

Call the annual credit report hotline at 877-322-8228 to request your reports. Complete the prompts, and allow seven to 10 business days to receive your information.

7

Go to the Federal Trade Commission website and download the Annual Credit Report Request Form (see Resources).

8

Complete the form and mail it to the address provided on the form. Allow at least 15 days to receive your information by mail.

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Credit Repair & Credit Building

There is no quick fix to repair your credit mistakes or build a good credit score from scratch. Your credit score is designed to reflect your long-term history and reliability in managing credit. However, there are some steps you can take that will have an increasing impact on your credit score over time.

Your Credit Report

Information about your credit management will only affect your credit score if it shows up on your credit report. Therefore, it is important to check your credit report and ensure its accuracy. If you have a credit account that does not appear on the report, you are likely missing out on a credit score boost that this account would bring. On the other hand, if your credit report shows inaccurate negative information, such as a false report of a late payment, this is causing your score to be lower than it should be. Get free credit reports through the Annual Credit Report website and dispute errors with the credit bureau that provided the report. Dispute processes are listed at the end of each credit report.

Payment History

About 35 percent of your credit score is based on your payment history on all accounts that appear on your credit report. If you have had missed payments, settled accounts, bankruptcies or court judgments in the past, these all hurt your credit score. If these negative items are accurate, they will remain on your credit report for seven years -- or 10 in the case of some bankruptcies. However, you can counteract their effect and build your credit by developing an on-time payment history in the future. Set up payment reminders or automatic payments on your accounts so you never forget to make a payment. Budget for your bills so you always have money when a payment is due.

Amounts Owed

The second major factor in your credit score is the amount that you owe on your accounts, which counts for about 30 percent of your score. Your credit score not only considers the overall amount owed on each account, but also the ratio of the current balance to the amount originally borrowed or, in the case of a credit card, the amount you are eligible to borrow. Make payments greater than the minimum to reduce your debt quickly and decrease the percentage of your available credit that you are using.

Other Factors

The remaining 35 percent of your credit score looks at the overall length of your credit history, the types of credit you have and how much new credit you have been obtaining recently. Although there is not much you can do to improve your score in this area, there are some behaviors to avoid. Keep your oldest accounts open to maintain your long credit history. Have a balance of a few types of accounts, including credit cards and installment loans, such as a mortgage, auto loan, student loan or personal loan. Refrain from applying for credit and opening new accounts unless you need them.

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Will My FICO Score Change If I Get Married?

FICO stands for Fair Isaac Corporation, which is a company that determines credit scores for individuals. These credit scores are based on only the actions of the individual in terms of your payment history, the amount of money you owe, the length of your credit history, your applications for new credit and the types of credit you use. These scores range from 350 to 850.

Does Getting Married Change Your Credit Score?

No, who you are married to does not factor into your credit score. Your credit score will remain the same no matter who you marry and what their credit score is. If you were to keep your finances completely separate, your score would be unaffected by getting married.

How Does Getting Married Affect Your Creditworthiness?

Whenever you apply for a loan with your spouse, both of your credit histories will be considered. If you have a great FICO score, but your spouse has a very poor credit score, you may not be able to get good interest rates or even get a loan at all, so it is important that you discuss your finances with your spouse so there are no surprises when you apply for a loan together. This also applicable to any joint accounts that you open with your spouse, such as credit cards.

Effects of Joint Accounts

If you have a joint account with your spouse, the account will affect both of your credit reports. Even if you are making all of your payments on time, but your spouse is missing his or her credit scores, those late payments will appear on both of your credit records. Similarly, if you are both making payments on time on your joint accounts, that positive information will appear on both of your credit reports.

Should You Keep Your Own Accounts?

When you get married, it is a good idea to leave a few accounts like credit cards open in your name to preserve your individual credit history. If you only use credit in your spouse's name for several years, your credit score will deteriorate because there will be a large gap in your credit history. Even if you never get divorced, if your spouse dies, you will only have your own credit score to rely on if you need a loan or credit card in the future.

FICO Score Calculations

FICO scores are calculated based on your credit history report. The score is based 35 percent on how you've paid your bills, 30 percent on how much money you owe, 15 percent on how long your credit history is, 10 percent on the different types of credit you've used, and 10 percent on the applications you've submitted for new credit. Your recent credit is more important than events in the distant past.

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How Are Credit Scores Used?

Many organizations view a person's credit as an important indicator of that person's character, and believe that how a person manages his finances speaks for how he manages other areas of his life. Increasingly, insurance companies and employers are turning to the credit score to help profile their applicants and get to know more about them. Although this practice is at times controversial, it is likely to continue into the future.

Lending

Banks and credit card companies are the most obvious users of credit scores; they have done this for years. The higher the credit score, the less likely a borrower is to default on a loan. Measuring the possibility of default allows banks to offer the best interest rates to customers posing the least risk to them, and allows credit card companies to offer higher credit limits to deserving customers. While some are concerned about classifying individual people just by a number, many defend the use of credit scoring, saying that it allows a lender to make fair credit decisions quickly and conveniently.

Insurance Underwriting

Your auto or home insurance company probably uses credit scoring to determine whether they will give you a policy, and at what rate. According to the Insurance Information Institute, drivers with poor credit have up to 40 percent more auto insurance claims than drivers with good credit scores. In response to insurers' desire to reduce their risks and claim payments, the credit industry has responded with insurance scores. The factors making up an insurance score are different than a score used for lending, placing a higher priority on how long a person has been managing credit as a factor in her stability and lower risk.

Cellular Phones and Utilities

Before you open a new cell phone account, the carrier will probably check your credit to obtain a credit score. Increasingly, utility companies will also do this. They use the score as an indicator of how likely you are to pay your monthly bills. A cellular phone company may require you to pay a deposit or agree to have your service terminated if your bill exceeds a certain amount when your score is not up to their standards. Utility companies may also require a deposit, or someone to guarantee your bill will be paid on time. Both may turn you down for services based on your score.

Employment

Employers sometimes look at credit scores as another way that they can pick the most qualified applicants. This is more common if a company is hiring an upper level manager, or a financial officer. Companies may also check the credit score on a person who will handle cash as part of his job. Many companies will look at your overall report, rather than just the score, to get a better picture of the applicant. Past due payments or financial problems in the past may be a sign that the person has moved on from his problems. Current credit problems may indicate a person is a higher risk for theft.

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How to Investigate Your Equifax Credit Report

There are three nationwide consumer credit reporting companies (Equifax, Experian and TransUnion) that maintain files of your debts and loans, as well as other information, such as personal judgments, liens, employment, and current and past addresses. In some circumstances, you might want to contact only Equifax in cases where you applied for credit or for employment and the company received a negative report from Equifax, or if you have reason to believe that there is erroneous information on your Equifax credit report.

Instructions

Contacting Equifax

1

Access annualcreditreport.com on the Internet to investigate your Equifax credit report. The Federal Trade Commission says the Fair Credit Reporting Act permits you one free credit report yearly from all three credit reporting agencies, and annualcreditreport.com is the only Internet portal authorized to provide this to you. You can choose to obtain only your Equifax report or your reports from all three agencies.

2

If you don't want to request your report online, call (877) 322-8228 for your Equifax credit report, or mail an annual credit report request form to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. The FTC notes that you might have to wait an additional 15 working days to get your Equifax report from the date you call or from the time your request is received. The Annual Credit Report Request Form can be found on annualcreditreport.com.

3

If you've already ordered your free annual credit report, contact Equifax directly to purchase another report. Equifax can be reached at (800) 685-1111 or online (see Resources section). You might have to pay up to $10.50 for any additional reports within a 12-month period, the FTC says.

4

Investigate your Equifax credit report for inaccuracies. Items to pay attention to could be fraudulent accounts (those you did not open), data errors and expired records. An example of an expired record would be a closed account that reflects late payments or other negative information that remains on your credit report for more than seven years. Bankruptcies should not be reflected longer than 10 years. To see what information is reflected in your Equifax credit report, see the Resources section.

5

Contact Equifax with if you notice legitimate errors. Although you can file a dispute online, credit.com indicates that it's best to put your communication in writing and send it to Equifax by certified mail, return receipt requested, so you can ensure that the letter was received--and you'll also have a copy for your own records (for a sample dispute letter, see the Resources section). Include a copy of your Equifax report with the questionable items highlighted or circled, as well as copies of any supporting documentation.

The mailing address for Equifax is Equifax, P.O. Box 740256, Atlanta, GA 30374-0241.

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What is a Subprime Credit Score?

Credit scores measure a person's likelihood of paying back a loan by analyzing their credit history. Credit scores, also known as Fair Isaac Company scores, or FICO, range from 300 to 850. A FICO score below 620 is considered "subprime."

Significance

A subprime credit score makes it difficult for a person to obtain lines of credit, such as loans and credit cards. Lenders tend to look for borrowers with "prime" credit scores--FICO scores of 620 or above.

Considerations

FICO scores estimate the likelihood that a borrower will repay his debt. The scores factor in length of credit, dollar amount owed, payment history and number of credit lines, according to CBS News. Credit scores also factor in negative credit history, such as outstanding collection accounts, charge-offs, bankruptcies and late payments.

Warning

Although it is possible for people with subprime credit scores to obtain credit, it often comes at high costs and interest rates. People with subprime credit scores should focus on credit repair before attempting to gain access to credit.

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How to Fix Your Credit Rating When It Is Wrong

One of the most frustrating experiences a person can endure is finding an error that negatively impacts his credit score. The good news is that anyone can take steps to correct the error, but the process requires determination, persistence and patience. While no one can legally remove accurate and timely negative information from a credit report, according to the Federal Trade Commission, anyone can remove inaccurate information which affects her credit rating.

Instructions

1

Every individual is entitled to a free credit report once every 12 months from each of the three major credit reporting agencies, and you also can obtain a free credit report if you have recently been denied credit for any reason. Visit the Annual Credit Report website, call 877-322-8228 or complete an Annual Credit Report Request form found on the Federal Trade Commission website and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281 (see Resources).

2

Review each credit report for errors and inaccuracies to determine exactly why your credit rating is flawed. Check for accounts of which you have no knowledge and outdated employment information.

3

Contact the creditors reporting the inaccurate account to notify them of the errors if accounts you do not recognize are on your credit report, or if the amounts owed or showing delinquent are wrong. Sometimes they will agree that there is an error and agree to either to remove the item or make it accurate. It is best to contact them in writing as well as by phone. According to the Fair Credit Reporting Act, the creditor then has 30 days to validate the debt.

4

Formally write each credit reporting agency (TransUnion, Equifax, Experian) and dispute any errors found on your credit report, as this is certainly the source of your incorrect credit rating. Include copies of documents that support your dispute, such as your letters of request to the creditors seeking validation. Ask that an investigation be initiated and that the errors either be removed or corrected. The address to file a dispute will be listed on the credit report that contains the error being disputed.

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How to Improve Your Credit Score Fast for Free

Restoring a poor credit score is essential to obtaining financing for a mortgage or vehicle loan. Some lenders will approve applicants with less than ideal credit, but these loans often come with higher finance charges and other fees. Credit scores can be repaired, allowing consumers to qualify for better rates.

Instructions

1

Aim to pay creditors. Missed and skipped payments are detrimental to your credit score. Recognize the importance of timely payments and resolve to submit your payments on time. Sign up for online banking and enroll in programs to automatically pay bills, or mail payments at least seven days before their due date to prevent a late arrival.

2

Live within your means. Maxing out credit limits or exceeding your limit also damages your credit score. Restore your FICO score by paying down debts. Prioritize money to pay off creditors and reducing debt to enhance your credit score.

3

Settle delinquent accounts. Use money from personal savings to pay off these debts, or contact the original creditor and set up a monthly payment arrangement.

4

Get a secured credit card, which help people establish or restore their credit rating. Contact a representative from a local bank or credit union and ask for an application.

5

Understand the impact of credit inquiries. Every request for credit appears on your credit report as an inquiry, and inquiries can reduce your credit score. Limit your number of credit applications to help increase your score and restore your rating.

6

Get your credit report. Consumers can get a free credit report once a year from any of three major reporting bureaus, as of 2009. Reporting mistakes are common, and one error can lower your FICO score. Order your report once or twice a year and dispute errors. Visit annualcreditreport.com to view or print your report online.

7

Increase your credit limit. Because maxed-out credit cards have a negative impact on your rating, request a credit increase if you're approaching your limit. This helps widen the gap between your balance and limit; and this provision is often reserved for people with a good payment history.

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How to Dispute a Late Payment on a Credit Report

Your credit report contains information about your financial history and how you've paid your bills. Credit bureaus use your credit report to calculate your credit score, which is then used by lenders to determine whether or not to issue you a loan or line of credit. If you find something on your credit report that you believe is inaccurate, you can dispute that information with both the credit bureau reporting the information and the creditor reporting the late payment.

Instructions

1

Gather any evidence you have to prove that the payment was made on time such as bank statements, payment confirmation emails or receipts.

2

Make copies of the evidence to send to the credit bureau (or bureaus) reporting the error and the creditor claiming the late payment. The three major credit bureaus are Equifax, Experian and TransUnion. If the error appears on more than one credit report, you should dispute the error on all three reports. Never send original copies, according to the Fair Trade Commission.

3

Write a letter clearly stating what you are disputing and why you dispute the information. Specifically state that you are disputing "the late payment on my Chase Visa from February 2008, account number 1234567890123456," rather than "the late payment on my credit report." You should also include a copy of your credit report with the disputed information highlighted or circled. See resources for a sample letter.

4

Mail your dispute to the credit bureaus reporting the late payment. All three major credit bureaus also allow you to dispute information online. To find the address for your creditor, use the number on the back of your card to contact customer service to request the address. Bureaus must look into your claim within a month and report their findings to you. If your claim is found to be correct, the information will be removed from your credit report.

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Does Income Improve Your Credit Score?

A FICO score ranges from 300 to 850. A higher credit score can lead to lower interest rates and even a new job. A poor credit score can prevent a landlord from renting to you or cause a denial on a credit card application. To get the best score, understand what factors contribute to improving your credit score.

The Score

FICO uses a specific criteria when calculating your score. According to MyFICO, your credit score has five distinct components: 10 percent is the amount of new credit you've applied for recently, 10 percent is the mix of credit types on your report, 15 percent is the length of your credit history, 30 percent of the score is the amount of debt you currently have and the last 35 percent is the payment history on your credit account.

Significance

FICO does not include certain factors in the creation of your score. Your income, or how much money you make, is one of these factors. Your score is based on the information in your credit report. Under the Fair Credit Reporting Act, credit bureaus are not allowed to include your income or salary on your credit report. Your report may contain the name of your employer, if your creditor reports that data to the bureau, but not your salary from that employer. The report also does not include other data that FICO does not consider as predictive of credit risk, such as race, gender or marital status.

Considerations

Income is not a direct factor in the calculation of a credit score, but a steady source of income can play a role in your ability to pay your bills. Lack of income can lead to missed payments. Even one late payment can damage your FICO score by 60 to 110 points, according to Liz Pulliam Weston at MSN Money. Adequate income can also help you use cash from that income to make purchases instead of running up a large credit card bill. Remember, 30 percent of your score is the amount of debt you have.

Prevention/Solution

According to MyFICO, one of the ways to improve your score is to avoid being late on your credit payments, since this factor measures 35 percent of your score. MyFICO also suggests limiting the amount of new credit you obtain and only apply for credit when you need it. You should also keep balances low on all of your credit obligations. The more you pay down debt, the more your score will rise, especially if those payments are on time. The more debt on a credit card, the more of a negative impact it can have on your credit score.

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The Types of Accounts on a Credit History

When evaluating a customer's application for a credit product, lenders will examine the applicant's credit history. Credit reports are available from three bureaus, each with information regarding payment history and a score based on the information contained in the report. Knowing which types of accounts are shown on a credit report can help consumers build a solid credit history and gain approval for additional credit products in the future.

Installment Loans

The majority of available credit accounts that a consumer can choose from are known as installment accounts. Installment accounts require that the consumer make a set monthly payment with an end date for the loan. Examples of installment loans include secured purchases that are secured by the item the loan is granted for, such as a mortgage loan or an auto loan. Installment accounts can also include unsecured loans such as a personal loan, which require only an application and a signature from the borrower in order to be granted. Loans for furniture, electronics and home furnishings can also be considered installment loans if there are set repayment terms. Installment loan lenders can report the amount of the loan, the payment amount and the payment history on the account.

Non-Installment Credit

Non-installment credit is considered a type of credit that allows a consumer to borrow funds on a credit account with the option to make irregular monthly payments with no specific amount. The most common form of non-installment credit is a credit card, which allows customers to make purchases up to the credit limit, with flexible repayment terms as the account balance decreases. Unlike installment loans, non-installment credit products allow the consumer to continue accessing funds until their limit is reached without providing a new credit application. Charge accounts for a specific retailer or a personal line of credit may also be considered types of non-installment credit. Similar to installment loans, lenders for non-installment credit products are able to report the account balance and payment history to the credit bureaus.

Collection Accounts

If a consumer defaults on loan payments to the point where the lender sells the debt to an outside company to collect, he will have collection accounts on his credit report. Collection accounts are a negative entry and will lower a consumer's credit score. Since the company is attempting to collect past due funds on the behalf of the original lender, it is allowed to place a notation on a customer's credit report. Often times collection accounts are sold between lenders, meaning that the consumer could have multiple collection accounts on his credit report for the same debt. If the consumer pays the collection agency in full, the notation is not removed from the report, it is simply updated as paid.

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What Is a Strong Credit Score?

Your credit score affects all aspects of your financial life. It can determine whether you get a good rate on mortgages, auto loans and insurance, and it can even affect whether you can rent a nice apartment or get the job you want. It's important to know what your credit score is, and the optimal range for your score.

Range

Generally speaking, your credit score can range from 280 at the low end to 850 for near-perfect credit. The majority of scores fall between 600 and 750, according to credit reporting agency Experian.

A Strong Score

Realistically, it would be almost impossible to attain even 800, and if your score is above 760, you are in the top tier of credit users, and have access to the best interest rates on all financial products. You may also find the best rates available even if your score is between 720 and 760, depending on the lender.

Good Enough

If your credit is around the 700 to 720 mark you could expect to pay about 0.2 percent more on a mortgage rate than someone with better credit, according to MyFICO. While that may add up in the long term, it's not so big a difference that improving your credit score should take priority over everything else in your financial life. Loans get progressively more expensive below 700, and If your score falls below 620 you will only be able to access sub-prime loans.

Improving Your Credit

If your credit is in the not-so-good range, you can work at improving it but don't expect instant results. Fair Isaac says it's unusual to get more than a 20 point bump in any three-month period, so If you want to go from 620 to 720, you should look at it as at least a year-long project. During that time, work at paying all of your bills on time, pay down your highest-balance credit cards, don't open any more credit accounts and order your credit report so that you can dispute any incorrect information.

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What is a Credit Report & a FICO Credit Score?

Lenders use credit reports and FICO scores to determine a consumer's creditworthiness. It is important for people to understand their credit report and scores in order to maintain good credit or improve their scores.

Credit Report

A credit report lists a person's personal information, such as current and previous addresses and employment history. It also includes revolving accounts, charge-offs and any lawsuits associated with the individual. The three major credit bureaus, Equifax, Experian and TransUnion, may have different information in your credit report since every creditor does not report to each bureau.

FICO Score

A FICO score is calculated using the information contained in your credit report. Various factors affect a FICO score differently. The score is based on payment history, amounts owed, length of credit history, age of current accounts and types of accounts. Most people are unaware of exactly how much weight each factor carries in your score. For example, credit cards may have a different effect on your score than a mortgage loan.

How to Get Your Credit Report and Score

You can obtain a free copy of your credit report under the Fair Credit Reporting Act. Equifax, Eperian and Trans Union have set up a central website through which consumers can request a copy of their report. Visit annualcreditreport.com for information. If you want your FICO score, you will typically have to pay. Some credit monitoring websites include your credit score with a subscription.

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How to Get Your Credit Score Safely

Your credit score is one of the most important numbers you have in terms of your finances. Your credit score allows lenders to determine whether or not you can get credit to finance loans, mortgages or even pay back your credit card balance. Scores that are high, typically above 720, usually get approved for higher credit limits and are entitled to lower interest rates. Before applying for credit or loans, check your credit score and report to be aware of your information. When checking your score, it's important to be safe and use a reputable site that will have access to your vital information.

Instructions

1

Visit the central website that is used by all three of the major credit reporting bureaus, which is Annual Credit Report (see Resources). The three bureaus are TransUnion, Experian and Equifax. The Federal Trade Commission suggests that you do not contact each of the bureaus individually, since they only provide credit report services though Annual Credit Report.

2

Order a copy of your credit report with score from one or all three companies at the same time. Federal law allows you to get a free copy of your credit report once every 12 months. While a copy of your report is free, you will need to pay for access to your credit score with each of the credit reporting companies.

3

Avoid using outside companies that claim to offer free credit scores or reports. The Federal Trade Commission states that only Annual Credit Report is authorized to provide you with free copies of your credit report. Be sure that you are actually visiting the Annual Credit Report website, since imposter sites may intentionally misspell the Web address to get you to visit their site accidentally to submit personal information.

4

Submit your personal information---including your name, address, birth date and Social Security number---to get access to your credit score. To ensure security, expect the credit reporting company to ask you a question only you know the answer to, such as a monthly car payment amount or an old address.

5

Select which credit reporting company you want to receive your report and credit score from. You may select one, two or all three. According to MyFico.com, your credit score may vary between the three companies because they might all have different financial information about you. Getting a score from all three companies is suggested to get the most accurate idea of what your credit history and score is.

6

Input your billing information to get access to your credit score. Once your credit or debit card is charged with the nominal fee, you will have access to your full report and credit score. Print out the report for personal reference if desired.

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How to Fix Erroneous Credit Report Data

Your credit score is only be as good as your credit report. When your credit report contains erroneous negative information, this drags your credit score below what it would be if your report were accurate. The Fair Credit Reporting Act gives you the right to dispute anything on your credit report that you believe is incorrect. The credit bureau with which you initiate the dispute must investigate the disputed data and remove it from your credit report if they cannot prove it is accurate.

Instructions

1

Obtain a copy of your credit report from each of the credit bureaus, if you have not already done so. The Annual Credit Report website allows you to order a free report from each bureau each year.

2

Review your credit reports carefully and mark each piece of information you need to fix. Examples include reports of missed payments when you actually paid on time, collection accounts that do not belong to you and negative items that are more than seven years old, or 10 years in the case of bankruptcy.

3

Go to the dispute website for the first credit bureau that provided a report with an error. Enter the required information to file the dispute.

4

Repeat the process for each additional credit bureau, if needed. Sometimes an error will only appear on one of your credit reports, whereas in other cases, it might be on all three.

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How Often to Check Your Credit Score

Your credit score is a three-digit number that lenders look at to determine how much of a credit risk you are. This number is based on your credit report, which lists all of your credit accounts and payment history. You will probably want to check your credit report more frequently than you check the score itself. This is because the credit report can be free, but you have to pay for the credit score.

Before Applying for Loan

Check your credit report and credit score at least six months before you plan to apply for a large loan, such as an auto loan or mortgage. This gives you an idea of where you stand and whether you will qualify for the top tier of interest rates on the loan. Checking your score early gives you time to clear up any mistakes on your credit report or pay off debt to boost your score before you apply for the loan.

Annual Credit Report

The Federal Trade Commission recommends checking your credit report at least once per year. All people are entitled to one free credit report each year from TransUnion, Equifax and Experian. This credit report does not include your credit score, but it has all the information that is used to calculate your score. Checking this free credit report helps you identify errors as they occur. One strategy is to stagger the credit reports from the three bureaus so you get one free report every four months.

Suspected Identity Theft

If you suspect you are a victim of identity theft, check your credit report immediately. You might have received a piece of mail or phone call about an account you never opened, both of which are warning signs of identity theft. Obtain your credit report to confirm whether accounts have been opened in your name. After finding identity theft on your report, check your credit report again every few months to quickly identify further fraud.

After Credit Denial

Consumers are entitled to a free copy of their credit reports after being denied credit. Check your credit report to find out why your application was denied and to learn what areas you should focus on to boost your credit score. Follow the instructions on the notification for denial to get the free credit report within 60 days.

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Credit Rating Problems

Credit rating problems can be caused by various factors, from irresponsible spending to outright identity theft. Fixing your credit rating problems requires a certain amount of financial discipline and a willingness to take charge of your credit report. The sooner you can identify a problem in your credit report, the easier it is to start fixing it.

Inaccurate Credit Information

Inaccurate credit information can adversely affect your credit score. This can happen through simple error, such as a wrong account history added to your credit report, or through identity theft, where multiple fraudulent accounts are opened in your name. The Fair Credit Reporting Act, or FCRA, requires credit bureaus to make copies of your credit report available to you for free at least once a year. Credit bureaus are also required to investigate any errors you find on the report and take action to correct them.

The Importance of Low Credit Balances

According to MSN Money Central, a large portion of credit rating problems can come from accounts with high revolving balances. This means you're carrying a number of of maxed-out credit cards, making only the minimum payments and generating little headway in actually paying them down. This may be an indication to a potential lender that you're using your available credit irresponsibly, which cost you a home or car loan if the problem isn't fixed.

Fixing Your Credit Rating

Fixing credit rating problems can be as simple as reining in your spending and actively paying down your credit card balances. MSN Money Central states that paying down these revolving accounts can have a dramatic effect on your credit score --- more so than paying down installment-type loans such as a mortgage or car payment. If you use a credit card, make sure the charges are small amounts that you can pay off at the end of the month. This increases your available credit and the likelihood that a lender sees you as a low credit risk.

Credit Traps to Avoid

Opening a new credit card is also a way to reestablish your credit history and improve your credit rating problems, but there are traps to avoid. Secured credit cards are collateral-based credit accounts that require you to make a down payment on the account before opening it. The credit card company can also charge you fees, including monthly servicing fees and an expensive annual fee. Unless you have the available cash to pay the initial charges all at once, it's best to avoid these credit money pits and instead devote your dollars to paying down existing accounts.

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What Is Credit Information?

Your credit information has a powerful effect on your ability to get good credit terms with lenders and insurance companies, and possibly to even get a job. Credit scores are affected by the information contained in the reports about your spending habits. Even if false information is entered by mistake, it affects you. Consider some of the type of credit information that might be found on a credit report.

Significance

Whenever you apply for credit of any kind, whether it's for a credit card, a loan, insurance, a mortgage, etc., your credit record is checked. A lender may check with any credit reporting agency of its choice, and there are many, but there are only three major ones (Equifax, Experian and TransUnion). The information found on that report will help determine what kind of credit terms you will receive--if any.

Types

The credit information that appears on your credit report focuses on information that pertains to your performance in handling finances. Some information may indicate whether or not there might be a problem if they lend to you. Your name is there, along with other possible alternate spellings, your social security number and your current and recent addresses. Your present and recent employers will be there as well.

The primary information that will appear on a credit report deals with how you pay your bills. This includes the amount of credit you have and with what company, and the amount of debt that is on each account. Dates as to when the accounts were opened are also there, as well as when they will be closed. The Federal Trade Commission also notes that legal problems about financial matters will also be there, such as if you have ever been sued, have overdue child support or if you have filed for bankruptcy.

No information will appear about your gender, your ethnicity, your politics, religion or your medical history. A criminal record will not be on your credit report.

Time Frame

Negative items that are on your credit report have a specified amount of time that they will appear there. Equifax states that a bankruptcy that happened more than 10 years ago will not appear there, and debts that were placed in collection or were charged off will not be there after seven years.

Considerations

Whenever you make an application for credit, the company checking your credit history will make an entry for a "credit inquiry" on your report. Each credit inquiry you make is listed in the credit report. MyFICO adds that the time since credit inquiries is also noted in your credit report.

Misconceptions

A credit score cannot be changed by any credit repair agency or by anyone else, Experian states. The agency indicates that only time can heal your credit score, and the single biggest factor you can use to accomplish this is to maintain an excellent record of paying on time.

Warning

It is important to occasionally check your credit report for errors that may have been entered by mistake. Problems with identity theft will also appear, and they can destroy your excellent credit history quickly. Each credit reporting agency has a procedure to go through on their website to get it corrected.

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Erroneous Credit Reporting Practices

According to "Consumer Reports", on average there are 13 million erroneous credit entries reported by the credit reporting industry every year. Erroneous credit reporting practices can lower a consumer's credit score by 100 points or more. Erroneous credit card reporting practices are usually negative credit entries, like late payments, for a line of credit that does not belong to the consumer. Erroneous credit reporting practices can prevent a consumer from getting a job, renting an apartment or getting an auto loan.

Annual Credit Report Review

Everyone older than 18 should carefully review his credit report on an annual basis. Consumers who have encountered previous erroneous credit reporting practices should conduct a credit report review every three months.
A good time for consumers to conscientiously review her credit report is before making major purchases, or conducting any personal financial transactions, which will require a credit check. Annualcreditreport.com is a great website for consumers to obtain an annual credit report free.

Significance

An article published by Consumer Reports in 2007 reported a little more than 50 percent of consumers actually conduct credit report reviews, specifically looking for erroneous credit reporting practices. If every credit report was checked for erroneous credit reporting practices, there could be more than 26 million inaccurate credit entries being reported annually.
Credit checks are performed nearly every time a consumer applies for a cell phone plan, new utility service or a professional employment position. Auto insurance premiums are also based in part on a consumer's credit score.

Disputing and Correcting Inaccuracies

Fighting and correcting erroneous credit reporting practices can be accomplished by contacting the credit-reporting agency in writing reporting the erroneous information. Disputing erroneous credit reporting practices requires contacting each agency in writing individually.
Creditors, who furnish information to the credit-reporting agencies, are required by law to report any corrections to credit-reporting agencies. It is up to the consumer to make sure corrections are reported by the creditor accurately.

The Best Approach

Even though consumers battle erroneous credit reporting practices online from the credit bureau's website, there is a better way. A letter disputing the erroneous credit entry should be sent with a return-receipt request via the U.S. Post Office. The return receipt will prove that the credit-reporting agencies got the dispute letter.
Along with dispute letters, copies of records like receipts that back up the consumer's dispute should be sent. Original receipts and other original documents that support the consumer's dispute should remain in the possession of the consumer filing the dispute.

Creditor Notification

The credit-reporting agencies are required by law to notify the creditor that made the erroneous information available, and supply them with the letter of dispute and pertinent supportive records. Credit reporting agencies generally have 30 days to conduct an investigation and render a decision on disputes.

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Does Getting Pre-Approved Affect Your Credit Score?

Pre-approval offers often are the primary source of junk mail. Whether the company in question is offering you a new credit card, auto loan or personal loan, you have probably tossed out hundreds of these offers in your lifetime. Lenders typically base your approval for a loan or credit card on your credit score, and credit inquiries can have a negative impact on your scores. Fortunately, though these pre-approval offers may annoy you, they dont hurt your credit.

How Pre-Approval Works

Companies that want to send out pre-approval offers as a marketing tactic contact the credit bureaus with their basic approval criteria. The credit bureaus then sell these companies a list of consumers whose credit scores meet each companys lending requirements.

The Fair Credit Reporting Act prohibits any individual or business from pulling and reviewing your credit for a loan or line or credit unless you actually applied for the service. Thus, lenders who send you pre-approved credit and loan offers never see your credit report and your credit score remains unaffected.

Credit Inquiries

Certain types of credit inquiries lenders conduct can hurt your credit scores. Known as hard pulls, credit checks for financial services, such as a loan, drop your credit by several points each time they occur. Receiving a pre-approved credit or loan offer doesnt mean you wont have to undergo a credit check should you decide to take advantage of the proffered service. When you formally apply for the service, the company will conduct a credit check and your credit score will drop but usually not more than five points.

Mortgage Pre-approval

A mortgage pre-approval differs from the pre-approval offers you get in the mail in that the pre-approval involves a hard credit inquiry and impacts your score. Mortgage lenders generally conduct a pre-approval before asking you to fill out a formal mortgage application. This saves you the trouble of gathering the extensive documentation required for a mortgage application package if you do not meet the lenders basic credit requirements. It also allows you to compare the interest rate you qualify for with other lenders rates.

The credit impact of mortgage pre-approval differs from other hard inquiries in that the FICO scoring formula considers all rate-shopping inquiries as one inquiry allowing you to shop around for a new mortgage without destroying your credit score from repeated hard inquiries.

Protecting Your Information

While whether or not to get pre-approved for a mortgage is your own decision, you also have control over whether the credit bureaus sell your information to third parties for marketing purposes. If you no longer wish to have your credit information sold to credit card companies, title loan providers and others, you have the right to opt-out of the service by notifying the credit bureaus via mail that you no longer wish to have your information sold to marketers. You can also opt out online by visiting OptOutPrescreen.com and filling out and submitting the online opt-out form. It can take up to six weeks to stop receiving pre-approval offers after requesting that the credit bureaus stop selling your information.

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How to Clear Old Creditor Collections From Credit History

Old collection accounts on your credit reports may not be hurting you as much as you think. Sure, they could be a drag on your credit scores, but the passing of time really helps. Most creditors care more about how you have paid your bills over the past 12 to 24 months than about one or two accounts that you defaulted on five years ago. On the other hand, removing old collection accounts could lead to a boost in your credit scores, qualifying you for better rates on credit cards, mortgages and other loans.

Instructions

1

Get copies of your credit reports from the website Annual Credit Report (see Resources). The nationwide credit bureaus established the site to provide free reports as required by federal law. Order from the homepage or call 877-322-8228.

2

Review your credit reports from all three credit bureaus, TransUnion, Experian and Equifax, to determine if you should simply wait for the old collection accounts to expire. According to the Federal Trade Commission, negative entries such as collection accounts can be listed on your reports for seven years. Check the date of last activity on your collection accounts. That could be the date the accounts were charged off by the original creditor or listed on your reports by a debt collector. If the accounts are due to naturally expire in a few months, you're better off just waiting. Go on to the next step if that's not an option.

3

Dispute the accuracy of the collection items. The Fair Credit Reporting Act gives you the right to challenge any information on your credit reports, even if you know it to be true. The credit bureaus have about 30 days to investigate and respond, and by law the information must be removed if the credit bureau cannot confirm its accuracy. The credit bureaus depend on the original creditors and debt collectors to verify the information, but that doesn't always happen, allowing credit repair agencies and others to take advantage of a legal loophole. To dispute your collection items, write a letter to the credit bureau and mail it to the address on your credit report. You have the legal right to claim that the collection accounts are not yours. The law says the burden of proof rests with the credit bureaus. Go on to the next step for another option.

4

Make an offer to pay the collection items if the creditor or debt collector agrees to remove the negative information from your credit reports. This process is called a "pay for delete," and is completely above board, although the creditor is under no obligation to agree. Make sure you get a commitment in writing. Take the process a step further by offering to pay less than the full balance, a process called debt settlement. According to The New York Times, creditors will sometimes settle old debts for as little as 30 percent of the balance.

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