What Gives Consumers the Right to Accurate Information on Their Credit Report?

An individual's credit report often determines whether she can get a loan, a credit card and, in some cases, whether she is given a job or rented a piece of property. If information on a credit report is inaccurate, it might cause unwarranted rejections or increased interest rates that the applicant doesn't deserve. Congress has passed several acts to guarantee accuracy on credit reports and empower consumers to check and correct their own reports.

Fair Credit Reporting Act

The Fair Credit Reporting Act of 1970 first established the right of consumers to have an accurate credit report. The FCRA created legal accountability for creditors and credit-reporting bureaus. It also gave consumers the ability to request their credit information from the bureaus that compile the reports. The focus of the FCRA was the elimination of inaccurate and irrelevant information from credit reports while maintaining consumer confidentiality.

Consumer Credit Reporting Reform Act

In 1996, Congress passed the Consumer Credit Reporting Reform Act to modernize and reform the FCRA. The CCRRA restricted what information third parties could pass on concerning an individual's credit report. Under the law, they could not report information known to be inaccurate. The act also created a legal obligation for these third parties if an individual disputes a charge or debt. The third party must inform all credit bureaus of the dispute.

FCRA Amendment of 1997

An additional amendment to the FCRA came in 1997 focusing on employers who check the credit of potential employees. It also strengthened the power of consumers to remove inaccuracies from their credit reports. The amendment requires employers to obtain written permission before checking the credit of a worker or potential employee. Additionally, creditors and credit reporting bureaus were required to take extra steps to ensure the accuracy of items appearing on credit reports.

Fair and Accurate Credit Transmissions Act

The Fair and Accurate Credit Transmissions Act of 2003 further modified the FCRA and updated it for the digital age. In addition to further defining the responsibilities of creditors and credit-reporting bureaus regarding accuracy, the FACT Act established the ability for consumers to receive free copies of their credit reports from each of the major reporting bureaus once per year. Consumers can access these free copies through the Annual Credit Report website, which includes information on how to dispute inaccuracies (see Resources).

Ensuring Accuracy

Checking your credit report lets you ensure its accuracy and request changes if necessary. If you find incorrect information, or entries on your credit report that do not belong to you, you should contact the credit-reporting bureau that issued the report and dispute the information. The law requires the bureau to verify the information and remove it if incorrect or if the agency cannot verify it.

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What Would Damage a Credit Score?

You might think paying debt is a good thing that should boost your credit score, but a quirk in the FICO credit scoring model could penalize you for this move. This just goes to show that you never know what might hurt a score. Most of the time, however, commonsense actions do the brunt of any damage, such as missing a payment.

Considerations

Sometimes, not even the national credit bureaus themselves can predict the effect of an item on a credit report. Thus, they usually call items that tend to have a negative effect "potentially negative." This is typically limited to missing payments, delinquent accounts -- charge-offs or a collection account -- public judgments, bankruptcy, foreclosure or any kind of debt settlement, such as a short sale on a home.

When Paying Debts Hurts Your Score

The FICO scoring system likes to see borrowers have multiple revolving and installment accounts, so if you pay off a mortgage, and this was your only installment loan, you could see your score drop from having a reduction in credit diversity. You can also see random drops due to moving into another demographic. Once a bankruptcy leaves your report, for example, you could see your score drop because you are no longer compared to just people with a bankruptcy on file.

Credit Utilization

The FICO model usually dings you for having debt on a revolving credit line and how much of your credit limit you use across all accounts and on each card -- credit utilization. If, for instance, you have $1,000 in credit card debt, it looks better to have $250 on four cards with a limit of $1,000 on each than maxing out a single card. You want to keep credit utilization below 30 percent across all accounts and ideally below 10 percent.

Tip

Every negative item has a credit reporting limit, except for unpaid tax liens, which can remain indefinitely. Thus, most items are only temporary, but since negative incidents become less important each year, they do less damage as time goes on. Send in payments on time and eliminate debt whenever possible and you should see your score improve within months.

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Will a Cell Phone Plan Improve My Credit?

Many people choose to carry a cell phone as their secondary or primary phone line. Cell phones make daily life more convenient and can provide a safety net should the owner have an emergency away from home. Cell phones, and the contracts that come with them, can also affect a consumer's credit score. Depending on how the customer manages his account, he could see an increase or decrease in his credit score over time.

Cell Phone Account Basics

Traditional cell phone accounts require that the customer sign a one- or two-year contract with the company. During that time, the consumer will pay a monthly rate for cellular service. The rate varies by wireless provider and type of service. As with most contracts, the consumer will have to pay a fee to cancel service before the end of the agreement. Qualifications for starting a new service plan vary by provider. However, most providers run a credit report on all potential applicants. Customers with a poor or limited credit history may have to pay a deposit to start service.

Benefits to Credit Scores

If the wireless provider reports the consumer's history with the company to the credit bureaus, it could have a positive impact on the consumer's credit score. For example, payment history accounts for 35 percent of a consumer's credit score, according to MyFICO. If the consumer makes his monthly payment by the due date, his credit score may increase over time. The consumer may also benefit from the new credit type being added to the report. According to MyFICO, 10 percent of a consumer's credit score depends on the different types of credit he has.

Disadvantages to Credit Scores

Applying for cell phone service may have a slightly negative effect on a consumer's credit score. When the consumer applies for the account, the wireless provider will pull her credit, and the credit bureaus will list a new inquiry on her credit report. As 10 percent of a consumer's credit report comes from the number of applications a consumer makes, according to myFICO, this could result in a lower score. If the consumer does not make the monthly payments on the account, the wireless provider will likely turn the account over for collections and report a charge-off to the credit bureaus. Charge-offs and collection accounts have a negative effect on a credit score.

Tips

Not all wireless providers report payment history to the credit bureaus. If a customer has a history of timely payments, he can request that the provider report his information on his credit report. Any requests should be sent to the wireless provider in writing. If the provider does not list the information, the consumer can file a dispute with the credit bureaus to add the account by sending them a written request.

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How to Notify Credit Bureaus

Credit bureaus keep track of information about your financial activities, such as credit card accounts, late payments on bills and installment loans you have outstanding. This information is used by banks and other financial institutions to decide whether or not to give you loans or increase your credit limit. You want it to be accurate as possible so you are not penalized by banks which use your credit report for inaccurate negative items such as an overdue account that is actually paid. There are many circumstances you may need to notify credit bureaus of, such as the death of a relative, inaccuracies on your credit report or an incident of identity theft.

Instructions

1

Call the big three credit bureau's fraud lines to notify them that you are the victim, or potential victim of identity theft. These are the three major credit bureaus. Beware of scams on the Internet.

TransUnion: 1-800-680-7289
Equifax: 1-800-525-6285
Experian: 1-888-EXPERIAN (397-3742)

2

Gather documents supporting your notification. These could include a police report, as evidence that you are an identity theft victim, account statements, credit report with inaccuracies circled or relative's certificate of death, to prove your relative is deceased.

3

Write a letter briefly describing the situation about which you are notifying the credit bureau. Provide specific details about the notification even if this information is repeated in your evidence. Also, list evidence you will be attaching. There are samples you can base your letter on in the resources section.

4

Print four copies of the letter, one for each of the three major credit bureaus and one for your own records.

5

Make four copies of the supporting documents. Keep one with your copy of the letter, the others will be sent to the credit bureaus.

6

Mail a copy of the letter and supporting documents to each of the three major credit bureaus. Their addresses are:

Equifax Information Services LLC
Office of Consumer Affairs
P.O. Box 150139
Atlanta, GA 30348

Experian
PO Box 9701
Allen, TX 75013

TransUnion
PO Box 6790
Fullerton, CA 92834

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How to Understand and Improve Your Credit Score

A good credit score is always important. Understanding how credit scores work can help you improve and continue to maintain an excellent credit score. Credit scores range from 300 to 850. Scores of 700 and above are considered very good to excellent credit.

Instructions

1

Check your credit report. AnnualCreditReport.com is the only way to access your free credit report, which the biggest three credit reporting agencies are required to give you once a year. You will get your report, but not your score. If you see any mistakes, make sure you remove them.

2

Pay your bills on time. This is the basic rule for achieving good credit; 35 percent of your credit score is based on your payment record. If you have a hard time remembering when your bills are due, set up automatic payments with your bank. Like we said earlier, times are tough, so if you can't make all of your payments do the best you can under your circumstances.

3

The length of your credit history accounts for about 15 percent of your score. Make sure to keep your oldest credit cards active -- the longer you have used credit, the better it is for your score. Just because you have a credit card doesn't mean you are building history. If you are paying your credit card off every month, this is not going to help build your credit. You need to let a balance carry over sometimes.

4

The amount of debt you carry relative to your credit limits accounts for 30 percent of your score. Maxing out credit cards is bad for your credit. A good rule to follow is to only spend 50 percent of your credit limit on any given card.

5

The amount and types of credit accounts you have can also boost or decrease your credit score. A mix of installment loans and credit cards may help to improve your score. Be careful, though; too many finance company accounts or credit cards can hurt your score.

6

Applying for too many accounts too close together can ding your score. Requesting a copy of your own credit history does not count against you, but if creditors pull your credit frequently, it can hurt your credit score.

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How to Build Credit With Credit Cards

Your credit score, also known as your FICO score, is calculated with an algorithm created by the Fair Isaac Corporation using information from your credit history. The algorithm is not released but the components are. Your score is based 35 percent on your payment history, 30 percent on the amount of money you owe, 15 percent on how long you've had credit, 10 percent on how much credit you have recently applied for and 10 percent on the types of credit you've used. Having a credit card can help you improve several of these categories.

Instructions

1

Make your payments on time. Even if it's only the minimum payment, each month you make an on-time payment improves your credit history.

2

Keep your balances low. Your credit score will be lower if your card is close to being maxed out.

3

Keep unused accounts open. Even if you do not use the account, it is still reporting that your account is current and that you have available credit, which increases your overall credit score. It also shows that you have been using credit for a longer period of time.

4

Limit the number of credit cards you apply for, especially if you are considering applying for a mortgage or auto loan soon. Each time you apply for a card, an inquiry is noted on your account that remains there for two years and reduces your score.

5

Cosign a credit card with a parent or friend with good credit. If you cannot get a credit card on your own, find someone to cosign for you or to list you as a user on her credit card. Even if you do not spend any money using the card, you can still get credit for being current with payments. This will help build your credit so you can get your own card.

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Damage to Credit From Being on Unemployment

Unemployment is a primary cause of poor credit, but the impact isnt the same for everyone. People who are prepared for a job layoff or termination may suffer no damage to their credit. Others who were already struggling financially may find themselves facing auto repossession or foreclosure within a few months of losing their jobs.

Unemployment Benefits

Many people who lose their jobs through no fault of their own are eligible for state unemployment benefits. Initial eligibility is usually for 26 weeks, with payments lasting for more than a year with extensions, in some instances. However, the weekly payments may be small compared with the salary the person earned while working. The benefits are enough to buy groceries and other necessities, but usually not enough to pay all bills and obligations.

Credit Reports

Unemployment benefits are not reported to major credit reporting bureaus such as TransUnion, Equifax and Experian. Because of that, periods of unemployment are not noted on credit reports. That means the act of applying for and receiving unemployment benefits does not damage credit. Problems begin only if the debtor cannot pay bills because of the unemployment. People who have several months take-home pay in the bank may never miss a payment during unemployment and suffer no damage to their credit score. Others not as well-prepared may see their scores plummet, with two or three years necessary for rebuilding their credit once they return to work.

Scores

Credit scores are three-digit numbers ranging from 300 to 850, with scores of 720 or higher most favorable. Scores of 720 or higher usually lead to the lowest interest rates on credit cards and loans. A person missing payments while suffering from unemployment will find it impossible to maintain a 720 or higher credit score. People with scores in that range usually never miss payments.

Extreme Debt

Long-term unemployment can cause a variety of credit problems, including charge-offs, collection accounts, court judgments and even bankruptcy. Charge-offs are accounts closed by the creditor because of missed payments. Collection accounts are credit accounts assigned or sold to debt collectors. A court judgment is a legal order in civil court demanding that a debtor pay a debt. If the debtor cannot pay the debt, the party filing suit can request bank or wage garnishment. Some unemployed people facing multiple garnishments and debt lawsuits file for bankruptcy. Bankruptcy remains on credit reports for 10 years, but allows participants to reorganize or eliminate debt.

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How to Remove False Credit Information

Keeping track of your credit report is more important than ever. Credit scores are used for everything from buying a car to getting a job. The accepted validity of the three major reporting agencies also means the burden of proof falls on you. To remove false credit information, thoroughly check all your credit reports, contest any bad information and contact the reporting companies.

Instructions

1

Order a copy of all your credit reports. If you find false information on your credit report, the first thing to do is find out if this information is on all your reports. There are three main credit reporting agencies: Experian, TransUnion and Equifax. You are entitled to one free credit report per year by law by going to the official free credit report website (see Resources).

2

Dispute the information. Each credit reporting agency has a process by which you can dispute the information on your report. The process involves selecting the particular item, choosing a reason why you believe it is inaccurate and providing additional facts to back your case. The agency will contact the source of the item to verify its accuracy.

3

Contact the source of the false information. While the credit reporting agency is required to verify the info, you should make an effort to contact the company reporting the item to make sure it is removed from their records. The credit reporting agency might remove the item from your report only to have it reported again by a unscrupulous collections company. The name of the reporting company and their contact information should be included next to the erroneous item on your report. Follow the company's dispute process to have the item removed.

4

Check your credit reports after 30 days. Each credit reporting agency should notify you when the results of your dispute investigation are completed. Review your credit reports to verify that the item has been removed.

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How to Help My Credit Rating

A credit score in the high 600s and 700s is considered good by most lenders' standards. Having a good credit rating opens the door to various finance options. You'll qualify for a mortgage loan and vehicle loan, and you'll likely obtain a low finance rate. The rate on a loan determines your monthly payment, and if you're looking to keep your payments within budget, now's the time to review your score and take steps to raise your rating. With effort, you can realistically increase your score by 100 points or more.

Instructions

1

Be aware of due dates. Each late payment drops your credit score. To increase your score by at least 100 points, consistently pay your bills on time. There are various ways to avoid late arrivals. Pay credit card statements online, or send checks several days before the due date.

2

Stay within the limit. Going over your credit limit on credit cards results in higher fees and a negative credit rating. Use credit cards sparingly, and track your spending to avoid excessive debt.

3

Decrease outstanding debt. Don't get into a habit of using credit cards for every purchase--unless you're in a position to pay off the card each month. Reserve plastic for emergencies. Keep a low balance to raise your rating.

4

Work to get negative items deleted from your credit report. Regularly monitor your credit report by ordering a copy from Annual Credit Reports at least once a year. Erroneous entries can damage your score. Dispute mistakes by contacting the credit bureaus.

5

Stop opening new credit cards. Excessive credit inquiries lower your credit score. If looking to increase your score, only apply for credit when absolutely necessary. Shred pre-approved credit card offers, and refuse invitations to apply for in-store retail accounts.

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How Much Do Unpaid Bills Affect Credit Scores?

A FICO score is a three-digit number ranging from 300 up to 850 that represents how much of a credit risk you are to lenders. The lower the score, the greater the risk. The score can impact your life in several ways, including how much interest you're charged on a loan, the rates you're offered by an insurance company and which jobs you can qualify for. It's important to understand how unpaid bills affect your credit score.

Basics

Your FICO credit score contains five key components. According to FICO, 35 percent of the score reflects the payment history on your credit accounts, 30 percent is the amount of debt you have on those accounts, 15 percent is the length of your credit history, 10 percent is the amount of new credit you've applied for and the remaining 10 percent is the mix of credit types present on the report.

Significance

At 35 percent, payment history accounts for the largest component of your FICO score. How well you pay your bills will have the greatest impact on how high or low your score is. Late payments will drop your score. According to MSN Money, one 30-day late payment can drop your FICO score anywhere from 60 to 110 points, depending upon what score you had prior to the appearance of the late payment on your credit report.

Consequences

Unpaid bills can affect your FICO score in other ways as well. Creditors often turn delinquent accounts over to collection agencies. The agency will place a collection account on your credit report. FICO includes the presence of collection accounts in the calculation of your FICO score. Collections are considered negative items and, as such, these types of accounts will damage your credit. How much the score falls will vary according to the other information present on your report.

Federal Law

Creditors report late payments in increments of 30. A 30-day late notation on your report indicates that the account is one month behind. A 60-day late notation means you are two months past due, and so on. Once an account reaches 150 days late, the creditor may charge off, or write off, the debt as a loss. The later the payment, the more damage it will do to your credit score. Under the Fair Credit Reporting Act, late payments can remain on your credit report for up to seven years.

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Does Paying the Minimum Hurt Your Credit Score?

Paying the minimum amount you owe on your credit cards can hurt your credit score if you carry high amounts of debt. Minimum credit card payments also increase the amount you pay in interest charges, and they prolong the time it takes to pay off debt. The Federal Trade Commission suggests you develop a lifestyle that allows you to pay more than the minimum amount. Doing so saves money and improves your score because you lower your debt-to-credit ratio.

Avoid Minimum Payments

Paying the minimum amount allows additional interest charges to accrue on your debt. For example, suppose you charge $250 on a credit card with a 21 percent interest rate and your minimum payment is $20. If you make the minimum payment, it would take you 15 months to pay off the balance, including the $35 interest charge accrued. If you double those payments, you decrease the payoff time to seven months and reduce your interest charge to $18, according to the Federal Reserve Board's credit card repayment calculator.

Understand Credit Impact

Paying the minimum amount on your credit card prolongs the time it takes to pay off the debt. Carrying a large amount of debt damages your credit score. The amount of debt you carry relative to your credit limit is called your credit utilization or debt-to-credit ratio, and it accounts for 30 percent of your credit score. According to the Fair Isaac Company (FICO), using 35 percent or more of your total available credit can significantly reduce your score. Conversely, paying more than the minimum amount can help you to shed debt faster, reduce your debt-to-credit limit ratio and increase your score.

Increase Card Payments

The Federal Trade Commission recommends you spend less so you can pay more than the minimum amount on your credit cards. Reduce excess spending in daily living: Take your lunch to work or rent a DVD rather than go to the movies. Shop discount stores and carpool with co-workers to save on gas. Apply these savings toward your credit card bills to pay down your debt. Target one card at a time until you are debt-free.

Read Your Statement

Read your credit card statement to understand the cost of making only the minimum payments. The Credit CARD Act requires your creditor to list how long it will take to pay off your balance if you only make the minimum payment. This calculation assumes you pay your bill on time and do not add more charges to the card. The Federal Trade Commission recommends you charge only what you can afford and pay off your card balance each month to avoid interest charges.

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10 Tips for Establishing an Excellent Credit Rating

Everyone wants an excellent credit rating because of the financial freedom it brings. When you have an excellent credit rating, you can easily get loans, open new credit-card accounts and even get a home mortgage. You have to work at establishing an excellent credit rating, but if you are financially responsible you will be able to achieve and maintain it.

Make On-Time Payments

According to the FICO credit-score company, your payment history makes up 35 percent of your score. If you never make a late payment, it will help you establish and maintain excellent credit.

Don't Overspend

FICO says that 30 percent of your credit score is based on the amounts you owe. If you want an excellent credit rating, don't have too many loans or accounts with high balances.

Limit Available Credit

Pat Curry of Bankrate says that if you have too much available credit, you look like a higher risk because you could use it to overspend. Your credit rating will be better if you don't have high available credit lines.

Maintain Long-Term Accounts

FICO says the length of your credit history counts for 15 percent of your credit score. Bankrate's Pat Curry says it's especially good for your credit rating if you have accounts with the same institutions for a number of years.

Keep a Balanced Mix of Accounts

FICO says that the types of credit you use counts for 10 percent of your credit score. If you want an excellent credit rating, you should have a mix of credit cards and installment loans, such as car or furniture loans.

Don't Fill Out Too Many Applications

According to FICO, 10 percent of your credit score is based on the amount of new credit you have applied for. Don't fill out too many applications in a short period of time if you want to establish an excellent credit rating.

Monitor Your Credit

Credit bureaus make mistakes, and it will hurt your credit rating if they put erroneous negative information on your report. You are entitled to a free copy of your credit report annually from Equifax, Experian and Transunion. Review your reports each year and dispute any incorrect information.

Freeze Your Credit

In all states, you have the right to freeze your credit for a cost that typically ranges from free to $10. No one will be able to access your credit unless you give permission by supplying a password or PIN. This protection will preserve your excellent credit rating.

Don't Co-Sign

When you co-sign a loan for another person, you are fully liable if he defaults. If you are unable to pay, it will destroy your good credit.

Don't Close Accounts

Closing your credit card accounts can actually hurt your credit. As long as the credit lines aren't too large, you should keep your cards open to establish good credit. Make two or three small purchases each year so the issuer won't close the account.

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How To Get Your Totally Free Credit Report

Your credit score is based on your credit report. Viewing the report can help you keep track of the items making up your credit score. According to the Federal Trade Commission, the only authorized place to get your free credit report is through Annual Credit Report. You are entitled by law to obtain one free credit report per year from each of the three major credit reporting agencies, Equifax, TransUnion and Experian. You can get all three reports at once or get one at a time to monitor your credit every few months.

Instructions

1

Go to the Annual Credit Report website.

2

Select your state of residence from the drop-down list and click "Request Report."

3

Fill in the required information on the form, including your name, date of birth, Social Security number and street address. Type the letters and numbers from the image at the bottom of the page into the box and click "Continue."

4

Select the box next to each credit reporting agency from which you would like to obtain a free credit report and click "Next" twice.

5

Follow the steps at the website of the company from which you are obtaining a credit report. Click "Return to AnnualCreditReport.com" in the top bar when you are done viewing that report and would like to see your next one.

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How to Stop Debt Collectors on a Credit Report

Removing debt collection notices from your credit report can be a stressful trial. Debt collectors know that their power over your credit report is the most powerful weapon in their arsenal. They don't want to give that up without getting something in return. At the same time, they know that you can continue to avoid paying a debt or eventually declare bankruptcy. Educate yourself about your options to strengthen your negotiating position.

Instructions

1

Request a copy of your credit report from one of the three major credit bureaus (Experian, Transunion or Equifax). Make note of the collection notice entries that you would like removed from your report. Gather all the documentation you possess related to this debt. Relevant documents include all letters from the debt collector along with any relevant bills from the original debtor.

2

Contact the collection agency by mail or telephone. Inquire about how much money you will need to pay the agency to get the debt marked as "settled" or "paid in full." Debts marked as "settled" will affect your credit rating more negatively relative to debts marked as "paid in full." You don't necessarily have to actually pay a debt in full for it to be marked down in your credit report as such, but you will need an agreement to that effect from the collection agency in writing in order to do so.

3

File a dispute with a credit bureau if a collection agency does not follow an agreement they made to change an entry on your credit report. Fill out the credit dispute form located on their website or request that one be sent to you in the mail. Include copies of written agreements from the collection agency stating their intent to remove their entry from your credit report.

4

Consider waiting seven years for the collection notice to fall off of your credit report. The notice will no longer affect your credit report after that time. That doesn't mean that collection attempts will necessarily stop. The statute of limitations on debt collection differs based on the type of the loan and the state from which it was made.

5

File a complaint to the Federal Trade Commission under the Fair Debt Collection Practices Act if a debt collection company continues to contact you regarding a debt that you have settled or paid in full. Include copies of all relevant communications with the collection agency. You may be entitled to damages and the striking of the collection notice from your credit report if the agency has violated the law in its attempts to collect on your debts.

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How Much Will I Improve My Credit If I Pay Off Collections?

Collection notations within your credit report indicate that, at some point in the past, you stopped making payments on a debt. Collection accounts are always harmful to your credit score. Paying off collection accounts demonstrates responsible financial behavior, but it does not positively impact your credit.

Credit Score

Various credit scoring formulas, such as FICO and VantageScore, exist to help lenders determine your nonpayment risk when you apply for a new loan or credit card. Although the credit scoring formulas differ, they all use the data your credit report contains to arrive at your credit score. Collection accounts fall under the category of "derogatory debts." Thus, these accounts negatively influence your score regardless of whether you still owe the debt or have long since paid it off. Paying off a collection account does not improve your credit.

Payment Effects

When you pay off your collection account, the collection agency updates its report to the credit bureaus. The notation on your credit file notes that you paid off your debt. While collection accounts are always derogatory, lenders prefer to see paid rather than unpaid collection accounts within your credit history. By paying off the collection account, you reduce your overall debt load -- lowering the risk you present to lenders.

Improving Credit

Paying a collection account in itself does not improve your credit. If, however, you can negotiate with the collection agency to delete the damaging notation within your credit history in exchange for payment, your credit rating will improve. If the collection agency refuses to delete the derogatory credit record, the credit bureaus, in adherence with the Fair Credit Reporting Act (FCRA), will delete it seven years and 180 days from the date you first defaulted on the original debt. Deletion occurs regardless of whether you pay off the debt.

Avoiding Further Damage

Paying a collection account can help you avoid further damage to your credit report. Should you leave the debt unpaid, the collection agency can file suit against you for the delinquent balance. If the company wins its case in court, a public record of the lawsuit, known as a "judgment" appears within your file. Like collection accounts, judgments are negative notations that adversely affect your credit scores. Unlike collection accounts, however, the FCRA states that judgments can remain on file for 10 years or longer, depending on your state's laws. Thus, while paying off the debt does not in itself improve your credit, it can help you preserve your current credit rating.

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Does a Name Change Affect Your Credit History?

After marriage, it is customary for wives to take the last name of their spouse. Because your name is tied to your credit history, you might assume that this would affect your credit history. However, because of how credit reporting agencies track credit activity, a name change affects your credit report less than you'd think.

Credit Reporting

Credit reporting is done by lenders. When you open a credit card account, take out a mortgage or get an auto loan, the lender reports information about the loan to the credit reporting agencies (Equifax, TransUnion and Experian). Other items, such as judgments, liens and collections, are obtained by credit bureaus through public records.

Identification

Your name is not the only method by which creditors and other agencies keep track of your activity. When you open an account, you disclose your date of birth, current address and Social Security number. This is necessary because of the vast amount of similarly named individuals. This keeps your records from becoming conflated with that of another person. When you marry or change your name, you retain the same date of birth and Social Security number. This information can be used to identify you.

Changing Your Name

In order to change your name, you must notify several government organizations. Most importantly, you must report your new name to the Social Security Administration and the Internal Revenue Service. You must also apply for a new Social Security card and a new driver's license. Once these agencies have your new information, credit reporting agencies will also learn of your name change and thus apply all your pertinent credit information to your file.

Notification

Although credit reporting agencies and lenders will likely update their records once your new name starts getting reported along with your Social Security number, it is important to notify them formally. Write a letter to every creditor, bank or other institution with which you have an account. Also write a letter to each of the three major credit reporting bureaus (see Resources).
Notifying institutions of your name change is important. Without formal notification, you will not be able to access your accounts under your old name. This includes validating charges, writing checks and signing other documents.

Considerations

In order to change your name, you must sign documents affirming that you are not changing your name in order to avoid taxes or other debts. If you change your name with the intent to affect your credit history or evade your financial obligations, you are committing fraud. Barring extenuating circumstances such as identity theft, you will not be able to change your Social Security number. Because creditors and crediting reporting institutions can easily track you by your Social Security number, changing your name in order to evade them is unlikely to be effective.

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What Does a Zero Credit Score Mean?

The FICO scoring system has a range of 350 to 850, but some people tout the benefits of a zero credit score. This is really an exaggeration, mostly used by financial guru Dave Ramsey as a rejection of the importance of credit scores as opposed to getting out of debt or preventing debt.

Identification

A credit score of zero really means the borrower lives a mostly cash-only existence and does not have enough debt for the credit scoring agencies to rate his profile. Some financial experts, such as Ramsey, claim that this is a good thing, because debt means you pay for more purchases and could take on loans you cannot afford.

Benefits

Taking out a loan to build credit diverts your resources from more important parts of your financial portfolio, such as emergency money or investing. Although most lenders base interest rates and approval on the FICO score, not all lenders do this. About 20 percent of lenders use traditional, informal methods of loan underwriting, such as looking at canceled checks and personally reviewing your financial history.

Disadvantages

Besides having a harder time finding a loan, you might pay more for noncredit related items. Insurances companies, for example, usually charge more to customers without a credit score and you might need to put down a deposit for utility services and cell phones. Employers often run credit checks on potential hires, so if the employer has to make a choice between two equally qualified candidates, he might use a good FICO score to tip the scale.

Warning

A zero credit score is not the same thing as a poor credit score. A credit profile with negative items, such as bankruptcy and collection accounts, is always terrible for your financial outlook. If you have unpaid debts, you should settle them, because the creditor or collection agency can pursue a judgment in court and extend the life on it indefinitely -- some states allow creditors to renew judgments for the entirety of a person's life.

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How Can I Build My Credit Without a Bank Account?

A credit score affects your ability to purchase a vehicle, secure housing and even get a job. When building new credit or repairing poor credit, it's important to focus on your credit score. Making changes in your behavior, such as paying debt obligations early, keeping low credit balances and avoiding the urge to close old accounts, can boost credit scores over time, even if you don't have a bank account.

Instructions

1

Consider applying for a secured credit card. If you don't have a credit history (or a bad credit history), companies might not give you an "unsecured" credit card. To get a secured credit card, you put down a security deposit. A history of timely credit card payments may encourage the creditor to offer you an unsecured credit card, which doesn't require a deposit.

2

Make timely credit payments. Paying monthly debt obligations on time has a huge impact on credit scores, according to MSN Money. Try paying your debt obligations at least a week early every month. Over time, remembering to make payments will get easier.

3

Keep balances on credit cards low. When using a credit card, always have your credit rating in mind. Balances that exceed 35 percent or more of your total available credit will negatively affect your credit rating. Keeping your balance below this percentage will boost your credit score over time.

4

Keep old credit card accounts open. Once you start building credit, it might be tempting to close old credit card accounts. However, leaving these accounts open (with a zero balance) shows credit bureaus you have restraint. This will raise your credit score, according to "Entrepreneur" magazine.

5

If you haven't reviewed your credit report in a while, request one from all three of the major credit-reporting bureaus: Equifax, Experian and TransUnion (see Resources). Consumers are entitled to a free report once every 12 months. Review each line of the report. If you find inaccurate information, such as late payments or accounts you don't own, contact the reporting agency immediately. Include supporting documentation, such as copies of bills showing timely payments, or a police report if the accounts aren't owned by you.

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Free Tips for How to Increase Credit Scores

Increasing a credit score can make the difference between being rejected for a loan and receiving a loan with a great interest rate. The two largest contributing factors to a credit score are payment history and amounts owed, which make up 65 percent of an individual's score. Efforts to increase a score should focus on these areas, although a few other strategies may help as well.

Pay on Time

Although it may take a while to have a significant effect on a credit score with blemishes, having a spotless payment history is always a plus for a credit score. Most credit accounts allow customers to set up automatic payments on their accounts, which should make it easy to never miss a payment. For those who have missed payments in the past, a year of on-time payments on the account should help a credit score significantly, according to Bankrate.com.

Use Less Credit

About 30 percent of a credit score is based on the amount of money the individual currently owes, in relationship to the amounts borrowed or the available credit line. Paying down balances on credit cards and other revolving accounts has an especially strong impact on this part of the credit score. Bankrate.com recommends keeping each card's balance at no more than 40 percent of its limit, although using less credit than that will increase a credit score even more. Although transferring balances from one card to another may achieve this result, the FICO website recommends paying off debt as the best way to increase credit scores.

Check Credit Report

Because credit scores are based entirely on the information contained on credit reports, individuals whose credit reports show incorrect information will see their credit scores artificially deflated. For example, someone may find that his credit report shows a bankruptcy when in reality he never filed, or even considered it. Smaller errors such as an inaccurate report of a missed payment can also have an effect. Credit bureaus provide people who receive their reports with information on how to dispute errors.

Additional Tips

Many other actions will help increase a credit score. For example, people should open and close accounts only when needed because opening a new account hurts a score in the short term and closing an account can increase the ratio of amount owed to available credit. Having a good mix of credit that includes revolving accounts and installment loans can help increase a credit score, although people should not take out lots of loans or credit cards just to try to increase this component. Another factor to consider is that maintaining accounts over a long period helps a credit score, so patience in this area will pay off.

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What Is Considered a Good FICO Credit Score

The Fair Isaac Corporation calculates a credit score for any individual who has had credit history information reported to the credit bureaus. Credit scores range from 300 to 850 and help lenders assess the credit risk an individual poses.

Ranges

The median credit score for Americans as of 2008 is 725. The best credit scores are above 760, but lenders generally consider a credit score over 700 to be good, according to Smart Money. People with credit scores under 660 fall into a category of potential credit risks, and people between 660 and 700 may be acceptable, depending on the lender.

Significance

People with a good FICO credit score are not likely to be turned down for applications of credit. They may not get interest rates reserved for people with the best credit scores, but they will get much better rates than people with poor credit scores.

Considerations

Not all lenders have exactly the same cutoff scores for determining interest rates. A score that gets the best interest rate with one lender may not be quite good enough to get the best interest rate with another lender. People can improve their credit scores by paying down debt and making sure to not miss any payments.

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How to Clean Up Your Credit File

Regardless of the mistakes you've made in the past, you can clean up your credit history and earn a score in the 600s or higher. Your credit score is a three digit number that lenders and banks use to judge whether you qualify for financing. Negative items such as collections and bankruptcies remain on reports for seven to ten years; and a low credit score limits your buying power and can lead to higher finance fees and unfavorable loan terms. There are ways to restore your good credit without paying for a credit repair service.

Instructions

1

Review your credit report from the three credit bureaus for negative items. Information on your credit report can contain errors that may lower your credit score. Free reports are available to consumers once a year from annualcreditreport.com.

2

Dispute inaccurate credit entries. Creditor telephone numbers and addresses are listed on credit reports. Call or write the reporting creditor to dispute erroneous information such as unfamiliar accounts. Creditors must investigate potential errors and correct mistakes.

3

Use credit cards occasionally to keep your account active and help raise your credit rating. Spend only what you can afford to pay back in full each month.

4

Don't carry a balance on credit cards. Decrease debt to help clean up your credit file. Avoid high balances and finance charges by paying off credit accounts each month. Exceeding your credit limit drops your score and results in additional fees.

5

Use electronic withdrawals. Set up automatic bank withdrawals to help manage your debts and pay bills on time.

6

Decline invitations for pre-approved credit cards and in-store credit. Your credit score decreases each time a potential creditor reviews your credit report.

7

Negotiate with your creditors. If you are experiencing financial problems, contact creditors to alter your due dates or payment amounts to avoid skipped or late payments.

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Does Buying Something on Revolving Credit Hurt My Credit Score?

Every purchase you make on credit may take a few points off of your credit rating. However, a credit card balance does not damage your credit rating as long as you pay off the bill every month. You can avoid wracking up too much credit card debt by not using a card, but this may hurt you more than making purchases.

Identification

Buying something on revolving credit, such as a credit card or home equity line of credit, hurts your credit rating if you carry the balance over to the next month. If you pay a credit card bill by the due date, the lender reports the account as active and paid as agreed, but with a balance of $0. If you carry a balance, the credit bureaus add the debt to your credit profile. The amount of debt owed to creditors counts for 30 percent of a FICO rating, according to the Fair Isaac Corporation.

Considerations

Not using a revolving line of credit can damage your score more than carrying a balance. If you do not use an account for 6 to 12 months, the lender may report it as inactive. The bureaus do not add the limit on an inactive account to your credit utilization ratio, or percent of total revolving credit limit available. If you have a balance of $5,000 across revolving accounts with a total limit of $10,000, you have a credit utilization ratio of 50 percent. If an account with a $2,500 limit goes inactive, your utilization ratio jumps to 75 percent. In general, you should keep utilization below 36 percent, according to Gregory Taggart of Bankrate.

Potential

Buying anything on credit risks that you pay much more than retail for the item because carrying a balance accrues finances charges. Also, if a sudden disaster strikes, such as unemployment, you may not have the resources to pay off the debt. Missed payments -- or worse, a collection account -- can ruin your credit score for seven years. Any major negative actions can take 100 or more points off of a credit rating.

Tip

If you have concerns about your credit rating and purchases on a revolving account, you should pay cash and only charge a small item to the account, such as an Internet bill, to keep the account active. Also, you should only make a purchase with the intent to pay off the bill before the next billing cycle starts.

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How to Contest Negative Entries on a Credit Report

There are three major consumer credit reporting companies: Equifax, Experian, and TransUnion. By law, these companies must provide every American who requests one with a free copy of his credit report every 12 months. You can request your report from the reporting bureaus or from www.annualcreditreport.com, which is the only government-authorized site. The Fair Credit Reporting Act requires these agencies, as well as the companies that report to them, to correct any information proven to be erroneous. For example, suppose your credit report lists late payments on your auto loan. If you have the canceled checks to prove that you made the payments on time, you should contest those negative, erroneous entries on your credit report. There are certain steps you need to take in order to have the information removed from your credit file.

Instructions

1

Order copies of your credit report from all three credit reporting agencies. This can be done by telephone, by mail or online. When you receive your reports, decide which negative entries you will be disputing, and circle them.

2

Make copies of any documents that will support your dispute, as well as copies of the credit report with the disputed items circled.

3

Write a letter of dispute. A sample of this type of letter can be found on the Federal Trade Commission's website. You need to include your name and address, and a list of each item that you are disputing. Explain why you are disputing each item and ask that the item be removed from your credit file.

4

To mail your dispute letter. put the copied documents, the copy of the credit report and your dispute letter in an envelope and send it via certified mail to the credit reporting company. It is very important to send the material by certified mail because then you have a receipt that includes the date of mailing and an article number that allows you to verify delivery, and the recipient must sign for the letter at the time of delivery. Remember to save copies of everything that you send, with the exception of your documentation; send only copies of that, and keep the originals.

5

You also can dispute negative entries on your credit report online at each of the three credit reporting companies' websites. www.experian.com, www.transunion.com and www.ai.equifax.com. There are easy-to-follow instructions on each site.

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Factors in Determining a Credit Score

Your credit score affects your life in a variety of ways. Your ability to get things such as a job, a car or a loan is often determined by your credit score. Considering its importance, you should know how your actions affect your credit score. You can improve your score or keep it in good standing when you know how credit bureaus determine the rating.

Length of Credit History

The length of your credit history counts for 15 percent of your credit score, according to the University of Minnesota. Older accounts in good standing are viewed more favorably than newer accounts. An old account in good standing shows creditors you can pay your bills responsibly over a period of time.

Payment History

Colorado State University reports that payment history counts for 35 percent of your credit score. A record of recent payments made on time increases your score. It doesn't matter so much if you paid on time in the past -- it's the recent activity that counts the most. So if you fall behind in payments after having paid on time for years, it will still count against you.

Outstanding Debt

Thirty percent of your credit score is determined by how much you owe and your credit limit. If a card has a $500 limit, and you owe $495, then that can hurt your credit score. On the other hand, owing $100 on a credit card with a $500 limit is looked upon more favorably.

New Credit

The Federal Citizen Information Center (FCIC) states that new credit affects 10 percent of your credit score. When you apply for or open several new accounts, it can lower your credit score. Applying or searching for one new account doesn't hurt your score, but applying for several may have a negative effect. The FCIC recommends applying for new accounts within a 30-day period to avoid hurting your score.

Credit in Use

Ten percent of your credit score comes from the types of credit you have. Credit cards from major lenders, such as Visa or Discover, are viewed more favorably than loans from finance companies. However, having more than two or three major credit cards or loans open at once can lower your score as well.

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Ways of Building Credit After Chapter 7 Bankruptcy

A Chapter 7 bankruptcy is a way for consumers to erase their debts, wherein they are no longer liable for these balances. While a bankruptcy can ease financial worries, a bankruptcy severely impacts your credit rating, and it can take years to recover. Despite the initial drop in your credit rating, there are several ways to rebuild credit after bankruptcy.

Apply for Credit

Applying for a new line of credit may appear impossible after a Chapter 7 bankruptcy. However, obtaining credit is the only way to build credit. And despite a bankruptcy, some banks are prepared and eager to offer loans and credit cards to people immediately after a discharge. Granted, you won't receive the best terms or rates on these loans. However, these types of loans can help get your foot in the door and put you on the path toward better credit.

Bad credit auto lenders are available to provide you with a new auto loan, and numerous banks offer secured credit cards, which require an upfront security deposit and generally feature a monthly and one-time setup fee.

Organize Your Finances

Acquiring a new line of credit is only one aspect of building good credit after a bankruptcy. Once you have these credit cards or loans, you need to make timely payments. It takes time to fix your credit after a discharge. Even so, every payment you make to creditors on time adds points to your credit rating, whereas late or skipped payments cause further damage.

Getting into the routine of paying creditors on time requires organization. You need to be aware of your due dates and plan to pay creditors several days in advance. Online payment forms add to the convenience, and you don't have to worry about payments arriving late or getting lost in the mail.

Manage Debt

High debts and the inability to repay these debts often contribute to bankruptcies. What's more, having excessive credit card balances reduces your credit rating. Building credit after a bankruptcy requires careful debt management. Not only do you want to pay your bills on time, but you want to keep your debts low to help increase your score. Maxed out accounts or having balances close to your credit limit hurts your score. Start anew and plan to pay off any new charges at the end of each billing cycle.

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How to Get a 650 Credit Score

An important aspect of financial health is maintaining your credit, which directly affects your ability to purchase a house or car, rent an apartment and even get a job. Your score is calculated based on how much debt and credit you currently have, the type of credit you use, the number of accounts you have, your payment history and the length of time of your credit use.

Instructions

1

Obtain your credit report. You are entitled to one free credit report each year from the three major credit-reporting bureaus: Experian, Equinox and TransUnion. Visit the official website of each bureau or obtain your report through online credit report sites. You will have to enter your social security number and possibly other personal information such as employment history and former addresses to verify your identity.

2

Look over your credit report to verify that information, both positive and negative, is accurate. If you feel there is an error, report inaccurate information to the credit-reporting bureau by writing a letter requesting an investigation. Include the inaccurate information and a reason why you feel it's inaccurate, along with proof of the error such as payment receipts. Your letter should include your name, address, city, state and zip code. Attach a copy of the credit report and highlight or circle the error.

3

Pay your bills on time. Late payments that are 30 days past due are reported on your credit report and can damage your score. Once you pay off the balance on your credit card bill, continue to make small purchases using the card and pay it off completely every month. This boosts your credit score and maintains your ratio of debt to available credit. Keep your debt-to-credit ratio below 30 percent, meaning you have more credit available than debt.

4

Create a budget. A budget can help you reduce your spending, which saves money that can be used toward paying off debt or building up your savings. Save money by eating fewer restaurant meals and foregoing expensive hobbies or other forms of entertainment.

5

Visit a credit counselor. A credit-counseling agency can help you rebuild your credit by negotiating with lenders to reduce your interest rate. Agencies can also help bring your accounts up to a current status, improving your score.

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How to Cancel True Credit Report

US citizens are entitled to a free credit report from Equifax, TransUnion and Experian once every year. This can be obtained by requesting a free report at AnnualCreditReport.com. Some people like to check their credit more frequently. This may be to make sure no fraudulent activity is going on, to monitor a credit problem or for other reasons. TrueCredit, a division of TransUnion, offers monitoring of credit. The first month is free and, after that, there is a monthly fee of $14.95.

Instructions

1

Call TrueCredit's customer service number: (800) 493-2392. To reach a representative, call during TrueCredit's business hours: Monday through Thursday, 8am to 12am Eastern time, and Friday through Saturday, 8am to 8 pm, Eastern time.

2

Press or say "2" after dialing the number to reach a representative to discontinue your TrueCredit report.

3

Give the representative your order number when they ask for it. If you do not have your order number, you may give them your Social Security number.

4

Be firm if the representative tries to talk you into not canceling your TrueCredit report. Simply state that you no longer want the TrueCredit report and ask them to please cancel the service.

5

Watch your email for confirmation that the account has been canceled. The email will be issued immediately.

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The Average Consumer Credit Score

Credit scores are a measure of a consumer's credit profile. A low credit score means the person is a high credit risk, while a high credit score means the person has an excellent credit history.

Significance

Generally, those people with credit scores significantly above the average are said to have "good" credit, while those significantly below the average are deemed to have "bad" credit. People with scores within a few points of the average have "average" credit. According to Credit Scoring, a score of 730 or above is considered good, 640 to 720 is considered average, while any credit score below 620 is considered bad.

Function

The average consumer credit score gives lenders a "baseline" from which to gauge a customer's creditworthiness. This allows financial institutions to make informed decisions on providing credit to consumers

Considerations

According to Money Zine, the majority of consumers have credit scores significantly above the average. However, the average is where it is due to consumers with very low credit scores that are hundreds of points below the average.

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Beacon Score Credit Rating Tips

Beacon score is another name for FICO or credit rating, and this term is used exclusively by the Equifax Credit Bureau. A high Beacon, or credit score, places you in the prime category for credit cards, auto loans and mortgages. Being a good or ideal candidate for loans usually results in better interest rates and terms. Sadly, some people don't maintain an acceptable credit rating (650 or higher). But even if you've always had a low score, you can improve your Beacon with a few simple measures.

Credit Card Balances

Expanding the gap between your credit card balances and your actual credit limit helps increase your Beacon score. Credit card companies and other lenders prefer applicants who demonstrate self control. Having a significant amount of available credit on a credit card proves that you're able to manage credit wisely. Keep credit card balances below 30 percent of your credit limit and get into a habit of paying down credit card balances monthly and only use credit when you can afford to pay off new charges.

Payment History

Keeping an acceptable credit rating is as simple as paying your bills on time. Even if you don't have the means or disposable income to completely wipe away debt, aim to pay credit card companies and other lenders on or before the due date to avoid late fees and delinquency notes on your credit report. Online bill payment systems can help you manage your finances, as do automated payment drafts. Signing up for online bill pay is free, and financial institutions tend to offer same-day posting.

Removing Negative Remarks

Avoiding collection accounts and judgments is imperative because once these remarks land on your credit report, they can remain for up to seven years. Removal of liens, judgments and collection accounts depends on the reporting creditor. Paying off an old debt doesn't guarantee its removal from your credit report. But if you ask kindly and work with creditors to pay off your old debts, they may update your credit report as a courtesy and delete the negative entry. Getting rid of negative remarks can add points to your Beacon score.

Add New Accounts

Credit scores don't automatically increase after acquiring one credit account. Diversifying and managing several different types of credit lines can help increase your Beacon score. If you already have a store or gas charge card, consider applying for a major credit card or perhaps an auto loan to build your credit history and raise your score. Find a local dealership that offers auto loans to people with limited credit histories and talk to your bank about secured credit cards. Secured credit cards require a security deposit between of $300 to $500, which acts as collateral for the line of credit, says Bankrate.com. These accounts are easier to acquire if you have no credit or bad credit.

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How to Have Negative Things Deleted Off of a Credit Report

James Kemish of the Street Directory says that more than 100 million Americans have credit reports that contain errors. Often, the incorrect information hurts their credit score, makes them pay higher interest rates and causes them trouble when they try to open new accounts. If your credit report has incorrect negative information, have it deleted. This will make it easier for you to get loans and other credit and receive more favorable terms.

Instructions

1

Identify the negative information on your three credit reports. A separate report is maintained by Equifax, Transunion and Experian, and each report may contain different information. You are entitled to a free copy of your report from each bureau every year. Get the three reports from the official Annual Credit Report website and make a list of the negative things on each report.

2

Find something erroneous about as many of the negative items as possible. Some errors will be obvious, such as accounts that do not belong to you or late payments that were actually made on time. Credit Infocenter says you should also look for obscure errors, such as the wrong credit limit or balance, an incorrect account number or date of last activity, or even the wrong name of the original creditor.

3

File a dispute for every negative item that you were able to link with an error. The three credit bureaus will let you do this online. List out the disputed items and the reasons you believe they are each incorrect. The credit bureaus will have to research them, and if they cannot be validated they will be deleted from your report.

4

Review the results of your disputes. Credit Infocenter says that the credit bureaus have 45 days to complete their investigation of your claims. Once they are done, they must send you a written notification of the results within five days. If items were deleted from your report, you will get a new copy.

5

Look for other reasons to dispute items if the credit bureau says that some of them were verified and must stay on your report. According to Credit Infocenter, you may still be able to get the negative information removed if you find the right grounds for your dispute. You can dispute an item as many times as you like, as long as you have a potentially valid reason each time. Credit Infocenter says you should wait 60 days before disputing the same item on new grounds.

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How to Determine the Closing Cost of a House

When completing the mortgage application process the final chapter is going to be closing. At the closing table you have to be prepared with a certified check to pay for all fees required by the lender. You should have an idea of the estimated closing costs you'll have to pay well in advance of closing as well as a breakdown of the fees.

Instructions

1

Complete a mortgage application (Form 1003) with the mortgage lender of your choice. You must answer questions about your income, assets and expenses. Later, you'll also have to provide documentation to prove information listed on the application.

2

Submit your mortgage application and wait about three days. The mortgage lender is required to submit a GFE (Good Faith Estimate) within three days of the application. The Good Faith Estimate lists all of the estimated closing costs associated with the proposed loan.

3

Analyze your GFE paperwork to see the total and breakdown of each fee. Fees may include title search costs, appraisal and service fees, and loan financing costs due to the lender, like the origination fee and discount points. It also includes a listing of any prepaid interest, taxes and insurance that will be due at closing. Keep in mind that the GFE is an estimate---the actual costs may vary slightly. However, new rules enacted in January 2010 require lenders to provide a binding cost GFE. The lender may have to pay any significant cost increases that occur between the issuance of the GFE and closing.

4

Add in your down payment as required by the lender when estimating the total amount you have to bring to closing. Many lenders ask for a down payment of at least 20 percent of the price of the home.

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