Does a Deferred Student Loan Help Your Credit?

Students and former students who are not financially able to make payments on their student loans can apply to have the loans put in deferment. If the lender grants deferment, the borrower can stop making payments on the loan for a specified time period. In general, student loan deferment neither helps nor hurts your credit score.

Payment History

The company that services your student loans reports your payment history and loan balance to the credit bureaus on a regular basis. When you miss a payment that you were supposed to make, this hurts your credit score. When you make payments on time and pay down your balance, this helps your credit score. When a loan is in deferment, the lender simply reports that the account is being paid as agreed because the deferment agreement states that you do not need to make payments. This does not help or hurt your score.

Loan Balance

The balance of your student loan will increase during deferment because of accrued interest unless you fall into one of two major categories. First, if you have a subsidized loan, the federal government pays all of the interest during deferment so your balance stays the same. Second, if you make voluntary interest payments during deferment, this keeps your balance from increasing. Otherwise, the interest is added to the loan balance when the deferment ends. If this occurs, the higher loan balance can slightly lower your credit score because you owe more money and have paid a smaller proportion of your initial loan balance.

Future Implications

Deferments never last forever, so you will need to start making payments on your deferred loan again in the future. If you miss the date when payments start again, you could end up with a late payment on your credit report, which will hurt your score. Or you might have trouble suddenly budgeting for the student loan payments and end up with late payments that way. In addition, if you did not pay interest during the deferment, your payments might be higher than you initially expected. For a good credit score, you must plan ahead and make student loan payments by their due dates when your deferment ends.

Tips

You must apply for deferment before you stop making payments on your student loan. To avoid damaging your credit, continue making payments until your lender has sent confirmation that your loan is actually in deferment. Otherwise, you could miss a payment, which would lower your credit score. In addition, some lenders do not grant deferment unless your account is in good standing. Therefore, plan ahead and apply for deferment as soon as you know you will need it. Lenders often grant deferment when you are in school at least half time, unemployed, serving in the military in active duty or suffering extreme financial hardship.

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How to Ask a Collection Agency to Remove an Account From Your Credit Report

The best method to remove unwanted items from your credit report is by contacting a collection agency or disputing the item yourself. Removing items may be the ideal result for errors or discrepancies you may have found while looking through your report or applying for a loan or line or credit. Depending on the nature of the item, it may take both methods to fully remove the account from your credit report.

Instructions

1

Obtain a copy of your credit report through the three major credit bureaus or through the FreeCreditReport website (see Resources). Contact Experian at 888-397-3742, TransUnion at 800-916-8800 and Equifax at 800-685-1111.

2

Locate the items you wish to dispute and gather the contact phone number from the entries. Obtain any relevant information about the account, such as the date you opened it, the amount owed and any additional information you feel you need to dispute it.

3

Call the phone number on the entry to speak with a collection agency representative regarding your account. Provide the representative with information needed to access your account and explain your reason for wanting the item removed from your credit. Ask for proof that the agency removed the entry, such as a letter on the company's letterhead, for your personal records.

4

Write the collection agency to once again provide your reason for removing the account and to give it any documentation to help prove your case. Send a copy of your credit report showing the entry you want to dispute. Keep a copy of all of these documents and record the date you sent them to the collection agency.

5

Dispute the account with the three major credit bureaus if the collection agency did not remove it. Send a letter to the credit bureau or through the online form if you received you reports online. State the reason for the removal of the item and provide any important details from the information you previously gathered.

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How to Remove Duplicate Information on a Credit Report

After obtaining your annual credit report, you may see some discrepancies, such as incorrect balances or duplicate information. If there is duplicate information on your credit report, you should have it removed as soon as possible so that your information stays correct. An incorrect entry on your credit history could affect your credit score and your ability to obtain a loan or insurance at lower rates--it can even affect your employment.

Instructions

1

Apply online for your free annual credit report from Annual Credit Report (see References). Follow the directions to receive your free report.

2

Look at your report to see if there is any duplicate information. If so, write down the account number and the description of the duplicate account. Find your duplicate account statement and make a photocopy of it. You will need to send this to the credit reporting agency that is reporting the duplicate information.

3

Write a letter of notice explaining the duplication. Include the account number and name on the account, explain where you see the duplicate information on your credit report and note the information in quotation marks.

4

Attach a copy of the statement for the account you are reporting. Then sign and date the letter of notice before placing it in an envelope. Send the letter to whichever agency is reporting the duplicate information--Equifax, Experian or TransUnion (see Resources for their mailing addresses). If your criteria fit the emailing or faxing requirements, you may be able to send your information in one of those ways.

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Will My Credit Score Increase if I Pay a Collection?

Your credit score ranges from 350 to 850 and helps lenders and creditors alike determine how likely you are to pay off your debts on time. The higher your credit score is, the lower interest rates you can qualify for, saving you money on your credit card bills and loan payments.

Facts

Collection accounts appear on your credit report when you stop making payments to a creditor who then sells or transfers the debt to a collection agency. Collection agencies often report debtors to the credit bureaus in an effort to elicit payment on defaulted accounts. Collection accounts over $100 have a negative impact on your credit scores and hurt your chances of obtaining new credit and loans at reasonable rates.

Significance

Although paying off collection accounts is admirable, doing so does not increase your credit score. The Fair Credit Reporting Act, however, requires all companies that furnish information to the credit bureaus to maintain accurate reporting records. Thus, the collection agency must update the collection account's status on your credit report to reflect that it was paid off. Lenders reviewing your credit files will see that you paid off the outstanding debts, even if your credit score remains unaffected.

Time Frame

Both paid and unpaid collection accounts can only remain a part of your credit history for seven years from the date your original debt was classified as 180 days past due. Making a partial or full payment on the debt does not alter its reporting period. If a collection account remains on your credit report for longer than federal law allows, you have the right to dispute the account with the credit bureaus in order to have it removed.

Considerations

While paying off collection debts doesn't increase your credit score, having the collection agency's trade line removed from your credit report in its entirety will have a positive effect on your credit rating. Some collection agencies will agree to delete their trade lines in exchange for payment of the debt. If a collection agency agrees to do this, get the agreement in writing before paying off the debt to ensure that the company upholds its end of the bargain.

Features

If a collection agency won't agree to delete the collection account from your credit record in exchange for payment, take solace in the fact that the older an entry is, the less impact it has on your credit score. According to the Fair Isaac Corporation, the company responsible for calculating FICO credit scores, newer entries carry greater weight in the scoring process than older ones. Thus, whether you pay it off or whether you don't, the collection account will impact your credit score less and less until the credit bureaus remove it from your credit history.

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What Do You Do When Your Husband Ruined Your Credit?

Opening joint credit card accounts or buying a home or a vehicle with your husband may seem like a natural part of being married. But what do you do if your husband stops paying the bills? Your credit could be ruined, right alongside his, if you place blind trust in the wrong person. Once the damage is done, you can take steps to clean up your credit rating and start fresh.

Check for Accuracy

Obtain a copy of your credit report from all three agencies and check the negative account listings for any inaccuracies. The Fair Credit Reporting Act prohibits credit reporting agencies from reporting inaccurate information. If you are listed as the joint account owner, the agencies can legally report the delinquencies on your credit file. If you are only listed as a user on the account, you are not responsible for the payments.

Check Dates

According to the FCRA, negative entries can only remain on your credit report for up to seven years. If your credit is ruined due to past-due payments, charge-off accounts and collections accounts, you can have the negative listings removed after seven years. Check your state statutes of limitation for the type of accounts that ruined your credit. For example, credit cards are considered open accounts and car loans are written agreements. If the statute has expired, the creditor or collection agency cannot obtain a judgment against you. Judgments make an already bad situation worse; in some states, they are valid for 20 years, giving creditors the right to seize property and garnish funds.

File Disputes

File a dispute with each credit reporting agency to document each inaccuracy or account that has exceeded the seven-year reporting window. TransUnion, Experian and Equifax allow online disputes; visit their websites and follow the instructions. The agencies have 30, sometimes 45, days to investigate the dispute. If the information in the report cannot be validated with the creditor or collection agency, they must remove the negative item listing.

Rebuild Credit

If your credit is ruined, you have nowhere to go but up. Start rebuilding your credit by making your payments on time. Timely payments account for 35 percent of credit scores. Open a secured credit card account, make charges monthly and pay them off monthly. Secured cards require fees and deposits, but if your credit is ruined, you may not have an alternative as unsecured cards are difficult to obtain. Youll also pay higher interest rates for vehicle and other installment loans, if you can get one. Find a co-signer to help you get the loan, then make responsible payments and your credit will slowly improve.

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What Is the Credit Score Range for Excellent?

Many lenders and potential employers look at your credit score to determine your creditworthiness and financial history. FICO credit scores fall between 300 and 850. An excellent score, 750 or above, will help you get the best loan rates, and possibly a job.

Interest Rates

An excellent credit score is an effective bargaining tool when shopping for a loan. The lender will look at your proven ability to pay bills on time as a strong indication you will continue to do so. As a reward for excellent credit, expect to be offered the lowest market interest rates, which could save you thousands of dollars over the course of your loan.

Excellent Credit Factors

Although the formula used to create credit scores is not public, there are five main categories that determine your credit score. Thirty-five percent of your credit score is devoted to payment history. How you utilize the credit you have counts for about 30 percent. Fifteen percent is devoted to how long you've had credit. Credit inquiries and your type of credit each make up 10 percent.

Rebuilding Your Credit

You can raise your credit score by following some simple rules: Pay all of your bills on time. Use credit wisely and sparingly. Don't carry high balances on your credit cards. If they have high balances, work on lowering the amount you owe to 1/3 of your total credit limit. With time, your credit score will rise.

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How to Get an Ex-Spouse's Credit Card Off of My Report

Separating your finances is one of the trickiest aspects of a divorce. One key area to address is your credit card accounts. The only situation in which you can get an ex-spouse's credit card account completely off your credit report is if you were only an authorized user on the card. In this case, unless you live in a community property state and the debts were included in the divorce agreement, you are not legally liable for your ex-spouse's debts on this card, and you can get it off your credit report immediately.

Instructions

1

Call the phone number printed on the back of your credit card.

2

Ask to remove your name as an authorized user on this account, and ask to receive written confirmation of your removal and lack of liability for debts.

3

Write a letter to the credit card company if it does not comply with your request. Point out that you never signed the account agreement, you were only an authorized user and you are not legally responsible for repaying the credit card debt.

4

Dispute the credit card account with the credit bureau if the credit card company fails to cooperate. When you pull a copy of your credit report, the last page of the report provides instructions for how to dispute accounts that do not belong to you. Because the account is in your ex-spouse's name, this will remove it from your credit report.

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Is Canceling Credit Cards Bad for Your Credit?

After paying off a credit card debt, you might think the next best move is to close the account to avoid future spending temptations. Think again. Though it may seem like a logical thing to do, canceling a credit card account can actually have a negative effect on your credit score.

What Goes Into Score

Your credit score is based on many aspects of your history of credit management. Whether you pay on time and how much debt you have carry the most weight in determining your score. Other considerations include how much credit you have available to you, how long you have had that credit and how often you take out new credit. Canceling credit cards can have a negative effect on your debt ratio and your credit history.

Debt Ratio

How much debt you carry relative to how much credit you have available can affect your credit score. For example, someone with $1,000 in debt and $30,000 in available credit is a better credit risk than someone with $3,000 in debt and only $10,000 in available credit. When you close a credit card account, it reduces this ratio. Say you have $5,000 in total credit card debt and two credit cards, each with a $10,000 limit. Your debt-to-available-credit ratio is 25 percent. If you pay off one card that has $2,500 in debt and then close the card, your debt ratio stays at 25 percent. However, if you leave the card open, your debt ratio drops to 12.5 percent.

Credit History

Another way that canceling a credit card affects your credit score is by shortening your credit history. This is especially true if the card you are canceling is one you have had for many years. Also, if the account was one where you constantly paid late, canceling the account will not make the black marks you incurred go away, even if you have paid it off, according to MyFICO.com. If you feel you must cancel a card, Leslie McFadden of Bankrate.com says you should cancel a newer card or one with a low credit limit if possible.

Alternatives

Instead of canceling a credit card, simply put it someplace where you won't be tempted to use it, such as in a safe. Don't forget about it, however. McFadden suggests using the card every few months, charging a couple of items you would buy anyway, such as groceries or gas, and then paying off the bill when it comes. This will prevent your credit card company from charging you an inactivity fee or canceling the card because of lack of use.

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Does Opting Out of Credit Card Offers Improve Credit Scores?

Pre-approved credit card offers mean your credit report is being pulled. Too many credit inquiries can lower a credit score. Opt out of credit card offers to stop unnecessary credit inquiries.

Effects

Pre-approved credit card offers potentially lower a credit score. Credit inquiries account for 10 percent of a credit score. Each time you receive a pre-approved credit card offer, your credit report has been pulled.

Benefits

When you opt out of credit card offers, you are denying creditors the right to pull your credit report without your permission. Opt out of credit card offers and avoid applying for credit cards to see a rise in your credit score. Deciding to opt out of credit card offers also relieves the temptation that goes along with a pre-approved credit card offer.

Procedure

To opt out of credit card offers, send a written request to Equifax, Experian and Trans Union. Notify the bureaus that you want to opt out of all credit card offers. The bureaus will notate your credit file, and you will no longer receive unauthorized credit card offers or unwanted inquiries on your report.

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Interesting Facts About Credit Scores

Before credit scores were prominently used in the 1980s, human judgment was the only factor in determining whether someone was given credit, according to Philly.com. Understanding common misconceptions regarding credit scores will help you improve your own credit score while staying informed.

Applying for New Credit

One common myth surrounding credit scores is that when you apply for new credit your score dramatically drops. Applying for new credit doesn't necessarily cause your credit score to drop, and if it does, it will only drop slightly, according to My FICO. The majority of credit scores are not affected by multiple auto, mortgage or credit card applications, even if they occur within a short period of time.

Soft Inquiries

Some people don't realize there are two types of inquiries that occur when you apply for new credit. Soft inquiries have no effect on your credit score and include things like a credit card company checking your credit report to see if you qualify for its card. Mortgage lenders also use soft pulls to preapprove mortgages. Potential employers can use them for background checks and banks may use them to verify your identity, according to Lending Tree. Most of the time, you won't know if a soft pull has been performed on your credit score. You can check your own credit score once a year for free with a soft pull.

Hard Inquiries

Hard inquiries do affect your credit score and include things like applying for a loan or a new credit card. Each time you perform a hard pull it lowers your credit score by five points for six months, according to Lending Tree. Some banks perform hard pulls when you open a savings account. Limiting the amount of hard inquiries that you pull will help protect your credit score.

How are Credit Scoring Systems Developed?

Credit scoring systems are developed when a creditor or insurance company collects a random sample of its customers and analyzes characteristics to identify risk, according to the Federal Trade Commission. Each characteristic is a weight based on how strong it is at predicting which individuals would be a good risk or investment. The Equal Credit Opportunity Act prevents creditors from using characteristics like race, sex, religion and marital status in these scoring systems.

Average Credit Score

The average FICO credit score in the United States is 678, according to the University of Texas at San Antonio, as of 2010. The FICO credit score is used by the three major credit bureaus -- Equifax, Experian and TransUnion.

Secured Credit Cards

One way of building your credit if you can't get approved for an unsecured credit card is by using a secured card. To get a secured credit card, you pay an up-front free such as $200 and get a credit card with a $200 credit limit. You're basically borrowing your own money, but these payments are reported to the credit bureaus, which will help build your credit score if you make payments on time.

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Does Settling a Loan With a Debtor Negatively Impact Your Credit Score?

Consumers with a higher credit score are considered to be less of a credit risk. The higher your score, the better. FICO credit scores go from 300 up to 850. If you owe unpaid debt on a loan, it may be tempting to settle that debt with the lender but you should understand if that settlement will negatively impact your credit score.

Scores

In order to understand how settling a loan can impact your FICO credit score, you must understand how a credit score is determined. According to FICO, how well you pay your bills, the length of your credit history, the amount of debt you have, the types of credit on your report, and the amount of recent debt you've applied for all factor into your score's calculation. Your score is not a stagnate number, but changes as the data within your credit report changes.

Significance

Settling a loan means you pay the lender of that loan less than the amount owed. A lender may be willing to accept less rather than get nothing at all from you. This is especially relevant if you're behind on your loan payments. A paid-but-settled account is reported to the bureaus as "settled in full," not as "paid as agreed." This is a negative on your credit report. According to John Ulzheimer of CNBC, credit-scoring models, like the one used by FICO, view settled accounts as a negative because you did not honor the original terms of your loan agreement by paying the lender back all that was owed.

Considerations

When you settle the loan, there is a portion of the debt that the lender does not receive payment for. The lender may forgive this amount and write it off as a loss on its taxes. The lender will then report that balance to the Internal Revenue Service as income to you. The lender will send you a 1099 form for you to include on your next tax return. The amount listed on the 1099 counts towards your total income, which means you may or may not owe taxes on it, depending upon your tax situation.

Credit Reports

Thirty days after you've made payment to the lender and settled the loan, visit AnnualCreditReport.com and order a free copy of your credit report. The Fair and Accurate Credit Transactions Act gives you the right to receive one free copy of your report from Experian, Equifax and TransUnion each year. Ensure that the loan is reporting accurately. If it isn't, the Fair Credit Reporting Act gives you the right to dispute it with the bureaus and have it corrected within 30 days.

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Am I Eligible for My Free Credit Report?

You can obtain a free annual report from all three of the nation's credit reporting agencies (TransUnion, Equifax and Experian), making it easy to monitor your credit on an ongoing basis. With cases of identity theft on the rise, you should monitor your credit report regularly. If someone does steal your identity and use it to open credit cards and take out loans, the evidence will show up in your report.

The Right Site

Go to the Annual Credit Report website to request the free report to which you are entitled. Simply typing "free credit report" into a search engine is likely to bring up a number of scam sites that promise a free credit report, but often require you to sign up for costly credit-monitoring services. At the Annual Credit Report website, you can request a copy of your report from all three major agencies (TransUnion, Equifax and Experian).

Stagger Your Reports

It is a good idea to check your credit profile at all three of the major credit-reporting agencies. Since you are entitled to a free copy each year, it makes sense to stagger those requests. If you request one report every four months, you can maximize its value to you.

Check Your Reports Carefully

Getting your credit report is only the first step. Once you have it, you'll need to check it carefully to make sure there are no outstanding issues. It is not unusual for credit reports to contain errors, and a mistake in your credit report could cause you to be turned down for a loan, or to pay a higher interest rate than you would otherwise have to.

Set Reminders

It is a good idea to set reminders on your email program, or write them on your calendar, to remind yourself to check your credit report every four months. Since identity theft can strike at any time, it is important to check your credit report as often as possible, though you are entitled to only one free report from each agency each year. Tracking the changes on your credit report is one of the best ways to spot early signs of credit problems.

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New Jersey Fair Credit Reporting Act

The New Jersey Department of Banking and Insurance offers state residents several resources for managing and protecting consumer credit, especially as it pertains to credit reports. The Fair Credit Reporting Act is a federal statute that protects consumers by regulating the collection, dissemination and use of consumer credit information. Following a significant amendment of the federal law in 1996, New Jersey enacted its own Fair Credit Reporting Act (FCRA) to provide additional consumer protection with consumer credit reports and credit reporting agencies.

Significant Credit Report Protections

A credit report is a report on an individual's credit record that is often used to determine whether credit should be extended to that person. Among the numerous credit report-related protections offered by state law, three of most practical use to New Jersey consumers are the right to receive a free copy of your credit report, the right to correct inaccuracies on a credit report and the right to freeze access to a credit file.

Free Copy

New Jersey residents are entitled to a free copy of a credit report once a year from each of the major credit reporting agencies (Equifax, Experian and TransUnion). To make the process easier, a consumer may view all three credit reports at the AnnualCreditReport website. Receiving a credit score is not part of the right to a free copy of the credit report, but consumers can receive their credit score for a reasonable fee from the credit agencies.

Correcting Inaccuracies

Credit reporting agencies must investigate credit report errors brought to their attention as described by the Federal Trade Commission (FTC), usually within 30 days. The right to correct inaccuracies arises from the federal FCRA and is enforced by the FTC, but New Jersey encourages residents also to file credit-related complaints with the state Department of Banking and Insurance.

Security Freeze

A "security freeze" is a notice that prohibits consumer-reporting agencies from releasing a report that is subject to a security freeze to a third party without the consumer's express authorization. To place a security freeze, the consumer must send a written request to the reporting agency by certified or overnight mail or through a secure email connection.The agency must place a freeze on the consumer report and send a written confirmation no later than five business days after receiving the request.At that time, the agency must provide a unique personal identification number or password that the consumer can use to authorize the eventual release of information.

If consumers wish their reports to be accessible to a specific party during the freeze, they must request by the same mail or email methods that the credit-reporting agency temporarily lift the freeze. The security freeze remains in effect until the consumer requests its removal. The agency has three days to comply with a temporary lift or removal request.

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How Do I Repair My Credit Report Due to Child Support?

The Social Service agencies of most state departments are responsible for monitoring child support payments. If you don't make your child support payments, these agencies do report it to the credit reporting agencies, which can cause your credit score to plummet. Overdue child support payments can also cause a blemish on your credit report, which can prevent you from obtaining credit and loans in the future. Whether the overdue child support showing on your credit is accurate or inaccurate, you can repair your credit.

Instructions

Overdue Child Support

1

Pull your credit reports. In order to see if overdue child support is showing on your credit reports, order a copy of your credit report from each of the three credit agencies (TransUnion, Experian and Equifax -- see Resources for links).

2

Contact social service agency for your state. If overdue child support is showing on your credit report, contact the social service agency for your state. You can usually obtain the contact information from the credit report.

3

Make arrangements to pay your overdue child support. Tell the social service agency that you would like to make payment arrangements or pay off your outstanding child support amount. Once you make the payment arrangement, make sure you receive a copy of the agreement in writing from social services and also be sure to stick to your end of the deal by paying the child support amount you've agreed to pay. Once you pay your overdue child support or start to make payments, the overdue child support is removed from your credit report.

Inaccurate Child Support

4

Pull your credit reports. Request one copy of your credit report by phone, fax or online from each of the three credit reporting agencies (TransUnion, Experian and Equifax -- see Resources).

5

Review each credit report. Review each credit report thoroughly to see if overdue child support is showing as a negative item on your credit report. If overdue child support is showing, but you no longer owe child support or you paid the overdue child support amount, then you can dispute the item.

6

Dispute the overdue child support. Read the instructions for each credit agency on how to dispute inaccurate items and follow these instructions to start the dispute process on having the item removed from your credit. The credit agency may require that you provide proof of child support payment such as cancelled checks or a letter from the social services agency.

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Adverse Credit Problems

Any type of bad credit on your credit report is considered adverse credit. The length of time these items remain on your credit file can vary. Whenever you have bad credit it affects the cost that you pay for other credit products and services. Sometimes adverse credit information is reported on your file in error. If this happens you should contact the credit reporting agency and dispute the information in writing.

Credit Score

If you are 30, 60 or 90 days past due on a credit account, this is considered adverse credit. This delinquency can lower your FICO score or credit score. A FICO score is what lenders use to predict the likelihood that you will default on a loan payment. The score can range from 300 to 850, and the higher your score the better. Lenders will use your score as a method for determining the interest rate they will charge for credit cards, auto loans, mortgage loans and home equity loans. Some lenders will not approve you for a mortgage if you have a score less than 620.

Types

Other forms of adverse credit include judgments, liens, foreclosures, repossessions, collection accounts and bankruptcies. Adverse credit can remain on your credit file for seven years with the exception of bankruptcies, which can remain for 10 years. As time goes on, adverse credit will have less of a negative impact on your credit file even though the seven-year time frame has not passed.

Re-establish

After you have experienced adverse credit, you will need to re-establish your credit. Some credit cards will charge you high rates of interest along with fees if you are approved. It is not uncommon to see annual fees, late fees, over-the-limit fees, application fees, maintenance fees, processing fees, and an activation fee offered by credit card companies catering to individuals with adverse credit.

Secured Card

When you have adverse credit you may have to apply for a secured credit card. This type of card has a high rate of interest and an annual fee. You must have a bank account, with a deposit of $300 to $500, which serves as security for the credit card. Your credit limit is the amount of the deposit. Once you have paid on your secured credit card, for one year, you may be able to receive a standard credit card with favorable terms.

Improvements

The best way to counter adverse credit is by making your payments on time with any new established credit. You need to pay consistently on time. It takes time for you to correct adverse credit. After seven years the vast majority of it will drop from your credit file.

Universal Default

If you are ever late with a credit card payment, your other credit cards could increase your interest, lower your limit or close your account altogether even though you have not been late with them. Credit card companies will periodically review your credit file to see if your credit profile has changed. They look to see if you have late payments, acquired too much debt or use too much of your available credit. This is called the universal default clause.

Considerations

When you have adverse credit it can cause a number of problems. You could be rejected for loans and other credit products. A lot of companies will review your credit report before they hire you, and adverse credit could prevent you from getting a job. Insurance companies will charge higher premiums when you have bad credit. Without a credit card you may not be able to rent a car or a hotel.

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Will Deleting a Charge-Off Improve My Credit Score?

A charge-off indicates you failed to honor an agreement with a previous creditor, and it is one of many items that negatively influences your credit rating. The Fair Credit Reporting Act (FCRA) notes that a charge-off appears on your credit report for seven years before being automatically deleted. Removing a charge-off from your credit record will improve your credit scores.

Credit Impact

How much a charge-off affects your credit scores depends on other data present in your credit file. Removing a charge-off impacts each individual's credit rating to a different degree, but the change is always a positive one. Once a charge-off disappears from your credit report, it is longer visible to lenders reviewing your records, and credit-scoring formulas no longer consider it when determining your scores.

Charge-off Disputes

If a charge-off appears on your credit file inaccurately or for longer than the seven-year reporting period mandated by the FCRA, you have the legal right to dispute the charge-off with the credit bureaus. Federal law requires the credit bureaus to investigate disputed credit information, and, if the information provider (creditor) cannot validate the disputed charge-off, the credit bureaus must remove it. The FCRA also gives you the right to dispute a charge-off with the information provider directly.

Credit Repair

A charge-off can have far-reaching consequences. Creditors typically sell charged-off debts to debt collectors, and collection agencies add their negative reports to your credit file after purchasing the debt. Should the original creditor or a collection agency sue you to recover the unpaid debt, a court judgment against you can also appear on your credit report, causing further credit damage.

You can avoid the future credit consequences a charge-off carries by settling the balance with the original creditor or, if possible, by paying off the debt in full. While paying the debt does not directly influence your credit rating, a paid charge-off always looks better to those reviewing your credit history than a debt left unpaid.

Negotiating With Creditors

Although creditors have various policies regarding modifying credit information, all consumers can attempt to negotiate with their creditors for more favorable reports following a charge-off. Creditors have the power to modify reports they previously filed with the credit bureaus. Thus, you can request that the creditor remove the charge-off from your credit report in exchange for payment. Once the company removes the charge-off from your credit history, your credit scores will improve.

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Will Paying Off a Judgment Raise Your Credit Score?

When you apply for a credit card or loan, your lender reviews your credit report. Your credit score rests between 300 and 850 and provides lenders with a generalized estimate of how dependable you are at paying off your debts. A judgment hurts your credit rating -- making it more difficult to obtain new credit and loans.

Facts

A judgment appears on your credit report if a creditor takes you to court over an unpaid debt and the judge decides in favor of the creditor. The court then enters the judgment into your county's public record. The credit bureaus pick up the record of the judgment against you, match it to the personal information contained within your credit file and insert it onto your credit report. This causes your credit score to drop.

Significance

Paying off a judgment does not remove the judgment from your credit report. The judgment notation will simply update as "paid." Thus, paying off your outstanding debt after your creditor wins a lawsuit against you won't improve your credit score. It will, however, stop the creditor from recovering the debt through a wage garnishment, bank account seizure or real estate lien.

Time Frame

The judgment, whether paid or unpaid, won't remain a permanent fixture within your credit file. The Fair Credit Reporting Act notes that a judgment will remain on your credit report for a minimum of seven years. If your state gives the creditor longer than seven years to enforce the judgment, the notation will remain on your credit report longer. California, for example, allows creditors to pursue judgment debtors for 10 years. As a result, a judgment levied in California would remain on your credit report for 10 years rather than seven.

Misconceptions

Many individuals believe that they can negotiate with the creditor and have the judgment removed in exchange for payment. While this may occasionally work with collection accounts, a creditor cannot remove a judgment from your credit report since the judgment was reported by the court -- not the creditor itself. Once the judgment "times out" and is no longer a part of your credit history, your credit score should immediately improve.

Considerations

You have the right to contest a judgment if the judgment was levied against you in error. If, for example, you did not receive notification of the pending lawsuit or you did not owe the original debt, you have the right to return to court and file a "motion to vacate." Should the court approve your motion, it will grant you a new hearing and an opportunity to present your case. If you are successful, the court will overturn the original judgment and remove it from your credit file.

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How to Get Rid of Sallie Mae Account With a Zero or Transfer Balance

Sallie Mae provides financing for private and federal student loans and as a creditor will report account information to the credit bureaus. Lenders use account history on credit reports to decide whether to extend you credit and at what interest rate, according to the Sallie Mae website. It is not recommended that credit accounts with a good history, either open or closed accounts, be removed from your credit report because these accounts help improve your credit score. If needed, closed Sallie Mae accounts with a zero balance or accounts that have been transferred to another company can be removed with a little bit of persistence.

Instructions

1

Call Sallie Mae directly and ask it to remove your accounts from all of your credit bureau reports. Explain why you need them removed, and then the customer-service representative can send your request to its credit reporting department to have them removed. If the information on your credit report is correct in regard to your Sallie Mae accounts, Sallie Mae may not remove the accounts from your credit bureau reports. If Sallie Mae is reporting inaccurate or false information to the credit bureaus, you have a right to dispute incomplete or inaccurate information, according to the Federal Trade Commission.

2

Dispute Sallie Mae accounts with all three credit bureaus: Experian, Equifax and Transunion. First, you will need a copy of your credit report from all three credit bureaus, and then you can either file the dispute online through their websites, by phone or in writing by mail. Ask the credit bureaus to remove your Sallie Mae accounts from your credit reports. They have 30 days to respond to your request, and if they cannot verify your accounts, they are required to remove them completely from your credit reports. If your accounts do not have any negative information such as late payments attached to them and the accounts are closed or the balance has been transferred, the account will most likely be removed from your credit report. The credit bureaus verify the accounts with Sallie Mae, and if Sallie Mae does not respond or dispute the validity of your request, the credit bureau will automatically remove the accounts from your credit report.

3

Request the original, signed copies of your loan documents from Sallie Mae and give them 30 days to respond to you. This forces Sallie Mae to prove that you have loans with them. If after 30 days, Sallie Mae has not supplied you with your requested copies, send another request in writing to remove the accounts from your credit reports stating that you do not have loans with them. Explain that they failed to supply you will the original documentation proving that you do indeed have loans with them. If Sallie Mae cannot prove you have accounts with them, they have to remove those accounts from your credit reports.

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Is a Credit Bureau Required to Look at Information Directly From a Consumer?

The national credit bureaus keep track of your private financial data, but you, the consumer, have little influence on what is in your profile. If you send in data to the credit agencies, they will probably just ignore it, because you likely do not have the proper setup to send them data. Some alternative agencies, however, base their business model on looking at information from the consumer.

Requirements

The credit bureaus do not have to look at information you send to them, because only creditors that pay for and receive approval for a national credit bureau subscription service may report the status of loan accounts. Also, the credit bureaus have stringent reporting requirements for report updates. Lenders, for example, must send in data properly formatted using a universal data form (UDF).

Disputes

The one instance in which the credit bureaus must look at information is when you initiate a dispute. If you see a negative item erroneously reported to your profile, the national bureaus have 30 days to investigate your claim or remove the item in question from your report. Part of this investigation might involve you sending in documents to back your claim, such as a bank statement saying you paid off a debt. Even then, the agencies usually do not delve much into details of your evidence, because the bureaus automate the dispute process and convert evidence into alphanumeric code.

Alternative Agencies

As a result of the national bureaus excluding some trade lines from their reports, such as rent payments, alternative agencies popped up to gather this data. Alternative agencies do the reverse of the major bureaus: They charge consumers to verify their information. It usually costs $20 to $30 a month per bill for you to send a bill into an alternative credit bureau and have them verify your payment.

Tip

Most lenders use credit reports from the national reporting agencies rather than an alternative score, although they might consider a report from an alternative agency. Thus, you should put your efforts toward improving the trade lines that affect your traditional credit score, such as bank loans and credit cards. The providers of these types of accounts usually report to the bureaus automatically, but you should still ask the lender if he reports to all three national bureaus.

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Federal Trade Commission Bankruptcy Credit Reporting Laws

The Fair Credit Reporting Act was created in 1970 to develop universal standards for the reporting of credit debts by credit bureaus. Bankruptcy is one of the many kinds of debts reported by the credit bureaus and the act details how long it can be on your credit report and other restrictions.

Length of Time

Most discharged debts on your credit report are removed after five years as a way to keep your credit report up to date and to focus on your recent and current debt. Bankruptcies deviate from this rule and will stay on your credit report for 10 years before finally being removed. Anyone viewing your credit report will see the bankruptcy and it will have an affect on your credit score.

Filing and Dismissal

The Fair Credit Reporting Act stipulates that if you file for bankruptcy and then seek a dismissal, the credit bureau has the right to note on your report that you filed for bankruptcy. They are also required to note the dismissal as well. The filing may cause a dip in your credit score, but the dismissal should offset it in the eyes of most creditors.

Balances

When you declare bankruptcy, the balance of most debts goes to zero. While the credit bureaus can report your bankruptcy, they must also report that all of the debt associated with the bankruptcy is reduced to zero. If the bureaus do not make the changes, then you have the right to dispute those debts and force them to make the change.

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How to Improve a FICA Score

The FICA score is the one score that will follow you all your life. Depending on how well you manage your money that can be a good or bad thing. Raising the FICA score is challenging, but really is about good money management. When someone runs your credit, it is the main thing they are looking for. Your FICA score is, is based on amount of debt versus income, payment history, type of debt and longevity.

Instructions

1

Don't borrow what you can't pay for now. That is a simple rule, but it is the one most people break. Of course this is not about homes or cars, but furniture, dinner out and so on . If you buy a $3000 item and only pay the minimum on it, then you will have paid over $15,000 for it by the time you are done due to interest.

2

Pay your bills on time monthly: One of the most effective means is an American Express (classic). They do not let you carry over the balance without consequences. Paying your bills on time cannot be stressed enough. If there is a history of late payments or discharges then you will be penalized with bad terms or no credit.

3

Get credit: it is the new wave to think that you should not have any debt and that is not true. If you do not have any debt you are in a worse position than someone with bad credit. With the person with the bad credit, they know what they are looking at, but the person with no credit is a toss of the coin.

4

Check all the credit files on you yearly. People sometimes don't find out there is wrong information or even identity theft until they go to purchase a home or a car. Be proactive and take advantage of your free yearly report. Challenge those items that are wrong.

5

Don't open or change too much credit at once or it will work against you. Even if you just got married and changed your last name, change over your credit cards slowly or you could be flagged for fraud or denied credit for opening new accounts.

6

Use associated accounts sparingly. If the other party is late or fails to pay then your credit gets hit.

7

Monitor credit reports: with identity theft at an all time high it is essential that you have your credit reports monitored. This is essential if you have an ex who knows your information or if you have been the victim of identity theft previously.

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Does It Affect Your Credit to Have Multiple Credit Cards?

Having credit card debt is always a bad thing, because finance charges mean you owe more money over time. Multiple credit cards, however, are essential to a good credit score as long as you manage them properly. Be careful not to have too many credit cards out at once, because it could end up hurting your score.

Identification

Simply having credit card accounts does not hurt your score until you have eight of them, according to The Motley Fool. Actually, you should not have more than eight revolving accounts. Credit cards are the most common type of revolving account, but there are some other revolving lines, such as home equity line of credit.

Benefits

Consumers should have at least one credit card account to get a variety of loans, which counts for 15 percent of a credit score. To have a truly elite credit score -- above 760 -- you should have two revolving accounts for every installment loan to get the perfect mix of credit, according to MintLife. Also, the more credit you have available, the lower your debt to credit ratio, which improves your score by showing that you need a smaller percentage of what a creditor offers.

Increased Risk

The more monthly credit card bills you have the more likely you are to spend money on credit and/or miss a payment. Missing payments or worse, defaulting on a credit card and forcing the creditor to send it to a collections agency, likely outweighs the benefits of taking out extra credit cards. If you are prone to overspending or do not think you can handle so many bills, it would be wise to avoid this extra hassle.

Tip

Financial expert Liz Weston suggests that consumers try to spread out their credit card debt over several cards rather than putting everything on one and not using the other lines. The FICO scoring model dings a person's score when the credit utilization on any account is high -- usually over 35 to 50 percent. Nobody can say what your ideal credit utilization ratio is, so you should aim to keep it as low as possible overall on any particular account.

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Does Having a Mortgage Increase Your Credit Score?

Having a mortgage provider approve you for a home loan may give credence to your creditworthiness, but getting approval for a mortgage won't improve your credit score---at least in the short-term. Even if your score improves in the next few months, simply having a mortgage could make you too risky for other lenders.

Identification

As soon as you receive your mortgage your credit score will likely see a drop, because adding any new debt makes a person a greater default risk. Also, a new mortgage has no history on it and lowers the average age of your accounts---10 percent of your credit score. Once you start paying your monthly installment as agreed then your score should improve, assuming that you have no other accounts in poor standing.

Mix of Credit

If you have no other installment loans, a mortgage improves your mix of credit. The FICO score model gives a 10 percent weight to people who use a good variety of loans. Ideally, consumers should have two revolving loans, such as a credit card or home equity line of credit, for every installment loan.

Debt to Income Ratio

Lenders probably care just as much about your income to monthly debt payment ratio as your credit score. If your DTI ratio exceeds 36 percent, the lender will probably reject your applicant in any circumstance, because your income won't support your debt liabilities. Ideally, your DTI should not go past 28 percent, according to Lending Tree.

Tip

When applying for a mortgage, do not tackle any more debt. Applying for several loans at once is a characteristic of someone anticipating financial hardship. Also, lenders tend to check scores again right before the close of a sale. When the lender reviews your score again, the dip from new loans could disqualify you for the best rate or the loan altogether.

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Do My Medical Bills Affect My Credit Rating?

Credit card issuers, banks, loan companies and other financial institutions report data to TransUnion, Equifax and Experian. These three national credit bureaus add it to their files, and it shows up whenever your credit reports are reviewed. Doctors and hospitals do not typically report bills to the bureaus, but medical debts can show up if they go to collection agencies.

Reporting

Collection agencies are hired by creditors, including doctors and medical facilities, or purchase charged-off debts at a discount, then profit by collecting the full amount or a negotiated settlement. They use various aggressive methods, like letters and telephone contact, to get the money. Some add the debt to the consumer's credit reports, where it interferes with opening new accounts. Collection accounts of any kind, including medical bills, fall under "payment history" in credit scoring formulas. The MyFICO scoring website explains that this affects 35 percent of the entire score.

Duration

Medical bills that go to collections do not stay in your credit files indefinitely. The Federal Trade Commission (FTC) website explains that the duration is seven years, after which TransUnion, Experian and Equifax erase them. Your reporting period starts on the date you let the account get past due.

Judgments

Debt collectors sometimes sue you if a bill is especially large or you have known income sources that can be attached after a legal judgment. Court records are public, so the judgment appears on your credit reports if you are successfully sued for a medical bill, according to the FTC site. This adds further damage to your credit rating.

Settlement

Debt collectors primarily want to get your money, and hurting your credit is a side effect of the collection process. Collection agencies can agree to wipe out the accounts in your credit bureau files if you pay in full or settle for a mutually agreeable sum, according to Bankrate.com writer Brigitte Yuille. Ask for this while negotiating with a collector, as most firms do not voluntarily offer to fix your credit records. Insist on a written promise prior to paying off the medical bill.

Warning

All states impose a statute of limitations on medical bills and other debts. Creditors and collection agencies may not sue you once this time frame passes. MSN Money columnist Liz Pulliam Weston warns that unscrupulous debt collectors pay a few pennies for old debts, then try to strong arm people into paying them with false threats. They cannot legally sue you or put medical bills on your credit reports after the statute passes, so ignore their scare tactics.

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How Much Will a Paid Judgment Raise FICO Score?

Your credit score shows lenders how well you've managed credit in the past, and how well you might manage it in the future. Your credit score changes with every financial move you make and a negative remark, such as a judgment, can follow you for years. Luckily, you can help your credit score by paying that judgment off.

Judgment Basics

A judgment is the result of an unpaid debt. If you fail to pay a debt, such as a credit card or loan, for several months, the lender will try to collect the balance due. As part of the collection effort, the lender can file a civil case against you. The case becomes a matter of public record and any judgment the judge decides on will appear on your credit report.

Effects on Credit Score

Your credit score consists primarily of your total debt and your payment history. Positive remarks, such as paying a credit card payment on time, will increase your credit score. Serious issues, such as a judgment against you, will lower your credit score. Both the outstanding debt and the record of the court case will appear on your credit history and will hurt your credit score. Bankrate reports that a judgment remains on your credit report for seven years.

Paying a Judgment

You can pay off the debt through the court that handled your judgment case. Once you pay off the debt, the court should update your credit history to report the debt as paid. The judgment will still appear on your credit report. However, paying off the debt can improve your credit score. The amount of improvement depends on your credit history. If you have a long credit history with several accounts, paying off the judgment will not have as much of an effect as it would if you had a limited credit history since your credit score calculates all of your credit history.

Other Considerations

While paying a judgment will improve your credit score, it will also improve your credit report. Many lenders look at your credit report as well as your credit score. A lender might be willing to consider you as a lower risk applicant if your credit report shows you made good on your debt. As the judgment ages, it will have less of an effect on your credit report and score.

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Credit Repair Basics

Sometimes people need to repair their credit reports because they contain errors that can hurt their credit scores. Other times individuals need to repair their credit scores because of a poor payment history. Either way, there are steps you can take to repair both your credit score and credit report.

Write a Dispute Letter

The Federal Trade Commission suggests sending a letter in writing to the consumer reporting company detailing what information on your credit report you think is inaccurate. Include copies of any documents you believe support your claims of inaccuracy. Make sure you provide your full name and address in the letter, along with a list of each item on your credit report you want to dispute. Ask the credit reporting company to remove or correct these items on your credit report. The FTC suggests printing out a copy of your credit report, circling the items you want to dispute and then sending the printed out copy of your credit report with your letter. It's also important to send your letter via certified mail with "return receipt requested" at the post office. This will help you document that the consumer credit reporting agency received your letter. It's also essential to keep copies of all letters you send to the credit reporting agency.

Fixing Accurate Credit Report Information

Unfortunately the only way for negative information that's accurate to disappear from your credit report is with the passage of time. According to the FTC, consumer credit reporting agencies can list accurate negative information on your credit report for seven years.

Improving Your Credit Score

If you need to repair your credit score and not your actual credit report, there are several steps you can take. The first is to pay off as many as your outstanding balances on your credit cards as you can, according to MyFICO.com. The second is to make sure you pay all of your bills on time. If you don't pay your bills on time your credit score will suffer. Setting up payment reminders is a one way to make sure you pay your bills on time. Paying your bills on time won't make your credit score improve overnight, but it will help in the long run.

Communicate with Your Creditors

If you're behind on your credit card bills, it's extremely important to communicate with your creditors, according to Purdue University. If you don't communicate with your creditors, they might send your debts to a collection agency, which will hurt your credit score even more. Communicating with your creditors will decrease the chance that your bills get sent to a collection agency.

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How to Request a Credit Report Before a Job Interview

Employers sometimes check an applicant's credit report as part of the job-screening process. Having a good report can help you get a job, whereas a poor credit history might cause the employer to choose another candidate. This is because poor credit history can suggest irresponsibility or be a predictor of financial stress that could hinder your job performance. In addition, jobs that involve working with money might require that you have a positive credit history. Before you interview, check your credit report to ensure that it is accurate and see what you can do to improve it.

Instructions

1

Go to the Annual Credit Report website (see Resources).

2

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

3

Fill out the required personal information to locate your credit report.

4

Select the credit bureau from which you would like to receive the report. You get only one free report from each bureau each year. If you would like, you can order all three at the same time, but you will not be eligible for another free report for a whole year.

5

Follow the links to view your report at the credit bureau website. You might have to answer a few questions to confirm your identity before you view the report.

6

Look over your report for errors and areas for improvement. For example, if your credit card balances are close to their limits, you could pay down the balances to improve your credit.

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Credit Alert Reporting Agencies

If you are possibly a victim of fraud or identity theft, each of the major credit reporting agencies can place an "alert" on your credit reports, according to both the Federal Trade Commission and Experian.

Types

In the United States, the three major credit reporting agencies are Equifax, Experian and TransUnion, according to the FTC.

Function

A credit reporting agency must set a "fraud alert" upon written or oral notice that a consumer might be the victim of a financial-related crime, according to the FTC. These alerts inform current and prospective creditors that they should take extra steps to confirm the customer's identity before making account changes or issuing new accounts.

Identification

Once you place the fraud alert, you are entitled to receive a free credit report from each of the three major credit reporting agencies, according to the FTC. Review your credit reports carefully and write letters to the credit reporting agencies if you find reports of accounts that you truly did not open or spot other types of inaccuracies; upon request, the credit reporting agencies can mask all but the last four digits of your Social Security number from your files.

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What Happens to My Credit Rating If I Pay Off My House?

Reducing debt should raise your credit score because it shows fiscal responsibility, but paying down a mortgage does not always make the most financial sense nor help your credit score. Mortgages, for instance, usually carry the lowest interest rate of all kinds of debt. Your other debt obligations and credit history determine what happens after paying down a mortgage.

Misconception

If you have more than one installment loan, paying off your mortgage should raise your score slightly, according to Kiplinger. Consumers who only have one installment loan -- their mortgage -- could see a dip in their credit score, because the FICO score model does not differentiate between a paid-off installment loan and never having had one.

Considerations

Overall, paying off a mortgage probably results in a net gain to your credit score if you have had years of prompt payments, according to Kiplinger. Payment history constitutes 35 percent of your FICO score. Ten percent of your score comes from using several types of credit; this is why eliminating installment loans lowers your score.

VantageScore

In 2006, the major credit rating agencies completed development on the VantageScore formula, which takes into account consumer trends and more demographics, such as people getting older and paying off large loans. While paying off a mortgage may help under the VantageScore model, as of 2010, lenders tend to stick with the FICO score.

Tip

If you have the choice between paying off more than the monthly installment amount on your mortgage and another loan with a higher interest rate, pay off the loan with the highest interest rate first, according to MSN Money Central. Credit cards, for example, typically have the highest interest rate -- most more than 10 percent. Also, the FICO formula puts more emphasis on paying off revolving loans than installment loans.

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Credit Score 101

The first thing to know about the credit score it that it is a complicated matrix on which an action, like opening a credit account, can impact one consumer's score quite differently from another depending on a myriad of factors. In a sense, your credit score is like a delicate ecosystem where a change in one element impacts everything else. But, as with any ecosystem, there are certain fundamental things it requires to be healthy.

Payment History

Your payment history is 35 percent of your credit score, according to the Fair Isaac Corp., which devised the credit score. It takes into account the number of payments you've made on time, the number of accounts you've paid as agreed, the amount past due on delinquent accounts and how long they've been past due. It looks at adverse judgements such as collections and bankruptcies. The farther collections accounts and bankruptcies are in your credit past, the less weight they hold in determining your score.

Amounts Owed

How much you owe is worth another 30 percent of your FICO score. This is also referred to as credit utilization. The score looks at how much money you owe, especially compared to how much credit has been extended to you. It looks at how much you owe on installment loans, credit cards, mortgages and other loans and what your original balance was. The score favors creditors who have low balances on several loans rather than a high balance on one. It would be likely to rate a consumer higher, for example, for having three loans and owing 20 percent of the credit extended on each rather than one credit card with 60 percent of the balance due.

Length of Credit History

The scoring system wants to see that consumers have shown a history of managing credit responsibly over time. It rates consumers more highly who can show through mortgages, credit cards, installment loans and other credit vehicles a history of managing credit and making payments faithfully. Fifteen percent of a person's score is credit history. By the same token, 10 percent is new credit which includes number of new accounts opened, numbers of times creditors have asked for your report because you applied for new accounts and how quickly you reestablished good credit after past credit problems. It's a red flag if you're applying for lots of new credit but if you're car or house shopping, all inquiries within a two-week period only count as one inquiry.

Types of Credit Used

This looks at what kinds of credit you have. Mortgages, auto loans and other secured loans are looked at more favorably than unsecured credit. In fact, consumer loans are also scored less harshly, according to Liz Weston of MSN Money.

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How to Freeze a Credit File

If you have been a victim of identity theft or fear you may become one, you may wish to freeze your credit file. When you freeze your credit file with one of the three credit-reporting agencies, your file is available to others only with prior, written permission. You can request a temporary lift of the credit freeze if you are going shopping and wish to allow lenders to access your credit file. After this temporary lift, your file will again be frozen. Requesting a credit freeze will require you to contact a credit-reporting agency.

Instructions

1

Call the credit-reporting agency from which you want to request a credit file freeze (see the Resource section for a list of numbers). Ask to be transferred to the department that handles credit file freezes.

2

Give the agent the reason you are requesting the credit file freeze. The agent needs to verify your identity by asking for your name, Social Security number, address and date of birth. She may also ask for information about some of your credit file accounts. You may also be asked to fax proof of your identity, such as a utility bill showing your name and address or a copy of your driver's license.

3

Make note of the information provided to you by the agent, including a password code required anytime you wish to access your credit file or thaw the credit file. Save this important information in a safe place. If you have been a victim of identity theft, you should not be charged for the credit file freeze. As of June 2010, you may be charged $3 to $10 depending on the credit-reporting agency if you are not a victim of identity theft.

4

Ask the agent for details on how to thaw your credit file. Ask about the specific process, including how many days' notice are needed to unfreeze your file and where requests need to be mailed.

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What Is a Derogatory Account?

Your credit report contains information about your currently active credit accounts as well as accounts you held in the past. When your creditors notify the credit reporting agencies about negative information related to your management of a particular account, credit bureaus notate that information on your credit file. Accounts on which negative information exists are commonly referred to as derogatory accounts.

Credit Bureaus

The three credit reporting bureaus, Equifax, Experian and TransUnion, all use different formulas for calculating your credit score and produce credit reports that contain the same general information but presented in a different format. However, each bureau's credit report template specifies the number of derogatory accounts that you have listed on your report. When you apply for a new credit account, the lender can decline your loan application based upon the number of derogatory accounts you have.

Derogatory Accounts

Derogatory accounts take many forms but range from mortgages that ended up going into foreclosure to credit cards on which you made one late payment. Late payments are only listed on your credit report if you fall more than 30 days behind on your payments. Several late payments have a less damaging effect on your credit score than a major event like a car repossession or foreclosure. Other derogatory accounts you may see on your credit report include overdrawn deposit accounts that you failed to settle.

History

A derogatory account typically stays in your credit report for up to seven years. Bankruptcies are not technically accounts but are still classified as negative credit events and can remain on your credit report for up to 10 years. However, credit scores are more tilted toward recent events than past account history. Therefore, while derogatory accounts continue to appear on your credit report for many years, how you manage your active accounts has more of an impact on your credit score.

Errors

On occasions, credit reporting agencies receive inaccurate information from creditors and data collecting agencies. When you are declined for credit based upon derogatory information listed on your credit report, you are entitled to obtain a free copy of that report. You must submit your request for a copy of your report within 60 days of being denied credit. Upon reviewing the report you have the right to contest any inaccurate information related to derogatory accounts on your report. Credit bureaus must respond to correspondence relating to credit reporting inaccuracies within 30 days of receiving your complaint and take steps to rectify your credit report.

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How to Run a Canadian Credit Check

In Canada, knowing your credit history is vital. Having established credit allows consumers to purchase items on credit without having to pay the entire amount upfront. Credit can allow you to obtain a mortgage on a home, a loan on a car or get a utility bill put in your name. As an employer, knowing the credit history of current and potential employees is an asset. For these reasons, your credit rating is extremely important to both you and your present or potential employer.

Instructions

Obtaining your personal credit report

1

Select two pieces of government identification. These may include a birth certificate, passport, age of majority card, citizenship card, social insurance card, aboriginal status card, military card or any other government issued identification. These two pieces combined must have your name, date of birth, signature and current address.

2

Download the appropriate request form from TransUnion Canada, Equifax Canada or Experian Canada (see Resources).

3

Complete all required information on the form.

4

Photocopy required identification (both sides), and send it with the form to the address indicated.

Running a Credit Check on a Canadian Resident

5

Register with a credit agency: TransUnion Canada, Equifax Canada or Experian Canada (see Resources).

6

Prepare a form for the customer to sign, allowing access to their credit information.

7

View and photocopy one piece of identification and verify that the information on the form is correct and in accordance with the identification.

8

Submit the information to TransUnion Canada, Equifax Canada or Experian Canada, and request a history of credit.

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How to Get a Better Credit Score

One of the most important numbers in your life besides your social security number is your credit score. The higher the score the better your ability to get a loan for a house, school tuition, car or other purchase. Your credit score tells lenders about your financial history and your ability to pay back a loan. A good credit score also gets you lower interest rates. While you cannot improve your credit score overnight, you can improve it within a month a two.

Instructions

1

Pay bills on time. This shows financial responsibility. If you think you will be late with a bill, talk to your creditor and make payment arrangements. Also ask that the late payments not be reported to the credit agencies. If you are already late with a payment, try to pay as soon as you can or speak with the creditor to explain the situation. Don't ignore late bills. Let your creditor know you are aware that you are late. A creditor may be more willing to work with you.

2

Reduce credit card balances. When considering you for a loan, a lender looks at your credit limit and you balance. Try to keep you balance at 25 percent of your limit. Paying more than the minimum each month will lower your balance at a faster rate.

3

Get copies of your credit reports. Each year you are entitled to one free copy of your credit report from each of the three credit reporting agencies, TransUnion, Experian and Equifax. After you get the report, read it carefully. If you find mistakes, contact the agency using either form provided or by phone. Each agency must investigate any items in your report that you dispute. If the agency agrees that an error has been made, the dispute item will be removed from your credit report. If you do not agree with the agency's finding, you have a legal right to add a brief note to your credit file explaining why you believe the item is in error.

4

Don't try to get more credit. One thing that will lower your credit score is applying for new credits card or loans. Too many inquiries on your credit report send up red flags with creditors. If you expect to apply for a loan for a major purchase, it is best not to apply for new credit the six months leading up to your loan application.

5

Don't consolidate your debts. Pay off the balances on your loans or credit cards instead of consolidating them into one large loan. Your credit score will be lowered if you have the same amount owed but on fewer accounts. Lenders look at the ratio of balance to limit when determining if you are a get risk for a loan.

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FICO Debt-to-Credit Ratios

Consumers use credit in a variety of ways. When a lender extends credit to you, that credit account is reported to the credit bureaus. Such information is distilled into a credit report. According to MyFico, your FICO credit score ranges from 300 to 850 and is directly based upon the data in your report. It's important to understand how debt impacts this score.

Identification

Your FICO credit score is determined by a mathematical algorithm that translates the data on your credit report into a three-digit number. The score looks at five areas: 35 percent is how well you pay your bills, 30 percent is how much debt you have, 15 percent is the average length of your credit history, 10 percent is the amount of new credit you've applied for recently, and the last 10 percent reflects the mix of credit found on your report.

Significance

The second largest factor in your credit score is how much debt you have. For this factor, FICO measures your debt-to-credit ratio, also known as your credit utilization ratio. In essence, this compares how much debt you have versus how much available credit you have. The more available credit you have, the lower this ratio and the higher your score. Conversely, the less available credit you have, the higher this ratio and the lower your score.

Considerations

How you use your credit cards can directly affect your FICO credit score. Since your FICO score measures your credit utilization ratio, maxing out a credit card will decrease your credit score. The reason is because if you use up your entire credit limit, that decreases your available credit while increasing the amount of your debt. According to Bankrate.com, a maxed-out card can lower your score by up to 45 points. A lower credit score can put you at risk for higher interest rates on other types of credit that you apply for.

Prevention/Solution

Lowering the amount of debt you have will gradually increase your score. According to MyFico, to improve your score you should keep balances on revolving credit, such as credit cards, low. Pay down the debt instead of using balance transfers. Transferring the balance doesn't eliminate the debt; it simply moves it around from one card to another. Decreasing the number of credit accounts that you have without decreasing the amount of debt may actually lower your score, according to MyFico.

Warning

Be careful when closing credit cards. Remember, 15 percent of your FICO score measures the length of your credit history. Closing a card, especially an old credit card, will shorten the length of your credit history, and that may lower your score. The longer your history is, the higher your score. Also, according to MyFico, don't open new credit accounts just to increase your available credit and improve your score. The opposite may happen because each new account decreases the average length of your credit history and this may drop your score. How much it drops depends upon the other factors present within your report.

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5 Steps to Building Credit

About 50 million people in the U.S. have no credit history, but most of these people can obtain some kind of creditable account, according to Lynnette Khalfani-Cox of Wallet Pop. The most important step to building credit is to open an account tracked by the major credit bureaus. Then you only need to pay your bills on time and keep your debt load small.

Check Your Credit Report

You may already have a credit history and not know it. If you have ever had a credit card, mortgage or any bank loan, your lender likely reports the account to the major credit bureaus. If you have bad credit and want to rebuild your score, check your report for weak areas in your finances. For example, if you see a high utilization ratio -- portion of your credit limit available -- funnel money into credit-card payments.

Budgeting

You cannot build good credit unless you have control of your finances. If you have an ever-increasing debt load and frequently miss payments, you need to adjust your budget to accommodate your life style. Go to a credit counselor if you cannot figure out a way to pay for your debts and essentials with your income. You may have to give up some luxuries, such as eating out and vacations.

Open New Accounts

Whether you have bad or no credit, a new credit account can help you build a good score, because the FICO scoring model gives you points the more accounts you have with a perfect history. Gas and retail cards have the most lax lending standards, but also have low limits and high interest rates and fees. A secured credit card almost guarantees you approval, because you secure the limit with a bank deposit. However, you also have to use these accounts. You only need to make a small charge, such as paying a phone bill, and pay it off so the lender can report something to the credit bureaus.

Beyond Credit Scores

Lenders may reject your loan applications even with a great credit score, because they factor in other variables into their lending decisions. For example, most lenders do not approve mortgages for people who have been at their job for less than two years or have large gaps in their employment history. Also, try to stay in the same state and keep the same telephone number, because the credit bureaus track demographic data, even though this data does not affect your credit rating.

Considerations

Recovering from bad credit can take months and years. If you have no credit history, the bureaus need about six months of data before they report your accounts and calculate a score, according to Khalfani-Cox. However, if you keep paying bills on time and eliminate as much debt as possible, you eventually will have at least an average score of 620.

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