How Does a Credit Score Work?

About Credit Scores Credit scores reflect an individual's financial responsibility over a period of time and are used by financial institutions to determine creditworthiness, eligibility for loans, and the appropriate interest rate. The scale for credit score is 300 to 850, with higher credit scores indicating a superior credit history. Individuals with high scores will find lenders competing for their business with low interest rates and better...

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How to Improve Your Beacon Score Fast

Credit scores are associated with your credit report and reflect how you have handled your financial responsibilities. The credit score used with an Equifax credit score is referred to as a Beacon score. Raising your Beacon credit score is a process that, generally, takes time. There is, however, one area you can improve and see an almost instant rise in your Beacon credit score. Instructions 1 Review your Equifax credit report and locate...

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Does Taking a Settlement on a Delinquent Bill Lower Your Credit Rating?

Debt settlement can help you finally pay down a debt you cannot afford, but the trade-off is you may do serious harm to your credit score. If you are already late on bills, however, this may be a small price to pay to get your finances under control. There are other alternatives to settlement that can get you back on track, such as counseling. Identification Taking a settlement on a delinquent bill damages your credit, but only those with...

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What Determines FICO Scores?

Knowing your FICO score is essential to staying on top of your financial status, especially if you need to obtain credit. Lenders use your FICO score to decide whether you're worth the financial risk. In fact, 90 percent of banks use this score to determine whether you are eligible for credit, according to the Fair Isaac Corp. The lower your score, the less likely you will be able to obtain good rates -- or secure credit at all. Requirements...

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How to Build a Credit Score With a Credit Card

Having a poor credit score canhave a negative effect on many aspects of your life. In addition to hindering you from getting a loan, a poor credit score can cause high car insurance premiums, prevent you from renting and even cost you a potential job. If you haven't built credit you will also find yourself in situations where a lack of credit can be detrimental to getting the things you need. There are ways to build your credit score by using a credit...

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How Does a Repossession Affect Your Credit Score?

A lender repossesses a vehicle when the borrower defaults on her loan agreement. A car repossession will lower a credit score significantly. In addition to the repossession, late payments and missed payments will also have a negative impact on a credit score. Types Vehicle repossession can be voluntary or involuntary. Either type of repossession will lower a score. An involuntary repossession occurs when the lender takes back the vehicle without consent from the borrower. In a voluntary repossession, the borrower agrees to surrender the...

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Does Filing Bankruptcy Help a Credit Score

Your credit score is the snapshot that lenders will use to get a closer look at your financial picture. Having a bankruptcy on your credit report will create a blemish on that financial picture for the next 7 to 10 years. That's not to say every lender will refuse to extend credit to you. In fact, some lenders will seek out your business within months of a bankruptcy. This is because the lender knows that you cannot file bankruptcy again for the...

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How Long Does an Uncollectible Tax Lien Stay on Your Credit?

Convincing the Internal Revenue Service that it cannot collect on a bill is a huge victory, because the IRS can pursue a debt forever, but this victory may be short-lived as a tax lien can affect your credit for years. Thus you may need to pay off a tax lien to obtain credit even if the IRS stops pursuit of the debt. A new law in 2011 makes paying off tax liens even more enviable for consumers that in years past. Uncollectible Tax Lien Sometimes, the IRS declares a tax lien noncollectable when the agency believes paying the tax would constitute...

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Can Settlements Affect Credit Even It Has Been Charged off?

If you are doing damage control after a creditor writes down your debt as noncollectable, you may know that settling a debt causes even more damage. A settled charge-off account probably does not do as much damage as you think. The settlement may even improve your credit rating if your only alternative is to ignore the debt. Identification Settling any account for less than the original balance usually negatively impacts a credit rating. John Ulzheimer of Smart Credit named settlements of the seven deadly sins in the FICO scoring system....

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Credit Reporting Statute of Limitations for Bad Credit

Potential lenders, employers and insurance agencies use the information listed in a consumer's credit file to determine creditworthiness. The Federal Trade Commission regulates basic reporting guidelines for consumer credit reporting agencies, also known as credit bureaus. Bad credit items may only be reported for a specific length of time, according to the Fair Credit Reporting Act. Exceptions to the time frame can vary by state. Definition "Statute of limitations" is a legal term referencing the time frame during which prosecution or...

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What Is Your Credit Score Right After Bankruptcy?

Your credit score is your ticket to credit cards and loans. A high score gives you advantages like mortgages at competitive interest rates and desirable credit cards with reward points. Unfortunately you may overextend yourself financially and feel bankruptcy is the only way out. Bankruptcy hurts your credit score, although you can bring it back up over time. Definition Bankruptcy is a court action used by people who cannot pay off their...

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Can You Get a Credit Score From Your Bank?

A little known fact outside the lending sector is that creditors may see a different credit score than the one you pull from a credit reporting agency. That's because lenders may use a different algorithm to determine a credit score. As a result, you might get turned down for a loan -- even when the credit bureaus rate you good risk -- for a low score the lender sees on its end but that is never revealed to you. Sometimes, a bank will gives the score it uses to you for free. Identification Banks are not in the business of selling credit...

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How Long Does It Take for Debt Settlements to Reflect on Your Credit Score?

Settling a debt can help you save a significant amount of money, but at the same time, it can hurt your credit score severely. Your score may not be affected immediately after you settle the debt, however. The amount of time that it takes to reflect on your credit report can vary, depending on the creditor. Debt Settlement Debt settlement is a process in which you negotiate with one of your creditors to close an account. You pay a lump sum of money and the creditor then closes your account and stops any collection actions. The creditor...

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Can One Late Phone Bill Affect Credit?

Consumers often falsely assume that utilities, such as cellphones, affect their credit rating like any other account. A late phone bill probably does not affect your credit rating. However, some cellphone companies try to motivate customers to pay on time by reporting accounts to the credit bureaus to affect customer credit ratings. Identification A late cellphone bill can affect your credit rating. Although phone bills rarely appear on a credit report because of privacy laws and the cost to the cellphone company, some phone companies report...

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How to Remove a Cell Phone Collection Account From a Credit Report

Removing a cell phone collection account from your credit report can be a difficult task. There are three credit reporting agencies that you need to get in contact with to remove your account: Equifax, Experian and TransUnion. Removing the account depends on how that cell phone account ended up in collection. If identity theft occurred, there are the steps you need to take for removal. Instructions 1 Go to your local police station. A police officer will take down your information and have you fill out and sign a theft affadavit. This shows...

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How to Fix Collections on a Credit Report

You can fix collection accounts by paying the debt. Collections are credit accounts closed by your creditor because you defaulted on the balance due on a credit card or loan. The creditor closed the account and assigned it to an in-house debt-collection team or sold it to a debt-collection agency. The current status of the account on your credit report is listed as "collection item." The Fair Credit Reporting Act allows it to be listed for seven...

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Do Rental Car Credit Checks Affect My Report?

Your credit report shows your credit history since your first credit approval. It states the duration of your credit history and how many times you made late payments during the previous seven years. It also indicates the minimum monthly payment, credit limit and current balance for each account. Credit Scoring Credit scoring is based on several factors. A computer compares the amount you owe for each account with your available credit. It also bases your score on your total available credit, the duration of each account, late payments...

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Does Credit Denial Affect a Credit Score?

You are never guaranteed credit approval, even through pre-approved credit card applications may come in the mail. Such offers simply mean you matching pre-screening criteria, but you can still be turned down if the creditor discovers negative information while processing your request. Credit denial does not generate an entry on your credit reports, but your credit application does show up. Applications affect your score regardless of whether you are approved or denied. Inquiries Credit applications generate inquiries to the credit bureaus....

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Bankruptcy & Credit Rating

Consumers are typically told to avoid bankruptcy --- it is the worst thing to appear on a credit report. However, the impact bankruptcy has on a credit profile typically depends on where you started off from and any other negative data in your credit history, such as late payments. In some cases, bankruptcy can help improve a credit score. Identification A bankruptcy hurts the most when you enter into your case with an excellent score --- higher than 760. In a 2010 study of its own data, the Fair Isaac Corporation discovered that a score...

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Importance of Establishing Good Credit in College

College graduates often think about buying a home after they leave college and begin to work full time. When you apply for a mortgage, a car loan, credit card or even for insurance, the company reviewing your application checks your credit report. Building a good credit score while in college enables you to borrow the money needed to buy a home or new car after you leave college. Obtaining Credit Traditionally, college students started to build credit by taking out student credit cards. However, federal laws that took effect in 2010, mean...

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How to Raise a FICO Score Quickly

A FICO score, also known as a credit score, is a three-digit number that rates individuals on their "creditworthiness," or the likelihood they will repay their debts. Lenders such as banks, credit card companies and mortgage companies use this score to decide whether to extend credit. This score, which ranges from 300 (very poor) to 850 (perfect), factors in items such as bill payment history, outstanding collection accounts, recent credit applications and total length of credit history. You can raise your FICO score in less than a year by following...

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Does Transferring Balances Affect My Credit Score?

A balance transfer, sending a balance on one credit card to another account, could be the best thing for driving down your credit card debt balance, but it might cost you more in the long run by potentially lowering your credit score. The act of the transfer itself does absolutely no harm to a credit score, but it can affect your credit utilization ratio or make you miss payments. Identification The credit score algorithm used by the national credit reporting agencies does not acknowledge a balance transfer. However, the FICO score formula...

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Legal Ways to Raise Your Credit Score

Your credit score is based upon information contained within your credit report. According to FICO, five specific criteria factor into your credit score. Once you learn what those factors are, you can focus on improving your credit in these specific areas and legally raise your credit score. Payment History Your payment history accounts for 35 percent of your FICO score. Late payments, repossession, judgments, bankruptcy and foreclosure will all lower your score. According to MyFico, making on-time payments each month on all of your credit...

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When Do Credit Bureaus Update?

Consumer information on credit reports is often misunderstood. Consumers each year are allowed to review a free copy of their report. Understanding the complicated numbers, trade lines and symbols on the reports can be challenging. Similarly, consumers should know when and how debts and accounts are listed on their reports. Understanding when credit bureaus update accounts can be helpful. Time Frame Credit bureaus are required to update information...

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What Is an Open Account on a Credit Report?

Credit reports offer a great deal of other information besides your credit score. Among the categories of information provided are "open accounts" and "closed accounts." An open account is an active loan of some sort that you are currently making payments on. A closed account is a loan that is no longer active --- i.e., it was paid off, settled or is in collections. Typical Open Accounts Many people have half a dozen or more open accounts on their credit report, including a mortgage, car loan, personal loan, credit cards, gas company cards,...

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Account Closings & Credit Scores

Closing credit accounts may make sense if you struggle with spending discipline, but closing an account that supports your credit history and debt utilization ratio can have a negative impact on your credit score. Consider the pros and cons of closing the account relative to your own financial habits before closing an account. Credit Score Basics Your FICO credit score is based on the Fair Isaac Corp. scoring model that serves as the basis...

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How to Build Credit After a Foreclosure

Losing your home to foreclosure is devastating, and you can expect your credit score to decrease. It's difficult to obtain new lines of credit after a foreclosure. And even if you're approved for another home loan, the lender will likely charge a high rate, which amounts to a higher mortgage payment. However, the effects of a foreclosure don't last forever. There are ways to build credit after a foreclosure and re-establish a good credit rating....

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Does Owning a Home Improve a Credit Score?

Creditors look at a number of factors, including your credit score, when assessing your eligibility for a loan or line of credit. One way to improve your credit score is to purchase a home and make timely mortgage payments. Benefits If you own a home, potential creditors will view you as less of a risk. Home ownership is a sign of stability, and you often need a favorable credit score to obtain a mortgage loan. Considerations Factors...

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How Much Will Foreclosure Lower Your Credit Score?

One of the most damaging events that can effect a person's credit score is the foreclosure of a property in his name. Most mortgages take the form of secured loans, in which the property the loan was used to purchase act as collateral. If the borrower misses too many payments on the loan, the lender may choose to seize the house in an action known as foreclosure. This will harm a person's credit score greatly, although by how much depends on several factors. Before Foreclosure The damage done to a person's credit score will actually begin...

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Does Breaking a Lease Hurt Your Credit Score?

Credit scores have a range of 300 up to 850. According to the Fair Isaac Co., which developed the scoring rubric, the higher your score, the better your credit. A higher score helps you qualify for lower interest rates, more favorable loan terms and certain jobs. Breaking a lease may impact your credit score now and for years to come. Significance Your payment history can have a huge affect on your credit. It accounts for 35 percent of your FICO score and is the largest component in the calculation of that score. Rental payments are not...

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How to Remove Bad Credit History

Removing bad debt from your credit report can improve your credit score and make it easier for you to qualify for credit cards, auto loans and mortgages. Your options are limited, however. Some creditors might agree to delete bad credit information in exchange for you paying an old bill in full, a process called "pay for delete." Other than that, your options are to demand information be removed if it is inaccurate, or wait for it to become outdated....

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Secured Vs. Unsecured Debt for a FICO Score

Your FICO credit score is a three-digit number between 300 and 850 distributed by Fair Isaac Corp. It helps your creditors determine the risk involved in lending to you. Generally, the higher your credit score is, the better your chances are of obtaining credit at favorable interest rates. Several factors affect your credit score, including the amount of secured and unsecured debts you hold. Secured vs. Unsecured A secured debt is a loan or line of credit with an asset or cash available to the lender as collateral. Secured debts represent...

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What Happens When You Deny Items on Your Credit Report?

TransUnion, Experian and Equifax are national credit bureaus that collect data on consumer credit accounts from banks, loan companies and similar firms. The three bureaus list and sell these data in credit reports, which lenders use to evaluate credit applications and the potential risk of opening new credit accounts. Although the credit bureaus initially compile credit reports without consumer input, consumers do have the right to challenge the items listed in their reports. Reviewing Credit Reports Federal law gives consumers the right...

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What Is the Fastest Way to Increase My Credit Score by 50 to 100 Points?

Any time you want to borrow money from a legitimate lender, the lender will check your credit score. A credit score is a three-digit number that credit bureaus use to summarize your credit history from the last seven years. If you're looking to take out a mortgage, an extra 50 to 100 points on your credit score can save you a fortune in interest payments. If you're careful, you can raise your score in one or two months. Instructions 1 Request...

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What Is the Quickest Way to Improve My Credit Score?

Improving your credit habits can improve your personal credit score. Good credit includes a Fair Isaac Corporation score 700 and higher. It can take weeks or months for credit scores to reflect changes, however. If looking for a fast way to improve your credit score in order to qualify for a credit card or loan, consider rapid re-scoring and improve your score in about 72 hours, says Bankrate's Pat Curry. Get Your Credit Report Order your personal credit report from Annual Credit Report. Improving your credit score fast entails knowing...

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Does It Hurt Your Credit to Short Sell a House?

Short sales get you out of a bad situation by letting you sell your house for less than what you owe. Your mortgage is part of your credit bureau records, including your balance, entire payment history and ultimate pay-off. Short sales become part of your credit records and hurt your credit if you do not negotiate the way in which your mortgage holder reports the information to the credit bureaus. Definition A short sale is an agreement between...

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What Is a Really Good Credit Score?

According to the U.S. General Services Administration website, credit scores are calculated using a scoring range developed by the Fair Isaac Corporation in 1958. Credit scores are calculated in a range of 300 to 850. Credit Scores Credit scores are used to calculate the risk presented by an individual attempting to gain credit, such as a credit card or mortgage. A credit score is used by institutions such as banks and other lenders to gauge how likely an individual is to make payments on time. Excellent Score The Adjust Credit website...

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How to Read a Credit Report Step-by-Step

The Fair Credit Reporting Act entitles you to three free credit reports every 12 months. You can order one report from each of the major credit bureaus: TransUnion, Equifax and Experian. The free reports are available from the Annual Credit Report website, which is managed by the credit bureaus and endorsed by the Federal Trade Commission. MSN Money reports that the credit reports may not all show the exact same information. For example, a creditor may report your payment history to just one credit bureau or to all three. Instructions 1 ...

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