How to Pay Off Several Credit Cards Without a Debt Consolidation Company

In our credit-happy economy, it is easy to run up balances on several credit cards at one time. Between minimum payments, late fees and interest payments, it seems impossible to ever get them all paid back, but you can do it using the debt snowball method popularized by personal finance pundit Dave Ramsey.

Instructions

1

Gather the most recent credit card statements for all your accounts. On each one, locate the minimum payment, interest rate and current balance. Write these down for each credit card account.

2

Find the contact information for each of the accounts. Contact them and ask if there is any way to reduce your interest rate or your minimum payment. You may not have any success, but it doesn't hurt to ask.

3

List the accounts, arranging them from the lowest balance to the highest balance and notate the minimum payment beside each debt. Select the account with the lowest balance to pay off first.

4

Add the minimum payments for each of the credit card accounts. Subtract the total of the minimum payments and your living expenses from your income. The amount left over after subtracting these expenses is the extra amount you can use to repay your credit card debt each month.

5

Send the first credit card company on the list the minimum monthly payment and the extra amount you determined you could afford to use to pay off your credit card debt. Send the minimum monthly payments to each of the other credit card accounts on the list. Continue in the manner each month until the first credit card debt is paid off.

6

Take a moment to celebrate and then cross it off your list. Move to the second credit card account on the list. Send this second credit card account all the money you had previously been sending to the first debt combined with the minimum monthly payment you had been sending all along. Pay the minimum monthly payment on the other debts. Continue in this manner until the second debt is repaid.

7

Repeat the process with each debt remaining on the list. Each time, combine all the money you had been sending monthly to the now-satisfied debt with the minimum monthly payment you had been paying. Continue to make the minimum monthly payments on the remaining debts. Each time a debt is paid off, the amount of money for debt repayment "snowballs" for the next debt on the list.

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How to Build Personal Credit Fast

Building a positive credit history is an important step to take for your financial future. With a history of good credit, you can qualify for new credit accounts and higher limits. You will also receive the best interest rates and avoid monthly and annual fees on your credit accounts. You can start building credit by opening new accounts and managing them responsibly.

Instructions

1

Visit a local bank and to open a checking and savings account. Complete the application given to you and provide the banker with your identity information, such as a driver's license and opening deposit. You will need a small deposit to open each account.

2

Open a new credit card account. You can apply for a credit card with your bank and research other financial institutions online. If applying with your bank, complete the application in person or online through your online banking account. If applying with another financial institution, use their online application form.

3

Open a retail store card. Many gas companies and retail stores offer credit cards good for use inside their stores. The finance company who manages these cards will report to the credit bureaus, which will help you build credit. Visit a store you shop at regularly and complete a store card application. Mail the application to the address listed on the brochure.

4

Open a secured card if you are having trouble qualifying for traditional credit. You will need to supply a security deposit to open this type of credit card, but you can receive the deposit back if you keep your account in good standing for several months.

5

Use your credit cards and retail cards every month, but keep your overall balance low. A high balance will reflect negatively on your credit report.

6

Pay at least the minimum amount due on each credit card by the due date. Paying your bill on time will build positive credit.

7

Visit your bank and apply for a small personal loan after you have maintained your credit cards for six to 12 months. Having a mix of credit types will improve your credit rating.

8

Pay the payment due on your personal loan every month by the due date.

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Facts About Credit Scores

A credit score, also known as a FICO score, is a system used by lenders to make lending decisions. Whether you are applying for a mortgage, car loan, student loan or credit card, lenders will want to know your credit score. Higher scores imply lower risks, while lower scores imply higher risks. Credit score calculations are based on your credit history, such as if your bills are paid on time and the amount of open credit you have.

History

Bill Fair and Earl Isaac founded the Fair Isaac Corporation in 1956 and introduced the Fair Isaac FICO score in 1981. FICO scores are calculated by a software program developed by Fair Isaac.

Function

FICO credit scores are managed by the three credit bureaus: Experian, TransUnion and Equifax. Each person will have three credit scores, one for each bureau.

Effects

The FICO credit scores are used by lenders to determine a person's creditworthiness. Using this information a lender then decides the how likely the borrower is to stay current on payments, which credit terms to offer, which interest rate to use, and how much risk will be involved.

Considerations

One must have open lines of credit reported to a credit bureau to have a credit score. As reported information changes, the bureaus will update your credit score.

Calculations

Credit scores are calculated by the Fair Issac software using a proprietary formula. However, these approximate values can be used as a guide. 35% Payment History, 30% Amounts Owed, 15% Length of Credit History, 10% Types of Credit Used and 10% New Credit.

Misconceptions

Not all creditors report to all three credit bureaus. Each bureau may have a different score, depending on the information the agency has.

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Is My Credit Score and My Husband's the Same?

Although you and your husband might merge all of your finances when you get married, one thing you cannot merge is your credit history. Because credit reports are tied to an individual's social security number, you and your husband will always have separate credit reports and, therefore, separate credit scores.

Separate Credit Reports

Your credit score is based on the information within your credit report and your husband's score is based on his credit report. Although you might have some joint accounts, if either of you had credit history before marriage or have any separate credit accounts, your credit reports will not contain exactly the same information. If you have similar habits for managing credit, you can expect that your scores may be similar, but they are not guaranteed to be the same.

Considerations

If one of you has excellent credit and the other has a poor credit, this could impact your ability to obtain joint credit. This is because lenders pull the credit reports for both applicants and consider both scores when extending an offer for joint credit. For example, although you might have excellent credit and be able to qualify for the lowest tier of interest rates on a mortgage, if your husband has poor credit, this will increase your offered interest rate or cause your application to be rejected entirely. The only way to get around this would be if you applied for the mortgage alone so only your credit counts. However, this would also mean that only your income would count, so it will likely decrease the maximum amount you could qualify to borrow.

Strategy

If one of you has much better credit than the other, you can use this to work together to boost the poor credit score. One method is to add the spouse with poor credit as an authorized user on a credit card account of the spouse with good credit. The entire credit history on that credit card account will show up on the authorized user's credit report. If the account history is good, with few missed payments and a low balance on the card, this can help boost the authorized user's credit score.

Unusual Exception

One particular situation will lead to a husband and wife to always having identical credit scores. If neither of the married couple had any credit accounts prior to marriage and they always applied for, and managed all credit jointly. In this situation, their credit reports will contain exactly the same data, therefore, they will have the same credit score.

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How Often Is Your FICO Credit Rating Adjusted?

Consumers use credit for a variety of reasons. To determine whether to give you credit, lenders look at your credit rating, also known as your FICO score. Your FICO credit score ranges from 300 to 850, according to MyFICO, a website run by the company that compiles credit scores. Each score is individual. It's important to know what your score is and how often that score changes.

Identification

Your FICO score measures five key areas. Of the factors that are included in the score, 35 percent measures how well you pay your bills, 30 percent reflects how much debt you have, 15 percent accounts for the length of your credit history, 10 percent is the amount of new debt that you have applied for recently, and the final 10 percent reflects the mix of credit types present on your report. You can purchase your FICO score at myfico.com.

Considerations

According to MyFICO, your credit score is based upon the information contained within your credit report. It is not a stagnant number; it changes as the information within your credit report changes. This is important because positive changes in your credit data, such as reducing the outstanding amount of debt or an increase in a credit card limit, can cause your score to rise. Likewise, negative occurrences, such as late payments or the appearance of a tax lien, can lower your score.

Significance

Your credit score can impact many areas of your life. When you apply for credit, lenders will often check your score when making a decision on your credit application. If approved for credit, such as a loan or credit card, your score helps determine the interest rate that you will receive, which in turn determines how much that extension of credit will cost you in the long run. Some employers and insurers also check your credit prior to making an offer of employment or issuing an insurance policy.

Misconceptions

If you have poor credit, you are not destined to remain a subprime borrower forever. Subprime refers to consumers who have a credit score of 660 or below. Your most recent credit history will have more weight on your FICO score than past history. By making on-time payments and reducing debt, you can create new credit history and improve your credit, according to Bankrate.com. And the higher your score, the more credit items you will likely qualify for.

Warning

Avoid companies that promise to repair your credit or raise your credit score. This could be a scam, according to the Federal Trade Commission. Under the Fair Credit Reporting Act, consumers have the right to dispute credit errors for free. You don't have to pay someone to perform for this service. Under the FCRA, bureaus are not required to remove accurate negative data from your credit report. Negative account data will remain for up to seven years, with Chapter 7 and 11 bankruptcies remaining for up to 10 years, and unpaid tax liens remaining for up to 10 years in California and indefinitely everywhere else.

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What Happens When Bankruptcy Comes Off Your Credit Report?

It can take up to 10 years for a bankruptcy to leave your report, so it will be a momentous day for your credit history when it does happen. However, the joy might be short-lived, because the short-term effect of a bankruptcy leaving a credit report can be a drop in your credit score. Eventually, however, expunging a bankruptcy will improve your financial profile.

Identification

From a purely technical standpoint, when a bankruptcy comes off your report the credit agencies can just no longer report to it to lenders, even though the record still exists in the court house where you filed bankruptcy. This usually benefits your credit score calculation, because bankruptcy is the absolute worst single item that can appear on a credit history.

Potential Score Decrease

A bankruptcy leaving your report could lower your credit score, however, because the credit bureaus do not rate bankrupt borrowers against normal consumers. The bureaus believe it is more fair to compare people in similar financial situations. If you rebuilt your credit history after the bankruptcy, you probably had a high credit score compared to others who also filed bankruptcy. Once the bankruptcy leaves your report, the bureaus rate you against normal consumers again, and you may not score as high in this category.

Getting Credit Again

Any hit to your credit score is likely only temporary. Assuming you do not miss any payments and continue to pay down debt, you have the potential to shoot your credit score into the high 700s and possibly the 800s. While you can have a good credit score with a bankruptcy on file, it usually cannot get past the low 700s, according to Aleksandra Todorova of The Wall Street Journal's Smart Money.

Tip

Depending on your situation, bankruptcy might actually be the best option for your credit score. Heavy debt that you cannot pay and constant missed payments for years could be worst in the long-term for your creditworthiness. Also, you can build a good credit history with bankruptcy on file by opening a new credit account, usually a secured credit card or department store card, to prove to lenders that you learned from your mistakes and can handle credit again.

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Do Collections Go on My Credit Report

Collection agency accounts are extremely harmful to your credit score, according to the MyFICO scoring website, because they are part of your payment history, which makes up 35 percent of the score total. Collection agencies report to the TransUnion, Equifax and Experian credit bureaus, so lenders and others who review your credit reports know you are being pursed by debt collectors.

Reporting

Some bills, like credit cards and loans, are almost always reported to the credit bureaus, whether you are in good standing or are delinquent. You get a new entry if the lender charges off your account as a bad debt and sells it to a professional debt collector, according to the Privacy Rights Clearinghouse. Other financial obligations, like medical bills or unpaid library fines, never show up unless you refuse to pay and the creditor turns the account over to a collection agency.

Effect

Collection agency accounts are a serious blemish because they show you are ignoring a bill. Their overall impact depends on whether they are the only negative entry on your credit reports or whether they are just one part of an overall negative history that includes late payments, charge-offs and court judgments for unpaid debt. Collections are visible in your records for seven years, according to the Federal Trade Commission (FTC), although they do not hurt you as badly after a few years if your other data is all positive.

Removal

You can sometimes get a collection account off your credit reports before the seven-year period expires by offering a settlement that includes removal as a condition of repayment, according to Bankrate.com. Debt collectors pay very little for accounts, so many accept less than you actually owe as a lump sum settlement. State that you want a written agreement, including the amount and a commitment to erase the account from your credit reports as soon as you make the payment. Check your credit reports with free copies from annualcreditreport.com, which lets you review them once per year at no cost. Complain to the collector if the account still shows up on any reports.

Warning

Scavenger debt collectors buy bills that are past state statutes of limitations, which means they cannot force you to pay or sue you. The NOLO.com legal website explains that they often try to intimidate or trick you into paying with falsehoods, including threats to add the bill to your credit reports. Demand immediate removal and file disputes with TransUnion, Equifax and Experian through their websites if a collection agency ever puts a debt on your credit reports when the statute of limitations is expired.

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How to Establish AAA Credit

Good credit allows you to qualify for many different loan products, generally higher limits than lower credit borrowers, and with the best interest rates available on credit products. Getting a credit score to the 700s and 800s takes time and a bit of foresight in the type of credit accounts that you are establishing as you build your credit file.

Instructions

1

Diversify your credit accounts. Part of your credit score is calculated by the type of credit accounts you have reporting on your credit report. Credit cards, store cards, mortgages, car loans and installation loans all count as different types of accounts for credit scoring.

2

Make on-time payments with all accounts. On-time payments made consistently establish your credit-worthiness. While you do not get a large boost all at once for on-time payments, as your credit accounts age and your payment history grows, you'll see score increases. A missed payment can make your credit score plummet. Credit accounts are not marked as late until you are over 30 days late with a payment.

3

Do not apply for more credit accounts than you need. Another significant factor in credit scoring is average account age. If you consistently apply for new credit cards, you drive the average age of your accounts down. As this is one factor that takes a significant amount of time to increase, you'll want to limit your credit applications. Each credit application also puts a credit inquiry on your report when the company checks your credit. Inquiries have a small negative effect on your report, but if you have a large amount of inquiries the decrease may be more significant.

4

Pay down revolving debt balances. Revolving debt balances are from credit card and store card balances. The higher the amount of revolving debt compared to your overall revolving limits, the higher your credit utilization is. A high credit utilization will get you denied for new credit and brings down your credit score.

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How to Remove All Negative Accounts Off My Credit Report in 30 Days

Remove all negative entries from your credit report within 30 days? That's easy--as long as the information is inaccurate. The Fair Credit Reporting Act requires the nationwide credit bureaus to remove inaccurate information within about 30 days of being informed of the errors. However, there are no provisions in the law for removing negative information that is true--unless the creditor or debt collector agrees to have the credit bureau remove the information in exchange for you paying the full balance. Otherwise, negative credit reports such as charge-offs and collection accounts can remain on your reports for a minimum of seven years.

Instructions

1

Obtain a copy of your credit report from the Internet site Annual Credit Report (see Resources). The site is authorized by the Federal Trade Commission to offer you three free credit reports every 12 months. View and print your report from the site or see instructions on the homepage to order by standard mail or telephone.

2

Review your credit report for inaccurate information. Request that the information be removed by writing a letter to the credit bureau at its address on the report. Explain why the information is inaccurate. Include your name, address and telephone number along with your Social Security number. Conversely, you can enter a dispute online (see Resources).

3

Contact creditors or debt-collection agencies to resolve your delinquent accounts. Get their contact information from the credit report. Offer to pay the old balances in full in exchange for the negative information being deleted from your credit report, a process called "pay for delete." Such transactions are legal but difficult to come by since some creditors believe they undermine the credit-reporting process. Get your pay-for-delete agreement in writing and ask the creditor or debt collector to remove the information within 30 days. This option is not available for serious negative entries such as foreclosures or bankruptcies.

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The Best Selling Personal Financial Books

Everyone can benefit from reading personal finance literature, whether you are just starting out or nearing retirement. Some of the best personal finance books cover important topics such as investing, getting out of debt, building passive income, and taxes, and are aimed at readers from all income levels.

The Total Money Make Over: A Proven Plan for Financial Fitness

"The Total Money Make Over: A Proven Plan for Financial Fitness" by Dave Ramsey is both a guide and a motivational tool for people looking to become debt free. In the book, Ramsey provides a step-by-step guide readers can use to build up an emergency fund and pay off credit card debts, loans and mortgages. The plan continues beyond paying down debt and shows readers how to stay debt free. The author also includes testimonials throughout the book from people who followed the plan successfully.

I Will Teach You to Be Rich

Ramit Sethi aims his book, "I Will Teach You to be Rich," at young adults. The book includes a six-week course that covers everything from banking, to investing, to saving, to credit cards and taxes. The book also includes tips on asking for a raise, being an entrepreneur and managing student loans. Ramit Sethi also runs a website as a companion to the book that includes charts, interactive graphs and a discussion center where readers can connect with other readers. According to Amazon.com, 175,000 new visitors come to the site each month.

Your Money or Your Life

"Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence," by Joe Dominquez and Vicki Robin, examines the difference between working to live and living to work. In the book, readers will learn a nine-step plan to help them reduce their spending, eliminate debt and learn to live on less. The main goal of "Your Money or Your Life" is to teach the reader how to gain financial independence by cutting out overspending and putting more emphasis on their quality of life. The book also includes tips on how to live an environmentally friendly lifestyle on a budget.

Jim Cramer's Real Money: Sane Investing in an Insane World

Jim Cramer, host of a popular CNBC show and founder of the website TheStreet.com, shares his plan for investing wisely in "Sane Investing in an Insane World." Cramer explains in this book everything a new investor needs to know, including how to research stocks, what a stock portfolio should consist of and how to know when to buy and sell. He also shares some of his own investing tips, such as researching companies for an hour a week to stay educated. Both new and seasoned investors can get some value out of this book.

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If I Pay Off Three Collection Debts & They Remove Them From My Credit Report, Should My Score Rise?

Your credit score is based on a variety of factors, such as how long you've had credit and the type of debts your credit report reflects. Collection debts that appear in your credit record negatively impact your credit scores due to their status as derogatory accounts. While paying off collection accounts demonstrates financial responsibility, doing so may not improve your credit rating.

Paying Collection Debt

A common misconception exists among consumers that paying off collection accounts results in the collection agencies or the credit bureaus removing the negative information from the debtor's credit history. Unfortunately, this is not the case. The Fair Credit Reporting Act notes that, once inserted, a collection account will remain in your credit history for up to seven years -- depending on when you defaulted on the original debt. As long as a collection debt appears on your credit report it has a derogatory impact on your score -- whether the account remains unpaid or not.

Pay for Delete

Collection agencies sometimes entertain consumer offers to pay off the debt in exchange for credit report deletion. The "pay for delete" process, as it is known in the credit industry, benefits both the collection agency and the consumer. The collection agency receives payment, and the consumer receives a boost to his credit rating from the deletion of the derogatory account. Not all debt collectors accept pay for delete offers. Some view this as a violation of their contract with the credit bureaus. Of those that do accept pay for delete proposals, the consumer typically must pay off the debt in full or through a lump-sum settlement.

Paid Accounts

Even if a collection agency refuses to delete its derogatory collection notation on your credit report, paying off the debt is still in your best interest. Paying the debt prevents you from facing wage or bank account garnishment following a collection lawsuit, and the company will notify the credit bureaus that you paid off your bad debt. Provided you pay off the amount you owe in full, your credit file will update to "paid." Lenders who review your credit report will see that you satisfied your obligation to the collection agency. Even though your credit score remains imperfect, a paid collection looks better to lenders than an unpaid one.

Credit Score Increase

The amount you credit score will improve after a collection agency or the credit bureaus remove a collection account from your record varies depending on the age of the collection account and the other data present on your credit report. The older the collection account, the less impact it has on your scores, and the less your credit score will improve once it vanishes from your credit history. If your report reflects other derogatory information, such as missed payments to creditors or a bankruptcy, this also negatively impacts how much your credit rating will improve after having a collection account removed from your record.

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Federal Laws Regarding Credit Repair

The Federal Trade Commission supports fair trade and financial transactions in the U.S. The commission also regulates and enforces laws regarding consumer credit reporting, working to protect consumers from inequitable credit reporting and deceptive credit repair professionals, as well as provides the tools you need to understand and improve your credit rating.

Third-Party Credit Repair

Many companies advertise services that guarantee to help you legally rebuild your credit by erasing information on your credit history regarding bankruptcies, late payments and other negative items. Unfortunately, many consumers fall victim to these claims, despite the Federal Trade Commission's warning that these claims should raise a red flag. The Credit Repair Organizations Act seeks to thwart the attempts of many third-party credit repair companies to scam you by preventing companies from accepting a payment from you until they perform the services they promise in their contract with you. Additionally, these companies cannot begin the credit repair process until three days after you sign the contract, allowing you ample time to reconsider your contract and change your mind.

Disputes

The Fair Credit Reporting Act provides you the right to dispute information on your credit report that you believe is inaccurate or incomplete. You can dispute information on your report free of charge by writing a letter of dispute to each of the three credit bureaus, as well as your creditor. Include in your letter information and documents that support your claim. Within 30 days, each credit bureau will make a decision whether or not to remove the disputed information from your credit report depending on whether or not the claim is substantiated. If you receive a claim denial you believe to be uncorroborated, you may file a complaint with the Federal Trade Commission by calling toll-free 1-877-382-4357.

Considerations

If you dispute information on your credit report that you know to be true, your claim may not receive investigation, and the credit agencies may instead toss out your dispute as frivolous. By law, no creditor, credit agency, third-party credit repair company or other entity may legally remove information from a credit report known to be true. Instead, allow time for the negative items on your credit report to disappear, usually occurring after seven years, though bankruptcies may remain on your report for up to 10 years.

Rights

Under the Fair Credit Reporting Act, you have the right to a free copy of your credit report from each of the three major credit reporting agencies each year. You may acquire a copy of your credit report more than once each year, but you will likely pay a fee for each additional report you request. Be aware, however, that your credit report does not include information about your FICO credit score, which you must purchase separately. To acquire your free copy of your three credit reports, call 1-877-322-8228 or mail a completed copy of the Annual Credit Report Request Form available for download from the FTC's website to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can also visit Annualcreditreport.com to order your copies.

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Information on Spotting Discrepancies on Credit Reports

The Fair Credit Reporting Act requires credit reporting agencies to correct discrepancies consumers find on their credit reports. Finding the errors is up to you and it is very important. A single mistake on your credit report can cause you to be denied a loan, insurance coverage or a job.

Accounts

The most obvious error to look for is accounts that you did not open. This might be a clerical error or it could be identity theft.

Mathematical Errors

Watch for mistakes in the math. If you had a $4,500 balance and paid $1,500 of it, your credit report should show a balance of $3,000.

Discrepancies

Make sure that the correct amount of major purchases is reflected on your credit report. Example: If your car cost $14,999, check for that amount to be listed and nothing more.

Notations

If you made a purchase and it was unsatisfactory to the point that you returned it or disputed it, you can ask for that to be noted on your credit report.

Outdated Information

Information about you on your credit report remains for seven years, except personal bankruptcy which stays 10 years.

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Can Unemployment Show Up on a Credit Check?

Ironically, many employers refuse to hire someone drawing unemployment or just unemployed, because they want to avoid desperate people, according to the Huffington Post. When an employer runs a credit check he will not see unemployment payments, but he can draw some conclusions from information of your report that could lead him to believe that.

Identification

As of 2010, the credit rating bureaus do not show your salary information or where you receive money, so it will not affect your score, according to John Ulzheimer of CNBC. Before the 1990s, credit reports did include unemployment claims and wage information, but the bureaus dropped this because of unreliability in salary reporting.

Considerations

Credit reports contain personal information, such as your current and previous employer. If you frequently switch jobs, the lender could question stability of your life. More than two job changes within a year could give the lender an impression you are a poor credit risk or that you need social services, including unemployment.

Where Do Agencies Get Information

The credit rating bureaus gather personal information from credit applications. After you apply with a lender, he will forward information from the application to the credit rating bureaus if he approves your request for a loan, according to eXtension. (ref 4)

Tip

Lenders weigh personal information almost as heavily as the score itself. Mortgage lenders are especially picky about your job situation and working for someone for less than two years or not having a job could sway the loan officer to reject your application, according to Liz Weston of MSN MoneyCentral.

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Does it Hurt a Credit Score to Settle Credit Cards?

According to Barry Paperno, consumer operations manager of Fair Isaac, the company that issues FICO scores, settling your credit cards will hurt your credit score. However, just how much your score will be hurt varies, depending on your credit report's condition prior to the settlement.

Considerations

A settlement on your credit report counts as negatively as a bankruptcy, since in both cases, your creditors did not get paid the full amount they were promised. However, if you have multiple negative items on your credit report, a single settlement will have less of an overall effect on your credit score. If the settlement is the lone negative item on your credit report, it will have a much greater negative effect on your credit score.

Time Frame

While settlements are viewed as negatively as bankruptcies, one bit of good news is that they do not stay on your credit report as long as bankruptcies; therefore, they will affect your credit score for a shorter period of time. Financial expert Liz Pulliam Weston advises that settlements stay on your credit report for about 7.5 years, while bankruptcies stay on your credit report for 10 years.

Warning

You may feel that settling your credit cards is the right thing to do, but if your account is already severely delinquent, payment may actually hurt your credit score more than simply ignoring that delinquency. While delinquency is certainly a negative mark on your credit report, your credit score also takes into account the concept of "recency," or how recently a negative event has happened on your report. Settlement makes the initial negative report of delinquency seem as though it took place very recently, because it is recent activity on the account.

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Do I Have to Pay a Charge-off of a Debt?

When you fail to payoff a debt, the creditor involved may charge off the debt. Creditors update company records to list bad debts as charge-offs, and this simply means that the creditor no longer includes the debt as an asset in its accounting records. However, you are still under an obligation to repay a debt, even if the creditor charges it off.

Types Of Accounts

People typically think of charge-offs as involving credit cards and loans, and while many charged off accounts do involve credit products, other charge-offs include deposit accounts. If you overdraw your bank account, you become a debtor of the bank and you must make a deposit to bring your account balance back into the positive. Banks normally charge off deposit accounts that remain in the negative for more than 60 days. On a loan, you are technically in default if you miss your loan payment by more than 30 days. Lenders can charge off an account once you are in default.

Fees

When you fail to pay a debt on time, your creditor can assess late fees. Credit card companies have the ability to raise your interest rate if you fail to make your monthly payments on time, while banks can charge overdraft fees when your balance remains in the negative. In addition to these fees, creditors and banks usually charge an administrative fee for charging off your account. Therefore, the longer you wait to pay the debt; the more it actually costs you to settle it.

Liens

Lenders often work with debt collection agencies to pursue debtors for balances owed on charged off accounts. Some state laws enable debt collection agencies and creditors to have a lien placed on your home. If a judge allows a lender to place a lien on your home, you must satisfy that debt when you sell your home. Any lien holder can foreclose on your home if you fail to repay a debt.

Seven Years

Charged off accounts are reported to the credit bureaus and remain on your credit report for a maximum of seven years. Thereafter, charged off debts are removed from your credit report. If your original creditor sells the bad debt to a collection agency, the debt disappears from your credit report seven years from the day the original creditor charged it off. State laws limit the number of years during which creditors can pursue you for payment of charged off accounts, and in many states, the statute of limitations prevents creditors from pursuing you for unpaid debts even before you reach the seven-year mark.

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Vantage Credit Score Vs. FICO Score

Lenders will look at your credit score before approving you for a new credit card or loan, increase your credit limit or offer you a lower interest rate. In the past, lenders had one option for credit scores, the FICO credit score. Now, lenders can pull either your FICO credit score or your VantageScore. These credit scoring models have several differences.

Number Grade

Both the FICO credit score and the VantageScore give consumers a three-digit numerical score. The FICO credit score reaches 850 while the VantageScore number grade reaches 990, according to Bankrate. With both scoring systems, consumers with a higher number rating will receive the most approvals and the best loan and credit card terms, while consumers with a low number grade may have trouble qualifying for credit cards, loans and mortgages.

Letter Grade

In addition to the three-digit numerical score, the VantageScore also rates consumers by a letter grade from A to F, according to Bankrate. The letter grade a consumer receives depends on his number score and credit history. Consumers with the best credit histories will have receive an A letter ranking, while consumers with serious credit problems, such as bankruptcy, collection reports and charge-offs will receive a lower letter grade.

Factors Considered

The FICO credit score uses five factors from a consumer's credit report to determine her credit score, while the VantageScore uses six factors. Bankrate reports that the FICO credit score considers payment history, total debt owed, total length of credit history, types of credit accounts and recent applications. The VantageScore uses a consumer's past payment history, total available credit used, total revolving credit balance, amount of credit the consumer has available, recent credit applications and depth of the consumer's credit history, according to Bankrate.

Accessing Scores

Consumers can order a copy of their FICO credit score the Fair Isaac Corp.'s MyFICO website. Consumers can order a copy of their VantageScore through Experian's website. Both the FICO credit score and the VantageScore cost a fee to order. Consumers should order both scores, as lenders can pull either type of score to determine a consumer's credit worthiness.

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Ideas on How to Fix My Credit Score

In the United States, a consumer's credit score can affect his ability to qualify for a mortgage, car financing and even credit cards. Your credit score can even affect how much you pay for other things like an auto or home insurance policy. A good credit score is generally above 720. If your credit score doesn't measure up, you can start doing things now that will fix your credit for the long haul.

Settle Up

Fix your credit score by paying off any old delinquencies, charge-offs and collection accounts that might be pulling your credit score down. It takes seven years for a bad debt to cycle off your credit report and cease its negative impact on your credit score. You can speed up the process and repair your credit score sooner by paying off all those old debts. Contact the lender, and ask them to send you a statement showing the total you need to pay for them to report a positive payment on your credit. Make the payment as agreed, request a receipt of payment, and send proof of the settled account via certified mail to each of the credit bureaus -- Transunion, Experian and Equifax.

Start Paying on Time

If you have had a history of late payments, your credit score may have been damaged by each late payment. To fix your credit score, start paying every bill on time each month. Each month that passes with timely payments reported by your lenders will increase your credit score. Keep records of your payments and when they were sent out or received, so you can dispute late payment reports if necessary. Sign up for automatic payments if possible, and schedule all of your monthly payments to arrive three to four days before their due date.

Evaluate Your Debt

If most of your credit accounts are maxed out or close to being maxed out, consider setting up a more aggressive payment plan to reduce your total debt. Your credit score may have been negatively impacted by having too much debt. Aim for approximately three credit or store charge cards along with one or two installment loans like a mortgage, car loan or personal loan. Reduce your monthly charging habits, and pay down the balances on your accounts so your total monthly revolving debt is around 30 percent of the total credit available to you. A lower debt ratio can increase your credit score because it shows lenders you use credit wisely.

Be Patient

Fixing a credit score can take time, and it's important to be patient while you wait for your positive actions to begin translating to higher scores. Use your credit sparingly, pay on time every month, and give your creditors time to report a positive payment history on your credit bureau report. As your improved credit habits are recorded, your credit score will follow suit.

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What Determines Your Credit Score?

Your credit score is one of the most important numbers in your life, and it is absolutely critical in managing your personal finances. Throughout your adult life, you will see this number influence major financial decisions. Five factors are used to determine your credit score.

Payment History

Payment history accounts for the largest portion of your credit score, at 35 percent. This is your track record on paying your credit card or loan bills in a timely manner: whether you've paid on time, were late even just once or were sent to collections. You do not have to pay your balance in full every month on most credit cards; credit card companies allow you to have a minimum payment for your convenience. You must pay at least the minimum amount listed on your bill to avoid a negative effect on your credit score.

Debt-to-Credit Limit Ratio

Your debt-to-credit limit ratio makes up 30 percent of your credit score. This is the percentage of money you have already borrowed compared with the amount you are allowed to borrow, i.e. your credit limit. Keeping this ratio below a 1 helps to raise your credit limit, which reduces your ratio even more.

Credit History

15 percent of your score is determined by the length of your credit history, which began the day you opened your first credit card. The longer a history you have, the better. Do not cancel your oldest credit card if you can avoid it; it will erase a large chunk of your credit history and negatively affect your credit score.

Credit Mix

10 percent of your score is affected by the types of credit you have in your history. A mix of credit cards, mortgages, car loans, etc. shows you are able to handle your fiscal responsibilities well. That is, of course, if you have a good payment history. But do not apply for loans and credit cards just to have a good mix because new account inquiries deduct points from your score.

New Account Inquiries

Account inquiries determine 10 percent of your credit score, whether the inquiries were made when you applied for credit or opened any new accounts recently. Constantly searching for or opening new credit will make banks less likely to invest in you because you are seen as a risk. It looks to them as if you are finding new ways to spend money without repaying it. However, if you are shopping around for the best interest rates on loans, as long as the account inquiries are within a two-week span, your credit score will not be affected with each inquiry as long as the inquiries were for the same kind of credit, e.g. three inquiries for a car loan within two weeks. The credit bureaus understand your right to shop around for the best options.

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Credit Repair Concepts

Despite the promises of some credit repair companies, cleaning up negative credit isn't magic. Items in collections will remain on your record for years. And paying bills on time is the only certain way to repair credit. The steps you can take to improve your ratings such as disputing errors and rearranging your credit take time and a lot of paperwork. But, they're not difficult to do and you can save money if you tackle these chores yourself.

The Quickest Fix is Your Credit Report

The first step to credit repair is downloading your credit reports from the three credit agencies: Experian, TransUnion and Equifax. Consumers may receive one free copy of each report annually from annualcreditreport.com. You need all three because an error may appear on one that isn't on the others. Fix an error by writing a dispute letter to the credit agency that reported the error along with documentation supporting your claim. If there are errors, such as paid debts marked unpaid or accounts that don't belong to you, you can boost your credit by getting them off your report.

Credit Adjustments Can Help

There are ways you can adjust your credit to make things look better. These do not include closing accounts or opening new credit cards. They include shifting debt from a high balance card to one with a lower balance to get all your balances as low as possible relative to your credit limit. As MSN Money points out, credit utilization -- meaning how much of your balance is in proportion to your credit limit -- is a big factor in your credit score. Also, if you transfer money to an installment loan from a credit card, the scoring formula treats these loans less harshly than credit card balances.

Start With Today

Once you've cleared off any mistakes and adjusted credit, you simply have to get current and stay current. If you need help doing this, then set up automatic payments or visit with a credit counselor. MSN Money recommends those that operate through the Association of Independent Consumer Credit Counseling Agencies and the National Federation for Credit Counseling. Over many months, you can build a solid credit history which will diminish the impact of past blemishes and help your credit rating climb.

Don't Look Back

To avoid lawsuits and keep a clean conscience, you can pay off debts that are recorded as collections on your credit report. But it won't help your credit rating. If you need to choose where to put money, put it toward current bills first and pay the collections off later. They will remain on your record for seven years, but if you have a clean record since they they will lose importance in the eyes of creditors.

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Free Credit Score Tips

Keeping tabs on your credit score is an important part of financial management. Credit scores are based on your credit information, such as whether you have made debt payments on time in the past and how much debt you hold, and can determine whether lenders will approve you for loans and credit. Consumers can order free credit reports from credit agencies which contain the credit information lenders use to calculate credit scores.

Ordering Reports

There are many credit companies that offer credit reporting services, but certain companies are required to give consumers free reports. According to the US Federal Trade Commission, consumers can order a free credit report from each of the three major national credit reporting agencies -- Equifax, Experian and TransUnion -- once every 12 months. Order your credit report from one of these agencies to make certain your report is free. The FTC recommends that consumers link to the official free credit reporting site (AnnualCreditReport.com) through its website to avoid misdirection (see Resources). Credit reports contain the information used to create credit scores but not the scores themselves; lenders may be willing to give you your score when you apply for loans or credit. The FTC states that you can also purchase credit scores from the major credit reporting agencies.

Stagger Your Free Credit Reports

You do not need to order the free credit reports you are entitled to from Equifax, Experian and TransUnion at the same time. Instead, order a credit report from a different agency about once every four months so that you can keep up to date with the current state of your credit file. You should order a free credit report at least once as it can call your attention to suspicious credit activity.

Dispute Erroneous Information

One of the benefits of ordering free credit reports on a regular basis is that it gives you the opportunity to correct errors that may be hurting your credit score. Study all the information in your free credit reports and make sure that it is consistent with your records. If you discover an error in your credit report, contact the credit reporting agency and the creditor associated with the error. Getting errors fixed can quickly boost your credit score.

Ignore Free Credit Score Advertisements

The Internet, television and other media are full of advertisements for free credit reports or scores. Michigan's Office of the Attorney General states that emails, banner ads, pop-ups and telemarketing calls that promise free annual credit reports are often scams aimed at defrauding consumers out of money or stealing personal information. You should not have to sign up for any service to order free credit reports.

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Five Factors Used in Determining a Credit Score

Your credit score is a major factor lenders use in determining whether to offer you credit, such as loans, mortgages and credit cards. The score calculated by the Fair Isaac Corporation (FICO) is most widely used by lenders. Even though the exact FICO algorithm is not released by the company, it does reveal five general categories used in the credit score formula. Understanding these five factors may help you make better decisions that affect your credit score.

Payment History

The largest factor affecting your credit score is your payment history, accounting for 35 percent of your score. Payment history includes accounts such as personal loans, credit cards, mortgages and student loans. This also includes public records, such as bankruptcies or collections. More recent negative information in your credit history has a greater detrimental impact. For example, being late with a credit card payment six years ago has a much smaller effect on your score than being late the past two months.

Current Debt Levels

Your current debt levels make up 30 percent of your FICO credit score. The more you owe, the lower your credit score. However, not all debts are created equal. For example, a secured debt, such as a mortgage, does not negatively impact your credit score as much as unsecured debt, such as a credit card. This category also considers the amount of credit you are using relative to your credit limit. MSN Money suggests keeping your credit card balances at less than 30 percent of your credit limit.

Length of History

The length of time you have used credit affects 15 percent of your credit score. The longer you have used credit, especially different types of credit, the better your credit score will be.

New Accounts

Credit inquiries account for 10 percent of your credit score. Each time a lender pulls your credit score when you apply for new credit, an inquiry goes on your credit report. The more inquiries you have, especially in a short period of time, the more your credit score will drop. Inquiries only remain on your credit report for two years. MSN Money warns against opening new accounts when you do not need additional credit.

Credit Types Used

The mix of credit you use affects 10 percent of your credit score. The wider your range of credit, the more trustworthy you appear to creditors. For example, someone who has used only a credit card will not have as high a credit score as someone who also has had mortgages, car loans and student loans.

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Is My Credit Ruined By a Money Judgment?

Your credit rating results from the interplay of many factors, all of which are related to your credit use and money management. Some actions have a mild negative effect, like an occasional late payment, while things like bankruptcy make it very hard to get loans, cell phone contracts, utility service or new credit cards. A money judgment also deals a bad blow to your credit.

Definition

A money judgment results from a creditor's lawsuit when you do not pay a bill. Judgments stem from things like bad checks, unpaid loans or credit cards. You can even be sued after a car is repossessed if the finance company does not recover the entire loan balance when it sells the vehicle. The court orders you to repay the money, and the judgment becomes part of public records. The Experian, TransUnion and Equifax credit bureaus routinely add information from those records to their files.

Effect

A money judgment falls into the "payment history" category. It greatly impacts your borrowing ability because items in that category account for 35 percent of your overall credit score. Creditors see the judgment date, amount and payment status on your credit reports. They may reject your credit applications, especially if you have other problems like many late payments or a high debt load because you appear less likely to fulfill financial obligations.

Reporting Time

A judgment can legally stay on your credit reports for seven years. The time frame starts from the original judgment date. Lenders see it the whole time, but they generally do not give it as much weight after the first two or three years if your recent credit history is very good. Concentrate on making on-time payments on all your other accounts after a judgment, and keep your credit card balances low. These two actions help raise your credit score.

Considerations

A satisfied money judgment looks better on your credit reports than one that is ignored, but lenders still see it as bad when evaluating your credit applications. Make sure the creditor notifies the credit bureaus when you make your payment. Check your reports a month or two after you send your money. Dispute the judgment entry with Experian, TransUnion and Equifax if they are still listing it as unpaid.

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How to Build a Credit History as an Expat Canadian

When a lender in America pulls an individual's credit history, he does so by using the individual's name and Social Security number. Canadian citizens are issued Social Insurance numbers rather than Social Security numbers. As a result, even though Canada uses the same credit bureaus as the U.S., American lenders are unable to pull a Canadian credit report. Canadian citizens living in the United States need to build an American credit history in order to be approved for mortgage or vehicle financing, credit cards and some forms of insurance.

Instructions

1

Check your visa status. Some forms of U.S. visas, such as the L1, grant visa holders a temporary Social Security number that is good for the life of the visa. A temporary Social Security number can be used to build credit.

2

Apply for an Adjustment of Status with the U.S. Citizenship and Immigration Services if you do not have a temporary Social Security number. An approved Adjustment of Status application will result in your being granted permanent residency in the U.S. You can apply on the basis of marriage, employment or the need for asylum. (See References 1.) The required filing fee varies depending on your age and current immigration status.

3

Wait to receive your employment authorization. Although applications for permanent residency can take up to one year to be approved, a work authorization and temporary Social Security card will be mailed to you approximately 90 days after your Adjustment of Status application is received.

4

Use your new Social Security number to apply for credit. Because you currently have no credit record, a secured credit card might be your best option to obtain a credit file. Secured credit cards require a cash deposit, but often do not conduct a credit check.

5

Make regular payments on your new credit card. The payment history on your account is responsible for 35 percent of your credit score, so missing even one payment could damage your new credit record.

6

Apply for a small loan after you have established a short, but positive, credit history. Even with a good credit score, you still might need a friend or family member to cosign with you due to the length of your credit history. Having one credit card account and one loan account will balance the types of debts you carry and increase your overall score.

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The Effects of a Home Foreclosure on a Credit Rating

The effects of a home foreclosure on a credit rating can typically drop a FICO (Fair Isaac Corporation) score by 200 to 300 points. If you have a "good" credit score of 710, it could plummet to 410.

Effects

Although the effects of a home foreclosure on a credit rating are negative, they are not irreparable. A home foreclosure on your credit history can result in future rejections for loans, credit cards and employment, and much higher interest rates, but after the first two years you can begin effectively repairing your credit.

Time Frame

Typically, a home foreclosure remains on your credit report for seven years, since your credit history and score are based on the previous seven years of data. The negative effects of a home foreclosure on a credit rating are reduced by 50 to 75 points each year, and many people are able to qualify for a home loan within two to three years.

Considerations

Rebuilding your credit can be accomplished through the establishment of new credit accounts and small loans. Making timely payments and paying off credit card balances in full each month will help offset the negative impact of a foreclosure.

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How to Get a New Excellent Credit File

You have three separate credit files because there are three national credit bureaus, each of which keeps its own records on you. The files should be similar because TransUnion, Equifax and Experian all collect the same type of data. The Federal Reserve Bank of San Francisco advises that they collect information on your credit account balances, whether you pay bills on time, available limits and court actions related to your finances, like judgments and bankruptcies. Negative items hurt you, but they do not stay in your file permanently so you have an opportunity to rebuild excellent credit.

Instructions

1

Order your credit files from TransUnion, Equifax and Experian. Use the official free credit report website if you qualify, the Federal Trade Commission (FTC) advises. You are eligible if you have not already ordered your three reports through the site within the past 12 months. If you have, you must wait until a year has passed or buy file copies directly from the credit bureaus.

2

Assess the condition of your files. Pay special attention to all the negative items. Most, like late payments, accounts written off as noncollectable, debt collector entries, repossessions and foreclosures, automatically disappear after seven years, while bankruptcies stay in your files for 10 years. Focus your attention on recent items since older items lose their influence on your credit as soon as they get erased.

3

Audit all the negative items, especially the most recent ones, for any mistakes. Anything from an improperly spelled creditor name to a misreported balance or an incorrect payment status gives you an opening to dispute the data, the Divorcenet website explains. The credit bureaus are not required to audit your files themselves, but they are legally required by the Fair Credit Reporting Act to investigate your complaints. The bureau websites have online dispute forms. The law gives them 30 days to either verify the data or erase it. Divorcenet advises that they often have trouble verifying entries within the required time so the bad entries get wiped out of your file.

4

Recheck your credit files once your disputes are all processed. The FTC explains that you get new no-cost copies from each bureau so you can see what has been removed. Make a list of the remaining negative items and the date they are due for automatic erasure.

5

Create a budget aimed to building up a perfect payment history until all your negative credit file data drops off because the reporting time frame has expired. Payment history is the most important aspect of your file, according to the MyFICO credit score company website. On-time payments help your credit score and prevent other issues like charge-offs and court judgments. You will have excellent new files once the old data is gone.

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Can a Collection Agency Claim Affect My Credit Score?

Your credit score measures your past credit activity. It factors in your repayment history, credit applications, number of credit lines and length of credit history, among other factors. Collection accounts will lower your credit score.

Significance

Collection accounts are considered negative items on your credit report and will reduce your credit score. The actual number that your credit score will drop depends on a variety of factors, including the number of collection accounts you have on your credit report, according to Privacy Rights.

Time Frame

Recent collection accounts have the largest negative impact on your credit score. As the debt becomes older, the effect on your credit score will lessen.

Considerations

Paying off your collection account will raise your credit score, according to MSN Money. Although the public record will remain on your credit report for seven years, the impact it has on your credit rating will lessen significantly.

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Does a Secured Card Show As Secured on Your Credit?

Secured credit cards --- a normal credit card account backed by a security deposit --- might be your only choice to build credit after a bankruptcy, or to start building credit for the first time. These function like a credit card, so there should be no indication on a credit report of the security deposit. However, it never hurts to be sure.

Identification

Although secured cards are less risky than a regular, unsecured credit card, they still show up on a credit report as a normal credit card. The issuer of a secured account usually puts the security deposit in a separate bank account and lets the borrower make purchases with a line of credit. Should the borrower ever default on the account, only then does the creditor draw on the security deposit.

Considerations

Not all issuers of secured cards report to all three major credit bureaus, especially not secured accounts with small, local lenders, according to the BCS Alliance. The large national banks almost always report to Equifax, Experian and TransUnion. This is why borrowers looking for a secured account should question the lender about which bureaus will pick up the account.

Secured Charge Cards

Very similar to credit cards and often confused with one another are charge cards. Charge cards have no preset limit; it's only what the lender thinks the borrower can pay. A secured charge card shows up as an open account, instead of a revolving account like a regular credit card. This does not necessarily offer fewer benefits to a credit score. However, it is better to have a credit card if you tend to carry no or low balances, because using a small percent of your credit limit boosts credit utilization, an important part of the FICO score. Charge cards do count towards credit utilization.

Tip

Overall, the BCS Alliance suggests applying for a secured account with a top-10 credit card issuer. Not only do these usually report to the bureaus, but also they are far more likely to charge a reasonable annual fee. Credit repair companies often charge huge fees by claiming they can guarantee an account to help rebuild your credit --- no legitimate creditor guarantees approval for anything. Some might use deceptive tactics to gather fees, such as requiring the borrower to call a pay-by-the-minute number.

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What Are Trade Lines on a Credit Report?

Creditors report information about their customers or borrowers to credit reporting agencies using trade lines. A trade line will include all of the information about the credit extended by a lender.

Features

A trade line will include the name of the creditor, the balance, opening date, date last paid, credit limit, and the credit rating.

Identification

Trade lines also indicate the status of an account. You can tell if an account is written off as a bad debt or charged off. These are accounts which the creditor has determined they are unable to collect and reported them as losses to the IRS. They also remove these accounts from their receivables listing.

Debt Management

You tell if someone is participating in a debt management plan by looking at the trade line. These type of plans help people who have overextended themselves financially. Debt management plans work by reducing payments, getting fees waived, and lowering the interest rates on accounts.

Installment

By looking at a trade line you can tell if someone has an installment account. The designation will be an I before the credit rating. An installment account is set up for a certain number of payments like an auto loan.

Revolving

A trade line will let you know if an account is a revolving account such as a credit card. Right before the credit rating there will be an R.

Updates

According to Mortgage News Daily, creditors are supposed to send updated information to the credit reporting agencies once a month.

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Information to Fix My Credit

Your credit score is a vital component of your financial life. You may not realize its use, but your credit report and your resulting credit score affects the type of mortgage you can get and the amount of interest you will pay on the loan you need for the car you want. If your credit score is low, you can take steps to fix it.

Fixing Errors

If you'd like to improve your credit score, first get a copy of your credit report. This can be ordered from the major bureaus, TransUnion, Equifax and Experian. Once received, review it for any errors or omissions. Any mistake to your credit availability or your payment history will hurt your credit score, so report any errors as soon as possible. You are entitled to one free annual credit report from the Annual Credit Report website.

Lowering Debt

Lenders do not view excessive debt in a favorable light. If you owe too much money to too many lenders, a lender may deny you a loan out of fear you will not be able to meet the repayment requirements. Having little debt means you can afford to spend your disposable income on repaying loans. Your credit report will be reflected positively, and in turn so will your credit score, if you reduce your outstanding debts.

On-Time Payments

Paying your bills late will hurt your credit rating. In fact, late payments have the highest impact on your credit score, making up 35 percent of the tally. Always pay your bills on time. If you are behind on paying your bills, start paying them on time. While it will be a gradual process, your credit score will improve as you show that you are capable of paying bills on time. If necessary, set up automatic bill payments with your bank.

Limit Credit Card Usage

It can be easy to swipe that credit card every time you go to the mall, but that's not the wisest thing to do when trying to improve your credit. The smart play is to stay far away from approaching your credit limit. If you are nearing your credit card limit -- for example, owing $9,000 on a $10,000 limit card -- it will be reflected on your score. To have a positive impact on your credit score, you need to have some breathing room. Do not allow your credit limit to reach 80 percent of your limit, with 30 percent being most ideal.

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How to Receive a Free Credit Score Report

The best way to keep track of your credit score is by viewing your credit report, which can cost money depending on how often you view it. It's no secret that there are lots of companies offering free credit reports, but many of them are just trying to lure you into signing up for their paid service. What many people don't realize is that the three major credit-reported companies, Equifax, TransUnion and Experian, are required by the Fair Credit Reporting Act to give you a free credit report once a year. There are a few different way you can request your annual credit report.

Instructions

1

Visit www.AnnualCreditReport.com and request your free annual credit report from their homepage. AnnualCreditReport.com is the only online company authorized to let consumers obtain their free annual credit report.

2

Dial (877) 322-8228 and follow the touch-tone menu, or request to speak to an operator and tell himyou would like access to your free annual credit report.

3

Complete the "Annual Credit Report Request" form (see Resources) and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

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Is the Use of a Credit Score a Valid Screening Criteria for Employment?

Forty-seven percent of employers perform credit checks on at least some jobs in their company and 13 percent do this for all employees, according to a 2010 Society for Human Resource Management study. As of 2010, credit checks are usually valid for screening employment applications. Federal and state privacy laws, however, sometimes prevent the use of your credit history or certain information in it when applying for a job.

Identification

Employers may use credit checks when reviewing your employment application, according to the Privacy Rights Clearinghouse. As of 2009, however, Hawaii and Washington state do not allow the use of credit checks when investigating an employee's background. Also, in states that allow employers to use credit checks, the employer must receive written consent on a separate document to run one.

Considerations

If an employer rejects your application, the Fair Credit Reporting Act requires him to notify you that adverse credit conditions caused your denial, according to the Privacy Rights Clearinghouse. Also, the employer must furnish a copy of the background check if he finds an "adverse" credit history. If you have a bankruptcy, the employer may not take this into account on your job application.

Loopholes

Employers can sidestep FCRA provisions for consent and notification of adverse conditions by conducting a credit check themselves, rather than hiring a third party, according the Privacy Rights Clearinghouse. Alternatively, the employer can find another reason to reject your application, such as having more qualified applicants. As of 2010, California has closed these loopholes.

Tip

The Federal Trade Commissions says that consumers should contact the FTC to file a complaint. The FTC will investigate claims of credit check discrimination and could help you sue companies that violate the FCRA.

Check your own credit report before applying for jobs. All consumers receive one free credit report from each of the three major credit reporting agencies each year. If you find errors, such as delinquent accounts you never opened, you can dispute this with the credit rating agencies.

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Credit Rating Strategies

You can't quickly remove accurate, negative information in your credit files, but you can work on a strategy to improve your credit rating. Credit-scoring models that determine a consumer's credit rating vary, but maintaining a low amount of credit-card debt and a good payment history can bolster your rating in any case.

Credit-Card Debt

Paying down a mortgage, auto loan or student loan will help decrease your overall debt load, but reducing credit-card debt will likely do more to increase your credit rating. Lenders tend to pay close attention to whether loan applicants are maxing out their credit-card limits. Applications are usually viewed more favorably if potential borrowers have low credit-card balances. Some financial professionals recommend using less than 30 percent of a credit limit. Therefore, you could increase your credit score by paying down credit cards that are close to their limits.

Closing Accounts

Some people assume they will bolster their credit rating by reducing the number of accounts they have. So they close old or unused credit accounts to increase their credit scores. This strategy can have the opposite effect because your credit score is impacted by the length of your credit history. The longer you've maintained credit accounts in good standing, the higher your credit score will be. Closing older accounts while leaving newer ones open could hamper your overall credit rating.

Payments

According to the Experian credit-reporting company, paying your bills on time is the most important thing you can do to maintain a good credit rating. Late payments documented on your credit report will hinder your credit score even if you don't owe a large amount of debt. Consider signing up for your creditors' automatic-payment services if you need help organizing your debts to get them paid on time. Many creditors allow their customers to have their payments automatically drawn out of their checking or savings accounts at a specified time each month.

Credit Errors

Your credit rating is based on what's in your credit files. Therefore, it's important to check your credit reports at the three nationwide credit-reporting agencies to ensure the information in them is accurate. For example, if you have higher credit limits on your accounts than your reports say you do, it could appear you're maxing out your available credit. Federal law allows consumers to request a free credit report one time per year from the following credit-reporting companies: Equifax, Experian and TransUnion.

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What Is Piggybacking Credit?

Much as the term "piggyback ride" refers to an adult allowing a child to ride on her back, a credit piggybacker uses an established credit card user to help build his credit history. When piggybacking credit, an individual with poor or little credit history can game the credit scoring system to obtain loans and interest rates that he cannot obtain on his own merit by enlisting the help of a credit repair service or friends and family.

Process

An established borrower will add a piggybacking individual as an authorized user on one of his credit cards. The credit bureaus will then consider the piggybacker as having an old, established credit line. An established borrower may use this process to help a relative or friend improve or build her credit history and improve her score. If an individual doesn't know someone who can help him with this process, some credit repair companies allow individuals to piggyback off a stranger's credit for a monthly or set fee, according to Mortgage News Daily.

Considerations

Since the Equal Credit Opportunity Act of 1974, credit card issuers must report an account holder's spouse to the credit bureau if he is an authorized user on a credit card account. Credit issuers decide to report all other authorized users on an individual basis, so individuals should check with the card issuer before piggybacking off of someone else's credit. The three major credit bureaus still count authorized users in the credit scoring process as of August 2011, but scoring standards may change in the future.

Benefits

Since credit line age, amounts owed and payment history count for 80 percent of a Fair Isaac Corporation (FICO) score, piggybacking credit can raise an individual's credit score significantly, according to MyFICO. This score increase can translate into significant savings on interest rates when the individual shops for a new vehicle or a home mortgage. For individuals with horrible credit or no credit file, piggybacking can make the difference between receiving a loan at any rate and not receiving a loan at all.

Warning

Since the piggybacking individual has access to the credit account and personal information of a more established borrower, individuals may have difficulty finding someone who will let them become an authorized user on a credit card. If the established user keeps high balances or doesn't make his credit card payments in the future, these delinquencies can actually worsen the score of the piggybacker. Due to these risks, most piggybacking individuals do not remain authorized users for long, so they only have a short time window to shop for a home or vehicle loan.

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How Can I Get Settlements Off My Credit Report?

Debt settlement allows you to resolve a debt by paying less than the full balance. The creditor or debt collector will consider the debt paid in full, but your credit report will list the account differently. Settled accounts are listed by the credit bureaus as "settled for less than the full balance." That's considered a negative entry that can cause your credit score to drop. By law, settlements can remain on your credit report for seven years, and can be removed only if they are outdated or inaccurate.

Instructions

1

Find the settlements on your credit report. Get a copy of your report from Annual Credit Report (see Resource section). The website was established by the nationwide credit bureaus to offer free reports as mandated by the Fair Credit Reporting Act. You're entitled to three free reports every 12 months, including one from each of the bureaus.

2

Challenge settlement entries that have been on your report for more than seven years. By law, entries listed longer than seven years are outdated and must be removed at your request. Demand the removal by writing a letter to the credit bureau at its address listed on the credit report. Wait 30 days for an answer.

3

Challenge settlement entries that are inaccurate. For example, an account owned by your spouse could have mistakenly been added to your account. Dispute the information by writing a letter to the credit bureau. By law, inaccurate information must be removed from your report if you challenge it. Wait 30 days for a response after mailing your letter.

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Does Employment Show Up on a Credit Report?

A consumer's credit report contains more information than credit account listings. The FCRA -- Fair Credit Reporting Act -- allows credit reporting agencies the rights to obtain and sell additional information on each consumer. Employment, public records and spousal information routinely show up on a credit report. Credit reporting agencies have a responsibility to provide each consumer with one free credit report each year, upon request by the consumer.

Employment Records

Your credit report likely contains employment records from past and present employers. Employment information is used to help identify you, in combination with your name, address, birth date and Social Security number. Credit reporting agencies -- Experian, Equifax and TransUnion -- update employment information based on information that you provide to potential lenders. Potential and existing employers typically examine your credit report before hiring or offering a promotion. Employment information listed within a credit report can support the information an applicant lists on an employment application. It can also help highlight inconsistencies.

Employment Reporting Consequences

If you are denied employment based on information contained in your credit report, you have the right to request a free copy of the report. Reporting agencies must supply the free report if you request it within 60 days of being denied employment. In addition, reporting agencies must maintain and provide you with a two-year history of every potential employer inquiry, according to the FCRA. This varies from the typical one-year history that agencies must maintain on everyone who requested your report for other purposes.

Corrections

Consumers should routinely check the information within their credit report for accuracy. This includes dates and places of employment, as well as other identifying information, along with credit account payment information. The FCRA gives consumers the right to correct any inaccuracies in their credit report by filing a dispute directly with the credit reporting agency. Each agency provides an online dispute method, in addition to the traditional postal method. Either way, disputes must be in writing.

Other Information

In addition to employment records and credit account information, credit reporting agencies compile and maintain a list of public information. Civil records -- judgments and lawsuits -- and criminal records -- arrests and imprisonment -- are also available to potential lenders, employers and insurance agencies who purchase an individual's credit report.

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How to Erase Potentially Negative Items From a Credit Report

It is possible to remove inaccurate, negative information from your credit report. Federal law gives you the right to dispute inaccurate information and have it removed within about 30 days. Negative information that is correct can remain for at least seven years, although you can ask creditors to have it erased.

Instructions

1

Get a copy of your credit report from the Annual Credit Report website. TransUnion, Equifax and Experian, the three nationwide credit bureaus, set up the website to provide free reports as required by the Fair Credit Reporting Act.

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Find negative items on your credit reports that are inaccurate. Contest the items by entering disputes online (see Resources) or by writing a letter to the credit bureau. Find the address on your credit report. The information will be removed if it is inaccurate. Go on to the next step if you're looking to erase negative information that is true.

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Find potentially negative information on your reports such as charge-offs and collection items. Accounts listed as charged-off were closed by your creditor after you stopped making payments. The creditor considered the closed account a business write-off and then listed the negative entry on your credit report. Some of the accounts may have been sold to debt collection companies and listed as collection accounts. Remove these items by contacting the companies and offering to pay the amount due in exchange for the negative entries being erased from your credit report. This process is called pay-for-delete. There is no guarantee that the creditor will agree to remove the information, but it represents the one shot you've got to honestly have the accurate, negative information removed. The only other option available to you under the law is to wait until the information naturally drops off your credit reports after seven years.

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What Can I Do to Increase My Credit Rating?

You can do plenty to increase your credit rating and qualify for financing. Credit ratings or scores fall within the 300 to 850 range, with higher scores indicating that a consumer is more creditworthy. Building a better rating and keeping a high rating includes following specific guidelines that ensure credit health.

Due Dates

Watch due dates on credit accounts and loans closely and always submit your payments before this date. Missing a due date or sending in a payment late can harm your credit rating and make it difficult to qualify for new financing. Creditors tend to report accounts that are 30 days past due, but even if you pay within this 30-day window, late payments result in additional fees and possible interest rate increases.

Account Balances

Another factor affecting your credit rating is the amount of debt you carry on credit cards. Credit cards help build a good rating because your rating is based on how well you manage credit. Using credit and then paying off debts helps you achieve a better rating. But leaving high charges on your card from month to month, keeping balances close to the limit and maxing out your credit cards will lower your personal credit rating. Aim to keep your credit card balances below 30 percent of the card's limit.

Include Additional Accounts

The types of accounts in your name also impacts credit scoring, and having only one credit account isn't typically enough to increase credit ratings. Credit scores factor in diversification, and opening another type of account can help increase your rating. Consider a credit mixture that includes a credit card, an auto loan and perhaps a mortgage loan.

Credit Reports

Dispute creditors' errors on your credit report to help add a few points to your personal rating. Any negative item on your report affects your credit score. But removing negative items reported in error can help you efforts to increase your personal score. Get your report from Annual Credit Report, and then ask creditors to investigate mistakes made on their part. Report unfamiliar accounts or suspicious activity to the credit bureaus.

Work with Creditors

Develop an amicable relationship with creditors to help limit negative items reported to the credit bureaus. For example, if you can't make a payment for one or more months, rather than skip and stop communication with creditors, alert them to your situation to see if they can recommend a solution. Creditors may reduce the amount due on the account or propose a skip payment option for a few months.

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How to See Who Has Checked Your Credit Report

Your credit reports keep track of all inquiries made in the past two years. Inquiries are requests for information from an organization or person. If you've been comparison shopping for a loan and you are approved for one within 30 days, do not expect this to lower your credit score. On the other hand, too many inquiries for credit can lower your score slightly and may flag you as a potential credit risk. Examine your credit reports to find out who has been viewing them.

Instructions

1

Request all three of your credit reports from the major credit reporting agencies, TransUnion, Equifax and Experian. Under federal law, each person may request one free credit report per year. You can get all three at once at AnnualCreditReport.com (See Resources).

2

Read your credit reports once you receive them. Find the section marked "Inquiries" or "Requests." If this section is blank, you have not received any inquiries on your credit reports in the past two years.

3

Examine the names of the institutions or types of inquiries if you do have some listed. Your credit reports should list the date of the inquiry and the name of the organization that requested the information. Sometimes, the type of inquiry may also be available. For example, if you requested a quote for a home loan, the report may state something like "mortgage inquiry."

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Investigate any inquiries you do not recognize. If your credit reports show an inquiry for a mortgage, but you have never attempted to buy a house, you could be the victim of identity theft. On the other hand, other inquiries labeled "promotional inquiries" that you do not recognize are nothing to worry about. These are typically unsolicited credit card offers and should not hurt your credit score.

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Does Credit Affect Getting Utilities in Your Name?

When you move to a new home, you must typically put the utilities, such as water, sewer, cable and telephone, in your name. Even though utility companies don't loan you money, most of them still check your credit report. If you have a history of missed or late payments, utility companies may refuse to grant you an account.

Utility Credit

According to the Federal Trade Commission, utility companies extend utility credit to consumers of gas, electricity, water and other services. The FTC considers utility accounts credit-based because you typically receive services before you pay for them. Because utility companies must trust that you will pay these bills in full and on time, they may require you to pass a credit check before opening an account.

Process

When you transfer a utility account or open a new one, most companies will collect several pieces of information from you, including your Social Security number. They use this information to check your credit history. If you have made late utility payments in the past, the company may deny your account or ask you to pay a security deposit. It may also ask you to provide a cosigner with better credit who agrees to pay the bills if you default.

Spousal Credit

If your spouse has a bad utility credit history, the utility company may deny your account, require you to pay a deposit or ask you to provide a guarantor. However, if your spouse has a good utility credit history, the utility company must regard your history as the same as his even if the accounts weren't in your name.

Discrimination

Utility companies can't discriminate based on sex, race, religion, age, marital status or national origin. They also can't discriminate against individuals receiving public assistance. Utility companies can only require a customer to pay a deposit if it is a policy for all new customers, or if the customer has a bad utility credit history. If you can show that a utility company has denied you service or asked you to provide a deposit on a discriminatory basis, the company may incur a penalty.

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Repossession on Credit History

When you finance a vehicle purchase, your car serves as security on the loan for your lender. In the event that you do not pay your car payment, your lender may then seize your vehicle through a repossession to recover its losses. The repossession will then appear within your credit history.

Significance

A repossession is a significant negative mark on your credit report and has a derogatory effect on your credit score. Future lenders consider your credit history and score when you apply for new loans and credit. In addition, your credit may be pulled by employers, landlords and insurance companies. The lower your credit score, the less likely you are to be approved for the apartment, job, credit card or loan that you want.

Time Frame

The Fair Credit Reporting Act contains federal laws regulating the reporting period for each item that appears within your credit history. Repossessions may be reported for up to seven years. After the reporting period for your repossession expires, the credit bureaus must remove all evidence of your past vehicle seizure from your credit history. If the credit bureaus fail to remove the repossession, you can dispute it with each credit bureau as an "obsolete" entry.

Misconceptions

Many people mistakenly believe that a voluntary repossession does not do as much damage to their credit scores as an involuntary possession. Unfortunately, this is not the case. In a voluntary repossession, an individual voluntarily turns his vehicle over to his lender rather than the lender hiring a repossession agent to travel to the borrower's home and take the car. Regardless of the method you choose when turning your car over to your lender, your credit score will still suffer.

Considerations

Your FICO score is the standard credit score most lenders will pull when evaluating your credit. If you intend to purchase a car and plan to finance that car through the dealership, however, your car dealer may pull an Auto Industry Option Score (AIOS). The AIOS is available only to car dealers and differs from the FICO in that it places a higher emphasis on your past history with vehicle loans. If you have lost a car to repossession and a notation of the event still appears within your credit file, you can expect to have a much lower AIOS than FICO score.

Warning

Once your lender seizes your vehicle, it will attempt to sell the vehicle to recover the amount you still owe on the original auto loan. If the vehicle sells for less than the remaining loan balance, you are still liable for the difference between the amount left on the loan and the amount the lender recovered from the car's sale. This is known as a "deficiency balance." Your lender can sue you for the deficiency balance. If the lender wins, a judgment will appear on your credit report and cause additional damage to your credit rating.

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