March 2011 ~ Personal Finance and Money Management

Wednesday, March 30, 2011

What Is an R7 Credit Rating?

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Credit reports contain codes that, when deciphered, can provide the reader of the credit report with more information on how he has handled his finances. R codes go from R1 to R9. In addition to R codes, there are also I codes from I1 to I9.

A credit report is a record of your financial past. Creditors report your payment information, balance, payment history and more about your accounts. Account history remains on a credit report for a minimum of seven years and can have a large impact on your credit rating and your future credit.

A credit rating or credit score is a three-digit number between 300 and 850. The higher the number, the better your credit is. A credit score is used by lenders when reviewing your application for new credit. When you handle your accounts well -- paying on time and keeping low balances, your credit score will remain high or will rise if you are rebuilding your credit. Paying payments late, having high balances and stopping payments completely all have a damaging effect on your credit score. The better your credit score, the lower your interest. The lower your interest -- the lower your payment will be.

Codes are used on credit reports to keep the reports from being too long. Credit reports are often many pages long, and writing out all information would significantly increase the number of pages. Both number and letter codes are used on a credit report to indicate both the type of account and the status of the account. An "I" indicates an installment type loan, "J" indicates a joint account and an "R" indicates a revolving account.

The R7 code indicates the account is a revolving account. A revolving account is an account that has a credit limit that you can pay down and then charge back up. A credit card is a type of revolving account. The number "7" indicates the account has been placed on a payment plan as part of a settlement agreement. An R7 code is a negative entry because it is telling creditors that you were unable to manage the account and the creditor had to work out an agreement with you.

Visit annualcreditreport.com to order a free copy of your credit report. (see Resources) Each account listed will have a code to indicate what type of account and whether the account is in good standing. The best indicator is a 1 attached to a letter code. A 1 indicates the account has never been paid late and is being paid on time.

How to Acquire Corporate Credit

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Some business owners choose to use their personal credit rating when applying for business loans and credit cards. While this method can help you acquire business financing, it does nothing to establish credit in your business's name or give your corporation a separate identity. Over time, your business will build its own credit score and history, which lets you apply for loans without using your personal information.

Instructions

Acquire a business license and register your business name. If you're establishing a new business or corporation, visit your local city hall to apply for a license and register your name. Business license fees vary.

Request a tax identification number. Rather than use your Social Security number to file business taxes, begin separating your business from your personal identity by applying for a free tax identification number. Request a number from the Internal Revenue Service's website (IRS.gov).

Get a bank account in your corporation's name. After registering your business name, visit your bank or credit union and open a business account.

Open a secured business credit card with your bank. Once you have opened a business account with your bank, you're eligible for a secured business credit card in your corporation's name. Talk with the bank representative and inquire about security deposits and application fees for secured accounts.

Pay your business credit card on time. Getting a secured credit card for your business is only the first step to establishing corporate credit. Pay your credit card statement on time each month to establish a good payment history and slowly build a good rating.

Apply for small-business loans. Having more than one business credit line helps build your corporation's credit history. Apply for a small line of credit or loan with your bank. Use collateral such as a vehicle title or jewelry to secure the loan.

Criteria for a Credit Report

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Your credit report contains your credit score, an important number that can determine your financial well being. The report is maintained by the three major credit bureaus: Equifax, TransUnion and Experian. Monitoring your credit report is an essential part of a personal financial strategy. The major criteria for a credit report are payment history, amounts owed, length of credit history, new credit and types of credit.

Your credit report is a reflection of your creditworthiness for lenders. It can influence things such as loans, credit cards, mortgages, property rentals and even your employment prospects. Credit scores can range from 300 to 850, and the higher your score, the better. Most scores fall within the 600s and 700s range.

Payment history is worth approximately 35 percent of your credit report, according to Credit.com. This includes items like paying your bills on time and collections notices. Late payments and missed payments can have a large adverse effect on your score. Payment history is pulled from credit cards, retail store accounts, student loans and mortgages.

The amount you owe is worth approximately 30 percent. This represents the dollar amounts you owe on all open credit accounts, such as credit cards, student loans and car loans. Two more factors taken into consideration are your total available credit and your debt-to-available-credit ratio, according to American Student Assistance.

Your length of credit history accounts for approximately 15 percent of your credit report. This represents the length of time your accounts, such as credit card and loan accounts, have been open. This can be a problematic criteria for young people who have only recently gotten their first credit card.

New credit accounts for approximately 10 percent of your credit report. It represents the number of times you have applied for new credit over a period of time. Lenders consider too many requests for credit as a credit risk, so the more you apply for credit, the bigger the adverse effect can be.

Your types of credit make up the final 10 percent of your credit report. This represents your account diversity. If your accounts include credit cards, student loans, a car loan and a mortgage, you will receive a small boost to your score. Different accounts are viewed differently. For instance, a high student loan balance will not affect your report as much as a high credit card balance, according to American Student Assistance.

What Are the Different Credit Bureaus?

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Credit bureaus are private companies that are in the business of collecting information about consumer credit behavior and selling it to businesses that need it. According to the Federal Citizen Information Center, there are three main consumer credit bureaus in the United States: Equifax, TransUnion and Experian.

Experian, which is based in Dublin, Ireland, is the largest of the three consumer credit reporting agencies, with about 15,000 employees located around the world. The company started in 1980, beginning as CCN systems. The company sells information about consumers, businesses, insurance and other areas. It provides credit services, marketing and other services as well.

Equifax was founded in 1899 and is currently based in Atlanta, Georgia. The company is listed on the New York Stock Exchange and has about 7,000 employees located in 15 countries. The company primarily offers business-to-business services by providing creditors with consumer credit information, but also sells analytical, demographic and other kinds of information.

TransUnion, the smallest of the three credit bureaus, operates in about 25 countries. Union Tank Car Co., a railroad car leasing company, created TransUnion as a holding company in 1968. Based in Chicago, Illinois, TransUnion offers credit information services to businesses and consumers.

While the three credit reporting bureaus are important because they maintain consumer credit reports, they are not the only companies that impact consumer credit. Other companies, such as FICO, create credit scores that many creditors use to help determine whether a creditor is a risky or safe investment. Other companies, such as Dunn and Bradstreet, collect business debtor information in the same way the credit bureaus collect information on individuals.

How to Build Perfect Credit

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To build perfect credit you need to pay your debts on time. Avoid bad credit such as foreclosures, bankruptcy, judgments, liens and repossessions which will have a devastating impact on your credit score. A credit score will determine if your credit is perfect, excellent, good, fair or bad. Scores are used by lenders to determine your level of risk. The range for credit scores is 300 to 850 and the higher your score the better your credit. To build perfect credit focus in on those categories that impact your credit score the most.

Instructions

Determine all of the elements and categories that affect your credit score. Even before you apply for your first credit card take a look at what contributes to your credit score. Five categories contribute a certain percent to your credit score which include, pay history (35 percent), amount of debt (30 percent), length of credit history (15 percent), new credit (10 percent) and types of credit used (10 percent), according to the website My FICO.

Pay your debts on time. When you are 30 days late your credit score can be lowered anywhere from 60 to 110 points according to the website Credit Cards. Lenders will charge you a higher rate of interest for credit products such as mortgages, credit cards and automobile loans.

Do not accumulate too much debt. Even if you make your monthly payments on time your credit score can be lowered when you have too much debt. If you take your credit cards to the limit or max them out, a credit score of 680 can be lowered 10 to 30 points and a credit score of 780 can be lowered 25 to 45 points according to the website Credit Cards. The amount of your available credit used also affects your credit score.

Keep zero balance credit card accounts open. The older your credit file is the better it is for your credit score. Closing old accounts makes it seem as though they are not a part of your original credit file. Even if you pay off a credit card do not close it out (old or new accounts). This lowers your available credit and lowers your credit score in the process.

Use moderately different types of credit. When you have different types of credit accounts such as mortgages, automobile loans, credit cards and lines of credit, your credit score improves. The amount of new credit can affect your credit score as well. Every time a lender looks at your credit report the score is lowered by almost five points, which varies.

How to Raise a Credit Score by 50 Points

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Perhaps you have gotten into financial difficulty and your credit score is a little worse for wear. Or maybe you have okay credit, but you would like to see it improved. According to a recent federal study, more than 30 million people have credit scores that are under 620, and they are considered risky by many lenders. Having less than perfect credit, these people have a problem getting loans or credit cards; and when they do, the interest rates are higher than if they improved their credit scores. Read on if you'd like to raise your credit scores by 50 points.

Instructions

Find out your credit score before you do anything else. Although the law states that you can check your credit file once every year, it says nothing about learning your credit score, a complicated algorithym created by Fair Isaac Company (FICO) that each of the three credit bureaus use. Go to MyFICO.com to get your FICO score (see Resources).

Be smart in how you use your credit cards. If you generate big balances on any of them, even if you pay them off every month, your credit score will be negatively affected. Keep your balances below 30 percent of the limits set on your cards and you will see an almost immediate improvement in your credit score. That means that you should pay down those credit card accounts that are closest to your limit, not just those that have a large balance.

Start using your older credit cards because the longer your history of good credit, the better your credit score will be. Better yet, periodically charge a reasonable amount to your older cards and pay them off when your statements arrive.

Beg a creditor for forgiveness. If you have been unavoidably late in making a payment, you could get a "goodwill adjustment" if you ask for it in writing. You'll stand a better chance that will happen if you have a good record. Or else, a creditor may erase those pesky delinquencies if you agree to make payments on-time in the future.

Make sure that errors in your credit reports are corrected. About one in four credit reports has erroneous information that can affect a credit score. In fact, each of the three credit bureaus must consider all errors brought to its attention in writing, according to federal law. The errors frequently made include late payments, collections or other negative information that don't belong to you. Another frequent error is under-reporting credit limits. All things negative must be erased from your credit history in 7 years (10 years if you've declared bankruptcy).

Avoid making mistakes, such as asking a creditor to lower your limit, and avoid making late payments, which is a sure way to lower your credit score. Do not apply for new accounts because that, too, will affect your score.

Do all the things mentioned above and you will begin to see your credit score going up. Remember, though, that a 50 point increase is fairly easy to accomplish if you began with a low credit score. If you are simply polishing a good credit history, you may find it more difficult to do.

Does Having a Zero Balance Hurt Your Credit Score?

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A zero balance on your credit accounts does not necessarily hurt your credit score. However, in a June 2011 Bankrate.com article, Leslie McFadden noted that Barry Paperno, FICO consumer operations manager, suggests that carrying a very small balance is often better than a zero balance for your credit score.

To fully understand the impact of zero balances on credit accounts you need to know the basic factors that affect your credit score. According to MyFICO, a site owned and operated the Fair Isaac Corporation, credit history, length of credit history, amounts owed, new accounts and types of accounts are the five major categories included in the FICO scoring model. Each of the three major credit-reporting bureaus -- Equifax, Experian and TransUnion -- uses this model.

Aside from other specific maneuvers you might consider to boost your score, a zero balance is usually beneficial because of your debt-to-credit-limit ratio, or debt utilization. This accounts for 30 percent of your FICO score, indicates MyFICO. Your debt utilization is the amount of your credit in use relative to your available limit. If you have $2,000 in use and $50,000 available, for example, you have a very low utilization of 4 percent. A zero balance means you have no debt in use on an account and you get credit for the limit available in your utilization ratio.

You may pay off a credit balance only to quickly use the account again. This is not the same as indefinitely maintaining a zero balance. McFadden points out that credit reporting does not occur in real time. You can max out a card and pay it off quickly, but still have your credit score reflect the maxed out balance. This may not matter much unless you are buying a home, a car or another major item and need a top credit score to get a good rate. Routine card use and quick payoff generally benefits you by building good credit history.

McFadden indicated in her article that a very low balance could help your credit score because it shows the card is active but has low debt utilization. She pointed out that the credit scoring models want to see recent activity. A zero balance on some credit accounts is okay, but a zero balance on all revolving credit accounts can lead to a slightly lower credit rating based on inactive credit.

How Long Does a Default Stay on an Account?

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Every time you apply for credit, the prospective lender checks your credit report on file with one or all of the three major credit bureaus -- Equifax, Experian and TransUnion. If you have a default in your file, your chances of securing the funds you need are diminished. Lenders generally won't report a default to the credit bureaus until they've tried to work with you to resolve any problems, so having one on your file is a sign that you've either buried your head in the sand or made no effort to make payment. Neither of these traits are qualities lenders look for in the people to whom they lend money.

A default will stay on your credit file for seven years plus 180 days from the date your lender charges off -- or writes off -- your debt. Most lenders charge off delinquent debt once 180 days have passed without a payment being made. If you're in financial difficulties and missing payments but making some contribution to your debt, your lender likely will report late payments and the fact that you're in arrears to the credit bureaus.

Having a default on your credit file will make it difficult for you to borrow money in the future. If your lender has issued a charge-off against you, other financial institutions will be able to see that you've made no effort to pay anything towards your debt for 180 days or more and allowed your account to default. The only credit you'll be able to secure with a live default on your file is likely to be at a high interest rate, according to the Federal Trade Commission.

If you're experiencing financial difficulties and are having problems paying your debts, contact your creditors to ask if you can make alternate payment arrangements. Although this also may damage your credit score, it's not as bad as allowing your account to default.

After the charge-off has appeared on your file, if you pay the balance due to your lender or a collection agency that was trying to collect it, your credit report will be updated to show that the debt has been satisfied. The fact that you defaulted will remain visible to any institutions that check your file, but your report will reflect the fact that it's been settled. The only way to fully recover from a default is to wait until it's been removed from your file after seven years. Managing your other accounts well can help to repair the damage, but a default will adversely affect any application you make for credit until it drops from your report.

Step-by-Step Credit Report Repair

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If your credit report is littered with late payments, charge-offs or a bankruptcy, you may find it difficult to get credit, rent a home or even get a job. Repairing your credit is not something you can accomplish overnight, but with a little time and some hard work, you can improve your credit report.

Know what's on your credit report that could be causing you problems. You're entitled to one free credit report per year from each of the three major credit bureaus, Experian, TransUnion, and Equifax. Request a copy of your credit report and search for any erroneous information that could be hurting you. Report any false entries to each of the three bureaus.

While there's nothing you can do about detrimental entries on your credit report that are correct, such as charged-off accounts or a bankruptcy, you can start to work on those accounts that are still open but not in good standing. If you're behind on any of your accounts, make a payment, and fast; if you can't make the minimum payment, call the creditor to set up a payment plan you can live with. If you have accounts that are maxed out or over the limit, begin paying these down -- credit bureaus and creditors alike like to see that you're not using all the credit that's available to you, so aim to use less than 30 percent of your available credit on any account.

The sooner you start making payments on time, the quicker your credit report will start to reflect the change. If you're bad at mailing in bills, set up automatic bill pay or set reminders on your phone or computer to nudge you at least 15 days before a bill is due. While it could take 12 to 24 months to start to see an improvement, paying bills on time will improve your credit report drastically.

Use credit wisely from now on. If you don't have a credit card, it may be a good idea to get one, even if the only option is a secured card, in order to start building a better credit report. Use the card lightly -- keeping your balance less than 30 percent of the total credit available. Pay the balance off or at least pay the minimum payment each month. This way you begin creating a new and better credit report.

The Effects of a Credit Inquiry on the FICO

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A credit score is very sensitive to credit inquiries from third parties. While some inquiries may have no effect on it, others can damage an already low score even further. Every time you respond to a credit card offer or apply for an auto loan, your credit score decreases by several points.

A soft inquiry, also known as a soft pull, comes from existing relationships with creditors and does not make a negative effect on the FICO score. Lenders usually use soft pull for loan pre-approvals. Your own inquiry into your credit report is also a soft inquiry. Potential employers sometimes pull a credit report as a part of background checks.

A hard credit pull, also called hard inquiry, happens when a lender requests your credit report while establishing a new loan. Some banks conduct a hard pull when you open a deposit account. One hard inquiry will not lower your credit score significantly. However, if you apply for several new credit accounts in a short time, this will decrease your credit score.

For larger loans, such as mortgages, vehicle and student loans, you want to shop around to find the best rate. This may result in multiple inquiries from different lenders. These inquiries will not affect your FICO score as long as you find a loan within 30 days. Inquiries for the same type of loans older than 30 days will count as one.

Making payments on time and keeping credit card balances low are the best ways to improve your FICO score. Resist the temptation to apply for new credit offers. Open new credit only if it is absolutely needed. It will take time to improve your credit score if you have had problems. However, monitoring your credit report and reporting incorrect information promptly will raise the score over time.

How to Get a Foreclosure Off a Credit Report

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Besides bringing down a FICO score, having a foreclosure on your credit report will also negatively affect your ability to purchase another home. Depending on your state laws, a foreclosure will typically stay on a credit report for seven to ten years. Many lenders will not finance someone who has a foreclosure on his or her credit report. It can also be difficult to rent a home after a foreclosure. To get a foreclosure off your credit report, follow the steps below.

Instructions

Wait the seven to ten years for the foreclosure to automatically go off your credit report. Many times creditors will keep reporting the foreclosure after the time limit. Writing a few letters to the creditor and the credit bureaus will easily remedy this situation.

Get a free copy of your credit report online and look for errors to remove a foreclosure off a credit report. Many times mortgage companies make errors reporting information. Check your name, address, date of birth, and social security number. If there are any errors, you can write a letters to the mortgage company and the credit bureaus. Legally credit bureaus are required to respond within 90 days. Make sure to send letters to credit bureaus by registered mail, and document dates and information. Remember, foreclosures are difficult to remove because the information is verified closely; however, errors are still made. It is challenging to complain about errors and get a foreclosure taken off your credit report, but with a little persistence, it is possible.

Find a reputable credit repair company to get a foreclosure off your credit report. The longer the foreclosure is on your report, the easier it is to remove. Credit repair companies are privy to the methodologies for removing foreclosures from credit reports. They use the Fair Credit Reporting Act laws to dispute information. Creditors by law are required to follow to these laws, and many do not have all the verification necessary to comply with the laws usually because they sold the debt to another company and did not transfer all the information correctly. Credit repair companies find discrepancies that warrant removal of the foreclosure. There are no guarantees, but it is possible.

How to Fix My Credit in North Carolina

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Multiple resources are available to help you fix your credit in North Carolina. Nonprofit financial counseling agencies, such as those affiliated with Consumer Credit Counseling Service (CCCS) are available throughout the state. Their services are often free, with a variety of help available ranging from financial literacy classes to a complete examination of your finances and credit reports. A number of for-profit credit repair firms are also available in North Carolina, but the Federal Trade Commission says you should handle credit repair on your own to avoid being victimized by companies that cannot legally fix your credit any better than you can.

Instructions

Get a copy of your credit report from Annual Credit Report -- a website established by the three credit bureaus to provide free credit reports as required by the Fair Credit Protection Act. Order from the website or call 877-322-8228.

Contact a nonprofit credit counseling agency in North Carolina. Ask for a free evaluation of your credit report from a trained counselor. Help is available in North Carolina from agencies such as Consumer Credit Counseling Service of Western North Carolina; The Women's Center in Chapel Hill; Northwestern North Carolina Regional Housing Authority; and CCCS of Greensboro. Or find another agency by getting referrals from community organizations such as Urban League Central Carolinas or the United Way of North Carolina.

Identify, with the help of a counselor or on your own, all the negative entries on your credit report. Look for accounts listed as delinquent. This includes accounts showing as more than 30-days past due, accounts that have been closed and charged-off, and accounts that have been sold to debt-collection agencies.

Make payments to bring all your past-due accounts current. Getting current on all your bills and staying that way is the bet strategy for improving your credit, according to the Federal Trade Commission.

Contact creditors and debt collectors to resolve collection accounts and charge-offs. Offer to pay the full amount due if the creditor or debt collector will agree to have the credit bureaus remove the negative entry from your reports -- a process called pay-for-delete. Not all companies will agree, although it is legal. Or offer to settle the account by paying less than the full amount due, a process called debt settlement. Debt collectors often will settle delinquent accounts for about half the balance or even less. The negative entry on your credit report will be updated to reflect that the account has been paid, with the notation "settled for less than the full balance."

Dispute any inaccurate information on your report by writing a letter to the credit bureau. Find the address on your credit report or enter a dispute online.

Establish new lines of credit. Contact your bank or credit card company in North Carolina to apply for secured or unsecured lines of credit, such as credit cards. People looking to rebuild their credit often start with secured cards, which require a deposit into a savings account. Your credit limit generally will equal the amount on deposit and will be held as collateral. Stay well under your credit limit and make all payments on time to help fix your credit. Then open three or four additional accounts over the next 12 to 24 months as you continue to rebuild your credit.

Tips on How to Increase Credit Score Quickly

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In general, it takes time to build a positive credit profile. Your credit score is based on a number of factors, such as when and how you pay your bills, how much credit you use, and how often you apply for credit. Over time, you credit score can change based on your changing situation. When you are preparing to make a major financial decision and need your score higher in a hurry, these tips might help boost your score quickly.

The credit industry is notorious for errors on personal credit accounts, and an invalid account or late payment on your credit report may be dragging down your credit score unnecessarily. Order a copy of your credit report from each of the three credit bureaus: TransUnion, Equifax and Experian. You are entitled to a free copy of your credit report from each of the bureaus once a year. Review your credit reports for falsely reported late fees, accounts that do not belong to you, or accounts that may still be showing as an unpaid delinquency even after you have settled them. Contact your creditor with proof of the inaccuracy, and request that the record be updated immediately. If the creditor is uncooperative, contact the credit bureaus directly, and demand a correction to your credit report. Corrections may be reflected in an increased score in as little as 30 days.

Your credit score is affected by the percentage of debt you owe in relation to the total available credit determined by your credit limits. You can improve your credit score by maintaining a debt ratio under 50 percent, or no more than $2,500 for an account with a $5,000 limit. In some cases, your lender may increase the credit limit on your account and fail to report the credit line increase to the credit reporting agency. This inconsistency can make it appear as though your debt to available credit ratio is higher than it actually is. To help increase your credit score quickly, contact your lender to request that they report the correct credit line to the credit bureaus.

If you currently use one credit card that has a balance about 50 percent of the total credit line, consider reorganizing that debt. According to BankRate.com, diversifying your debt across two or three different cards with low balances can be more beneficial to your credit score than only having one credit card that is nearly maxed out. If you have the available funds, make a payment to decrease the debt level of your single account below 50 percent. If you do not have the cash available, transfer a portion of the balance to your other cards. Continue paying all accounts on time, and you could see a quick adjustment to your score from this simple action.

What is the Best Way to Increase Your Credit Score Quickly?

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Increasing your credit score or rating can make you a more attractive candidate for a mortgage or auto loan. Even if your score isn't horribly low, employing a few techniques can quickly add points to your score.

Writing a check and completely eliminating your credit card debt can quickly increase your credit score. The amount you owe has a major impact on credit scoring, and people with minimum or no credit card debt tend to have higher credit ratings.

Forgetting to send in payments or mailing payments late will hurt your credit score. Start fresh and begin paying creditors several days or weeks before your due date. This method ensures an early arrival and you'll begin to add points to your score.

Removing or disputing a major error on your credit report can immediately increase your credit rating. A creditor may accidentally submit wrong information to the bureaus such as a judgment, lien or collection account. Free credit reports are available yearly from Annual Credit Report, and creditors' contact information is included on these reports.

How to Get Collection Agencies to Remove Negative Credit

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If a collection agency is handling your account, there is a good chance that you have some negative information on your credit file. To have it removed there is a certain process you have to go through. In some cases you will not be able to get the information removed until the necessary time has passed. Negative information can lower your credit score, which can affect your ability to receive credit in the future. If you are approved, you may have to pay higher rates of interest and some fees.

Instructions

Call the collection agency. Sometimes a specific individual is handling your account. It is best to speak with the agency if possible. The best time to ask a collection agency to remove derogatory information from your credit file is when you are about to pay your outstanding balance in full. If you have already paid your account off and you call the agency to have derogatory information removed, your chance of having this done is little to none. Once a collection agency has received your money don't expect any time of customer service. Agencies are in business to collect money.

Ask the collection to remove the derogatory information. Tell the representative that you will send in your entire balance owed if they will have the derogatory information removed from your file. If the representative agrees make sure you receive written confirmation before you send any money. In the past some people have asked a collection agency to remove derogatory information, but they did not receive any written correspondence. After sending in their money they were disappointed to find that, conveniently, there were no comments or notation about that part of the conversation. Arguing the point further will be futile. The decision to remove the derogatory information, as part of the payment arrangement with you, is completely up to the agency.

Wait the appropriate time frame. Old accounts that have been on your credit report for seven years will drop off automatically, at least in theory. According to Experian.com accounts not paid in 30 to 180 days will remain on your credit file for seven years past the last payment date. Therefore the seven-year time frame starts when you first miss a payment. Any accounts that remain on your report longer can be disputed with the credit reporting agency in writing. If you need a copy of your credit report go to AnnualCreditReport.com. You can order copies by phone, mail or online. A credit report is available from all three credit reporting agencies, which include Equifax, Experian and TransUnion.

What Is an Alternative Credit Score?

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When an individual applies for a loan or credit card with a bank, the bank pulls and evaluates his FICO score before approving his application. FICO scores are calculated by the Fair Isaac Corporation and are the industry standard for credit scoring. Unfortunately, not everyone has a FICO score. This can lead to responsible consumers being turned down for loans. In cases where a FICO score isn't available, an alternative credit score may take its place

All credit scores are based on the information present within a consumer's credit report. Any past credit cards, loans, bankruptcies, judgments and collection accounts are included on a credit report. Lenders evaluate both an individual's credit record and her FICO score when determining the consumer's risk level. Some individuals, such as recent immigrants and college students, may not have a FICO score due to lack of a credit history.

The FICO score isn't the only credit score that banks can use to evaluate a consumer's creditworthiness. Consumer credit scores provided by the credit bureaus and third party credit report providers offer an estimated FICO. Lenders may also consider Auto Industry Option Scores, which calculate a credit score based primarily on an individual's past payment history on his auto loans. Bankruptcy risk scores are also available to lenders to determine how likely a consumer is to file for bankruptcy based on his past credit information.

The Fair Isaac Corporation, in an effort to more accurately assess risk and allow individuals to quickly build a credit history, offers an alternative credit score for consumers without a FICO score. The alternative credit score takes into consideration payments to creditors that don't normally report to the credit bureaus, such as landlords and utility companies. Another company, First American, provides alternative credit scores to banks based on non-traditional credit information.

According to USA Today, individuals who lack traditional FICO scores often turn to high interest payday loans due to their inability to obtain bank loans. High-interest, short-term loans present a danger to the consumer since the inability to repay the debt can lead to lasting credit damage. Alternative credit scores prevent this scenario by giving banks the information they need to lend to those without a traditional credit history. The banks also benefit by attracting new, responsible, customers.

Alternative credit scores should not be confused with alternate credit scores. Alternative credit scores offer individuals with a limited credit history but good debt management skills the opportunity to obtain bank loans. Alternate credit scores are a method by which an individuals creates a new credit file for himself by applying for credit using any nine digit number other than his Social Security number. According to the Federal Trade Commission, building alternate credit profiles is fraudulent and illegal.

How Do I Get a Free Credit Report That Doesn't Require a Credit Card?

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Television commercials and online ads for free credit reports are common, but the Federal Trade Commission (FTC) warns that they have a catch. You must buy something and pay for it with a credit card or sign up for some type of trial membership in order to qualify for a free report. The Fair Credit Reporting Act entitles you to free Equifax, Experian and TransUnion reports every year without entering a credit card number, but they must be ordered from a special website.

Instructions

Gather your financial records and Social Security number (SSN). AnnualCreditReport.com will ask for your SSN, and the credit bureau from which you order your report will ask for additional financial information to prove your identity. AnnualCreditReport.com will then route you to the appropriate web page for that bureau. Typical security questions involve your mortgage holder and payment amount or credit card accounts.

Visit AnnualCreditReport.com, which the FTC states is the official, free, no-obligation credit report website. Select your state of residence from the drop-down box on the home page and click the "Request Report" button.

Enter your information on the AnnualCreditReport.com form--your name, address, date of birth, SSN, and current and previous addresses, according to Summit Credit Union's guide.

Choose the credit bureau from which you want a credit report. You can select one, two or all three. MSN Money recommends ordering one every four months so you can monitor your credit regularly throughout each annual period. AnnualCreditReport.com will then route you to the correct page for each bureau to complete the order.

Fill out the required information when you are transferred to the appropriate credit bureau website. You may receive offers for paid services. Do not select any of them because they require a credit card. You will never have to enter a credit card number to complete your credit report order if you avoid all the offers.

Print out your credit report when you have completed the order process. You will be eligible for another free report from the chosen bureau in twelve months from the date of your order.

How to Obtain a Good Credit Rating

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Credit scores range from 375 to 900 points. According to the U.S. Department of Commerce, a score of 680 or higher is considered a good, or "A," credit rating. Maintaining a high score makes it easier for you to qualify for credit, such as mortgages, auto financing and credit cards. You also qualify for lower interest rates on these loans when your rating is good. Even if your credit rating is currently lower than you would like, you can take steps to obtain a higher score.

Instructions

Obtain copies of your credit reports from each of the three consumer reporting companies, which are Equifax, Experian and TransUnion. This enables you to look for and dispute any errors as well as take care of any outstanding debt of which you were unaware. You are entitled to a free report from each company once a year. You can begin this process online by visiting AnnualCreditReport.com.

Pay your bills on time all the time. According to the Consumer Federation of America, your payment history makes up over one-third of your credit rating. While paying off your debts is important, it is better to make the minimum monthly payment on time than to pay extra yet be late.

Keep your credit usage well below your available credit. Avoid maxing out your credit cards and installment loan accounts. The closer your debts are to your credit limits, the lower your credit rating will become. If you continually carry high balances, work to pay them down.

Minimize the amount of different credit balances you keep open. While it is favorable to have a variety of credit types, too many credit cards or loans will mar your rating. Get rid of excessive accounts by paying even a little extra each month on one bill. When that account is paid in full, close it and take the monthly amount you were paying on it and send it to another creditor.

Build up your credit over time. The length of your credit history accounts for 15 percent of your credit score. Following good credit practices over time will improve your rating. In addition, too much new credit lowers your score, so wait before you apply for a new credit card or other nonessential line of credit.

Is There Anything That Cannot Be in My Credit Report?

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A credit report is a document that contains a history of your financial activities. Three main agencies compile the information that goes into your credit report: Experian, Trans Union and Equifax. Each credit agency may have slightly different information about your history with credit, employment and inquiries by potential lenders. However, there are some items that are never included on your credit report.

According to Experian's customer service website, information in your credit report will mainly consist of only your credit record. Your credit report will never include information such as race, political party, religion or other personal lifestyle details. A credit report will not contain your medical history, although payments or nonpayments to hospitals or other medical professionals may appear. Your credit report will not include information on your criminal record or any other legal decisions that do not have a direct relationship to your credit. Your credit report will only include information about your credit history, not that of your friends or family. If you are married, joint accounts will be included on both parties' reports, but your spouse's financial information is not included in your report.

The information in your credit report includes several categories. Identifying information includes your name, including any previous names such as maiden names. A list of your current and previous addresses is also included, as is information about current and past employers. Credit reports will also note your Social Security number and birthdate. Recent inquiries are the next category of information, which includes data on who has received a copy of your credit report recently. Public record information includes court records on financial issues such as bankruptcy and tax fines. Finally, usually the largest section reports credit information, which includes details of your accounts with banks and other lenders.

Your credit score is a numeric representation of your credit history, based on information from the credit agencies. Fair Issac Corp. (FICO) is the best-known credit scoring agency. Your FICO score includes information from your three credit reports and is used by lenders to help make informed lending decisions. According to FICO's consumer website, there are five main categories of information considered for your credit score: payment history, amounts owed to all lenders, length of credit history, new credit and credit type.

Your credit report is not available to anyone who wants to look at it. Credit agencies are only allowed to provide a copy of your credit report in a number of circumstances. According to the Federal Reserve Bank of San Francisco, there are five main categories. First, lenders considering offering you a line of credit can request your credit report. A potential employer can use your credit report when making a hiring decision. Insurers can use credit reports when issuing or renewing policies. Government benefits agencies can use your credit report to determine whether you are eligible. The fifth category is anyone with a "legitimate business need," including someone like a potential landlord.

What Can Drop Your Credit Score?

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You can spend years building a high credit score, but it only takes a mistake or two to trash it. Some actions, such as letting a credit card go into collections, have a larger impact on your score than other actions, but many things can cause your credit score to drop. The Fair Isaac Corp. considers several items, such as debt, payments and open accounts, when factoring your score. Making a mistake in any of these areas will cost you.

Bankrate reports that as of 2011, your payment history makes up 35 percent of your credit score. Every time you run late on your credit card payment, it will lower your credit score. If you miss payments entirely for several months, the lender will note your account as a charge-off and close it. A charge-off will cost you a drop in your credit score. To make matters worse, the lender will likely sell your account to a collection agency. Having a collection file on your credit report also drags down your credit score.

Lenders put a lot of stock into your debt to credit ratio, as having a low balance on your credit cards shows that you can handle debt. The amount of debt you have makes up 30 percent of your credit score, according to Bankrate. If you keep a high balance on your credit cards, you will have a lower credit score. Maxing out your credit cards entirely will cause an even lower credit score. CNNMoney recommends keeping your balances at or below 35 percent of your available credit limit.

Opening and managing a credit card will help you build a credit history, but applying for too many credit cards in a short timeframe will hurt you. Most lenders see submitting multiple applications as a sign that you have a financial burden causing you to look for more credit lines. A hefty financial burden could mean you won't repay your debts, which makes you a higher risk candidate. Bankrate reports that a credit inquiry stays on your credit history for two years, and a single inquiry could cost you up to five points off your score.

The length of your credit history factors into your credit score. The longer you keep a credit card open, the longer your credit history will get. If you close older credit card accounts, it will shorten your credit history and lower your score. You should always try to keep your oldest accounts open and good standing to maintain your credit history. You may need to use the card periodically, as the lender can close the account for inactivity.

Will My Credit Score Affect My Fiance's Once We Are Married?

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The short answer to this question is no: getting married won't affect either of your credit scores. However, because married people often commingle their finances, your debts and expenses will often end up affecting one another's credit scores over the years. The most common example is joint debt, where both of you sign for a high-ticket loan like a mortgage or a car loan -- but there are other ways you will affect your spouse. There are also strategies for one spouse to help the other improve his credit score.

The three major credit bureaus report on the credit history of individuals. You have a credit history. Your fiance has a credit history. Once you've been married for 50 years, you will have a credit history and your husband will have a credit history. At no time will there ever be a credit report on the two of you as a couple.

Many spouses will apply both of their incomes to get approved for a mortgage, car loan or other high-ticket loan. When this happens, the lender will look at both of your credit histories and make loan decisions based on the worst history or a combination of the two. If approved, what happens with that loan is recorded on both of your credit reports. Because of this, the credit reports of many longtime spouses look almost identical.

A similar practice is co-signing, where one spouse co-signs on the other spouse's loan. The action on that loan appears on both the signer's and the co-signer's credit history.

When a lender considers giving you a loan, the lender takes into account debt-to-income ratio as well as your credit score. Debt-to-income ratio is the percentage of your current income that you already spend on debt service. If both you and your spouse work, your combined income can make the debt-to-income ratio look very good. However, if one of you has a lot of debt and one very little, it might be better to seek a loan under only one of your names.

You can use the information above to help improve the weaker of your two credit scores. If you take out a loan in both of your names, and have the more responsible spouse (one is always more responsible) handle the payments, that incrementally improves the lower credit score while not hurting the higher score.

Over the years, alternate which spouse is the primary holder of different kinds of debt. A good credit history shows regularly paid-off accounts of secured, unsecured, consumer and investment debt. Many couples end up with one holding all of one kind of debt and the other holding all of another. If you avoid this, both of you look more attractive to potential lenders.

Does My Wife's Credit Affect Me?

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When considering the joys of matrimony, dealing with the blending of finances can wind up fairly low on the list. It can be as simple as sharing a bank account or as difficult as trying to tell your spouse that you don't care to be associated with her poor credit history. One question that arises as couples build a future together is how much one spouse is impacted by his partner's credit score.

There is no "our" credit report; simply yours and mine. You and your spouse have individual credit reports. Any credit problems your partner had prior to your marriage do not show up on your account unless you entered jointly into a financial obligation or co-signed one of his loans.

As much as you love the person you plan to marry or have already married, listen to your instincts when it comes to entering into joint liability situations. Even after the wedding, you can protect your credit by obligating yourself to pay only for things you know you can afford. If you know that your spouse has an issue with misusing credit or spending more than she can pay, think seriously about whether you want her bad habits to reflect on your credit report.

In the event that you and your spouse decide that you would like to make a major purchase that will require both of your incomes for qualification, both of your credit reports are going to be pulled for review. It is at this point that the credit of one spouse can prevent you from getting a mortgage, a boat or an automobile. Many leasing agents also review credit reports of all adults who are going to be residing in a home. Unless you can afford to pay the lease on your own, this could be a problem.

You can take small steps to help your spouse rebuild tattered credit. Add your spouse as an authorized user on one of your credit cards and pay it off each month. Put money into a savings account and then co-sign for an unsecured loan with your spouse. Use the money you've saved to pay off the loan right away. Those timely payments will be reflected on your spouse's credit report as well as on yours, helping to raise both of your scores.

How to Remove Federal Tax Liens on a Credit Report After the Statute of Limitations

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Negative credit marks, which include public records such as a federal tax lien filing, can only appear on your credit report for ten years. Once this period of time has finished, you may request that the lien is removed from the report. The ten years is counted from the paid date of the lien, as opposed to the date it is actually entered on the credit report. Some states do not have a statute of limitations on tax collection, so you need to check your state's statutes prior to attempting to remove the lien from your credit report.

Instructions

Prepare a letter to the Internal Revenue Service requesting a release of a federal tax lien due to the expiration of the statute of limitations. You do not have to fill out a specific form or template for this letter, but the IRS requires you to provide the request date, your name and address, a copy of the federal tax lien notice for the lien you need released and the reason for the lien release.

Send this letter to the proper address for your state listed in IRS Publication 4235.

Write a letter to each of the three credit reporting agencies: TransUnion, Experian and Equifax. Send a copy of the lien release to each credit reporting agency and inform the agencies that the lien is past its ten year reporting date. The agencies will double check this information and remove the federal tax lien once they have verified that the information is accurate.

How Much Can a Notice of Federal Lien Hurt Your Credit Score?

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When you owe taxes to the federal government and do not pay your tax liability, the Internal Revenue Services (IRS) will file a lien against your property. You will then receive a Notice of Federal Tax Lien notifying you that the lien was filed. IRS liens automatically attach to all of your assets, such as your home and vehicle, and damage your credit score.

A tax lien is a matter of public record and along with bankruptcies, judgments and foreclosures, serves as one of the many derogatory public records that can appear on your credit report. All of the data reflected on your credit report contributes to your credit score. Credit scores help lenders evaluate your debt-management skills and determine how likely you are to make timely payments. Derogatory public records that demonstrate your inability to manage your debts adversely impact your credit scores. Thus, you can expect your credit score to drop after a tax lien appears on your report.

According to the Fair Credit Reporting Act, most derogatory information on your credit report only contributes to your credit rating for seven years. After seven years, the credit bureaus purge your report of most negative entries. Paid tax liens are no exception. If you pay off your tax lien the reporting agencies delete it from your credit record seven years after the date you paid the debt in full. Not paying a tax lien will haunt your credit history for much longer. Each reporting agency decides how long it will report unpaid federal tax liens. Although reporting agencies have the right to maintain your tax lien indefinitely, most unpaid tax liens will vanish after 15 years.

Paying off your tax lien does not result in the reporting agencies removing it from your credit history. The full seven-year reporting period must pass before your paid tax lien is deleted. Paying the lien also does not improve your credit score because the lien record itself is derogatory -- whether you paid it or it remains outstanding. Lenders reviewing your credit history, however, would much rather see a paid lien than an unpaid one. The fact that you took responsibility for your delinquent tax debt reflects more favorably on your future debt management skills than liens you ignore.

While a tax lien does damage your credit rating, that damage is the most prominent when the tax lien is recent. Recent entries, whether positive or negative, carry the most weight with the credit-scoring system. As the tax lien ages, it has less of an impact on your credit score.

Do I Need to Buy My FICO Score?

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Your FICO score is one of the most important numbers in your life, but you may have to pay to know what your score is. Even if you pay for your FICO score, you may not get the one that a lender sees or uses. But for some people it might be enough to get a close estimate.

The Fair Credit Reporting Act gives you the right to view your credit report from each credit bureau for free every year but does not entitle you to a free credit score calculation. Credit scoring algorithms are not necessarily owned by the credit bureaus and lenders can use whatever formula they want to rate you as a credit risk. Creditors may prefer to design their own algorithm.

You can probably get your score for free by signing up for a trial offer. The credit rating bureaus sometimes run promotions where they calculate your score if you try a service, such as credit monitoring. This is only free if you cancel before the trial membership ends. You will have to give out your credit card number. You could also use a FICO score estimation tool and get a general idea of what type of risk you are.

Some financial gurus, such as Dave Ramsey, claim you do not need to know your FICO score or even take out loans picked up by the national credit bureaus. Lenders sometimes base their credit decisions on an informal judge of character rather than looking at how a formula rates you. It is just as important to have a good history with a lender and to pay your bills on time.

If you decide to pay for your FICO score, purchase a score labeled as a FICO or based on the FICO model. The credit bureaus have educational scores that look like a FICO score but are of little use for judging your creditworthiness, because creditors probably do not care about anything but a true FICO score.

How Long Does It Take to Repair Credit?

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There are many companies that promise to instantly repair your credit history. This is impossible. It can take years to rebuild your credit history and raise your credit score.

Your credit history is a record of all of your borrowing from the last seven years. It also includes things like bankruptcies, court judgments and liens.

Most of the information stays on your credit report for seven years. After that, it's erased. Bankruptcies can stay on your credit report for up to 13 years. Certain things, like defaults on college loans, can stay on there indefinitely.

Some people believe that a credit history can be repaired instantly. This is not true. No "credit repair" company can erase negative information from your credit report unless that information was incorrect in the first place.

The easiest way to avoid ruining your credit is to make all of your payments on time. Even a single missed or late credit card payment can negatively affect your credit score.

The main benefit of having a good credit score is easy access to cheap credit. The lower the score, the more difficult it is to borrow money. A low credit score can also keep you from getting your dream job, as many employers now look at the credit history of potential employees.

What to Do to Improve a Credit Score

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A bad credit score can affect your ability to get more credit, rent an apartment or even get certain types of jobs. But having bad credit doesn't have to be a permanent situation. You can improve your credit over time by taking certain steps to use credit responsibly.

You are entitled to one free credit report every year from each credit reporting agency. Although free reports don't include a score, you can still see everything else on your report, such as balances and delinquencies. Credit report inaccuracies can lower your credit score. For example, if you know you've paid off a loan but your credit report shows a balance, that balance can reduce your score by affecting your balance to limit ratio. Checking your credit report every year will help you spot inaccuracies. You can report inaccuracies to the credit reporting agency, which will investigate and correct the information if required. Small inaccuracies can add up.

Making regular, on-time payments every month increases your credit score. If you've been behind before and your score takes a hit as a result, you can build it back up by resuming regular payments and catching up on past-due balances.

Every time you apply for a new credit card or loan, the application counts against you on your credit score. Applying for a lot of loans and credit cards within a short period can make you look irresponsible. If you apply for a credit card and are denied, don't just keep trying until you get one. Back down and wait a few months to a year before trying again. Additionally, having a large number of credit cards and personal loans can hurt your credit. If your credit is diversified and you have some credit cards and some installment loans, such as car loans or mortgages, your score will be higher -- but a high number of credit cards can show irresponsibility.

Having high balances on your credit cards can negatively affect your credit score, especially if your balances are at or near your credit limits. A lower debt-to-limit ratio is helpful. Don't max out your credit cards, and try to pay more than the minimum payments to reduce the balances, even if you can only do it one card at a time.

If you have a short credit history or no credit history, you can build a credit history by obtaining a reasonable amount of debt and using it responsibly by repaying it on time every month and not overspending. Over time, your score will increase and your credit outlook will improve. If you already have a lot of debt or have been in debt for a long time, getting more debt will not help you.

How to Erase Bad Credit From a Credit File

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Bad credit on your credit file reduces your credit rating, and after checking your credit file, lenders may not approve your credit application. It takes time to remove negative items from your credit file and repair a low credit rating. But the sooner you begin fixing your bad credit history, the sooner you can get a mortgage, auto loan or other type of financing with a low interest rate and better terms.

Instructions

Assess the negative items on your credit file. Annual Credit Report provides every consumer with one free report each year. Review your report and circle negative items on your credit file such as unfamiliar accounts, collection accounts and late payments.

Reverse late payment habits. You can't remove late payments once a lender reports this information to the credit bureaus. Start paying your bills by the due date to raise your credit rating and ultimately improve your relationship with your creditors.

Pay down maxed out credit cards. Exceeding your credit limit or having credit card balances close to your limit hurts your credit file. Improve your credit standing by increasing your available credit on credit cards. Pay more than your minimum and stop using credit cards to bring down your balances.

Write the credit bureaus to investigate unfamiliar accounts. It's possible for someone to steal your personal information and open fraudulent accounts in your name. Dispute unrecognizable accounts or information on your credit report.

Work with creditors to satisfy collection items and negotiate the removal of these items from your credit report. Like late payments and high debts, collection items on your credit file damage your credit rating. Pay off these old delinquent accounts and then ask creditors to delete the collection from your file.

Good Credit Score for a College Student

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Many college students are in their early adulthood and thus just starting to build credit. Unfortunately, students sometimes are careless with credit, running up credit cards and failing to pay on time. However, how well they handle credit during the college years can decide whether or not they can get the loans they need to complete their educations, and whether they can land jobs, finance cars and get mortgages after they graduate.

College students who have no credit because they've recently come of age can start to build credit by applying for store credit cards and secured credit cards. Such cards report to the three credit bureaus --- Experian, Equifax and TransUnion --- so establishing a positive payment history can help build a credit score enough so that other lenders, such as national credit card companies and banks, will be more willing to extend credit to them.

If you are in college, it is likely that already have some student loans. Approval for many of these loans is typically contingent on need rather than on a good credit score. Student loans will help build your credit once they go into repayment and you start making monthly payments. Getting other types of loans with the help of a cosigner is a good idea. If you are short on money for books one semester, you might consider getting a private loan from your local credit union or banking institution with the help of a cosigner. Paying this loan off on time will give your credit score a boost.

Use your credit cards every month, but don't charge more than 30 percent of your limit. If possible, pay off the full amount charged each month to avoid interest. Additionally, pay more than the minimum amount of your monthly payment on any loans you may have. This shows lenders that you are responsible with money, and will make you seem like a good investment to lenders. The longer you have open accounts in positive standing, the higher your credit score will rise. Request your credit report yearly to ensure there are no errors that could be dragging down your score.

While college is traditionally seen as a time to experiment, taking unnecessary risks with your credit will hurt you for many years to come. On the other hand, being responsible with your credit will lead to a favorable credit score. This will ensure that if you need to take out a private educational loan to finance some of your schooling, lending institutions will welcome your business. If your car suddenly dies, you will be able to finance a new one without paying exorbitant interest rates. Because employers often check credit reports of potential hires, a good credit score will also ensure that after graduation, you're not denied employment because your credit report reflects financial irresponsibility.

How Long Is It for Debts to Be Removed From a Credit Report?

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Debt information that is positive can remain on credit reports indefinitely. A borrower who never misses a payment on an active credit card may see the account remain on the credit report for more than a decade. Most people want good credit history to remain on their credit report because it boosts credit scores. However, there are federal laws regulating how long negative credit information can remain on credit reports.

Negative credit information includes missed payments, balances over the credit limit, debts that are settled for less than the full balance, monetary judgments, foreclosures and bankruptcies. The Fair Credit Reporting Act requires removal of most negative credit information after seven years. For example, an auto loan account with a poor payment history would expire after seven years. Bankruptcy information remains for a minimum of 10 years. Typically, the impact of negative information on a credit score decreases as time passes, even before it is erased from the report.

So-called credit repair agencies may insist they can remove negative credit information and debts sooner than the established standards. However, the Federal Trade Commission suggests that many of the agencies engage in unethical practices while attempting to repair credit. The FTC recommends that people forget about negative information on their credit reports and focus on the future instead. The agency notes that it is possible to overcome all credit shortcomings -- including foreclosure and bankruptcy -- in as little as two to three years.

The three major credit bureaus -- TransUnion, Equifax and Experian -- must remove credit information that is incorrect. The credit bureaus acknowledge that mistakes happen, and inaccurate or outdated information on debts sometimes is placed on credit reports. The Fair Credit Reporting Act requires credit bureaus to conduct an investigation after a consumer submits a dispute challenging the accuracy of information on his credit report. If the credit bureau cannot verify that the information is valid, it must delete the information. Some people exploit the process by challenging debt information they know is accurate. Their hope is that the credit bureau will not complete the investigation within the 30-day time frame required by the Fair Credit Reporting Act, which would force the credit bureau to delete the item. Credit bureaus are allowed to dismiss disputes deemed frivolous.

Creditors and debt collectors sometimes will remove certain debts through a process called "pay-for-delete." This allows removal of the account before it is scheduled to expire under terms of the Fair Credit Reporting Act. The borrower usually initiates the agreement by offering to pay the full amount owed on a delinquent debt. In exchange, the creditor agrees to delete the account from credit reports. This process is legal, but many creditors and debt collectors will not participate, because they consider the practice unethical.

Will an Increase in a Credit Line Affect a Credit Score?

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With most Americans having multiple lines of credit at any given time, usually in the form of credit cards, a reasonable question is whether increases to a credit line will impact a credit score. The answer is that it depends on how you treat the extra credit you get, whether the credit card company issues an inquiry and what else is happening with other areas of your credit.

Part of your credit score is your debt utilization ratio. This is simply a number that indicates the amount of credit you are using divided by the amount of credit you have available to you. Typically, a lower debt utilization ratio will raise your credit score slightly, as a low ratio means that you still have borrowing room left. This is partly why your score increases if you pay off debts but keep the accounts open.

When you are given an increase in your credit line, either because of your good history with your company or because you request one, you increase the amount of total credit by which your accessed credit is divided. For instance, if you were using $250 of a $1,000 in credit, your debt utilization ratio would be 25 percent. If you got an extra $500 in credit, your ratio would be $250 divided by $1,500, or just under 17 percent. For this reason, getting a better credit limit sometimes can raise your credit score.

Improving your credit score using credit line increases assumes that, even though your available credit goes up, your spending does not. However, in reality, when some people get increases to their credit line, they spend more than they otherwise would. In these instances, the debt utilization ratio doesn't necessarily decrease, and for some people, the extra spending actually could lower the debt utilization ratio.

Often, if you request a credit line increase on your own, the credit card company will investigate your financial history to determine whether you will be a greater risk if given the increase. These investigations sometimes show up on your credit report as inquiries. These can damage your credit score and take time to disappear off your credit report.

As Maxine Sweet, financial expert with Experian, points out, everything in your credit score is connected. It is not entirely possible to guarantee that your score will go up if your credit lines increase for this reason. Inquiries necessary to approve the increase likely will cancel out the benefits of the lower debt-to-income ratio, at least initially. Because the debt utilization ratio is just one part of your credit score, any credit line increases you receive probably will provide only marginal improvement unless the amount of the increases is significant.

If I'm Being Sued for Medical Bills, How Will This Affect My Credit?

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Medical bills differ from other types of debt in the fact that you don't always know how much treatment costs until after your hospital or physician administers it. This could leave you facing a much higher bill than you originally anticipated. Although seeking medical care isn't always optional, you are still responsible for paying the bills associated with any doctor's visit or procedure. If you fail to do so, you could face a lawsuit and damaged credit.

Being sued by your health care provider or a collection agency assigned to recover your unpaid medical bills does not automatically impact your credit. Your credit only suffers if you lose the lawsuit. Lawsuits and their resulting court judgments are a matter of public record. Derogatory public records impair your credit rating as soon as they appear on your credit report. Because your credit score is a compilation of all of your credit entries and each individual's debts and assets vary, the degree of damage your credit sustains after the lawsuit may vary.

When a creditor sues you, it must prove your liability for the account during the hearing. If the creditor cannot prove its case or you have a successful defense, the judge will decide the case in your favor and no judgment will subsequently appear on your credit report. Unfortunately, the absence of a judgment doesn't stop the original medical debt from damaging your credit. Health care providers often sell delinquent accounts rather than putting forth the effort necessary to collect them. If the collection agency that purchases your debt reports it to the credit bureaus, it appears on your report for seven years and lowers your credit score regardless of whether the collection agency or health care provider ever sues you.

Preventing a lawsuit is preferable than trying to defend against one. Most health care providers prefer to set up payment plans for consumers that cannot afford to pay off their medical bills in one lump sum rather than send those bills to a collection agency. If a collection agency already owns your medical debt, you can attempt to negotiate a lower balance or reasonable payment plan with the collection agency as well to avoid going to court.

Once a judgment appears on your credit report, it remains there for the duration of its reporting period. While federal law establishes the reporting period for most credit entries, The Fair Credit Reporting Act states that the reporting period for civil judgments depends upon how long the creditor has to enforce the judgment. The minimum amount of time a judgment for any debt, including medical bills, can remain on your credit record is seven years.

Short Sale & Credit Rating

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Late mortgage payments make your credit score tank, especially when combined with other delinquent accounts, since the MyFICO credit score website advises that 35 percent of your score is based on how you pay your bills. Foreclosure makes things even worse, but you can sometimes avoid losing your home and minimize credit rating damage by getting your lender to agree to a short sale.

A short sale means selling your house for less than your outstanding loan balance, according to Maxine Sweet of the Experian credit bureau. Your mortgage company agrees to accept this lesser amount as full payment, rather than pursuing you for additional money like it would do after a foreclosure sale. Most lenders do not agree to a short sale unless your loan is already delinquent, because they want to avoid the hassle and expense of foreclosure.

Your credit report does not reflect a short sale as a separate entry on your credit report. Sweet explains that your mortgage loan reflects a "settled" status, which means you did not pay the full amount due. Other lenders and credit score formulas consider this negative because the mortgage holder took a loss for the remaining money owed on the account.

Short sales save up to 175 points on your credit score when compared to foreclosures. MortgageFit community mentor Jessica Bennet explains that a foreclosure drops your score up to 250 points, while a short sale only pulls it down 75 to 100 points. Lenders and insurance companies that review your TransUnion, Experian and Equifax credit reports after the short sale view it as bad. They may turn you down or force you to pay higher interest rates or insurance premiums, depending on the other information on your reports.

Mortgage lenders automatically report "settled" status to the credit bureaus unless you negotiate something different. Lita Epstein of the Wallet Pop financial website explains that you can sometimes get the bank to agree to report the loan as "paid in full," which avoids credit rating damage. Most people who do short sales are represented by an attorney. Ask your lawyer to negotiate a positive credit report status as part of the deal.

Your credit rating is not ruined forever by a short sale that gets reported to the credit bureaus. Experian, Equifax and TransUnion remove most negative information, including mortgage accounts, in seven years, according to the Federal Trade Commission. Rebuild your credit in the meantime by concentrating on the factors that influence your credit score the most. The MyFICO scoring site advises concentrating on debt reduction and on-time payments.

Tips for Couples With Different Credit Scores

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Couples in a relationship can differ in how they manage money. This may translate into differences in their credit profiles. Whether you and your partner are married doesn't matter. Financial woes are a common problem couples face. One partner's credit score can affect the other. If you apply for credit together, one bad credit score can affect both of you.

Different credit scores for couples who have not been together for a long time is not uncommon. In fact, each may be unaware of the other's credit standing until they apply for credit together. Questions about credit often don't come up until the time arrives to apply for joint credit card accounts or a home mortgage. No matter what the situation, marriage does not combine two credit scores into one. A couple's individual credit scores remain separate.

Despite being married, if you apply for credit or a loan as an individual, a creditor will only look at your credit record. However, if you and a partner apply jointly for a credit account or as co-borrowers on a loan, the creditor or lender will look at each of your credit reports. In this case, you are both responsible for repaying the debt. Likewise, sharing a joint account can drag both your credit ratings down even if only one of you abuses the account. Individual credit scores can also be affected if one of you adds your name onto the other's credit account as an authorized user. These accounts appear on your separate credit histories. An account with a poor payment history will lower both your credit scores. On the other hand, adding a partner who has bad credit onto a healthy credit account as an authorized user can help improve that person's credit score.

Married couples still have separate credit files even if they share several joint credit accounts. Both partners can request a free annual credit report from each of the three major credit reporting agencies --- Equifax, Experian and TransUnion . By spreading out the times when you request your copies, you can get a copy of a credit report every two months between the two of you --- allowing you to keep a close watch on your credit report. Monitoring your credit report can help you identify errors that can lower your score.

One partner's bad credit could disqualify the two of you from obtaining a home mortgage. MSN Money reports that current underwriting guidelines require that a lender default to the lower credit score when determining the borrowers' credit risk. Even if the other person has a high credit score, lenders base interest rates on the lower of the two scores. When a difference in credit scores means getting approved for a loan but at a higher interest rate, it makes more sense to leave the person with the lower score off the loan application. The drawback is that the lender will consider only one income. This can be a problem if the primary wage earner is the partner with the lower credit score. Likewise, if the person with the higher credit score has the lower income, this can affect the borrower's debt-to-income ratio. Lenders like to see less debt and more income. Even so, a lender might be more flexible and willing to make the loan if the couple transfers all their savings into an account in the name of the partner with the better credit rating.

How to Remove a Duplicate Credit Report Entry

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The credit report has become central to life in the United States. The information held on this report can either help or hinder you in getting a job, car, apartment, mortgage, credit card, loan or more. Having duplicate entries on a credit report is a common error and is usually due to credit sources reporting slightly varied information to the credit reporting agency. When this happens, a duplicate entry may appear. It is possible to have duplicate entries removed or consolidated in a few simple steps.

Instructions

Order and examine your credit report. You may do this from one agency or you may choose a comprehensive report from all three U.S. credit reporting agencies: Experian, Equifax, and Trans Union. Ordering a credit report may be done online (see Resources section) or by telephoning one of the credit reporting agencies.

Note any possible duplicate entries. Compare the information provided, such as date the account was opened, the name on the account and account numbers. Verify that the account is a duplicate, and gather any information you have regarding the account such as statements or bills.

Dispute the information. This can be done online at the credit reporting agency's website--each agency now has this feature available--or by telephoning the agency. The information for disputes can be found on your credit report and will vary depending upon the agency.

Submit any additional information necessary. The credit reporting agency may ask you to submit additional documentation such as bills or statements for the account, proof of address or proof of identity.

How Long Does a Short Sale Stay on a Credit Report?

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Selling a house short means that an individual has worked out an agreement with the lender wherein the lender is willing to accept less than the current balance on the mortgage, provided that the current homeowner can find a viable buyer within an acceptable period of time. Short sales have become a popular alternative to foreclosures in many markets around the country because the long term ramifications on credit are not as detrimental as a foreclosure filing and judgment would be. However, should a short sale be unsuccessful, the lender still has the option to foreclose.

In a typical short sale scenario, a homeowner must be very clear and have in writing a statement from the lender detailing how he will report the short sale once the transaction is complete. The most favorable filing is one that reads "Paid" -- however, unless there is only a small amount of debt to forgive, most lenders will report the short sale as "Settled" on a credit report. A "Settled" account is equivalent to a 30 -- 60 day late payment in most cases, and can put the homeowner in a position to purchase a new home in as little as two years. However, if a bank lists the short sale as "Closed but not paid in full," this could have dramatically devastating credit repercussions for as long as seven years, or as many as ten.

While a short sale will have negative effects on credit history, it is important to remember that a foreclosure will be attached to a consumer's credit report for as long as ten years. The same is true of a deficiency judgment should the lender not be able to recover what is owed on the mortgage from the home owner at a foreclosure sale. It might not be the most attractive option for credit; however, a short sale is an option that allows a homeowner to recover her financial health much faster than the alternatives.

About Low Interest Credit Cards

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If you want to make an expensive purchase, but you don't have the cash, use a low interest credit card and pay off the balance within a few months. Low interest credit cards are ideal because they offer a low or zero percent interest rate. Thus, the bulk of monthly payments go towards reducing the balance. In turn, you'll keep your debts low, and you'll have money in your pocket to spend on other things.

There are two types of low interest credit cards. Some credit cards offer a low introductory rate, in which the low interest is temporary. In this case, you'll receive a low rate for 6 to 12 months. During this time, you can purchase merchandise or apply for a balance transfer and consolidate all your debts. Once the introductory period ends, the interest rate increases. On the other hand, some credit cards offer a permanent low rate. To qualify, you need an excellent credit history.

Low interest credit cards typically feature zero percent interest for the first few months. Even if you don't qualify for zero percent interest, you may qualify for a low 2 or 3 percent interest rate. A lower rate decreases the minimum monthly payment, which allows you to pay off the debt quicker and save money each month. These credit cards are ideal for anyone who want to consolidate and ultimately eliminate debt.

Low interest credit cards are beneficial for several reasons. A lower interest rate saves you money each month; and if you double or triple the minimum monthly payment, you can be debt-free before the low-introductory period ends. What's more, low interest credit cards allow for easy debt consolidation. Apply for a low interest credit card, and transfer balances from your high interest cards onto the low rate card.

Although several credit cards offer low interest rates, credit card companies can increase the rate at their discretion. If you apply for a credit card that features a low introductory rate, pay the credit card bill on time every month. Submitting one late payment to the creditor (or any other creditor) gives your credit card company just cause to void the low rate agreement. In turn, they can increase your interest rate, which ultimately increases your minimum monthly payment.

If your present credit cards feature a high rate, contact your credit card company and ask for a rate reduction. Credit card companies want to keep your business, and if you've been a good customer, they're prepared to offer a temporary rate decrease. Depending on your credit history, they'll offer a temporary low rate between zero and five percent. The average rate reduction period is 3 to 12 months.

How to File a Bad Credit Report

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Having a good credit report is very important. Your credit can make the difference in qualifying for a loan. Even with carefully management of your credit, there are times when mistakes can show up in your credit report. However, credit bureaus have effective ways for you to file a dispute. There are also laws that help you if the dispute is not resolved in a timely fashion.

Instructions

Purchase a credit report through one of the credit report agencies: Experian, Equifax or TransUnion. You are allowed one free report each year and whenever you are denied credit.

Examine your credit report and take note of any errors you see. Common errors can include incorrect name, Social Security number, address, incorrect amounts on open account, or accounts that you never opened. Accounts that are in your name but that you did not open could signal fraud, so you want to act fast.

Fill out a dispute form with the agency you found the error with. This can be done online for the quickest results. Make sure you have as much information about the item as possible to ensure timely processing. Refer back to your credit report if you need to. Once the dispute is place, the company in question has 30 days by law to respond. The item will be corrected, removed, or left as is.

Wednesday, March 30, 2011

What is a Credit Report?

What is a Credit Rating?

Credit Reporting Codes

R7 Code

Order Credit Reports

Tuesday, March 29, 2011

Instructions

Monday, March 28, 2011

Identification

Payment History

Amount You Owe

Length of Credit History

New Credit

Types of Credit

Sunday, March 27, 2011

Experian

Equifax

TransUnion

More Companies

Instructions

Instructions

Saturday, March 26, 2011

Credit Score Basics

Debt-to-Credit-Limit Ratio

Reported Balances

Activity

Time Frame

Consequences

Avoiding a Default

How to Recover

Friday, March 25, 2011

Check Your Credit Report

Create Payment Plan

Make Payments On Time

Use Credit Wisely

Soft Inquiry

Hard Pull

Rate Shopping

Improving the Score

Wednesday, March 23, 2011

Instructions

Tuesday, March 22, 2011

Instructions

Monday, March 21, 2011

Fix Errors

Verify Your Credit Limits

Reorganize Your Debt

Sunday, March 20, 2011

Effects of Paying Off Debt

Benefits of Paying on Time

Review Your Credit Score

Saturday, March 19, 2011

Instructions

Facts

Types

Considerations

Significance

Misconceptions

Instructions

Thursday, March 17, 2011

Instructions

Wednesday, March 16, 2011

Information Not Allowed in Your Credit Report

Information Used in Your Credit Report

Information in Your Credit Score

Who Has Access to Your Credit Report

Misguided Payment History

Carrying a Balance

Overzealous Applying

Not Staying Active

Tuesday, March 15, 2011

Your Credit is Your Credit

Commingling Debt

Debt-to-Income Ratio

Helping Each Other Out

Seen as Individuals

Follow Your Instincts

When It Impacts You

Help Your Spouse Rebuild