The Factors Considered in the FICO Credit Scoring System

The Fair Isaac Co. created the FICO credit scoring model that the three major credit bureaus use to calculate the credit scores lenders use to determine a consumer's creditworthiness. Your credit score can impact many areas of your life, and understanding how it is calculated can help you build it up over time. Several factors go into calculating your FICO score.

FICO Score Basics

The FICO score is a numerical representation of the information that is contained in your credit report. Your credit report is filled with information provided by your creditors. The FICO scoring system runs from 300 up to a maximum of 850. Your credit score from each of the three major credit bureaus may be different, because each bureau might have a slightly different mix of information about you in your credit file.

Past Payment History

The biggest variable in calcuating your credit score is your past payment history. This factor looks at whether you have paid your bills on time and considers practically every bill that you have. Your credit file can include information about your payment history with credit cards, mortgages, auto loans and even your utilities. This variable makes up about 35 percent of your total FICO credit score. If you miss a payment, it can significantly affect your score.

Amount Owed

Another important factor that is used when calculating your credit score is the amount that you owe creditors. This is typically based on a ratio that compares the amount you owe to the amount of credit that you have available to you. For instance, if you owe $5,000 on credit cards and you have an available credit limit of $10,000, you have a credit utilization ratio of 50 percent. If you can keep this ratio below 30 percent, it makes you look like a better credit risk.

Additional Factors

The length of time that you have used credit is another factor considered by the credit bureaus. Having a longer credit history helps boost your FICO score. The number of new accounts that you opened recently can also have an impact on your score. If you open too many accounts at once, it hurts your score because it looks like you need access to additional credit. Having a mix of different types of credit can boost your score overall. If you only have one type of credit, it does not look good in eyes of your creditors.

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Should I Cancel One of My Credit Cards to Improve My Credit Score?

A credit score is calculated by a mixture of factors. You may have heard that too many credit cards can lower your credit score. Canceling one of the credit card may seem like a simple solution. Unfortunately, canceling a card is not that simple. A canceled account can have a negative impact on your credit report.

Consider Age

The age of a credit card account is something to consider when canceling a credit card. Closing an older account could have a negative impact on your credit score. Because the time an account has been established plays a role the overall score, keeping an older credit card can improve your score.

Consider Balance

Each credit card you have is scored individually and then scored together with all your other cards. If the card you are canceling carries no balance, it provides you a good individual score. You are utilizing less of your available credit. By canceling the credit card, you lose that good score and the available credit. If you must cancel a card with a zero balance, make sure you pay down the other cards to keep your ratio the same.

Tips

A closed account will still show up on your credit report. The credit score may even still factor in the closed account. If you plan to cancel an account, make sure you do not have a balance. The banks can raise the interest rate. If you must cancel a credit card, make sure you do it properly. Contact the credit card issuer and notify them you wish to cancel the card. Also submit the request in writing.

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Six Sneaky Factors That Affect Your FICO Score

Your FICO score can dictate the quality of certain aspects of your financial life. The Fair Isaac Corporation calculates a FICO credit score for borrowers based on several key credit management characteristics. While common advice for keeping a good FICO score includes paying down your debt and paying your bills on time, several "sneaky factors" affect the direction of your score, as well.

Debt Utilization Ratio

Obviously, lots of debt can have a negative impact on your FICO score. If, however, you manage that debt well, you might still boast a strong score. When your outstanding credit balances run close to your available credit, your FICO score usually reacts poorly. The Fair Isaac Corporation refers to the ratio of your total debt relative to your available credit as your debt utilization ratio. The higher the percentage, the more likely the chances you are putting your FICO score in peril.

Damage Potential

The MyFico website puts it plainly: "High scores can fall further." If you have experienced credit problems at some juncture, FICO may already have factored them into your score. When something else goes awry, the downside might be greater than you expected. If you have a high score and few, if any, any credit problems, one slip-up can result in a more dramatic score decrease.

New Credit

The Fair Isaac Corporation uses several points related to new credit to calculate your FICO score. For example, recent credit inquiries and newly opened accounts come into play. Your score also fluctuates along with the amount of time since credit inquires and new account openings.

Types of Credit

Having and managing various types of credit can bode well for your FICO score. The science behind a FICO score considers the types of credit you have and use, which include credit cards, student loans, auto loans and personal loans. If you have several credit cards and installment loans and you manage them effectively, your score should benefit. That said, running out and opening up a whole bunch of new accounts could have the opposite effect.

Credit Inquiry Timing

The FICO score assesses the time between credit inquiries when devising your score. For instance, if you are shopping around for the best loan rate, conduct all of your inquires within a short period of time, instead of over long durations. The FICO score detects inquires pertaining to one particular search credit and various different ones.

Closing and Paying Accounts

When you pay off a collection account, it does not disappear. Instead, the Fair Isaac Corporation reports that collection accounts stay on your credit report for seven years. While they are there, they generally have a negative influence on your FICO score. Just because you close an account, it does not mean the FICO gods don't consider it when calculating your score. If there's a balance or another key factor associated with that entry, it will continue to counts toward your score.

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How to Use Prepaid Credit Cards to Help Rebuild Credit

Whether through bankruptcy, foreclosure or other reasons, many people lose their good credit rating. Having a low credit score can make it hard to get a car or auto loan or a credit card. Though there are many options for rebuilding your credit, one fairly easy way is by using prepaid credit cards. This is an excellent way to rebuild your credit as well as retrain yourself to stick to a budget.

Instructions

1

Look for a prepaid credit card provider that reports to the three credit reporting agencies: Equifax, TransUnion, and Experian. Be very certain that the prepaid companies you consider clearly state that they report to the credit bureaus, which is necessary to help you rebuild your credit score.

2

Make a list of the companies you are considering and the fees associated with them, along with the applicable terms and the website address or phone number for each. Make sure that you are aware of whether or not overdraft fees may apply.

3

Review your list to determine which terms and fees meet your needs the best. As a final measure of security, call the companies that are in contention for the final pick and verify their terms by phone. Complete an application for the one you select and deposit any start-up money or set up direct deposit to recharge the card balance as needed.

4

Begin using your prepaid credit card as you need. Always keep track of the remaining balance available and use it responsibly. Take care, especially, not to go over the limit of the card.

5

After using the card for about 60 days, pull your credit report from one of the credit reporting agencies. Any of the free credit reporting companies will suffice. Just be very careful, as you usually have to sign up for a monthly fee and you will need to cancel the service before you get charged. Annualcreditreport.com does provide one free credit report per year without an ongoing obligation. Verify that the prepaid credit card company is actually reporting for you. If not, you will need to contact the prepaid credit card company by phone to resolve the matter.

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Fast Ways to Raise a Credit Score

Your credit score is what lenders look at to determine whether or not to let you borrow money. If one or more incidents in the past have caused your credit score to dip to unacceptable levels, it is possible to raise the score in a relatively short time. If the score is extremely low, it will take some patience to get the number back to where you want it to be, but following a few financial tips will get you on your way in a hurry.

Resolve Old Open Debt

Check your credit report for old accounts that show unresolved debt. Just because a business or lender may have given up on trying to collect a debt and you no longer get phone calls or letters, it does not mean it has been erased from your credit report. These problems may never go away if you do not work to clear them up, according to RepairBadCreditReport.com.

Find all unresolved accounts listed on the report and try to get the lenders to settle. In some cases they will be willing to take an amount much lower than you owe and call it even. Be sure that these accounts get reported as "paid as agreed" by the lender. On the other hand, if any accounts show up as unresolved or delinquent and you can provide proof that you paid these debts, contact the lender and get it cleared up and have them report the correction to the credit reporting agencies.

Keep It Under 50

Don't simply think about how much debt you owe. Think about how big of a percentage of your total credit line you owe. The two most important factors in determining your credit score are timely payments and the percentage of your credit you have as an outstanding balance, according to The Motley Fool website.

It is a good idea to keep your balances below 50 percent of your available credit. It is better to aim for 30 percent.

Ask for Increases

If you are unable to pay down your balances to less than 50 percent of your total credit limit, then don't hesitate to ask for an increase in credit. It doesn't sound sensible at first, but the larger your credit limit is, the higher the balance can be before it reaches 50 percent of the total--and that will make a difference on the credit report. Of course, you should not spend this additional money should it become available. Continue to pay the balance down as quickly as you can.

Open Diverse Accounts

It will raise your credit score if you make timely payments to a diverse set of accounts, according to RepairBadCreditReport.com.

If you have a mortgage but have never had a car loan, then consider financing a car the next time you need one instead of paying cash. If you have a car payment but no mortgage, try to get your rent payments reported to the credit bureaus. If you have both, but no unsecured credit, it can only help to open a credit card account. Just be sure not to abuse it.

If your problem is a lack of credit, try getting a secured credit card. Even these cards report to the credit bureaus and will help to quickly establish credit.

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Tips for an Excellent Credit Rating

A credit rating affects many things in a person's life, such as a job offer, opportunities to rent an apartment or buy a house, and the rate a bank charges on a loan. There are three major companies that provide credit ratings in the United States, which are the firms Experian, Equifax and TransUnion. These companies do not provide the exact method that they use to create a credit score to consumers. An individual can still establish a high credit rating by following certain practices.

Use Credit Sparingly

A credit-reporting agency considers an individual's level of credit usage when it assigns a credit rating. If an individual borrows $800 and can borrow a maximum amount of $1,000, this lowers the individual's credit rating much more than borrowing $800 when the individual can borrow $100,000. To receive an excellent credit rating, an individual should only borrow a small portion of the total amount that is available.

Monitor Your Credit Report

The Federal Trade Commission requires credit-reporting agencies to provide free credit reports once a year to consumers in the United States. Examining a credit report can improve an individual's credit rating because the person may find inaccurate charges or unpaid bills. If there are unauthorized charges on a person's credit report, this may be a sign of identity theft, so the individual should report any unknown charges to the credit reporting agency.

Pay on Time

Prompt bill payment ensures that an individual can maintain an excellent credit rating. Many banks offer automatic bill payment, which is useful to ensure that an individual does not miss a recurring payment such as a phone bill or a water bill. Many companies also allow a client to select automatic payments when setting up an account, so the company automatically deducts a payment from the client's bank account when it is due.

Negotiate with Creditors

An individual's credit report includes information that a lender provides to the credit reporting agency. A lender may decide to remove negative information if an individual repays a debt. The Los Angeles County Department of Consumer Affairs website states that a lender must report payments that it receives from a debtor, but there is no legal requirement for a lender to remove other negative comments about the debtor from the credit report.

Consider Credit History Length

The length of an individual's credit history affects the credit rating. Lenders want to see evidence that an individual can pay bills on time over a period of many years. Even signing up for a single credit card will start a credit history for an individual. The Federal Reserve Consumer Information website states that a consumer can still have an excellent credit rating with a short credit history if the consumer manages credit accounts correctly.

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Does Poor Credit Drop Off After Seven Years?

Consumer credit reports provide a picture of an individual's financial well-being at a specific point in time. In order to give consumers a chance to improve their financial health, the Fair Credit Reporting Act (FCRA) stipulates that poor credit entries on a consumer credit report be removed after seven years, in some cases. Certain types of poor credit information may remain as part of a consumer credit report for significantly longer than seven years, depending on several variables.

Credit Cards

Original creditors, collection agencies and debt buyers can legally report credit card and other payment delinquencies and charge-offs for seven years. While these items are supposed to drop off after seven years automatically, consumers should monitor their credit reports to ensure compliance. Consumers can file a dispute with credit reporting agencies to have the listing removed after seven years. While the credit must be removed, the debt may still be collectible, depending on the consumer's state statute of limitation laws.

Tax Liens and Judgments

Paid tax liens that precede the credit file by more than seven years should drop off of a consumer credit report. The seven-year clock begins on the date that the tax lien was paid in full. Judgments are part of the consumer's public record and may be listed on her credit file for at least seven years. If the consumer's state of residence allows judgments to remain valid for longer than seven years, the poor credit listing will remain on the credit report for the life of the judgment.

Student Loans

Poor credit listings as a result in delinquent or defaulted federal government-guaranteed or insured student loans and national direct student loans do not fall off after seven years. These negative listing on a consumer credit report may remain up to seven years after the loan is paid in full. This means that the seven year credit reporting time clock starts after the loan is paid, not after the date of last activity. If you never pay off the student loans, the negative entry will remain part of your credit file indefinitely.

Bankruptcy

Filing for Chapter 7 or Chapter 13 bankruptcy can remove poor credit listings from a consumer credit file for accounts covered in the bankruptcy. Bankruptcies can remain as part of a credit report for up to 10 years after the bankruptcy is discharged, not seven.

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Does a Deed-in-Lieu of Foreclosure on a Timeshare Affect Credit?

Some timeshares fall in value so much that the owner sells the property for nothing, and others may try to give the deed back to the developer -- called a deed-in-lieu of foreclosure. While a deed-in-lieu may get you out of a property, you may destroy your credit rating in the process. On the other hand, a deed-in-lieu can save your credit rating.

Timeshare Mortgage

A deed-in-lieu of foreclosure will affect your credit rating if you have a timeshare mortgage, because the lender -- often the timeshare developer -- usually reports to the credit bureaus that you did not repay the loan in full. A deed-in-lieu takes 80 to 160 points off of a FICO score of 780, and even more for higher scores, according to Les Christie of CNN.

No Mortgage

A deed-in-lieu may avert damage to your credit score if you do not have a mortgage. If you have unpaid dues, the timeshare company will eventually sell the debt to a collection agency or sue you, both of which will destroy your credit rating. If you work out a deal to exchange the property to pay the debt, you can avoid a negative account on your record.

Considerations

Timeshare companies do not always report a deed-in-lieu to the credit bureaus. For example, you may have a lawyer negotiate with the timeshare company to agree to not report the account to the bureaus. However, you must get the the timeshare company to agree to not report the deed-in-lieu in writing. You have no leverage once you complete the deed transfer.

Tip

You probably have options other than a deed-in-lieu that may protect your credit score. For instance, you can trade vacation weeks with timeshare owners at other properties. You can even exchange ownership of the properties. Some charities take timeshares if they think they can sell the property for a quick profit. You can take a charitable deduction on your taxes worth the fair market value of the property or whatever it sells for.

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Does Paid Mean Closed on a Credit Report?

A paid or closed account it usually a good thing on your credit report, or at least neutral. Whether you have a "paid in full" or "closed" status on your account makes little difference, according to credit reporting agency, Experian.

Identification

The only difference between paid and closed on a credit report is that they signify a different type of account,. "Paid" accounts are installments, such as loans, while "closed" accounts refer to revolving accounts, like credit cards.

Significance

A paid account means you have given back all the money you borrowed from a lender, according to Experian. A closed account is inactive, but has no outstanding balance.

Effects

Having either a paid or a closed account is a good thing, as long as you were never late on a payment, according to Experian. Both of these stay on your report for 10 years -- three years longer than any negative information.

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Will Merging Two Cards From the Same Company Affect the Credit Score?

Your credit score is a number summarizing the activity in your credit report; Any financial activity reported on the credit report affects your scores, including merging or combining cards. Even if you have two credit cards from the same company, each account appears separately on your credit report. The trick is to merge the cards in a way that preserves the positive attributes of each account. The financial advice service Bankrate reports that it is difficult to know exactly how many points any given action adds to or subtracts from to your score.

Your Credit Report

Lenders and creditors can opt to report any number of transactions to credit rating agencies, who compile this activity into a credit report. Agencies then use equations to condense the activity in the report into a credit score. Your credit report includes all open credit card accounts, mortgages, car loans and other loans, as well as open accounts, late payments, defaulted or delinquent accounts, inquiries into your credit score, usually during the last seven years and any bankruptcies in the last 10.

Scoring Factors

Lenders look for responsible management of credit. Having access to credit, especially a lot of credit, and using it well results in a high score. With credit cards, the three major factors are extent of credit history (how long you have been using credit), credit use ratio (the percent of available credit that you use -- ideally under 10 percent) and timeliness of payments. When you merge cards, try to preserve the positives as they appear on your credit report.

Merging Cards

To maximize the benefit to your credit report, see if you can preserve the oldest card's activation date so as to preserve the extent of your credit history and opt for the highest credit limit. Higher credit limits lower your credit use ratio -- as long as you do not end up spending more because of the increased availability. Talk to your credit card company about your options when merging two accounts; Options vary among companies.

Tip

What you see as an attractive feature in a credit card -- low interest rates, low fees and purchasing perks -- may not be what matters on your credit report. Try to avoid losing your oldest card activation date -- length of credit history accounts for 15 percent of your score. If you are trying to increase your score, consider forgoing the perks for the time being. Finally, if you have problems with debt, do what makes the most sense in the long run; if a card with low rates and a lower credit limit keeps your spending in check, it will help you more than a temporarily high credit use ratio.

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How to Make Your FICO Score Work for You

Fair Isaac is the company that came up with the original credit scoring model and it is still used today by all of the major credit bureaus. Your credit score is an important number as it can play a role in many areas of your financial life. Your insurance premiums, rental deposits and interest rates can be impacted by it. Getting your FICO score on an upward trend can significantly improve your financial life in the long-term.

Instructions

1

Get a copy of your credit report from each of the three major credit bureaus. TransUnion, Experian and Equifax all use the FICO scoring model and they all have different information from your creditors. Examine each credit report to see exactly what is bringing your score down. Most credit reports give you some type of information as to the factors that are contributing to your credit score the most. This will give you a place to begin your efforts to build your score.

2

Start making all of your bill payments on time or pay them before they are due. If it helps, you can set reminders on your computer or phone to make sure that you pay your bills on time. In some cases, you may be able to set up automatic bill payments so that your bills are deducted from your account at the appropriate time. Your payment history makes up a large percentage of your credit score and by making your payments on time, you can bump up your scores.

3

Pay down the balances on your debt accounts as much as possible. Another important factor in evaluating your credit score is the amount of debt that you have in relation to the available credit. If you can get the amount of debt down below 30 percent of what you have available, it will reflect positively on you with the credit bureaus. This might take some time to accomplish, but it can make a big difference in your score.

4

Use your credit responsibly whenever you get the chance. This can include opening a credit card account and making small purchases. Then when you get the bill for your credit card, make the payment immediately. You should also strive to get a good mix of credit. For example, if you have different types of credit like credit cards, a mortgage and an auto loan, this helps boost your score. Many people who have poor credit scores never use their credit and it ends up lowering their score even further.

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Reliable Consumer Credit Advice

Everyone from friends to co-workers can offer advice on credit. However, improving a bad score and maintaining a high rating calls for adhering to reliable credit advice. There is plenty of information available. Do your own research to ensure that you're making the best credit decisions.

Check All Three Credit Reports

Every consumer has three credit reports and three credit scores. When applying for mortgage loans and home loans, lenders tend to pull all three scores and use the middle score to determine eligibility and the interest rate on your loan. Get a free copy of your report for all three bureaus once a year from Annual Credit Report and check your personal score with MyFICO.com.

Delinquencies

Raising your credit score often calls for good payment habits. Payment history makes up 30 percent of credit ratings, says MyFICO.com. A good payment record entails making on-time payments each month. Late or skipped payments shed points off your credit score and makes it harder to get financing.

Minimize Debt

Debts not only affect whether you can get a loan, they also affect the interest rate on such loans because lenders take into account your debt load in determining your risk of default. Keep a good credit score by keeping your balances manageable. Debts can easily get out of hand. Paying off new charges each month alleviates high debts and helps you maintain a good credit rating.

Closing Credit Accounts

Closing or canceling a credit card doesn't make the balance disappear. People who have difficulty controlling their spending may decide to close credit card accounts to avoid accumulating additional debt. This a huge mistake, because the length of your credit history factors into your credit score. For example, canceling a credit card that you've had for 10 or more years can significantly shorten your credit history and trigger a decrease in your credit score.

Moderation

Because high balances and debt can lower credit ratings, some people refuse to use credit cards and pay for everything in cash. While this approach alleviates debt problems, it doesn't help your credit score. Scores are based on credit usage. And if you don't have credit or use it, creditors will not update your credit file to reflect good payment habits. Acquire credit, and then use credit responsibly. As discussed, pay off balances in full and only borrow what you can afford to pay off.

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Equifax Credit Score Tips

Everywhere we turn, we seem to hearing about the importance of our credit score. You must increase your score in order to get a loan. Improving your credit score is possible, but you have to be responsible in your spending and wise in the financial decisions you make. Equifax is one of three credit reporting agencies that monitor your credit activity and give you a score based on your creditworthiness.

Credit Score

Your credit score is a reflection of the amount of risk that a lender or creditor takes upon himself by lending you money or extending you credit. As your score increases, the lender takes less risk; therefore, you are more likely to get the loan you are looking for. Credit scores range from 300 to 850. In order to get the most competitive interest rates, your credit score needs to be at or above 720.

Increasing Your Score

Equifax recommends several different strategies for improving your score. Many of them are intuitive, while some are not. Since there are many components of your score, it is important to understand them all.

One important component of your Equifax credit score is your debt ratio. Higher credit card and loan balances mean you have a higher risk of missing payments. Paying off your balances is an important step to raise your score.

Credit history and average account age are important components of your credit score. The longer you have an account, the better that reflects on your score. Equifax recommends against opening multiple accounts at once, because that can lower the average account age and actually lower your score. Only open new accounts as needed, and avoid closing old accounts.

Your payment history is perhaps the biggest contributor to your Equifax credit score. Making payments diligently and on time each month will raise your score and keep it high.

Other Tips

If you miss a payment, make sure to make it up immediately. Catch up and stay current. If you fall behind on payments, contact your creditor to explain the situation to them and work out a payment plan. Also, write to Equifax and the other two credit reporting agencies--Experian and TransUnion. They can put that information in your credit report.

Contact a legitimate credit counseling service for assistance in managing your credit. Many nonprofit agencies can help get you back on your feet.

Check your credit reports often. You can check your credit report annually for free from each of the three credit reporting agencies. Verify that the information is correct, and dispute anything that is in error.

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How Are Credit Scores Used for Employment?

Credit card companies, mortgage lenders and banks all use credit scores to determine borrowers' likelihood to repay their debts. However, a bad credit score can also hurt a person's chances of finding a job, states MSN Money, a consumer finance website. Many companies run credit checks on applicants. Businesses use these credit data in many ways.

Identity Verification

Some companies that run credit checks on applicants do not place much, if any, weight on an applicant's credit score or past financial history. Instead, these corporations run the checks simply as another way to verify an applicant's legal name, Social Security number, employment record and address history, all of which appear on a person's credit report.

Money Handling and Security-Sensitive Jobs

Banks, financial institutions and governments often run credit checks on applicants for jobs that involve handling or managing large amounts of money, such as financial executives, or obtaining high-level government security clearances, such as intelligence analysts. An applicant's credit score and financial history is an important factor in obtaining a job in one of these fields. These employers prefer to hire those with low outstanding debts and good credit scores, because they believe those with bad credit or large amounts of debt will be more likely to take bribes or steal money.

Determine Job or Life Responsibility

Some companies believe individuals' credit scores relate to their overall level of responsibility in their professional and personal lives. Therefore, they run credit checks on all job applicants, even those applying for entry-level, low-paying positions. These businesses shy away from hiring those with substandard FICO scores, preferring those with sterling credit histories.

Firings and Promotions

Credit scores do not just impact hiring decisions. In some cases, employers may use poor or substandard credit scores to fire existing employees, especially those who work in financially oriented or security-sensitive positions. Additionally, some employers check the credit of employees whom they plan to promote to higher positions. These companies may decline to promote those with substandard FICO scores.

Exceptions

As of March 2010, the states of Washington and Hawaii made it illegal for private (nongovernment) employers to run credit checks on employees, says Find Law, a legal information Web page. As of January 2011, other states and regions were considering bills to make employer credit checks illegal.

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Who Is Experian Credit?

You've probably heard about the importance of checking your credit report and obtaining your credit score. Experian is one of the three main companies that compile and provide that information.

About Experian

Experian provides information about credit, analytical tools and marketing data to consumers and businesses to facilitate loan underwriting and other financially based decisions. Experian employs more than 15,500 people around the globe, and has clients in more than 65 different countries.

Personal Services

You can check your credit report through Experian as well as obtain your credit score. Additionally, the company offers identity theft protection and resolution. Education, advice and credit-report dispute resolution are also services offered by Experian.

Your Credit Report and Score

Federal law entitles all consumers to one free copy of their credit reports from the three main reporting agencies (Experian, Equifax and TransUnion) annually. Credit reports offered on the Experian site are part of their free trial offers. See the link in the Resources section for your free report as established by law.

Business Services

Businesses of all sizes use Experian to obtain credit reports on their clients and vendors. Experian also offers mailing lists and sales generation lead services.

Contact Information

Experian can be contacted at their corporate headquarters: 475 Anton Blvd., Costa Mesa, CA 92626. The phone number is (714)-830-7000. However, this address is not for credit report assistance. For that, visit online (www.experian.com) or call at (888)-397-3742.

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What Time Is Required to Get a Problem Fixed on a Credit Score Report?

It might take several months before you see a change in your credit report after winning a dispute. In the most unusual dispute claims, fixing a problem can take years. You may be able speed up this process if you agree to pay a fee, because a lower credit score can mean thousands more in interest charges.

Preparing a Dispute

Most disputes take the consumer about four hours to prepare. You will need to pull your own credit report, gather documents to prove a claim, write a letter to the bureaus identifying the disputed item and mailing off the package, according to Bankrate.com. Complex disputes, such as proving that a bankruptcy case does not belong to you, could take far longer to prepare.

Credit Report Changes

Winning a dispute case does not automatically update your credit report. The credit bureaus have millions of reports to update, so they tend to do it all at once, which means it can take up 90 days to process a new batch of data and insert it into reports. However, this process might take as little as a month or less---it is hard to predict when the bureaus will update their databases, according to Bills.com.

Shortcut

Rapid re-score companies offer a shortcut to change a credit report, because they have a special agreement with the credit bureaus that allows them to update reports themselves. You can see a correction within 72 hours using a rapid re-score company, but you can only change falsely reported data and only when you already won your dispute. Also, you must ask a lender for this service, because rapid re-score companies do not deal with individuals. Rapid re-score companies rarely do anything beyond confirming the case with the creditor. In 2011, rapid re-score companies charged $30 to $50 to correct each dispute.

Considerations

Always assume that your dispute could require litigation to force the bureaus to correct data on your report, suggests Anne Kadet of Smart Money. When you submit a dispute, the bureaus simply ask the creditor to report the questioned data again. If the creditor has wrong data, the normal dispute process may not work, because it will keep reporting the wrong data. Sometimes, dealing with the creditor directly is a faster, more effective option. In any case, document all interactions as soon as they happen and try to solve the case without involving lawyers unless it is your only option.

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How to Dispute Trans Union Reports Online

Inaccurate information on your credit report can adversely affect your credit score. Every person is allowed a free copy of their three credit reports every year. Because credit reporting agencies can have typos and clerical errors, careful inspection of your credit report is necessary to maintain a good credit score.

Individuals with negative information on their credit report will want to take an extra close look. There are limitations on the length of time a negative entry can be reported on your credit report. Accounts that have surpassed this allowed time can be disputed and removed from your report. This will increase your credit score.

Instructions

1

Order a copy of your free credit report online. You are allowed one copy from each credit reporting agency yearly. People who have been denied credit due to credit information pulled from TransUnion can order a free report.

2

Select the dispute button on the credit entry that is in question. A form will appear asking why you are disputing the information. You will also be given an option to add a note.

3

TransUnion will contact the creditor to confirm the accuracy of the information. The creditor will have up to 45 days to verify the information. Failure by the creditor to respond to the request will result in having the item deleted.

4

Check your email for a response from TransUnion. They will email you the results of the investigation approximately 3 to 5 days after they close the dispute.

5

Add a consumer statement to your report. When a dispute result is unsatisfactory, you have the right to add a personal statement to your credit report explaining your side of the situation.

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How to Obtain Free Credit Rating Scores

Your credit worthiness needn't be a mystery to you --- and thanks to the Fair Credit Reporting Act, it is your right as a consumer to have access to the important information on your credit report. Your credit report won't show your actual score unless you pay for it, but you can obtain the information that determines your score for free annually.

Instructions

1

Go to annualcreditreport.com to order your free report online. You'll be asked for your name, Social Security number, address and possibly past addresses. Once you've provided your information, your report will be available instantly to view online.

2

Call 877-322-8228 if you are uncomfortable ordering your report online. You will need the same information listed above.

3

Order your report by mail by filling out the Annual Credit Report Request Form listed in "Resources" and mailing it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

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Deed in Lieu of Credit History

While a deed in lieu of has less of a damaging impact on your credit score than foreclosure, it is still horrible for any credit report. However, a deed in lieu is one of the fastest and cheapest ways to get rid of a home you cannot afford or sell. Before you make any decision, research all options, especially if you want to save your credit rating.

Identification

A deed in lieu involves you voluntarily relinquishing possession of your home to your lender. In general, a deed in lieu is as bad as foreclosure or a short sale to lenders. As far as your credit score, however, it may do a little less damage than any other option that ends with you paying the creditor less than you borrowed. Your score may drop anywhere from 85 to 160 points -- far less if you have terrible credit and several other bad items on your credit report before the bank accepts a deed transfer.

Alternatives

Anything is better for your credit score than foreclosure. However, a short sale might be the best option for your credit score, because the proceeds from the sale of the property might satisfy the balance on the mortgage. Ideally, you want to ask the lender for a loan modification, such as a lower interest rate, that helps you meet monthly mortgage payments so you can return the account to positive status.

Credit Reporting Time Limit

A deed in lieu of stays on your credit report for seven years, as does foreclosure or a short sale. Because a bank processes a deed in lieu of faster than foreclosure or a short sale, a deed in lieu generally lets you rebuild your credit faster than any foreclosure option. Short sales can take months before you find the right buyer and foreclosures can take a year or longer due to regulations and time in court. Time is important in a credit rating, so you want to stop missed payments and add positive data as soon as possible.

Tip

It never hurts to ask the lender how it plans to report the account, and try to get the bank to report the account as "paid as agreed" in your negotiation for a deed in lieu of. However, do not plan on the bank offering any positive reporting on the account. Also, banks do not always go for a deed in lieu, because banks tend to avoid owning property to avoid taxes and maintenance costs.

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By How Many Points Does a Short Sale Affect Credit?

A short sale may save you from the added expenses of a foreclosure, but it probably won't save your credit score. In a short sale, the bank agrees to let you sell the house for whatever you can get and then call off the mortgage. Because most short sales do not pay off the entire mortgage, the agencies will report the debt as delinquent.

Identification

Like any item on a credit report, a short sale has an unpredictable effect on any borrower's credit score, because the FICO scoring formula is a secret. With what is known about the FICO system, negative items like a short sale take away more points as you climb up to the top score of 850. When Fair Isaac released a study of consumers in 2010, it found a short sale took off 85 to 105 points on an average score of 680 and 140 to 160 points on a score of 780, according to CNN.

Is This Better Than Foreclosure?

As far as credit scoring goes, foreclosure, short sale and giving up the deed to the property in lieu of foreclosure have the same effect, because they all result from the borrower repaying the bank less than what he borrowed. Actually, the credit bureaus do not use short sale, instead listing the account as "settled." A short sale could have a neutral effect on a credit score if the sale repays the entire mortgage. Then the creditor can report the account as "paid as agreed."

Considerations

Banks do not go to foreclosure until the borrower misses a few payments in a row, usually between three and six. These missed payments cause almost as much damage as the foreclosure, because they are a serious incident. The lender could agree to a short sale and the borrower would have no negative history on the account until the short sale occurs as long as he meets the minimum payment. If the short sale is the only thing on your report and you have a score of 780 before the short sale, you would probably have good enough creditworthiness to get new credit and possibly another mortgage, but at much worse terms.

Tip

Consult on an attorney about how the creditor will report the short sale to the credit bureaus. Some lenders may agree to report the account as "paid as agreed" in return for some concessions. Also, do not forget about the tax implication of forgiven debt. If the lender forgives $50,000 on the mortgage, the IRS considers this $50,000 in income. Not paying your IRS bill could result in a tax lien that further damages your credit score.

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How to Quickly Fix Your Credit Score

As soon as you apply for your first credit card, you start to build a credit history. Every time you apply for a new account, make a payment or cancel an open account, the financial institution reports this information to the credit reporting bureaus that collect a file on your history. Missing a few payments or defaulting on a loan will damage your credit score. However, you can take steps to get back on track and improve your rating.

Instructions

1

Order a copy of your credit report from TransUnion, Equifax and Experian. Under the Free File Disclosure Rule of the Fair and Accurate Credit Transactions Act, you can get a free copy of your credit report once a year, according to the Federal Trade Commission.

2

Review your credit report and circle any errors you find. Pay close attention to the credit history section.

3

Write a letter to the credit bureau that listed the inaccurate information stating you wish to dispute the item. Be as detailed as possible. Include a copy of your credit report with the error circled.

4

Mail the letter certified mail to the credit bureau. By law, the agency has 30 days to review the information and correct or remove inaccuracies.

5

Contact any companies you have an account with not listed on your credit report, such as a wireless provider or gas card. Ask them to report your payment history to the credit bureaus. Adding a positive credit history will improve your credit rating.

6

Verify the credit bureau completed an investigation on your dispute after 30 days. If the credit bureau makes any changes to your account, they must send you a copy of your updated credit report. If you do not receive information on your dispute within 45 days, contact the credit bureau directly for a follow up.

7

Create a budget to pay down your credit card debt. Write down all of your household expenses for the month, including mortgage payments, utilities, groceries and the minimum amount due on your credit cards. Subtract this total from your total monthly income to get your excess income for the month.

8

Pay the minimum amount due on every credit card by the due date.

9

Apply your excess income to a credit card with a high balance and continuing paying toward the credit card until you have no remaining balance.

10

Repeat Step 8 for every credit card you own with a balance until you have no rotating credit card debt. Reducing your overall debt will increase your credit score.

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Credit Audit Checklist

It's always a good idea to audit your credit reports before applying for credit. By looking over your credit reports you'll see the same information your potential creditors will be reviewing. Seeing the information first will give you a chance to correct errors or make other moves to improve your credit score before applying. Free copies of your credit reports are available from the website Annual Credit Report (see Resources, below). The three nationwide credit bureaus set up the website to offer free reports as required by law. Your free report does not include your three-digit credit score but will include directions for how to order your credit score separately.

Credit Score

Any audit of your credit should begin with a review of your credit score. An acceptable credit score is one of the most important requirements for being approved for credit. "Good" credit generally starts with a credit score of about 620, according to the website Bank Rate. That could be enough to qualify you for a bank credit card, auto loan or a home mortgage, although your interest rates will probably be higher than borrowers with higher credit scores. It's also possible to be approved for credit with scores in the 500s. However, scores in the mid-700s and higher are considered ideal.

Inaccuracies

The three credit bureaus---TransUnion, Equifax and Experian---all issue credit reports. You should periodically check all three for errors that could be deflating your credit score. You're entitled to three free reports every 12 months from Annual Credit Reports---one from each of the credit bureaus. Check each report for inaccurate information and write letters to the credit bureaus asking them to remove the information. Find their addresses on the credit reports.

Delinquent Accounts

Review your credit reports for accounts reporting as past due. Along with your credit score, potential creditors will review how well you're currently paying your bills. Being behind on a couple of accounts could cause you to be turned down. Make note of the delinquent accounts and make payments to bring them current before applying for new credit.

Charge-Offs

Look for any accounts on your reports being listed as charged-off. Creditors will close your account and list it as being charged off if you stop making payments. A charge-off is an extremely negative entry on your credit reports because it suggests that you cannot be trusted to pay your bills. Before applying for new credit contact your old creditor and offer to pay the full amount due on the charged-off account in exchange for it being removed from your credit report. The creditor isn't required to accept such an offer, but getting the entry off your report could improve your credit score.

Collection Items

Items listed on your reports as collections are also very bad. These are accounts that have been charged-off and sold to debt collection companies. Get the contact information from the collection company and offer to pay the debt in exchange for it being removed from your credit reports.

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What Is the Credit Score Scale?

Within the credit world, your credit score is invaluable. Before a lender will issue you credit of any sort, they refer to your credit history to determine your credit score. The higher your credit score is, the better your interest rates and loan amount will be. Credit scores are on a scale from about 330 to 850. Each lender will determine what your number means; however, generally credit scores fall into the following ranges.

Bad

Credit scores below about 579 are considered extremely high risk. Bankruptcies, poor payment history, foreclosures and other severe financial events may put you in this category. You may not qualify for any credit with this score.

Poor

Credit scores ranging from 580 to 619 are considered high risk, with extremely high interest rates.

Ok

Credit scores from about 620 to 679 are considered medium risk. Expect to see moderate to high interest rates.

Good

Credit score ranging from about 680 to 719 are considered good. Many Americans fall within this range. Expect to see more approvals and better interest rates.

Very Good

Credit scores ranging from about 720 to 799 are considered low risk and are marked by excellent interest rates, high loan amounts and other perks and rewards.

Excellent

Credit scores above 800 are considered excellent and extremely low risk. At this rate, you will have significant financial freedom, and will qualify for the best interest rates, loans and other perks and rewards.

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What Is the Best Credit You Can Have?

Obtaining the perfect credit score may be impossible for most people, but you need much less than a perfect score to get all of the same benefits. Going for perfect credit is really an effort in futility and doesn't offer much more than bragging rights. This doesn't mean, however, that you should slack off on trying to boost your score.

Identification

The FICO scoring scale goes from 300 to 850. Other scoring systems may use a different range. The VantageScore model, for instance, tops out at 900. In the FICO system, an 850 is only theoretically possible and even if you had it, you may not necessarily be the best investment possible for a lender. FICO uses several different rating systems based on your demographic, such as new borrowers. Thus, you may just be the least risky borrower in your bracket. Alternatively, you might have a perfect rating in one demographic, but less than that in another.

Considerations

Having the best credit does not require you to own an 850 FICO score. Anything over 750 to 760 requires dedication to paying bills off on time and keeping debt levels low. Thus, most lenders consider anyone in the 750 to 850 range equally trustworthy. Some lenders may have a few perks, such as a slightly lower interest rate, for people with extremely high scores -- 800 and above.

Tactics to Get a Better Score

Run your credit report from Equifax, Experian and TransUnion each year -- you get one free from each bureau. Lenders use this data to calculate your FICO score, which is the most popular scoring system. Compare data on these reports to your accounts and search for errors. Do not use more than half your available credit limit on all of your cards combined and each individual one. Mark bill due dates on your calendar and try to pay a few days early to keep a buffer zone.

What Not to Do

Do not close credit card accounts or retail cards. The fewer accounts you have and the lower your available credit limit, the more likely you are to go over 50 percent on your credit utilization ratio. Ideally, you want as much credit as possible available to you, but low balances. This proves that while you are qualified for a high limit, you do not need it and have the wherewithal to avoid using it.

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Can I Improve My Credit Score With Paying Purchases Off?

When you apply for new loan, the lender typically reviews your credit report and score to determine if you qualify for a new account. If your credit score is low, you may have trouble obtaining loans. To improve your credit score, consider paying off some of your debts.

About Credit Scores

A credit score is a number that credit providers use to evaluate your creditworthiness. To obtain your credit score, lenders make inquiries with credit bureaus. The bureaus calculate your score based on the length of your credit history, your total amount of debt, payment history, the number of inquiries on your report and the amount of your defaulted debt. If your score is too low, a lender may deny your loan application or ask you to agree to a higher interest rate.

Total Debt

Paying off debts reduces the amount of your total debt, which typically increases your credit score. Individuals with a large debt-to-income ratio usually have lower credit scores than those with lower debt-to-income ratios. However, it is important to have some open accounts to show that you can make monthly payments responsibly. If you close too many accounts, your credit score may decrease.

Payment History

Paying off debts also improves your payment history, which may raise your credit score. Your payment history accounts for approximately 35 percent of your credit score. Making your payments on time and in full each month has a positive effect on your credit score, and the longer you make your payments on time, the better the effect will be. If you fail to make your payments on time, your score decreases.

Considerations

If you have a limited credit history or a low number of credit accounts, you can raise your score by opening a few new accounts and paying them on time each month. However, paying off debts is only one of many methods you can use to raise your credit score. You also can raise your score by avoiding hard inquiries, which occur when a lender requests a copy of your credit report.

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How Much Will Paying Off a Debt Collection Affect Your Credit Score?

Prior to 2008, paying off a collection account transformed the old account into a new one, which significantly impacted your score. The scoring model, however, changed in 2008; your score no longer decreases when you pay off a collection account and the activity date on the account becomes the date the debt was paid off. Wether paying off the collection account will raise your credit score and how much depends on a number of other factors on your credit report. The scoring model is proprietary information and how a certain item impacts the scoring calculation is not made public. The only certainty is that it will not lower your score.

Debt Collections

Lenders typically sell your debts to a collection agency if they feel they cannot collect what you owe them. If the debt is several years old at that time and the collection agency reports the collection to the credit bureaus, the date of the debt changes to the date reported. This will lower your credit score. If the collection agency tries to collect the debt for a few years and is unsuccessful, it may turn the debt over to another agency. The new agency will report the debt, and the date of the debt will change again. This cycle can go on indefinitely unless you pay off the debt.

Credit Scores

The Fair Isaac Corporation, or FICO, developed the scoring model that determines your credit score. The scoring model is adjusted every few years to accommodate changing conditions. Each credit reporting bureau uses the same basic program. The reason your score may vary in different bureaus is that not all creditors report to all three credit bureaus. Your score is determined from the information in your credit file, also called your credit report. For example, the mortgage crisis of 2008/2009 caused most lenders to increase minimum credit scores required for a loan application approval. In 2011, mortgage approvals typically require scores of 680 to 720. Prior to the crisis, scores of 640 were generally adequate.

Strategy

If you plan to apply for a loan, you should obtain a copy of your credit report two or three months before you apply. You can get a free copy of your credit report once each year at the AnnualCreditReport website. Look for errors on the report and dispute any inaccuracies with the credit bureau. Provide as much proof as possible. This can take as long as two months. If the bureau verifies that an error was made, it will mail you an updated report.

Considerations

If you want to maximize your credit score, pay down any credit card balances to 30 percent of your credit limit or lower and pay off any collection accounts. Late payments on your credit report will lower your credit score. If the late payment was five years ago it will not have much of an impact; if it was a recent late payment, it may keep you from having a loan approved. If possible, make all your payments on time for a year or longer before you apply for a loan. You should also try to pay at least twice the minimum payment required.

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What Measures Debt & Paying Ability?

Your ability to secure credit and successfully manage your debt is one of the most important aspects of your life, both financial and otherwise. Your credit management is tracked by your credit report and credit score, which are also used by creditors to evaluate your level of risk when you apply for credit.

Credit Score

Your credit score is a snapshot of how well you manage your credit based finances. Credit scores numerically express the information found in your credit report, which shows your entire credit history. These two pieces of information, in conjunction with each other, can literally make or break your quality of life.

Credit Score Factors

Your credit score is a weighted summary of your credit report that gives emphasis on the most important areas of your ability to manage your debt. The most important part of your credit score is your payment history, which comprises 35 percent of your score. Next is the amount of your outstanding debt in relation to your credit limits. Combined with your payment history, these two factors make up two thirds of your credit score. The average age of your open accounts, the number of times you've applied for credit recently and the mix of your credit accounts are the basis for the rest of your score.

Debt to Income Ratio

Your credit score isn't the only number you should be aware of as you make credit based decisions. You should also be aware of your debt to income ratio. Although you may have a great credit score, if your monthly obligations are equal to your monthly income, you're in trouble. For this reason, your debt to income ratio might be an even better indication of your financial health and your ability to repay loans and credit cards. Bankrate.com recommends that you have a debt to income ratio of approximately 36 percent; that is, if your monthly income is $3000, the amount you owe to your creditors each month shouldn't exceed $1080.

Importance of Credit

Your credit score and your debt to income ratio aren't just numbers - they're the keys to the life you've always dreamed of. If you have good credit and you can successfully manage your debt and pay off your creditors, you can get the best interest rates on a mortgage or a car loan. This allows you to save thousands over the life of your loan. On the other hand, if you have poor credit and your debt is close to or in excess of your income, you could find yourself in serious trouble. Not only will you have difficulty scraping by, but if you do apply for credit, you'll either be denied or you'll be charged the highest interest rates possible. In the end, you control which financial future is ahead of you, as it's your ability to pay back your creditors that determines your credit score and debt to income ratio.

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The Best Credit Repair Advice

It's smart to repair your credit if you plan on buying a home or financing a car. Credit repair doesn't happen overnight. But with a plan and consistently good credit choices, you can raise your low score. The benefits of a good credit rating include quick loan approvals and lower interest rates on loans.

Bill Payments

Repairing credit and maintaining a good credit rating involves more than paying your creditors and lenders on time. Paying utilities such as electric, rent and cell phone bills also plays a role in good credit. These creditors do not regularly report to the credit bureaus. However, if you default on these bills and don't pay off balances, these creditors can send your account to collections or place a judgment on your credit report. Pay everyone from credit card companies to utility companies on time to improve credit.

Debt Reduction

Avoid huge credit card debts and overwhelming loan payments. Don't apply for credit just for the sake of acquiring additional material possessions. Attempt to pay for items with cash, and if you do use credit, pay off balances in full once you receive the statement balance in the mail. Debts make up 30 percent of credit scoring. Repair credit and quickly add points to your score by paying off credit cards and loans.

Credit Report

Asking creditors to update your credit file and remove mistakes on their part can help repair your credit. Lenders check credit reports before giving mortgage loans and auto loans. Serious errors such as collection accounts, late payments and bankruptcies can ruin your chances of approval. Get your report from Annual Credit Report each year and before applying for credit. Check for accuracy and dispute any errors.

Loan Application

Applying for credit unnecessarily can hurt your score because inquiries reduce your rating. But if you have few credit accounts or if you recently filed a bankruptcy to wipe out your debts, applying for a new credit card or taking out a small personal loan can help repair your bad score. Secured credit cards are easier to acquire with a low score or no credit history because they require collateral (security deposit); and some banks will approve you for a personal loan after a bankruptcy as long as you have collateral (car title, home equity other personal property) to secure the loan. Paying these new accounts on time each month slowly fixes a bad credit rating.

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How Do You Remove Child Support From Your Credit Report?

Having kids is a wonderful experience. Failure to pay child support, on the other hand, can be a costly mistake. Collection agencies can report late payments to the credit bureau; such derogatory marks have the potential to lower your FICO score. According to Fair Isaac Corporation, the company that invented the FICO scoring model, the way you pay your bills accounts for 35 percent of your overall score. Fortunately, negative items on a credit report can only remain for a maximum of seven years, according to the Fair Credit Reporting Act. If you have late child support payments on your credit report that are beyond the statute of limitation, here's how to have them removed.

Instructions

1

Get a free copy of your credit report. Consumers are allowed one report each year under the Fair and Accurate Credit Transactions Act of 2003. Congress created the website www.annualcreditreport.com as a way for consumers to order the free reports, but you can also order one directly from the website of the three major credit agencies: Experian, Equifax and TransUnion. You can also order reports by phone or by mail.

2

Look over your credit report carefully. Creditors can add information to your report at any time, so it's prudent to check for any changes. Always check the "personal information" section to ensure that your credit file isn't merged with that of another consumer. Read the "negative accounts" section and check to see if the child support delinquency still appears on the report. Items are removed from the credit report on a regular basis as well.

3

File a dispute with the credit bureau to have the child support delinquencies removed. The Fair Credit Reporting Act mandates that only accurate information may appear on a credit report. You can file disputes online at the bureau's website, via phone or by mail. You will need the credit report number of your most recent credit report in order to initiate a dispute. If filing online, the dispute form will allow you to indicate which items you are disputing and the reason for the dispute. If disputing by phone, simply tell the representative the information instead and if done by mail, include all pertinent information in your dispute letter. Include your credit report number on all correspondence. Always send the dispute certified mail.

4

Print out your credit report if you ordered it online. Also print a copy of the dispute form that you filled out. Maintain these items for your records and as proof that the dispute was actually submitted. For mailed disputes, keep a copy of your mail receipts.

5

Give the credit bureaus up to 30 days to investigate your dispute and make any corrections. Bureaus are required by law to verify the information with the reporting party and correct any inaccurate details. If unable to verify the information, they must delete the item completely. You will receive the results of an online dispute via email, and the results of phone or mail disputes by mail. The investigation results will include any changes that were made and a new copy of your credit report. When receiving a report by mail, please allow a few extra days beyond the 30-day mark for the report to arrive.

6

Contact the reporting agency or department directly if the credit bureau's investigation is not to your liking. Bureaus can only verify information, but if you correct the error at the source, those changes will appear on your credit report as well.

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How to Get Your 3 Credit Reports

The federal government mandates that the credit bureaus--Experian, Equifax and TransUnion--allow consumers to check their credit report once per year free of charge. Your credit report contains information about how you have handled debt such as credit cards, auto loans and mortgages. Check your credit report annually to make sure the information on the report is correct. You can access your free credit report from each of the three credit bureaus online, over the phone or through the mail.

Instructions

1

Open the Annual Credit Report website (see resources) and select the state you live in. The site is the only website the Federal Trade Commission recognizes to distribute free credit reports.

2

Enter the requested information. You will need your date of birth, Social Security number and address. If you have moved within the past two years, you will have to submit your previous address as well.

3

Check the box next to each of the three credit bureaus. If you have requested your free report in the past 12 months, you will not be able to order a free report. After your request is submitted, you will be able to view your credit report online.

4

Dial 877-322-8228 if you want to order your credit reports over the phone instead of online. You will be asked for the same information over the phone and your report will be mailed to you within two or three weeks.

5

Fill out the paper application which you can download from annualcreditreport.com if you want to order by mail. The report will be sent to you within two or three weeks of when the application is received. Send the application to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

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How to Select a Credit Monitoring Service

The three national consumer credit-reporting bureaus in the country are Experian, Equifax and TransUnion. Each offers credit monitoring products and services. For example, Experian's Triple Advantage Credit Monitoring service gives you regular access to all three of your credit reports and scores. When choosing a credit monitoring service, read the terms of each product and educate yourself on how the credit monitoring service works.

Instructions

1

Compare product offers. For example, if you wish to receive email notification whenever changes to your credit report and score are reported, select a credit monitoring service that offers automatic email alerts. Inquire about real time, daily and weekly email alert notifications. It may be necessary to provide an email address.

2

Check to see if the credit-monitoring service analyzes your credit report, offers ways to improve your credit score and provides free credit educational tools.

3

Compare level of access to your credit reports. Opt for a service that offers unrestricted online access to your credit reports and scores, so you can regularly monitor your credit report for unfamiliar inquiries.

4

Compare customer support options. Determine which modes of delivery are available. Examples include phone support, Internet support (i.e. email, live chat, forums), in-person support and mail support. Also, ask if your service provider will assist you in reporting fraudulent activity on your credit report.

5

Check payment options for credit monitoring services and compare with your budget. Some credit monitoring services require you to prepay for a fixed number of months, whereas others permit you to enroll in a month-to-month subscription. Compare pricing for each subscription option and ask about cancellation requirements.

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How Long Does Bad Credit Stay on Your Credit Report?

Bad credit stays on a credit report for an average of seven years. Negative marks may stay on a report for a longer or shorter, depending on the statute of limitations in your state and the type of transaction involved. Depending on a credit reporting agency's policy, positive credit may stay on a report indefinitely or for as long as an account remains open.

Bankruptcy

A bankruptcy may stay on a person's credit report for 10 years. Credit reporting agencies may remove Chapter 11 and Chapter 13 bankruptcy reports after seven years; these are reorganization or repayment bankruptcies, unlike Chapter 7, which liquidates assets and discharges almost all debts.

Tax Liens

Liens for unpaid taxes may stay on a credit report indefinitely, depending on state laws. Paid tax debt shows up on a credit report as paid but will stay on a credit report for seven years.

Consumer Debt

Bad credit from consumer debt stays on a credit report for seven years. Consumer debt may include credit cards and most bank or private business loans.

Inquiries

Credit inquiries by potential lenders stay on a credit report for up to two years. Inquiries you make for your own credit report do not negatively affect your credit rating.

Lawsuits and Convictions

Lawsuits due to unpaid debt stay on a credit report for seven years. In some states, the statute of limitations for a lawsuit may run out before seven years, effectively shortening the length of time it remains on a credit report. Criminal convictions may stay on a credit report indefinitely.

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How to Reinstate My Credit After Bankruptcy

Credit ratings take a major hit after a bankruptcy, and reinstating your credit or getting back on the right track requires quick action and better credit habits. There are numerous ways to reestablish your credit history after bankruptcy and build a good rating. The key is knowing where to look for credit and adopting habits that are sure to boost your low score.

Instructions

1

Use secured credit cards to help you bounce back and restore a low credit rating. Apply for a secured credit card and set up a savings account with your bank or another financial institution. Deposit the required amount into this account. The bank will issue a credit card with a limit that matches your security deposit.

2

Get an installment account. Diversifying and acquiring different types of credit helps you fix a low score after bankruptcy. Along with a secured credit card, look into other types of loans such as installment accounts. Visit a bad credit dealer to finance an automobile or use personal collateral and apply for a small bank loan.

3

Talk to your lawyer about excluding some of your debt from the bankruptcy. Before filing the bankruptcy with the courts, discuss retaining some of your creditors. You can exclude student loan lenders, mortgage lenders and auto loan lenders from the bankruptcy and continue making these payments as agreed. A good payment record with these creditors helps your credit score.

4

Fix credit habits. Reinstating or restoring credit is only the first step to a better score. Make timely payments to gradually improve your low score after a bankruptcy. Before applying for loans or financing items, review your finances to make sure you can afford the new debt. Lack of funds can result in late or skipped payments and a bad credit rating.

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How Can I Tell What My Credit Score Is?

Your credit score is a numerical representation of the credit risk you pose to lenders. The higher the score, the less risk that you will default on a loan. Lenders use your credit score in conjunction with your credit report to determine whether to give you a loan. Your credit score also determines your interest rate; people with high scores typically get lower interest rates because lenders consider them more credit-worthy.

Fair Isaac Corporation Credit Score

In the 1960s, the Fair Isaac Corporation revolutionized the credit-scoring industry with its credit risk scoring service, now known as the FICO credit score. The three credit bureaus use software developed by Fair Isaac to generate a FICO credit score. FICO scores consider the information contained in your credit report; each bureau's credit report might be different, so you might have three different FICO credit scores. Experian's score is also known as the Experian/Fair Isaac Risk Model; Equifax's is called the BEACON score; and Transunion's is the EMPIRICA score.

VantageScore

The three credit bureaus jointly developed their own credit scoring system, VantageScore, which launched in 2006. Like the FICO scores, VantageScore utilizes your credit report to calculate your credit score, so you may have a different result for each credit bureau. Each bureau might also provide an independent credit score. In addition, some lenders use their own algorithm to evaluate a customer's credit risk.

Factors Used to Determine Your Credit Score

Every credit-scoring system uses the same basic information to determine your credit score, with different weight given to the various categories. Federal law prohibits credit-scoring companies from using your race, gender, religion, marital status or national origin when calculating your score. The key factors in your credit score, which come from your credit report, include your payment history, length of credit, account balances, types of loans, credit utilization, and recent loans or inquiries. While the methods of calculating credit scores vary by company, in general a long history of paying your credit on time, keeping your balances low compared to your available credit, and having both credit cards and installment loans will lead to higher credit scores.

Obtaining Your Credit Score

Many companies offer your credit score for a fee, including Fair Isaac and the three credit bureaus. Sometimes you can obtain a free credit report with a trial of a credit-monitoring service. If you cancel the service within the trial period, you will not be charged. Legislation effective January 1, 2011, requires lenders to provide you with your credit score in some situation. If a lender provides different terms based on the customer's credit report or score, the lender must either inform customers who don't receive the best terms of that fact or provide them with the credit score used to determine their terms.

What Your Credit Score Means

In addition to having a different score from different credit providers, your credit score can vary from day to day as your balances change and age. Fair Isaac recommends checking your credit score six to 12 months before applying for a large loan, so that you can take steps to raise your score if necessary. A higher score often means you will get a higher loan amount or lower interest rate, which generally means you will pay less over the life of the loan.

Credit scores fall within a range of numbers, which vary by the scoring company. FICO credit scores range from 300 to 850, while the VantageScore range is from 501 to 990. For both systems, a higher score means a lower credit risk. Lenders do not rely solely on your credit score when evaluating your credit worthiness, but it can provide a general idea of where you fall on the scale of responsible credit use.

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Can You Rent an Apartment If You Owe Another One on Your Credit Report?

When looking for an apartment, the worst thing you can have in your credit history is an unpaid bill from a previous apartment. Owing on a previous apartment doesn't preclude you from renting a new one. However, delinquent rent probably reduces your options for a new place, or you may have to pay more for an apartment.

Identification

Nothing stops a landlord from renting to you under any circumstance, even when you owe money on a previous apartment. For practical reasons, a landlord probably wouldn't rent to you with a delinquent lease on your credit history, because you may break your new lease, too. Landlords often require at least an average credit rating --- about a 620 --- and no broken leases; the ideal applicant should have a rating of at least 670.

Considerations

Not all landlords require a credit check. Owners of large apartment complexes usually run a credit check on applicants, but landlords of smaller complexes may not run a credit check due to the cost. Mom-and-pop complexes may allow more flexibility as far as their credit rating requirements. You may have a chance to explain the delinquent rent, such as a period of unemployment causing you to miss rent and that you paid off what you owe to your previous landlord.

Paying Off a Broken Lease

Landlords usually don't report to the credit reporting agencies, so delinquent rent probably appears on your credit history because your previous landlord sued you in small-claims court or sold the debt to a collection agency. Talk to your previous landlord about settling the debt or paying it off in installments. A paid collection or judgment doesn't improve your credit rating, but it usually looks better than ignoring the debt.

Tip

Start repairing your credit history before you look for a new apartment. Bankruptcies and frequent late payments are red flags to a landlord, so make it a priority to pay bills on time. You may have to offer the landlord a larger security deposit than that required from a normal tenant, as well as let the landlord deduct rent directly from your bank account. You may also offer to prepay several months of rent or the entire lease.

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