March 2010 ~ Personal Finance and Money Management

Wednesday, March 31, 2010

How to Create a 680 Plus Credit Score

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A good credit score improves your likelihood of acquiring a loan. While lenders vary in their definition of a good credit score, a FICO score of 680 or higher is generally enough to obtain a good interest rate and loan. Fortunately, there are many ways to raise a low score and improve your chances of getting financing.

Instructions

Get your credit score and assess your rating. You can request your credit report and credit score from websites such as AnnualCreditReport.com.

If you don't have a credit account, get one. You need credit to build a 680 credit score. If you have no credit history or bad credit, apply for a secured personal loan using collateral such as a car title, or obtain a secured credit card. Secured credit cards require a security deposit.

Make timely payments. Creditors report late or skipped payments to the credit bureaus. Avoid a negative remark by making on-time payments each month. Mail payments several days before the due date, or make online or telephone payments to ensure a timely arrival.

Keep unused accounts open. Closing older or unused accounts reduces your credit history and lowers your FICO score. Store unused credit cards in a safe place and keep the account open to increase your credit score.

Pay off your balances every month. Keeping a high balance on credit cards also reduces your score. If you're a frequent credit card user, resolve to pay off the statement balance each month to keep your debt-to-income ratio low.

Watch out for credit inquiries. Applying for multiple credit cards or store accounts may appear harmless. However, this action reduces your FICO score. Keep credit applications and inquiries to a minimum

Dispute credit report mistakes. Along with ordering your credit report and score, check your report periodically for possible mistakes. Erroneous remarks on your credit report decrease your score and may ruin your chances of qualifying for a loan.

How to Obtain Credit After Chapter 13 Bankruptcy Discharged

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Finalizing your Chapter 13 bankruptcy can lift a huge burden. On the downside, filing bankruptcy has a major impact on your personal credit score, and after the discharge, it becomes extremely difficult to acquire financing. While some lenders will not approve your loan applications, it's imperative to obtain credit after a Chapter 13 bankruptcy in order to rebuild your credit. Fortunately, there are ways to acquire credit and undo past mistakes.

Instructions

Start over with a high-interest credit card. While these cards are not appealing, high-interest credit cards are easier to acquire than traditional cards. Demonstrate a good payment history with the credit card issuer, and they'll gradually reduce your interest rate. Compare sub-prime credit cards on websites like Creditcards.com.

Rebuild credit with secured credit cards. Save about $500 for a security deposit and then apply for a secured credit card with your bank or another financial institution that provides these accounts. You'll be required to open a savings account with the bank, and the amount deposited into this account will reflect your credit limit.

Get an auto loan. Because your automobile secures an auto loan, it's possible to acquire a vehicle loan after a Chapter 13 discharge. Expect a higher finance rate and payment. Skip big dealerships and purchase the car from auto dealers who work with bad credit applicants.

Join another person's account. Ask your spouse, sibling or parent (with good credit) to add your name as an authorized account user on their credit card. This positive account will appear on your credit report and help rebuild your credit after a Chapter 13 discharge.

What Is a Bad FICO Score?

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Your FICO credit score is the main way lenders measure whether or not you're worthy of credit. It's important to keep your FICO score as high as possible in order to qualify for credit cards, loans and mortgages.

FICO scores range from 300 to 850 with 300 being the lowest and 850 the highest. Few people are able to obtain an 850 FICO score, but the national median hovers around 711, according to the credit-reporting agency Equifax. Generally, a FICO score below 600 is considered high-risk and it's unlikely a lender will grant you credit.

FICO scores depend on a variety of factors. The Fair Isaac Corporation keeps the exact formula a secret, but generally the score's ratio is weighed 35 percent on your payment history, 30 percent on your outstanding debt, 15 percent on the length of your credit history, 10 percent on the amount of new credit accounts you open and 10 percent on the type of credit you use.

You have control over your FICO score. To improve your score, make payments on time every month, pay off as much debt as you can and limit the number of new credit accounts. Over time, your past mistakes will matter less and you'll see your FICO score increase.

How Do I Get My Credit Information From Free Triple Credit Report?

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It's almost a source of wisdom that anything described as "free" comes with a price. In the case of many on-line offers, "free" means something for free as long as you provide a credit card number for further charges.

Freetriplecreditreport.com does not explain how much it charges for the monthly service on its homepage, but there is a monthly charge and no truly "free" credit report. Likewise, Freecreditreport.com has become popular because it's in our heads from the many catchy songs its commercials feature. And you do get a "free" credit report, but what is also required in enrollment in a monthly credit update service.Currently that monthly charge is $14.95 and is charged against your credit card. Some of the offered resources can be helpful, but there is nothing free about the report.

Everyone is entitled to a genuinely free credit report through the Federal Trade Commission. You can request a free report from each of the reporting credit bureaus, all through the FTC.

The short answer is--you don't. If you're not financing a home or car or applying for credit, your credit score is not a part of your regular financial dealings. But what the commercials prey on is the idea that your credit report scores might be messed up. It's possible you have incorrect information on your credit report, but unlikely if you have not had identity theft or defaulted on a credit card or loan.

The Disadvantages of Credit Ratings

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Every resident in the United States needs to build credit if they plan to purchase a home, buy a car or rent an apartment. Good credit must be maintained by making payments on existing bills and loans in a timely manner. Failing to do so can lead to low credit ratings. The disadvantage of these credit ratings is that they often make it difficult to obtain necessary services in the future. While keeping a high score may be hard, it is important to do so to avoid being turned away from banks and financing companies when the help is needed most.

A disadvantage of credit ratings is how difficult they can make it to obtain a loan to purchase a home or vehicle. Banks and financing companies require good to excellent credit scores to lend money to individuals to make such purchases. The credit ratings also determine the annual percentage rate (APR) that is to be paid by the individual. If the person requesting the loan has a poor credit rating, he might be turned away from the bank or financing company, or given a high APR, which can lead to higher monthly payments.

Employers often run background checks on potential employees to ensure that they will not be a threat or liability to the company. Part of these background checks include viewing the potential employee's credit rating. Most job seekers are unaware of the effects that a credit rating can have on employment. Employers may feel concerned about individuals with low credit ratings, as financial troubles might affect job performances or distract from tasks that require special attention. However, if a potential employer makes the decision not to hire an individual do to low credit ratings, the applicant must be informed of it.

Individuals who are looking to rent an apartment or home within their community may find it difficult due to their credit ratings. Property managers and owners may turn away potential renters because they may have little or poor credit. These managers and owners, much like banks and financing companies, need to ensure that future tenants can pay their rent on time and in full. Individuals who have been turned away from renting can seek assistance from a friend or family member with a good credit rating to co-sign on the agreement.

What Happens to a Cosigner if I Get Sued?

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A cosigner is someone who qualifies for a loan for which the original borrower does not qualify, and the cosigner agrees to sign the loan along with the primary borrower. In doing so, the cosigner is taking on the same responsibility as the primary borrower, which means that if the primary borrower does not pay his bills, the cosigner is responsible for paying them. Essentially, it is as if the cosigner borrowed the money himself, which means he is subject to the same legal consequences as the borrower if the loan is not repaid.

If the original borrower does not pay her bills, the cosigner can be sued. Usually attempts will be made to collect from the original borrower, but if she will not or cannot pay, the cosigner is pursued. In addition, the cosigner's name will usually be turned over to a debt collection agency that will attempt to collect the debt before further action is taken. If the debt collection service is unsuccessful, the process of filing a suit to collect the money through the court begins. If the original borrower is broke, suing her will not help the creditor, so the cosigner most likely will be sued at the outset of the legal proceedings.

A cosigner can have his property foreclosed, especially if he cosigned for the loan through a bank. If neither the original borrower nor the cosigner has enough funds to repay the loan, the bank can take whatever assets it deems necessary to repay the value of the loan. If the original borrower does not have enough assets to repay the loan and the cosigner does, the bank will foreclose on the cosigner's property to obtain its repayment. For example, if you cosign for the loan on a house and the borrower does not make payments, the creditor can foreclose on his house, and you, as the cosigner, will be billed for the unpaid debt. If you do not pay the debt, the creditor can foreclose on your home.

If payment is not received, a creditor can obtain a judgment to have a cosigner's wages garnished. If the original borrower does not have a job and therefore has no wages, he obviously cannot make his payments. Therefore, the creditor turns to the cosigner. If the cosigner refuses to make the payments but has a job, the creditor can seek a judgment from the court. If the court grants the judgment, the creditor can request that the cosigner's wages be garnished until the debt is repaid.

If the original borrower misses payments, stops making payments or submits late payments, it affects the cosigner's credit rating too. In addition, the creditor does not have to notify the cosigner of the missed or late payments, so the cosigner's credit could be adversely affected without her knowing it. Having a damaged credit rating could make it difficult for you, as the cosigner, to obtain financing or get loans at low interest rates.

What Is the Time Frame to Remove Negative Credit Information Excluding Bankruptcy?

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If you exclude bankruptcy from the federal credit reporting time limit, negative items may remain on your report for from two years until the end of your life. Although bankruptcy is the worst financial incident you can experience, is not always the most serious event for a credit report. Owing the government money comes with extra punishment to motivate taxpayers to repay their debt.

Most negative credit report information abides by the "seven-year reporting time limit," except inquiries, which remain for two years, and unpaid tax liens, which can remain indefinitely, according to Smart Credit. Bankruptcy usually takes more points off of a credit score than a tax lien, but the government allows the credit bureaus to report a lien forever, because it does not want to give citizens any incentive to avoid paying tax.

Under the Fair Credit Reporting Act (FCRA), the credit bureaus can shorten the federal credit reporting time limit. As of 2011, only Experian utilizes this provision and reports unpaid tax liens for 15 years. However, the states can also shorten the reporting time frame, but this is rarely exercised by the states. California, for example, is the only state that does this, reducing the time limit on unpaid tax liens to 10 years.

The FCRA also lets citizens dispute inaccurately reported negative information as long as the bureaus report it, according to the Federal Trade Commission (FTC). Because negative items are usually the most important to a credit history, it is in a consumer's interest to dispute inaccurate negative items immediately. Consumers can dispute an item through an agency's online website or by writing a certified letter detailing why the item is inaccurate. Include documentation that supports your dispute. The credit bureaus are required to investigate the claim, and if it cannot verify the validity of the disputed item, it must be removed from your credit report.

Federal law allows the credit bureaus to ignore all credit reporting time limit statutes when the borrower requests more than $150,000 in credit or life insurance or when he applies for a job that pays more than $75,000 a year, according to the FTC. As of 2011, the credit bureaus follow the federal reporting limit in all cases, but this does not mean they cannot change their policy in the future.

Does Buying a House Improve Your Credit Score?

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By itself, the act of buying a house will not affect your credit score. However, to buy a house, most people need to take out a mortgage. A mortgage is a large, secured debt. In the short term, a large debt can hurt your credit score. However, in the long run you can actually improve your credit history dramatically simply by making your mortgage payments on time.

A credit score is a summary of your borrowing and repayment activity from the past seven years. The actual formula used to figure out the score is secret, but the data that is used in the calculation is not. Approximately 35 percent of the score is your repayment history. Another 30 percent is the total amount you owe. A further 15 percent is the length of your credit history. The remaining 20 percent is split between new credit applications and the types of credit you use. All of this information is converted into the three-digit number that is your credit score.

When talking about your credit score, you should be thinking about three numbers, not one. Each of the three major credit bureaus -- Experian, Equifax and TransUnion -- issues its own credit scores. The ranges for the scores are slightly different, as are the formulas used to calculate them. However, if you have a low score with one credit bureau, you will have a low score with the others. You should only worry about the difference in the scores if you are on the border between an average and a good credit score. In that case, you may want to apply for credit with lenders that use the bureau that gave you the best score.

When applying for a mortgage, most people want to shop around. Multiple credit inquiries can hurt your credit score. However, lenders know that buyers like to compare offers before committing to such a large debt. Therefore, all credit inquires made in the 30 days prior to taking out a mortgage count as a single inquiry. A single inquiry will not hurt your credit score. Borrowing hundreds of thousands of dollars can temporarily lower your score. However, as it is a secured debt, a mortgage will not count against you as much as an unsecured loan.

The biggest factor in calculating your credit score is your repayment history. Lenders like to see that you are a responsible borrower who will repay your debts on time. You can use your mortgage to improve your credit score simply by making all of your payments on time. If you can pay more than the minimum, you may be able to clear your debt sooner. However, as far as your credit score is concerned, it's enough to pay the minimum amount, as long as you do it by the required date.

What Is the Difference Between Tier 1 & Tier 2 When Purchasing a Vehicle?

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Lenders and other creditors report information to the credit bureaus. This data is used by the bureaus to create your individual credit report. Information in your credit report determines your Fair Isaac Corporation, or FICO, credit score, which ranges from 300 up to 850. If you're purchasing a vehicle, it's important to understand how having Tier 1 or Tier 2 credit can impact the terms of your auto loan.

Your credit score has five distinct components, according to FICO. The bulk of the score measures how well you pay your bills and accounts for 35 percent of the score. Thirty percent of the score is the amount of debt that you have. The average length of your credit history is 15 percent of the score. Ten percent of the score is the mix of credit types that you use, and the remaining 10 percent is the amount of new credit you've recently applied for.

The higher the FICO score, the less of a credit risk you are to lenders. A Tier 1 credit score is 720 or above. Someone with this score is considered less risky than a person with a Tier 2 credit score, which ranges from 700 to 719. Whether your credit falls into a Tier 1 or Tier 2 will help determine what interest rate the auto lender will give you. Generally, Tier 1 credit will receive a lower interest rate than Tier 2.

An auto loan is often financed over a period of years ranging from 36 months, or three years, up to 72 months, or six years. The interest rate on that loan will decide how much that car purchase will cost you overall. The higher the interest rate, the more you will pay in interest over the life of the loan. For a 72-month loan, a buyer with Tier 2 credit may receive an interest rate of 7.19 percent from a dealer, whereas a Tier 1 credit buyer may receive 6.74 percent, according to Edmunds.

Auto loan rates may vary from dealer to dealer and from one type of financial institution to the next. Credit unions may have lower rates for members than the rates offered at an auto dealership. Shop around to see who can give you the lowest rate. Each time a creditor pulls your credit report, however, a hard inquiry is placed on the report. Too many inquiries in a short period of time can cause your score to drop. According to FICO, if you're rate shopping for an auto loan within a two-week period of time, the scoring model will view those multiple inquiries as one, and this will have less of an adverse impact on your score.

Does Closing a Credit Card Drop My FICO?

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It is possible that by closing a credit card, you could inadvertently reduce your credit score. Whether closing the account reduces your FICO score depends on a number of factors, including your credit history length, how many accounts you currently have open, the different types of accounts you own and your outstanding credit balances.

FICO is an acronym for the Fair Isaac Corp. credit scoring agency. FICO is the most widely recognized and frequently used credit scoring agency. Thirty-five percent of your FICO score is composed of your payment history; 30 percent is outstanding balances on your credit accounts relative to your credit limits; 15 percent is the length of your credit history; 10 percent is your amount of new credit; and 10 percent is the types of credit accounts you own. The factors that affect your FICO score the most are your payment history and outstanding balances relative to your credit limits because they collectively make up 65 percent of your FICO score.

Just as a negative payment history hurts your score, a positive history helps your score. Because payment history makes up 35 percent of your FICO score, if you close a credit account with a positive payment history, it could possibly drop your score. Once you close the account, the information related to that particular credit card will eventually fall off your credit report and lenders will no longer be able to see the positive payment history associated with the account.

Another major factor in your FICO score is your credit utilization, which is the amount of credit you are using compared to the amount of credit available to you. Credit utilization makes up 30 percent of your FICO score. When you close a credit account, it removes the amount of available credit you have on that account, causing a recalculation of your credit utilization rate. This can result in a decrease in your FICO score because the credit limit on the closed account is no longer used in the credit utilization calculations and your remaining outstanding balances relative to your credit limits are higher.

You have two credit cards, each with a $10,000 limit. One card has a $2,000 balance and the other has a $5,000 balance. Your credit utilization rate is $7,000 total outstanding balances / $20,000 total available credit = 35 percent. Say you pay off the card with a $2,000 balance and close the account. Now, your credit utilization rate is $5,000 total outstanding balance / $10,000 total available credit = 50 percent. This increase in your credit utilization rate by closing a credit card can lower your FICO score.

Experian Credit Reporting

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Experian is one of the three major credit bureaus in the United States along with TransUnion and Equifax. Experian is best known as a provider of credit reports, because by law they must provide every individual with one free credit report every year. But the company also provides other credit-related services to individuals and businesses

Experian was founded in England in 1980, and it wasn't until 1996 that it entered the credit reporting business in the United States. As of 2009, Experian has clients in more than 65 countries.

In addition to providing individuals with credit reports, Experian also provides several credit monitoring services to protect individuals against credit fraud. Consumers are notified when any suspicious activity takes place so they can minimize the damage of identity theft.

One popular commercial product Experian produces is credit scores, which it does by using the algorithm developed by the Fair Isaac Corporation. These scores are used by lenders to determine whether or not to issue loans to individuals.

Experian is also distributing VantageScores for educational purposes. VantageScores are credit scores that are calculated using a formula developed by Experian. VantageScores claim to better predict the credit worthiness of individuals with a shorter credit history.

In addition to providing consumer credit scores, Experian also provides information about businesses and their track records of paying bills on time. This helps companies who engage in business-to-business sales determine which companies are more likely to default on their payments.

When Do Things Go Off Your Credit Report?

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A few years of abusing your credit can have much longer implications, especially if you are looking to buy a home, car or just need a loan in general down the road. Items on your credit report determine your credit score. A good credit score means your bank will give you a better interest rate. Conversely, a bad score gives you a worse interest rate. Negative items can last from seven to 10 years, and some items have no time limits.

Some items that will take seven years to come off your credit report, according to the Fair Credit Reporting Act. Examples include civil suits, judgments, records of arrest, collection records, and accounts that are closed with a negative record of foreclosure records. Furthermore, any late payments and repossession records will remain on your record for seven years.

There is only one item serious enough to warrant staying on your credit report of 10 years, according to the Fair Credit Reporting Act, and that is bankruptcy filings. While Chapter 7 (liquidation) will stay on your credit report for 10 years, Chapter 13 (reorganization of debts) can come off your record after seven years, but only at the discretion of the credit bureau.

Some items are exempt from time limitations on your credit report. According to the Fair Credit Reporting Act, information that is reported because of the following reasons are exempt from a time limit: credit transactions with a principal amount of $150,000 or more, underwriting a life insurance with a value of $150,000 or employing a person who has an annual salary of at least $75,000.

It is recommended to check your credit report on a regular basis to ensure there are no errors. Any error can have a negative impact on your score. Order your credit report from one of the major credit bureaus TransUnion, Equifax and Experian. If you see an error, such as your bankruptcy still on record even though it is 12 years later, report it right away. Your score will the adjusted accordingly.

Can Paying off a Charge-Off Account Make Your Credit Scores Go Down?

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A charge-off is one of the worst items that can show up on your credit report, so you'll probably want to do damage control and pay it off. In the past, paying an old debt usually damaged your credit history. However, as of 2011, paying a charge-off account may improve your credit rating and even eliminate record of the account.

The major credit scoring system in the United States -- the Fair Isaac risk model -- used to punish consumers for paying old debts because payments renewed the date on the debt, making it looking more recent than its actually date of delinquency. As of 2011, paying a charge-off or collection account makes almost no difference to your credit rating; just having a charge-off on your credit report at all is a detriment to your rating, whether you pay it or not.

Paying a charge-off probably will raise your credit score a few points, because an outstanding charge-off counts against your debt burden in to the FICO system. Your debt burden counts for 30 percent of your FICO rating, so paying off thousands of dollars of charge-off debt can raise your score significantly. The FICO formula is a trade secret, which means nobody can say how much paying a charge-off will raise your credit rating.

Lenders and anyone else who looks at your credit report, such as an employer, like to see paid charge-off accounts because they show high integrity, because you paid a debt even though you could have let the statute of limitations expire or force the creditor to collect. If you and another applicant for a job are equally qualified, paying a charge-off may tip the scales in your favor. The same can happen when a lender is having a tough time deciding whether to give you a loan.

If possible, talk to the original creditor about deleting the account with the credit bureaus in return for full payment on the debt, or pay for deletion. Only the original creditor of the account can substantially improve your credit rating. If you offer a pay-for-deletion deal with a collection agency, the payment history -- including missed payments -- on the original still affects your credit rating.

What Is the Fastest Way to Receive a Copy of My Credit Report?

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Federal legislation passed in 2003 required the three major credit reporting bureaus to set up a system to allow every individual to get free copies of their credit report. You can order your credit report by phone or by mail, but the fastest way to get a copy is to use the online system. You'll get your report instantly.

The Fair and Accurate Credit Transactions Act of 2003 included a provision giving everyone the right to receive a free copy of their credit report from each of the three credit bureaus once every 12 months. Each of the three bureaus---Equifax, Experian and TransUnion---compiles credit data separately using its own systems, so all three of your credit reports may not necessarily have the same information. That's why the law gives you the right to see them all.

The credit bureaus have set up a website to handle requests for the free reports: AnnualCreditReport.com. Go to the site, select your state from the drop-down menu on the home page and click "Request Report." You'll see a form to fill out with your name, birth date, Social Security number and address. After filling it out, you choose which credit bureau you want to order a report from. That bureau will then ask you some questions to verify your identity. For example, it might say you opened a car loan in a certain month, and it will ask you who lender is and the amount of your monthly payment. Once the bureau confirms your identity, it shows you your report instantly. You can view it and print it---but you can't save it on your computer.

What you won't see on your free credit report is your credit score. The Fair and Accurate Credit Transactions Act requires the bureaus only to provide free reports, which are the raw data they use to calculate your credit score. That's "your" data, and the law says you have the right to review it and, if necessary, request that errors be corrected. But the way the bureaus interpret that data is their intellectual property. If you want to see your credit score, you'll have to pay for it. When you order a free report, you'll get the opportunity to pay for the score, too. Or you can go directly to the three credit bureaus' websites (see Resources).

According to the Privacy Rights Clearinghouse, hundreds of "impostor" websites have been identified that try to fool users into thinking they are ordering the free reports mandated by the federal law. These sites dupe visitors into providing their personal information, making them vulnerable to identity theft. There are other, more legitimate sites that have names similar to AnnualCreditReport.com that exploit this same confusion. They don't necessarily steal information; but they try to get consumers to pay for the same credit reports they could get for free at AnnualCreditReport.com.

Quickest Way to Repair Credit Legally

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Credit reports play a large role in the financial life of consumers. Credit reports provide repayment history for a consumer's credit accounts, including mortgages, car loans, and department store and bank credit cards. A consumer's credit score is used in loan decisions and by the federal government in granting security clearances. Negative information can ruin a consumer's financial opportunities and job prospects. There are a few steps you can take to legally repair poor credit.

You must repay credit obligations on time. The negative and adverse credit history section reports nonpayment or slow payment of credit obligations. Start paying your obligations on time each month, by arranging affordable payments with each creditor or by consolidating your debts through a reputable debt consolidation program. As you repay on time, you'll build a positive credit record with a timely repayment history.

Negotiate repayment of liens or judgments and request that the status of each obligation be reported as "in repayment" by the major credit bureaus. Credit reports contain a public records section that lists all judgments or tax liens against a consumer for debt nonpayment. Call the tax authority or judgment creditor and ask to begin making monthly payments in exchange for removal of the judgment or lien from your credit record.

Dispute inaccurate information, which can distort your credit record, by following the instructions on the website of the three national credit bureaus. The three bureaus--Trans Union, Equifax and Experian--are mandated by law to investigate inaccurate and erroneous information in a consumer's credit record. Visit the website of each bureau to request your credit record and begin the dispute process. The credit bureaus must delete inaccurate and erroneous credit history.

Consumers have a legal right to append a statement of up to 100 words to a credit report. If there is a reason for negative and adverse information in your report, you can explain it using a personal statement. This statement can explain negative information to companies making an inquiry about a consumer's credit. Creditors may choose to ignore the negative portion of the credit report that's explained in the personal statement.

How to Remove Bankruptcy From Your Credit

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Forget about all the ads you see from the credit repair firms. The only way to legally and ethically remove a bankruptcy from your credit reports is to allow the information to become outdated. The Fair Credit Reporting Act, a federal law, requires bankruptcies to be listed on your report for 10 years. That's obviously a long time, but your credit may bounce back quicker than you think. According to Microsoft Money, many people successfully rebuild their credit just three or four years after bankruptcy, with some gaining new credit almost immediately.

Instructions

Get copies of your credit reports from Annual Credit Report. (See resources.) The website offers free credit reports as mandated by the Fair Credit Reporting Act. Request reports from each of the three nationwide credit bureaus: TransUnion, Equifax and Experian. View and print the reports online or follow instructions on the home page for ordering by mail or telephone.

Review each report to note the date the bankruptcy was initially listed. Determine if the entry has become outdated because it has been reported for more than 10 years.

Challenge the outdated information by writing letters to all three credit bureaus. In your letter, note that your bankruptcy occurred more than 10 years ago and by law must be removed from your report. Send the letters to the respective credit bureaus. Find their addresses on the reports. Then await a response, which should come within about 30 days.

How Long Does it Take for Your Credit Score to Rise After Paying Off Debts?

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Credit scores can plummet quickly when a person defaults on bills, according Fair Isaac Corp., creator of FICO credit scores. It takes a longer time to repair damaged credit. One of the best ways is simply by paying off debts, especially if the payments are all made on time.

A credit score is a three-digit number calculated by FICO or one of the credit bureaus and sold to lenders to help them make decisions on credit applications. Leslie McFadden of the Bankrate.com financial website explains that a score is supposed to indicate a consumer's chances of becoming delinquent on bills within two years. FICO scores range from 300 to 850, with higher scores indicating more creditworthiness.

Debt levels and account balances are part of a person's credit score. FICO puts the most weight on whether consumers pay their bills on time, followed by debt load, credit history length, the number of recently opened accounts and the different types of credit used, such as loans and revolving account. Balances make up 30 percent of the score.

A credit score rises a little bit with each on-time payment that brings down an account balance. Bankrate.com says that prompt payments and lowering balances are the two quickest ways to bring up a score, although the process takes several months. The credit score does not rise significantly when an account reaches a zero balance.

Financial columnist Liz Pulliam Weston warns that paying off old debts can hurt a person's credit score under certain circumstances. Some people contact lenders or collection agencies to pay old bills for a quick credit rating boost. Their score actually goes down if they negotiate a pay-off amount less than the original bill. Agencies sometimes agree to remove a negative item from a consumer's credit reports or to change it to a positive status in return for payment, which boosts the score. All such agreements should be put into writing before the account is paid, Weston states.

Debt pay-offs will not raise a credit score if they are not being correctly reported on a person's Experian, Equifax and TransUnion credit files. The Federal Trade Commission notes that consumers can order free credit reports once a year from each of the three major credit bureaus by going through annualcreditreport.com. Consumers have the right to dispute any mistakes they find in their report, and the Fair Credit Reporting Act requires the bureaus to either correct or remove wrong information.

Five Ways to Harm Your Credit Score

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Credit scores range between 300 and 850. A high score indicates superb credit habits. A good credit rating qualifies for you for the most competitive interest rates on mortgages and other loans. Keeping a good rating involves avoiding habits that can harm your score.

Carrying a credit card balance alone doesn't hurt your credit score. On the other hand, if you carry high balances, have maxed-out accounts or exceed your credit limit, expect a dip in your credit score. To be on the safe side, keep balances below 30 percent of your credit limit. On a credit card with a $2,000 credit limit, your balance should never exceed $600.

A payment that reaches your creditor a few days after your due date may not affect your credit score. On the other hand, being 30 or more days late on your payments may prompt the creditor to report this information to the credit bureaus, and having a late payment on your personal credit file can reduce your credit rating. Always pay on time to keep a good payment record and credit rating.

In an effort to control debts, some people cancel their credit cards. This seemingly innocent maneuver can significantly damage your credit rating. The length of your credit history influences credit scoring, and canceling an older credit card can reduce your credit history and bring down your score.

Credit scores decrease every time you submit a credit application and a creditor checks your credit report. This includes credit checks for instant credit approvals offered by department stores and other retailers. Only apply for credit cards and loans when necessary to avoid harming your credit score.

Co-signing a vehicle loan or personal loan can help someone get on his feet and establish a credit history. However, a co-signed loan appears on your credit report. You're responsible for the debt if it isn't paid, and late or missed payments may cause your credit score may suffer.

What Is the Most Important Thing to Keep a Good Credit Score?

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A credit score is determined using a formula of various factors involving your current and past credit activities. The score is known as a FICO score, which stands for the Fair Isaac Company score.

There are five factors in determining your credit score. 35 percent of your score is determined from your payment history. 30 percent of your score is related to outstanding debt. Your length of credit history accounts for 15 percent of your score. New credit and hard inquiries and the types of credit that you have each account for 10 percent of your score. The highest possible score is an 850.

Payment history is the most important thing affecting your credit score and there are several types of payment history factors to consider. The score will be calculated in part from your account payment history for loans, mortgages, retail accounts, credit cards and finance company accounts. Your score will be docked for delinquent payments and adverse public records like bankruptcy or law suits. Lastly, past due items on file will reduce your score. The more recently these events, delinquencies or past due items have occurred, the lower the credit score will be.

Other things you can do to improve your credit score is to keep your account balances low, have fewer accounts with balances and fix any credit errors that may be present on your credit report.

Easiest Ways to Build Your Credit

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Consumers need credit to build a credit history. But oftentimes, getting first time credit can prove challenging. And if you have no credit history, lenders may deny your credit application as if you had a low credit rating. Certain tricks can help you establish and build credit. The earlier you begin to establish credit, the quicker you can finance a home or acquire other lines of credit.

Getting approved for a major credit card with a financial institution can put you on the path to a good credit history. But getting your first credit card isn't easy, and to acquire credit, you may have to consider secured credit cards. Secured credit cards are cards that require collateral in the form of a security deposit between $300 and $500. The drawback is that you need to pay this deposit before you can qualify for approval. Another disadvantage is that secured credit cards require other fees such as an annual fee and setup fee, and sometimes, credit card issuers will report the credit account as secured to the bureaus, which can impact your ability to acquire other types of financing. This is because a secured credit card often indicates credit problems. On the other hand, secured cards benefit applicants who cannot qualify for an unsecured card due to bad credit or no credit. These cards provide the opportunity to establish credit, wherein you may qualify for an unsecured card in the future. Ask around and look for a credit card company that doesn't report the account as secured.

Young adults can establish credit with the help of their parents or older siblings with a method called piggyback. Basically, someone with a credit card agrees to add your name to their account. Credit card companies view you as an "authorized user" and they'll mail a card in your name. The primary accountholder remains responsible for the account. However, the account will appear on your credit report, and if it remains in good standing, you'll start to build a good credit score.

While it's tricky to get a credit card, personal loan and mortgage with no credit history, there are auto dealers who specialize in helping newbies establish or reestablish their credit history. Commonly referred to a "fresh start" or "bad credit dealers," a low credit score or no credit score doesn't impact the approval process. However, these lenders will require steady, verifiable employment and perhaps a down payment. Higher interest rates are typical with bad credit and no credit auto loans.

Securing a credit card or auto loan is only one aspect of building credit. The way you manage credit after your approval impacts your credit score and history. Different factors affect the credit scoring process. And maintaining a good, solid score involves adopting good habits such as making timely payments and keeping credit card balances low. According to MyFico, payments account for 35 percent of credit scores, whereas the amount owed accounts for 30 percent of credit scores.

How to Check Credit and Background

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It is important to check your credit and background history. Each time you apply for a line of credit, lenders check your credit rating. The higher the number, the better your chances of obtaining credit. Your rating also affects the terms and interest rates offered. You are entitled to a free copy of your credit report annually. You can check your credit and background, check for errors and see areas for improvement.

Instructions

Apply online at AnnualCreditReport.com to check your credit and background history.

Click the box to select your state, then click "Request Report." Carefully enter your personal details in the application form. Errors invalidate your application to check your credit and background history. Retype the alpha-numeric security code into the box at the bottom of the page.

Click "Continue." Review your application form and click "Continue." Wait for your identity to be verified.

Click "Continue." Enter a login ID, password and password reminder. Click "Continue."

View your credit report online instantly. Your report details all your current and past credit history.

Check the report for errors. Report any to the credit reference bureau to get them corrected.

What Kind of Score Is FICO?

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Your FICO score is a widely used indicator of your credit-worthiness. Lenders, landlords and other businesses consider individuals with a high FICO score to be good credit risks, that is, very likely to pay back any debts owed. Conversely, the same banks and businesses consider a client with a low FICO score to be a substantial credit risk. Customers with high FICO scores are generally given better interest rates and credit terms than those with lower scores.

The Fair Isaac Corporation, found in the 1950's by Bill Fair and Earl Isaac, developed the FICO scoring system. FICO is a mathematical score assigned to individual based on a variety of factors such as timely payment of credit cards and mortgage payments. FICO is very widely used in the financial and real estate industries as a key determinant of a person's credit-worthiness.

FICO scores are assigned in the range 300-850, with 850 representing excellent credit. In general, scores above 800 are treated as excellent credit, while scores below 600 are treated as a high risk to lenders. FICO scores in between 600 and 800 are considered good to very good credit.

Although the exact manner in which FICO scores are calculated is an industry secret, the general factors that make up the score are well-known. Your payment history is the most important component; paying accounts on time is treated favorably, while late payments or bankruptcies lower your FICO score. The length of your credit history is also a factor, with a lengthy history of good credit raising your score more than a recent history. Other components of FICO include the amount you owe, your pattern of recent credit applications, and the mix of credit cards held.

Federal law prohibits FICO and other credit scoring systems from taking into account discriminatory information, such as race, religion, gender or marital status in assigning credit scores.

You can purchase your FICO score and a credit report directly from Fair Isaac. You can also obtain your credit report for free, but it generally will not include your numerical FICO score.

What Is the Impact of an Overdrawn Bank Account on Your Credit?

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If you make an error and overdraw your bank account, you will owe the bank the amount you overdrew in addition to any fees your bank charges for the overdraft. If you fail to pay the bank what you owe, you may suffer damage to your credit.

Banks do not report consumer checking accounts to the credit bureaus. Because of this, if you pay the amount you owe to the bank promptly, your credit will be unaffected.

After repeated attempts to collect the debt you owe proves unsuccessful, your bank may turn the unpaid debt over to a collection agency. This usually occurs after 180 days.

A collection agency will report the amount you owe to the credit bureaus as a derogatory debt. Doing so will result in your credit score dropping.

A collection agency may attempt to sue you for the amount you originally owed to the bank in addition to collection fees and court fees. If the lawsuit is successful, a judgment will appear on your credit report that will cause additional damage to your credit score.

The Fair Credit Reporting Act states that a collection account and a judgment can both remain within your credit history for seven years. Both entries will have a negative effect on your score until they are removed.

Does It Affect My Credit When It Is Pulled?

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Consumers often worry about how credit report inquiries affect their credit scores. Some credit pulls do not affect credit scores at all, while others do. Credit inquiries that affect your score are reported on your credit report for a specific period of time, and may ultimately contribute to decisions lenders make on credit applications you submit. Credit inquiries may be necessary at times, but for the best credit score, it's a good idea to monitor the number of inquiries you make each year and submit credit applications infrequently.

Soft inquiries are credit pulls made by companies that already have a file on you. These may be collection agencies, credit card companies and banks where you have a mortgage or vehicle loan. Companies you already have accounts with may check your credit periodically to extend new offers on your account or update your contact and employer information. Soft inquiries do not affect your credit score and cannot be seen by new lenders who view your credit report.

Hard inquiries are initiated by you when you authorize a new lender to access your credit information in connection with a new credit card, mortgage, auto loan or similar application. Hard inquiries are the credit pulls that affect your overall credit score and remain visible to new lenders and viewers of your credit report. Limit the number of hard credit inquiries on your credit report by turning down in-store credit offers and applying for new credit cards responsibly.

Although hard inquiries affect your credit score, the effect on your score is not extremely significant. Single hard inquiries affect your score less than five points per hit. However, if you submit multiple applications within the same period, you may experience a significant drop in score. For example, if you submit five credit card applications in one week, your score could drop 25 points. Your score is affected regardless of whether your application for credit is approved or denied. In addition to the impact points, lenders may base new credit decisions based on the number of recent inquiries you make. If you make many inquiries and are not granted credit by the companies you apply with, new lenders may see you as a credit risk because other lenders did not approve your application. Also, multiple credit applications within a short time makes you appear desperate for credit, which lenders view as an additional risk.

Credit inquiries made on your report stay on file for one to two years. Each of the three credit reporting bureaus uses the FICO scoring system. Under the FICO system, the effect of a hard credit pull is not factored into your overall score after one year. Because of this, some credit bureaus may remove the inquiry automatically after a year. However, the credit bureau may report the inquiry for up to two years. If you have an inquiry on your report that is older than one year, the entry does not affect your score and may not contribute to new lender decisions.

How to Get All 3 Credit Scores

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There are a variety of offers for free credit reports and scores found online. With so many choices, it can be difficult to choose the best option. Consumers are entitled to one free credit report each year but obtaining credit scores requires a fee.

Fair Isaac Corporation, or FICO, created a credit scoring system in 1958 to help lenders determine creditworthiness and the likelihood of timely debt repayment. The FICO score helps businesses to improve their ability to make better decisions about money and credit lending. The credit score is generated by information from independent credit reporting agencies and some lenders.

Instructions

Go to myfico.com. Click on the orange "Start Free Trial" button in the middle of the page. You will need to pay for the credit scores so you should have a valid credit or debit card available. Myfico.com, which charges consumers $14.95 for one FICO score and $44.85 for all three scores, is the best way to obtain all three credit scores.

Equifax, Experian and TransUnion are the three U.S. credit reporting agencies. The Federal Citizens Information Center says using myfico.com or annualcreditreport.com, which offers consumers one free credit report per year, are the preferred methods of obtaining credit scores.

On annualcreditreport.com, complete a personal information form. You will be directed to each credit reporting company's website to obtain information. Place a check mark on each credit reporting agency that you want to visit. Each website allows you to order a personal or business FICO score for a fee. Select the options you want.

You can obtain a credit report for free if you are denied credit for any reason. These reports do not include credit scores unless the consumer asks specifically for a credit score; there is still a fee for the score.

If you don't want to receive credit score information on the Web, you can request that each credit reporting agency send the report by U.S. mail. Free credit reports requested by phone or mail will be sent 15 days of receiving the request, according to annualcreditreport.com.

The FCIC advises against contacting each credit reporting unit outside of the two websites because of contractual agreements.

Be aware that credit scores differ according to the agency. Also, the credit scoring purchased by businesses about consumers may differ slightly from the score that consumers are issued individually. Credit scoring is important because it helps businesses to make good financial decisions. Your scores can also make the difference between obtaining approval for a low-interest rate loan, a high-interest rate loan or no loan at all.

Will Paying Off Past Due Accounts Help Your Credit Score?

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You've made some financial mistakes in the past. Now that you are on track financially, you want to improve your credit score and settle old debts. Settling the payment of your past due accounts will help to settle those old debts. However, paying off past due accounts may not necessarily improve your credit score right now.

Paying off past due accounts will improve your credit situation in the long run. However, because these are accounts that you have let go past due, you will be facing some credit repercussions.

Your credit score is calculated by the Fair Isaac Company. While most people do not know the exact formula for calculating credit, a rough estimate indicates that your payment history accounts for approximately 35 percent of your credit score.

In most cases, paying off your past due bills will not immediately improve your credit score. However, once your accounts are reported as paid your credit will start to slowly improve.

Make sure that you know exactly what is on your credit report. Request a free copy of your credit report by visiting www.annualcreditreport.com.

The best way to keep and have good credit is to pay your bills on time every month. If you financial past is leaving you less than desirable credit, work hard to repair your credit score. Your credit score can have an impact on many important aspects of your life.

How to Get a Private Mortgage on My Credit Report

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While your mortgage is typically the largest account on your credit report, private lenders often do not report to the credit bureaus. Your credit report should reflect a complete picture of your payment history and should especially include the most important payment you make each month. Making sure your credit report is accurate and includes all of your best-handled accounts can also improve your credit score. Consider taking steps to add your private mortgage to your credit report.

Instructions

Contact your private mortgage holder. Request that your account be added to each of the three credit-reporting agencies: Equifax, TransUnion and Experian. Make it easy for your lender by providing the contact information for the credit bureaus and your mortgage information, such as your account number, original and current principal balance, and payment history since inception. Let your lender know how important it is to continue reporting to the credit bureaus monthly, not just once.

Contact each of the credit bureaus to request your unreported private mortgage be added to your credit file. Call or go online to find out what each bureaus requirement is, but most likely youll have to correspond by mail. Be prepared to supply supporting documentation, such as your identification and mortgage contact information and payment history; dont send your originals -- keep copies.

Make sure your private mortgage is being reported to the credit bureau agencies by checking your credit report about 30 to 45 days after you request its addition to your credit file. Order your free all-in-one credit report from the three main credit-reporting agencies by going online to AnnualCreditReport.com. Print your reports so you can make sure there are no errors or inaccuracies, especially with the newly reported account. If you notice mistakes, complete online dispute forms with each of the credit bureaus.

How Long Can a Credit Reporting Agency Hold Information?

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Bad credit reports haunt people who have had past financial problems. Lenders see evidence of past mistakes whenever they view the reports in response to a new credit application, and it influences their decisions. The Federal Trade Commission (FTC) explains that credit reporting agencies don't hold most information, including negative items, forever, so even a terrible report eventually improves on its own if the consumer keeps any new accounts in good standing.

Credit reporting agencies are firms that collect and sell financial data about consumers. There are three national reporting agencies: TransUnion, Experian and Equifax. All three are subject to a federal law called the Fair Credit Reporting Act (FCRA), which governs things such as how they report data and how consumers can view and dispute it.

Credit reporting agencies provide several types of financial data in their records. Lenders, insurance companies and others who view credit reports can see current and past accounts, including creditor names, account types, balances, credit limits and repayment histories. This information helps credit and insurance applications if it's positive, but missed payments, defaulted accounts and other negatives may make it harder to open accounts or obtain new insurance policies. Credit reports also show certain public court records, such as liens and bankruptcies.

Positive information appears on credit reports indefinitely while accounts are open, according to Maxine Sweet of Experian's public education department. Positive closed accounts stay in the records for 10 years. The FTC states that most negative items, such as late payments, unpaid accounts, car repossessions and property foreclosures, disappear from reports in seven years, while bankruptcies are erased in 10 years. The seven-year time frame starts when an account first becomes late.

The FCRA allows consumers to check their credit reports in case old negative information still shows up after seven years. There's an official website (see Resources) that provides no-cost Experian, Equifax and TransUnion reports once per year. Outdated information can be disputed directly with the relevant credit bureau, which must remove it if there's no legitimate reason to continue reporting it.

Harmful credit report entries may be deletable before the end of the seven-year term. Any mistakes in credit report data can be challenged. Negative items sometimes contain minor inaccuracies such as typographical errors or incorrectly reported dates or account balances. The credit reporting agencies have to ask the original creditors to verify these entries if consumers dispute them. Sometimes they can't get a reply, which forces them to delete the questionable entries even if the accounts are recent.

Can Credit Agencies Change the Terms of Agreement?

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The credit rating agencies compile data used to calculate credit scores, but this has nothing to do with loan approval nor can credit agencies change the terms of a credit agreement. The only parties authorized to change the terms of a credit agreement are those that sign the promissory note.

Only creditors, such as banks, auto dealers and private lenders, can decide if you are creditworthy. Lenders pull credit reports from credit agencies to weed out applicants that present a clear risk to the company, such as people with bankruptcies or multiple collections accounts. Credit agencies cannot change the terms of an agreement because they are not the original creditors. The most they can do is verify account data.

Technically, any party to the contract can change the terms of an agreement, but the other party or parties must agree to it. Some contracts allow the lender to change the terms of a contract at his discretion. Adjustable rate mortgages, for example, allow the provider to change the interest as long as the borrower receives advanced notice. Credit cards often change the terms of the agreement but need to give borrowers 45 days advance notice.

Accepting changes to a loan agreement requires the borrower to take into account his specific situation. Changes to credit card agreements may require the borrower to accept them or close the account. Closing a credit card account could lower your credit score. In the case of an adjustable rate mortgage, the borrower may have no choice but to accept the new changes.

You might have to go to a judge -- a credit agency can do nothing -- if changes to the terms of an agreement become predatory. Signs of a predatory agreement include payments that exceed the agreed-upon amount when closing a home or when the lender tells you to falsify information on the application.

Tips on Cleaning Up Your Credit History

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If you have been through financial difficulties, you probably have some black spots on your credit history. Even if you have never made any late payments, errors against you could appear on your credit reports. Because your credit history and credit score have such importance for your future borrowing and even your future job hunting, you should make cleaning up your credit history a high priority.

Find out the extent of the damage. Obtain and examine reports from the three main credit bureaus: Experian, TransUnion and Equifax. They may have different information about you, and, in any case, you need to ask them to make corrections separately. Get a free copy of each report at AnnualCreditReport.com, as Bankrate.com adviser Steve Bucci suggests. You can also contact each bureau separately online to order your report. Having the online report will facilitate making corrections online later.

You should not worry about slight errors in your name, address or employment history on your credit reports, according to Liz Pulliam Weston at MSN Money. You should, however, identify untrue reports of late payments or overdue accounts, credit limits that show up lower than the actual ones or outdated information. Bankruptcy information remains for 10 years; most other information should disappear after seven years. Note any old bills marked unpaid that you have since settled.

Once you have discovered mistakes, dispute them in writing or online with each bureau whose report contains errors. According to Jane Bryant Quinn in "Making the Most of Your Money Now," the bureaus have to verify your claim with your lenders and make corrections within about 25 days. If you have proof of payment or other supporting documents, submit them to the bureaus as well.

After giving the credit bureaus time to remove the negative information and make corrections, check to make sure the corrections were made. Then request that Experian, TransUnion and Equifax give the correct information to the other credit bureaus to which they report. If the false information remains, Bucci suggests you contact the creditors directly and ask them to intervene.

Mistakes do not give you grounds for a lawsuit, according to Quinn. However, you may want to sue if a creditor does not fix an error that you have proven. The credit bureaus must show that you have disputed a particular item. If you believe you may have grounds for a lawsuit, she recommends locating a lawyer specializing in credit through the National Association of Consumer Advocates.

Your financial habits affect your credit history during the clean-up process and going forward. Practice good credit management or all your hard work will fail. Pay down your debt so that you are using less than 30 percent of available credit. Pay all your bills on time without exception. Use your older cards with some frequency to maintain a long history. Keep at least two credit cards, but don't open new accounts if you already have two or more.

How to Get Different Types of Loans Despite a Poor Credit History?

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You can still be approved for various types of loans even if you have bad credit. Loans are available for people with poor credit scores, bankruptcies, foreclosures and even car repossessions. However, you can expect to pay sometimes staggering interest rates, or you may have to place money in a bank account as collateral.

Instructions

Start by seeking a secured credit card -- the easiest full-featured credit card to get with poor credit. Ask your bank or credit union if it offers secured credit cards, or seek a referral from a friend. You can also review secured credit card offers online. You'll be required to place money in a bank account as collateral, and your credit line generally will be 50 to 100 percent of the amount you have on deposit. Make the deposit and pay any required fees to obtain the card.

Establish a positive credit history with the secured card by making all payments on time and remaining under the credit limit. Consider opening a second secured account and establish a positive repayment history with it as well. After several months, apply for other types of cards that could help boost your score, such as gas cards or department store cards.

Watch your credit scores improve as you establish positive payment histories with the new cards. Your credit may still be considered poor -- but improving. Use that momentum to obtain other types of credit. Approach your bank, credit union or another lending institution about a signature loan or automobile loan. The responsible manner in which you have utilized your new credit accounts should help you obtain various types of loans despite your poor overall credit. This strategy works best over the long-haul, or you can go on to the next step for even faster -- but more expensive--results.

Skip secured cards altogether if you'd rather not have to put up cash as collateral. With your poor credit score you can still get credit. If you're shopping for a car, tell the dealer up front that you have poor credit. Chances are the dealer will have relationships with several finance companies or other lenders who will be happy to grant you credit -- at interest rates up to 25 percent or more. Lenders who specialize in loans to people with poor credit are known as sub-prime lenders. There are sub-prime lenders for nearly every type of loan. Find sub-prime lenders by looking past traditional banks and credit unions and focusing instead on small finance companies, car dealers offering their own financing and even rent-to-own stores that also offer credit terms. Pay-day loan stores and their online counterparts are also options. Ask relatives and close friends with poor credit how they've been able to find credit, and follow suit. You'll pay a lot more in interest with this strategy, but your objective will be accomplished.

How to Erase Late Marks Off of Credit

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The shaky state of the economy is causing many people to lose their jobs and fall behind on their credit card and loan payments. These late payments can wreak havoc on their credit reports, making it difficult to obtain additional credit.

If you've fallen behind on your credit card payments, it's important to get back on track financially. Unfortunately, those late payments can remain on your credit report for seven years and significantly decrease your credit score.

Because these late payments are so troublesome, it's easy to think that removing these marks will help improve your credit. But it's not as simple as it sounds. Late payments cannot legally be removed from your credit report if they are accurate. All you can do is ask your lender to remove late payments from your credit report as a goodwill measure.

Instructions

Look over your credit reports and determine which accounts have late payments. The three big credit-reporting companies are Experian, TransUnion and Equifax. Some lenders may report late payments to all three agencies, while others may only report to one agency. You want to make sure you're asking your lender to remove the late payment from the right report.

Write a letter to your lender asking them to delete your late payments from your credit report or reports. Kindness is key: they don't have to change anything, especially if the payments were actually late. In your letter, include that you've made mistakes in the past but are now trying to improve your credit for whatever reason (to purchase a home, have a secure financial future, etc.) and would appreciate it if they could remove a late payment connotation from your credit report. Be sure to include your full name and account number to help them identify you correctly. At the end of your letter, ask that they notify you of their decision within a certain period of time, such as 30 days (or whatever other time period you decide.)

Address your letter to a decision maker at your lender, if possible. Search your lender's website or throughout the Internet to see if you can determine a person that deals with goodwill requests. If you cannot find one, call your lender's customer service line and ask, or simply address the letter to their customer service department.

Send your letter certified through the United States Postal Service and ask for return receipt. Certified letters provide proof that your letter was sent and return receipt proves that your lender received the goodwill letter.

Follow up and resend your request letter certified and return-receipt requested if you don't hear from your lender within the time period you stated in your letter. Lenders receive hundreds of letters each day and it's possible yours could get lost. It may take more than one requests, but eventually you'll receive word on the lender's decision.

How to Restore Your Credit After Paying Off All of Your Debts

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Building good credit requires a significant effort and some patience on your part. If you've worked hard to get out of debt, you may have to work just as hard to rebuild your credit score. If you're debt-free but your credit is still suffering, there are some steps you can take to begin restoring your credit.

Instructions

Check your credit report. Request copies of your credit report from each of the three major reporting bureaus, Equifax, Experian, and TransUnion, and go over each one with a fine-tooth comb. You want to make sure that all of your accounts are being reported accurately and that there is no negative or incorrect information contained in your report. If there are any inaccuracies, take the necessary steps to dispute them or have the negative information removed altogether.

Pay your bills on time. If you have yet to learn how to create a budget, now is the time. Take the time to calculate your total monthly income versus your total monthly expenses. Create a system for paying bills that will ensure that your bills are paid on time each month. Thirty-five percent of your FICO credit score is based on your payment history, and if you consistently have late or missed payments on your credit history, your score will continue to suffer.

Use your credit wisely. Don't take on any new debt, unless it's something you can and will pay in full each month. If you choose to keep one credit card active, make sure you can pay the balance off each month. Thirty percent of your FICO score is determined by the amount you owe, so even if you have high credit limits, it's best to keep your actual balances low.

Keep older accounts open and active. Fifteen percent of your FICO score is based on the length of your account history, so if you have older accounts in good standing, it may benefit you to simply leave them open and only use them often enough to keep them active.

Maintain a diverse mix of account types but keep inquiries for new lines of credit to a minimum. The remaining 20 percent of your FICO score is based on the types of credit you have and how often you're applying for new credit. Frequent inquiries from lenders can have a negative impact on your score as it gives the impression that you are credit-seeking and possibly a high risk.

How to Follow Up on a CBR Check

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An inaccurate item on your credit report can have a negative effect on both your score and your efforts to obtain credit. When a credit bureau report, or CBR, comes back with erroneous information, you have the right to dispute said data. The Federal Trade Commission states under the Fair Credit Reporting Act that such disputes must be addressed within 30 days. If you do not receive a response in that window, follow up by mail or by phone. Wait at least 30 days after submitting your dispute before following up.

Instructions

Insert the current date at the top of the letter.

Begin the letter with a statement that you have tried to contact the credit bureau but have not received a response. Explain the details of the initial letter, including the date and content of the request.

Inform the credit bureau that it is in violation of the FTC regulation stating you must receive a response within 30 days of inquiry.

State that you are enclosing a copy of your original request. Sign the letter.

Provide clear instructions on the manner and location in which the bureau can send the information.

Make a copy of the letter for your records. Mail the original along with a copy of your initial request.

Call the credit bureau. The number is listed at the end of your report. If you can't find the number, look on the bureau's website (see Resources).

Follow the automated prompts until you reach the department that handles credit checks. Choose the option to speak to a live operator.

Request the person whom you spoke with previously. If this is your first call, or if you did not retain the information, request someone who handles disputes.

Ask about the status of the credit check. Explain the details of the disputed item and ask whether it has been cleared. Request an updated property of your credit bureau report.

Will Taking Out a Loan Improve a Credit Rating?

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When you have bad credit, the only way to improve your credit rating is to pay your bills on time and eventually take out new lines of credit. Taking out a loan will improve your credit rating over time, as long as the loan amount isn't too much and you make on-time monthly payments.

To improve your credit rating by taking out a loan, consider the loan amount. If the loan amount is too high, then it may look as though you are taking on too much additional debt. When your credit rating is already low, taking on too much additional debt makes you look like a high default risk to creditors. Stick to a loan amount within your financial means to ensure you can make your payments on time for the loan's duration.

Secured loans may be easier to get when you are trying to improve your credit rating because they offer the bank collateral in exchange for the loan. A secured loan may also help you stay within your budget because the loan amount is generally not more than the value of the collateral. Staying within your budget is essential when it comes to your ability to make on-time monthly payments.

Getting an unsecured loan may be more difficult if your credit rating is already low. If you obtain an unsecured loan for trying to improve your credit rating, expect to pay a higher interest rate because you are not pledging any collateral in exchange for the loan. As long as you make your payments on time, an unsecured loan will improve your credit rating.

How to Repair a Credit Report With Write-Offs

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Some people are able to repair their credit reports by disputing information on the report, including charge-offs. Charge-offs occur when a creditor gives up on collecting a debt from you and closes the account. The remaining balance is charged off, or considered as a bad debt by the creditor. The charge-off is then reported to the credit reporting bureaus and can cause your credit score to drop. On the other hand, removing the charge-offs can cause your credit scores to rise. You can dispute charge-offs by following a few steps.

Instructions

Obtain your credit reports from the three credit reporting agencies--TransUnion, Experian and Equifax. Order your credit report directly from the companies or get free copies at AnnualCreditReport.com. With each of the sites, you will have to go through a brief registration process that requires you to enter personal identifying information such as your address, Social Security number and related data. According to the Federal Trade Commission, you are entitled to one free credit report every 12 months, from each of the credit reporting agencies.

Identify the charge-offs you believe should be removed from your credit reports. The credit bureaus will not remove accurate information that is verified by your creditor. Information that is not verified, however, will be removed, along with any inaccurate information.

Begin the dispute process. Navigate to the websites for Experian, Equifax and TransUnion. Enter "dispute" in the search box on the home page. Find the option for entering disputes online, and follow the prompts to continue. You'll use coding from the credit reports you pulled and your Social Security number to begin the process. That coding will be clear to you as you follow the prompts. Once you log into the database for making online disputes, you'll see your credit report, including the charge-offs.

Dispute the accuracy of the charge-offs. You will be given options such as "this account never belonged to me," or "I never paid this account late." You will also be able to enter comments supporting your dispute. Finish your disputes and exit the system. The credit bureaus will check with your creditors. The information will remain on your credit report if your creditors confirm it is accurate. If the creditors do not respond within 30 days, however, the credit bureaus will consider the information unverifiable and will remove it. Some so-called "credit-repair agencies" routinely dispute all negative information on reports in hopes that the creditors will not respond and the information will be deleted.

Wait for emails from the credit bureaus offering what action was taken--if any--regarding your disputes.

Steps to Take When Information on Your Credit Report Is Too Old

7:32 PM No comments

Knowing what is on your credit report is the first step to making major purchases and protecting your financial future. It is important that what's on the report is accurate and current. Errors and inaccuracies can lead to problems that range from having to pay additional fees and increased interest rates to being denied credit altogether. If you come across any errors on your credit report, there are several steps you can take to make sure that you are protected.

Whether it is a change of name or a change of address, the information might not always reach your creditors. Just because you are receiving your bills in the correct location with the correct name does not necessarily mean that it is correct throughout their system. If your creditor has incorrect information, it will continue reporting it to the credit monitoring agencies. Call your creditors to verify that the information in their systems is up-to-date. Once the information is updated, they will report the current information to the credit agencies. Usually this happens at the end of the billing cycle in which the latest payment was received--generally no more than 30 days.

After you have updated your information with your creditors, contact the major credit monitoring agencies (Equifax, Experian and Trans Union) to make sure that the new information has been included and any outdated information has been removed. To do this, you must contact them through certified letter informing them of the error and asking the bureau to investigate and remove the item or items. It is important that you are specific about what you want removed. Remember that you are not the only person inquiring about errors, and chances are the person reading the letter is not interested in hunting through your entire credit history to find what is wrong. Include a copy of your credit report with the errors in question highlighted. It probably will take time before you see any change in your credit report because the agencies are only required to update their information every 90 days.

Getting confirmation is perhaps the most important step, especially when dealing with creditors. Calling them to ask that your errors be corrected is fine, but be sure to ask for written confirmation that it has been done. The best option is to ask for the UDF or Universal Data Form, which is the form your creditors send to the credit agencies to update your report. Ask creditors to send the UDF to your other creditors as well. Sometimes inaccurate information from one creditor will affect a person's standing with a different creditor. This is a good way to make sure that all creditors have your current information. At the very least, ask for a letter of confirmation ensuring that your report has been updated. When dealing with the credit bureaus, make sure that all of your communication is by certified letter to verify that your correspondence has been received.

Self Help to Fix Credit and How to Repair Bad Credit Now

7:45 AM No comments

Repairing your bad credit can be done by you. Many people feel they cannot repair bad credit without the help of experts or agencies, but this is not true. Every individual has the ability to do anything a credit repair agency can do. With time and consistent effort you can restore your credit rating. Most credit repair techniques take time to see positive results, but there is one method where you can see an immediate improvement to your credit report and score.

Instructions

Look at your credit card statements to determine the amount you have charged and the credit limit. Make a note of how much 30 percent of your credit limit is. According to myfico.com, your credit utilization accounts for a full 30 percent of your credit score. Credit utilization is the amount you have charged in relation to your credit limit. To find out what 30 percent is, multiply the credit limit by .30.

Call the customer service number for each credit card company for which you have a credit card. Find out what day your account is reported to the credit agencies. Make note of this date for each account. The date will be different for each creditor.

Look at your finances and determine how much you can pay down on each account. Strive to pay as much as possible. The goal will be to make each balance under 30 percent of the credit card limit. Your credit score will improve more and more the closer you get to having your balances under 30 percent.

Make your payments three to five days before the creditor reports your account to the credit agency. This allows the creditor enough time to receive and post your payment before the reporting date. Your credit score will rise the same day the creditor reports the new lower balance.

Wednesday, March 31, 2010

Instructions

Tuesday, March 30, 2010

Instructions

Score Range

Formula

Improving Score

Cute Commercials You Pay For

Truly Free Credit Report

Why Do I Need Credit Report?

Sunday, March 28, 2010

Credit Ratings Affect Future Loans

Credit Ratings Affect Employment

Credit Ratings Determine Living Situations

Saturday, March 27, 2010

Sued

Foreclosure

Garnished Wages

Ruined Credit

Identification

Exception to Tax Lien Rule

Shortcut

Tip

Thursday, March 25, 2010

Credit Scores

Multiple Scores

Mortgages and Credit Scores

Raising Your Credit Score

Tuesday, March 23, 2010

Credit Scores

Considerations

Significance

Tips

FICO Scores

Payment History

Credit Utilization

Credit Utilization Example

Monday, March 22, 2010

History

Personal Services

Credit Scores

Vantage Scores

Business Services

Seven Years

Ten Years

No Limitation

Reporting Errors

History

Debt Burden

Considerations

Pay for Deletion

Sunday, March 21, 2010

Law

Website

Scores

Warning

Timely Repayment

Negotiate

Dispute

Personal Statement

Instructions

Friday, March 19, 2010

Definition

Factors

Time Frame

Misconceptions

Considerations

High Balance

Late Payment

Canceling Older Credit Cards

Multiple Inquiries

Co-signing Loans

Wednesday, March 17, 2010

Factors

Types

Other

Secured Credit Card Options

Piggyback Credit Card

Apply for an Auto Loan

Payment History