How to Contact the Big Three Credit-Reporting Agencies

The three U.S. consumer credit-reporting agencies are TransUnion, Experian and Equifax. Credit-reporting agencies keep a record of consumer credit history. Creditors will update a debtors payment history once per month. You can contact the credit-reporting agencies using several methods. The method you use will depend on your reason for contacting that agency. Sometimes credit-reporting agencies are contacted to dispute items on a credit report. People also contact credit-reporting agencies to get copies of their credit report.

Instructions

1

Order a copy of your credit report. You can get a free copy of your credit report once per year from all three credit-reporting agencies. To order a copy from all three agencies at once, go to AnnualCreditReport.com.

2

Click on the button that says, Select your state. Select the button that says Request report. Fill in all of your personal information such as name, address, date of birth and Social Security number. Order your reports online, by mail or by phone.

3

Contact each individual credit-reporting agency for other requests. Go to the website of the agency (see Resources). Contact them to dispute items on your credit report, get information about credit monitoring, put a fraud alert on your report, order a security freeze or report identity theft. You may be able to perform some of these requests online, by mail, over the phone or by email. Each website will provide directions.

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Does a Forebearance Hurt Your Credit Score?

Debt can be a beneficial way to manage your finances as well as a potential source of problems. Investments such as a home mortgage or college education often leave borrowers with major financial commitments, and any financial hardship can make it difficult to pay back the loan. A forbearance, which is temporary permission from the lender to stop making payments, is one way to avoid default, but it can have unintended consequences.

Loan Types

If your lender grants you a forbearance, it will appear on your credit history. However, the way that a forbearance affects your credit score depends on the type of loan. For example, a forbearance on a mortgage loan has the same negative impact on your credit score as a 90-day late payment, according to the Bad Credit Advisor website. This may seriously impair your ability to borrow money in the near future, until your credit score improves. On the other hand, student loan forbearances still appear on your credit report, but they don't affect your three-digit credit score.

Benefits

With any type of loan, the key benefit of a forbearance is that it can protect your credit score by allowing you to avoid missing payments or submitting payments late. Even a single missed payment is enough for your lender to note your loan's status as in default. In most cases, the negative impact of defaulting on your loan is much greater than the impact of a forbearance. A forbearance also gives you time to save for future payments and get your finances in order, enabling you to guard your credit score from damage in the future.

Drawbacks

In a detailed credit check, prospective lenders look not only at your credit score but also at your full credit report. This document includes your entire financial history for the past several years. A forbearance, regardless of the type of loan or specific circumstances, may indicate to the lender than you represent a risk and may not be able to pay back your new loan.

In addition, during a forbearance, your loan continues to earn interest. This means that when you begin making payments again, they will be higher because your loan will have a new, higher payoff amount.

Alternatives

Forbearance isn't the only way to deal with a loan that becomes difficult or impossible to pay back. A deferment is similar to a forbearance but may apply to different types of loans. Deferments and forbearances also may differ in terms of whether you must show proof of hardship as well as how long they last.

Prior to applying for a forbearance or deferment, you should contact your lender directly and explain your situation. Some lenders may lower your monthly payment or offer an extended-term repayment plan that allows you to keep making payments and preserve your credit score.

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Does Using a Debit Card Build One's Credit History?

Debit cards are a convenient way for consumers to make purchases since paying with a debit card is faster than writing a check and easier than carrying large amounts of cash. Debit cards are such a common feature of checking accounts that you probably have one in your wallet right now. Unlike credit cards, however, debit cards do not help you build a credit history.

Facts

Your debit card is tied directly to your bank account. When you use your debit card, you are not borrowing money from the bank. You are paying for purchases with your own money. A debit card works the same way as a check. Due to this, some individuals refer to debit cards as "check cards."

Significance

Your credit history is a record of how well you manage debt. Using a debit card does not typically place you in debt, since the card pulls funds directly from your checking account. You do not have to make payments on items you purchase using a debit transaction -- the transaction itself serves as the payment. Credit cards let you borrow money, with interest, and repay the amount you borrow over a set period of time. This builds your credit history because it allows lenders to see how responsibly you made payments on the debt you incurred.

Warning

If you opted for overdraft protection with your bank, your debit card will work even if you do not have the necessary funds in your checking account to cover the transaction. Your bank will then assess a fee for the overdraft. You will continue to incur overdraft fees each time that you make a purchase without enough money in your account to pay for the item.

If you do not promptly pay your overdraft fees, the bank will eventually close your checking account and sell your debt to a collection agency. The collection agency will file a derogatory report with the credit bureaus. Thus, your debit card transactions can appear on your credit history -- but only if you fail to pay off overage charges. Collection accounts on your credit report are always derogatory.

Considerations

Although a debit card doesn't help you build a credit history, responsible use of your debit card demonstrates to the bank that you may be a good candidate for a credit card. Even if you lack a credit history, your own bank may award you a credit card based on your good standing as a customer.

Prevention/Solution

While a debit card doesn't help you build a credit history, it does teach you how to manage your money without overspending -- a quality that will come in handy when managing credit card debt in the future.

If you cannot qualify for a credit card of your own, you can build your credit history by asking a friend or family member that you trust to add your name to their credit card account as an authorized user. The credit card company will then report the account to the credit bureaus in your name as well -- helping you build a credit history that will allow you to qualify for credit on your own.

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Are Credit Scores Valid?

When you obtain a copy of your credit report, you can also pay to access your credit score. In some cases, the credit score displayed may not seem completely accurate. Your credit score is a compilation of all the information that credit bureaus document on your credit report. In some cases, your credit score may be affected by incorrect information.

Credit Reports

Every time you make a payment, open an account, close an account or take some other action that involves a creditor, it usually is reported to the credit bureaus. The three major credit bureaus -- Equifax, Experian and TransUnion -- document this information in a credit report. Information from your report is used to calculate your credit score. Because the number is based on the information in the report, the score is only as accurate as the credit report.

Faulty Information

Creditors and the credit bureaus sometimes make mistakes. A creditor might submit information for you that belongs to another customer, or the credit bureau may report accounts as delinquent that were paid on time. When the information on your credit report is inaccurately reported, it can lower your credit score. If you believe the information on your credit report is inaccurate, you can dispute the infomation with the credit bureaus. You can obtain a free copy of your credit report each year through AnnualCreditReport.com. To dispute an item on your report, visit the website of the appropriate credit bureau and complete a dispute form. You also can mail a dispute letter to the credit bureaus as well as to the creditor involved.

Credit Reports Updated

In some cases, your credit report may not have been updated in a timely manner. When you pay off an account, you might expect the information to go onto your credit report automatically. However, most creditors update their information to credit bureaus monthly or quarterly. As a result, the information in your credit report may not change immediately. If this is the case, it may take some time for your credit score to reflect your current credit situation.

Lingering Information

When you have negative items on your credit report, they can linger on the document for many years. These items can significantly pull down your credit score even if you had taken the necessary steps to try to rebuild it. For example, if you default on a credit card debt, this will show up on your credit report for seven years. This can negatively affect your credit score and make it difficult to receive approval for credit.

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How to Repair Your Beacon Score

Your credit score is very important, especially if you are preparing to make a large purchase, such as a home or car. Before you complete any applications for credit, you should take a look at your credit report and make sure everything is correct and that your credit score is good. You want to make sure your Beacon score is at least 620, which will give you some of the better interest rates and less problems when trying to buy something on credit.

Instructions

1

Call one of the three major companies (Experian, TransUnion or Equifax) to get a current copy of your credit report.

2

Read over the report carefully, making sure information is correct. Highlight anything incorrect, such as accounts you no longer have or discrepancies in payment history.

3

Call the companies showing errors or call the credit reporting agency to request an inquiry. Follow up at the end of the time period the company specified.

4

Complete as few applications as possible for credit cards and loans. Each one is reflected on your credit report, and it can look bad if you have too many in a six-month period.

5

Pay all your bills on time to help build up your credit score. This is especially important with revolving credit.

6

Lower your debt load and pay extra on different accounts. Keep balances low through making timely payments each month.

7

Apply only when you actually need credit. Do not apply for credit cards or loans just to see if you can get them.

8

Hire a lawyer or professional credit repair company to remove any negative credit issues appearing on your credit report.

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How to Rebuild Credit After Repossession

Skipped or late payments contribute to a low credit score. Additionally, experiencing a repossession can damage your score and make it harder for you to obtain future financing. To qualify for a future car loan or mortgage, you'll need to rebuild your credit history and maintain a high score.

Instructions

1

Dispute credit report errors. Credit report errors reduce your credit score. If you're trying to rebuild your credit history after a repossession, dispute inaccurate information. Contact the reporting creditor or write the credit bureaus.

2

Obtain a secured credit card. You probably won't qualify for a credit card immediately after a repossession. However, having a credit card is a quick way to boost a low score. Contact your bank or credit union and apply for a secured card. Lending institutions require a deposit before issuing a credit card.

3

Maintain your existing credit accounts. If you already have a credit card, mortgage loan or another credit account, maintain these accounts by submitting on-time payments. To add points to your score, pay down your debts.

4

Negotiate with the auto lender. After repossessing a car, lenders auction off the vehicle and use the funds to pay off the loan. Oftentimes, auction proceeds aren't enough to pay off the loan. Contact the auto lender and agree to pay off the remaining balance in installments. As a courtesy, the lender may not report the repossession to the credit bureaus.

5

Apply for a personal loan. Using collateral such as a vehicle title and a co-signer apply for a secured personal loan. Rather than spend the funds, deposit the money into a savings account, and then pay off the loan within six months. Making timely payments and satisfying the debt adds points to your credit score.

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Why Do Companies Check Credit Histories?

Though applying for a credit card and applying for a job might seem like unrelated events, they share one thing in common: The company to which you apply may request a copy of your credit report. Knowing how companies use this information can help you change your financial habits to work in your favor.

Your Payment History

To creditors, the most accurate indicator of whether you will make timely payments on a loan is your past payment history. So, they request a copy of your credit report when you apply for a loan to find out how often you make late payments. Your credit report also lets creditors know whether other companies have taken action against you for lack of payment. Such details on your credit report can decrease, but not necessarily eliminate, your chances of obtaining new credit. Paying your bills on time gives creditors more confidence that they will receive timely payments from you, making it one of the most effective ways to ensure they approve you for new credit.

Whether You Can Afford to Pay

Your credit report lists your past and current debts, including the amount you still owe on each debt. Using this information, a creditor can determine how much money you owe to creditors each month. If this amount is high in relation to the amount of credit you have available to you, creditors may take it as a sign that you don't have a lot of money to spare for more monthly payments, meaning you may make late payments on a new account. Keep your debt-to-credit ratio low by paying off debts while keeping credit accounts open. If you pay off the remaining $2,000 balance on a credit card with a $3,000 limit, for example, you eliminate $2,000 in debt while increasing your available credit by $2,000. If you close the account after paying off the card, you decrease your available credit by $3,000.

Length of Your Credit History

Creditors want to be able to predict your habits over the course of the debt repayment period. Even if you pay your bills on time and have a low debt-to-credit ratio, these may not be enough to secure new credit if your credit history is relatively short. Each creditor determines what constitutes a short credit history. This can be one of the most difficult hurdles to overcome when applying for credit since you can only change it with time.

Assessing You As an Employee

Whether or not you apply for a job that involves money handling, an employer may use your credit report to assess your responsibility as an employee. If your report shows a high debt-to-credit ratio, for example, some employers view it as an indication that you may be distracted at work or more likely to steal from the company to cover your debts. Employers must get your permission before checking your credit history. If information on your credit history negatively affects your employment, the employer must tell you this and give you contact information for the company that provided the information.

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How to Scrub Your Own Credit

There are no easy fixes for a credit score. Repairing your credit takes time, commitment and consistency. However, there are some steps you can take that will help boost your score relatively quickly.

Instructions

1

Find out your credit score. Websites such as annualcreditreport.com provide three free credit reports per year, with scores costing between $5 and $10. Make the investment so that you can understand your score and how to improve it.

2

Check your credit report thoroughly for any mistakes. You may wish to obtain a credit report from multiple companies and compare them, noting any discrepancies among them. Thoroughly follow up on any concerns you have about misrepresented information. Items that may show up incorrectly include accounts that don't belong to you, outstanding debts that you have actually paid off, late payments that were not really late, etc. The presence of any of these on your credit report will negatively affect your score.

3

Pay off any outstanding fines. These may include fines for library books, movie rentals and other items that start small and accumulate. While it may not be convenient to pay these off, the affect they have on your credit score will make it well worth the money.

4

Catch up on any overdue payments. Even if your bills have been consistently late, making your accounts current will boost your credit score. Once you have caught up on your payments, make it a priority to pay them on time in the future.

5

Make partial payments. If you are simply not able to pay off outstanding bills in full, at least begin by making partial payments. Paying only a small amount is significantly better than paying nothing at all.

6

Do not combine all your debt onto one credit card. While offers like "six months with no interest" will save you some money in the short term, it will cost you more in the long run because of how it will affect your credit score. If all your debt is on one card, it will appear that you are close to maxing out your credit cards. Rather, try to keep each of your cards under 30 percent of the maximum.

7

Be sure not to close out accounts you have paid off. Closing these accounts will make your credit history appear to be shorter and less trustworthy. As a general rule, credit cards that have a high maximum and little or no debt are always a positive addition to your credit.

8

Open two or three new credit accounts, and pay them faithfully. Do not allow yourself even one late or missed payment. You should also be careful to pace yourself when opening new credit cards, as starting too many in a short period of time will cause your credit score to drop.

9

Talk to a credit counselor. If you still find yourself overwhelmed by the thought of correcting your credit, you should speak with a professional who can work one on one with you and your situation. However, be careful to avoid scams. Many people seek to take advantage of individuals who are desperate to improve their credit.

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Mandatory Reports to a Credit Agency

With credit scores playing such an important part in our lives, many people are worried about what is being said about them on their credit reports. While it's easier than ever to obtain a copy of your credit report, it helps to understand what the credit bureaus require creditors to report about your credit activity.

Credit Reporting Requirements

According to the Privacy Rights Clearinghouse, the Fair Credit Reporting Act does not require creditors to report anything to the credit bureaus, including negative information. This can work against you if you run into hard times, but it helps to build your credit history if you're making payments on time and the credit bureaus are notified of your good credit management. However, most companies do choose to report information about you to the three main credit bureaus: Experian, Equifax and TransUnion.

Credit Limits

Since most creditors choose to report information about their customers, legislation has been enacted to ensure that the information reported is accurate. Among the items included in this legislation is a rule stating that creditors must report your credit limit in conjunction with anything else they report. This helps to give your credit profile some perspective; a low balance doesn't help your credit score much unless your credit report shows that it's a small part of the card's limit. The credit limit plays into calculating your overall debt in relation to your available credit, a ratio that comprises 30 percent of your credit score.

Payment History

Though not required, most companies will report information about your payment history. Since this is the biggest factor in creating your credit score, it's a critical part of your overall credit profile. Late payments aren't reported unless they're at least 30 days past due; some companies choose not to report your lateness unless you're 60 days past due. You can help your own cause by paying on time each month and avoiding the possibility of being reported.

Credit Report Disputes

Because credit companies are not required to report anything to credit bureaus, it's surprising that errors on credit reports are so prevalent. A 2004 report stated that nearly 80 percent of credit reports contained errors. Of this number, 25 percent contained errors that would sway a decision on one's credit worthiness. Fortunately, you can dispute anything on your credit report that you may not think is accurate; better yet, you can usually file disputes online. If an item is removed from your report, you'll receive an updated copy of the report with the negative item removed.

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What Is the Fastest Way to Increase Your Credit Score or to Raise Your FICO?

Lenders depend heavily on your FICO score to determine your creditworthiness for a car loan, home mortgage and consumer credit cards. Your score may not always reflect accurate information, but true credit missteps take time to repair.

Expert Insight

"There's no quick fix for creditworthiness...it takes time, a conscious effort and sticking to a personal debt repayment plan," according to the Federal Trade Commission. The FTC warns against credit repair companies that claim to increase your credit score by removing negative accurate information from your report; they're illegal.

Potential

Some mortgage companies can offer applicants a service called rapid rescoring, which expedites the removal of outdated or erroneous information from the credit report, thus increasing FICO scores in three to five days. The mortgage specialist has an account with the rapid rescoring company, which has a relationship with the three bureaus. A fee of approximately $30 applies for each correction.

Time Frame

Creditors and collectors generally report to the bureaus once every 30 days. If you pay a debt, your score does not reflect the update for at least 30 days.The same is true for corrections you submit to creditors. They have 30 days to investigate the correction and 30 more days to report the update to credit bureaus.

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What Looks Worse on My Credit Report, a Repossession or a Bankruptcy?

Generally, your payment history with lenders has the most influence on your credit report when determining credit scoring. Late payments do damage your credit score, but not paying debts at all lowers your score and significantly reduces your creditworthiness with would-be lenders. The negative influence of bankruptcy or repossession depends on other information on your credit report and your starting score.

Credit Scoring Facts

According to the Fair Isaac Corp., or FICO, bankruptcy represents the single biggest negative mark on your credit score, and individuals with decent beginning scores generally notice the largest drop in scoring. If your credit report already reflects multiple or recurring late payments or delinquencies, bankruptcies and repossessions won't ding your credit as badly as if you had a positive repayment history prior to filing. However, your credit report constantly changes, and the damage of a bankruptcy or repossession does diminish as new positive information is added.

Comparisons

Repossessions remain on your credit report for seven years while a bankruptcy can linger for up to 10 years. Repossession appears on your report as a default against a single creditor. Bankruptcy involves discharging all or most debts, indicating serious financial problems or money mismanagement to lenders. Adversely, some employers, insurance agencies and other companies use your credit report to help determine creditworthiness. While a single delinquency is frowned upon, a bankruptcy may hinder your prospects with a wider range of opportunities, not just future lending.

Bankruptcy and Repossession Types

According to the Experian credit-reporting agency, the credit scoring differences between voluntary and involuntary repossessions are minor. However, the former may indicate more financial responsibility to lenders if, say, you returned the vehicle rather than allowing the company to come take it. Both Chapter 7 and Chapter 13 bankruptcies --- commonly used personal bankruptcy options --- are scored the similarly under the FICO scoring model. Chapter 7 may involve liquidating some assets before discharging debts, while Chapter 13 requires a repayment plan for most debts prior to discharge.

Concerns

Although bankruptcy may absolve you of responsibility for most or all your debts, lenders still have rights regarding secured debts such as home or car loans. If you do not establish a new payment plan or continue to make payments, creditors may repossess the vehicle or property, depending on state laws and your particular bankruptcy case. Essentially, repossession can occur after the bankruptcy resolves even if the loan is discharged.

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How to Clean Up Bad Credit Fast

Perhaps you're ready to apply for a mortgage loan or buy a car. Checking your credit report and score before applying for financing provides some indication of your approval odds. But what if your report and score reveal problems that can ruin your chances of an approval? Rather than accept credit problems, take steps to clean up your bad credit fast and get the financing you need.

Instructions

1

Pay down accounts that have balances. You can quickly raise a bad credit score by paying down or eliminating your high credit card balances. What you owe on credit cards accounts for 30 percent of your credit score. Have self-control and do not exceed 30 percent of your credit limit. For example, the balance on a credit card with a $1,000 limit should not exceed $300.

2

Fix payment history. Being 30, 60 or 90 days late on payments hurts your score. Start anew and provide payments by the due date to increase your score and clean up bad credit. Use online services or telephone payment systems to avoid tardiness and late fees.

3

Limit inquiries. Diversifying and acquiring a mixture of accounts (credit cards, installment loans, car loan) helps your score. However, applying for many different accounts within a short time frame takes points off your score. Apply for credit only when necessary to avoid lowering your credit score.

4

Pay off old debts and have any derogatory information deleted. Getting remarks such as judgments, liens and collection accounts taken off your credit report can quickly increase a low score. Find old creditors and set up installment payments to pay off outstanding debts. Request removal of derogatory information after you've paid the balance.

5

Pay for rapid rescoring. After paying down account balances or detecting errors on your report, ask creditors to immediately update your credit file. This requires a $50 fee for each account that needs correction, and the lender must be a customer of a rapid rescoring service. If creditors agree to update your file, you can clean up your credit within 72 hours.

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Credit Rating FAQ

From television commercials to radio ads you have probably heard about credit ratings (also called credit scores) for a long time. Credit ratings are complicated and at times confusing for most consumers. Make sure you are informed about credit ratings and how they affect you; it is important to separate the fact from fiction.

Does Applying for Credit Lower Your Rating?

Yes, it does---but only slightly. Each time you apply for credit your credit rating will lose approximately one point. Excessive requests for credit (known as inquiries) can present a bad picture to a lender when you apply for an auto loan or home mortgage. Excessive inquiries make you look "credit-hungry" to a potential lender and may adversely affect the interest rate or your chance of approval. It is important to note that the occasional inquiry is okay; just try to keep them to a minimum.

How Can I Raise My Credit Rating?

Credit cannot be turned around overnight; it takes months, even years to establish a good credit rating. It is important to always pay your bills on time, keep balances as low as possible and communicate with creditors you have charged-off in the past, to work out payment plans---it won't remove the negative item from your credit report, but will show that you are making payments; this can raise your credit rating.

What is Considered a Good Credit Rating?

There are three different credit reporting agencies: Equifax, Experian and Transunion. Each have different criteria for what is considered a "good" credit score, but generally a credit rating of around 700 is considered good, and 800 is considered excellent.

If I Have No Credit, How Can I Establish a Good Credit Rating?

Without an established history, acquiring credit can be difficult. Applying for a secured credit card is usually a good idea for someone with no credit. Secured credit cards take a deposit from you to hold in case you default; the amount of the deposit is usually your maximum credit limit. You are essentially borrowing against your own money, but timely payments will be reported to the credit agencies and help you get started establishing a good credit rating.

Why Does My Credit Rating Change from Month to Month?

Creditors send their financial data to all three agencies once per month. The agency updates the information in your credit file and this information may adversely or favorably affect your credit rating. Changes such as: balances, age of accounts, credit limits and inquiries can affect your credit rating.

How Can I Get My Credit Rating for Free?

The answer to this question is not on any television commercial, no matter how amusing or cute they are. Sites that advertise a "free credit report" are usually selling you a service coupled with it. Federal law requires that every consumer be awarded a free copy of their credit report each year. The offer is year-round, but the month you can get it depends on the state you live in. See the resource below for the calendar and instructions.

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What Does EFX Mean on My Credit Report?

The oldest of the three major credit rating agencies, Equifax, started in the 1890s as a company that sold credit reports of customers to members of the Retail Grocer's Association. If you see EFX on a report, it is an abbreviation for this company. EFX scores are technically not a true FICO score but are essentially close enough.

Identification

The acronym "EFX" comes from the stock ticket symbol for the company. The other two credit agencies also sometimes go by this. TransUnion uses "TU" and Experian "XP." Until 1979, Experian was known as "Retail Credit." During the 1970s it became the first credit rating agency to transfer files written on index cards to computer databases.

Features

Equifax uses abbreviations on its credit reports for most of its information. Installment accounts received the letter "I" and a number corresponding with the status of the account. "I1" means the account has never been past due. The abbreviations on an Equifax report can change when you order additional services.

Equifax Score

People tend to refer to FICO scores as the "credit score" because most lenders use the FICO algorithm. Equifax sells the Beacon score, which is based on the FICO model and gives similar results. All major credit scoring models factor in financial data, such as debt owed, payment history and types of credit held, but differ in how much weigh they give each category.

Tip

Equifax and the other two major credit rating agencies are required by federal law to furnish one free report each year. They only offer this, however, through AnnualCreditReport.com. Other companies or websites may try to charge for an EFX report or make you sign up for other services. Even the EFX website does not offer a free report.

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Does Having a High Credit Card Limit Lower Your Credit Score?

Before you apply for a new loan, do whatever you can to raise your credit score so you get the best loan possible. Having a high credit card limit rather than a low credit card limit, in most cases, will raise your credit score.

Effects

Having a high credit card limit helps you keep your balance-to-limit ratio low (provided you pay off your cards in full each month, and don't carry a lot of debt). The FICO credit-scoring model uses your credit use, or balance-to-limit ratio, to determine about 30 percent of your credit score.

Example

A person with two credit cards with high limits of $10,000 and $5,000 and a balance of $2,000 on each card would be using $4,000 of the $15,000 of credit, or about 27 percent. A person with low credit card limits of $3,000 and $2,500 and a balance of $2,000 on each card would be using $4,000 of the $5,500 of credit, or about 73 percent. Thus, higher limits lead to a better credit score.

Considerations

If you use your high credit card limit on purchases you cannot afford, it can end up hurting your credit score. For example, if you purchased items and fell behind on payments because the payments were too high for your income, this would decrease your credit score. In this case, it's best to lower your limit to help resist the temptation to spend too much.

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Credit Freeze FAQ

If you're concerned about who may be accessing your credit history or if you want to avoid the risk of identity theft, consider implementing a credit freeze. Each state has different laws on when and how you can enact or remove a credit freeze. If you're interested in protecting your credit, understand how the freeze process works and how it can benefit you.

How Do I Freeze My Credit?

To place a freeze on your credit, you must contact each of the three major credit reporting bureaus: Equifax, Experian and TransUnion. You may freeze your credit report with any or all of these agencies at any given time. You can contact them in writing or through their company website to request a freeze. Provide them with your name, Social Security number, date of birth, current address, proof of residence and a photocopy of your state ID or driver's license. Depending on your state of residence, you may have to pay a small fee unless you are over age 65 or a previous victim of identity theft.

What Are the Benefits of a Credit Freeze?

The primary benefit of a credit freeze is that it prevents consumer credit agencies from releasing your personal information to a third-party creditor. This can prevent people from using your information to obtain new credit in your name. It can also reduce the amount of unsolicited credit offers you receive. A credit freeze cannot prevent someone from using credit that has already been established in your name.

Who Can Access My Credit During a Freeze?

A credit freeze does not entirely limit access to your credit. For example, any company that you have previously done business with, such as a mortgage lender or a utility company, would still be able to access your credit. This also applies to any collection agencies contracted by these companies. State agencies, including law enforcement, child support enforcement or tax agencies can also see your credit records. Anyone acting under a court order or subpoena can request your credit history during a freeze.

Can I Apply for New Credit During a Freeze?

As an added security measure, each credit reporting agency provides you with a unique personal identification number (PIN) or password. Any time you wish to apply for new credit, you must contact the appropriate credit bureau and verify your identity using your PIN. This temporarily lifts the freeze and allows lenders to view your credit history for a limited time. Depending on your state, you may have to pay a fee to lift a credit freeze. Also, processing a lift can take up to three days, making it difficult to apply for instant credit offers.

Does a Credit Freeze Hurt My Score?

Placing a freeze on your credit has no negative impact on your credit score. In some cases, it may help to boost your score by reducing the number of inquiries into your credit report.

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Impaired Credit History

Your credit history gets impaired by many different financial activities. Fair Isaac Corporation, or FICO, takes information from your credit reports to calculate your credit score. The Experian, Equifax and TransUnion credit bureaus sell your credit history to lenders and insurers when you seek loans, credit cards and insurance, so impaired records hurt you by getting you rejected or subjecting you to higher interest rates or premiums.

Common Impairments

Past-due payments impair your credit history, as does ignoring a bill until it gets written off or sent to a collection agency. The MyFICO scoring website advises that repossessions, foreclosures and court judgments in favor of creditors or collectors also hurt you. You can hurt your credit score even if you pay all your obligations on time if your debt load is too high, you have too many credit cards, or you close old accounts that were in good standing.

Weight

Some credit history impairments carry more weight than others. The worst thing you can do is skip payments and let an account get charged off, and home and vehicle repossessions fall into this same category. Court judgments and bankruptcies get lumped into your payment history, too. All of these things make up 35 percent of your credit score, according to MyFICO. Owed money, the number of your accounts that have balances and your ratio of available to used credit accounts for 30 percent of the score.

Correction

Fixing impaired credit takes time and effort. Concentrate on the most important areas by paying all bills on time and putting more money on your biggest debts. The Federal Reserve Bank of San Francisco advises speaking to a credit counselor if you cannot get your finances back on track without help. Most bad items that cause credit history impairment disappear from your credit reports after seven years, and lenders place more emphasis on recent history in the meantime.

Warning

Your credit may be wrongly impaired because of mistakes on your credit reports that give lenders a bad impression and impact your credit score. Thirty-seven percent of the people who reviewed their reports in 2007 discovered harmful mistakes, according to survey company Zogby International. Fix these impairments by getting the free credit reports to which you are entitled yearly from AnnualCreditReport.com. Notify the Experian, Equifax and TransUnion credit bureaus about mistakes through their online dispute forms. The Federal Trade Commission advises that they must fix or remove bad data within 30 days.

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How to Clear Up an Error on My Credit Report

A credit report details an individual's credit history. This document details a person's repayment history, revolving lines of credit (such as credit cards and home equity loans), mortgage loans, personal loans and automotive loans. Additionally, credit reports contain negative credit items, such as collection accounts, late payments, foreclosures and bankruptcies. Equifax, Experian and TransUnion, the three credit bureaus, use a person's credit report to determine her FICO score. A credit report inaccuracy, especially a negative item such as a collection account, can harm a person's credit profile and may preclude her from getting access to credit. You can fix a mistake on your credit report in a few steps.

Instructions

1

Go to TransUnion's, Equifax's or Experian's (whichever one contains the inaccurate credit report item) credit dispute website. Fill in your identifying information, including your name, address, date of birth and Social Security number.

2

Use your copy of your credit report to fill in the inaccurate item's information, including the type of item (for example, "collection" for a collection account), name of the item and date the item last updated.

3

Verify all your information is correct. Submit the dispute resolution form.

4

Repeat these steps to dispute the inaccurate item with the other two credit bureaus (if the inaccurate item appears on those credit reports).

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How to Have Things Deleted on Credit

If you have been late on payments to your creditors in the past, you likely have some negative items on your credit report. These items may be affecting your credit report and credit score enough to prevent you from obtaining financing with favorable terms. There are ways to remove some or all of these items as a way to rebuild your credit profile as long you make timely payments on your current accounts.

Instructions

1

Call and request that a negative item be removed from your credit report. In rare cases, having a negative item or inquiry removed from your credit report may be as simple as calling your creditor and asking the creditor to remove it. Creditors are required to be accurate when reporting your credit history to the major credit reporting bureaus, but they are not required to report your account. This first step is unlikely to be effective, but the worst that can happen from a phone call and request is that the creditor will say no.

2

Dispute inaccurate information. You can obtain a free copy of your credit report once each year by requesting it through the AnnualCreditReport website. Conduct a full review of your credit report and the accounts you wish to have removed from your account. This will take some time and a review of your records, but if you find any discrepancies, you can submit an investigation request to the major credit bureaus. The three major bureaus -- Experian, TransUnion and Equifax -- make it fairly easy to initiate a dispute online, and you can cite a variety of reasons for the dispute, such as an account being too old, information reported inaccurately or you are no longer responsible for the account. The credit bureau will investigate the dispute if it is filed appropriately. In some cases, you will get a reply confirming the item as accurate or marking it as deleted. The latter results if the investigation is decided in your favor or if the creditor does not respond at all.

3

Request a goodwill adjustment. If an objective investigation fails, you can try writing a letter to request a goodwill adjustment to your account. In this approach, you are admitting that you were delinquent on payments but are requesting that the creditor, as a courtesy to a valued customer, adjust the reporting so it is shown in a more positive light. In short, you are asking a favor. Chances of success are higher if you are an active customer and in good standing. The creditor cannot submit false information to the bureaus -- if you were late on a payment, you were late. However, a creditor may choose to stop reporting the item or note the account differently to make it seem less derogatory.

4

Threaten legal action. Nobody likes law suits. Sometimes, a stern, aggressive letter written by an attorney can achieve the desired result. The letter should be sent via certified mail, and it should officially state a legitimate grievance against the creditor and the negative item being reported. An example may be alleging the creditor is in violation of the Fair Credit Reporting Act because it is inaccurately representing the status of your account. With luck, the creditor may adjust your record or stop reporting it altogether just to close the matter and avoid a legal entanglement. This is more of an attempt to achieve the desired result out of threat of force rather actual action.

5

Hire a third party. There are many third-party services in the marketplace that claim to be able to rid your credit report of negative items. While there are many unscrupulous companies offering this service, some may be able to help. Some charge monthly fees; others charge only for deleted items. Make sure you understand the methods the service provider employs and that the company is reputable, but a professional group that can help you objectively present your case can be helpful.

6

Wait it out. The good thing about your credit report is that nothing is forever. Most inquiries disappear in two or three years. Most settlements or seriously delinquent reports disappear after seven years. After that time, these items will drop off your report. Furthermore, the older the items are, the less they affect your credit report and credit score.

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How to Dispute an Incorrect Credit Report

A low credit score can not only affect your ability to obtain credit but also sometimes your ability to get a job. A low credit score means your report contains negative information about some or all of your accounts. You should review your credit report annually to check for inaccuracies and incorrect information. Individuals who have discovered inaccurate account information on their credit report can dispute this information with the reporting agency and creditor to have it corrected or removed.

Instructions

1

Request a copy of your credit report from each of the three major credit reporting companies -- Equifax, Transunion and Experian. Under current legislation, consumers are entitled to a free annual credit report from each company. According to the FTC the only authorized site to obtain these free reports is AnnualCreditReport.com.

2

Review the reports carefully. Highlight and notate any items that you do not recognize or any information that is incorrect.

3

Write a letter to the appropriate agency disputing the inaccurate information. Provide the credit bureau with a detailed account of why you believe the information reflected is not correct. Attach any supporting documentation, such as account statements, canceled checks, or correspondence from the creditor.

4

Make a copy of this letter for your records before mailing it to the credit bureau.

5

Wait for the credit bureau to investigate the claim. You should receive a reply from the credit reporting agency within 30 days.

6

Review the information received in the credit reporting agency's reply to your dispute. The response should include verified items and corrected items with the new information being reported. Verified items have been confirmed by the creditor to be true and correct in their original form, and will have to be disputed with the creditor directly.

7

Dispute verified items directly with the creditor. If you believe that a verified item is indeed inaccurate, you will need to take this up directly with the creditor reporting the account.

8

Gather any collaborating evidence for your claim -- canceled checks, proof of payment, statements and other items.

9

Write a letter to the creditor disputing the inaccurate information. Provide evidence that the information they are reporting is inaccurate. If the account is not yours or if you cannot provide documentation that the account information is not correct, request proof from the creditor of the validity of the debt.

10

Give the creditor a deadline for correction and response. Remind the creditor that they are obligated to correct or remove inaccurate information within 30 days of the date of the letter, and that you are requesting validation that this has been done in the form of a response letter from them or corrected credit report from the credit bureau.

11

Make two copies of this letter and the supporting documentation, one for your file and one to send to the credit bureau.

12

Mail the letter to the creditor via certified return, receipt requested. By doing so, you will have documentation of your dispute and the time frame the creditor has to respond.

13

Write a letter to the credit bureau explaining that you are still disputing the inaccurate information. Provide them with a copy of the letter to the creditor and backup documentation. Request that the incorrect information be corrected or removed immediately.

14

Wait for a response from both the creditor and credit reporting agency.

15

Determine if additional action will need to be taken once you receive the creditor's response. If the information has been corrected or deleted, no further action is required. If they are unwilling correct or delete the questionable account, you can proceed by either taking the creditor to court or by adding a statement of dispute to your credit report or both.

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How to Freeze Your Social Security Number With a Credit Bureau

Your credit report and the Social Security Number (SSN) the credit bureau has on file carries significant importance for individuals interested in a loan or other form of credit. Individuals who have their Social Security number linked to a poor credit score may encounter difficulty finding low-interest credit rates, and may be rejected outright. Sometimes, individuals who fall victim to identity theft find their SSN used in conjunction with false information that may jeopardize their credit score. Learn how to freeze your credit report and the connected SSN with a credit bureau in order to protect your personal identity and credit score.

Instructions

1

Understand what a credit freeze accomplishes. When your credit score is frozen, your Social Security Number is locked and no one can apply for credit under your name. This prevents identity thieves from using stolen Social Security Numbers. If you ever want to apply for credit, you will have to contact the credit bureau and lift the freeze.

2

Collect your personal information. You will need to provide this information to each credit bureau at which you wish to freeze your credit report and the Social Security Number on file. You will need to provide the credit bureau with all basic identity information (e.g. date of birth and name). You will also need to provide proof of current address (e.g. a recent utility bill with your name and address on it), a list of all addresses that you lived at for the past 5 years, and a clear photocopy of a state-issued ID card.

3

Type a short, straightforward letter to the credit bureau. You may find the contact information for all three of the major credit bureaus (Experian, Equifax and TransUnion) on their respective websites (links in the Resources section). In the letter, specify that you wish to freeze your credit report.

4

Place the letter in a manila envelope, along with all documents and identification you collected in Step 2. Never send original documents. If you need to use something like a birth certificate, make a photocopy and send the copy.

5

Send the envelope to the credit bureau via certified mail. This ensures that the letter will get to the intended recipient, and you have proof of the date that you sent the letter.

6

Wait for the credit bureaus to respond to your letter with confirmation that your credit score and Social Security Number have been frozen. You may receive a letter with a special personal identification number that you must use if you ever wish to lift the freeze on your file.

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Will a Short Refinance Payoff Hurt My Credit Score?

Twenty-five percent of mortgage holders owe more than the current market value of their home -- they have what's called an underwater mortgage. Many people in this situation seriously consider just walking away from an underwater mortgage, but you should consider another option: short refinance. This can save your home, but sacrifices your credit score.

How it Works

In a short refinance deal, the mortgage provider forgives the "underwater" portion of the mortgage and writes a new loan. If you have a $200,000 home worth $170,000, the lender would forgive $30,000 and authorize a $170,000 loan. The lender typically reports to the credit agency that the original mortgage was "settled" -- a negative item than drops a good credit score anywhere from 45 to 125 points, according to Bank Rate.

Is It Worth It?

Whether you should go for a short refinance depends on the status of your mortgage. If you are current on your payment, you might be able to save tens of thousands on your mortgage in return for a negative item that will disappear from your credit history in seven years. If you are behind on your payments, you probably already have a rocky credit history and would likely see a much a smaller dip in your score, because negative items affect you less as your score goes down. This may, then, be a small price to pay to keep your home and avoid a bigger negative item: foreclosure.

Considerations

A short refinance could have effects on your credit other than a "settlement." Lenders usually require the borrower to fall behind on his payments by several months before approving any type of settlement. Purposely missing payments hurts your score by 70 to 135 points, according to CNN. Any future late payments or negative items look even worse in light of the previous late payments and settled account.

Alternative

Getting a lender to approve a short refinance is difficult and most people who default on their mortgage end up in foreclosure. This occurs because you must prove a hardship case and that the short refinance will cost less than a foreclosure. An alternative to this is a deed in lieu of foreclosure -- where you give the bank your home and it cancels the loan. A "deed in lieu" hurts your credit score, but you get out of the mortgage without owing anything further.

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What Is a Poor Credit Score?

A poor credit score makes it difficult to borrow money. It makes it harder to get a mortgage or an auto loan with favorable interest rates. According to Bankrate.com, the big credit bureaus--TransUnion, Experian and Equifax--use different formulas to figure your FICO score, the most common type of score. As a result, you probably have a different score at each bureau. If your low score is causing problems, you can raise it if you understand its basic composition and how to improve it.

Range and Distribution of Credit Scores

Credit scores range from 300 to 850. Fifteen percent of Americans have a score below 600, according to Bankrate. Twenty-seven percent fall between 600 and 699. The largest number of people, 45 percent, have scores from 700 to 799. Only 13 percent have scores of 800 or higher.

Significance of Scores

The significance or interpretation of your credit score depends upon the lender. Most lenders consider a FICO score of 740 or better as quite good, according to personal-finance columnist Jane Bryant Quinn in her book "Making the Most of Your Money Now." They consider a score below 620 poor. We can conclude that a score between 620 and about 740 is fair to good. The exact cutoff for a particular loan package depends on the lender.

Effects of a Poor Score

Your credit score will help determine what interest rate you get on a loan, and whether you receive quick pre-approval to borrow, according to Bankrate. A poor score means you will pay more in interest and might not even get the loan.

Similarly, a poor score will probably qualify only you for a subprime mortgage, if any, according to Quinn. With a low score, you will have trouble borrowing or will pay more to borrow.

Factors Creating a Poor Credit Score

Your credit score comes from a mix of factors, according to Bankrate. Your bill-paying habits make up 35 percent of your score. Late payments, bills in collections, and bankruptcy lower your score. Your ratio of credit used to credit available makes up 30 percent of your score. Using most of your credit lowers your score. The length and stability of your credit history counts for 15 percent. The number of new applications and your mix of credit types count for 10 percent each.

Improving Your Poor Credit Score

You can improve your score with good habits. Check your report for errors and informing the bureau in writing of mistakes, suggests Quinn. Try to pay down the balance on your debts, and always pay bills on time. Avoid opening or closing accounts.

Keep your spending within your credit limits, and try to have your credit limits raised to improve your ratios. Use credit cards instead of debit cards, and pay them off each month. If you change the habits that lowered your credit score, it will improve over time.

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Why Is a Collections Not on My Credit Report?

When you keep receiving calls about an account in collections, you probably assume that the credit bureaus know about it and put it on your file. Sometimes the credit bureaus do not list a collections -- a great benefit to your credit score. Usually, this occurs because of a bureau slip up and you should take this as an unexpected gift.

Credit Reporting

The credit agencies are not perfect and miss some items. Collection agencies usually have a private database the bureaus can search rather than updating accounts individually. Not all credit agencies search or have access to every database, which is why one credit bureau may report a collections but the others do not. However, bureaus could always find out about in the future.

Lag in Updates

The databases of the national credit bureaus contain billions of pieces of data on millions of files, so updating accounts can take a month or longer. The bureaus may know about that collections not on your report, but need some time to update your file.

Benefit

If several years pass and the credit agencies do not list a collections account on your credit report, consider this good luck. A collections account can destroy a pristine credit rating, because unpaid debts are the most heinous crime in the lending industry. While you should not depend on inefficiency of the credit reporting bureaus to save your score, you do not need to report this omission.

Tip

Ascertain the original charge-off date on the collections account -- the date the original creditor claimed it noncollectable -- but do not in any way claim liability for the debt. The bureaus can only report a collections for seven years. If your debt is older than that, the statute of limitations has probably already passed too, which means the creditor cannot sue you. However, claiming responsibility for the debt renews the life on it and can appear on your report again.

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List of Legitimate Credit-Reporting Agencies

Credit-reporting agencies maintain and distribute public and private credit information on people around the world. Private information is provided by creditors that report individual credit account activity to the agency. Public information is gathered from court records, such as bankruptcy filings and civil judgments. The information is included in individual credit reports that the credit agencies sell to banks, credit card companies and other lending institutions. Creditors rely on information on the credit reports to help make lending decisions.

Experian

Experian reports on its website that it maintains credit information on about 215 million people in the United States. In addition to collecting credit information, the company sells mailing lists to banks, credit card companies and other businesses looking for new customers. According to the website, about 100 million addresses provided by Experian receive a total of 20 billion pieces of promotional mail every year.

Equifax

Equifax has its headquarters in Atlanta and has operations in 15 other countries throughout North America, Europe, Asia and Latin America, according to its website. The company reports that in September 2010 it ranked No. 29 in the 2010 InformationWeek 500. The list, according to Equifax, represents the nation's most innovative users of business technology.

TransUnion

TransUnion was founded in 1968 and maintains credit files on an estimated 500 million people around the world, according to its website. In addition to standard credit information, TransUnion sells criminal background information to apartment complexes, property management firms and other landlords. The companies order the background checks on potential renters as part of the rental application process. TransUnion's headquarters is in Chicago.

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Credit Score Scales & Information

Credit scoring models review consumers' credit files to identify common variables. The models are used to highlight variables that are most likely to predict consumers' future behavior when handling financial matters. Some variables are given more weight than others, which can help consumers understand how creditors and lenders judge their creditworthiness.

Credit Scoring

According to the Experian credit-reporting company, lenders as a whole may use any of more than 1,000 types of credit scores to determine consumers' creditworthiness. Yet Experian notes on its website that some scores are used more than others. A credit score reflects a person's credit history. A high score indicates that a consumer has managed credit and debt well by paying bills on time, not racking up large amounts of credit-card debt and not exceeding credit limits. For lenders and creditors, the number indicates whether a consumer is likely to allow an account to become delinquent.

VantageScore

Experian touts the VantageScore as the first credit score developed jointly by the three national credit-reporting companies, which includes Experian, TransUnion and Equifax. Experian says the score is more consistent than others because it uses one set of calculations that produces more uniform results when weighing consumers' credit histories. The VantageScore is based on an A, B, C, D and F rating scale. Scores range from 990 to 501, and top or A-range scores are in the 900s.

FICO Score

Fair Isaac Corporation created the FICO score. According to the company, FICO scores provide the best guide for creditors and lenders to determine future risk based solely on a consumer's credit file data. FICO scores range from 300 to 850, and banks generally view people with higher scores as less risky borrowers who are likely to pay off their loans and credit accounts. Still, the FICO website notes that each lender decides what level of risk is acceptable, so there is no single score that all lenders use to determine a consumer's creditworthiness.

Considerations

Consumers' payment history and debt accumulation usually have the biggest impact on their credit scores no matter what scoring system is used by a creditor or lender. For instance, 35 percent of a FICO score is based on whether consumers pay their bills on time or have delinquent accounts. Payment history impacts 32 percent of the VantageScore. People's credit scores can drop if they accumulate a lot of debt by maxing out credit-card lines. The amount of credit card debt a person has can impact 30 percent of a FICO score and 23 percent of the VantageScore.

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How to Understand Credit Scores & Risks

Gain knowledge necessary to understand credit scores and types of credit risks. Knowing and understanding these terms is essential in today's society. Credit scores coincide with credit reports and are maintained by three main credit agencies, Equifax, Experian and TransUnion. Each of these maintains a separate credit file for each individual, identifiable by an individual's personal information and Social Security number. Each credit file contains a credit score that potential lenders or companies use to evaluate financial risk.

Instructions

Credit Scores and Risks Explained

1

Learn the range of credit scores; they range from 300 to 850 with the average consumer score being 693. Scores are determined by the evaluation of data listed on your credit report. Payment history, balances owed, length of credit history, new accounts, and the types of credit are the main factors in determining a credit score. Positive credit such as on-time payments, low balances and few inquiries would result in a higher rating. Making payments late, possessing high balances, and having a high number of inquiries lowers your credit score.

2

Know what lenders look at. Credit scores determine if a company or person is going to extend you credit. Other factors may include employment and length of time at your residence. Generally, the higher the credit score is the more likely it is that you are granted credit. With lower credit scores, one may be denied credit or offered a high interest rate with unfavorable terms.

3

Understand the risks; lenders evaluate your credit score, payment history, and balances. For example, if you have multiple late payments with an automobile loan, it would be a risk for lender when buying a new car. Mortgage lenders may require a history of no late payments to qualify for a prime loan with favorable interest rates. Possess a credit score ranging from 720 to 850 and qualify for an excellent mortgage interest rate. Possess multiple late payments, high credit balances or a score below 640 and the lender may consider that a risk.

Improving Credit Scores

4

Obtain a free credit report at annualcreditreport.com; this website offers all three credit reports. Input your basic information on the website, it then takes you to each credit agency's website. While visiting each site, buy your credit score online; scores are not offered for free.

5

Review your credit reports for any inaccuracies. Search for items such as payments that were marked late that were paid on time, incorrect balance information, or accounts that are not yours. Make a note of any errors that you have found in your credit file. Disputing and correcting these errors improves your credit score.

6

Dispute Inaccuracies. Visit each credit agency's website and begin the dispute process. Go to equifax.com, scroll down to correct errors, click on "Start a new Dispute," and follow the dispute process. Visit experian.com, scroll down to credit report assistance and click on "Disputes," follow the dispute process. Go to transunion.com, scroll down to consumer assistance and click on " dispute an item," follow the dispute process.

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Will Several Mortgage Preapprovals Affect My Credit Score?

Mortgage preapprovals help you as a home buyer because you know how much you can spend and sellers know you are serious. You are in a better negotiating position when you have financing in place. Credit applications are required for mortgage preapproval, and they result in inquiries that appear on TransUnion, Equifax and Experian credit reports and figure into score calculations, according to the MyFICO credit scoring website.

Effects

Mortgage applications generate hard inquiries, meaning credit report reviews made for the purpose of evaluating a loan application. Soft inquiries, which are generated by your own credit report reviews and pre-screening for marketing offers, do not affect your credit score. A single hard inquiry lowers a credit score by up to five points, and multiple applications hurt it even more. Multiple mortgage preapprovals are an exception if you apply for them within a short time. FICO and other credit scorers consider them as a single application if they happened within two weeks.

Warning

While several mortgage inquiries are lumped together to keep them from hurting your credit score too badly, Jason Goldwasser of Kiplinger's Personal Finance warns that other applications pull the score down if you fill them out in around the same time. For example, your mortgage preapprovals can combine with requests for new credit cards or a car loan within the same year to make it hard to get approval for future applications.

Prevention

Check your FICO credit score before initiating mortgage applications, Goldwasser recommends You are required to pay for your score, but it shows you how lenders will view you. Your mortgage requests could hurt you if your score is borderline, dropping it enough to make you pay higher interest on a mortgage. Skip preapproval if your score needs to be raised and concentrate on catching up credit accounts and building a string of on-time payments while you house shop. Seek financing once you decide on a house and your credit has had time to improve.

Considerations

Certain other credit applications are treated in the same way as mortgage loans. For example, the MyFICO website explains that several inquiries from auto financing companies or banks that handle student loans are lumped together if they occur within a 14-day span. FICO and other credit scorers treat them as one inquiry because they result from loan-rate shopping rather than the opening of several new accounts.

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How to Build a Better Credit Report

Your credit report is important to your financial standing. A good credit report is helpful should you need a line of credit, allowing you to get lower interest rates, often with preferential terms. Check your credit report regularly to ensure it is correct. This will allow you to monitor areas that need improvement. Building a better credit report can take time and effort. By following a few procedures, your credit report can improve.

Instructions

1

Apply online to get your credit reports. You can get a free report annually from AnnualCreditReport.com (see References) to start building a better credit report. You are entitled to free report from all three credit reporting bureaus: Experian, Equifax and TransUnion. Get all three, as they may contain different information. Complete the online application form and you will be able to access your credit reports at once.

2

Check the three reports for errors. This is the quickest way to build a better credit report. Contact the lender and the reporting bureau with any errors immediately. Check the Federal Trade Commission website on how to dispute errors (see References).

3

Check areas where your credit history could be improved. Credit cards that have a high outstanding balance affect your credit history. Reduce the balances as quickly as you can. Use the cards you have sensibly, but regularly. Using all your cards and keeping the balances under 50 percent of your credit limit for each card is better than using one card to its limit and not using other cards. This use of your credit cards will help build a better credit report.

4

Ensure all payments for your loans and credit cards are made on time. Each payment is recorded and shows on your credit report. Consistent regular payments build a better credit report.

5

Pay your utility bills by the due date. Electricity, water and gas companies report payment history to the credit reporting bureaus. If you have a contract cell phone, pay the bill on time. They also report to the bureaus.

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How Often Does Your Credit Score Go Up?

You may feel tempted to check your credit score every day to track its improvement, but this usually becomes an exercise in futility. The national credit reporting bureaus update their files all the time, but it is ultimately up to your creditors to give them something new to report. In some cases, you may wait months to see your score improve or as little as a few days.

Identification

Your credit score only improves when new, positive data enters your report. The effects of the data has two limitations: When your creditor reports it and when the credit agencies update their files. The agencies do not follow any set schedule to update their reports, so it can happen at any time. However, because of technical capabilities, this usually takes one to three months. Even if the agencies updated their reports daily, they probably would have nothing to report on most days because creditors usually only send in payment data once a month.

Considerations

If you have several negative items on your credit report, such as bankruptcy, it may take months or even a year before you see an appreciable difference in your score. Positive items -- paying a bill on time -- have far less of an impact than a bad item, like missing a payment. Also, lenders usually break scores down into tiers. Lifting a score from 620 to 630, for example, probably would not make a difference to a lender, because both scores fall in the average range.

Improve Your Score in Three Days

Disputing an item and having the credit agency side with you provides the fastest method for improving your score. This too, however, can take months. The agencies have 30 days to investigate your case and even if you win, you have to wait for the bureaus to update their databases. The alternative is rapid rescoring. This type of service offers to correct errors on your report in as little as three days for what often amounts to a minimal fee compared to what it can save you on a loan, because negative items can drag down a score and increase the cost of a loan. Private individuals cannot access this service, only lenders, such as a mortgage provider. Also, the creditor must admit to reporting an item in error or agree that something is erroneous in writing. A rapid rescoring service usually does not investigate a claim.

Tip

When you have a poor score, nothing other than disputing errors can improve your score drastically in a short period of time. The Fair Isaac Corporation recommends consumers be patient and work on paying down debt and sending in their monthly payments on time. As long as you do this, your score eventually rises into the top tier of scores.

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What Is the Meaning of Beacon Score?

The Beacon score is the name of the credit score used by the Equifax Credit Bureau. It's calculated using a complex secret formula that tells lenders whether the individual is creditworthy.

Identification

There are 3 main credit bureaus in the United States: Equifax, Experian and TransUnion. Each one uses a slightly different algorithm to calculate credit scores. Equifax calls its version of the score the Beacon score.

Features

The exact formula that Equifax uses is kept secret. However, it does include borrowing history, repayment history, total amount owed, frequency of credit applications and many other factors. All this information translates into a single 3-digit number.

Size

The Beacon score ranges from 300 to 850. The average American has a score between 670 and 699.

Prevention/Solution

Improving a Beacon score takes time. The most important thing is to pay bills on time and not to max out credit cards. Even a single missed credit card payment will reflect badly on the score.

Warning

There are companies that promise to improve your Beacon score overnight. This is impossible. The only way to improve your credit score is to replace negative credit information with positive credit information. Since negative information cannot be erased, the only way to significantly improve the score is to wait for it to expire.

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Will Disputing an Item Temporarily Raise Your Credit Score?

The Fair Credit Reporting Act requires that credit rating agencies investigate all disputed items and correct any errors, according to the Federal Trade Commission. Disputing any negative item on your credit report is a common tactic suggested by nefarious credit repair agencies to raise your score. This, however, is a temporary solution to long-term credit problems.

Identification

Disputing an item will temporarily raise your credit score because credit rating agencies must remove the negative item while investigating the veracity of your claims, according to Fox Business. Once the investigation is complete, the credit rating agency puts the negative mark back on your report if it deems the item valid.

Considerations

Credit rating agencies know the common credit repair tactic of disputing any black mark in the hopes that enough requests will backlog the investigation process or the agency will remove the item because it is not cost effective to review it, according to My Credit Group. If you try this tactic, the agency may have the right to ignore your disputes as frivolous.

Benefits

Disputing an item can permanently raise your score if it is a legitimate error. About 70 percent of credit reports contain at least one piece of erroneous information, according to Bank Rate. If the credit rating agency ignores your request for more than 30 days, it will have to remove the item regardless of its legitimacy.

Tip

Nothing can replace managing your finances responsibly. Disputing items related to an unpaid debt could give the company motivation to renew attempts to collect on it. Start raising your score now by paying down debt, setting a budget and paying your bills on time. Avoid credit repair companies that claim they can eliminate negative marks or give you a new identity.

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What Your Credit Score Means

A credit score is a way for mortgage lenders and other companies to know if you make your payments on time. Fair Isaac Corporation (FICO) has a formula that is used for calculating your credit score. This calculation gives companies a way to figure out how much risk you pose as a borrower.

There are several things that effect your FICO score. These include your payment history, how much you currently owe, how many and what types of credit cards you have, and the length of your credit history.

Payment History

Your payment history makes up 35% of your FICO score. It includes whether you are paying your bills at all, paying them on time, or whether a collection agency had to go after you for payment of a bill. The quality not the quantity of your payment is key to getting a good score in this area. Pay your bills on time even if it is the minimum payment. If you need help with paying your bills, call the company and set up a payment schedule with them. Showing such financial responsibility may help your score.

How Much You Owe Now

30% of your score is made up by how much you currently owe in loans, credit cards, or other bills. If you pay all of your bills on time, you'll have a high score in this area. Even an occasional late payment won't hurt you much. Be careful, though, not to max out your cards, avoid paying your bills or ask for a lot of loans. This behavior will greatly effect your FICO score in a negative way.

New Credit Cards

About 10% of your FICO score involves recent activity for new credit cards. Be sure to avoid signing up for several new credit cards and asking for loans all in a short period of time. This can put a "red flag" on your record and make it look like you are unreliable and at risk of not paying your bills. Sign up for one new credit card at a time and let that credit get established before signing up for another card.

Credit Type

Another 10% of your FICO score involves the type of credit activity you have. The more variety you own, the better. For example, if you have various lines of credit like a mortgage, credit card, and a finance account your score will be given more positive points than if you owned only 19 credit cards. Again, payment of these bills, no matter how many, is key to receiving a high score.

Establish Credit

15% of your FICO score is based on how long you've had credit. It is important to establish some credit in order to qualify for loans or other financial aide. This can take time but once you begin to establish a good credit history, you want to keep this credit active throughout your life. You may want to begin by opening up a retail credit card or a less desirable card for several months before you can receive other credit opportunities. Maintaining good credit habits will determine that you are responsible enough to have a positive FICO score. Keeping these habits throughout your life will keep you in good standing with creditors.

FICO score range

The higher your FICO score, the more creditors see you as someone who is able to pay off a loan on time and pose less credit risk. A score of 720-850 is the best score range you can receive. 700-719 means you have good credit and will be able to receive positive financing terms. A score of 675-699 means that you are still in a positive range. A score between 620-674 may give you trouble getting favorable financing. With a score between 560-619, you may have trouble getting any financial terms. And if you receive a score of 500-559, it is time for you to work on improving your credit.

Keep Credit Cards Active

Even if you are not using your credit cards, don't close them down. You want to still maintain a good credit history even if they are not being used. The longer you have good credit, the more easily you will be able to approach lenders for loans in the future.

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