Does an NSF Affect Your Credit?

An NSF check is a check written on an account that has non-sufficient funds to cover the check. Banks may refuse to open a new account for you because they use a service called ChexSystems, which reports such activity. Lenders check with the Experian, Equifax and TransUnion credit bureaus, which do not directly report NSF checks, but your credit may still be affected indirectly.

Credit Reports

Your credit reports show all your current credit-related accounts and old accounts going back at least seven years. Entries include branded credit cards and cards from gas stations and retail stores, loans, mortgages and equity credit lines. Your reports list your payment history for every account, as well as such actions as charge-offs, transfers to collection agencies, court judgments for debt and bankruptcies. The credit bureaus do not list your checking account activity, so your NSF checks do not show up. Your credit score comes from the report information, so bounced checks do not affect it.

Collection Activity

Merchants to whom you write bad checks may turn them over to collection agencies if you do not respond to demands for payment. Debt collectors can add such accounts to your credit reports, so collection agency information related related to NSF checks can affect your credit if it gets reported to the credit bureaus. Collection accounts fall into the payment history category, which accounts for 35 percent of your credit score total. Such accounts can legally show up on your reports for seven years.

Judgments

Collection agencies may decide to sue you for NSF checks if your state's laws allow them to do so, and if the owed amount is high enough to make it profitable. Judgments happen when you get taken to court and the judge rules in the debt collector's favor. These actions are public records that show up in court files and eventually get added to your credit reports. They make you look bad to lenders who review your credit reports. Judgments also become part of your payment history and pull down your credit score for the seven years they can legally be included in your records.

Warning

You may create court records because of a bounced check if charges are filed against you and you are found guilty of an NSF-related crime. Many states have criminal penalties for making payments with bad checks, and Steve Bucci of Bankrate.com warns that court records of convictions can show up in background checks forever. Lenders generally limit themselves to credit checks, but employers may check both your credit reports and your background, so the NSF check could cost you a job.

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What to Do About Wrong Information at Credit Reporting Agencies

Your credit report reflects every aspect of your credit management, good and bad. So if any information is wrong and reads negatively on your credit report, you may have a hard time obtaining a mortgage, car loan or even getting a new job. The Fair Credit Reporting Act allows consumers to dispute incorrect information on their credit reports, and in turn the reporting agency must review your request within 30 days.

Process

Write an explanation of what appears wrong on your credit report. Be as specific as possible, and include copies of any documents (court papers and bank statements, for example) you have to back up your claims. If you're dealing with multiple errors, provide separate paragraphs or bullet points detailing each error on your report. At the top left corner of your letter, provide your full name and address. Below that, write the address of the reporting agency. At the bottom of your letter, write a list of the documents you've enclosed.

What to Expect From the Agency

The credit reporting agency must contact you with a decision, usually within 30 days. If the reporting agency agrees that your information is inaccurate, it must notify all three major credit reporting agencies to have your information changed. For a fee, you may request that the agency sends a statement of the changes on your report to anyone who received your credit report in the last two years.

If the Agency Denies Your Request

You can request that the credit reporting agency includes your dispute letter in your credit report for future lenders or employers, but you may have to pay a fee for this service. If you need additional help in dealing with a credit reporting agency, call the Federal Trade Commission at 877-382-4357.

Prevention

To keep your credit report accurate in the future, take advantage of the one free annual credit report allotted to you by the FCRA. Simply go to annualcreditreport.com to request one free copy of your report every year from one of the three leading credit reporting agencies: Experian, Equifax or TransUnion. Review your report to make sure your information is up-to-date and your accounts haven't been subjected to identity theft.

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How to Get Arrears Off of a Credit Report With a Modification in Pennsylvania

The Pennsylvania Department of Public Welfare Bureau of Child Support Enforcement collected and distributed $1.38 billion in payments owed by noncustodial parents in the fiscal year that ended Sept. 30, 2010. Another $1.13 billion in payments were in arrears, or overdue. If you are in arrears, your county's Domestic Relations Section will report your past-due balance to credit reporting agencies until you pay or prove the report isn't accurate. A modification to a child-support order doesn't resolve the amount unpaid. You must provide proof of any accompanying adjustment in the overdue amount to the credit reporting agencies to remove arrears from your report.

Instructions

1

Find your county's DRS office by using the agency's online office locator.

2

Petition your county DRS office for a modification of your child-support order if you meet any of the common causes in Pennsylvania law -- your income has decreased, the custodial parent's income has increased, the child has been emancipated or you have reached a private agreement with the other parent.

3

Attend the DRS office conference that is scheduled for you. Bring any information that the DRS may request.

4

Agree upon a modified amount of support with the other parent at the conference or let the DRS enter an order. Appeal the order if you aren't satisfied.

5

Download a copy of your credit report from AnnualCreditReport.com, which is maintained by the three major credit bureaus, or directly from the websites of Equifax, Experian and TransUnion. Contact the agencies using their online dispute services if outdated arrears information appears on your reports. Provide a copy of the modification addressing arrears if needed.

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What Does No Information in a Credit Bureau Mean?

The only way to establish a credit history is to apply for and use credit. If you don't have a history of using credit, you won't have a credit report. Without a credit history, you may find it difficult to make major purchases, such as a home or a car, making establishing credit a wise financial move.

Credit Bureaus and Reports

Credit bureaus are receive and keep track of information about your use of credit. Many businesses submit information about your applications for credit, your payment history, and your credit limits to these bureaus. Each bureau then develops a report that lists your credit accounts and applications, making the reports available to any business or individual who has a legitimate business need to check your credit.

What No Credit Information Means

If you don't use credit often, or at all, you aren't alone. Many people prefer to manage their finances on a "cash-only" basis. While this is certainly a responsible approach, it also means that you aren't developing a credit history. If a potential creditor (such as a mortgage lender) requests your credit report from the credit bureaus, the bureaus may have very little, if anything, to include in your report. This can happen even if you did use credit in the past, but your former creditors no longer report your information to the bureaus. Unfortunately, without a credit history, many lenders won't be able to accommodate your need for a loan or credit, even though you've always paid your bills (in cash) on time.

Establishing Credit

Establishing credit can be difficult, but there are a few things that you can do to develop a good credit history, even if you've gone through most of your adult life without credit. Apply for a credit card at a retail or department store: Many of these stores only require that you have a credit history free of bankruptcy or recent charge-offs in order to qualify. Another option is to apply for a secured credit card. A secured credit card requires you to open a savings account into which you deposit an amount of money that can be used as collateral against your credit limit. Finally, if you've ever had a private loan or line of credit with a company that does not report to credit bureaus, ask if the individual or company is willing to report your payment history to the credit bureaus.

Alternative Credit Data

The Fair Issac Corporation, originator of the FICO credit score, now offers a new type of credit score based on "alternative credit data," such as information gathered from banks, landlords, and utility companies. Called an "Expansion Score," this type of credit rating is new, but may be of some use to people who don't have a long track record of using credit.

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How to Report Changes to Credit Bureaus

A credit report is a summary of your financial history--current and past credit accounts, how much money you have borrowed and how well you pay your bills. Many lenders and merchants use credit reports to determine an applicant's creditworthiness. So, it is important that your credit report contains accurate information at all times. However, it is up to you, the consumer, to make sure that your credit report is up-to-date. Learn how to properly report changes to the credit bureaus.

Instructions

1

Order a copy of your credit report. You will need to obtain your credit report from all three major credit bureaus--Experian, TransUnion and Equifax. In most instances, you can order your credit report online--if the credit bureaus can verify your identity and you do not have a security freeze or fraud alert on your account. Visit AnnualCreditReport.com to obtain a free copy of your credit report from each bureau once a year.

2

Review all three credit reports. Read through your credit reports very carefully and verify that all of your personal details and account information is correct. Make a list of any inaccurate, incomplete or outdated items that you find on your credit reports.

3

Submit a dispute form to the credit bureaus. You will be required to complete a separate dispute form for each item that needs to be updated. You may choose to submit the dispute form online, over the telephone or via postal mail. Visit the appropriate credit bureau's website to obtain the dispute form.

4

Wait for the credit bureaus to contact you. It can take anywhere from 30 to 45 days before you receive a response from the credit bureaus--depending on the nature of the dispute. The credit bureaus must properly investigate each disputed item by contacting the creditor and verifying the information in question. However, each credit bureau will contact you individually with the results of its investigation.

5

Check your credit report for updates. Give the credit bureaus at least 30 days to update your credit report. After 30 days, order a recent credit report from the three credit bureaus. Make sure that all disputed items have been updated with the appropriate information.

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How to Rebuild Credit After a Chapter 7

The filing of a Chapter 7 bankruptcy is a way a consumer can eliminate his debts to the detriment of his creditors. To rebuild credit is to ask new creditors to give you another chance; however, your bank may not agree to assume any risk on your behalf. The beginning stage of rebuilding credit after Chapter 7 requires credit cleanup, time, diligence and money.

Instructions

Rebuilding Credit After a Chapter 7 Bankruptcy

1

Go to annualcreditreport.com and request your yearly free credit reports. Read through these to make certain all accounts that were in the bankruptcy are listed as discharged. If not, send in your bankruptcy papers to each bureau and have them correct your reports. You can do this by calling the consumer use phone number given on each of the three reports. When the corrected reports come back to you, check them for accuracy.

2

Schedule an appointment with the bank or credit union you use for your checking and savings accounts. Ask the banker about a secured credit card. This is a credit card (line of credit) account that is secured by your savings account. The bank will place a hold on your savings account and give you an open line of credit for all or part of the savings account balance. Your payment history on this account will be reported to the credit bureaus.

3

Use the secured credit card, but do not allow the balance to exceed more than 30% of its maximum limit since the purpose of this card is to build credit and good scores. It will take six months of payment history before this new account will affect your credit scores.

4

Make 12 months of timely payments. After this, the bank will most likely release your savings account from its hold and may raise your credit limit.

5

Build your credit carefully. If you need to buy a car, talk with your banker. You will probably need to make a down payment, but it is best to have a mix of account types in building credit, so a car loan can do your report good as long as you pay on time.

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What Happens to Your Credit When Your Car Is Repossessed?

If you can't afford to pay cash for a car, then you may consider taking out an auto loan to cover the costs. A loan is a credit-based transaction and how you handle that credit obligation will appear on your credit report. Failure to make payments on a car loan can lead to a repossession, so it's helpful to learn how a repossession affects your credit.

Identification

When you obtain a car loan to purchase a vehicle, the car serves as collateral for the loan. The lender of that loan expects payment based upon the agreed-upon terms. If you fail to pay the amount due, the lender make take possession of the car. This is called a repossession. Repossessions can be voluntary, where you turn in the car yourself after realizing you can no longer make the payments, or involuntary, where the lender hires a tow truck to come pick it up.

Significance

Both voluntary and involuntary repossessions are listed on your credit report as a repossession. A repossession is one of the most devastating items to have on your report. Your credit, or FICO, score ranges from 300 to 850 and 35 percent of that score measures how well you pay your bills. A repossession shows that you failed to honor a credit obligation and thus it will lower your FICO score. How much your score drops depends upon the other factors present on your report.

Considerations

Although your credit score will drop once a repossession appears on your report, the damage to your credit isn't permanent. As the repossession gets older, or ages, it will have less of an impact on your credit score. According to MyFico, making on time payment on all of your debts will cause your score to increase over time. Also, another 30 percent of your FICO score is the amount of debt you have. Reducing your overall debt load will gradually help raise your score as well.

Warning

Even if a lender repossesses a car, that action doesn't terminate your legal responsibility to repay the debt. The lender will auction off the car in an effort to recoup some of the monies owed. The difference between what the lender receives at the auction and the outstanding amount of the loan is called the deficiency. You are responsible for the deficiency and as such, the lender will seek to obtain payment from you. The lender may turn the debt over to a collection agency or sue you in court to obtain a judgment against you for the deficiency amount. A judgment may allow the lender to garnish your wages or seize funds in your bank account.

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Does Credit Restoration Work?

A credit score is a vital statistic for any American in modern times. More than just a risk analysis for creditors, your score could determine whether you get a job and how much you pay for utilities, a cellphone and cable service. You may have noticed ads for credit restoration services that promise to clean your record. These can work, but are not necessary to rejuvenate your credit score.

Credit Restoration Basics

Credit restoration works, and legitimate credit repair companies have a few weapons at their disposal to help you out. The credit restoration service may go through your report with you and look for common errors, such as an incorrect posting date on a collections account, and dispute the mistake with the credit bureaus. The bureaus must investigate all serious claims and remove any negative item if they cannot verify its authenticity. They might also settle with a creditor to have a delinquent account removed in return for a full payment on the debt.

Considerations

While credit restoration is real, you do not need to hire a company to this work for you. Disputing errors with the credit agencies is a free service. You can also negotiate personally with lenders to delete a bad item. Some restoration techniques only you can do, such as adhering to a budget to reduce overspending.

Credit Restoration Takes Time

Unless you have several mistakes on your credit report or can negotiate bad accounts off your credit report, credit restoration is not an overnight fix. Negative incidents, such as payments that are late by 90 days or more, tend to weigh more heavily than positive data, especially if they are recent. It is not out of the realm of possibility, however, to see an appreciable boost to your score in a few months if you start restoration now.

Tip

You can start your own credit restoration plan by setting up automatic bill paying with your online bank account and putting as much money as possible toward your existing debts. Part of rebuilding credit involves using credit, so you may need to apply for a new loan. Do not, however, apply for too much credit if you are a new borrower, because several new accounts will lower the average age of your credit history.

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Why Are My Credit Scores So Low?

Your credit report and subsequent credit score reflect your lending and payment history. While more severe financial setbacks -- such as bankruptcies, foreclosures and charge-offs -- may lower your score significantly, credit bureaus calculate your score based on numerous factors over years of lending history. Additionally, damaging information hits higher scores harder than lower credit scores that already reflect past financial difficulties.

Payment History

Your payment history influences credit scoring more than any other factor. Late payments and, more importantly, how long the account is delinquent lower your score significantly. The more accounts reflecting missed or late payments, the faster your score drops. Late payments may stay on your credit report for up to seven years. The impact of late or missed payments does fade over time, so older delinquencies lower your score less than newer late payments. Additionally, adding positive payment information helps you recover from the negative influence of a previous poor payment history.

Balances

Major payment delinquencies aside, overall debt compared to your available credit has the second biggest impact on your credit score. Having loans or credit cards with balances near the credit limit indicates financial difficulties or potential difficulties to lenders. As your total debt accounts for 30 percent of your credit score, maintaining high balances may lower your score considerably even if you have a perfect payment history.

Joint Accounts

Generally, your credit report only reflects your payment history. However, if you have a joint account with another person, his account usage does influence your credit score. Having "authorized user" status on a credit card also affects your credit score regardless of your obligation to pay the debt. Excluding couples living in community property states and joint account holders, your spouse's lending history generally does not affect your score.

Errors

Double reporting of negative information, inaccurate reporting or just simple clerical errors may result in a lower credit score, since it is calculated based on the information in your credit report. You can have negative information erased from your credit report if the information is inaccurate. Check your credit report regularly for errors -- federal law allows you one free credit report from each of the three credit-reporting agencies annually as long as you order the reports from annualcreditreport.com. Contact the credit bureau and the lender to have inaccuracies corrected.

Considerations

Credit types and credit inquiries influence your score to a lesser degree. Generally, credit scores increase with a mix of credit types reflecting your experience with a range of lending types. Reduce potentially damaging credit inquiries by spacing new credit applications rather than opening or applying for numerous loans or credit cards within a short period.

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4 Types of Credit Information

Your credit report contains records of your current and past personal information, credit cards, loans and credit inquiries. Lenders take all of your credit information into consideration when considering any applications that you make for new credit. There are different types of credit information on your report.

Revolving Debts

Revolving debts are debts, which are subject to change, and as such, your regular repayment amount will also change. A revolving debt will report on your credit file indefinitely until the account is closed, after which it will report for up to 10 years. Credit cards and lines of credit are revolving debts.

Installment Debts

Installment debts have a set monthly payment amount and payoff date. Mortgages, student loans and vehicle loans are all classified as installment debts. Having installment accounts appear within your credit file along with revolving debts demonstrates a balanced financial profile and will increase your credit score.

Derogatory Accounts

Derogatory accounts are debts that have been sent to collections due to nonpayment. A collection agency will then place an entry on your credit report identifying itself as the current holder of the debt. Derogatory accounts have a negative effect on your credit score but can only appear for 7 years before being removed.

Credit Inquiries

Whenever a lender pulls your credit report, a credit inquiry will appear within your credit file. Credit inquiries have a slight negative effect on your score, thus you should take care to only apply for credit you are reasonably sure you will qualify for. When you pull your own credit report, however, your score remains unaffected.

Considerations

You can request a free copy of your credit report once each year to review it for inaccuracies at AnnualCreditReport.com. Should you find mistakes in your report, you can dispute the errors with the credit bureaus either by mail, telephone or online.

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The Importance of Paying Bills for a Credit Score

The monthly chore of paying all your bills can have a significant impact on your future borrowing ability if these bills appear on your credit report. Companies issuing some types of bills report both positive and negative payment history, while other bills only affect your credit score if you are seriously delinquent.

Types of Bills

Only some types of bills appear on your credit report on a regular basis. These bills typically are traditional loans and credit accounts, such as mortgages, auto loans, student loans and credit cards. Generally, if you take out a loan for a specific purpose from a bank or other traditional lender, every payment will appear on your credit report. Other types of bills, including your utilities, medical bills, payday loans, rent, library fines and parking tickets, do not appear on your credit report on a regular basis. The only times these affect your credit is if the service provider sends the account to a collection agency.

Credit Score Factors

Your payment history on bills that appear on your credit report accounts for 35 percent of your credit score. Your score increases as you build up a history of on-time payments, but your score decreases with each late payment. The later the payment is, the greater the negative impact on your score. The negative impact diminishes as time passes since the late payment. The payment history portion of your credit score also penalizes you for each account that went to a collection agency, each account settled for less than you owe and negative public records, such as bankruptcy and court judgments against you.

Effects

If you pay all your bills on time every month, this builds a solid foundation for your credit score. On the other hand, if you are consistently late on bills that appear on your credit report, this causes significant damage to your credit score. The number of points your score will drop depends on what your score was before the infraction and how much positive history you have to balance it out. Although the bills that do not regularly appear on your credit report will not damage your credit if you are a month late, these bills might result in you losing particular services if you fail to pay them. Plus, the company may give up on receiving payment from you, in which case it sends the account to a collection agency, and that will hurt your credit score.

Significance

If you know when a late payment will affect your credit score, you can strategically focus your attention on the bills with the greatest potential impact. It is best to pay all your bills on time every month. However, if you cannot afford to pay on time, making a late payment on a medical bill or traffic infraction might cause late fees, but will not affect your credit score. Paying late on a credit card or your mortgage, on the other hand, will affect your score immediately. In addition to considering the impact on your credit score, consider what services you could lose if you pay late. Missing a mortgage or car payment could result in you losing your home or car, while missing a credit card payment does not result in any immediate loss of property.

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Can Too Many Inquiries Lower Your Credit Score?

Requests for information contained in your credit file run the gamut, from routine account maintenance to inquiries that can crush your score. Credit reporting agencies mix the good, the bad and the confusing into a report summarizing your financial history. In turn, credit scoring services uses this data to calculate risk -- this is called your credit rating. By learning how agencies rank inquiries and what to avoid, consumers can peek under the hood of the process and tune-up their credit score.

Soft Inquiries

It takes a bit of vigilance to sort out inquiries. According to a 2004 survey, one in four consumers have inaccuracies on their credit reports. The type of credit check requested by utility companies, prospective employers or a landlord leave a record without affecting your score, and fall off in about a year. These "soft" inquiries provide an excellent resource to cull information about companies poking in your file. Download a free copy of your report at the Annual Credit Report website (see "Resources").

Hard Inquiries

That dinging sound is a credit reporting agency filing an electronic demerit. When you apply for a car loan, student loan, credit card, a mortgage or signature line of credit, these "hard" inquiries can chip your score down one to five points for each hit. They live on your credit file for two years, available as public information to every potential creditor pulling your file. Lenders penalize wobbly credit with higher interest rates. Use a copy of your current credit report and dispute inaccuracies online at the TransUnion, Experian and Equifax websites.

Rate-Shopping

FICO's scoring model allows consumers to shop for rates without multiple inquiries impacting their credit score. It bundles all rate-shopping activity that falls within a 14-day window. The inquiries generated from this activity count as a single credit check. You can search for a mortgage, student loan or auto loan without fear of marring your credit score for 30 days. There is also a scoring model with a shopping period of 45 days. The lender decides which scoring model it prefers.

Scoring: FICO

The average FICO score is 692, according to Experian's Score Index. The Fair Issac score rates the risk of lending money. According to FICO statistics, consumers that tallied six or more inquiries posed the greatest risk of bankruptcy. The FICO formula looks at the number of inquiries filed in the past year. Multiple applications for credit increase your risk profile, but these inquiries tell only part of the story. Your FICO score assesses 35 percent for repayment history and 30 percent for how much you owe on the total amount of credit available.

The VantageScore

Where FICO scores range between 300 and 850, VantageScore rankings run 501 to 990. The company assigns a letter grade, A to F, like a school report card. Created by the three credit reporting agencies in 2006, VantageScore reviews a consumer's profile over two-year period to obtain a score. Take their credit score quiz and see how you stack up (see "Resources").

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How to Get My Credit Score in Canada

Two agencies in Canada, Equifax and TransUnion, maintain credit histories of Canadians. Both offer free copies of credit reports by mail. This does not include a credit score. To obtain a credit score, consumers must visit one of the two companies' websites and choose a for-payment credit package. You should receive the credit report and score almost instantaneously after online payment has been processed.

Instructions

1

At the Equifax website, print and complete the Credit Report Request Form (see Resources). Fill out the form and mail or fax it, along with copies of two pieces of government-issued identification and proof of address to Equifax. You will receive a free copy of your credit report within 5 to 10 business days. You have the option when completing the form to obtain your credit score for an additional charge.

2

Alternatively, you can obtain your credit report online for a fee. To do this, visit the Equifax Consumer Homepage website (see Resources). Choose the credit product that best suits your needs. They include a credit report, credit score, and credit monitoring. To learn more about each package, click "Learn More" under each product. Once you have chosen a product, click "Order Now." You will be prompted to register with the site, verify your identification, and provide payment information.

3

Alternatively, you can obtain a credit report or score from TransUnion, the other major credit reporting agency in Canada. A free Consumer Disclosure can be obtained from TransUnion by mail or in person by visiting one of TransUnion's offices (see Resources). To request the disclosure by mail, download and print the Consumer Disclosure Request Form (see Resources), complete it, and send it to TransUnion with copies of two forms of government-issued photo ID and proof of address. The same identification requirements apply if you request your consumer disclosure in person at a TransUnion office.

4

Alternatively, you can also purchase a credit product from TransUnion online, and you may choose a credit product that includes your credit score. From the TransUnion website (see Resources) choose a credit product that meets your needs. Click "Order Now" to order the product. You will be prompted to give your personal information, payment information, and ID verification in order to complete the transaction.

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Do Prepaid Credit Cards Improve Your Credit Score?

Banks check your credit score before they issue a credit card. If you have poor credit, qualifying for a traditional card can be tough. A prepaid credit card may be convenient, but it's wise to learn how that option affects your credit score.

Identification

A prepaid credit card is a card that you add funds to and use as a credit card. The card will have a Visa or MasterCard logo. These cards do not require a credit check for approval. They are marketed to consumers that do not have a bank account or have poor credit.

Significance

Prepaid credit cards can be used like traditional credit cards for purchases and bill payments. They do not require monthly payments and can only be used as long as there is cash on the card. These cards do not require a credit check and thus, they also do not report to the credit bureaus. As such, they cannot improve your credit score.

Considerations

A credit card that can improve your credit score is a secured credit card. These cards are geared toward consumers that have credit problems. By placing your deposit in a savings account or certificate of deposit with the issuing bank, your credit limit will be equal to the amount of your deposit. These cards do report to the credit bureaus and can help increase your credit score, as long as you use it responsibly.

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Will Paying Three-Year-Old Debts Increase Your Credit Score?

Once you get behind in payments on credit cards, loans or other debt, your credit score will decrease when the delinquency is reported to the credit bureaus. Paying off your old debt, however, can have a negative impact on your credit score in certain situations. While the exact formula used to calculated credit scores is a secret, there are several common repayment situations that can impact your score.

Setting Up a Payment Plan

If you have a three-year-old unpaid debt on your credit report, the impact of the delinquency decreases the older the debt gets. Newer defaults are weighted more heavily into your credit score than older ones. Setting up a payment plan with a creditor sometimes shows up on your credit report as a new event and can hurt your credit score. Fair Isaac, the company that created and manages FICO, the main credit score used by lenders, is working to remove this anomaly from credit scores. Until that occurs, setting up a payment plan for an old debt may drop your score.

Re-activating a Charge Off

After six or more months, most companies charge off a payment owing as a bad debt. At this point, they may turn it over to a collection agency to further pursue collection or they may stop trying to collect it. The fact that the company has written off the debt does not mean that you do not owe it any longer. However, if an old debt is showing as charged off with a zero balance, contacting the company and even paying the debt may re-activate it on your credit report. The balance owing may re-appear and any payment may make the debt appear more recent than it is. This can lower your credit score.

Settling for Less Than You Owe

After a long period of delinquency, a lender may be willing to take a chunk of cash as full payment of a debt rather than \getting nothing. However, settlements for less than the full amount of the debt are recorded with the credit bureaus and have a negative impact on your credit score, even if the company shows a zero balance on the debt.

Re-starting the Statute of Limitations

Each state has a statute of limitations that limits the time period that a lender can pursue collections on a delinquent debt. This period of time can range from 3-to-15 years. If the lender has not heard from you when the statute of limitations runs out, they write off the debt and can no longer attempt to get you to pay. If you contact them, however, you can re-start the clock on the statute of limitations again and they can resume collection efforts and re-activate the debt on your credit report. If the statute has run out on your debt and you still wish to pay it, wait until you have the entire payment amount before contacting them.

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What Is the Impact of Marriage on a Credit History?

Getting married does not impact your credit history nor does it affect your credit score according to the FICO scoring guidelines. However, holding a joint account, with your spouse or anyone else, may affect your credit history.

Misconceptions

According to Credit.com, when you get married, you and your spouse continue to maintain separate credit scores. Your credit scores do not get combined.

Name Change

If you change your name when you get married, your new name will be added to your credit report so that all of your credit history---good or bad---will be carried over and will remain with you, Credit.com reports.

Effects

When you apply for a joint loan, such as a mortgage, the lenders will look at both spouses' credit reports. Both spouses will need good credit scores to be approved.

Joint Accounts

According to Experian, a global information services company, joint accounts you have with your spouse, or anyone else, will appear on both credit reports. If you are listed as a joint account holder and your spouse misses a payment, it will appear on your credit report as well.

Function

When you get married, financial institutions do not automatically add you as an authorized user to your spouse's accounts, according to Credit.com. You must request this if you want to be added.

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Tips on Building Your Credit Score

A good credit score not only determines the types of credit cards you can get, but affects your ability to buy a house, rent a car or sign-up for utilities. Specific strategies, as suggested by the Federal Reserve, can help raise this number.

Manage Credit Lines

Do not open lines of credit that you don't need. At the same time, do not close unused credit lines. Closing lines may reduce your credit score because you have less credit available to you.

Use Revolving Accounts

Use your credit cards regularly, but only enough so you can pay off the card in full when it is due. Paying your bills on time updates your score regularly and shows that you are a good credit risk, which raises your score, according to MSN Money.

Deal with Errors

If you find errors in your credit report, deal with them immediately by phoning the credit reporting companies and informing them. You will most likely need to submit a written request, but they can tell you the correct procedure, and take immediate action, such as putting a hold on any new accounts in case of identity theft, advises the Federal Reserve.

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How to Report a Court Judgment to Credit Bureaus

If a co-worker defaults on a personal loan or a roommate moves out and leaves you with a pile of bills, you have the right to fight back in small claims court. If you win a civil judgment, it doesn't guarantee you'll get your money back, but the judgment can be reported to a credit bureau. Though the law prohibits individuals from directly adding information to another person's credit report, you can take steps to facilitate the process.

Instructions

1

Verify that the judgment was filed. Court caseloads for civil actions are large. According to the New York State Unified Court System, in 2010 almost 149,000 civil actions were filed in New York City in three months. A mis-keyed Social Security number can result in a judgment slipping through the cracks and make it unlikely to be reported to a credit bureau. Verify with a court clerk that identifying information for the parties in question is accurate. Verify that the judgment was entered into the public record and appears in a computer search.

2

Hire an attorney. You cannot directly report a judgment to an outside party. The three major credit bureaus (Experian, Transunion and Equifax) routinely scan the records of civil courts for judgments and update credit reports as needed. However, if a judgment is not paid within 30 days, you can hire an attorney to place the judgment in collection, which ensures it will be reported to the credit bureaus.

3

Issue a property lien. If the debtor has property, you are entitled to place a lien on the property until the judgment has been paid. An enforcement officer can be identified through your local court and can assist you in seizing that property. Property liens are reported to credit bureaus.

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How to Get Things Off of Your Equifax Credit Report

Negative items on your credit report can affect things like your ability to get a job and buy a house, as well whether or not you are able to get auto and homeowners insurance. If your Equifax credit report contains accounts that were opened fraudulently or that have been reported incorrectly by creditors, you can dispute the legitimacy of these items. Equifax will remove derogatory data from your credit file if your request is found to be valid.

Instructions

1

Visit Equifax.com and click "Start a New Dispute" in the section labeled "Other Credit Services."

2

Enter the required information into the form, including the 10-digit confirmation number found on your Equifax credit report. Click "Submit." Answer the identity verification question on the next page, and click "Submit" again.

3

Click "Start a New Dispute." Your credit report will be displayed on-screen. Click the different sections in the menu on the left to navigate to the different parts of your file.

4

Click the "Dispute This Item" link next to the item that you want to dispute. Select the reason for your dispute from the drop-down menu and enter an explanation in the text box. Click "Add Dispute." Repeat this process to add more items to your dispute.

5

Select "Dispute Summary" from the left navigation menu to review the items you have selected to dispute. If you are finished, enter your email address and click "Submit Dispute." Equifax will notify you of the results within 30 days (45 days if you are using an annual free credit report) and remove disputed items if the investigation is resolved in your favor.

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Can I Buy a Car Without a Credit Score?

Whether you have no established credit history or have only recently begun establishing a line of credit, it can be frustrating trying to buy a vehicle. Getting approved for an auto loan or financing plan can be extremely difficult if you do not have a solid credit history. However, there are several different ways you can purchase a car without a credit score.

Pay Cash

If you can afford purchasing your car in cash, you will not need to possess a credit score. Purchasing a car with cash will eliminate a monthly car payment and will only require you to hold a liability policy on your auto insurance. The downside to paying cash for your car is that you will not be able to build credit like you would when financing a car through a dealership or making payment toward an auto loan through a financial institution. You can pay cash for a car when buying from either a dealership or a private seller.

Use a Cosigner

A valid cosigner may be required for you to finance a car or take out a private loan. A cosigner may be any friend, family member or acquaintance with qualifying credit. A cosigner will sign the same agreement as you and will agree to take on the financial responsibility of the loan should you happen to default. Using a cosigner enables you to purchase a newer or more expensive car, or a car that you can simply not afford to pay for in full. It is important to note, however, that if you make late payments or neglect to make payments on your car, the credit of your cosigner will suffer along with yours.

Utilize a Large Down Payment

Putting down a considerable upfront payment toward your new vehicle can help you buy a car without a credit history. A large cash down payment may offset the risks associated with selling to a buyer without credit in the eyes of some sellers. Speak with the seller or dealer about your options regarding financing, under the condition you pay a certain percentage of the cost upfront in cash.

Considerations

Before deciding which route to take when buying your car, it is essential you take a long, hard look at your finances. Make sure you can realistically afford to buy the car you are interested in to avoid hurting your credit score before you even get a chance to develop a solid history. Buying a car that you cannot afford and then missing payments will have a negative effect on your credit.

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How to Repair Your FICO Score

Your FICO score, or credit score, is very important when it comes to being approved for new loans and credit cards. Almost all lenders place a high priority on having a good credit score when determining if they should trust you with a loan or line of credit. If you have not handled your credit well in the past, there is no magic fix to give you a great credit score overnight. However, if you find your credit score has been damaged by incorrect information, you should take steps to correct the errors on your credit report to repair your credit score.

Instructions

1

Request a copy of your credit reports from each of the three major credit bureaus: Experian, TransUnion and Equifax. Under the Fair Credit Reporting Act, you are entitled to a free copy of your report from each bureau once every 12 months.

2

Check the credit reports for any mistakes pertaining to your financial history such as on-time payments reported as late, your credit limits on credit cards or other lines of credit being lower than your actual credit line and negative information over seven years old (10 years in the case of a chapter 7 bankruptcy).

3

Gather any evidence you have of your claim, such as receipts or bank statements.

4

Write a letter to the credit bureau, explaining what specifically you are challenging and why you believe the information to be inaccurate.

5

Write a letter to the creditor explaining what specifically you are challenging and why you believe the information to be inaccurate.

6

Enclose copies of your supporting documents in your letters to the credit bureau and the creditor, and send via certified mail so you can document what was mailed and when it was received. Credit bureaus must usually investigate your claim within a month of receiving your appeal. If the information is found to be incorrect, it will be removed from your report.

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How Much Does Your Credit Score Go Down After a Vehicle Is Reposessed?

Your auto loan is secured by the vehicle itself. Thus, should you stop paying the auto loan, your lender will hire someone to go to your home or place of employment and repossesses the car in lieu of payment. Not only does repossession leave you without transportation, it also severely damages your credit rating---making it challenging to obtain another auto loan for a replacement vehicle.

Credit Impact

The derogatory credit effects of a repossession vary depending on the individual and how much negative and positive information is already present on his credit file. The credit scoring formula is a trade secret and only the Fair Isaac Corporation---the company responsible for "FICO" scores---has access to it. Thus, there is no way to estimate the damage a repossession will do to your credit before it occurs. On average, repossessions generally cost consumers 100 to 150 points.

Voluntary Repossession

If you know that you can only continue making car payments for a limited amount of time before you will no longer be able to afford your loan, you have the option to return your car to your lender. Doing so is commonly referred to as "voluntary" repossession.

While voluntary repossession saves you from having to pay the towing and storage fees your lender incurs when it seizes your vehicle, it does not lessen the negative effect the repossession has on your credit rating.

Reporting Period

The Fair Credit Reporting Act notes that an auto repossession will remain a part of your credit history for seven years. After seven years, the record of your previous auto loan and the repossession that followed will vanish from your records.

Even though the repossession stays on your credit record for seven years, its negative impact on your credit scores diminishes over time. The more recent an entry is, the greater the effect it has on your scores. Thus, your credit suffers the most from a repossession immediately after it appears on your file.

Additional Damage

After repossessing your vehicle, the lender sells it. It applies the funds recovered through the sale to your remaining auto loan balance. In some cases the lender cannot sell the car for enough money to erase your balance. Should this occur, you still owe the remaining deficiency.

If you do not make arrangements with your lender to pay off your auto loan deficiency voluntarily, the lender can sue you and obtain a court judgment against you---which also appears on your credit report. Because judgments are derogatory, your credit score will suffer even further.

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Does It Hurt Your Credit to Consolidate Your Student Loans Twice?

As with anything in the lending world, consolidating your student loans, especially multiple times, can damage your credit rating. Not all consolidation loans will damage your credit. If you transfer debt to an existing account, it is unlikely your score will change at all. The key to reducing the impact of consolidation is to avoid anything that might look negative in light of the consolidation.

Identification

If you have to apply for a new loan account, the creditor usually performs a credit check which does up to five points in damage. If you consolidate federal student loans, you do not go through a credit check. The only requirement to consolidate federal student loans is that your accounts are not in default.

Length of Credit History

Private lenders probably will perform a credit check unless you transfer your debt to an existing account. If, for instance, you have a student loan of $5,000 and another at $10,000 with another lender, the creditor probably can just combine the two accounts and avoid the application process. A new account, however, lowers the average of all of your accounts, which would lead to an additional drop in your score.

Recovery

As long as you handle the rest of your accounts responsibly, such as always paying at least the minimum payment on time and not adding any credit card debt, the effects of consolidating student loans will last only a few months, according to MyFICO. If you have to apply for a new account, you should avoid applying for other new creditable accounts for the next six months to a year because multiple queries within a month makes you appear desperate for credit.

Considerations

You should consolidate your student loans only if doing so will lower your interest rate. Constantly shifting debt around and never tackling the balance delays the issue of not being to pay back the loan. However, federal loans have some benefits such automatic deferral in case of a hardship that you will lose if you consolidate them with private loans.

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Does Adding Your Child to a Credit Card Help His Credit Score?

Establishing credit can be challenging when creditors are unwilling to extend it. Young adults are often faced with the struggle of obtaining credit when they have no credit history. In some cases, parents add children to their accounts as authorized users to help boost the child's score.

Piggybacking

When people realized that an added user could inherit a cardholder's good credit, many consumers began taking advantage of the system. The practice earned the nickname "piggybacking." In 2008, FICO began cracking down on those trying to deceive credit bureaus by piggybacking. Fortunately, true authorized users are still able to reap the credit benefits of being added to a parent's credit card account. Scoring models will check spending habits and account history to determine the legitimate accounts.

Co-Sign

Parents who wish to help build credit for their child can co-sign on the child's credit card application. When a parent co-signs, she is promising to cover the payments if the cardholder defaults. Any delinquencies will also show up on the parents' credit reports.

Tips

Young adults with no credit or limited credit history may want to consider alternative ways of increasing their credit score. For example, a secured credit card can be opened by almost anyone, regardless of their credit history. As long as the credit card company reports to the bureaus, a secured credit card can help a child establish their credit. It is also important to establish checking and savings accounts. Lenders often look for both accounts before offering credit.

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What Is a Charged Off Account?

On your credit report is a section for potentially negative accounts, and this is where you will find any charged off accounts, also called charge-offs. A charge-off is one of the most damaging marks you can have on your credit report. According to Steven Bucci, Bankrate debt adviser, a charge-off on your credit report is the No. 1 reason for being denied credit.

Charged Off Account

An account usually is charged off after 180 days, or six months, of missed payments. After that period, the company considers the money you owe a "loss." The company can claim this money as a loss on its tax return, according to Bankrate.

Do I Still Have to Pay a Charged Off Account?

You are still liable for a charged off account. After an account is charged off, it typically is sent to a collection agency or to a collections department within the company. The collection agency will persistently try to collect this debt from you. Depending on the size and type of debt, the collection agency may require full payment of the debt, agree to take a portion of the debt or allow you to make payments to settle your charged off account, according to Bankrate.

How Long Does a Charge-Off Stay on My Credit Report if I Don't Pay?

A charge-off remains on your credit report for seven years. The seven years does not begin when you pay the debt in full; it begins when the account was charged off. Even if the debt is sold to a collection agency, the time period does not reset upon the sale of the debt, according to Maxine Sweet, public educator for Experian. For example, if you stopped making your personal loan payments in January 2010 and the account was charged off in July 2010, the charge-off will be removed from your credit report in July 2017, according to Bankrate.

What Happens if I Pay My Charged Off Account?

If you pay your account in full, it will show up on your credit report as a "paid charge-off." If the collection agency accepts partial payment, your report will show a "settled charge-off," which hurts your credit rating more than the "paid charge-off" designation. You can contact the creditor and request that it report the debt as "paid as agreed" in exchange for full payment, according to Bankrate. Any of these options is better than nonpayment, as an unpaid charge-off severely damages your credit and your ability to obtain future credit.

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How to Explain Your Credit Score

Your FICO credit score, calculated by Fair Isaac Corp. based on information on your credit reports, is a very important number. A high credit score makes it easier to get loans and credit cards and to qualify for lower interest rates. A low score can impair your ability to get credit, insurance and even employment. Although Fair Isaac does not release its exact formula, you can explain your credit score by knowing the main factors Fair Isaac considers in its calculations.

Instructions

1

Review your payment history, taking any late payments into account. Over a third of your FICO score is based on your payment history. If your score is low and you have a history of late payments, that will explain a large part of why it is low.

2

Calculate how much you owe to creditors. Just under one third of your FICO score is based on your outstanding loan and credit card amounts. If you owe too much in relation to your income, it will explain why your score might be low.

3

Count how many different types of accounts you have on your credit report. Having a variety will explain part of why you might have a higher credit score than someone who only has credit cards. It is better to have a mixture of credit cards and other loan types, like a car loan or mortgage. Creditors like to see a good mix of revolving lines and installment loans.

4

Consider whether you have recently applied for any new credit cards or other accounts. When you make too many applications, the high number of inquiries on your credit history will explain a dip in your credit score. Creditors don't like to see a flurry of applications or a lot of recently opened accounts.

5

Note the average length of time your credit accounts have been open. If you have a relatively long credit history, with long-term accounts that have a good payment history, it will explain a higher credit score. A short history with very few accounts will result in a lower score.

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Quickest Ways to Improve a Credit Score

When your credit goes bad the first thing you want to do is try to repair it so that you can finance the purchases you need to make such as a home or a car. Repairing your credit can take a long time, but while you are in the process of repairing your credit there are several things you can do to improve your credit score.

Pay Your Credit Cards Down

When it comes to your credit cards, you only want to use a maximum of 30 percent of the available credit to help maintain the maximum credit score possible. One of the quickest ways to raise your credit score is to stop using your credit cards, and then start paying them down on a rotating basis. Start with the card that has the most balance used on it, and pay it down to a level of 30 percent usage. Once you have it paid down that far, move on to the next card. As you pay cards down and stop using them, your credit score will quickly rise.

Keep Cards You have Paid Off

As you pay cards down you may find that you are able to pay some of them off. When you are recovering from bad credit and trying to bump your credit score up as quickly as possible, you need as much old credit history as possible to help raise your score. As you pay cards off do not have the accounts closed. Leaving credit accounts open that are paid off means that you have credit accounts that were in good standing still on your credit report. The zero balance on these accounts will help raise your credit score quickly.

Pay Off All One-Time Bills

We all forget to pay a bill once in a while. You get a co-pay bill from the doctor's office for $20 that you forget to pay and it eventually winds up in collections. When you are trying to raise your credit score quickly, these little one-time bills can be credit score killers. Gather all of your bills together and pay off the ones that have been sitting in your bill basket for a long time. As long as you pay them prior to going to collections then there should be no negative effect. Doctor's offices, hospitals, book clubs, and other one-time bill generators do not report regularly to credit agencies. They only show up on your credit report when they go to collections. Avoid having that mark on your credit report and pay those one-time bills.

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How to Rebuild Damaged Credit

If you have had credit problems in the past, you may have a low credit score due to your damaged credit. Having damaged credit is not forever. In fact, you can actually take action and begin rebuilding your damaged credit on your own. Rebuilding your credit means that you are showing creditors that you can responsibly manage your money and are worthy of being issued credit. Rebuilding your credit can be a lengthy process, but it will work if you stick with it.

Instructions

1

Get a copy of your credit report to look for anything that is inaccurate. You can do this by contacting the credit bureaus, Experian, Equifax and TransUnion, directly or by using an online service such as TrueCredit to get all three at once. It is important to get all three because they may not all have the same information. If you find something inaccurate, use the dispute option listed on the credit report.

2

Pay down credit cards that have high balances. When you have credit cards that are close to the limit, it lowers your credit score. By carrying a low balance, you show a low credit utilization, which boosts your credit score.

3

Leave all of your credit card accounts open. The longer your credit history appears on your credit report, the higher your credit score. Closing older credit card accounts, even if you do not use them, can actually lower your credit score.

4

Get a secured credit card if you want to start showing new positive credit history. Secured credit cards require you to place money in a savings account that is used to fund the credit card. The Find Secured Cards website (see Resources) has a list of current secured credit cards that are available.

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