Does Medical Debt Cause a Bad Credit Score?

Unexpected medical bills can wreck someone in the best financial shape and ruin his credit for the foreseeable future. This does not always happen, because medical debt is very common among Americans and hospitals are more forgiving, so they may not report your debt. However, you should not rely on the medical provider or credit agencies to give you a break.

Identification

Ignoring medical bills can drop your score like a rock. Like any other unpaid debt, the medical provider can charge off the balance and report it to the credit bureaus or, more likely, send it to a debt collector. Medical providers rarely report debts to the agencies themselves, because that requires added expenses and regulations the medical provider must follow. Collections accounts are one of the worst things for a credit score---worse than late payments, which can take more than 100 points off your score.

Considerations

Medical providers try to avoid heavy-handed tactics like employing a collections agency, according to Daniel Schorn of CBS News. Most hospitals are nonprofits, so they probably just add the unpaid bill to the rest of their outstanding debts and use the figure for fund-raising efforts or motivate Congress for more public medical assistance program payments from Medicare and Medicaid. For-profit hospitals might just accept the tax write-off they can take from bad debt.

Lenders Might Not Care

Lenders may overlook a poor credit score caused by a medical bill in collections. This is not to say that paying it off does not improve your chances at receiving a loan---lenders like to see borrowers who try to pay off any debt no matter how small or old.

Tip

You never want a collections or unpaid debt on your record, even if a lender ignores it, because other creditors might consider it a significant event. Negotiate with your medical provider before he decides to send the account to collections. Many doctors will work out a payment plan and even lower your bill if it prevents involving a debt collector, because they only receive a portion of the balance by sending it to a collector.

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What Is the Best Way to Remove a Paid Tax Lien From My Credit Report?

Tax liens are one of the seven most derogatory items you can have on a credit report, but you might be able to have the credit bureaus remove it immediately. The Internal Revenue Service helps taxpayers improve their credit rating when they settle their debt with the federal government. However, you must pay every cent you owe, even penalties and fees.

Tax Lien Withdrawal

If you pay off your tax lien, the IRS automatically releases the lien because of a regulatory change in February 2011. Before February 2011, the credit bureaus could report a paid tax lien for seven years this no longer applies to settlements with the IRS. Thus, if you make a partial payment through an "Offer in Compromise" the lien stays on your credit history for seven years.

Requesting Removal

The IRS does not automatically withdraw a paid tax lien. You must file an Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien. You must furnish a copy of your form 668(Y) -- for a Federal tax lien -- and any information that proves you paid your tax lien, such as a certificate of release. The IRS automatically sends out a Certificate of Release of Federal Tax Lien within 30 days of your payment on the tax bill.

Considerations

If you negotiated a partial payment, you might be able to remove your tax lien by disputing the record with the credit bureaus. The bureaus must verify the tax lien with the IRS ,and the IRS must be able to document the tax lien. Even if you legitimately owe money on the tax lien, the Fair Credit Reporting Act requires creditors to report accurate information as well as verifying data.

Tip

The rules for withdrawal of an IRS tax lien apply to installment plans. You can file a request to withdraw the lien as soon as the IRS accepts the installment agreement. This might mean the IRS removes the lien long before you make your final payment on the loan. In the future, you should enter into an installment agreement or find some other way to pay your IRS bill, such as with a credit card advance, instead of ignoring the debt.

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How to Build Your Credit With a Utilities Bill

Building a solid credit history is a key to your financial wellbeing. With good credit, you can get the lowest interest rates and get approved for a car loan and mortgage. However, you don't just wake up one day with good credit; you have to build it over time. One of the easiest ways to do this is by successfully managing a utility bill in your name. Even if the utility provider doesn't report to the credit bureaus, utility payments are part of your FICO Expansion Score, which is used for people with limited or no credit history. Paying your utility bill on time will not only help to avoid late fees and service interruption, but you'll also be working towards a blemish-free credit history.

Instructions

1

Sign up for a necessary utility, such as a telephone or electricity. A credit check is often required for new customers, and a deposit may be necessary if you don't pass the credit check.

2

Budget a little extra money for your first month's bill. Some industries, such as wireless phones and cable companies, bill you in advance. As a result, you may have to pay for a partial month in addition to your monthly rate, plus installation or any other setup fees charged by the company. Being prepared for this bill can help you get started on the right foot.

3

Register for the utility company's automatic payment option, which takes your monthly payment from a checking account or credit card. This helps you to stay on top of your monthly payments.

4

Contact the utility company after a year of consecutive successful payments. Ask for your deposit if you were required to make one, as you've shown that you're a reliable credit risk. See if you qualify for a better rate due to your status as a loyal customer who always pays on time.

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How Do I Know What Credit to Expect Based on My Score?

There are general guidelines for gauging your creditworthiness based on your Fair Issac Corporation (FICO) score. But it isn't an exact science. Someone with a 720 credit score but a very limited credit history (say, less than a year) might be turned down for a signature loan, while someone else with a 620 score and a long credit history might be approved. Your credit score is just one factor that creditors consider when evaluating you for a loan. Salary, employment and stability also play important roles.

Instructions

1

Get a copy of your credit report and score. Free copies of your report are available from the website Annual Credit Report, the only website authorized to provide free reports under the terms of the Fair Credit Reporting Act. View and print your report from the home page. Then follow instructions on the report for ordering your credit score separately.

2

Review your credit score and compare it to the range of scores generally recognized for good and bad credit. According to the website Bankrate.com, credit scores range from 300 to 850, with a score of 620 generally recognized as the cut-off for good credit. Generally, a score of 750 or higher places you in the best position for loan approval at the most attractive interest rates. However, credit approval is possible at almost any score. Generally, the lower the score, the higher the interest rate. For example, someone with a credit score of 500 might qualify for a credit card at a whopping 21 percent interest rate, while someone with a 720 score might be approved for a card at 12 percent.

3

Improve your credit score, if necessary, by paying all your bills on time. Make payments to bring any delinquent accounts current and also contact creditors or debt collectors to resolve any outstanding old debts. Address any other negative issues on your credit report as well, including judgments or liens.

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Simple Steps to Improving Your Credit Report

When you apply for any loan, the lender will look at your credit report. In addition, landlords and even some employers check your credit prior to doing business with you. There are important steps you can take to improve your credit report and credit score.

Know Your Report

The first step to improving your credit is to familiarize yourself with the information contained in your credit report. In 2003, Congress passed the Fair and Accurate Credit Transactions Act. Under the law, consumers can receive one free report each year from all three main bureaus: Experian, Equifax and TransUnion. You can order the free reports online at the Annual Credit Report website. This site will also tell you how to order the reports by mail or phone, if you prefer.

Dispute Errors

Your credit score is based upon the data found in your credit report and as such, errors can lower your score. Under the Fair Credit Reporting Act, consumers have the right to dispute errors and inaccuracies with the credit bureaus. Once you file a dispute, the bureau has up to 30 days to investigate your dispute and then make changes. The FCRA requires the bureau to send you written notification of the results.

Pay Bills On Time

Lenders report your payment history to the bureaus and it will appear on your credit report. The largest contributor to your FICO credit score is how well you pay your bills, which accounts for 35 percent of the score. Late payments will drop your score. According to Bankrate.com, one single 30-day late payment can drop your score by 60 to 110 points. The later the payment, the more damage occurs. To improve your score, make all credit payments on time.

Pay Down Debt

The amount of debt you have represents the second-largest contributing factor to your FICO credit score at 30 percent. Your credit report lists the accounts you have and the corresponding amount of debt for each one. FICO looks at your credit utilization ratio, which measures the amount of available credit you have versus the amount of credit you're using. The higher your amount of available credit, the lower this ratio and the higher your score. Conversely, the less available credit you have, the higher this ratio and the lower your score. To improve your score, reduce the amount of debt you have and keep credit balances low.

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Everything You Need to Know About Credit Scores

Credit scores are numbers that are closely tied to your financial life in a variety of ways. These numbers impact almost everything you do, from determining the interest rate that you pay to helping you get a job. Understanding what these numbers are and how they work is essential to your financial future.

What is a Credit Score?

A credit score is a number that is calculated based on a formula created by the Fair Isaacs Corporation, or FICO. It is also sometimes referred to as your FICO score. The three major credit bureaus; TransUnion, Experian and Equifax, use these scores. They use the formula that was created by FICO to calculate your scores based on the information that is provided to them by creditors. This number is designed to simplify the lending process and help lenders evaluate your applications for credit more easily.

What it Affects

Your credit score can play a vital role in many different areas of your financial life. Lenders will look at this number when determining if you should be approved for a loan or some other type of financing. Besides approval, the credit score will also play a role in determining the interest rate that the lender charges. Your credit score is also use by insurance companies to determine what your premium rates will be. Landlords and companies will use your score to determine if you have to pay deposits. Potential employers can also use your credit history to evaluate you for a job opening.

What Comprises Your Score

When calculating your credit score, the credit bureaus look at several factors in your financial life. One of the most important factors that goes into your score is your payment history. If you pay your bills on time, this reflect positively on your score. The amount of debt that you have in relation to the amount of available credit you have also plays a role. The length of your credit history also affects your credit score. Creditors also look at the different types of credit that you have such as installment loans and revolving credit lines.

Boosting Your Score

If you look your credit report and determine that you have a low credit score, you are not stuck with this number. Your credit score can be improved over time if you take the proper actions. When you get a copy of your credit report, you can also usually find out why your score is lower than it should be. Use this information to plan your next steps when trying to boost your score. For example, you may want to pay down your credit cards and get in the habit of paying your bills before they are due.

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Credit Information on Hard Inquiries

One of the main purposes served by credit reports is telling creditors whether you are likely to repay a new loan or account. Lenders judge you by your past and present payment performance and current account balances, and they also consider the number of applications you filled out recently. All of these things factor into your credit report and your perceived creditworthiness.

Definition

Hard inquiries are one of two inquiry types you see when you order your TransUnion, Experian and Equifax credit reports. Lenders check your credit bureau records whenever you apply for a credit card, personal loan, auto financing or mortgage, and their inquiries become part of your file, too. While hard inquiries come from credit applications, the other type, called soft inquiries, results from companies pre-screening you for marketing and your own credit report checks.

Effects

Soft inquiries are invisible to lenders, but they see every hard inquiry made into your records for the past two years. Application-based inquiries also hurt your credit score to varying degrees. They only lower it by five points or less if you have a single inquiry over the past 12 months, according to the FICO scoring model, but the negative effect increases for additional credit checks. You look especially risky to creditors if you filled out more than five applications in a short time because your possibility of filing bankruptcy is statistically very high.

Assessment

Your TransUnion, Experian and Equifax credit reports are available for free every year if you wish to check the number of hard and soft queries showing up in your records. This, combined with other account information, lets you assess your credit rating and attractiveness to lenders. Use AnnualCreditReport.com for your report orders, the Federal Trade Commission advises, because it is the official website run by all three bureaus to handle the federally mandated no-cost report orders. You will see all your credit checks over the past two years, while lenders only see hard inquiries.

Considerations

You may find some unrecognized hard inquiries on your credit reports, and federal law allows you to request proof of your authorization for those credit credits, according to the Illinois Attorney General's Office. The companies listed as making those inquiries must erase them from your credit reports if they cannot comply with your validation request. Write letters to any unrecognized companies, using the contact information on your credit reports, and ask for a copy of your authorization or removal of the inquiry.

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How to Dispute a Judgment on Your Credit Report

A credit report contains information about how you pay your bills and bankruptcy filings. It also contains information about judgments. A judgment appears on a credit report when an individual has lost a court case. In special cases, such as identity theft, the credit bureaus will remove these judgments from credit reporting files.

Instructions

1

Order a copy of your credit report. If an inaccurate judgment is appearing on a credit file, there also may be other reporting errors. According to the Federal Trade Commission (FTC), consumers are entitled to a free credit report every 12 months. In addition to the inaccurate judgment, look for inaccurate late payments and accounts that don't belong to you.

2

File a police report. If the judgments on the report are the result of identity theft, you must file a police report. A police report establishes a claim of identity theft and can help remove inaccurate judgments on credit reports, according to the FTC.

3

Write a letter to the three main credit reporting agencies---Equifax, Experian and TransUnion. The letter should include why the judgment is inaccurate and documentation supporting the claim, such as the police report. Also attach a copy of your credit report, circling the disputed items in red pen. This will make it easier for the credit bureau to find the items under dispute.

4

Send the letter by certified mail. The FTC recommends sending your dispute letters through certified mail. This can be accomplished by visiting your local post office. A certified letter will create a paper trail documenting your dispute.

5

Follow up with the credit bureau after 30 business days. According to the FTC, these organizations usually respond to disputes within this time frame.

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Is It Better to Close an Account for My Credit Report?

Credit cards can be open even if you do not owe any money and have not used them for a long time. The Experian credit bureau explains that such accounts do not have a "paid" status. The balance fluctuates as you use the account, and shows zero if you pay it off. It also shows your available credit line. You may close the account, which changes your credit report information and affects your credit score.

Effects

Credit card closure hurts your credit score rather than helping it because of the way scores are calculated. The MyFICO scoring site explains that its formula looks at what you owe, your open credit lines and the age of your accounts. Credit card closure makes your debt load look worse because it erases a chunk of available credit, Bankrate.com Debt Adviser Steve Bucci explains. You also stop activity on the account, which hurts the history part of your score.

Process

Close your account properly to ensure minimal damage to your credit reports. Your credit score is harmed if it looks like the account was closed involuntarily because banks cut off credit cards if they see you ask a bad risk, even if the account is not delinquent. Call the customer service number on your credit card, request account closure, and specify that you want the status to reflect "closed by consumer." Send a letter that summarizes the conversation after your telephone call, Bankrate.com writer Holden Lewis advises.

Follow-Up

Check your Experian, TransUnion and Equifax credit reports a month or two after the closure. The reports are free if you get them through annualcreditreport.com, according to the Federal Trade Commission, because every consumer is entitled to no-cost copies from that site once a year. Make sure the closed account shows no owed balance or credit limit and reflects the fact that you closed it voluntarily. Complain to the bank or file credit bureau disputes if any of the data is wrong.

Warning

Credit card companies will close an account before it is paid off, but Bankrate.com Don Taylor warns that it is not a true closure. You still owe the debt, but the available credit line gets removed from your credit reports because you can no longer use the card. This action hurts your credit score by changing your debt to available credit ratio. The debt looks worse because of the credit line reduction. Leave your credit card open until it reaches a zero balance if you really want to close it.

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The Impact of a Foreclosure on Credit and Employment

A foreclosure can have a ripple effect throughout the rest of your life, even on your employment. At the very least, a foreclosure likely means you cannot obtain credit on reasonable terms for several months. However, you probably can avoid a foreclosure affecting your chances at employment as long as you offer a good explanation for your financial situation.

Impact on Credit Score

Foreclosure is the second-worst item you can have in your credit history, next to bankruptcy. As with any negative item, the effect of foreclosure on your credit rating depends on the rest of the information in your credit history. Most credit ratings drop no more than 160 points, but it is possible your score could drop by 200 or 300 points, according to Nina Silberstein in Mint.com. Missed payments and the foreclosure itself stay on your report for seven years.

Employment

Almost half of all employers perform credit checks on some positions, and 13 percent of employers run checks on all applicants, according to the Society for Human Resource Management. A foreclosure is a hugely negative account, so an employer may question your character and finances with this on your record. People in dire straits sometimes steal from their employer, especially if the position requires handling cash like a bank teller. Thus, you may not qualify for certain positions based on your foreclosure, even if you meet all the other requirements. Some states, such as Illinois, ban certain credit checks.

Avoiding Foreclosure

If you are considering foreclosure, you probably have missed payments on your credit record, which look bad, but not as terrible as a foreclosure. Foreclosure is a last resort, so you may have options available to you to save your home. For example, you can sell your home for whatever you can get and negotiate with your lender to pay off any deficiency under an installment plan. You may even get a forbearance, where the lender delays payments for a few months, or a modification on the terms of your loan from your lender.

Tip

The credit reporting bureaus allow you to leave comments on anything in your credit history. You can also write a letter to a hiring manager about your credit history. For example, you might say that unexpected medical bills caused you to miss payments on your mortgage, but you received help and mortgage problems are no longer an issue.

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Does Using a Check Card or Debit Card Help You Build Credit?

The primary measure of an individual's creditworthiness is his credit score. A credit score is calculated by credit reporting agencies using financial information found in a person's lending history. This includes information about loans that the person has taken out, as well as his record of repaying them. While the use of a check or debit card will not directly affect a credit score, it may affect the consumer's relationship with his bank, which may lead to being offered new lines of credit.

Check and Debit Cards

Both check and debit cards, when used to withdraw cash or make purchases, take money out of a checking account. While some lenders may look at the size of a person's bank account when deciding the terms under which to offer her a loan, the size or activity of a checking account is not reported on her credit report. Therefore, use of a check or debit card will not affect a person's credit score.

Credit Scores

Credit reports are composed only of information directly related to the issuance of loans. The more positive information that a person has on her credit report, the higher her credit score will be. Positive information can include a history of paying back outstanding loans on time, as well as a low ratio of debt to available credit. Transactions involving checking accounts are not included on this report.

Misconceptions

Sometimes when a person uses a debit card to make a purchase, the retailer will ask whether he would like to use the card as credit or debit. If the person chooses to use the card's credit function, the card will not be used to access a line of credit. Instead, the money will still be withdrawn from the individual's bank account, but the transaction will be routed through a credit card company. The person's credit score will not be affected.

Lending Institutions

Although using check or debit card will not directly affect a person's credit score, responsible use of a card may place an individual on good terms with the financial institution that manages his account. If this institution also issues credit cards or loans, the institution, based on the individual's use of his checking account, may be willing to extend him favorable terms on loans or a line of credit. The individual can then use this to help build his credit score.

Considerations

While using a check or debit card will not all by itself help an individual build credit, if the card is used to help pay off debt, it can help build credit. For example, if a debit card is used to pay off a credit card bill on time, then the person's credit score will likely improve. Similarly, if a credit card is secured using collateral held in a checking account and the card is paid on time, the person's credit score will improve.

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The Meaning of Credit Report Scores

Your credit score comprises a number of factors which summarize your credit activities, including how much money you owe and how timely you are with your payments. A credit score, also known as a FICO (Fair Isaac Corporation) score, consists of a number ranging from 300 to 850. The higher the number is, the better your credit rating. Before you can work to improve your FICO score, you should know the meaning of credit report scores.

Credit Scores

Your credit report scores are calculated using five different categories of credit data found in your report: payment history, amounts owing, length of credit history, recent credit and types of credit used. More than one-third of your credit score is a reflection of your payment history -- number of accounts paid as agreed, past due accounts, collection items and the total amount of any delinquencies. Nearly one-third of your score is determined by your credit-utilization rate, or how much you owe compared to your total available credit.

Score Ranges

Another meaning behind credit report scores focuses on how likely you are to repay your debts and the amount of risk you present to lenders. Higher credit scores will translate to lower interest rates and easier approvals for you on loans and credit cards, since you present less risk. Whereas, lower credit scores mean higher interest rates and more restrictions on loans and other credit or being turned down altogether by lenders. A score of 720 or higher is generally considered to be excellent and should get you the most favorable mortgage interest rate. Only 13 percent of the population has credit report scores over 800, with the majority of the population falling somewhere between 750 and 799.

Benefits

Higher credit report scores can be beneficial for reducing premiums for homeowners, car and private mortgage insurance. Car insurance providers use credit scores to assess your accident probability ratio, as consumers with higher credit scores typically tend to file fewer insurance claims. In contrast, lower credit report scores can mean higher insurance premiums. It can also mean getting approved for a smaller amount with a mortgage loan and bigger security deposits required to set up utility or phone service accounts.

Free Reports

Since your credit report contains a decade's worth of information about your credit activities, there is a chance it could have errors. Correcting any errors in your report is an easy way to improve your credit report scores. At AnnualCreditReport.com you can get a free copy of your credit report from each of the three main credit reporting bureaus -- TransUnion, Experian and Equifax -- once a year. Common reporting errors include out-of-date addresses, accounts listed that you no longer have and sometimes, outright false information.

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Does Having a Medical Bill in Collections Affect Your Credit Score?

About half of all collections accounts exist because of outstanding medical bills, according to the Federal Reserve Board. Unpaid medical bills can result in wage garnishment or other public judgment and destroy a credit rating. A medical bill in collections, however, may not hinder future applications for credit,, and you do not have to declare bankruptcy to pay it back.

Identification

Having any type of account in collections will affect your credit score. If a debt collector makes it public knowledge, the major credit reporting agencies eventually pick it up. This can cause massive damage to your credit score, because collections accounts are a heinous incident in the world of credit, like a foreclosure. On an average score -- around 680 -- a collections could do 85 to 105 points worth of damage

Considerations

Lenders often ignore medical debt in collections because it is so common, according to Conforming Rate. Not all creditors are willing to forgive unpaid medical debt, so you should check with the lender to see what you should do about it. The most common lenders that ignore medical collections are sub-prime lenders, who sell loans at very high interest rates to consumers with poor credit, and Alt-A creditors, who lend to people with scores between sub-prime and good.

Considerations

All medical collections fall off your credit report seven years after the original creditor reports the debt as delinquent. Consumers should check their credit report from all three major agencies before applying for new credit to see if they have a medical collections account. If a lender requires you to settle the bill, try to pay it off in full rather than negotiating for a partial payment -- debt settlement hurts a score about 45 to 65 points more than "paid as agreed," according to the Fair Isaac Corporation. Paying a collections account does not raise a score, but at least you can prevent a loss of points.

Tip

Avoid having a medical provider send your bill to a debt collector in whatever manner possible, such as setting up a payment plan. Bankrate suggests a payment plan of 10 percent of the bill each month. Hospitals rarely report to the credit rating agencies, while debt collectors always do. Also, you can dispute erroneous medical collections accounts on your record, such as when the medical provider reports debt to a collections agency before sending you a bill.

HIPAA

The Health Insurance Portability and Accountability Act protects a person's right to medical privacy. This, however, does not extend to unpaid bills. Unpaid bills can be reported to debt collectors because it counts as "payment activity."

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Does Being Denied for a Loan Hurt Your Credit Score?

Being denied credit probably hurts your feelings, but that is pretty much the only thing that happens after a rejection. You could cause significant damage if you refuse to accept that you might have bad credit and stop applying for new loans before rebuilding your score. In some cases, extra applications do not hurt your score and are a good move.

Identification

A denial for credit does not affect your credit score nor do the credit bureaus track such data. The only harm that comes from applying for a loan and receiving a rejection is the hard inquiry. When lenders request your credit history because you applied for a loan and consented to a credit check, the bureaus note this and it takes a few points off of your score. Considering the range of the FICO model -- 300 to 850 -- a single inquiry barely makes a difference to a score.

Potential Damage

You might not accept a denial and keep applying for loans. This could cause as much damage as anything else on a credit report, because once you get past six hard inquiries you have an eight times greater chance of declaring bankruptcy, according to the Fair Isaac Corporation. However, some loans carry a tradition of the borrower shopping around and putting in several applications. The credit bureaus count all inquiries for student or car loans and mortgages in a 45-day period as one inquiry.

Improving Credit

When a lender rejects your application, you probably have some negative information in your profile. Check your own credit report, which should list all of your negative items and debt burdens in the summary section. Always eliminate debt if possible and assume that negative items are your weak areas. Automatic bill pay usually prevents missed payments unless you do not have enough money left in your bank account. The worst offenses, such as bankruptcy and foreclosure, can take years to recover from.

Tip

The Dodd-Frank Wall Street financial reform bill passed through Congress in 2011 and one provision gives consumers the right to see their credit report and credit score if a lender rejects them based on a credit reason. As of March 2011 the regulations are not final, so consumers must wait until the Federal Trade Commission issues final rules for the bill to exercise this clause.

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How to Improve Credit After a Consumer Proposal

A consumer proposal is a Canadian court-approved program through which your outstanding debts are renegotiated with lenders by a third party. Though a consumer proposal will help immediate financial problems by lowering monthly payments and reducing debt, it will hurt your credit score. A consumer proposal will stay on your credit report for three years, but you can begin improving your credit score immediately by removing inaccurate information from your credit history and reestablishing positive credit.

Instructions

1

Check your credit report for inaccurate information. It's especially important to check your credit report after a consumer proposal or bankruptcy to make sure that accounts included in the proposal are marked as paid. A consumer proposal on your credit report obviously doesn't help your score, but having negative information reported twice for the same account will damage your credit even more. You can get a copy of your credit report from Equifax or TransUnion via there websites: www.equifax.ca and www.transunion.ca.

2

Pay bills on time. Credit card issuers and banks are not the only companies who report to credit agencies. Utility, cell phone, and even subscription services can report delinquent account information to credit agencies. Every mark on your credit report either improves or decreases your score, so stay on top of payments even if you don't think they're important.

3

Start rebuilding a positive credit history. You need to show that you're responsibly paying back lenders, but this can be hard if nobody will lend to you. One solution is to apply for a secured credit card. Secured cards allow you to place money in an account tied to the card and use it to purchase items. Since there is no risk to lenders with secured credit cards, you will qualify no matter how poor your credit rating.

4

Apply for an unsecured loan or credit card. Though it's harder to qualify for unsecured credit after a consumer proposal, it's not impossible. Unfortunately, you will be offered less desirable rates and fees due to your credit score. Once approved, you need to use the card or loan to start improving your credit. Just be sure to pay off your balance each month to show lenders that you're financially responsible.

5

Avoid applying for too many cards at once. Many people apply for numerous credit cards or loans after a consumer proposal just to see who will lend to them. This practice will actually lower your credit rating as lenders may think you're overextending yourself financially.

6

Keep your balances low. Once you get a new credit line, make sure that you keep the balance below 50 percent of the credit limit. Lower balances show creditors that you're not in financial trouble and are able to make payments.

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Does Paying Off Old Debt Improve a Credit Rating?

Time and responsible actions are the only sure ways to improve your credit rating. With the exception of rapid re-scoring to correct errors and/or inaccuracies in your credit report, there is no quick or easy way to accomplish this task. Understanding that old debt is always bad debt, paying it off can have a positive effect on your credit rating.

The Facts

Old debt remains in your credit file for seven years from the date of the first delinquency report, which usually occurs when the account becomes 180 days past due. Whether or not you pay the debt, credit bureaus must remove this information when the seven-year time frame expires. However, in the meantime, old debt affects your credit score; and whether the debt is a credit account charge-off, collection agency account or a legal judgment, anyone reviewing your file will have access to this information.

Effects

As part of your credit profile, old debt affects your credit score in two ways. First, it affects your payment history; second, it adds to your overall debt load. Payment history is a record of whether you pay bills on time, pay late or do not pay. Your overall debt load is a measure both of how much debt you carry in total, and as it relates to the amount of your available credit. Together, these two factors count for 65 percent of your credit rating.

Results

Paying old debt will help increase your credit rating, although how quickly depends on a number of factors. The older the debt, the less effect it has on your credit rating and the less your score will increase by paying it off. In addition, until and unless you pay the debt in full, credit bureaus consider you a high risk. As a result, you may not see your credit rating improve until you do pay the debt in full. Finally, if old debt is all that is in your credit report, your score will not improve as much as if you also apply for and use new credit responsibly.

Considerations

Even though old debt may fall off your credit report after seven years, it remains your responsibility until the debt statute of limitations for your state expires. Any payments you make on the old debt starts the time frame for the statute of limitations over again. Understand that until your responsibility for the debt legally expires, creditors have a right to try to collect the amount whether or not it is part of your credit report.

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How Time Affects Your Credit Score

A credit score provides a rating based off a consumer's credit report. Most lenders use a consumer's credit score to determine whether or not to extend a new line of credit. Credit scores also play a factor in the type of interest rate a consumer gets on a credit card or loan. Credit scores change with time and include factors such as payment history and debt.

Credit Score Factors

The credit bureaus take information from a consumer's credit report and divide it into five categories. These categories make up a consumer's credit score. Payment history counts for 35 percent of a consumer's credit score, total debt accounts for 30 percent, length of credit history accounts for 15 percent, recent credit applications accounts for 10 percent and types of credit accounts for 10 percent, according to myFICO. Credit scores change over time as the consumer's credit history lengthens.

Positive Information

Certain factors, such as paying a bill on time or paying down credit card debt, typically have the largest positive impact on a credit score. Other factors, such as opening a new credit card or developing a blended credit profile through a mix of loans and credit cards have a smaller positive impact on a credit score. Consumers with a limited credit history will see their scores improve over time as they add credit cards and loan accounts, increasing their length of their credit history. Positive information remains on a credit report as long as the account stays open. After the consumer closes the account, the positive information will stay on their report for 10 years, according to Bankrate.

Negative Information

Certain actions, such as filing for bankruptcy or an unpaid credit card account turning into a collection will have a large negative impact on a credit score. Smaller actions, such as missing a credit card payment or increasing debt will also have a negative effect on a credit score but consumers with a longer credit history or several positive accounts will see less of a drop in their scores. As the negative remark ages, it will have less of an effect on the consumer's credit score. Negative information, such as a late payment on a credit card, remains on a consumer's credit report for seven years.

Tips

Consumers can check their own credit report without affecting their credit score. By law, TransUnion, Equifax and Experian have to supply every consumer with a free copy of their credit report each year. Consumers can order their credit reports online through Annual Credit Report. Consumers can purchase a copy of their credit score for a small fee through each of the credit bureaus directly.

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Problems With a Credit Check

According to Bankrate, Inc., "70 percent of credit reports contain serious errors." PT Money, LLC claims the number of errors is closer to 79 percent. Either statistic is alarming when considering how many important life events are affected by credit reporting information. This makes it imperative for consumers to examine their credit reports frequently for errors.

Personal Information

It is common for personal information to be recorded incorrectly on credit reports. Names, addresses, telephone numbers, birth dates and social security numbers can all be incorrect on credit reports. These errors often go beyond simple misspellings and can involve completely incorrect names and addresses at which an individual never lived. When an individual's personal information is incorrect, it can be difficult for her to even obtain a copy of her credit report.

Incorrect Account Histories

Sometimes credit reports show inaccurate account history details. Account history inaccuracies may involve reporting incorrect credit limits on accounts or incorrect account balances. It is also common for account payment histories to incorrectly show late payments on some accounts. Account balances that have been paid in full are sometimes incorrectly listed as charged off.

Other People's Issues

Sometimes information can make its way onto the wrong person's credit report. An individual's credit report may show accounts that don't belong to him or loans he never took. Lawsuits that did not involve an individual can also erroneously find their way onto his credit report. Divorce can be problematic in this regard when financial responsibilities court-ordered to be paid by one spouse appear on the credit report of the other.

Old Negative Events

Laws exist that dictate how long negative accounts and events can appear on a credit report. Collections and charge-offs may appear for only seven years while bankruptcies can appear for 10 years, but it is common for accounts to remain on a credit report even after the prescribed time has expired.

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Does Being a Homemaker Affect Your Credit Score?

The daily tasks of being a homemaker may not require you to handle credit, but this does not mean you have a poor FICO credit score. In fact, you may have a great one. Not having a employer can affect your ability to get certain types of loans, but the credit bureaus can never penalize you for listing your occupation as a homemaker.

Identification

Occupation does not affect any of the variables in the credit score calculation used by most institutions. At one time, the credit bureaus collected data on salary for credit scoring, but this no longer matters in 2011 because verification of income is nearly impossible. The credit bureaus list your previous jobs, but this too does not matter for your credit score.

Employment History

Lenders, especially mortgage providers, care more about your financial background that just whatever the credit bureaus list in your credit history. When the creditors sees you worked as a homemaker for the past few years, he may question your ability to repay a loan. If you claim you currently have a job and this does not match the employment history listed in your credit report, the creditor could use this as a mark against your integrity and deny a loan.

Marriage and Credit History

Marriage brings two people together, but the credit bureaus do not combine credit histories. You may connect your account and your spouse's accounts by becoming joint account holders. When a spouse lists you as a joint holder, you receive any history on the account--good and bad. Should you apply for a loan with a spouse, the creditor looks at both credit histories and likely worries if one of you has a poor credit history or none at all.

Tip

Before applying for any loan, look at all of your sources of income, even if it does not come from a job, such as dividend income. Lenders want to know your debt-to-income ratio as well as your credit score. An income of zero probably disqualifies you for any loan, because the lender assumes you have no way of paying it back.

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Employee Credit Checks

The Fair Credit Reporting Act (FCRA) protects consumer privacy and ensures accurate reporting of consumer information. Employers who run credit checks must do so within the confines of FCRA rules. Overall, an employer can run a credit check on new hires and on employees it is considering for promotion and retention.

Background Check

It is understandable why a company would want to investigate the background of new hires, which is why background checks have become the norm. The FRCA does not cover reference verifications. However, the FRCA does cover references verified by another employer, "reference checking agency" or other credit rating agency (CRA). A typical background check involves verification of past employment, current employment, character references and credit report. A background check can also include drug and fingerprint testing. Jobs handling money or precious items require background checks. Some industries such as brokerage and law enforcement also require background checks.

Credit Check

A business has the right to pull your consumer credit report if it is considering hiring you. A consumer credit report contains all your credit accounts including payment history. It also includes judgments and criminal violations. An employer can deny you employment for having a bad credit score. Many argue the practice of denying a person employment because of bad credit is unfair particularly if she did have good credit at one time but fell on hard times. This becomes a Catch-22 and a hot button for lawmakers. On the other hand, many employers who conduct credit checks are more interested to know if you have a criminal background and not necessarily to find out your credit score.

Your Rights

If the company intends to run a credit check, it must notify you in writing. The company must also get your authorization before obtaining a credit report. If the company runs a credit check and denies you employment, it must provide you with a copy of your credit report and a copy of "A Summary of Your Rights Under the Fair Reporting Act," which is a document prescribed by the Federal Trade Commission. The company is required to provide you with notice of the adverse action either orally, written or electronically. The company must provide a notice with the name and location of the credit rating agency (CRA) used and a statement that the CRA was not responsible for the company's decision. It should also provide a notice informing you that you are entitled to dispute the accuracy of completeness of the information provided by the CRA.

Insight

Finding employment is challenging without the additional stress of worrying that your credit may sink your chances of landing a job. Get a copy of your credit report before you start your job search. The Fair and Accurate Credit Transactions Act (FACTA), an amendment to the FRCA, allows consumers to obtain a free annual report from the credit rating agencies: Equifax, Experian, and Transunion. The CRAs established a website, www.annualcreditreport.com, so that consumers can get copies of their credit reports online. Obtain copies of your credit reports and check them for accuracy. Dispute inaccuracies and supply missing or incomplete information. Knowing what's in your credit report makes you better prepared for your job search and provides with an opportunity to explain your credit history to a company looking to hire you.

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Alternative Credit Scores

Credit scores are one of two components of the credit application system, the other being credit history reports; a score aims to produce a snapshot of the overall creditworthiness of the individual. While a system known as FICO dominates, other systems have emerged, either to produce more accurate guidance or to better reflect the standing of people who do not have a detailed credit history.

Traditional

The main form of credit score in the United States is FICO, named after the Fair Isaac Corporation that developed it. The score is used by the three major credit record agencies (Equifax, Experian and TransUnion).

Although the precise formula for the score is confidential, it is known that the key components are: payment history (which makes up 35 percent of the score), the percentage of credit use compared to the person's credit limit (30 percent), length of credit history (15 percent), variety of credit granted (10 percent) and recent credit applications (10 percent).

VantageScore

This is a rival score developed by the three major agencies in an attempt to provide competition with the FICO system. It uses six components: payment history (32 percent), use-to-limit ratio (23 percent), total debt (15 percent), length of credit history (13 percent), recent credit applications (10 percent) and total credit limit (7 percent). The main reasoning behind the different breakdown is that VantageScore is designed to distinguish more precisely among individuals who are less creditworthy.

PRBC

Pay Rent Build Credit offers credit scoring for people with little or no credit history. It allows members of the public to report details that are not listed on traditional credit reports, such as rent agreements and utility bills. If the person then pays these bills on time, her score with PRBC (known as a FICO Expansion score) will improve.

Concerns

The National Consumer Law Center has warned that some lower-profile alternative credit score systems may be counterproductive. It says that scores based on high-cost credit may simply serve to attract lenders that want to target vulnerable customers.

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The Importance of FICO Scores

Your Fair Isaac Corporation, or FICO, score is a number that measures whether you're worthy of credit. The score ranges from 300 to 850 and is determined by a statistical analysis of your credit report. Your payment history, debt ratio and number of accounts open and closed all factor into the final number. A high number means that more credit options including better interest rates, loans and credit cards are available to you. A lower number indicates that you have a poor credit history and will likely not be able to get the best interest rates on loans. Fortunately, there are many ways to improve your score, and it usually does not take a long time to do so.

Payment History

Your payment history accounts for 35 percent of your FICO score. This includes payments made not just to credit card and loan accounts, but also utility bills and other installment payments. Any adverse items like accounts that have gone to collections or past due items, even if it was just once, will affect your score. The score does, however, take into account how quickly an adverse item is paid and whether a past due on an electric bill, for example, is an isolated incident or a regular occurrence.

Debt Amount

The FICO score also weighs how much you have outstanding overall. This counts for 30 percent of your overall score. The number of accounts you have open, particularly revolving accounts, how large a balance you have and how often you pay off the whole amount all figure into that 30 percent. The amount of time you've had accounts open and how often you use them is also important. Inquiries into your credit also can count against your FICO score.

Employment and Loan Approval

Your FICO score can affect whether or not you are hired for a job or approved for a loan. Employers often look at the FICO scores and credit reports of potential employees. This is particularly important if the potential employee is going to be in a position of trust or authority. For example, the credit score of a person who will be caring for small children or the elderly might be important since the person will need to be responsible. A solid payment history would show a person's ability to take care of various responsibilities. A person being considered for a bookkeeping position might also need to submit his FICO score, since a bookkeeper should understand how to make payments on time. A banker will also look at a person's FICO score before approving a loan. A lower score doesn't always mean a denial, however. A banker will look at a person's employment and other factors before making the final decision.

Score Improvement

One of the best ways to start improving your credit score is to pay all of your bills on time. Repeated delinquent payments, even by only a few days, can affect your FICO score by a lot. Reducing your debt will also improve your score. Do this by eliminating the use of credit cards instead of simply moving the balance around to cards with low interest rates. Pay them off and then don't use them any more. The fewer accounts you have, the easier it will be to pay them all on time, and the better your score will be overall. Check your credit report regularly to see what you look like on paper. If you don't agree with an amount owed, contact that creditor. If you don't have enough money to pay off certain accounts, try to make payment arrangements directly; this will look much better than avoiding the bill all together.

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Information About the Three Credit Bureaus

Credit bureaus record, keep files on and continually update credit information about consumers. When consumers purchase anything by credit card or use other financing options, the credit bureaus record it. When payments are late, the bureaus also capture the information. The credit bureaus make money by selling credit information about consumers. Although there are hundreds of credit bureaus, the three major ones are Equifax, Transunion and Experian.

Equifax

Equifax, headquartered in Atlanta, Georgia, employs 7,000 people in 15 different countries. It is publicly traded on the New York Stock Exchange under the ticker symbol EFX. The company has been providing credit reporting services for more than 100 years. Key industries the company serves include insurance, health care, financial, mortgage, consumers, commercial, retail, human resources, auto, telecommunications, marketing services and government.

Experian

Experian, headquartered in Costa Mesa, California, and Schaumberg, Illinois, employs 5,500 people in the United States. It provides information on 215 million consumers. Some of the services it offers include credit services to rate consumers' ability to pay, decision support software for corporation, tools to assist companies in marketing to consumers based on their credit histories and online services to provide immediate access to credit information.

TransUnion

TransUnion, based in Chester, Pennsylvania, originated in 1968 as the Union Tank Car Co. This company created a parent organization called TransUnion. Part of TransUnion's growth has been through acquisition. It acquired the Credit Bureau of Cook County in 1969 and TrueCredit.com in 2002. In 1988, the company's coverage expanded to the entire United States. TransUnion now operates in 25 countries. TransUnion provides business credit reporting, residential real estate origination and closing services and decision support.

Consumer Use

Consumers should access their credit reports from these three companies once a year to check the accuracy of reports so that their credit scores are not misrepresented, especially before applying for major financing, as scores often impact the interest rate a lender offers. A consumer is legally allowed one free annual copy of her report from each of the three companies, accessibly through AnnualCreditReport.com.

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Does Closing Small Credit Accounts Help a Credit Report?

Consumers often close small lines of credit because they think it will help their credit rating; instead, this can be very damaging to a credit rating. In general, closing any account dings every category in the FICO credit scoring system. Instead of closing small lines of credit, it is better to use them sparsely to keep them active.

Identification

Closing small credit accounts damages your score because you may lower the average age of your accounts. In the FICO rating system, the average length of your credit accounts counts for 15 percent of your score. If you have to apply for new accounts with a larger limit, the inquiry dings your score by up to five points for each application and lowers the average age of your accounts even further.

Credit Utilization

The percent of your credit limit you use, or credit utilization, can account for dozens of points. You should never use more than 36 percent of any limit -- aggregate across all of your accounts or on each account -- so every bit of credit available is important to lower your credit utilization rating. For example, if have $10,000 in credit card debt with a total limit of $40,000 across all accounts, you have a utilization ratio of 25 percent. Close accounts with a limit of $10,000 and your utilization ratio goes up to 33 percent.

Mix of Credit

Having more than seven revolving accounts, such as credit cards and home equity loans, damages your credit rating, according to Dayana Yochim of The Motley Fool. If you close all of your credit cards, you reduce your mix of credit by 10 percent. Ideally, you should have two revolving accounts for every installment loan. For example, if you have a credit and home equity loan, you should have a single student loan or mortgage.

Tip

Put a charge on those small credit card accounts every couple of months to keep the lines active. You can pay the balance as soon as you make a charge to have the creditor report an on-time payment. However, consider your ability to manage credit. If you constantly forgot about those small lines of credit, missed payments will do more damage than any boost you get from keeping the accounts active. You can ask the creditor for a limit increase to gain access to more credit without applying for a new account.

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Credit Report Dispute Reasons

The Fair Credit Reporting Act protects credit bureaus from having to investigate baseless disputes. However, the Credit Infocenter credit repair website states there are many legitimate reasons for legitimate challenges. You can dispute any kind of mistake, the Federal Trade Commission (FTC) explains, and the item containing it must be taken off your credit report if the lender does not prove it is correct. You may be able to significantly improve your credit score if you can find errors in most of the negative items on your report.

Names

Banks, finance companies and other lenders often change their names. You can dispute an account if this has happened and your credit report still shows the old name. You may also file a dispute if there is a misspelling or other error in the name.

Dates

Credit reports are full of dates. Each account lists the date it was opened, payment dates and related information. An item can be disputed if any of the dates are incorrect, the Credit Infocenter explains, especially if you are being dunned for a late payment that was really made on time. You can strengthen your position if you have a contract, statement or receipt that can be sent along with your dispute.

Amounts

There will be many amounts on your credit report, such as your current balance, high credit limit and payment amounts. Many of these should change monthly, but they may be wrong if they have not been updated or if they are being reported incorrectly by the lender. This gives you legitimate grounds to challenge them.

Status

Each credit bureau uses codes to show the status of your accounts. They provide a key with your report report so you can interpret it. You can file a dispute if any item has been given an incorrect status, the Credit Infocenter advises.

Unfamiliar Accounts

You may find unfamiliar accounts on your credit report. They should be removed if they do not belong to you. Such accounts could be an indicator of identity theft, the FTC warns, so you should contact the lenders along with disputing them through the credit bureaus. Ask the bureaus to place a fraud alert on your credit reports if you have reason to suspect criminal activity.

Outdated Information

Most negative information can only stay on your credit reports for a limited time period. The Motley Fool financial site states that most items must be removed after seven years, although bankruptcies can remain for ten years. You can dispute any old items that were not automatically erased at the end of the legal reporting period.

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How to Fix or Repair Credit

As of 2009, the average American credit score was dropping, and stood at 651. Unfortunately, your credit score determines your ability to do the things you want in life, whether that's buying a car, purchasing a home or getting a job. It is therefore not surprising that consumers are constantly looking for ways to improve their credit score. Fortunately, by following a few simple steps, you can raise your rate to a healthy place.

Instructions

1

Pay your bills on time. Every time you miss a payment, are late or become delinquent, it is recorded on your credit report, which is utilized to calculate your overall credit score. This makes up 35 percent of your credit score, so turning around your behavior on this front can make a definitive impact.

2

Pay your debts off. The more debt you have in your name, the more of a risk you are to lenders because it indicates an inability to pay for what you need upfront, which can hurt your score as a whole. Your debt-to-available-credit ratio is also important. You may have $10,000 in debt, but if your $300 balance is 90 percent of your credit limit, then it will also reflect poorly on your score. This component accounts for 30 percent of your score.

3

Don't have too many open lines of credit. A large amount of available credit makes you a risk in the eyes of lenders because it presents the possibility for a large amount of debt accumulation in a short amount of time. At the same time, you should not close all of your accounts, because a lack of available credit or the quick closing of too many accounts can make you look unstable as a consumer. You want to have a stable, lengthy credit history, as this accounts for 15 percent of your score.

4

Attempt to establish different forms of credit. Your credit score is best served by having installment debts, such as mortgages and car payments, as well as revolving debt, like credit cards. Having too much of one category does not make you an ideal consumer and can lower your credit score. This makes for 10 percent of your credit score.

5

Be careful not to inquire into too many credit opportunities at once. Applying for multiple credit cards at one time, for example, sends a message to the companies calculating the score that you may be experiencing money flow problems, making you more of a risk and causing a temporary dip in your score. This accounts for 10 percent of your score.

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Does Financing With a Co-Signer Help Credit?

It is a paradox of lending and credit. You can not borrow money without a good credit history, but you cannot establish a good credit history without borrowing money. It can be a challenge to break through this loop and establish credit. A co-signer can help you in the process.

Function

A co-signer is a person who guarantees payment on a loan or credit card if the primary borrower does not pay. People usually co-sign for someone who cannot get credit on his own, often a close friend or family member.

Considerations

If you finance a loan with a co-signer you will generally improve your credit, particularly if you have a very limited credit history or no credit history. You can use the co-signer's good credit history to get you approved for a loan. After you are approved, the lender will report your positive payment history on your credit report. This will build your credit history.

Types

Just as having someone co-sign for you can help build credit, so can being added to another person's account as an authorized user. If you are named as an authorized user, you generally do not have any liability for charges made on the account, but you have the ability to use the credit account. Being an authorized user may cause the payment history on the account to report on your own credit report. This may or may not have an effect on your credit score depending on the scoring model that is used and the relationship between the authorized user and account holder.

Benefits

Sometimes a co-signer is also considered a co-owner of the account. This is particularly true with credit card accounts. When someone adds you as a co-owner of his account, the credit reporting agencies may add his history to your credit report. This may instantly give you a good credit history based on timely payments. But any negative payment history could end up on your credit report as well.

Warning

A person co-signing a loan for another person is taking on a risk that a professional lender will not take on for themselves. If you are considering cosigning for another person, think about why they cannot get credit on their own. If they are young and lack credit history, then you may be comfortable cosigning and only exposing yourself to minimal risk. If the person you are co-signing for has bad credit, much more risk is involved. Consider carefully if the person has learned how to use credit wisely, and if he is able to pay his bills on time. If he does not use this account wisely, his bad credit may soon become your bad credit.

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When Should You Discard Mortgage Papers?

It is sometimes frustrating to hold onto paperwork related to bills and personal accounts. It clutters the home and office and makes it difficult to maintain organization. But you may need to keep some items, like paperwork related to a mortgage, handy for a while. Learn rules of thumb when it comes to keeping and disposing of mortgage papers.

Types of Mortgage Papers

When you close a mortgage, the lending official provides you with a stack of papers in regards to the loan. The paperwork is your signed copy of all closing documents that prove the loan's existence, including the mortgage agreement, title paperwork and details of any required mortgage insurance. Besides the closing documents, you may also have printed monthly bills that you receive regularly. The lender also sends a 1098 form to the borrower each year for tax purposes.

Why Hold Onto These Papers?

A number of situations may arise where you'll need to refer to the paperwork related to your mortgage. For instance, if you're unsure of how the lender will handle certain circumstances regarding the mortgage or you need to double-check terms, you need to pull out the mortgage agreement. If it is a variable rate mortgage loan, you need those closing documents to understand when and how the rates change. In most cases, you only need to keep monthly bills for reference purposes temporarily. Finally, you need 1098 tax documents from the mortgage lender to fill out tax forms properly and also to keep on hand for long-term reference purposes.

When to Discard

Keep mortgage bills for up to a year; then dispose of them. If the same information is available online, it may be unnecessary to keep the billing statement after you've finished paying the bill that month. Keep any printed payment receipts as proof until the payment shows up on the mortgage statement. You should keep the mortgage agreement and related official paperwork for as long as you have the loan. Keep 1098 tax forms for at least three years after filing.

Organizational Tips

Mortgage paperwork commonly contains very sensitive and private information like account numbers and even Social Security numbers. Shred this paperwork when it is time to do so. Develop an organizational system where you can store the paperwork in a file cabinet or bin for quick access. Transfer the paperwork to a shred bin when it is no longer needed, and set a day to shred all paper and empty the box.

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How to Legally Remove Late Pays on Your Credit Report

When you have a history of late payments on your credit report, it can affect your ability to get new credit cards and loans. It can also count against you when you apply for a job or try to get an insurance policy. While it is illegal to remove correct information from your credit report, you can legally remove negative information that you believe is incorrect. You just need to follow some simple steps with each of the three credit bureaus.

Instructions

1

Get a free copy of your credit report from each of the three main credit agencies. Under the law, Transunion, Experian, and Equifax must all provide you with a free copy of your report once a year.

2

Carefully go over each of the three credit reports, looking for any erroneous late payment information. Each report will have instructions on how to interpret your payment history for that particular report.

3

When you locate late payment information that is in error, file a dispute with each of the credit bureaus that is listing the incorrect information. Each bureau has its own procedure for doing this. Typically the dispute can be done online or through postal mail. Let each bureau know which information is incorrect and why you believe that it's wrong.

4

Follow up with each bureau in 8 weeks to make sure they have removed the incorrect information about late payments. The bureaus have 30 days to investigate a dispute, so 8 weeks gives them time to do their investigation and correct the error.

5

If any of the credit bureaus refuse to remove the incorrect late payment information, file a consumer statement. This is a statement that explains why you believe there is an error. It will be provided to prospective lenders and others who request your credit report.

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Do Student Loans Affect Credit History?

Your student loans affect your credit history in a few different ways. If you manage the loans responsibly, you can use them to help increase your credit score and help you qualify for bigger loans in the future. The opposite is also true. If you mishandle student loans, you can seriously damage your credit history.

Your Credit Report

Each student loan you have appears as a separate account on your credit report. Therefore, if you get a federal Stafford loan and a student loan from a private lender each year for four years of undergraduate study, you will end up with eight student loan accounts on your credit report. The data on each account is reported separately, so it is critical to manage each account responsibly. One option to make this easier is to consolidate your loans after you graduate. You can consolidate all of your federal loans into one accoutn and all of your private loans into another account so you have a maximum of two open student loans on your credit report.

Payment History

The major impact of your student loans on your credit history comes through your payment history on the loans. Approximately 35 percent of your credit score is based on your payment history. If you make your student loan payments on time every month, you will boost the payment history portion of your credit score. On the other hand, each payment reported as 30, 60 or 90 days late will hurt your score. If you go into default on the loan, this significant negative information remains on your credit report for seven years after you finish paying off the loan.

Amount Owed

Student loans also affect the 30 percent of your credit score that considers the amount you owe. For each student loan, your credit report shows the amount you originally borrowed and the amount you still owe. Boost your credit score by reducing the proportion of the amount borrowed to that you still owe. Do this quickly by making extra student loan payments if you can afford to. You can also make interest payments while you are in school so you do not owe even more than you borrowed upon graduation.

Other Effects

The other major factors in your credit score are the types of credit you have, the length of your credit history and the prevalence of new credit. Student loans can both help and hurt your credit score in these areas. In the types of credit, student loans are generally helpful because they are installment loans. You should have both installment loans and credit cards to help your credit score. Student loans can also help the length of your credit history because you usually get them while you are young. By the time you are out of college, a student loan from your freshman year will already be almost four years old. However, loans from your senior year will be quite new. For new credit, the most recently opened student loans can hurt your credit score, but these effects diminish over time.

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Does a Prepaid Visa Show on a Credit Report?

Companies offering prepaid Visa cards often market the cards as prepaid credit cards. The marketing may attract people who lack the credit qualifications for a regular credit card. However, a prepaid Visa is merely a debit card. The cards do not offer a line of credit, and do not show up on credit reports. On its website, at the time of publication, Visa makes a distinction between "prepaid and gift cards" and credit cards. Visa points out that some of its regular Visa credit cards are useful for establishing credit, but it does not list that as a feature of its prepaid cards.

Considerations

Standard Visa credit cards offered by banks and credit unions usually require an application followed by a credit check. Upon approval the bank issues the card along with a credit line ranging from a few hundred dollars to more than $10,000, depending on the applicant's income, credit history and credit score. Banks report certain information about the account to major credit bureaus such as Experian, TransUnion and Equifax. Each month the credit bureaus receive information about the current credit limit on bank-issued Visa cards, along with the balance and minimum monthly payment, if any. Companies offering prepaid Visa cards report no information on such accounts to credit bureaus.

Confirmation

People considering a Visa card to build their credit should contact the issuer to ask if the company reports information to credit bureaus about the card. The absence of a credit line makes a prepaid Visa card an excellent substitute for cash or checks, but it is not helpful for determining how a person handles credit.

Drawbacks

Prepaid Visa cards do not offer other important features that are standard with bank-issued Visa cards. For example, hotels and rental car companies may accept prepaid Visa cards for payment. However, in addition to the cost of the rental car or hotel room the rental car company or hotel may place a hold on a portion of the balance on the prepaid Visa. The amount could total hundreds of dollars and remain unavailable to the owner of the card for days after the car rental or hotel stay. Credit-authorization holds are also possible on regular Visa credit cards, but the hold is against the credit line on the card.

Alternatives

A secured Visa credit card is a better option for people needing a card to build credit. Some banks and credit unions offer secured Visas, which require a deposit to a savings account. The amount on deposit usually becomes the credit limit. The cards look and work just like regular bank-issued Visa cards, and banks report information about the account each month to the credit bureaus.

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If I've Never Owned a Credit Card Can My Credit Be Bad?

Credit cards play a large role in determining your credit rating, but other factors are important, too. Your credit rating can be good or bad, even if you have never owned a credit card. Other factors, including account types, financial activities and, possibly, identity theft, can affect how the major credit bureaus rank your creditworthiness.

Credit Cards

Credit card companies let you borrow as much or as little as you like, up to a preset limit, and expect repayments over time or for you to pay the full balance all at once. These types of loans appear on your Experian, TransUnion and Equifax credit reports. They can negatively affect your credit rating if you skip payments or send the money late. But credit card debt is not the only type of debt that can affect your score.

Collection Accounts

Several credit-related debts can affect also your credit rating. Such accounts include medical and cell phone bills as well as motor vehicle tickets and library fines. If you become delinquent on these bills, a collection agency may come after you. Collection-agency accounts negatively affect your credit rating if the agency reports you to Experian, TransUnion and Equifax. When these companies determine your credit score, they factor in bills in collections, according to the MyFICO website. In fact, these bills make up 25 percent of the credit score.

Rental Payment

Apartment rental payments can affect your credit score if you rent a unit from a landlord or management company that reports your data to the credit bureaus. Experian, for example, includes your rent payment history on its reports, according to a 2011 Los Angeles Times article. You can build your credit by paying the rent on time, but lenders who pull your Experian records will view you unfavorably if you are a chronically late payer. Keep in mind, however, that your rental history has no effect if your landlord does not provide the data to the bureau.

Repossessions

Car loans are collateralized by the vehicles. As a result, some creditors finance auto loans for people without credit cards or extensive credit histories. Just the same, your credit score will drop if you stop paying your car loan and wind up having it repossessed. The Federal Trade Commission warns that most car loan contracts allow repossession of the auto as soon as you default. The action is then reported to the credit bureaus.

Identity Theft

An identity thief can trash your credit rating -- without your knowledge -- even if you have never obtained credit cards or loans legitimately for yourself. These criminals can use your name, Social Security number and other personal data to open credit card accounts, which they use until they are caught or reach the spending limit. You find out when bill collectors call or you pull your credit reports and see the fraudulent accounts. Federal law allows you to get free credit reports from all three bureaus every year, according to the FTC. Order them from the official site, AnnualCreditReport.com, and review them for unrecognized accounts. Contact the police and creditors, and ask Experian, TransUnion and Equifax to put fraud alerts on your reports, if you find suspicious data.

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