Can Rent Be Reported to a Credit Agency?

For most renters, rent can only damage a credit rating, but there is a push in the credit reporting industry in 2011 to report a consumer's entire rental history. If the credit reporting bureaus included rental history in credit reports, consumers could qualify for billions of dollars more in mortgage and credit card accounts, according to Charles White of Corporate Credit Builders. Consumers can pay agencies to report rental history, but it may not help them acquire a loan.

Identification

The national credit bureaus have almost no rental history on consumers because landlords rarely have the resources to report rental history to the bureaus or the minimum number of accounts to join a national reporting service. Rent payments that appear on a credit report usually come in the form of a collections account or civil judgment. Thus, rent reported to a credit report typically lowers a credit rating.

Experian

In 2011, Experian -- one of the major credit reporting bureaus in the U.S. -- became the first major bureau to incorporate rental history into consumer credit reports when it acquired RentBureau, one of the largest collectors rental payment data in the U.S. In 2011, Experian reported on-time payments only, and it added missed payments starting in 2012. This may motivate the other bureaus to start reporting rental data in the future. For example, the Fair Isaac Corporation, designer of the most common credit scoring model, has a credit scoring system that includes rental history from tenant-screening companies.

Alternaive Agencies

Consumers can report rental payments to alternative credit agencies, but unlike with the consumer credit bureaus, an alternative agency requires a monthly service charge to verify payment data. Under the Equal Credit Opportunity Act, lenders must at least consider an alternative credit history report. However, lenders often ignore alternative payment data and those that look at alternatives may scores may restrict their use. For example, applicants for a Federal Housing Administration loan cannot use nontraditional payment data to supplement a poor credit history with the major bureaus, according to Kenneth R. Harney of The Los Angeles Times.

Tip

While you can report rental history to some agencies, starting a history with the major bureaus opens up more credit opportunities. If you have no traditional credit history, you can probably still get a low-level credit card, such as a secured card. Secured accounts require a deposit in a savings account, but having an on-time payment history and keeping a low balance may prove to the lender that you can handle a traditional, unsecured credit card. Department store and gas station credit cards also have few approval standards.

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What Information Does a Credit File Contain?

Whenever you apply for a loan, creditors need a way to determine whether you are likely to repay the money as expected. Some employers, especially ones that deal with sensitive information or that handle cash, also want to know how you handle your personal finances before hiring you. Several credit bureaus, including Experian, TransUnion and Equifax, keep track of this information and compile it in your credit file.

Types

Your credit file contains two broad categories of information: identifying information and information about your financial history. Identifying information includes your name, current and past addresses, Social Security number and date of birth. Financial history information includes your credit accounts, how you pay them, how much you owe, how much credit you have available, how much credit you've applied for and any public records such as judgments, defaults or foreclosures.

Time Frame

As a general rule, information remains on your credit report for seven years. However, as the information ages, it has a smaller impact on your credit score. For example, a default six year ago will not hamper your credit score as much as a default just two months in the past. Exceptions to the seven-year time frame include credit inquiries, which stay for just two years, and Chapter 7 bankruptcies, which remain for 10 years.

Benefits

Your credit file can be used in applying for a loan anywhere in the country. For example, even if you have lived in Houston your entire life and suddenly move to Maine, lenders in Maine can have virtually instant access to your credit report containing all your information from Houston so the lenders can judge your credit. Though this might not seem so beneficial if you've had credit problems in the past, it streamlines the process of applying for loans.

Misconceptions

Your credit file may be slightly different at each credit reporting agency because each agency has its own method of gathering data. In addition, some creditors only report information to certain credit bureaus. As a result, your credit score may differ slightly from one bureau to the next. Regularly check your credit file at each reporting bureau because each file might have different records that you need to correct.

Considerations

Because of the importance of your credit file, check it at least once per year for errors. To make it easier, the Fair Credit Reporting Act, a federal law, mandates that Experian, TransUnion and Equifax each give you a free copy of your credit file once every 12 months. Order your free report online at annualcreditreport.com. You can even dispute credit file errors online with each bureau.

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How to Get a Free Credit Rating

Your credit rating is important as it is used by lenders to assess your suitability for credit and how much you can have. The better your credit rating, the more likely you are to be approved for credit facilities. Your credit rating also affects the amount of money that credit card companies facilitate on your cards. A poor credit rating can mean loans are more expensive--or, at worst, can mean refusal of credit when you need it most.

All US citizens are entitled to obtain a free copy of their credit rating report every year as mandated in 2003 under the Fair and Accurate Credit Transaction Act. There are three official credit reference agencies in the U.S: Equifax, Experian and TransUnion. Together they sponsor the official website where your free annual credit report can be obtained.

Instructions

1

Apply for your credit report online. This is the best and quickest way. You can view your report online or you can have it mailed to you. Click on the link in the resources section; this will take you directly to the correct page.

2

From the drop-down box, select the state in which you currently reside. Click "Request Report" and a new window will open. Complete the form accurately as you will not be able to view your report unless the details are verified. You will need to supply a previous address if you have not lived at your current address for more than two years.

3

Click "Continue" and follow the instructions. Once you have completed the forms and the details have been verified, you will be directed as to how to access your report. If you have chosen to have it mailed to you, you will receive it in a few days.

You are entitled to a credit report from each agency once a year.

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Can I Close a Credit Card & Not Hurt My Credit Score?

Liz Pulliam Weston points out in her December 2010 MSN Money article, "Weird stuff that wrecks your credit," that you can lose points on your credit score by closing a credit card with a relatively strong history. Closing an account affects your credit utilization, which is a significant component of your FICO score.

FICO Score

Many Americans have heard of FICO and know it relates to their credit, but often know little beyond that. FICO is the most prominent credit score model, originated by the Fair Isaac Corporation. It serves as the model that the three major credit reporting agencies -- Equifax, Experian and TransUnion -- use to develop their credit scores. According to the Fair Isaac Corporation website, MyFICO, your individual credit score includes many specific factors divided among five major categories -- payment history, credit length history, amounts owed, types of accounts and new accounts.

History

Closing a credit card account does not immediately erase your credit history related to that card. That is important because the combination of your payment history and the length of credit make up half of your FICO score value, notes MyFICO. Your credit card account and any negative activity associated with it, such as late payments, remain on your credit report for seven years after the last activity, according to Dayana Yochim of "The Motley Fool" in his article "Don't Cancel That Credit Card!" On the other hand, if you have a positive credit history with the card, you lose that credit-score benefit seven years from your last use if you close the account.

Credit Utilization

The amounts owed section of your credit score largely emphasizes your credit utilization, or debt-to-credit ratio. This is the amount of your available credit currently in use -- that is, the amount of debt you carry relative to your credit limit. A lower ratio helps your score, whereas a high credit utilization, on a single card or overall, hurts your score. If you have a zero balance on a card with a $5,000 limit, and you close that card account, you lose that zero percent card utilization and decrease your overall credit limit, both of which raise your overall credit utilization.

Other Considerations

If you want to ensure you don't use the card, consider putting it away a place safe, such as a safe deposit box, as an alternative to closing the account. However, the card provider may close the account following an extended period of inactivity. The month when the card is last used begins the seven-year period in which this account will be included on your credit report. Close a credit card account that was opened more recently than one you've had a long time if you have a choice, because keeping the older one helps your credit length history more and, therefore, hurts your credit score less.

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How to Check Other People's Credit

Before you extend credit to a customer or lease a property to a potential renter, you may want to make sure that he is financially responsible. Obtaining a credit report can give you a glimpse at how much debt someone has and whether or not they have a history of paying it back on time. Doing a little bit of homework before entering a potentially risky financial transaction can save you a lot of trouble in the future.

Instructions

How to check other people's credit.

1

Obtain written permission from the person whose credit you would like to check. It is illegal to check someone else's credit without permission.

2

Gather the necessary information. You will need his social security number, full name, date of birth, and address. You may also need his previous address for verification.

3

Contact the credit reporting agency that you want to use. The credit bureaus operate independently of one another, so each report will be slightly different. You can contact them by calling 1-888-202-4025 for Equifax, 1-888-414-1120 for Experian or 1-866-922-2100 for TransUnion.

4

Identify yourself to the representative and tell her that you would like to purchase a credit report for someone else. Tell her that you have written permission. She will guide you through the process of obtaining a credit report.

5

Notify the person for whom you obtained a credit report of your decision. You are legally required to let him know if you are denying him credit based on information found in his credit report.

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How to Fix Your Credit in 90 Days

You can work towards improving your credit history and credit score in as little as 90 days. Every 30 days, updates are made to your credit by the credit bureaus. This gives you time to start improving your credit with a 90-day plan. Each person's credit situation is different, so the outcome after this timeframe will vary. To estimate the impact 90 days can have on your credit score, you'll need to consider a few factors. Among the considerations, is the type of credit on your report, your payment history and the amount of debt you owe.

Instructions

1

Reduce credit card balances to 30 percent of available credit. Check your credit card statement for inaccurate information and identify theft before make payments. According to MSN Money, creditors prefer to see a large gap between your account balance and your credit line.

2

Make all necessary payments on your credit accounts. This includes school loans, mortgages and car payments. Maintaining low balances and paying your credit bills on time are the two factors that impact your credit the most.

3

Use any old credit cards you have put away. Credit card companies may not update your account with the credit bureaus if you stop using your cards. MSN Money suggests making small purchases on those credit cards and paying them off each month. These cards start to be reported again which may help improve your credit score.

4

Obtain a copy of your credit score and report. You are entitled to a free credit report under the Fair Credit Reporting Act. Find a credit reporting service from the website AnnualCreditReport.com, the only legitimate resource for credit reporting. You can download one free credit report from one of the three major credit reporting services (TransUnion, Experian and Equifax) every 12 months. You must pay for your credit score each time.

5

Write letters to credit card companies disputing any outdated information or any errors indicated on your credit reports. Check for old bankruptcies or court rulings being reported. Court judgments can be reported up to 7 years, while bankruptcy information can show for 10 years. Removing incorrect information from your credit history can impact your credit score.

6

Order another copy of your credit score and report at the end of 90 days to see your progress. Financial expert Suze Orman says you should download a free credit report every 4 months from one of the bureaus and check for major changes or incidents of identify theft.

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How Much Do Negative Collections Hurt Your Credit Score?

Your credit score uses many different factors to get the consolidated score lenders use to check your credit worthiness. A collection account on your credit report is placed there by a collection agency who is hired to retrieve a delinquent debt. A collection account always has a negative effect on your credit score, but the severity of the impact depends on the overall credit profile.

Factors Affecting Credit

Credit scores are compiled using the different credit accounts on your credit report. According to MyFICO, five general factor categories are used in producing the credit score. These categories are payment history, account balances, credit history length, new credit and the different types of credit accounts. Negative collections fall under the payment history factor, as the negative accounts denote accounts so far past due that they were charged off and sent to collections.

Collection Process

The first notice that you'll have of the collection account is a written notice from the collection agency informing you about the account, and explaining your rights in disputing or verifying this account. The collection agency may have already put the collection on your credit report at this point, or it may wait until later to report the collection.

Time Period

Collections that have been included on your credit report several years ago affect your credit score less than those that have recently been added. The range of severity is due to a factor that MyFICO calls "time since past due items," counted under the payment history factor. Another factor that reduces the impact of individual collections is if you have many negative accounts on your credit report. Each individual collection does not have as large of an impact on the credit score compared to a report with a single collection, although the overall reduction of score is high in aggregate.

Re-establishing Credit

If you have a positive payment history following the collection account, your score will start to trend upwards. The only way to completely negate the effects of a collection account is to get it removed from your credit account complete, either by negotiating with the collection agency or by waiting seven years for the collection to drop off of your account.

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How to Add Creditors to Credit Reports

Most creditors are automatically added to your credit report as soon as your account is opened or approved. However, if you notice that there are creditors missing from your credit report, you may be able to have them added directly. By maintaining an accurate record of your good credit history, you will be able to ensure that your credit scores properly reflect your creditworthiness.

Instructions

1

Check your credit reports. Before you attempt to add a creditor to your reports, you should verify that they are not already listed. You can obtain a free credit report yearly from each of the three major bureaus. If you've already taken advantage of your free yearly report, and your state does not allow for an additional report, you will have to pay a nominal fee in order to access the information.

2

Confirm your creditors' information. For each creditor you wish to add, have an address, telephone number, the length of time the account has been open, and account number available. This will increase your chances of having the creditor added to your report the first time.

3

Contact each credit bureau and request the addition. Write to each credit bureau individually. In the letter, ask that the account be verified and included on your account, along with the verifiable payment history. Provide accurate contact information to each bureau so that your identity can be confirmed before the creditor will be added.

4

Confirm the addition. After giving the credit bureau time to act on your request, check your credit report again. It may take from 30 to 90 days for the account to be added, so you may not hear from the credit bureaus right away. If your creditor does not confirm the account with the credit bureaus, you may not be able to get the creditor listed on your credit report.

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How Fast Can a Credit Score Go Up?

The higher your credit score, the more likely you will be approved for a loan or other forms of credit and at a lower interest rate. If your credit score is low and you find yourself needing to get your score up quickly different measures will take different amounts of time, ranging from days to months.

Error Fixing

The first thing you need to do is check your current credit report and history for any errors -- things like available credit limits or payment history. Any mistake will hurt your score, so getting credit report errors corrected is essential. The credit bureau will investigate the error usually within 30 days. The entire process of correcting errors, thus improving your credit score, can take 30-90 days. You can order your credit report from TransUnion, Equifax, or Experian.

Credit Cards

Don't overuse your credit card. In fact, don't even approach anywhere close to your credit card limit. If it appears you are maxing out your credit card -- for example, your limit is $10,000 and you owe $9,800 -- your credit score will reflect that. Create some breathing room by limiting your debt ratio to no higher than 80 percent, with as low as 30 percent being most ideal. This can increase your credit score almost instantly.

Lower Debts

Having excess debt is not viewed in a favorable light. Banks are wary of lending to consumers with too much debt. If you have little or no debt, your disposable income can be used to pay for the mortgage you want. Lower your outstanding balance to reflect judicious credit management. The effect on your credit score can be seen in about 30 days, equivalent to one billing cycle.

Pay On Time

Paying your bills late will hurt your score the most, therefore always make your payments on time. Bill payment history makes up 35 percent of your credit score. A credit complaint to a collection agency will take up to seven years to come off your report, but your credit score will go up with each timely payment you make. Obtain your credit scores after a few months to verify the increase.

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Credit Score Tricks

Credit can impact your life in numerous ways. Your FICO credit score ranges from 300 to 850. Lenders check your credit before approving a loan and employers may check it before making a hiring decision. It's important to know the factors that contribute to your credit score and what tricks you can implement to achieve the best score possible.

Don't Miss Payments

The largest factor that impacts your credit score is how well you pay your bills. According to MyFico, this represents 35 percent of your FICO score. To raise your score, it's imperative that you make at least the minimum payment on your credit accounts each month. Late payments will cause your score to drop; how much of a drop depends upon how late the payment is and the other items present on your credit report. Other items that can drop your score include bankruptcy, charge-offs, repossessions, judgments and tax liens. For the highest score, honor all of your credit obligations.

Pay Off Debt

Another 30 percent of your score measures the amount of debt you have. This component looks at two areas. The first is your credit utilization ratio. This ratio measures how much credit you have available versus the amount of credit that you're using. The more credit you have available, the higher the ratio and the higher your credit score. This is why maxing out credit cards will lower your credit score. The second area is the amount of installment debt you're carrying. This is debt with fixed payments as opposed to the revolving debt of credit cards, such as a car loan, a mortgage or a personal loan. As you pay down installment debt, this also increases your credit score.

Be Careful With New Credit

Part of your FICO score represents the amount of recent credit that you have. This is 10 percent of your score. Although FICO encourages new credit, if you open too many new accounts at the same time, FICO will view that as risky behavior and it will drop your score. Also keep in mind that opening new accounts impacts another 15 percent of your FICO score, which is the length of your credit history. A long credit history increases your credit score. Each new account shortens the average length of your credit history and this may drop your score. Plus, the final 10 percent of your FICO score represents the type of credit mix you have. Having a variety of credit, such as credit cards and loans, increases your score, but FICO warns consumers not to open new credit accounts just to achieve a better credit mix. It could lower your score instead. Only open new accounts if you need them, not to improve a credit score.

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Which FICO Score Is Most Used for Credit?

When you apply for several types of credit, there is a good chance that all of those lenders use the same basic scoring system: the FICO model. Thus, consumers usually associate a consumer credit score with a FICO score. Some alternative models exist and even within the FICO scoring system itself, different versions abound.

Identification

About 75 to 80 percent of all lenders use an algorithm developed by the Fair Isaac Corporation (FICO), according to CBS News. The actual formula to the FICO model is a closely guarded traded secret, but we do know the basics of what affects scores. Payment history and debt load are the two most important pieces to the equation. Types of credit used, new credit and how long a consumer has used credit round out the rest of the categories in the formula.

Considerations

The Fair Isaac Corporation constantly tweaks the variables in their formula, and lenders do not receive scores from the credit bureaus or FICO but with software that uses data from a person's credit report. Thus, some lenders may use an outdated version of the FICO formula, meaning your FICO score can vary from lender to lender.

Alternative Scores

The major credit bureaus are always looking for a way to break the stranglehold of the FICO score on the credit history, so some alternatives exist but lack the consistency and trust in the FICO model. The VantageScore, a model developed and promoted by the national credit bureaus, has a little less than six percent of the credit scoring market as of 2010, according to Bankrate. Some lenders use credit histories from the major bureaus, but develop an in-house scoring system for the actual risk score.

FICO 8

As of 2011, the FICO 8 system is the latest FICO model and will likely become the industry standard. Nearly 3,000 lenders already upgraded their software to FICO 8. This system hurts consumers a lot less for the occasional 30-day late payment and ignores outstanding accounts with a balance less than $100. Additionally, it places more importance on your usage of available credit card limits.

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Highest Credit Scores Possible

Your credit score is based on your credit report, which is a comprehensive history of the your debts, including mortgages, credit cards, auto loans and any accounts that have gone into collection. Having a high credit score qualifies you for better interest rates on lines of credit.

FICO Score

The Fair Isaac Corporation, more commonly known as FICO, calculates the credit score that most lenders use when offering consumer credit. The FICO scale ranges from 300 to a maximum credit score of 850.

Prevalence

As of 2010, about 1 in 200 Americans manage to get a perfect 850 credit score at some point during their lives, according to CNN Money. The credit score may drop below perfect again if the individual opens a new credit account, has credit limits lowered or uses a higher percentage of available credit.

Significance

According to Bankrate.com, a credit score over 760 qualifies borrowers for the lowest interest rates on loans. Increasing your credit score over 760 is unlikely to get you a better interest rate, but does provide a buffer in case your score drops slightly.

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What Can I Do About an Adverse Remark in My Credit Report?

A single negative item can wreck a pristine credit score for years -- bankruptcies can bump down a score by up to 240 points, according to CNN. The course of action you should take on an adverse item depends on the circumstances surrounding it. You can remove an erroneous piece of data, but only mitigate the effects of a legitimate one.

Dispute It

Consumers have the legal right to dispute any item they feel the agencies list in error. All the bureaus have online forms for such needs or you can send a personal letter to each bureau that reports the item. The bureaus have 30 days to investigate your claim otherwise you can request they remove it immediately. Unless you provide ample evidence to back up your dispute, the agencies may require extra time to investigate your case.

Personal Statement

You cannot dispute legitimate adverse marks on your credit report, though, some credit repair companies tell consumers to dispute legitimate items en masse in an attempt to overwhelm the agency. If you do dispute legitimate adverse marks, the agency will, most likely, ignore your request as "frivolous," according to the Federal Trade Commission. Instead, you may add a 100-word personal statement about the debt. For example, you could claim that you moved and the creditor sent your bill to the wrong address, which resulted in your late or missed payment. This does not guarantee that creditors will ignore the item, but they usually consider your argument.

Waiting

At the very least, you can wait out any negative information on your credit report. Most adverse items follow the "seven-year rule." Except for certain items, such as bankruptcy and judgments, all negative marks fall off a report after seven years. Inquiries fall off your report after two years and only affect your credit score for one year, although they have little impact on your credit unless you have more than six.

Tip

Every now and then the credit agencies keep reporting a false negative item. The agencies, for instance, use third-parties to report court judgments and the people transcribing information can accidentally leave off a digit or two from a court statement. In these situations you may have to take legal action because the bureaus resolve most disputes through an automated system. A lawsuit should be a last resort because it requires legal fees, but always in the back of your mind. Thus, you need to document any interaction with the credit bureaus and employee you talk to, suggests Smart Money.

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Self Help Credit Repair Tools

Your credit report is like a financial report card, according to Consumer Credit Counseling Services, a nonprofit debt management agency. It is a record of the way you handle loans, credit cards and other accounts. Creditors shy away from you if it shows you have poor financial management skills. You can repair your credit and mitigate past damage with several tools.

Credit Reports

You need a copy of your TransUnion, Equifax and Experian credit reports to find and remove harmful mistakes. The Fair Credit Reporting Act empowers you to dispute any item with an error, according to the Federal Trade Commission (FTC). This is important to credit repair because the bureaus must contact the creditors to validate the information. Many do not respond, so the negative item is completely wiped from your reports. The FTC advises that annualcreditreport.com gives free reports every 12 months to every consumer upon request. Use them to review your records and formulate as many disputes on bad items as possible.

Budget

Credit repair involves handling your finances responsibly and building up current positive records that eventually offset the old negative items. Credit score compiler FICO explains that you must get all your accounts current if you are behind in any payments and keep up on-time payments. You must also pay down high balances on cards that are close to the credit limit. Plan and maintain a budget that cuts out unnecessary expenses so you can focus on the important bills every month.

Bank Account

A checking or savings account helps you repair your credit in multiple ways. MSN Money financial columnist Liz Pulliam Weston explains that bank accounts look good on credit reports. You can pay bills electronically with them, which reduces the chance of a payment arriving late or getting lost. You won't forget to send it because you can schedule it to go out automatically every month on the specified day. You also can show fiscal responsibility by not bouncing checks.

Secured Credit Card

A secured credit card is a good credit repair tool if your other accounts were written off by creditors or wiped away in a bankruptcy. It lets you rebuild a positive credit history without having to qualify for conventional credit. Pulliam Weston advises that you guarantee the account with a deposit of at least $200 to $500. The bank extends a credit limit equal to the deposit and reports the credit line, purchases and payments to the credit bureaus.

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How to Obtain Credit Records

The Fair Credit Report Act is a federal requirement that the three major credit bureaus provide you a free copy of your credit report each calendar year when you request it. The three credit bureaus are Experian, Equifax and TransUnion. A website has been credited to allow you to send just one request and receive all three reports. Obtaining credit reports is important because lenders use it to determine whether to issue you a loan or line of credit.

Instructions

1

Go to the annual credit report website and select the state in which you currently from the drop-down menu on the left-hand side, then click "Request Report."

2

Fill out the identifying information, including your name, current residence and social security number. If you have not lived at your current address for at least two years, you will need to enter your prior address to verify your identification.

3

Wait while your information is processed. Unless further identifying information is needed, you will be able to view your credit report online in just a few moments.

4

Print out a copy of your credit report for your records. If you find information that is incorrect, send a letter of dispute to the credit bureau with copies of any supporting documents. The bureau must follow up on your claim within a month and inform you of its findings.

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Help Me Rebuild My Credit

As of February 2011, the average national credit score is a 692. Although this is a very good credit score, it is not near what you need to get the best rates on a loan: 720 used to get the prime rate, but now you need a 760. Even if you have a bad credit score, you can probably get close to a 760 within a year or two by doing some things to help rebuild your credit.

Fix Errors

Finding errors on your report has the potential to fix your score faster than any other method. According to Bankrate.com, 70 percent of credit reports contain some kind of mistake, which can cost you dearly. Pull your report for free from AnnualCreditReport and check everything. Payments mistakenly marked as delinquent are the obvious culprit, but reporting wrong limits also has a significant impact. Credit utilization, or the percentage of your total credit card limit you use, counts under the "amount owed" category of the FICO score calculation worth 30 percent of a score.

Pay Bills on Time

If missed payments on your report are legitimate, there is nothing you can do about them. You can, however, commit to paying future bills on time. Automatic payment can help you avoid missed payments, but make sure you receive a receipt each month for each bill. You might be tempted to sign up for another card to get a zero percent teaser rate, but this could increase your debt burden if you cannot control your spending. At the same time, do not cancel cards, because you want to keep accounts with a good payment history for as long as possible.

Time Frame

Eventually, all negative items fall off your credit report, even bankruptcies and tax liens. The FICO score and lenders usually give the most weight to your last two years of credit, so you do have to wait for the item to leave the report to get good credit. You will need an installment and revolving account, such as a credit card or home equity loan, to maximize your credit mix. If you do not have a credit card, consider a secured card, which is backed by a security deposit.

Advanced Tactics

Getting an elite score may involve more than just paying bills on time. You can raise your credit limit without a credit inquiry, which hurts your score by one to five points, by asking the lender for more credit. Instead of applying for a loan, you can avoid the credit inquiry by finding someone willing to list you as a cosigner. The best ratio of installment to revolving loans is 1:2, according to Mint Life.

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What Is Limited Credit History?

The length of time you have used credit counts for 15 percent of your credit score, according to the Motley Fool. Creditors feel more comfortable lending to people who have experience handling a loan. Because everyone starts without a credit history -- considered a "limited" credit history -- your first loan or credit card will probably have a low limit and a high interest rate.

Identification

A person with a limited credit history may have no record of a loan on their credit report. Alternatively, not using much credit can also count as a limited history, according to Experian. Having, say, a single credit card with a $1,500 limit for a year or two would likely make a lender think you do not have enough history handling borrowed money if you wanted a large loan for a house. Lenders look at patterns of fiscal responsibility in your credit report as much as the score. Part of a good history is a paying back large loans or having a lot of credit available, but not needing it.

Time Frame

Any credit history shorter than six months does not even receive a credit score, according to MSN Money Central. The length of time it takes to build an excellent score, somewhere above 700, depends on if you pay your bills on time and the variety of your loans. Actually getting a credit card or loan to build history will take work. The 2009 credit crisis tightened lenders standards; creditors did not mind a limited credit history when when credit was cheap and plentiful during the early part of the decade, but that changed.

You may have to start with a secured card -- where the bank requires some collateral before issuing a credit line. Cosigning a loan with someone who has excellent history gives you the same positive items on your report. Usually, only close relatives and friends agree to cosign a loan.

Starting Your Credit History

You want to start building credit early if you'd like to own big ticket items like houses, because most people purchase property with credit, not cash. A long an excellent credit history can help with other aspects in the financial world, such as getting low interest rates, cars loans and even background checks for employment.

Wells Fargo suggests that consumers hoping to build a credit history consider a secured credit card. Secured credit cards require you put up collateral, but unlike a prepaid debit card, on-time payments are reported to the credit rating agencies. You could also send copies of canceled rent checks to creditors to prove your ability to handle monthly charges. Retail store cards are easier to acquire than bank cards, but the FICO score model gives retail cards less weight.

Instant Credit History

You can get a instant good credit history if you someone puts your name on a join account. The history on a joint account will become yours, but both parties are responsible for repayment in case of default which could end up hurting you score. Alternatively, you can build a credit history by finding someone to cosign on a loan. Simply being authorized to use a credit card account does not help build credit.

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Quick Tips to Repair Your Credit

Even though you can't increase your credit score by 200 points overnight, there are practical and quick ways to repair bad credit. Improving your credit score is beneficial for a number of reasons. You'll qualify for loans, and you'll obtain the best rates on these loans. Boosting a poor score is often a matter of recognizing risky credit habits, and developing wiser habits.

Pull Your Credit Report

According to Bankrate.com, ordering a copy of your personal credit report is vital to repairing a low score. Your credit report reveals your credit history--the length of time you have had credit accounts, current accounts, balances and delinquencies. This information determines whether a lender issues a line of credit. If you have a low score, lenders may refuse your application or charge additional fees. Free reports are available online from AnnualCreditReport.com. Check your report once or twice a year, and look for signs of identity theft (unfamiliar credit accounts) or reporting errors. These mistakes can knock points off your credit score, which is also known as a FICO score. Repairing mistakes can raise your score quickly.

Reduce Credit Card Balances

Using credit cards excessively results in overspending and maxed-out accounts. This increases your debt-to-income ratio, and lowers your FICO score. To quickly repair your credit, pay off your debts and maintain low balances. Eliminate debts using cash from your personal savings, or transfer your balances to a zero percent or low-interest credit card. A lower rate equals lower interest charges. As your interest charges drop, credit card companies apply more of your monthly payments to the principle balance.

As far as future spending is concerned, reserve credit cards for emergencies. And aim to pay off any new balances within a few months--or less.

Recognize the Importance of Timely Payment

Your payment history plays an important role in determining your credit score. Skipping payments or making late payments negatively impact your credit rating and reputation. According to MyFico.com, habitually paying your bills on time raises your personal rating. Manage your accounts online, if you can, and submit payments one or two days before the due date. Contact your creditors immediately if you are unable to send a payment.

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The ABCs of Credit Repair

Your credit history influences many things such as your ability to get approved for loans and your insurance premiums. If you have a low credit score, taking the necessary steps to repair your credit history is important as it allows you to potentially save money on many things in the future.

Disputing Negative Items

When you want to repair your credit, you need to look at a copy of your credit report. This way, you can see if any inaccuracies exist on your report. If you find something wrong with your report, you can dispute this matter with the credit bureaus. Most major credit bureaus have a specific system for filing a dispute on an item in your credit report. You typically have to provide a letter outlining the problem as well as documentation that proves your argument.

Reduce Your Debt

One of the most important factors in determining your credit score is the amount of outstanding debt that you have. If you have a large amount of debt on credit cards and other accounts, you need to make every effort to pay it off. Try to get your debt down to below 50 percent of the credit that is available to you. This makes it look like you are more responsible with credit, which improves your credit score.

Use Credit Wisely

You may be hesitant to use credit, but this is actually the way that you build your credit score. For example, if you have a credit card, making small, regular purchases can help you. Once you make a purchase with your card, pay off the balance immediately when you receive the statement. The credit bureaus report this and having a positive payment history is one of the most effective ways to build your credit score.

Watch For Scams

In the area of credit repair, many people want to take shortcuts to get a high credit score. This leads them to work with a credit repair company. Many of these companies charge upfront fees and then do not actually help your credit at all. Before working with a credit repair company, check some reviews online and do not make an upfront payment. You would usually be better off using the money that you would spend on a credit repair company on paying off your debt.

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Why Does Buying a House Increase Your Credit Score?

Though buying a home itself does not affect your credit score, taking out a mortgage does. Assuming you handle the mortgage well, it can have a positive impact on your credit score in the long run.

Balances Owed

In the short term, your credit score may drop because of the large increase in the amount of money that you owe. However, having the debt as an installment loan, rather than a revolving account like a credit card, minimizes the negative impact.

Inquiries

When you apply for a mortgage, inquires from each of the lenders you applied to will appear on your credit report. However, as long as you apply within a short time, the credit scoring algorithm will treat all the inquires as one since you are applying for a home mortgage.

Payment History

Assuming that you make payments on your mortgage on time, you will build a positive payment history which will improve the 35 percent of your score based on payment history.

Types of Credit

When you take out a mortgage, you diversify your experience with different types of credit, which improves the 10 percent of your credit score based on the types of credit you have used.

Available Credit

As you begin to build equity in your home, you will see your credit score rise because you are using a smaller percentage of your available credit.

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Why There Are 3 Different Credit Reports

Almost the entire credit industry is reliant upon three companies to gather information on customers so lenders can rate people as a credit risk. Since these are three separate companies, you also have three different credit reports. This does not preclude other reports on your habits as a consumer, but they are typically the most important.

History

Modern credit reporting goes back to the late 19th century. During this time, credit reporting was a local industry because no company had the reach to have a national database on consumers. However, local credit bureaus began consolidating over the decades. By the 1980s, Equifax, Experian and TransUnion were left as the only major credit bureaus in the U.S. They collect information on their own and even though much of it is the same, the bureaus still sell reports separately.

Other Credit Agencies

The U.S. still has some local credit bureaus left in 2011. Some of these bureaus may exist to report information to the major bureaus or are a subsidiary of them. Alternative credit agencies also pop up from time to time. PRBC, for example, is one of the biggest reporters of payments the major bureaus ignore or cannot verify, such as rental history and utility payments. Alternative agencies only verify what you report, so you do not have a history with them unless you sign up for their service.

Subtle Differences

Your credit reports probably contain redundant data with a few omissions because the bureaus cannot find out about all accounts and they rarely share data. Part of the differences in your credit reports come from the regions that the bureaus dominate. Equifax, for example, originates from Atlanta, so it tends to have more connections in the Southeast and East coast. Missing just one account can make a huge difference in the dominant FICO scoring model.

Considerations

Lenders know that the bureaus sometimes miss accounts, so they usually purchase a consumer's report from all three agencies. Consumers should check reports from all three major agencies too. The bureaus might erroneously list a negative account, so be on the look out for accounts you do own. If you see an error, dispute it with the bureaus as soon as possible.

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Why Do Credit Scores Vary So Much Between Bureaus?

If you've ever received copies of your credit history from the three main credit reporting agencies--Equifax, TransUnion and Experian--you've noticed your credit reports most likely have different scores.

Vying for Business

The three main credit reporting bureaus are competitors. Each bureau bills itself as having the consumers' definitive credit report. These reports are basically a composite of the consumer's financial life--spending, bankruptcies, debts. For the bureaus, it's not in the other's interest to have the same scores. Although the differences are academic to the consumers, to lenders the credit reports are worth millions of dollars and ultimately determine how much risk these lending companies can take on.

Different Methods

The three main credit reporting agencies also use different methods to compile their credit reports. While based on the same model, all three agencies use different software in credit reporting. The mathematical algorithms are secret, but the credit scale is not: The scores range from 300 to 850, with 850 being top-of-the-line borrowing power. Because credit scores for some consumers can vary favorably as much as negatively, the agencies and many consumers oppose standardization of credit reporting.

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How Does Getting Sued Affect Your Credit?

Getting sued in civil court by creditors claiming an unpaid debt will not affect your credit rating. However, losing the lawsuit and having a judgment issued against you will affect your credit rating for 20 years, in some cases. The length of time a judgment impacts your credit standing is based on the statute of limitations in the state where the judgment is awarded.

Civil Judgments

Civil judgments are court orders that give creditors the right to pursue debt collection through a variety of methods. Common civil judgments that affect your credit are summary and default judgments. The court will award a summary judgment if you present a defense against the creditor's claims, but the evidence is not sufficient for the judge to rule in your favor. If you neglect to present a defense against the claims, the judge will have no choice but to award a judgment by default. Both types of civil judgments have the same negative impact on your credit.

Credit Rating

Your credit rating is an indication of your financial welfare at a particular point in time. Judgments are listed in the public record sector of your credit file. Potential lenders, employers, insurers and other third-party credit issuers consider the presence of a judgment in combination with your three digit credit score when evaluating your credit worthiness. Credit scores are mathematical calculations devised by the three credit reporting agencies that summarize a consumer's credit management. How you pay your bills and the amount of debt that you owe in relation to the amount of credit available to you carry the most weight in factoring credit scores. Other scoring factors are the types of credit that you carry, the length of time you've had credit accounts and recent credit accounts.

Statutes of Limitation

Judgments will affect your credit standing for as long as they are valid in the state where they were issued, or for at least seven years. For example, judgments issued in Massachusetts are valid for 20 years, but judgments in South Carolina are only valid for seven years. South Carolina, and other states, allows judgments to be renewed for an additional seven years. In this case your credit is affected for 14 years. The Fair Credit Reporting Act allows a minimum seven year time frame for judgments to remain on consumer credit reports. If you are getting sued for unpaid credit accounts, check the statute of limitation in your state for the validity of the debt. Every credit account has a lifespan during which the creditor may pursue collection. If the debt is out of statute, you can defend the credibility of the claim based on the statutes and avoid a judgment altogether.

Judgment Collections

Creditors who win a judgment against you have the right to garnish your wages, seize your car, home and other non-exempt property and take money from bank accounts. Each state determines non-exempt status based on property values and specific uses, such as vehicles or tools necessary for trade. Creditors can collect on a judgment for as long as the judgment is valid.

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Credit Card Applications to Rebuild Credit

Improving your credit can often be a long process, but there are ways to do it. An important first step is requesting a credit report to better understand what is causing a low score. The Federal Trade Commission's website lists several ways to request a free report. Credit reporting agencies want to see that you can handle credit responsibly, and that you have the means to pay your debts. Therefore, if you have bad credit, the credit cards you qualify for may initially have low credit limits, high interest rates and annual fees. However, if you prove that you are responsible with credit, these can improve over time.

Current Credit Cards

If you currently have credit cards with balances, it is important to pay these down before you apply for new credit cards. Credit reporting agencies report a percentage of credit in use, which will be given on your credit report. By paying down revolving accounts, such as credit cards, you are decreasing your percentage and increasing your credit worthiness. Paying these down is the first step toward improving credit.

Credit Card Applications

If your credit is bad and you don't have current credit, it may be difficult to get a new credit card, but not impossible. One step you can take is to call a company that has previously given you credit. If you have proven that you were responsible in the past, there is a chance that they may give you a chance again.

Again, it is important to remember that you won't be getting a prime rate, but it is the first step toward building your credit.

Credit Card Use

Once you are approved for a credit card, use it wisely as that will help you in the long run. Limit your use of a credit card to only those times when you can afford to pay it off in full at the end of the month. This way you won't accrue interest and you will prove that you are using credit responsibly.

Gradual Improvement

In time, by using your credit card responsibly, you will be granted a higher limit, a lower interest rate and your annual fee may be reduced or even waived. According to the FTC, continuing to use credit cards wisely will also allow you to apply for larger loans, such as car and home loans, at better rates.

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How to Get My Yearly Credit Report

A credit report is an important tool in monitoring a person's credit history and FICO credit score, which can either help or hurt you when applying for loans for such purchases as cars or homes. A credit report sums up your credit history and can show your potential risk with new creditors. By law, everyone is entitled to receive one free credit report per year from each of the three major credit reporting bureaus, and any time a person is denied credit for any reason, he can receive a free credit report.

Instructions

Internet

1

Visit annualcreditreport.com. Select your state from the drop-down menu underneath "Start Here."

2

Complete the online form. Submit and select which of the three credit reporting agencies from which you would like to receive reports. You can select only one or all three.

3

Either download or print your credit report.

Telephone

4

Call 1-877-322-8228.

5

Follow the automated prompt or request to speak to a live customer service representative in order to request a copy of your credit report.

6

Follow up at the same phone number listed above if you have not received your credit report within eight weeks.

Mail

7

Visit the Federal Trade Commission website at ftc.gov/credit. Print the annual credit report request form found on the website under the link to free credit reports.

8

Complete the form. You can type a formal letter of request to complement the form, but a letter is not necessary.

9

Mail the form to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

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Can You Run a Credit Check on Someone?

Running a credit check involves requesting a copy of someone's credit report and credit score. Because a credit report contains personal information, there are restrictions on who can run a credit check on someone.

Legitimate Business Reason

You must have a legitimate business reason to run a credit check on someone. This can range from considering someone for a loan, renting them your property or hiring them for a job.

Permission

You must have the person's permission before you can request the credit report. Most credit bureaus will require the person's signature.

Court Orders

You are allowed to run a credit check if a court orders the check without the person's permission.

Obligations

If you run a credit check on someone and as a result decide to reject his application, you must inform the person of the reason for the rejection, so he can correct any incorrect information on the credit report.

Where to Run Credit Check

You should run your credit check with at least one of the three major credit bureaus: Equifax, Experian and TransUnion.

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Types of Credit Bureaus

Borrowers often focus on the major national credit bureaus, but the lesser known credit agencies can be more important, especially to new borrowers, and just as respected. Because of the dominance of the major bureaus, however, it is almost always better to have a file with them. Closely related to credit bureaus are consumer reporting agencies, which control other aspects of your financial life.

The Big Three

The big three national credit bureaus -- Equifax, Experian and TransUnion -- are in a class of their own."National" bureaus are not government entities, just the only bureaus that serve lenders across the U.S. As of 2011, almost all lenders that use consumer credit reports purchase files from these agencies. The bureaus have an up-and-coming competitor in Innovis, but as of 2011 this bureau does not sell reports to consumers and focuses almost solely on selling histories to lenders to mail "pre-approved" credit offers and mortgage reporting.

Alternative Agencies

Agencies other than the "big three" are called alternative credit bureaus. These bureaus report data not normally picked up by the national bureaus, such as rent payments. Most alternative agencies are not widely know, so lenders do not always accept their reports in lieu of one from the national bureaus. However, 50 million people in the U.S. have no file with the major bureaus, so alternative bureaus will probably become more important in the future, according to "USA Today." Fair Isaac, maker of the dominant scoring algorithm in the U.S. already incorporates data from on alternative agency -- PRBC -- into its scores.

Local Bureaus

Local bureaus across the U.S. began consolidating in the 1970s and 1980s, which is why the U.S. has only three bureaus. The U.S. still has some local credit bureaus, but most of them have some affiliation with at least one of the national agencies. Some local bureaus are nonprofits used to serve the credit reporting needs of a community.

Other Consumer Reporting Agencies

A few other consumer reporting agencies exist that focus on financial reporting other than credit histories. ChexSystem, for example, tracks consumer banking history. Central Credit Services serves the casino credit line sector. Dozens of local bureaus across the U.S. report rental data to landlords. These companies do not fall under the federal Fair Credit Reporting Act, but they might give a free report if you ask.

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Ohio Identity Theft Protection Act

Many states have passed identify theft protection laws in an effort to combat the use of another person's personal information to commit fraud or theft. The state of Ohio enacted its own Identity Theft Protection Act, which is codified in section 2913.49 of the Ohio Revised Code, for this purpose. The Act makes it a crime to use another person's identity in a manner that is inconsistent with the proscribed allowable uses under the law.

Main Provisions

The main provisions of the Ohio Identity Theft Act prohibit the use of an individual's personal identifying information for purposes of misrepresenting his identity or for defrauding a third party. Common articles of information that are frequently used in these types of offenses include driver's licenses, passports, photo I.D. cards, Social Security cards, birth certificates and financial account numbers.

Affirmative Defenses

An "affirmative defense" is a legal term that provides for an exception to the rule or law in question. If an affirmative defense exists in an identity theft case, the person accused of the theft may not be held criminally or civilly liable for using another individual's personal identifying information. Individuals who have been granted guardianship, conservatorship, trustee or fiduciary status may have an affirmative defense to charges of identity theft as long as they used the information in a manner that is permitted within their respective roles. Attorneys and law enforcement officials may also use personal information for conducting investigations.

Deceased Persons

The Ohio law is not limited to the fraudulent use of personal information of living individuals. On the contrary, anyone who uses or attempts to use the personal information of a deceased person fraudulently may be held liable under the Act. The law specifically states that use of a deceased individual's personal information is not an affirmative defense or a legal excuse under the law.

Criminal Penalties

The Ohio Identity Theft Protection Act provides for criminal penalties for individuals who violate the Act by misusing another person's identifying information. Basic violations of the law are categorized as fifth degree felonies under Ohio's statutory scheme. In cases where $100,000 worth of cash, property or credit is involved, the crime will be categorized as a second degree felony.

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Who Can Pull Credit Reports?

A credit report is a very important tool in someone's financial life. Having good credit can affect many things, such as how affordable a home or car is, in obtaining buying power for personal living and being able to get a good job. More and more lenders and companies are pulling credit reports than ever before. Many companies believe that a person who has good credit is more trustworthy financially and holds his financial lifestyle in the highest regard.

Mortgage Companies

Mortgage companies are either banks themselves or work closely with a group of banks to determine whom to lend funds to. When a borrower approaches a bank wanting to obtain a loan for a new home or to refinance an existing one, the first thing it does is pull a credit report. The credit report often includes a FICO score, which determines the person's creditworthiness. A FICO score is between 500 and 850 points with 850 being perfect credit. Depending on the loan type, most mortgages are generally unsecured---meaning there is a minimal down payment or equity when the lender writes up the loan. The only way a lender can feel secure in lending the money is by giving it only to someone who has a high rating---often in the high 700s and up.

Employers

Employers are becoming more likely to pull a credit report than ever before. The reasoning for this is they want to hire someone who has a proven track record of paying bills on time and showing a sense of financial stability. Most employers believe this trait of responsibility will follow through into the person's professional life as well. For those who work in financing or security, credit reports are a must. An employer can also cross-check a resume with a credit report. Via the report the human resources representative can tell if the potential employee has been honest about whom their previous employers were and their previous addresses.

Insurance Companies

Obtaining insurance on a home, boat, car or business can be more challenging for those with a bad credit history. Most insurance companies will base their rates on what a person's credit score is. The lower a person's credit or FICO score, the worse rate she may receive, even if she has had no prior claims. One of the first things companies do when someone calls in for a quote is to gather information such as a Social Security Number from an online application, over the phone or in person. Insurance companies do not always inform a potential customer that they are running a report; this can be troublesome, because every inquiry made on a report lowers a person's score.

Credit Card Companies

Credit card companies always use a credit report to determine creditworthiness. Not only do they go off of what a FICO score is---they also skim the report. They can deny credit if a borrower shows a large amount of revolving credit, new accounts, high balances or only a short period of time of having credit. Most credit card companies base their decisions off of the report alone and do not require additional information to make an initial credit determination.

Utility Companies

Those who are looking to open a new utility account need to have good credit. This means no late payments, no outstanding debt and a solid residence history. If the consumer has a low score, he may be required to pay a security deposit before services such as gas, electric and water may be turned on. Some utility companies also report any late utility payments or unpaid balance to the major credit bureaus, so making sure bills are paid on time each month is essential in maintaining good credit.

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How Do I Receive a Free Copy of My Credit Report?

Your credit record offers information to lenders, employers, insurance companies and others with a legitimate business interest about how you handle your financial obligations. It is possible for wrong information to be posted to your credit report, which can adversely affect your ability to obtain credit, get a job or rent an apartment, so it is a good idea to check your credit report at least once per year. The Fair Credit Reporting Act requires the three national credit reporting agencies to give you access to your credit report once a year.

Instructions

1

Log on to the Internet and go to AnnualCreditReport.com. This is the only federally authorized website where consumers can request a free credit report from all three national credit reporting agencies under the provisions of the Fair Credit Reporting Act.

2

Left-click on the "State" drop-down box and select the state where you reside. Left click on the "Request Report" button. This will open the online request application.

3

Complete the application. The information that is starred, including your name, address and Social Security number is required. Your credit report cannot be provided if you do not supply this information. Enter the verification characters at the bottom of the screen. Left-click "Continue."

4

Determine which credit report you wish to view. You will be offered a report from each of the national credit reporting agencies, including Equifax, TransUnion and Experian. You may request a report from any or all of these agencies. Left-click in the box of each report you wish to see. Left-click "Next." You will be taken to a page that will show you which credit reporting agency you will be taken to first. Left-click "Next." Once you have finished reviewing your credit report from this agency, left click the "Return to AnnualCreditReport.com" button to view your report from the other agencies.

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How to Interpret FICO Scores

Credit agencies and lending institutions measure your financial health by your FICO score, otherwise known as your credit score. FICO is actually an acronym for the credit score model developed by the Fair Isaac Corporation. Basically your FICO score tells the lender the probability of you paying your bills on time. It is important because it affects your ability to obtain credit as well as the interest rate you will receive on extended credit. This article will describe how to interpret your FICO score.

Instructions

1

Obtain your credit report. Individuals are now able to obtain 1 free credit report every 12 months from each of the three major credit reporting agencies. The three major credit reporting agencies are Equifax, Experian and TransUnion. You can obtain your credit report and credit score for free by visiting the Annual Credit Report website.

2

Understand what makes up your FICO score. Your credit score is calculated on a number of factors with approximate weights given to each as disclosed by the Fair Isaac Corporation. These include late payments, bankruptcies and collections (weighted at 35 percent), current debt (30 percent), how long your accounts have been open and established (15 percent), type of credit such as installment, revolving or finance company (10 percent), and applications for new credit and inquiries (10 percent).

3

Know the credit score range. Credit scores range from a minimum of 300 to a maximum of 850. Different lenders view bad, acceptable and good credit scores differently. For example, an automobile lender may view a 680 credit score good while a mortgage loan lender may view a score of 720 as a good credit score. Generally speaking, a credit score of 650 is considered to be the lowest score required to obtain a fairly good credit rate.

4

Compare your credit score to the range. Higher credit scores result in a lower interest rate or cost of borrowing. The Fair Issac Corporation now discloses their interest rates on a 30-year fixed mortgage, 15-year home equity loan, and a 36-month car loan broken down into FICO score ranges. See the Resources section for the link to this chart of scores and interest rates.

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What Is Your Credit Score With Nothing on the Credit Report?

A credit score is a numerical representation of your credit worthiness based on the information in your credit report. There is more than one type of credit score, and knowing your score will help you better judge what kind of credit is available to you. If you have never used credit in the past, however, you will likely have no credit score at all.

Credit Report

Everything you do as a user of credit, from loans to credit cards, gets recorded on your credit report. This report is maintained by three consumer credit agencies: Experian, TransUnion and Equifax. Each report details what you've done as a credit user, containing such information as your history of payments, number of accounts and the length of each. If you haven't used credit, you don't have anything on your report.

Credit Score

The same companies that collect your consumer credit information and include it in your credit report also use that information to create a credit score. The score lets creditors know if you are a safe or risky borrower. The score is based on your actions as a credit user, and if there is not enough data, the company cannot give you a score. If you haven't used credit before, you aren't likely to have a credit score, according to Experian.

Building Credit

Just because you don't have a credit history or a credit score doesn't mean that you will never be able to build credit. By obtaining any kind of loan, whether it is a car loan, credit card or student loan, you begin building a credit history. As you make payments on the loan, use your credit card or take other such actions, this gets included in your credit history and establishes your credit worthiness.

Improving Credit

If you want a good credit score, you have to prove to lenders that you are a responsible borrower. You do this by simple behaviors such as paying your bills on time, not opening too many new accounts at one time and limiting how much of your available credit you use on your credit cards. If you don't pay your bills on time or carry high balances on your credit cards, your credit score will suffer.

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Does Paying Off My Federal Student Loan Help My Credit?

College students have the option of taking out student loans directly through the government, called Stafford loans. Once you have signed up for this loan, the account goes on your credit report. For some students, this is the first credit account added to their report, while others may already have an established credit profile. Completely paying off this loan has different effects depending on elements contained in the rest of your credit profile.

Credit Score Factors

Your credit score is a number that lenders use to help them determine whether to offer you a loan. The score is calculated using five main category factors, according to MyFICO. The factors are payment history, account balances, period of time you've had credit accounts, new credit accounts and your credit account diversity.

Credit Length

Federal student loans may be your first or only credit accounts shown on your credit report. The average of all of your credit accounts determines your credit length, so if you pay off your oldest account, the student loan, your average may lower, as the account no longer ages once you have paid it off. If you have accounts that are older than your student loans, or ones that are close to its length, your credit score should not be negatively affected by paying off the loan. Positive accounts such as student loans can stay on your credit report for as long as the company wishes to report the information.

Balances

Paying off your federal student loans can have a positive effect on your credit score due to lowering the balances on the account, as well as proving to lenders that you can completely fulfill your debt obligations. This factor can have a positive effect on your credit score.

Interest

You also have a benefit to paying off your federal student loan early, outside of any credit score alternations. When you pay off the balance of your loan, you no longer accrue interest on the loan. Depending on the amount of your student loan, you can save hundreds or thousands of dollars in interest payments.

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Is a Lawyer Needed to Refinance?

A lawyer can help with a number of important financial transactions, from closing a business deal to resolving personal disputes regarding money. Refinancing a home loan is another very common and important financial transaction during which you transfer a loan balance to a new loan at new terms. Explore whether you might need a lawyer for this type of transaction.

Point of a Lawyer

Before considering whether or not it is necessary to hire a lawyer for a refinancing, understand the point of having a lawyer. Many lawyers have an advanced knowledge of state and federal rules regarding various matters, including financial issues. Though you can do research yourself at the library or online, it is sometimes more advantageous to have a lawyer at your side to ensure that you get the best deal possible.

Refinancing

In a refinancing transaction a new lender takes the reigns of an existing loan. The borrower initiates a new loan and transfers the balance, plus any additional amounts like cash-back from the equity (difference between market value and current loan balance) of the house, to the new lender. The reasons for refinancing range from lower available interest rates to needing to change from an adjustable rate mortgage to a fixed rate mortgage. The process involves a significant amount of paperwork, similar to the documents required to finance a newly purchased house. At closing the homeowner must sign a number of official contracts and statements that make the mortgage agreement official.

Is a Lawyer Needed?

Due to the straightforward process of initiating and closing a refinancing transaction it is unlikely that the borrower would need a lawyer to get involved. However, if the borrower needs help deciphering contracts and terms of the loan, a lawyer is useful. Also, if the borrower has a problem with a lender changing terms as agreed late into the process, he may need a lawyer to help straighten things out.

How to Find a Lawyer

Finding a lawyer who can help with mortgage-related matters isn't always simple. Credit counseling services like the NFCC (National Foundation of Credit Counselors) can refer homeowners to local lawyers who can help with personal financial matters, like refinancing questions. It is also a smart idea for the homeowner to ask for a referral from a friend or family member who has used a lawyer to help close a personal financial transaction.

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How do I Create a Good Credit Score From Bad Credit?

Creating a good credit score is important. So many things in your life can depend upon it. Every time you apply for credit your credit score gets checked. A bad credit score not only means you may get declined for credit, it can also affect the interest rates you have to pay, the type of deal you can get on a cell phone and even whether you get a place to rent.

If you've got bad credit your credit score is likely to be low, but, with some time and dedication you can create a good credit score from bad credit.

Instructions

1

Get your credit history report from AnnualCreditReport.com. It's free once a year, easy to get and you can view it instantly. You need your credit report so you can see where you have bad credit; then you can start to create a good credit score.

2

Review your credit report carefully. Check for errors or inaccurate information before you check for bad credit. If you find errors, write down the details and contact the lender and credit reference bureau. Tell them about the errors in writing and let them know the correct information. Your credit report should be corrected in about 30 days and is the quickest way to create a good credit score.

3

Check the credit report for areas with bad credit. This is likely to have occurred if you have missed or late payments. You need to rectify missed or late payments in order to create a good credit score.

4

Pay any late or missed payments to your lenders as soon as you can. Ensure you maintain your payments in the future. Lenders usually update your credit report monthly, so once you have made your payments and your accounts are up to date, your bad credit will be removed and your credit score will improve.

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Do HAMP Loans Affect Credit?

You might be able to make your mortgage more affordable if you are behind on payments by using the Home Affordable Modification Program (HAMP). HAMP loan modification, however, may hurt your credit score as a side effect. It can only damage your credit score if you are already behind on payments.

Identification

The HAMP program allows lenders to report payments as being in a federal government loan modification program when the person enters the trial period already in default. The trial period of HAMP gives a person three months to prove he can afford the modified loan. If a person is current on his payment before the trial period, the lender must report the individual as current.

Possible Mistake

Even though HAMP guidelines say that the program should not affect a credit score of a person current with her payments, some lenders still report the account as delinquent because they are unaware of the proper way to handle these accounts. Also, credit experts are uncertain how reporting a loan in a HAMP program affects credit scores, because the initiative was started in 2009 and thus is relatively new.

Considerations

No matter what the status of the loan was before entering the HAMP trial period, the account will have a notation that it is under a federal loan modification program. Lenders can see this and deduce that the borrower could be under financial duress, even if taking part in the HAMP program does not affect a credit score.

Tip

Homeowners should get a statement in writing from the loan officer explaining how the bank intends to report the status of the account during and after completion of the HAMP program. If the lender strays from the wording of the promise, the homeowner can contact a housing counselor, who then directs the lender on the proper way to report the account. Alternatively, the homeowner can try to pay off any outstanding bills before entering the program to make the account current.

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