How Much Can I Raise My Credit Score If I Pay Off My Debts?

The purpose of the credit scoring system is to assist lenders by helping them identify those consumers most likely to repay their debts. To your bank, a low credit score means you are less likely to meet your financial obligations than someone with a high credit score. Because of this, banks, credit card companies and other businesses are less likely to deny applications from consumers with high credit scores. One way you can increase your credit score is by paying off your current debts.

Amounts Owed

One factor that influences your total credit rating is how much outstanding debt you owe. A portion of your income each month goes toward paying down your current debts. The less debt you owe, the more disposable income you possess. Thus, paying off your debts increases your credit score because it signifies that you take your financial responsibilities seriously and can afford to take on new ones. The amount you owe your creditors accounts for 30 percent of your total credit score.

Credit Utilization Ratio

Paying off your debts isn't the only way to raise your credit score. Paying down your debts, in some cases, can prove just as effective a credit repair tool.

The credit scoring formula compares the spending limit on your credit accounts to your balance. The difference between the two numbers is your "credit utilization ratio." A significant gap between your spending limit and balance indicates that you manage credit well and results in a higher credit score. If your credit cards are nearly maxed out, however, your credit will suffer. The good news is that if you cannot pay off your credit cards altogether, paying down the balance still benefits your credit score.

Scoring Factors

How much your credit score will increase after paying off your debt depends on a variety of other factors such as the type of debts you carry, the length of your credit history and if your credit report reflects any derogatory items like a past charge-off or bankruptcy. The mathematical formula the credit bureaus use when calculating scores is a trade secret. Thus, there is no way to know ahead of time how much your credit score will increase after you pay off your debts.

Derogatory Debts

While paying off most types of debt makes you appear more financially stable and results in a higher credit rating, the benefit your scores receive from payments you make does not extend to all accounts within your credit history. Paying off derogatory entries, such as a collection account or civil judgment, does not improve your credit. Derogatory items remain a negative influence on your scores until they age off your credit report -- regardless of whether or not you paid them.

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What Credit Reporting Agency Do Most Creditors Use?

When creditors are deciding whether or not to issue a loan to an applicant, they check the person's credit scores from the most commonly used credit bureaus. There are three credit reporting agencies that are used nationwide. For credit scores, almost all lenders rely on the FICO score, but some have started using the VantageScore on an experimental basis.

Major Bureaus

The three major bureaus are Experian, Equifax and TransUnion. Equifax is the oldest, founded in 1899. TransUnion was founded in 1968, and Experian was founded in 1980. These three bureaus operate nationwide, and most smaller bureaus are affiliated with one of these three bureaus. Lenders usually order a credit score from all three of these bureaus because they usually have slightly different information.

Where Bureaus Get Information

Credit bureaus rely on a number of businesses to report your financial activities as well as public record. Any time you open an account, the company notifies the credit bureaus and then continues to notify them as long as the account is open. The company will report positive information, like on-time payments, as well as negative information, like delinquencies and defaults.

FICO Score and VantageScore Calculation

The most widely used credit score is the FICO score. The score was developed by the Fair Isaac Corporation, and the formula is not public knowledge. However, the factors that affect your FICO score have been released. Your FICO score is based 35 percent on your credit score, 30 percent on the balances on your accounts, 15 percent on the length of your credit history, 10 percent on your applications for new credit and 10 percent on the mix of credit you use.
VantageScore is an alternative scoring system that was developed by the three credit bureaus. The score has not been adopted yet, but some lenders are using it on a test basis along with the FICO score. The VantageScore is based 32 percent on your payment history, 23 percent on the percentage of your available credit you are using, 15 percent on the amount of money you owe, 13 percent on how long you've had credit and the types of credit you've used, 10 percent on how much credit you have recently applied for and 7 percent on how much credit you have available.

Personal Services

The three credit bureaus offer credit monitoring services to individuals to protect against identity theft. These services give individuals access to check their credit report any time during the time they are enrolled in the service. It also provides alerts when new accounts are opened or suspicious activity is detected and also offers identity-theft insurance. TransUnion calls its service TrueCredit, Experian calls its service ProtectMyID, and Equifax calls its service ID Patrol.

Business Services

The credit bureaus also provide services to businesses that are looking for new customers. These businesses need to know whether their potential customers, either individuals or other businesses, are creditworthy so they can determine the terms of their agreements. The credit bureaus provide information that helps businesses predict which companies are at a greater risk for being late with their payments or defaulting on the payments altogether.

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What Credit Past Will Affect Hiring for a Job?

Almost half of all employers require a credit check for some positions, and 13 percent of companies perform checks for any position, according to a 2010 Society for Human Resource Management survey. The major national credit bureaus sell a special type of credit report for employers. An employer credit report is almost the same thing as a regular consumer credit history.

Identification

Employers that perform a credit check almost exclusively use reports from the three national credit bureaus -- Experian, Equifax and TransUnion. A credit history for employment purposes contains data from your creditors that report to the major bureaus, usually any major bank and credit card companies. It also contains public records, such as bankruptcies and court judgments in the past seven years. The only item an employment credit check cannot contain is your age.

Why?

Companies perform credit checks because they want to weed out applicants who might be in financial straits, according to Liz Weston of MSN Money Central. A person with a bankruptcy, for example, might be tempted to steal money or just be an unstable person in general. If an employee were to steal a customer's valuables, the company could be liable for the losses for not properly investigating the employee. At the very least, credit reports tend to be a good indicator of a person's overall integrity. People who manage money well also tend to be the best employees.

Considerations

Credit checks for employment do not include a numerical credit rating. Thus an employer can only factor in specific items from your credit past. However, a credit report also contains previous employers and addresses. The employer might just pull a credit report to verify your employment history, so always be as accurate as possible about prior employers on a job application. Also, review the fine print on the pre-application screening. You must give your consent to a credit check in all cases. Unlike an check for a loan, an employment check does not harm your credit score.

Tip

A bad credit history may not necessarily disqualify you from a job that requires a background check. You should ask the employer his policy on credit checks and the general screening process. This gives you a chance to let the employer know ahead of time about credit problems, which looks better than the employer finding out about it himself. However, make sure to give a good explanation, such as a personal event like divorce or medical bills.

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Will Paying Bills With a Credit Card Hurt My Credit Score?

Credit cards offer a convenient way to make purchases, including goods and services you can pay for on the Internet. One way to use credit cards online is to pay bills with them, including utility bills, traffic tickets, bank fees and even rent. Paying bills online with a credit card can have an impact on your credit score, both in a positive and negative way.

Available Credit

One way that paying your bills online with a credit card can hurt your credit score is by reducing your available credit. Credit rating agencies look at how much you owe on your credit card accounts as a percentage of your credit limits. When you charge bills to a credit card, you reduce your available credit balance. Avoid this damage to your credit score by simply paying off your credit card balance in full each month. However, if you carry a balance over time or make minimum payments on your cards, you'll see your available credit shrink each month and your credit score fall as a result.

Paying On Time

Paying bills late can hurt your credit score as the companies you owe money to report late or missed payments on your credit report. This is where paying your bills online with a credit card can help your credit score. Automatic payments, email reminders and instant transfers all make it easier to track your bills online and pay them before missing the due date. A history of on-time payments will build up your credit and improve your credit score. It may also cause your credit card company to extend a higher credit limit, which will increase your available credit and boost your credit score even higher.

Inquiries

Another way that online credit card payments can hurt your credit score is when you first sign up for an account and the company you plan to pay makes an inquiry into your credit history. These inquiries are necessary for lenders and utility companies to ensure that you have the means to pay your bills, but they also reduce your credit score slightly for a short time. Opening several new accounts, which might happen when you move to a new city, will have a visible impact on your credit score. Signing up for new credit cards specifically to use for online bill payments will also create an inquiry that will hurt your score, albeit for a short time.

Responsible Spending

As with most types of credit, your level of responsibility will determine what impact your use of it has on your credit score. If you allow automatic online billing to drive up your credit card balance, or use credit cards to pay bills you can't afford, you'll see your credit score suffer as a result. On the other hand, using credit cards to make sure you pay your bills on time will build a good credit history and make it easier for you to borrow in the future, all while saving you time. Read your credit card agreements before making charges and also read the bill payment agreement from each company you plan to pay online; payment agreements will tell you how long it takes to process a transaction and if there are any fees associated with the service.

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What Accounts Are Not Reported to Credit Bureaus?

Credit reports contain information pertaining to your management of credit accounts such as loans, mortgages and credit cards. Banks and credit unions do not typically report information relating to other kinds of accounts. Additionally, details of accounts that you establish with service providers are not usually reported to credit reporting agencies.

Deposit Relationships

Lenders use credit reports to determine whether you have a history of paying your debts as agreed. Consequently, lenders have no interest in data relating to deposit relationships because when you establish a deposit account, you are a creditor rather than a debtor. When you establish a savings account, your bank in its capacity as a borrower, pays interest on the money you lend it. On a checking account, the bank typically pays no interest but you are loaning the bank money in return for services related to that account. These kinds of relationships have no bearing on your credit score.

Investor Loans

Lenders usually have strict rules about lending and only allow people with good credit scores and suitable collateral to borrow money. However, if you are unable to qualify for a bank loan, you can borrow money from an investor. Some investment firms specialize in loaning money to start-up businesses or high-risk borrowers. Generally, these kind of speculative loans are not reported to credit rating agencies. Similarly, personal short-term loans financed by pay day advance offices or pawn brokers are not reported to the credit bureaus.

Small Lenders

Lenders are not required to report information about consumer loans to credit reporting agencies but most lenders do. Lenders can file monthly reports with Equifax, Experian and TransUnion with details of your account balances and your most recent payment activity. However, since it costs money to file these reports, some small banks and credit unions only work with one credit reporting agency.

Considerations

While financial institutions typically only file reports relating to your credit accounts, on some occasions details relating to other kinds of accounts are reported to the bureaus. If you overdraw a checking account, your bank lends you money to cover the debt and you must repay this money. When this occurs you become a debtor of the bank and if you fail to settle the debt, the bank can file a report relating to your overdrawn account with the credit bureaus. The same applies to other situations when you fail to settle a debt with a vendor or service provider.

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What Is the Highest Credit Rating Available?

Credit ratings can go from R0 to R9. The highest credit rating you can receive is an R1. The "R" stands for revolving account. The rating you receive will depend on how you pay your various credit accounts.

Definition

An R1 means that you are paying a creditor on time or as agreed. Payments are received before they are 30 days late.

Effects

When an account has a number of accounts that are rated R1, it will have a positive effect on your credit report. This will increase your credit score.

Bad Debt

The lowest credit rating you can receive is an R9, which is a bad debt. This is an account which has not received a payment in 180 days, and the creditor has written it off of its receivable listing and recorded it as a loss. The account is then turned over to a collection agency.

30 Days

An R1 can turn into an R2 if a payment is 30 days late but less than 60 days. When an account is reported as an R2, it can eventually return to an R1 if payments are made on time for a substantial period of time such as a year.

60 Days

An R1 can turn into an R3 if payments are more than 60 days late.

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What Happens to My Credit Rating If I Pay Off All My Credit Cards?

Your credit score is sensitive to many different financial actions. For instance, the score increases when you make timely payments and drops when you send money late. Scorers consider all your accounts, including credit cards, and your credit rating is affected if you pay off all of the cards.

Benefits

Your score goes up when you pay off any account, including installment loans like auto financing and student loans, but revolving debts like credit cards have the biggest positive impact. MSN Money writer Liz Pulliam Weston explains that your score benefits even if you just reduce the balances without entirely paying off the cards, as long as you get the balances down to 30 percent of the credit limit or lower.

Drawbacks

Over time, your credit score can actually drop from paying off all your credit cards. Lenders want to see that you are managing your finances properly. You will not show a current payment history on your credit reports if you pay off all your accounts and stop using them altogether. Pulliam Weston recommends using them regularly for small purchases, especially if you have had the accounts for a long time. MyFICO.com explains that part of your score comes from the length of your history. Older paid-off cards that go unused for long time periods lose their positive effect.

Considerations

You do not necessarily help your credit score if you pay off a delinquent credit card that was charged off by the issuer. Bankrate.com columnist Steve Bucci explains that banks charge off accounts when a person stops paying for about six months. The bank gets a tax benefit, and the charge-off goes on Experian, Equifax and TransUnion credit reports and pulls down the consumer's credit score. You can call the creditor and arrange payment, but a paid charge-off is still very damaging. Ask the bank to erase the charge-off from your credit reports or alter the status to "paid as agreed" as a condition of your pay-off. Either of these changes helps your credit rating.

Process

Focus on your credit card accounts with the highest interest rates if your pay-off plan is stretched over time. Interest is assessed monthly, so a big chunk of each payment goes to that month's interest charge rather than reducing the actual balance. Consider making the biggest possible payments on your high interest accounts. Move that money to your other accounts once the high rate cards are paid off.

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How to Apply for a Mobile Home Loan After Bankruptcy

Bankruptcy can be a serious black mark on your credit report. It will make obtaining loans very difficult but not impossible. Bankruptcy can actually help you get a fresh start and eradicate debts owed in the past. Cleaning up credit will make it easier to qualify for a mobile home loan as long as you can prove you are financially responsible.

Instructions

1

Improve your credit score after filing for bankruptcy. One of the most important things lending institutions are looking for is financial responsibility. After a bankruptcy, you will need to make timely payments, obtain a secured credit card or two, and keep a low debt to income ratio.

By opening a secured credit card, you can improve credit history and increase your FICO score. This score is what lenders look at when determining trustworthiness for a home loan. Keep a low balance on this card or any other credit card you have. Running up a high debt or maxing out your card will lower your credit score. Make payments on time on all of your credit cards as well as other bills you must pay frequently.

2

Save enough money for a down payment on a mobile home. The likelihood of qualifying for a "no money down" loan for a home after bankruptcy is very slim. It is standard to place 10-20% of the mobile home cost as a down payment. With a bankruptcy, you may need more like 25-50% of the total cost. The more money you can put down, the more likely you are to get financed.

3

Prove that you have a steady income. A regular income from an employer that you have been with for a long period of time will cast a favorable light on you. Someone who has only had a job for a few months, receives sporadic payments such as those with freelancers and the self employed, and has job-hopped will have a more difficult time obtaining financing for a mobile home. It may still be possible, but you and your lender want to be certain that you can make the regular monthly mortgage payments.

4

Be patient if you are unable to get reasonable financing. Sometimes it is better to wait at least two years after filing bankruptcy so your credit score has time to improve. If your credit history is stable after that period of time, you are likely to receive a better loan rate than if you try to buy immediately after bankruptcy.

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A Guide to Credit Ratings

There are good reasons to establish a credit rating. Ratings or scores are three-digit numbers between 300 and 850. Higher ratings signal good credit habits, whereas a score below 650 indicates credit problems. But even if you know very little about credit ratings and factors that affect your score, you can educate yourself and build a high rating.

Importance

The importance of a good credit rating is apparent when applying for vehicle financing or buying a home. Everyone has three credit ratings because there are three credit bureaus. Lenders check all three ratings and use the average of your scores to determine if you can get a loan. Because ratings impact approvals and the rate you receive on a loan, it's vital to establish good credit habits. Some lenders set the credit minimum high, wherein you may need a score of 680 or higher to qualify for prime rates on loans.

Payments to Your Creditors

Credit scores are based on numerous factors, and payment history accounts for 35 percent of your personal credit rating. With that said, payment habits can either increase or decrease your rating. Regularly paying your bills on time every month and avoiding late payments will help your score.

Debts and Your Credit Rating

Never underestimate the impact of high debts. Credit ratings drop when you carry excessive credit card debt because the amount owed makes up 30 percent of scores. Signs of credit card debt problems include maxed-out accounts or accounts with balances greater than 30 percent of your credit limit. And if applying for a loan or another credit account, lenders will review your credit report and take note of high balances and likely reject your credit application. Pay down debt to fix a low credit rating.

Considerations

Together, payment history and debts account for 65 percent of your credit score. Factors that influence the remaining 35 percent of your score include length of credit history, credit applications and the mixture of accounts. Building a good rating involves more than paying on time and keeping debts low. Individuals with a long credit history usually have higher ratings; and someone who frequently applies for new lines of credit may have a lower score than someone who only applies for credit when necessary. Inquiries account for 10 percent of your score, whereas length of credit accounts for 15 percent of your score. Types of credit account for the remaining 10 percent of your score, and increasing your score calls for acquiring a mix of credit -- perhaps an auto loan, student loan and credit card.

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Collections and Credit Rating

Your credit rating encompasses the information on your credit reports and your credit score as calculated by FICO and the Equifax, TransUnion and Experian reporting agencies. Many credt-related factors influence your rating, the Federal Reserve Bank of San Francisco explains. You look bad to creditors when you stop paying your accounts and they get turned over to collection agencies.

Definition

Collections on your credit report refer to accounts that have been turned over to a debt collection agency. The original delinquent account shows up, as well as a collections entry. Liz Pulliam Weston, a MSN Money website writer, explains that lenders usually write off unsecured debts like credit cards that go six months with no payment. This action does not absolve you of paying the debt. The lender gets a tax benefit and then sells the account to a collection agency, which continues to pursue you for payment.

Effect

Collections fall under "payment history" when your credit score is calculated, according to the MyFICO scoring information site. This area accounts for 35 percent of the total score, so collection debts drop your score significantly. Lenders who see collection entries on your credit reports may reject your applications because they know you defaulted on other bills. Collection agencies can often take you to court, depending on your state laws, and win a judgment against you for the bill. The court action is added to your credit reports and makes your rating even worse.

Considerations

Collection agencies sometimes agree to stop reporting an account to the credit bureaus in exchange for a lump sum settlement. Offer less than the actual amount because they pay very little for debts and make a profit even if you get a discount. Ask them to provide written documentation of their promise to stop reporting the item before you send the money, Bankrate debt adviser columnist Steve Bucci recommends. Your credit rating improves as soon as it is gone.

Time Frame

Collections do not stay in your credit bureau files forever. These entries get erased seven years from the day you missed your first payment, even if you never pay the bill, the Federal Trade Commission explains. Their effect goes down as the year pass because creditors pay more attention to your recent records. Beware of trying to settle a collection account that will drop off your reports soon. Bucci warns that this might rekindle the agency's interest in aggressively pursuing it if you do not reach a settlement agreement.

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How to Freeze People From Pulling My Credit Report

Too many inquiries about your credit reports could drop your credit score several points. Your credit score affects your ability to get loans and the interest rates you pay on those loans. You can effectively prevent people from pulling your credit reports by contacting the three major credit rating bureaus. Freezing your credit reports will prevent others from looking at your credit history and credit score and using that information for fraudulent purposes, but it also will prevent you from obtaining credit cards or loans.

Instructions

1

Research your state laws to find out whether you can freeze your report. Each state has its own requirements and fees payable to the credit bureaus.

2

Gather your personal information, including a list of your addresses for the past five years, your Social Security number, proof of your current address and a photocopy of ID such as a driver's license or birth certificate. Make three copies of all documents.

3

Write a cover letter to each credit bureau stating that you would like to freeze your credit report.

4

Place a cover letter, a copy of your documents and a money order (if state law requires a fee) in each of 3 manila envelopes.

5

Mail each packet, posted certified mail, to the following addresses:

Experian Security Freeze
P.O. Box 9554, Allen, TX
75013

Equifax Security Freeze
P.O. Box 105788, Atlanta, GA
30348

TransUnion, Fraud Victim Assistance Department
P.O. Box 6790, Fullerton, CA
92834

6

Allow 30 days to receive confirmation from the credit bureaus that they have frozen your credit reports. You also should receive a unique personal identification number (PIN) that you will need when you wish to unfreeze your reports.

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How a Credit Bureau Functions

Information

There are three major credit bureaus--Experian, TransUnion and Equifax--and all three gather information on consumers when they get a loan or credit card, or use credit in some other way. Companies such as Visa and MasterCard issuers, banks that make loans, cell phone carriers and others all report your account and payment history to the three credit bureaus each month.

Consumer Files

Using the information passed along by credit issuers, the credit bureaus put together a file on each consumer. They create the file by compiling all of the information into a format that is simple to read and interpret. All of the accounts are summarized in that one file.

Categories

Credit bureaus provide other information, above and beyond credit accounts and payments. It falls into four categories, the first of which is identifying data such as name, home address, telephone number, Social Security number, date of birth and employment history. The second is credit accounts and repayment history. The third contains public court records including bankruptcies and tax liens. The fourth lists any inquiries made by potential creditors and others who recently requested a copy of the report.

Access

According to the Solve Your Problems website, access to your credit report is only given out by the bureaus under certain circumstances. You can give prospective creditors and potential landlords and employers permission to get your report. It can also be viewed by potential insurers and agencies evaluating your eligibility for certain governmental benefits. You are also entitled to one free copy of your report from each of the three credit bureaus annually. Anyone who obtains an illegal copy of your credit report may face a year in jail.

Limitations

A credit bureau functions under the limitations of the Fair Credit Reporting Act. The act spells out how bureaus can gather and use data and the process under which you can dispute incorrect information. If you find any wrong entries on your credit report, you can dispute it in writing. If the credit bureau cannot confirm its accuracy, it must be removed from your report.

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How Long Does Negative Information Stay on Your Credit?

Negative items such as late payments, judgments, liens and charge-offs will haunt any credit record. For how long depends on the type of negative information and what the consumer does to remedy the situation.

Late Payments

Late payments will show up on an average credit report for two years, as long as the account is open. A credit report will reflect payment history for the most current two years. If the account is closed, that late-payment history will show up until the account is removed, up to seven years later. The older the late payments, the less they affect your credit score, but they will still be visible until on-time payments have been made for two years.

Judgments/Liens

Judgments and liens are a little different. These will stay on your report, if unpaid, until the statute of limitations runs out or seven years passes, whichever is longer.

Bankruptcy

Bankruptcies are reported for 10 years from the date the debt is discharged. There is nothing you can do to remove this information or shorten the time it takes to have it removed.

Other Negative Items

Other negative information, such as credit card charge-offs and collections, will be removed after seven years from the date of the last report. If these accounts remain unpaid, they can continue to be reported, which will keep them on your report indefinitely.

Considerations

Your credit report is like your motor vehicle record. Even if the negative information doesn't show up on your report, that doesn't mean it's not there. Negative information can be included in your credit report when you apply for a loan of more than $150,000 or a job that pays more than $75,000 annually, according to Brightscore.com, which advises consumers about managing credit.

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What Is a Safe Credit Score Number?

Few numbers are as important today as your credit score. Lenders, whether they're approving mortgage, auto, personal or business loans, rely on this score to determine not only if you qualify for a loan, but also what interest rates you'll pay. A low credit score means that you'll pay higher interest rates. Knowing the basics about what makes a bad credit score can help you decide when to apply for a loan and when to wait.

A Bad Credit Score Can Hurt

Too much shopping, resulting in too much debt, can leave you with a bad credit score.

A credit score is a numerical representation of how well you've managed your money. A low score--and most lenders consider anything under 620 to be a low or "bad" score--means that you'll have to pay higher interest rates. Borrowers with a credit score of 520 will pay an interest rate that is 3.45 percentage points higher than a borrower with a credit score of 720, according to Fair Isaac Corp., the company that developed the credit score.

What Is Considered a Safe Number?

You'll pay fewer dollars in interest with a high credit score.

Lenders consider any score above 620 to be a safe credit score, according to financial Web site Bankrate.com. But "safe" is not the same as "excellent." Most lenders want to see even higher scores, according to Bankrate.com. Fair Isaac Corp. reports that scores of 720 or higher nab the best interest rates.

Most Have Safe Scores

Most consumers are credit-wise.

The good news is that most borrowers do have scores of at least 620, the threshold that separates "safe" borrowers from "risky" ones in the eyes of mortgage lenders. Bankrate.com writes that 11 percent of U.S. residents have credit scores between 600 and 649, 16 percent from 650 to 699, 20 percent from 700 to 749 and 29 percent from 749 to 799.

Scores Can Rise

Hide your credit cards to help improve your credit score.

If your credit score is not considered "safe" by lenders, you can take steps to improve it. Start paying all your bills on time. Close some of your open credit card accounts. Cut your revolving debt. Do all this on a consistent basis, and your scores will gradually rise.

No Quick Fix

You might need to wait before taking out that mortgage loan.

Unfortunately, there is no quick fix for repairing a low credit score. Boosting a score takes time. It might make more financial sense to wait to apply for that car or mortgage loan until you've increased your credit score into the "safe" zone.

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Is Alimony on Credit Reports?

Information about alimony agreements does not appear on credit reports. The reporting agencies are more interested in how responsible you are in paying your bills, and they also monitor any derogatory information about your financial status, such as judgments, liens, foreclosures, charge-offs and bankruptcies.

Disclosing Alimony

Disclosures about alimony arrangements are made by the consumer. When you fill out an application for credit, lenders by law are allowed to ask if you are obligated to make any alimony or child support payments. They are not allowed to ask if you are receiving alimony, or the amount, unless you are relying on that income to qualify for your loan or credit line.

Proving Your Income

Your lender will ask about your employment and income as part of the application process for credit. You'll be asked where you work, and how much your earn. You are also free to list additional income, such as alimony payments. It's up to the lenders to confirm that the information you provide is correct. For major loans, such as a home mortgage, lenders might request income tax returns, paycheck stubs, bank records and court documents.

Equal Credit Opportunity Act

The Equal Credit Opportunity Act (ECOA) offers consumers many protections. Among them, it ensures that lenders may not refuse reliable alimony payments as a legitimate source of income. However, the lender can ask you for proof that you have been receiving your alimony payments on a regular and consistent basis.

Protection for Spouses

The Federal Trade Commission recommends married couples establish credit in their own names, no matter who is considered the head of the household. This makes it easier for either spouse to continue on with a credit history in the event of a divorce or death.

Documentation

Be sure to maintain accurate records of your income from alimony. Make copies of checks or money orders from your ex-spouse. Some home mortgage applications require proof of income for the past two years, so be sure to hold on to your records.

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How Does a Tax Lien Affect Your Credit?

A tax lien is one of the final collection steps that a government takes in order to collect a tax debt that it is owed. It involves making a legal claim against the property of a person or company who owes taxes that are past due. A tax lien not only affects the ownership status of the property, it also affects the owner's credit rating.

Significance

Tax liens appear on your credit report as a public record. Other examples of public records are bankruptcy filings or judgments. Public records appear in their own section on your credit report. The credit scoring models treat each type of public record differently when calculating a credit score. The effect of a tax lien will also vary depending on the individual circumstances. If a person has a perfect credit history and a tax lien is reported, their score will drop considerably. If they have multiple negative entries then the effect of a tax lien by itself will be much less as their score is already considerably damaged.

Time Frame

Tax liens can stay on your credit report longer than most other negative items. An unpaid tax lien can remain on your credit report for up to 15 years. A paid tax lien can be part of your credit report for up to seven years.

Function

A tax lien is primarily used to secure the payment of taxes owed. In addition to this, a tax lien will make it difficult for you to obtain credit due to the negative credit report entry. Many people are extremely concerned with the information on their credit report or with their credit score and how it affects their ability to borrow money. This concern may lead a person to pay the lien faster than they otherwise would.

Considerations

Your tax bills should be some of the first bills that are paid. If you do not pay them the resulting tax lien could cause you to lose your home or other property. Another consideration is that outstanding tax bills in most cases can not be discharged in a bankruptcy action.

Warning

If you have a tax lien placed on property that has a mortgage against it, the tax lien takes first position amongst the outstanding liens. This means that if the property is sold, the tax debt will be paid first before any other mortgage is paid. Many mortgage lenders consider the placement of a tax lien against your property to be a default on the loan agreement. They can report this as a default on your credit report, giving you another negative credit report entry. The mortgage holder may also begin foreclosure proceedings if a tax lien is placed on your property. Foreclosure is one of the biggest negatives that your credit report can show.

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What Credit Information Makes up the FICO Score?

Fair Isaac Corporation provides one of the credit scores that lenders use when evaluating your credit application. Your "FICO" score is a number between 300 and 850, with a low number indicating a risky borrower and a high number indicating a low-risk borrower with good credit history. You actually have three credit ratings, one from each of the major credit bureaus, and all are based on a few types of information that appears on your credit report at that bureau.

Payment History

The most important factor in your credit score is your payment history, which makes up 35 percent of your score. This is what most people think of when they hear about a credit report. Creditors regularly report to the bureaus how much you paid and whether it was on time. The more on-time payments you have on your credit score, the higher your FICO score will be. Late payments lower your credit score, especially if they are recent. In addition to your accounts in good standing, your collection accounts, court records of bankruptcy or credit-related judgments and wage garnishments all affect your score.

Account Balances

Another 30 percent of your FICO score is made up of information on your account balances. In addition to the dollar amount you owe, your score considers the ratio of the amount you owe now to the amount you borrowed in the first place, or in the case of a credit card, your limit on the card. One of the best ways to improve your score in this area is to pay down your credit card balances so you are using only a small percentage of your available credit.

New Credit

About 10 percent of your score is based on credit that you have obtained recently. One piece of information that affects this area is the list of creditors that have looked at your report recently in response to your application for credit. Having many credit inquiries lowers your score. In addition, each new account that you open lowers your score, especially if a high proportion of your credit accounts are new.

Types of Accounts

Credit accounts fall into two major categories: installment accounts and revolving accounts. Installment accounts generally have a fixed monthly payment and an end date on which you will have paid your debt in full if you stick to the schedule. Mortgages and car loans fall into this category. Revolving accounts are those on which you are continually borrowing and repaying money, as with a credit card or line of credit. About 10 percent of your score considers the variety of account types that appear on your report. Having one or more accounts in each category helps your score because it shows that you can manage different types of credit.

Length of Credit History

The most difficult part of your credit score to change expediently is your length of credit history. This component makes up about 15 percent of your score. Your score does not only consider how long you have had your oldest account, but also how long you have had accounts in each of the categories of types of accounts. Your average account age also affects your score. The longer your credit history, the better your score.

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How to Rebuild Credit With No Security Deposits

Credit issues can influence your ability to purchase a vehicle, a home and get a job. Even if your credit score is suffering, there are several changes that will help rebuild credit without a security deposit. Using the credit you have to build a positive history and looking for possible credit reporting errors can help rebuild your credit over time.

Instructions

1

Pay existing bills on time. This might seem like common sense, but according to Entrepreneur website, it's one of the simplest ways to rebuild credit. Consider setting up automatic payments to your creditors with your financial institution. This will prevent last-minute scrambling and oversights that could further damage credit.

2

Keep credit balances low. If you have credit cards, keep your balances low. A balance that exceeds 35 percent or more of the credit limit can pull down your credit score. Also, paying down large balances will show your ability to reduce your overall balance, which will help rebuild your credit.

3

Take care of collection issues. Creditors want to settle your debt. Contact your creditor and negotiate a payment plan that fits your budget. As a result, the creditor will start making positive reports to the credit bureau, which will rebuild credit over time.

4

Avoid closing old accounts. It might be tempting to close all unused account. According to Entrepreneur Magazine, however, this might aversively affect your credit rating.

5

Clean up your credit report. Inaccurate information on your credit report could be hurting your credit (without your knowledge). You are entitled to a free credit report from all three credit bureaus--Equifax, Experian and TransUnion--every 12 months. Review it carefully and report inaccuracies, such as late payments and accounts that don't belong to you, to the credit reporting bureaus. Make sure to include supporting documentation, such as account statements or a police report in cases of fraud.

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Where Can I Find My FICO Score?

A FICO score is what retailers and financial institutions use to judge your ability to pay your bills and repay loans. Consumers can check their credit history to make sure there are no irregularities on the report. There are myriad ways to get your score from credit-reporting companies, personal finance sites and FICO itself.

Annualcreditreport.com

Credit scores are usually not given to you by banks or others who check your report. You can order your credit report for free from annualcreditreport.com.

Credit Bureaus

You can also elect to contact each of the three credit bureaus--Equifax, TransUnion and Experian as of 2010--to purchase a copy of your credit score. Each credit-reporting company may have a different score.

Credit Monitoring Sites

CreditKarma.com and Quizzle.com allow you to sign up and get credit score information for free. CreditKarma allows as many inquiries as you want, while Quizzle.com will send a free credit report and score every six months.

Additional Options

Bankrate.com and credit.com also offer credit calculators free of charge that allow you to check the state of your credit history.

MyFICO.com

FICO, the company that creates the FICO score will sell you your score for a fee. Go to MyFICO.com to purchase your score and credit report.

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How to Check Credit Report

It is a good habit to regularly check your credit report to review your credit score and look for any changes that may affect your credit rating. Also, people who are worried about suspicious activity can also view their credit report to inform authorities about potential identity theft and put a fraud alert on the credit report. Luckily you can check your credit report for free through various credit reporting agencies.

Instructions

1

Go to the Annual Credit Report website (see Resources). This site is backed by the Federal Trade Commission and provides free annual credit reports to those who request one. If you need more frequent credit reports, you will have to pay a modest fee.

2

Provide your social security number, full name, address and date of birth. If you request your credit report online, you will be redirected to a secure page on Annual Credit Report to give this information.

3

Choose the credit reporting agencies that you want to receive a report from. The three central credit report providers include Equifax, Experian and TransUnion. You should opt to receive a credit report from all three agencies. You can also visit each agency's individual website to check your credit report.

4

Check your credit report by sending in an annual credit report request form to the Annual Credit Report Request Service. You can download the site from their website and mail it to Annual Credit Report Request, PO Box 105281, Atlanta, Georgia 30348. You will then receive a copy of your credit report via mail.

5

Call to check you credit report. The final option that you have is to contact Annual Credit Report by phone. Call 1-877-322-8228 and follow the prompts to receive your credit report.

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Equifax Vs. Transunion Score

Equifax and TransUnion are agencies, which report people's credit history with information received from retailers, banks, collection agencies and mortgage lenders. Equifax has been in business since 1899 and TransUnion since 1969.

Comparison

Equifax has offices in 15 countries on three continents, TransUnion has offices in 25 countries on five continents.

Score

Equifax uses Score Power to report people's FICO scores that range from 300 to 850. TransUnion uses zendough to report credit scores with a range of 300 to 900.

Format

Equifax provides credit-report history as short statements. TransUnion displays credit history in a table format.

Coding

Equifax and TransUnion use codes to report spending and borrowing information. Equifax and TransUnion codes may have different meanings that are interpreted differently by companies that read the reports.

Benefits

Consumers can obtain an Equifax or TransUnion credit report to let them know what information has been reported about them by retailers, banks and collection agencies. When people obtain their credit report, they are able to check for errors.

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How Will a Deed-in-Lieu Affect My Credit in California?

In 2010, California had the third highest foreclosure rate in the United States, with 1 out of out every 240 homes in foreclosure. Many of these homeowners choose to give the bank the deed to the home, or deed-in-lieu, instead of trying to pay the mortgage. However, if you choose a deed-in-lieu of foreclosure, it affects your credit the same way as in any other state.

Identification

A deed-in-lieu of foreclosure has the same impact on your credit score no matter where you live. Depending on your credit history and credit score before you completed the deed-in-lieu, your score drops anywhere from 85 to 160 points, according to Les Christie of CNN Money. A deed-in-lieu usually does a little less damage to a credit score than a foreclosure or short-sale, but it is essentially the same in the eyes of lenders.

Tax Lien

California has slightly more favorable credit reporting standards than most other states. For example, the bureaus can only report a lien for seven years after you pay it off or 10 years from the filing date. Unpaid tax liens can remain for 10 years. This is important, because your deed-in-lieu might result in tax consequences if you owe a deficiency balance. Your lender might be able to pursue a leftover mortgage balance after you trade in the property. If you cannot afford the tax on the canceled debt income when you file your taxes, the Internal Revenue Service will issue a tax lien against any of your property. California is a non-recourse state, so it does not allow lenders to pursue deficiency balances except in certain cases, such as a line of credit secured with the home.

Considerations

If you cannot handle a mortgage and it gets to the point where the bank accepts a deed-in-lieu of foreclosure, you probably already have numerous negative items and terrible credit. Thus, the deed-in-lieu likely does little to affect your credit score much. You might benefit more from a deed-in-lieu than most other options, because a deed-in-lieu of foreclosure happens more quickly than foreclosure and short-sales, which means you can start rebuilding your credit sooner.

Tip

Explore every option available before choosing a deed-in-lieu of foreclosure or anything that results in defaulting completely on your mortgage. Your bank might be able to offer a loan modification under the federal Making Home Affordable program. You could try to sell the home for an amount that covers your mortgage. Whatever you choose, ask your bank how it will report the account. Anything less than "paid as agreed" usually hurts your credit rating.

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Are There Any Legal Ways of Getting Bankruptcy Off Your Credit Report After Four Years?

Going through a bankruptcy can do significant damage to your credit score, and any time you can get a bankruptcy off your credit report early will help your score. Federal law dictates how long a bankruptcy, and other negative factors, must remain on your credit score, and you can only get it removed if it is there in error.

Mandatory Period

If you go through a bankruptcy, your credit report will reflect this for up to 10 years from the date upon which the bankruptcy case is filed, according to the Federal Trade Commission.

Credit Reports

Whenever you take part in a consumer credit transaction, such as by paying your bills, applying for a loan or going through bankruptcy, a history of your actions gets included on one of your three consumer credit reports. These reports are maintained by three main companies: TransUnion, Equifax and Experian. It is up to these companies to collect information from various sources and include the relevant data on your credit report. As a consumer, you have the right to look at your credit reports once a year, free of charge.

Errors in Your Report

While bankruptcy information, even when a bankruptcy is filed but later dismissed, has to remain on your credit report for 10 years, errors on your report can be removed. For example, if you filed for bankruptcy protection but voluntarily withdrew the case before the court issues a discharge of your debts, and your credit report fails to show the dismissal, you can demand that this information be changed to accurately reflect the status of the case. Any time you find erroneous information, you have the right to have it changed by contacting the credit reporting company on whose report the information appears.

Non-Erroneous Reports

If your credit report has errors or mistakes, you cannot legally have the record of your bankruptcy removed. You cannot, for example, make false statements or misrepresent the facts about your bankruptcy in an effort to get your bankruptcy removed from the report.

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How to Recover From Personal Bankruptcy

Filing personal bankruptcy stops harassing phone calls from creditors and gives you the chance to wipe out your debts and make a fresh start. While you're no longer liable for debts after a bankruptcy, this process ruins your personal credit score. A low score can stop you from getting a mortgage loan or auto loan in the future. Thus, it's smart to rebuild your credit score and recover after a personal bankruptcy.

Instructions

1

Review your credit report to make sure creditors update your file. Order your credit report from all three credit bureaus a few months after your bankruptcy discharge. Debts included in the bankruptcy should have an entry that reads, "included in bankruptcy." If you don't see this notation, contact the creditors and ask them to update your file.

2

Manage old debts. You have the option of excluding some debts from the bankruptcy process such as a home loan, vehicle loan and student loan. Recover faster from a personal bankruptcy by paying these creditors in a timely fashion--by the due date.

3

Acquire new credit and start fresh. If all debts were wiped out in the bankruptcy, apply for a new credit line and begin rebuilding your credit history. Go to a local bank or credit union and pick up an application for a secured credit card. Ask about the security deposit and other start-up fees for this type of account. Secured cards have an easy approval process and are designed for people who can't qualify for unsecured credit cards due to bad credit.

4

Keep debts to a minimum. Learn from past mistakes and avoid accumulating debt. Use credit cards to build credit, but give yourself a low monthly spending limit. Pay off your new charges at the end of each month to stay debt free.

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Does Applying For Credit Lower the Rating?

Credit applications are part of most consumers' lives. People open new credit card accounts, apply for vehicle loans or fill out mortgage applications to buy new homes. Lenders review their credit reports or check their credit scores before opening the account or granting the loan. These inquiries are all noted by the credit bureaus and become part of the consumers' files, where they may affect future creditor decisions, according to the FICO credit score company.

Factors

Many factors go into determining a person's credit rating, including the number of accounts, current balances, credit limits and payment histories. These items are visible on the credit reports put together by the TransUnion, Experian and Equifax credit bureaus, and they are used by FICO and other credit score compilers to calculate scores that indicate whether the person is a good risk for a loan or credit card. Inquiries by lenders evaluating credit applications also go onto credit reports and get figured into scores, according to FICO.

Types

Credit inquiries come in two different types. One is called a soft inquiry, and it happens when businesses check credit to make promotional offers to consumers, when one of a person's current creditors looks at the records, or when people check their own credit reports. Soft inquiries have no affect on credit ratings, according to FICO. Hard inquiries are credit report reviews that result from applications for new loans and accounts. FICO explains that hard inquiries sometimes lower the credit rating.

Effects

Hard inquiries often have little or no affect on a person's credit rating. The credit score drop caused by a single inquiry should be less than five points for most people. Consumers with a short credit history, or those who apply for many different accounts within a short time span, can see a bigger drop. Inquiries show up on credit reports for two years, according to Bankrate financial site columnist Don Taylor. They lose their impact as time passes and disappear completely at the end of that period.

Purpose

Credit ratings drop when people seek many new accounts because such people pose a greater statistical risk for defaulting on credit cards and loans. FICO notes that people with six or more hard inquiries on their credit files are eight times more prone to filing bankruptcy than consumers with no inquiries at all.

Considerations

Some consumers shop around for the best deals on major financial transactions like car loans and home mortgages. They may fill out several credit applications within a few weeks as part of the process. FICO's credit score formula allows for loan shopping and considers multiple inquiries that happen with two weeks as a single credit check.

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What Is a FICO Score Based on?

The Fair Isaac Corporation, also known as FICO, uses an individual's credit information in order to come up with a score which can range from 300 to 850. Lenders are then able to review the score and determine an individual's creditworthiness.

The Facts

A FICO score reflects the information found in an individual's credit report, which is available through any one of the three credit bureaus including Equifax, Experian and TransUnion. Information regarding five major areas such as payment history, account balances, length of credit history, newly established credit lines and credit types are used to calculate a FICO score. The importance that is placed on each of these areas varies depending on each individual and on their recently updated credit information.

Time Frame

A FICO score is based on information that has been reported to the credit bureau and listed in an individual's credit report. Due to delays in the reporting procedures used by some creditors, the score may not be based on activities from the most recent months.

Considerations

An individual's age, employment and banking information are not part of a FICO score. However, a FICO score does take into account all closed accounts, regardless of whether they were paid off on time or delinquent.

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Does Accepting a Settlement From a Debt Collector Affect Your Credit?

Your credit rating is a time-sensitive picture of your financial health through a collection of personal and credit account information. Lenders, potential insurers, employers and landlords use your credit score to determine if you are credit worthy. Accepting a settlement from a debt collector will affect your credit, but you can control the extent of the impact.

What is a Settlement?

Your three-digit credit score is calculated based on the information provided to the credit reporting agencies from existing and potential lenders as well as information that is available publicly. A settlement from a debt collector is often listed in the accounts section of your credit report as "settled for less than originally agreed." The settled account is closed, but that one statement can remain as part of your report and negatively affect your score for seven years.

Credit Impact

Payment history is one indicator that has a significant impact on your credit score. How you pay your bills accounts for roughly 35 percent of your total credit rating. Accepting a settlement from a debt collector may seem like a responsible action, especially if you are not in the position to pay the entire balance, but the negative implications of a settled account is a red flag to potential lenders. The upside to accepting a settlement is that the debt collector will not pursue a judgment for the outstanding debt. Judgments can affect your credit rating for up to 20 years in some states.

Agreement Stipulations

Credit reporting agencies list credit account information that debt collectors and other creditors report to them. As part of the settlement agreement, negotiate with the debt collector to remove the negative account entries attributed to the debt from your credit report. This includes the delinquency entries the collector likely reported to your account prior to your accepting a settlement. If you can have those negative items removed, the settlement will not affect your credit score. Get the account removal stipulation agreement in writing from the debt collector.

Alternatives to Settlement

Accepting a settlement agreement from a debt collector is better than not paying the debt in terms of potential judgment litigation, especially if you can have the account listing removed from your account. If the debt collector refuses to remove the account listing, your credit is negatively affected for at least seven years, whether you accept the settlement or not. Alternatives to settlement include renegotiating a repayment plan with the debt collector. If you make your payments on time, your payment history will be positively affected.

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What Credit Score Do I Need to Rent an Apartment?

Your credit score can affect many aspects of your financial life, including your ability to rent an apartment. Along with your income, your credit score is a key factor on most apartment applications. Landlords use your credit score to gauge whether you will reliably pay your rent on time. A bad credit score makes finding an apartment more difficult, although not impossible.

Key Score

A credit score of 680 or higher is considered "fair or better" and generally makes renting an apartment easy. According to a study conducted by the credit bureau Transunion, among tenants with credit scores of 680 or above, only about 10 percent ever faced a 90-day delinquency on their rent. The likelihood of a 90-day delinquency was much higher among tenants with a credit score of below 650 (31 percent) and 600 (51 percent).

Getting Your Score

Your credit score is compiled by each of three bureaus--Equifax, Experian and TransUnion--and reflects your ability to pay back debt and pay your bills. The bureaus collect information from landlords, utilities, insurance companies and credit card companies to generate the score. You can get your scores from all three bureaus by signing up for a free 30-day trial at freecreditreport.com. If you do not want to end up paying for the service, simply cancel within 30 days.

Overcoming a Bad Score

In some cases, such as with smaller apartment buildings and single-family homes for rent, the landlord might not require a credit check. If a credit check is mandatory and your score is low, you still may be able to rent the apartment by putting down a bigger security deposit. It is not out of the question to be asked to put down three to six months' rent as a deposit if you have a bad credit score. You can try to negotiate a payment plan for your security deposit, but be aware that failure to pay the deposit on time could result in immediate eviction.

Your Credit Check

One strategy if you have a low credit score is to ask whether you can provide the report instead of having the landlord initiate a credit check. In this scenario you can include a letter that explains any issues with the report and paints your credit situation in the best light. This action, in combination with a letter of reference from your previous landlord, is often enough to mitigate your bad score. Also, too many "hard checks" on your credit by landlords or companies can have a negative effect--albeit a small one--on your score.

Get Some Backup

If a landlord is set to reject your application, you still might be able to sign an apartment lease if you get a guarantor who is in better financial standing than you. A guarantor is a co-signer from whom the landlord will seek payment if you violate the rental agreement. Guarantors can be a friend or relative, or you can hire a company such as WeCosign Inc., which co-signs your lease for a monthly fee.

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How to Get Damaging Information Off of My Credit Report

Removing damaging information from your credit important can improve your credit score. Information such as collection accounts, charge offs, late payments, foreclosures and bankruptcies can harm your credit for years. The Federal Trade Commission reports that federal law allows credit bureaus to report most negative credit information for seven years. The credit bureaus can list bankruptcy information on reports for at least 10 years. Removing negative information that is accurate and timely is impossible, according to the FTC, although there is at least one legal loophole. However, the FTC strongly recommends that you direct your credit repair and avoid so-called credit repair agencies. The agencies often make promises they cannot keep while collecting expensive fees.

Instructions

1

Get a current copy of your credit report from AnnualCreditReport.com. The Federal Trade Commission endorses the site as a source for free credit reports under terms of the Fair Credit Reporting Act. Visit the site to view and print reports from major credit bureaus Experian, TransUnion and Equifax.

2

Read the credit report to identify damaging information. Contact creditors directly to demand removal of information that is incorrect or outdated. Call the customer service number for the creditor to request that it update your credit report to remove damaging information such as a credit card charge off that is more than seven years old. Alternatively, ask the creditor to correct an account that is showing as open and past due although you paid it off several years ago. Follow up by sending a letter recapping your request. Get the creditor's mailing address from customer service.

3

Contact the credit bureaus directly as an alternative. Dispute damaging information on your credit report that is outdated or wrong by writing letters to the credit bureaus, or enter disputes online or by phone. Follow instructions on the credit reports to file disputes by mail, phone or online.

4

Ask creditors or debt collectors to delete delinquent accounts with balances from your credit reports. Offer to pay the balances in full in exchange for the arrangement -- a process known as "pay for delete." This is a legal loophole for removing damaging information from credit reports, but not all creditors or debt collectors will agree to the arrangements.

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Can One Speeding Ticket Affect Your Credit Score?

Going a few miles per hour over the speed limit could cost you thousands of dollars on a mortgage, if you can get one at all. However, a speeding ticket does not always damage your credit rating, because the governing authority decides how to collect speeding fines. Thus, you should make a good faith attempt to pay the fine.

Identification

A single speeding ticket can affect your credit. Although governments do not report tickets directly to the credit reporting bureaus, the government can send the fine to a collection agency who then reports the debt to the credit bureaus. Collection accounts are one of the seven deadly sins that can appear on a credit report and take over 100 points off of your credit rating.

Time Frame

A collection account for any kind of debt affects your credit rating for seven years, even if you pay off the entire balance. If you have an excessive amount of fines, the government can sue you too. Any civil judgment involving money affects your credit rating about the same way as a collection account and for seven years.

FICO 8

Even if your government sends the account to a collection agency, the account may not affect your credit rating. The FICO 8 credit scoring system does not lower your credit rating when you have a collection account worth less than an original balance of $100. However, if you apply for credit with a lender that uses an earlier version of the software, the account will damage your credit rating.

Tip

You usually have at least 60 days to pay a speeding ticket before a government will consider sending it to a collection agency. Most courts will allow you to put a down payment on any fine and then have you pay it off in installments. You can also try to fight the ticket in court. For example, if you were speeding to get someone to the hospital because of a medical emergency, the court might waive the ticket. Many courts will remove the speeding ticket from your record after you take a defensive driving course.

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Does a Credit Report Freeze Block Your Credit Score?

Credit Report Freeze Blocks New Access

A credit report freeze blocks your credit file, including your credit score, from new inquiries. All three credit bureaus can charge a fee to freeze credit reports as well as to lift or remove a freeze from credit reports. Fees vary between $3 and $20 by state; a few states allow freezing services. Fees may be waived for consumers targeted for identity theft.

Credit Scores Available During Freeze

A credit report freeze does not block existing lenders from accessing your credit report activity or credit scores. Potential lenders as well as potential identity thieves receive a code when attempting to access frozen accounts. The code only references that the credit file is frozen, offering no indication as to the consumer's credit score.

Bottom Line

Freezing your credit report is one way to prevent identity thieves from opening new accounts in your name. If your credit file is frozen, you must take steps to unfreeze it several days before applying for a new loan.

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How to Increase a Credit Score With Lines of Credit

Caution and planning need to be applied when trying to increase your credit score -- especially if you are using new lines of credit. Every time you apply for a loan or increased credit limit, a mark is placed against your credit score. Too many applications in a short space of time will result in your credit score being downgraded, the very opposite of what you are trying to achieve. Lenders get nervous about multiple applications because it indicates a possible financial problem.

With forethought and careful planning, there are several ways to successfully improve your credit score by utilizing lines of credit.

Instructions

1

Use your current lines of credit to increase your credit score. Check your available balances and choose the card that you use frequently and that has at least 25% of available credit. Ways to apply are online, by telephone or mail. Applying online is the quickest method, and some card lenders will give you an instant decision.

2

You will generally be asked how much you want to increase your limit and why. It is best to ask for an increase of no more than 50% of your current credit limit. For example, if you have a limit of $3,000, don't ask for more than an extra $1,500. Know why you want an increase; maybe a family vacation or a large purchase. Remember, you don't have to use the increase. The higher the difference between your credit limit and your unused credit, the more your credit score will increase.

3

Applying online may mean that your lender will not access your credit file to assess your status because they already have your personal details and history. This means that you will not receive a mark for applying, which leaves you able to apply to someone else to increase your limit without appearing to have multiple requests. Most online facilities will inform you before you "click" to increase your limit that a credit search will be performed. If they do, try another lender first.

4

Don't close card accounts simply because you never use them. If you have a selection of cards operating properly, your credit score will increase.

Manage the use of your cards. Use one for a while, then switch to another and so on. But make sure you stay well within your credit limit. Lenders like to see your cards used, even if only for small purchases. The more you use your cards, the greater the chances of improving your score.

5

Paying off an existing loan that is close to completion is beneficial. This gets marked on your credit file as "satisfied." Lenders like this. Once done, you can apply for another loan, possibly at preferential interest rates. Your chances of being approved are high, and this will result in an increase in your credit score.

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How to Get Your Credit Report by Calling

Ordering your credit report by phone is one of the safest methods, according to Bankrate.com. You don't risk your check or money order getting lost or stolen in the mail; you also eliminate the risk of online fraud. Each credit agency (Equifax, Transunion and Experian) allows you to order a copy of your credit report by telephone. You can also request your free annual report by telephone.

Instructions

1

Request your free annual credit report by calling Annual Credit Report at 1-877-322-8228. All consumers are entitled to a free copy of their credit report every 12 months. You will receive the report within two to three weeks.

2

Order your Equifax credit report by calling 1-866-493-9788. Equifax offers several product choices starting from around $10. Purchasing your credit score is extra.

3

Order your Transunion report by calling 1-800-888-4213. Transunion charges $11 for each copy. The report will arrive within two to three weeks.

4

Order your Experian report by calling 1-888-397-3742. Experian charges $10 for the report. You can add your credit score for $5, a total of $15.

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