What Is a Good Credit Score Number?

Your credit score number is a reflection of how wisely you've managed your credit over the past seven years. Making your credit card payments on time and not charging the maximum limit on your cards can help raise your credit score.

Significance

Having a good credit score number will allow you to receive lower interest rates on lending products such as car loans and mortgages. Employers may also check your credit report before extending an offer of employment, and future landlords will check your credit score before allowing you to rent an apartment.

Scoring Range

According to the Pueblo Federal Information Center, if your FICO credit score is above 700, lenders would classify you as having a good credit record. If your credit score is under 600, however, lenders would consider you a credit risk.

Considerations

Each of the three credit reporting agencies may have a slightly different credit score on file for you, depending on the accuracy of the information they have on file. You can find out your credit score by paying a fee to Experian, TransUnion or Equifax.

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What Does Transfer Sold Mean on a Credit Report?

Each account that appears on your credit report does so within a trade line. The trade line contains all of the information the creditor reported to the credit bureaus about your account and includes the amount you owe, the creditor's contact information and the current status of the account. Trade lines on your report that list a status of "transferred" or "sold" are no longer owned by the account's original creditor.

Account Status

A creditor reports an account as "transferred, sold" when it sells the account balance to a third party. When a debtor refuses to pay, selling nonproductive accounts reduces the original creditor's financial loss. Collectors purchase unpaid accounts for far lower than the amount the consumer actually owes. The original creditor then writes off any balance that remains as a loss when it files taxes.

It isn't only original creditors, such as banks and credit card providers, that transfer debts. Collection agencies sell debts they cannot collect to other collectors. Thus, both an original creditor's trade line or a debt buyer's trade line can reflect that your unpaid debt was sold.

Collection Accounts

Not all unpaid debts that a creditor transfers to another company are sold to that company. Instead of selling the debt, the creditor has the right to hire a third party to recover the debt on its behalf. Should this occur, the account status may read "transferred, closed" or simply "transferred."

If a creditor maintains ownership of a debt and the collection agency it hires successfully collects the unpaid balance, the collection agency does not have the right to keep the recovered amount as it would if it had purchased the debt from the original creditor. Rather, the collector transfers payment to the creditor that then pays the collection agency a commission for its work.

Credit Reporting

Collection agencies often report accounts they purchase to the credit bureaus. If the original creditor's trade line notes that it transferred and sold your debt, it's a fair bet that the debt collector that purchased the debt also inserted a trade line into your credit file. Because collection accounts have a negative effect on your credit score, your ability to obtain new credit will decrease after an account is sold to a collection agency and the collection agency reports the debt to the credit bureaus.

Time Frame

All trade lines on your credit report, regardless of their status, are subject to federal credit reporting periods set by the Fair Credit Reporting Act. Accounts that reflect a status of "transferred, sold" are derogatory by nature and, according to the FCRA, must be deleted after seven years and 180 days. When the credit bureaus remove the negative trade line from your credit history, your credit score will improve.

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What is the Credit Score After Negative Items Are Removed?

Events such as bankruptcies, car repossessions and charged-off credit cards have a negative impact on your credit score. When these items are removed from your credit report, it can cause your credit score to rise. However, many factors have an impact on your credit score and no two people's credit reports are exactly the same. Therefore, you cannot accurately predict how the removal of a negative item will impact your score.

Negative Events

In terms of credit reporting, a negative credit event can hurt your credit score in two ways. Firstly, the fact that the event actually happened has an impact on your score. Secondly, failure to resolve the negative event also has an impact on your score. This means that a charged-off credit card shows up on your report and while you can minimize its impact by paying off the debt, the fact that you failed to pay it to begin with remains on your report.

Paid Versus Settled

You cannot remove a delinquent debt from your credit report by paying it off but if you pay it off then the creditor reports the debt as closed rather than outstanding. If you pay the debt in full, the creditor informs the credit bureau of the pay off and your credit report says "paid." You tend to see a bump in your score when this happens. If you agree to settle the debt for an amount below the outstanding balance, then your creditor notifies the credit bureaus that you "settled" the account. Settled accounts are little better than delinquent accounts in terms of your credit score because essentially in both circumstances you failed to pay your debt in full.

Removal

Negative credit events remain on your credit report for seven years with the exception of bankruptcies, which stay on your file for 10 years. However, credit score calculations are heavily tilted towards recent credit activity rather than past history. By the time a seven- or 10-year-old debt clears your report, it really has very little impact on your credit score anyway. Therefore you should not expect an immediate bounce when these items disappear.

Considerations

You can improve your credit score by paying all of your existing debts on time and attempting to keep low balances on revolving credit accounts such as credit cards. Additionally, limit your applications for new credit because frequent credit inquiries are usually associated with people who are having money problems. Positive credit related data helps to offset negative events and often has more of an impact on your score than the gradual removal of old debts.

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Does My Parents' Credit Affect Me?

You may not realize it, but your parents may have damaged -- or helped -- your credit rating. How your parents handle credit does not automatically pass on to you, but many parents attach their children's names to parental accounts that affect your credit rating. If you want to build credit on your own, you can probably acquire accounts by yourself.

Identification

The credit bureaus never merge credit reports. Your parents' credit can only affect you when they add your name to an account. Becoming an authorized or joint holder builds your credit rating when your parents pay bills on time, or damages your credit rating when they miss payments. Thus, much of your credit rating is in your parents hands when they list you on an account. Any debt on a co-signed or authorized account counts against your month debt to income ratio, which has just as much importance as a credit rating. If your parents declare bankruptcy, you probably become solely liable for any co-signed debt.

Credit Card Reform

In some cases, you must rely on your parents' credit history. Congress required anyone under 21 to have a parent co-sign on an account or have some verifiable source of income to acquire credit. Unless you hold a job and earn at least a few thousand dollars in income, you may need your parents to help you build credit.

Considerations

Lenders do not always use the details listed on a credit report when they see joint or authorized accounts. For example, you can have a credit history older than you are when your parents add you to an account they opened before you were born. In this case, the lender probably would give you a shorter credit history, which counts for 15 percent of your credit score, according to Jeanine Skowronski of Main Street.

Tip

You should have some income, such as a part-time job, so a lender can verify that you can afford a line of credit. Unless your parents have helped you build credit, you may need to look at entry-level credit cards. Secured credit cards -- credit card backed by a security deposit -- and retail accounts are a common first credit card because of their low limits and lax approval requirements. If you feel comfortable attaching your name to your parents' account, consider becoming an authorized user so you have no legal liability to pay the bill.

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Where to Find Your Credit Score for Free

Your credit score is a three-digit rating that helps lenders, credit-card issuers and others determine if your creditworthiness. It is calculated based on your payment history, how much you have borrowed, the types of credit you have had and the average age of your credit-card accounts. While you can get a credit report for free from credit bureaus once annually, you typically must pay for an official credit report. Several websites offer some level of access to your credit score.

Credit Karma

Credit Karma gives you daily access to your credit score. Credit Karma is supported by ads and does not require you to put credit-card information on file. It only asks for date required to pull your credit report. In addition to offering daily access to your credit score, Credit Karma provides a credit report card and tips for improving your credit score.

Quizzle

Quizzle offers free access to your credit report and score. The score and report are updated every six months. No credit-card or personal information needs to go on file, and you provide only data required to pull your credit report. Quizzle also offers advice and tips to help you understand what is in your credit score and how to improve it.

Introductory Trials

Experian, Transunion.com and Equifax.com offer free access to your credit score. However, these require you to enroll in free trials of various identity protecting/monitoring programs. You are required to provide your credit-card information and if you do not cancel within the trial period, you may be obligated for monthly payments for a year for enrollment in the service. Many banks and credit-card companies also offer free trials of credit-monitoring services that provide access to your credit score but enroll you in programs with annual commitments if you do not cancel within a stated period.

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How to Remove Negative Marks From Credit

You have limited options for removing negative information from your credit report. You can have the information removed if it is inaccurate or outdated. Credit repair firms may insist that there are other options, but the Federal Trade Commission or FTC says that just isn't so. The FTC says credit repair agencies use misleading advertising when they say that late payments, foreclosures, bankruptcies and other information can be removed. Only the passage of time can cause accurate, negative information to be removed from your report, the FTC says.

Instructions

1

Get a copy of your credit report from Annual Credit Report. The website was created by the nationwide credit bureaus to offer free reports under the terms of the Fair Credit Reporting Act. Annual Credit Report is the only website authorized to offer completely free reports under the act, according to the FTC.

2

Review your credit report for negative information that is inaccurate or outdated. By law, the credit bureaus must correct information that is inaccurate within about 30 days after receiving notice from you. Most negative information becomes outdated after seven years and is automatically removed from credit reports after that. Bankruptcies remain for 10 years.

3

Write the credit bureau to dispute inaccurate or outdated information. Send your request to the credit bureau at its address on the credit report. Follow up in writing a second time if you do not receive a response after about 30 days. The FTC says the credit bureau must offer you another free credit report -- through Annual Credit Report -- if it makes changes based on your correspondence. You're entitled to three free reports a year through the site, but a reorder because of a change by the credit bureau won't count toward your total.

4

Order another free copy of your credit report to confirm that the changes you requested were made.

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How Come My Credit Scores Are All Different?

Credit scores have been used in the United States since 1956, when engineer Bill Fair and mathematician Earl Isaac created a formula to determine whether a person was a good credit risk, according to Alexis Leondis of the Bloomberg financial website. These scores are now widely used by banks, finance companies, insurers and other companies to make important decisions about your credit worthiness when you seek loans or insurance policies. There are several different versions.

Definition

Your credit score is a three-digit number that tells creditors how likely you are to fall behind on your bills within the next two years. The score comes from information in your Experian, Equifax and TransUnion credit reports, coupled with a comparison to other consumers from similar financial backgrounds. The MyFICO scoring website explains that credit report factors include payment history, owed debt, credit limits and the ages of your accounts.

Differences

While Fair Isaac Corp. (FICO) originated credit scores, each credit bureau now has its own variation on the FICO formula, according to Pat Curry of Bankrate.com. Experian calls its version the Experian/Fair Isaac Risk Model, while Equifax uses the BEACON score and TransUnion uses the EMPIRICA score. Each credit bureau collects material independently for its credit reports, so they may be slightly different, which is what causes variance in their scores. Their formulas have minor differences, which also makes the numbers vary, according to Curry. Lenders consider the differences when evaluating your scores in response to a credit application.

Standardization

The Vantage Score is a standardized credit scoring model resulting from a credit bureau collaboration. Curry explains that this score will eliminate differences in the number, no matter which credit bureau provides the number, because Experian, TransUnion and Equifax all calculate it in the same way. The Vantage Score runs from 501 to 990, with higher numbers being more desirable. The bureaus also attach a letter grade, from F to A, as a quick indicator of your credit worthiness.

Significance

Your credit score is very important, no matter which version a lender uses, because it influences your borrowing ability and the amount of interest you pay. For example, the FICO credit score ranges from 300 to 850. Curry explains that a person with a 520 score pays almost four and a half percentage points more than someone with a 720 score. This translates to over $110,000 in additional interest payments on a 30 year mortgage loan.

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Can I Report My Own Good Credit?

Instead of depending on lenders to report your good payment habits, you can report your own good credit -- with a catch. The only credit agencies likely to accept your self-reported payments are far less known and respected than the national credit bureaus. Thus, reporting your own payments is of questionable value.

Identification

You can report your own good credit, but usually only to an alternative agency. Unlike the national credit bureaus -- Equifax, Experian and TransUnion -- alternative agencies accept almost anything they can verify, such as rent and personal loans. However, you must pay an alternative agency to perform this service. The national credit bureaus could verify good credit, but only if the account comes from a lender that already reports to the bureau and forgets to update it.

Disadvantage

Most lenders prefer the FICO scoring model to rate customers. You can find a lender to accept a score from an alternative agency, but this process likely takes longer than if you just use your traditional FICO score. If you go through the expense of paying an alternative agency to verify your data, it might just cost the same to get a card with typically low lending standards -- such as a retail card -- and bear the high interest rate until you can acquire a card with a lower interest rate.

Benefits

Reporting your own good credit to an alternative agency might be your only option for proving your creditworthiness. The traditional credit bureaus contain no information on 50 million people, because they do not report utilities or rent, according to the Fair Isaac Corporation. As of 2011, the major bureaus have plans to incorporate nontraditional data from alternative agencies into regular credit reports. The FICO Expansion model, for example, uses information from alternative agencies such as PRBC. If you have a poor regular FICO score, you can use alternative ratings to supplement it.

Tip

When you cannot obtain a conventional credit card, a secured account can report your own good credit to the national credit bureaus and improve your FICO score. Secured accounts require a security deposit, so they have the lowest standards of any card. Put bills on your account and pay it off every month. You won't see specific purchases on your secured account, but it will add good data if you pay at least the minimum every month.

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Do Rental Lease Agreements Drop Your Credit Score?

Owning a home isn't for everyone. Unlike homeowners, renters are not liable for property taxes and insurance, and maintaining the property's condition is often the sole responsibility of the landlord. Renters, however, must sign a lease agreement with a landlord prior to moving into the rental property. A renter's failure to adhere to his lease can have a negative impact on his credit score.

Lease Agreements

A lease agreement spells out the terms of the renter's contract with the landlord, including such items as how long the renter agrees to live on the property, the amount of rent she must pay each month and how the renter may use the property while she lives there.

Your credit report is a record of previous accounts and payments to current and past creditors. Signing a rental lease has neither a positive nor a negative impact on your credit because the lease itself is not something the landlord can report to the credit bureaus.

Credit Checks

Before offering a prospective tenant a lease agreement, most landlords want to make sure the applicant is trustworthy. By checking an individual's credit history, a landlord can determine how likely the applicant is to pay his rent on time based on the individual's history of past payments -- or lack thereof -- to other creditors.

When you apply for a rental home or apartment, the landlord conducts a "hard" credit check. This type of inquiry lowers your credit score, but only by a few points. Your credit score will gradually recover on its own after a hard credit check.

Payments

As a general rule, most landlords do not report the monthly rent you pay to the credit bureaus. Thus, adhering to your lease by paying your rent on time does not help your credit score because your payments do not appear on your report. If you move without paying rent you owe, fees you agreed to in the lease or damages you or your guests caused, your landlord may take you to court for the balance you still owe. A court's judgment against you appears on your credit record and drops your credit score.

Lease Violations

Violating the terms of your lease -- even if you pay your rent on time -- can result in your landlord evicting you from the property. If you leave peacefully and pay off any debt you owe, the landlord has little incentive to take you to court and your credit score will not suffer. If your landlord sues and wins a judgment, however, your credit score will drop.

Not only does the judgment itself hurt your credit score, but the credit bureaus will note that the judgment was connected to an eviction. Future landlords who pull your credit record will see that a previous landlord had to have you evicted from your rental property. This makes you a higher risk and could result in future landlords denying your housing applications or demanding a higher security deposit before allowing you to sign a lease.

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How to Build Credit When You Are 17

Credit is one of the most important foundations of any individual's personal financial planning. A line of credit allows you lots of leverage to purchase items and make investment choices such as taking out a mortgage to purchase a home. Building up a superior credit history should ideally start as early as possible. Even if you are very young, you can still build up a good credit history that will allow you the freedom to achieve your long-term financial goals.

Instructions

1

Find a part-time job and hold it for at least a year. A part-time job has several advantages. it will allow you demonstrate that you are capable of meeting the expectations of employers and earning a steady paycheck. Creditors look upon long-term jobholders with great favor.

2

Open up a bank account. Many banks will allow adolescents to open up bank accounts in their own names. Check carefully with the bank first. Banks vary in the amount of money required to open an account. Some banks may ask for a certain sum, such as $1,000, to open the account. Some banks may let you open accounts with lesser amounts, but may charge fees for services such as withdrawals and checking. A bank account will serve as collateral for credit and demonstrate that you are capable of saving money.

3

Apply for a debit card. A debit card differs from a credit card in that the money is immediately withdrawn from your account the minute you pay for an item. Debits cards are linked to bank accounts. Minors may apply for debit cards provided they have the funds. Consult with your bank for more information. Holding a debit card can demonstrate that you know how to stick with a budget.

4

Apply for a credit card with a parent as a guarantor. Credit card companies allow adolescents to have cards as long as they have parental permission.

5

Purchase inexpensive items on credit. Make small purchases (less than $100) with a credit card. Pay off the cost of the items each month when the bill comes due. This will show that you are capable of using credit and paying your bills on time.

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Does Refinancing Hurt Your Credit Score for a Mortgage?

Individuals with mortgages will often choose to replace their mortgage with a new, more favorable one. This process, called refinancing, can be motivated by many things: an improvement in interest rates, a change in the mortgage holder's financial situation or a desire to change the loan's repayment terms. So long as the size of your new mortgage is similar in size to that of the old mortgage, refinancing should not harm your credit score.

Amount of Debt

One of the chief factors that goes into the calculation of a person's credit score is the amount of debt he currently has. Generally, when mortgages are refinanced, the old loan will be purchased and paid off by a lender, who will issue the borrower a new mortgage of a similar size but with different terms. If the size of loans are similar, the borrower should see no change in his credit score.

Credit Inquiry

While actually refinancing the loan will likely not affect your FICO score, applying for new loans might. This is because each time a lender runs a credit check on a prospective borrower who has requested a quote for a loan, this inquiry--known as a "hard" inquiry--is listed on the person's credit report and causes her score to drop a few points. However, multiple inquiries from similar lenders--a sign that the individual is shopping for a new loan--will likely be counted as a single inquiry.

Paying on Time

While refinancing will not affect your credit score much, if at all, how you repay your mortgage will. The surest means of dropping a credit score quickly is to miss a payment. Sometimes people will choose to refinance into a mortgage with larger-sized payments to pay off the loan quicker. This may make it more difficult to repay the loan on time. However, repaying the loan on time can improve your credit score.

Length of Credit

One additional factor that may affect your credit score is the length of time that you've had your old mortgage. Credit scores are calculated in part based on the length of time that a person has had credit, going back to the person's oldest open account. The longer your credit history, the better your score. If your mortgage represents your oldest credit account and you close it, your score may drop a few points.

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Effect of Balance Transfers on Credit History

Your credit history is quite comprehensive. Three national credit bureaus called TransUnion, Experian and Equifax maintain databases with information on your credit-related activities, including credit card use. Various actions, such as purchases, payments and even balance transfers, affect your credit history and the way in which lenders view you.

Definition

A balance transfer is an action in which you move the amount you owe from one credit card account to another. You can transfer the entire amount or just part of it, according to the My FICO credit score website. The credit card company to which you transfer the balance usually charges a fee, although some run free transfer specials. The average fee is 3 percent of the transferred amount. The original credit card account remains open, even if you transfer the entire balance, unless you close it.

Effects

All of your credit card accounts and balances appear on your credit reports, the Federal Reserve Bank of San Francisco site explains, and the information is regularly updated. The balances change once your transfer is complete, showing the new decreased amount on the original account and the increased balance on the card to which you made the transfer. This does not change your overall debt, but it may affect your credit score if you opened the transfer card recently. The My FICO site explains that credit application inquiries may shave up to 5 points from your score. Your score can also drop if you close the original account because lenders favor long-term accounts over new ones when evaluating your history.

Considerations

Your balance transfer may help you raise your credit score if your debt load is high. You save money on interest when you transfer the balance to a card with a lower interest rate. The Motley Fool financial website recommends paying more than the minimum amount due, which drops the balance faster, and the lower rate allows more of each payment to knock down the principal amount.

Alternative

You can sometimes get the same money-saving and credit history benefits without transferring your balance from a high-interest credit card account. Lisa Lazarony, a writer for the Bankrate website, recommends calling the card issuers for your high-interest accounts and requesting a rate reduction. Your position is strengthened if you have an excellent long-term payment history. Call back in two to three months and ask again if the company says "no" to your first reduction request.

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Code of Conduct for Credit Rating Agencies

In September 2003, the International Organization of Securities Commission established a code of conduct for credit rating agencies. The overall goal for the code of conduct is the oversight of investor and public protection and transparency and fairness in business practices.

Integrity

The code of conduct provides for specific integrity standards. A few of these include detailed written procedures, efficient internal records, a consistent rating process and upfront information. Credit rating agencies are obligated to review credit reports and update client records regularly.

Responsibility

Credit reporting agencies must conduct business practices using only factors that are specifically related to the credit rating. Agencies need to ensure that they maintain appropriate professionalism and objectivity.

Conflicts of Interest

A credit rating agency must have specific policies and procedures in place for identifying and managing conflicts of interest. All conflicts of interest must be disclosed to the appropriate individuals. The areas of rating and oversight should be separated, and different employees should work in each section.

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Do Financial Inquiries Lower Your Credit Score?

In some cases, the mere act of having a creditor check your credit score can result in your score dropping a few points. This is because the credit reporting bureaus responsible for maintaining credit reports will interpret this inquiry as a sign that you are considering taking out another loan, suggesting you may be less creditworthy. However, only certain types of inquiries hurt your score.

Credit Report

Whenever a creditor inquiries about your credit history to a credit reporting bureau, this inquiry is listed on your credit report. It is the information contained on this credit report that is used by credit reporting bureaus to fashion your credit score. However, only inquiries made by creditors in response to a request by the individual for information about a new loan will count against your score.

Soft Inquiries

Inquiries made by parties that were not done at your request are known as soft inquiries. Soft inquiries can be made by a number of different kinds of people, including landlords, employers and finance companies trolling for new clients. None of the inquiries were done at your request because you were considering taking out new credit. Therefore, although they are listed on your credit report, these inquiries won't hurt your score.

Hard Inquiries

An inquiry made by a lender or creditor from whom an individual is considering taking out a loan is called a hard inquiry. A hard inquiry will count against your credit score, although it generally will only shave off a few points. This is because credit reporting bureaus believe that if a person is considering taking out a new loan, he may have a slightly lower chance of paying off his current loans.

Considerations

A borrower seeking a new loan on a home or car may worry that each of the inquiries by the finance companies to which he turned in applications will count against him. In fact, credit reporting bureaus do not count similar inquiries--such as multiple inquiries for a car loan--made within a short period of time against the individual multiple times. A group of these inquiries will result in a single, small reduction in score equivalent to if the individual has applied to only one company.

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Where to Get Free Credit Score Information

Under the Free Credit Reporting Act, American consumers are entitled to one free credit score report from the three major credit reporting companies per year. Other companies may offer free credit score reports, but usually with conditions.

Ordering the Report

Equifax, TransUnion and Experian --- the three major credit score reporting companies --- have jointly established a toll-free number, a mailing address and a website for consumers to order a free annual credit score report.

Required Information

Provide your name, address, date of birth and Social Security number. A previous address may be required if you have resided at your primary address for less than two years.

Other Companies

Several companies offer free credit reports as a means to lure the customer into services that they will have to pay for later. Often, these companies provide a short free trial membership (along with the free credit score report) that, if not canceled by the end of the trial period, the customer will begin paying for.

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What Items Are Considered on an Overall Credit Score?

Having a good credit score is important because it has a direct impact on whether or not an individual will get approved by lenders for mortgages, car loans and other credit. In addition, having a low credit score can lead to significantly higher interest rates. Understanding the different items that are considered on an overall credit score is an important part of being financially responsible.

Payment History

Payment history accounts for 35 percent of a person's overall credit score, according to MyFico.com. Even making one late payment can lower your credit score significantly. Missing your payment entirely and having your bills sent to a collection agency will hurt your score even more. Setting up payment reminders is one option to avoid late payments. Making payments on time for several months after making a late payment will help bring your score back up.

Amount Owed

The amount of money an individual owes accounts for 30 percent of a person's overall credit score. Credit bureaus look at how much a person owes compared to their total available credit limit. Bankrate.com suggests keeping your total amount owed below 30 percent of your total available credit.

Length of Credit History

The length of a person's credit history accounts for 15 percent of a person's overall credit score. Creditors are more interested in giving a new line of credit to someone with six years of reliable payment history than someone with just six months. Credit bureaus typically look at individual accounts when determining the length of a person's credit history. Accounts that have been open for three years have a bigger impact on a person's credit score than one that's been open for only a few months. However, if the older account was not used consistently, then it will not have as large an impact on a person's credit score as a newly opened account that's used consistently every month. Older accounts that are used consistently have the largest bearing on a person's credit score.

Types of Credit

The types of credit a person uses accounts for 10 percent of a person's overall credit score. The main two types of credit are revolving and installment credit. Installment loans are loans like mortgage and car loans. Credit cards are the best example of revolving credit. Individuals with a mortgage will get a boost to their credit because mortgages are harder to obtain than credit cards. Individuals with a general credit card instead of a store credit card are also looked upon more favorably. When it comes to this credit score factor, having a mix of revolving and installment credit is your best bet.

New Credit

New credit accounts for 10 percent of a person's overall credit score. The term new credit encompasses recently opened accounts and recent credit inquiries. Applying for new lines of credit will temporarily lower your credit score. However, as time passes your score will rise, even if you were turned down for new credit line.

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How Derogatory Items Affect Your Credit Score

Your credit score serves as an assessment of your credit history to help creditors and lenders reduce their financial risks when lending to you. Derogatory entries on your credit report, such as a bankruptcy or collection account, lower your credit score and lead to lenders charging you higher interest rates on money you borrow -- if they agree to do business with you at all. Derogatory entries influence your credit score differently depending on a variety of factors.

Initial Impact

An identical negative report will damage different consumers' credit scores by varying degrees, depending on the information already present within each individual's credit file. This is because your credit score takes all the financial data within your credit report into consideration. For example, while a foreclosure may drop one consumer's credit score by 150 points, it may cost another consumer only 85 points. In general, the higher your credit score is, the greater the damage you will suffer from a derogatory entry.

Effects Over Time

Your most recent history with debt has the greatest importance to prospective creditors. Because of this, the FICO credit scoring formula -- the one used by many lenders when reviewing consumer credit scores -- places the greatest degree of importance on accounts less than two years old. Provided you practice responsible habits, such as keeping your balances low and making timely payments to your creditors, a derogatory entry will have less of a negative effect on your credit score as the entry ages.

Paid vs. Unpaid

While paying your debts is one method of keeping your credit score from suffering, paying off certain derogatory debts, such as collection accounts, does not positively influence your credit score. Paying off a charge-off that reflects a balance, however, does positively influence your credit score. This is because the credit scoring formula considers the information your original creditor reports more pertinent to your creditworthiness than information reported by a collection agency.

Settling old debts, while admirable, does not erase the debt's status as delinquent. The very act of settling the account updates it on your credit report -- causing the derogatory debt to damage your credit score further.

Reporting Period

The Fair Credit Reporting Act notes that, with the exception of bankruptcies, judgments and tax liens, the credit bureaus must delete derogatory entries from your credit file after seven years. Once the credit bureaus delete a negative entry, it no longer factors into your credit score and lenders do not view evidence of the debt when evaluating your credit report. Although you still technically owe a deleted unpaid debt, it cannot affect your credit rating, nor can the creditor "reinsert" the debt once the federal reporting period passes.

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What Are the Three Major Credit Reporting Companies?

Three companies---Equifax, Experian and TransUnion---control the credit file that most lenders see when you apply for a loan. However, they do not necessarily control your credit score. Another company, the Fair Isaac Corporation, has a proprietary formula that the major bureaus use when you purchase your score from them. The bureaus themselves, however, are mostly the same with subtle differences.

History

Equifax has the longest history of any of the bureaus. Cator and Guy Woolford started Retail Credit Company to collect payment history on local grocery store customers. RCC was the largest credit bureau until the 1970s when it changed its name to Equifax. Experian formed in 1980---then known as CCN Systems---and is the youngest of the major bureaus and the only foreign company. CCN was based out of England, but acquired U.S. defense conglomerate TRW Information Services in 1996. TransUnion started in 1968 as a subsidiary of Union Tank Car Company to collection information on clients. Their credit reporting took off when it acquired Credit Bureau of Cook County and its files on 3.6 million people in 1969.

The "Fourth" Bureau

Technically, a fourth bureau exists: Innovis. However, this company does not sell credit reports to the general public. Their credit reports only affect the types of loan offers you receive through the mail, so it might not be as important as a report from the other three. It might more become important for consumer credit reporting in the future, because Fannie and Freddie mortgage providers must report to Innovis. As of 2011, you cannot request your free Innovis report, even though the Fair Credit Reporting requires it.

Any Differences Between Them?

Equifax, Experian and TransUnion function in basically the same way and report the same the data. The difference lies in their ability to acquire data. The bureaus sometimes miss items, such as a collections account, which leads to most consumers receiving a different report from each bureau. They also have slightly different reporting standards. Experian, for example, acquired RentBureau in 2010, so it reports some rental histories, while the other generally do not.

Annual Credit Report

The bureaus rarely work together, except on the Annual Credit Report website, which federal law requires. Experian, Equifax and TransUnion must provide a free credit report each year and in some cases, such as when you are reject for a job due to credit problem, more. The Annual Credit Report website is the only way to get your free reports. The individual agency websites can---and do---charge for reports.

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Debt-to-Income Ratio and Credit Scores

Consumers with a high debt-to-income (DTI) ratio can breath a sigh of relief -- credit scores do not factor in their DTI ratio. However, a high DTI also means you might not qualify for any loan. The DTI may be as important as a credit score in determining credit approval and often is the decisive figure on a credit application.

Relationship

DTI does not affect credit score calculations because income is not reported to credit reporting bureaus, and those bureaus cannot confirm a consumer's income. DTI and credit scores usually have a direct relationship, however. That is, the higher your credit score, the higher your DTI can be for you to still receive credit approval. Also, the lender might use information on your credit report to calculate your monthly debt payments.

What is a Good DTI?

DTI typically takes precedence over credit scores in credit approval decisions, because DTI quantifies an ability to pay, whereas credit scores calculate a willingness to pay. If a DTI is as high as 38 percent, according to the Michael Bluejay website, few lenders will approve credit for a prospective borrower, because this leaves very little income left to pay for expenses and other essentials not included in a DTI ratio, such as grocery bills. Bankrate reports that certified financial planner Diane McCurdy recommends keeping your DTI below 30 percent.

Considerations

Some credit scoring systems can incorporate a DTI ratio, known as application-scoring models. These usually are custom-made formulas for a company's use only, and they are not used by credit bureaus. Thus you should keep a DTI ratio as low as possible.

Tip

If you have a high DTI, you should find ways to cut spending in your budget and divert those resources to paying down existing debt. Credit card debt typically may be the first thing you should tackle, because it usually has the highest interest rate. When you cannot cut spending and have a high DTI, a new large loan, such as an auto loan or mortgage, is probably too risky at the moment.

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Tricks to Raise My Credit Score

A low credit score can cost you both time and money. If you have poor credit, you will have more trouble getting a mortgage or auto loan. You will have to pay a higher interest rate on a loan than people with high scores. But your credit score changes as new information updates your credit history. Find out how to raise your credit score by managing your use of credit and improving your credit history.

Pay Bills on Time

Your credit score reflects your reliability in paying your creditors. They want to lend to clients who always pay on time. Therefore, begin immediately to pay on time every month, as finance expert Jane Bryant Quinn suggests. Find ways to cut back on monthly expenses to free up money to keep up with your obligations. Cut back on eating out, monthly cable or phone expenses or cancel your gym membership.

Eliminate Errors on Your Credit Report

If your credit report has errors against you, they can lower your score. Get copies of your reports from the three major bureaus and inform them of errors in writing, as Jean Chatzky, the author of "Pay It Down," suggests. Attach copies of proof of payment or any other documents that support your claim. Getting rid of false negative information will raise your score.

Improve Your Credit Use Ratio

According to Kimberly Lankford of "Kiplinger's Personal Finance," about a third of your credit score reflects the ratio of the credit you use to the credit available. If you pay off some of your debt, your ratio will improve. Move cash from savings or money market accounts to pay down debt. Cash in some savings bonds or mutual funds, and put the money toward your debt. Lankford suggests aiming for use of 20 percent or less of your credit.

Raise Your Credit Limits

If you have been a good customer for a credit card company, usually or always paying on time, call and request an increase in your credit limit. If the company grants your request, you will receive a favorable boost to your ratio of used to available credit. This method will improve your credit score at no cost to you.

Watch Your Debt to Income Ratio

Credit bureaus also watch your debt to income ratio. Including your home mortgage, you should owe less than 40 percent of your gross income to debt obligations each month, according to Quinn. Avoid additional borrowing if this ratio is high. Free up money to pay down debt. Sell assets or find extra work to earn money to pay down your debt and improve this important ratio.

Become a Sane and Stable Borrower

Practice good financial habits.

Practice good financial management every month. Pay your bills on time, but avoid running up large bills each month even if you can pay them. Liz Pulliam Weston of "MSN Money" says that large charges will count against you. Avoid opening or closing many accounts, but use your long-standing credit cards once in a while. These techniques over time will give your credit record stability and improve your credit score.

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What Is a Poor Credit Score Range?

If you have an excellent credit score, you might be able to get a loan to buy an entire store in New York City. But with a poor credit score, you might not get any credit at all. Credit scores range from 300 to 850. If your score is in the poor range, now is the time to improve it. Otherwise lenders will offer you only the most expensive loans, if they offer you any loans at all.

Identification

The term FICO refers to Fair Isaac and Corp., which developed the system that credit bureaus use to calculate your credit scores. The score is omputed based on your credit history. A lender can look at your FICO score and assess what kind of credit offers or interest rates you qualify for.

You have three credit scores, one from each of the three major credit bureaus: Experian, TransUnion, and Equifax. For your scores to be calculated, each of your credit reports must have at least one account that has been open at least six months.

Considerations

Thirty-five percent of your credit score is based on payment history. Thirty percent is based on amounts you owe. Fifteen percent is based on the length of your credit history. Ten percent is based on new credit. And another 10 percent is based on types of credit used, according to What's in your FICO Score at myFICO.com.

A poor credit score is anything under 580, according to Bad Credit Repair. Even a score of 580 to 619 is low, and it mean you'd pay a hefty amount in higher interest rates on loans. If your credit score is below 499, you need serious credit repair.

Significance

Your FICO score can make a huge difference in how much money you end up paying over the life of a loan. For instance, with a 30-year mortgage on a $300,000 loan, just a 100-point difference in your score could equal $40,000 extra in interest payments, according to Your FICO Score Is Pivotal at myFICO.com.

Prevention/Solution

Your credit score changes over time, and that's good news. You can improve your credit by making just a few changes each month. For instance, you can pay your bills on time. Get any past due bills up to date and make sure they stay current. Try not to get accounts put into collections, and try your best to avoid going into bankrupcty. These things will stay on your credit report for seven years. If you are having challenges paying all of your bills, contact the creditors to see if they can work out something for you. You can also contact a credit counselor. Keep the balances on your credit cards as low as possible. If you do these things, over time your credit score will get better.

Expert Insight

You can request your credit report for free each year from Annual Credit Report. You'll get your report from the three major credit bureaus so you can make sure you stay out of the poor credit range.

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How to Block Credit Information

You have the right to restrict third parties from gaining access to your consumer report. The law permits you to block all or a list of specifically named third parties from viewing your credit report at any time and for any period of time. Placing a block on your credit report also can be reversed at any time. Before blocking credit information, consider the timing and understand that a block -- or security freeze as it is also known -- can seriously delay credit and loan applications.

Instructions

1

Contact each of the three consumer reporting agencies and request a block to prevent the dissemination of your credit information to creditors, companies, employers and other requestors without your consent.

Equifax

P.O. Box 740241

Atlanta, GA 30374-0241

800-685-1111

Equifax.com

Experian

P.O. Box 9595

Allen, TX 75013-9595

888-397-3742

Experian.com

TransUnion

P.O. Box 1000

Chester, PA 19022

800-888-4213

TransUnion.com

2

Verify your identity. Provide your legal name, personal identification number or password, Social Security number and date of birth.

3

Authorize a security block and set a date on which the block will go into effect. Give verbal authorization (or written, if making your request by mail) for the consumer reporting bureau to block your credit information until a specified (or indefinite) date.

4

Grant a specific person or company access to your credit information. You can also temporarily lift the block during a specific period of time, which is a viable option well after your security freeze is in place.

5

Lift the freeze at least one week before applying for credit or beginning any activity that requires a third party to request your credit report, such as applying for a new job or line of credit.

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What Is R3 on a Credit Report?

A credit report---a record of how you have handled your financial responsibilities---contain numerous codes to denote account activity. The reader of a credit report must understand what the codes stand for to be able to correctly interpret the credit report.

Why Use Codes?

A credit report contains so much information on each account that codes are necessary to keep the length of the credit report reasonable. Common information including per account on a credit report is creditor name, balance, high balance, monthly payment, payment history and type of account.

The R Code

Accounts showing an "R" code indicate the account is a revolving account. An account with revolving credit has a credit limit. You can make payments to reduce the balance on the account and charge back up to the credit limit. A credit card is an example of a revolving credit account.

The I Code

Accounts showing an "I" code indicate the account is an installment loan. An installment loan begins with a set loan amount. As you pay down the loan, you cannot charge back up. You make payments until the loan is paid off and closed. A mortgage or a car loan is an example of an installment loan.

The Numbers

The number codes are in addition to the letter codes. The number codes run from are one through nine. One, two, three, four and nine are the numbers commonly seen on a credit report. A one indicates the account is paid on time. A two means a payment has been 30 days late. A three shows the account has been more than 60 days late. A four is telling you the account has been more than 90 days late. A nine indicates the account has been sent to collection or charged off.

R3 Code

As you can interpret from the above information, an R3 would mean the account is a revolving credit account that has been 90 days late at some point. This could be currently 90 days late or 90 days late at some point in the account history.

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Will My Husband's Short Sale Affect My Credit?

Sometimes, one spouse sacrifices his credit history so the other spouse can save hers. However, because spouses often join their accounts, a major delinquency like a short sale can affect the reports of both spouses. The effect of a short-sale on your husband's credit report depends on where you live and how you set up the mortgage.

Identification

Your husband's short sale will not affect your credit rating as long as you did not co-sign on the mortgage. If you co-signed the mortgage, the lender reports a delinquency on both of your reports. A short sale can also affect your credit report if you live in a community property state. In a community property state, both spouses are liable for debts incurred during marriage. The lender could pursue a judgment in your name if your husband does not pay off any balance left over on the mortgage after the sale in a community property state. Judgments appear on your credit report as a public record and do damage like a collection account or charge-off debt.

Benefits of Individual Accounts

There is no such thing as a joint credit report, only joint accounts, but keeping only joint accounts could impede your ability to gain credit in the future. If you apply for credit in the future as co-signers, the lender is more likely to deny your loan if one of you have poor credit. On the other hand, if you want to qualify for a mortgage again, you have use only your income if you apply as an individual.

Considerations

Short sales do not always damage your credit, because there is the possibility that the sale pays off the entire mortgage. The lender and seller in a short sale agree to take a minimum amount for the property and cancel the rest of the mortgage. This does not preclude someone from making a much larger than anticipated offer that covers the mortgage, especially if you already paid off a significant chunk of the debt. Alternatively, you could try to negotiate with the lender to get him to report the account as "paid as agreed" regardless of the selling price.

Tip

The short sale probably lowers your husband's credit score by more than 100 points. You should help him start rebuilding his credit immediately. You can add him as an authorized account holder on your individual accounts, which transfer account history to his report. Authorized users are much easier to remove than joint account holders. Also, authorized users do not have to pay the bill on an account.

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How Quickly Does a Credit Score Increase After Full Payment of Credit Card Debt?

Your credit score reflects your creditworthiness at a particular point in time; it tells lenders how much risk they would be taking by lending you money. You can expect your credit score to increase within 30 days of paying off your credit card debt. Paying down a significant chunk of your credit card debt can also raise your score within a month.

Time Frame

Typically, creditors update consumer accounts with new information on a monthly basis. Federal law allows credit bureaus 30 days to report on your payment activities.

Debt Management

In addition to paying off credit card debt, keeping your credit card balances below 50 percent of your credit limit --- or better yet, at no more than 30 percent --- will increase your credit score over time. The system that credit bureaus use to calculate your credit score takes your utilization rate into consideration, as well as the actual amount you owe.

Utilization Rate

Credit bureaus calculate your utilization rate by comparing your total credit card balances to the total available credit on your cards. The higher your utilization rate, the more likely it is to affect your credit score adversely. Therefore, it may not be wise to close a credit account once you've paid the balance in full. For example, if your total credit limit is $30,000 and you have a total balance of $17,000 on your cards, your utilization rate is 57 percent. If you close an account that had a limit of $10,000, you will raise your utilization rate to 85 percent (i.e., $17,000 divided by $20,000).

Prioritizing Accounts

You've probably heard that you should always pay down the credit accounts with the highest interest rates first. This may be the best plan, provided your individual balances are at or below 50 percent of your credit limit. Otherwise, you should first pay down the account that is closest to being maxed out, or has the highest balance.

Considerations

Paying off installment loans like mortgages, car loans and student loans can help your credit score over time, but full payment of credit card debt will boost your score dramatically. Even if you pay your balances in full each month, charging large amounts on a regular basis can hurt your credit score.

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How Can You Protect Yourself From Identity Theft?

Introduction

Identity theft occurs anytime someone else uses your information, without your permission, to commit any type of crime. The most common forms of identity theft involve using social security numbers and personal information to open up credit accounts in your name. Identity theft can have a real impact on your financial life, leaving a ruined credit report and loads of debt that you never accrued. However, taking a few simple steps can help you to protect yourself from identity theft.

Safeguard

The first way to protect yourself from identity theft is to safeguard your personal information. A thief can use everything from your address to your social security number and credit card numbers to steal your identity. Keep this information safe by never throwing away any document that includes personal information without shredding it first. Identity thieves often find their targets by dumpster diving for personal information. You should also safeguard any online information you have. Make sure that you have both spyware protection and virus protection on your computer. Turn on your automatic updates so that you have current protection against any new viruses or spyware that can steal your personal information. Other simple safeguarding tips include: not carrying your social security card with you in your wallet or purse, not giving out your personal information online to untrusted sources, not clicking on links on websites and emails that you do not know, and refraining from using common passwords such as "1234" or your birth date.

Monitor

For a monthly charge you can sign up to have the credit reporting agencies contact you any time there is a new change in your credit report. This will alert you immediately to any new accounts that have been opened without your approval. If you cannot afford a monthly monitoring service, order a copy of your credit report at least once every 6 months. By law you are allowed one credit report annually for free. For links to credit monitoring services, and how to get your free annual credit report, visit the additional resources section of this article.

Defend

The last way to protect yourself from identity theft is to not allow yourself to become a victim. At the first sign of identity theft you should contact your credit report immediately to get the ball rolling and catch the thief. This will both protect your credit score, as well as catch the criminal before they can do too much damage. The following signs may alert you that you may be the victim of identity theft: your billing statement does not arrive as expected; there are unexpected statements from credit card companies; there are calls about purchases you never made; you see suspicious activity on your credit report; or you are denied a new credit line without prior issues with credit. If you experience any one of these signs, you should contact your credit reporting agency immediately.

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State Laws on Identity Theft

Though the specifics are different, all 50 states have some type of identity-theft legislation in place. The National Conference of State Legislatures reported in 2010 that 11 states have created programs to help the victims of identity theft. The District of Colombia, Guam, and 29 states have specific laws requiring the perpetrators of identity theft to make restitution to their victims.

Alabama: Making Crime Pay

Anyone convicted of identity theft in Alabama can be ordered to make restitution not only to the person whose identity was stolen but to "any other person or entity that suffers a loss from the violation." Those sentenced to serve time in any Alabama correction facility for the crime of identity theft must pay $25 each day that they are incarcerated. Any medical expenses they incur while in prison are the responsibility of the inmate.

D.C.: Protecting the Elderly

The District of Columbia has enacted legislation to help protect senior citizens from becoming victims of identity theft. Persons who are convicted of identity theft and ordered to pay a fine can expect that fine to be up to 1 times more if the victim was 65 years or older at the time of the crime. Prison sentences can also be up to 1 times longer if the victim of the crime was 65 or older. In order to avoid extra punishment, identity theft defendants must be able to reasonably argue that they did not know and had no way to determine that their victim was 65 or older.

Oregon: Repeat Offenders

Oregon recognizes both identity theft and aggravated identity theft as crimes. Aggravated identity theft is essentially identity theft involving several transactions, large amounts of money ($10,000 or more within 180 days), or multiple pieces of personal identification (10 or more pieces from 10 or more different persons). Oregon law mandates prison sentences of 19 months for both identity theft and aggravated identity theft but requires longer sentences for people who have been convicted previously of theft-related crimes. When sentencing those charged with identity theft, a judge must add additional jail time if the defendant has previously been convicted of first-degree aggravated theft, the unauthorized use of a vehicle, first- or second-degree burglary, first- or second-degree robbery, possession of a stolen vehicle, trafficking in stolen vehicles, or aggravated identity theft. Aggravated identity theft prison times must be extended for defendants who have been previously convicted of first-degree aggravated theft, first-degree burglary, first- or second-degree robbery, or aggravated identity theft.

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How Many Points Does a Collection Account Lower Your Credit Score?

Having an account sent to a collection agency is a major hit in terms of your everyday money management and your confidence in your financial health. Where a collections account hits the hardest, though, is on your credit report. Having an account placed in collection status can cripple your credit score by itself, both now and in the long-term future.

Collections Accounts

If you fail to make a payment to one of your creditors by the due date, you'll be subject to calls from the creditor as well as a late fee. If you fail to make your payment for a lengthy period of time, usually 180 days, your creditor may feel as though it needs outside help in getting its money. Collections agencies are that outside help, and having one of your accounts sent to one can mean big trouble for your financial future.

Collections Agency Procedure

When a collections agency is brought in to help a company recover its money, it will initially contact you to state its intention to collect a debt. If you feel the debt is not yours, you have 30 days to notify the agency that the debt is not valid. If the debt is in fact valid, the agency has the right to inform the credit bureaus about your collection status. If you make arrangements to pay the collections agency right away, this may convince the business not to report you to the credit bureaus.

Impact on Credit

If one of your accounts is sent to collections, your credit report will show this information for the next seven years, no matter how low the balance is on the account in question. The impact of a collections account is huge; if your credit score is very high, you could see your score decrease by as much as 100 points if one of your accounts goes into collections. Worse, even if you pay the account, it doesn't change anything, because the fact that the account was sent to collections is still reported.

Rebounding From Collections Activity

Having an account sent to collections is tough, but it isn't a death sentence for your financial future. Though your credit report will show an ugly mark for the next seven years, its impact will diminish over time, particularly if your subsequent credit activity is blemish-free. Eventually, the good things you do with your credit will outweigh your past activity. You can also try asking the collections agency in question if it will consider a pay-for-delete, in which you pay the outstanding balance of the account in exchange for the item being removed from your credit report. However, not all agencies honor these agreements, so don't count on the removal of your collections account being a sure thing.

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How Long Does It Take for a FICO Score to Rise?

Fair Isaac Corportion (FICO) provides credit scores to the consumer reporting agencies that provide credit reports. Most credit score improvements require at least 30 days to take effect, states Bankrate. There are some ways, including rapid rescoring, that can help scores within days. For the most part, though, a high FICO score requires months or years of positive credit history.

Balances

Paying down a substantial amount of credit card debt boosts a credit score. This boost occurs over a two-month period, according to Bankrate.

Timing

By looking at their credit reports, consumers can see when their credit card companies post account information each month. Paying down debt a few days before the monthly reporting boosts the FICO score within 30 days, states Bankrate.

Rapid Rescoring

Rapid rescoring organizations work only for lenders who request a rescore for potential borrowers. Rescoring after paying off significant debt or correcting a credit report error takes about 72 hours, according to Bankrate.

Misconceptions

Closing credit card accounts, even those with negative payment history, hurts your FICO score. The less available credit you have, the higher your balance-to-credit ratio.

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How to Delete Outdated Credit Information

According the Fair Credit Reporting Act (FCRA), negative information on your credit report, such as collections and charge-offs, can be reported only for a certain number of years. After the allotted time frame has passed, the credit-reporting bureaus have to remove the information from your report. Despite the FCRA rule, sometimes you have to be proactive in getting the bureaus to delete the information. If you remain passive, your information will stay outdated, which can hurt your chances of getting future credit.

Instructions

1

Pull a copy of your credit report from all three of the major credit-reporting bureaus: Equifax, TransUnion and Experian. You can visit the website for each individual bureau to get a paid credit report or request a free copy of your report from the "Free Annual Credit Report" website.

2

Look at each account that is listed on your credit report to see the date the account became delinquent. If a period of seven years has passed since the date the account first became delinquent, you can request removal of the account information. Note that bankruptcies are an exception to this rule since they can be reported for 10 years.

3

Write a letter to the credit bureau advising them of the account that is outdated and your desire to have the information removed from your report. Be sure to list the creditor's name along with the account number. List also your credit-report number, which can be found at the top of your credit report.

4

Make a copy of the letter, and keep it for your own records. Mail the letter to the address indicated on the credit report.

5

Allow the credit bureau 30 days to remove the information from your report.

6

Order another copy of your credit report to ensure that the outdated information has been removed. Don't worry; ordering your own credit report will not affect your credit score.

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What Company Can Raise My Credit Score?

There is one person who can raise your credit score, and that person is you. You may hear companies promising in radio or TV commercials that they can boost your credit scores, but don't believe their hype. Only by changing your own spending and money-managing habits can you raise your credit scores.

Put Your Credit Report Under a Microscope

Put your credit report under a microscope.

Lenders generally consider anything over 720 a good credit score. If your score is below that, order copies of your credit reports from the big three credit-reporting bureaus: Experian, TransUnion and Equifax. Study the reports carefully for any errors. If you find open credit card accounts that you closed years ago, missed payments that you think were incorrectly reported or any other inconsistencies, report them in writing to the bureaus. Fixing these errors can improve your credit score.

Pay Your Bills on Time

Don't miss those credit-card payments.

If you've had a history of missing your credit-card or other bills, your credit score will suffer. If you want to boost your score, immediately begin paying these bills on time. Gradually, your score will improve.

Keep Your Debt Levels Low

Keep your debt levels low for a good credit score.

Your credit score will suffer if your debt levels are too high. By paying down your debt, you'll increase your score.

Don't Have Too Many Open Credit-Card Accounts

Buy more purchases in cash, not with credit.

Don't keep too many open credit-card accounts. This will negatively impact your credit score. Lenders will see multiple credit-card accounts as an opportunity for you to run up too much future debt.

It Takes Time

Improving your credit score takes time.

Unfortunately, many companies promise that they can help you improve your credit scores, but only by changing your financial habits can you do this. It takes time to raise a low credit score. If you need good credit to buy a home or a car, you may have to wait a year or more until you've taken the financial steps to improve your score.

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Credit Score Guidelines

One of the most important factors in whether a lender will approve your application for a loan is your credit score. Knowing how your score is calculated can help you maximize your chances of being approved for loans or having access to other types of credit.

The Facts

Credit bureaus calculate your credit score using information found in your credit report, such as your credit history, the types of credit you have and how much you owe.

Misconceptions

Even though personal and employment information is included in your credit report, they have no affect on your credit score.

Factors

The credit scoring model assigns different weights to different factors: 35 percent of your score is determined by your payment history; 30 percent by your outstanding balances; 15 percent by how long you've been using credit; and 10 percent each by your applications for new credit and the types of credit you've used.

Time Frame

Your credit score takes into consideration your financial history from the past seven years, with a few exceptions. A Chapter 7 bankruptcy filing will affect your credit score for 10 years, while inquiries remain only for two years.

Considerations

Each credit bureau collects your credit information independently, so some information may be found on one credit report but not others, which can lead to different credit scores.

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How to Fight Unfair Credit Reports

Every consumer benefits from a good credit score, however, it's a misconception that individuals who have a negative mark on their credit report are irresponsible consumers. If there is a glitch in a creditor's system and a payment isn't reported on time, your credit score can plummet. If a consumer is involved in an automobile accident and the insurance company delays payment to the hospital or doctor, the same thing can occur. In such cases the consumer must contact the credit bureaus to remove the mark from the report.

Instructions

1

Get a copy of your credit report from the Annual Credit Report website. You are entitled to a free copy from the three major credit bureaus -- Equifax, Experian and TransUnion -- once every 12 months.

2

Look over the credit report for errors, then circle or note them. Errors may be as simple as an incorrect employer or address, or as serious as a late or missed payment.

3

Write to the company issuing an erroneous report and tell them about the information you think is incorrect. Attach copies of documents, such as statements from creditors, that support your complaint. Identify every item that you dispute.

4

Photocopy your letter and all of your documentation. Send your letter and evidence by Certified Mail so you have proof of delivery. The credit reporting agency will send your data to the organization that reported the information to the credit bureau. They have 30 days to review your information and report back to the credit bureau.

5

Wait for the results from the investigation, which will come from the credit bureau. If the information was found to be in error, it cannot be put back into your credit report.

6

Ask the credit reporting agency to put a statement of your dispute in your file if the item was not corrected. You will be given the name of the information provider, and you can contact them directly.

7

Write to the creditor directly and dispute the information in writing. Include documents that support your complaint.

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How Long Do Satisfactory Student Loans Stay on a Credit Report?

When you receive a student loan to fund your education, evidence of the loan and its payment history will appear on your credit report. Once the loan is paid off, however, the credit bureaus will eventually remove it.

Time Frame

A student loan, whether it has been paid off satisfactorily or whether you have defaulted on the loan, will appear on your credit report for 10 years.

Facts

If your student loan is considered satisfactory but has not yet been paid off, the time limit for its removal will not begin until the last payment has been made on the account.

Significance

A loan that has been paid off or that you are currently making timely payments on will benefit your credit rating as long as it appears on your credit report.

Considerations

At your request, the credit bureaus are often willing to remove positive accounts that have been paid off prior to the 10-year time limit.

Warning

The length of your credit history accounts for 15 percent of your credit score. If the student loan is your oldest account, having it removed from your credit report may lower your credit score.

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Is It OK to Run a Free Credit Report?

Your credit report is one of the major factors in helping lenders determine whether to offer you credit. The Fair Credit Reporting Act gives you the right to view a copy of your credit report from each of the three major credit bureaus once per year. You are not charged or penalized for these annual credit reports.

Get Free Reports

The federal government only authorizes one website to provide you with a free credit report from Experian, Equifax and TransUnion each year. Visit the Annual Credit Report website and fill in your identifying information to be directed to the credit bureaus to get your free credit reports. After viewing each credit report, return to the Annual Credit Report website and click on the link for your next credit report. If you would like, you can check your three credit reports at different times of the year instead of all at once.

Importance

Getting a free credit report can help your credit in a few ways. First, when you see your report, you get a better idea of what sort of information can affect your credit score. This includes not only your payment history, but also the account balance on each credit statement and how long you have had each account. Second, viewing your credit report allows you to look for accounts fraudulently opened in your name by identity thieves. Finally, you can also look for errors that your creditors have made in reporting account information. If you find mistakes on your credit report, dispute them so they do not affect your credit score.

Effects

Checking your own credit report does not affect your credit score at all. Although your credit report keeps a list of companies that pull your credit report, only some of these credit inquiries hurt your score. A credit inquiry hurts your score if it is from a company checking your report because you applied for some type of credit, including a credit card, loan or line of credit.

Warning

You do not need to enter your credit card number or any other financial information to get your free credit report. Although some websites claim to offer free credit reports or credit scores, they often require you to sign up for a free trial of a paid service and enter your billing information. If you do not cancel your free trial, you can be charged for the service. Avoid this risk by only getting your free credit report through the Annual Credit Report website.

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Does Paying Bad Debt on Your Credit File Help It?

Reporting

When you stop paying a debt and it becomes delinquent by at least six months, the creditor may decide to charge it off. If this is done, it becomes a bad debt and will be reported on your credit report with the three major credit bureaus. Anyone who reviews your credit report will be able to see the date and amount of the bad debt and the fact that it was not paid. This will hurt your credit report and bring down your credit score.

Paying

A bad debt will not automatically be removed from your credit report if you decide to pay it off. Instead, its status will change to a "Paid Charge-Off." This will help your credit file, but only in a very minor way. The fact that you had a bad debt will still show up for the legally allowed time (usually seven years). This still pulls your credit score down despite the fact that you paid it off.

Negotiating

If you negotiate with your creditor before you pay off a bad debt, it can help your credit file significantly. You can offer to settle with the creditor and pay the debt in exchange for having it removed from your credit reports. Get this agreement in writing before making the pay-off so you can force the creditor to follow through if necessary. If you paid in exchange for having the bad debt removed from your credit file, you will help it and your credit score will go up significantly.

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How to Dispute an Item From a Collection Agency

It is important to check all three of your credit reports every year for inaccuracies. Not only could this alert you to potential identity theft and fraud, but errors on your credit report can hurt your credit score. Common errors include inaccurate balance information, accounts marked delinquent that were paid and old credit listings that were not removed from your report. If you find errors, take steps to correct them right away.

Instructions

1

View your credit reports. You are entitled to one free credit report from each agency every year. Go to annualcreditreport.com to get yours.

2

Review your credit reports and note any incorrect information.

3

Visit the credit reporting agency's website. Look for a link on the homepage that says "Correct Errors" or "Submit a Dispute." To submit a dispute, you need a credit report from that agency no older than 90 days.

4

Confirm your identity. You can only dispute your own credit report. Enter the credit report number, your Social Security number, birthday and any additional information requested to confirm that you are who you say you are.

5

Dispute the error. You will be provided with a list of items that you can dispute or you may have to hand enter the account information. Tell them why you believe the item to be inaccurate. You will receive the results of the investigation within 30 days and a new credit report will be issued.

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Does a Bank Levy Affect Your Credit?

Through a bank levy, a creditor you owe seizes payment from you by deducting it directly from your checking or savings account. Creditors can levy your accounts repeatedly until they successfully recover the entire balance you owe. A bank levy does not have a direct impact on your credit scores. The financial events connected to the levy, however, can leave your good credit in shambles.

Court Judgment

With the exception of the United States government, all creditors must sue debtors and obtain legal permission from a judge before levying consumer bank accounts. The court's decision following a lawsuit is known as a judgment. Creditors request a certified copy of this judgment, and use it when filing a bank levy. After the court awards its judgment, the county clerk's office formally records the judgment as a matter of public record. Credit reporting agencies pull the information from the court's public record and add it to the debtor's credit report. A court judgment is a derogatory credit entry. Should a creditor receive a judgment against you, your credit score will drop as soon as the reporting agencies add the information to your credit record.

Missed Payments

If you pay your debts as agreed, your creditors have no reason to sue you and seek a bank levy. Bank levies are the result of numerous missed payments that eventually leave your account with the creditor in default. The creditor then sues and uses a bank levy to collect the missed payments. Missed payments have a considerable negative impact on your credit. MSN Money notes that a single missed payment notation on your credit report could result in your credit score dropping by 100 points or more.

Lack of Funds

When a creditor institutes a bank levy, it serves a writ of garnishment on your bank, forcing your bank accounts into a mandatory freeze. The purpose of the freeze is to provide you with ample time to contest the impending levy. Unfortunately, you cannot access any money that was in your bank account when it was frozen. This could leave you unable to pay other creditors on time, resulting in missed payment notations on your credit report. The bank typically does not lift the freeze until after the creditor levies the account. Depending on how much you owe, a creditor's levy may clean out your entire bank balance. Like a bank account freeze, this could leave you making payments late to other creditors.

IRS Levies

The Internal Revenue Service, as a government agency, does not need a judgment against you to levy your bank accounts; it only needs a tax lien. The IRS files tax liens against consumers who owe tax debts and do not make payment arrangements. Tax liens automatically attach to each of your assets, including your bank account. While a tax lien gives the IRS the ability to levy your bank account, it also appears on your credit report. Tax liens, like judgments, are public records that damage your credit rating as soon as they appear within your history. Even worse, unpaid tax liens can remain a part of your credit record for up to 15 years.

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Does Forfeiting a Contract for Deed on Property Effect Credit Rating?

Contract for deed sale agreements offer an opportunity for a buyer and seller to skip the lending approval process and deal directly with each other. Unfortunately, when the buyer is unable to make payments on the contract, he not only forfeits the home but the payments he made as well; whether or not the forfeiture will affect credit depends on whether the seller reported the payments to the credit bureaus.

Contract for Deed and Credit History

Sellers are not usually able to report a buyer's contract for deed payments to credit bureaus, because reporting is permitted only by licensed lenders. However, if the seller used a private loan servicing company to collect the payments, administer escrow and provide tax statements, then a strong possibility exists that the payments have been reported all along. If the buyer defaults, the servicer is obligated to report it. However, if the "loan" isn't being report to the credit bureaus, then a forfeiture would not affect credit.

When It Goes Well ...

Buyers frequently like contract for deed agreements because it permits them the opportunity to enjoy the advantages of homeownership, including reaping the tax advantages of deducting mortgage interest and property taxes. It also affords the chance to improve credit; buyers who couldn't qualify for a regular loan may use the equity that accumulates during the contract period to refinance at a later date. If the buyer makes timely payments and these payments are recorded with credit bureaus, the likelihood that a refinance will occur increases greatly, because timely home loan payments increase a buyer's credit score significantly.

... And When It Doesn't

Unfortunately, the same reasons that cause a buyer not to be able to secure a loan at the beginning of the term are the same reasons that prevent him from getting refinanced. If he defaults on payments and cannot resolve the situation, then the seller may initiate forfeiture proceedings. In contract for deed forfeiture, the property is returned to the seller, who keeps all of the payments made as liquidated damages. Forfeiture actions are relatively fast and cheap, when compared to foreclosure. Forfeiture proceedings will not be reported to credit bureaus if the payments haven't been recorded.

Foreclosure

Contract for deed foreclosure proceedings are similar to forfeiture in that the buyer loses the home. However, foreclosure accelerates the balance due so that the buyer is forced to pay off the entire amount immediately; if he cannot, the home will be sold, and it's possible that a judgment against the buyer may be entered. However, just like forfeiture, foreclosure will not be reported if the payments haven't been.

Keep in mind that a buyer may opt to self-report his own timely payments on a contract for deed. Should the buyer eventually default, he may stop self-reporting but should be prepared to answer questions about the loan when the time comes to apply again.

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How to Make Payments for a Summary Judgment in New Jersey

When a civil suit in New Jersey results in a summary judgment for money, the losing party -- the defendant must pay the amount awarded to the winner, i.e. the plaintiff. Since judgments and payment thereof are public records that are reported to the credit bureaus, they can have a lasting effect on your credit record.

In the state of New Jersey, the defendant is normally expected to pay the plaintiff or her attorney directly. The plaintiff is required to provide the defendant with a "Warrant of Satisfaction" to be filed with the court as proof that the amount owed has been paid. This outcome stays on your credit record for seven years and is considered a negative factor. You can achieve a better outcome by having the judgment dismissed and completely removed from your credit record instead, but you will need the plaintiff's cooperation.

Instructions

The Satisfied Judgment

1

Meet with the plaintiff or his attorney and agree on terms for paying the amount owed.

2

Make the agreed-upon payment(s).

3

Obtain from the plaintiff a Warrant to Satisfy Judgment as proof that youve paid what you owed. The plaintiff is legally required to give this to you.

4

File the warrant with the Superior Court Clerk, and request a copy to use as proof that the judgment was paid, in case the credit bureaus don't update your credit report.

The Dismissed Judgment

5

Meet with the plaintiff or his attorney and negotiate an agreement that upon payment of the amount owed, the plaintiff will file a motion to have the judgment dismissed. Put the agreement in writing and have the plaintiff date and sign it and two copies. Keep one copy for yourself.

6

Pay the amount owed.

7

Have the plaintiff file a motion to vacate the judgment and dismiss the complaint on the grounds that the judgment has been satisfied.

8

The dismissal will be reported to the credit bureaus, but if the judgment has not been removed from your credit record in 45 days, send each bureau a copy of the your signed agreement with the plaintiff and ask that the judgment be removed from your record.

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