How Do Credit Bureaus Form New Profiles?

There are credit profiles maintained for businesses as well as individuals. When you apply for credit with a bank or lender, a credit profile begins to form with the credit bureau used to inquire about your credit. A credit profile includes your personal identifying information, employment information, credit information, inquiries and public record information, according to the website Mortgage 101.

Identification

To form a new credit profile you must apply with a lender, or someone has to pull your credit report. If you previously had credit, you have an established profile. When you have no approved credit, the only thing on your credit profile will be your name, address, Social Security number, date of birth, and place of employment. You will also have an inquiry. Every lender that looks at your credit file leaves an inquiry.

Trade Lines

When you gain approval for a loan or some other form of credit, a trade line establishes or forms as part of your credit profile. A trade line consists of the name of the creditor who approved you for credit, the amount of credit extended, the date last paid, the credit limit, the payment history, the type of account, and the credit rating, which describes account payments.

Changes/Updates

Every time you receive approval for a new credit account, that lender will submit information to the credit bureau. The bureau maintains a record of your payments and any changes in your account such as a reduction in the balance or the credit limit. If you have a credit card and make new purchases, that information goes to a credit bureau as well. Changes, to your credit profile, such as a new employer or a new address, update whenever you apply for new credit.

Public Record

If a creditor decides to bring legal action against you because of non-payment on an account, this information will show up on the bottom of your credit profile as a public record; this is a judgment. Bankruptcies are public records, too. Other items that can appear on your credit file as public record include tax liens.

Inquiries/Credit Scores

Inquiries from creditors can reduce your credit score. Lenders use credit scores to determine your credit worthiness; they help lenders estimate the likelihood that you will default on a loan. Credit scores range from 300 to 850. High credit scores help you get more favorable terms and conditions from lenders, such as lower interest rates. Bad credit, such as late payments, judgments, bankruptcies, and collection accounts, will lower your credit score.

Credit Bureaus

Lenders check with one of the three major credit bureaus before approving or denying you credit. The three credit bureaus are Transunion, Experian, and Equifax. You can get a free copy of your credit report, which is a record of your credit profile, from the Annual Credit Report website.

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How to Lease With Poor Credit

Your ability to lease with poor credit may largely be determined by the type of product you're trying to lease. For example, leasing an apartment or a home with poor credit may be easier than leasing a new automobile, Landlords know they can evict you for not paying rent, but an automobile leasing company might have a tougher time getting your leased car back if you stop making payments.

Instructions

1

Review your credit reports. It's important to know what your potential landlord or leasing agent is going to see when they pull your credit reports. Get free copies of your reports at the website Annual Credit Report. Federal law entitles you to one free copy of your report every 12 months from the three nationwide credit reporting agencies -- TransUnion, Experian and Equifax.

2

Correct any inaccurate information on your report that may be hurting your credit scores. Examples include a delinquent account that isn't yours or delinquent accounts that should no longer be included on your reports because of statute of limitation guidelines -- usually seven years. Visit the websites of the credit bureaus to enter disputes.

3

Study the negative information on your reports and be prepared to respond to questions about your credit as the landlord or leasing agent reviews your application.

4

Place a consumer statement on your credit reports explaining why you have poor credit. Under federal law, you can enter a statement of up to 100 words on your credit reports, and up to 200 words if you live in Maine. Use that opportunity to explain that you fell behind on your bills because of an illness, long-term unemployment, or some other reason. Call or write the credit bureaus to enter your statement.

TransUnion Consumer Solutions
P.O. Box 2000
Chester, PA 19022-2000
800-916-8800

Equifax Consumer Services
P.O. Box 740256
Atlanta, GA 30374-0256
800-846-5279

Experian
P.O. Box 2104
Allen, TX, 75013
888-397-3742

5

Prepare another letter explaining your credit situation. Explain why you fell behind and tell how things are different now. Point out that medical bills that knocked you off track are paid off now, or that you have finally found work again after a long layoff. Stay with the facts and avoid emotion or finger-pointing in writing the letter.

6

Present your letter along with your application for the lease. Also present other documentation, including pay stubs, a recent offer letter for a job, and letters of recommendation from other companies you have recently leased from, such as an apartment complex.

7

Tell the leasing agent about your credit issues when you apply. Be upfront and honest. Offer to make a larger deposit, if applicable. Formally apply and wait for a response. If you are turned down, ask if adding a co-signer will help, or correct the problems with your credit and try again.

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What Does Insufficient Trade Lines on a Credit Report Mean?

Insufficient trade lines is one of the reasons a creditor may deny your request for credit. If a creditor thinks your credit history is lacking, they will not approve you.

Identification

A trade line consists of the information regarding your credit account. It will include such information as the balance owed, date of last payment, credit limit, credit rating, type of account and the name of the creditor. When you owe a creditor they send trade lines to the credit reporting agency containing all of your account information.

Significance

Creditors like to see you have trade lines or credit with several other creditors before they extend you credit. Insufficient trade lines mean you have not established credit with enough creditors. A creditor cannot make a decision based on your limited credit file.

Time Frame

When you apply for credit, and you only have one trade line which was opened two or three months ago, there is a good chance your request for credit will be denied. Trade lines should be opened at least two years. This policy can vary from creditor to creditor.

Misconceptions

If you apply for a credit card and you never use the account, this will show up on your credit file as a trade line but it will have limited information. Another creditor will not consider this to be a valid trade line if you have never used the account. There is no pay history for them to evaluate.

Expert Insight

If you have trade lines for a mortgage, auto loan and a credit card company this is likely to increase your chance of getting approved for credit in the future. You have to make payments on time to establish a good credit history.

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Do Paid Medical Collections Affect Your Credit?

Your credit reports are full of data about paid and unpaid accounts. Creditors charge off unpaid bills and sell them to debt collectors, who add harmful notations on your credit reports. Medical bills that go to collections stay on TransUnion, Equifax and Experian credit bureau reports for many years, even if you eventually pay them off, unless you negotiate removal. Those accounts affect your credit as long as they are visible to other creditors.

Effect

Your credit score is based on credit bureau information. Medical collections count as part of your payment history, and payment history accounts for 35 percent of your three-digit credit score, according to the MyFICO scoring company website. Paid medical collections are still negative items on your credit report, because they indicate you previously neglected a bill to the point of having it charged off.

Time Line

Medical bills are unsecured debts, which typically get charged off and sold to collection firms after about 180 days for non-payment, according to MSN Money writer Liz Pulliam Weston. The Federal Trade Commission (FTC) website warns that collection accounts remain on credit reports for seven years. They have the most damaging impact within the first few years, because lenders are most interested in your recent financial performance. A paid medical collection loses most of its negative effect in the last years before TransUnion, Experian and Equifax erase it.

Removal

Medical collection companies purchase unpaid doctor, hospital and ambulance bills for much less than their face value. These firms profit by getting debtors to pay as much as possible, so you have negotiating power before making your payment. You might offer a discounted lump sum to be accepted as full settlement and require the collector to remove the bill from your credit reports as part of the agreement. You should obtain written confirmation of the agreement prior to payment, advises Bankrate debt adviser Steve Bucci. The paid medical collection account loses all its influence once it disappears from your records.

Considerations

You may be able to erase paid medical collection accounts from your TransUnion, Experian and Equifax records if the firm made any mistakes in reporting the data. Search even for small errors, such as a wrong date or an amount that is a few dollars off. If you detect errors, dispute the collection account with all three credit bureaus, because they gather and report data separately. They must stop reporting the account if the collection agency does not verify the information. The Divorcenet website explains the bureaus sometimes drop disputed data without investigating it, or collectors may simply disregard the request for verification. The account loses its impact if it is erased because of the dispute.

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Do Bad Checks Show Up on a Credit Report?

On a positive note, a bad check probably won't show up on your credit report, but can become a far more serious problem -- maybe even resulting in criminal charges. Whether or not a check shows up on your credit report might be immaterial, because it definitely affects your ability to open a bank account. Bank accounts are often needed to start a credit account.

Identification

The credit reporting agencies do not track banking data, such as writing bad checks, according to Martha White of Wallet Pop in "Six Money Mistakes That Won't Hurt Your Credit Score." Only when the creditor initiates litigation can it appear on a credit report, because the court might award a judgment. Judgments appear on your credit report; the creditor can sell the judgment to a collection agency, which also appears on your credit report. In either case, a negative account is a huge drain on a credit score.

Banking History

The banking industry keeps track of check writing history through the ChexSystem. Some reporting agencies specialize in banking history too. Most banks run a report through the ChexSystem before opening an account for someone. A single bounced check is often all a bank needs to know to reject an application. Credit cards and installment loans often require a bank account as a condition of approval. If bounced checks prevent you from owning at least one account, you might not receive any credit in the future.

Preventing Bounced Checks

Always keep track of the balance on your bank account. Most banks offer online checking for this reason alone. Also, consider applying for overdraft protection or linking accounts. Overdraft protection usually requires a credit check, which dings your score a little bit, but it is probably worth the short-term hit if it prevents a bank from sending an overdue balance to a collection agency. In some cases where the attorney general of the state proves a case, you can go to jail for writing bad checks.

Tip

If you become a victim of check theft, review your credit report and warn the bank about potential fraudulent charges. A thief who steals checks might have stolen other items that contain your personal information and could be used to open credit accounts. Any new fraudulent accounts likely appear on your credit report eventually -- probably within the first billing cycle.

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How to Repair Your Credit in a Short Time

A credit score can help or hurt you when you apply for loans or a job. Cleaning up your credit is an excellent way to help raise your credit score. This can be done quickly with a few easy steps. Also, some long-range planning can help raise your score in the long run. It takes 45 to 60 days to see any results from changes made on a credit report.

Instructions

1

Get credit reports from all three major credit bureaus (Experian, Equifax and TransUnion) for both you and your spouse. Check all line items to see if there are any errors. Report any errors online by selecting the reason for the error next to the line item on each online report.

2

Pay off any collections, liens or judgments. Negative items will affect your credit less harshly if paid in full.

3

Look at your credit card balances. Pay down your balances to less than 30% of the limit. This will help raise your score as well.

4

Follow up on any changes with your credit report. Make sure errors were removed. The credit bureaus have 30 days to respond to your request. Provide proof of payment, if needed, to ensure that paid collections, liens and judgments show as paid in full.

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Ways to Build Credit History

The length of your credit history impacts your credit score and, in turn, your ability to get approval for low-interest loans and credit cards. This makes building a credit history early a crucial part of your future financial stability. Unfortunately, lenders and creditors are often hesitant to grant credit to individuals with no previous credit history. There are ways, however, for you to build credit even if you lack any current credit information.

Authorized User Account

A friend or family member with a credit card in good standing can add your name to the account as an authorized user. Your lack of a credit history does not affect your ability to become an authorized user. This is because the primary cardholder -- not you -- has responsibility for making the monthly payments. As an authorized user, you will receive your own credit card connected to the account, and the credit card company will report the account, along with the primary cardholder's payment history, to the credit bureaus. Provided the cardholder makes timely payments, becoming an authorized user lets you build a positive credit history.

Secured Credit Card

Companies typically market secured credit cards to high-risk individuals and those with a tarnished credit history. Consumers with no credit history, however, can also take advantage of these accounts. If approved for a secured credit card, you must make a deposit to the credit card company that will serve as your spending limit. While secured cards do not offer the best interest rates and often come with additional fees, as long as you make regular payments on your account and the company reports your account to the credit bureaus, a secured credit card serves as a viable method for building a credit history.

Student Credit Cards

If you are a college student, consider applying for an unsecured student credit card you see advertised on campus. Unlike secured credit cards, unsecured credit card companies do not require a deposit. According to MSN Money, these accounts are available to students who lack a credit history because card companies know parents often manage college students' debts. This makes extending unsecured credit to students a lower risk than to individuals not enrolled in school.

Co-signed Loans

Like credit cards, loans you apply for also appear on your credit report. While many lenders hesitate to loan money to individuals without a credit history, asking a loved one with good credit to co-sign your loan makes you a much lower lending risk. By co-signing, your loved one accepts responsibility for the payments should you fail to adhere to the agreement. Having a co-signer makes the loan a lower risk for the bank, but a high risk for the co-signer. Because your co-signer is responsible for paying off your debt should you default, it is crucial that you make timely payments to build a positive credit history and preserve the co-signer's good credit rating.

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How to Read Your Credit Report Rating

The information contained in your credit report is critical because it establishes your creditworthiness to potential lenders. You should periodically review it for accuracy -- but that may be easier said than done considering the volume of information reported, not to mention that it can be a confusing array of codes and numbers that may be presented and formatted differently, depending on the reporting agency.

Instructions

Preparation

1

Review the format. All credit reporting agencies uniformly present some information. For example, personal information like your name, address, date of birth and employment history will likely appear at or near the top of the report. However, depending on the agency from which you obtain the report, the format used to present your credit history -- the information that determines your credit rating -- can vary from one reporting agency to the next. Scan your credit report to gain an understanding of its format, as well as the manner in which information is presented.

2

Identify complex reporting elements. Your credit report may use alpha and numeric codes, rather than easily understandable words, for some information. This can be especially true for information that pertains to your payment patterns and use of credit. Additionally, some of the codes -- as well as the scope of the information reported -- can vary by credit reporting agency. Scan your credit report to determine and note the information that is presented in code or that you otherwise cannot understand.

3

Have the information key readily available as you scrutinize the details in your credit report. To help you understand the various codes and information fields on your report, it should also contain a glossary of the terminology and coded data; however, the location within your credit report of these terms and codes can also vary by reporting agency.

Implementation

4

Review creditors. The names of the creditors reporting your information should be listed. This information may also be titled "trade lines" or "account name." Your account number with each creditor may also appear in or near this section.

5

Check account ownership. This information identifies ownership of the account. It may also be titled "ECOA" because it refers to the Equal Credit Opportunity Act, which makes it illegal for creditors to discriminate based on your marital status, gender, age, whether you receive public assistance and other factors. Ownership may be spelled out -- for example, "individual" -- or may be reported using one of nine possible alphabetical codes: A -- authorized user, C -- joint account, I -- individual account, M -- you are the account owner, but the cosigner is responsible if you default, P -- shared account that cannot be distinguished from either A or C, S -- you're the cosigner and are responsible if the owner defaults, T -- your relationship with the account has been terminated, U -- undesignated, X -- account owner is deceased.

6

Review specific activities. Your borrowing and repayment behaviors are important determinants of your overall credit rating. Among the information you should carefully scrutinize and review for accuracy: Types of accounts: This identifies the nature of the credit. For example, installment, revolving and mortgage. Date opened: This is the month and year in which you opened the account. Date verified: This is the date the account was last updated. Last activity: This is the last date on which your account had activity and could be the date your last payment was processed or the date of the last charge on the account. Manner of payment: This indicates whether your payments are current or the extent to which they are delinquent. High credit: This could be either your credit limit with the reporting creditor or the largest balance you've carried with that creditor.

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Can a Landlord Put a Nonpayment of Rent on Your Credit Report?

Consumers may be relieved to know that landlords usually cannot report rental payment history to a credit bureau, but unpaid rent can still appear on a credit history. A common way for landlords to collect rent and have the debt appear on your credit history is to sell it to a collection agency or sue you. Some credit agencies may find out about nonpayment of rent via a third party.

Identification

Landlords often turn over unpaid rent balances to debt collectors because they may not have the time or resources to pursue the debt in court. Another way that landlords try to collect unpaid rent is by obtaining an eviction order and civil judgment. Either a collection account or civil judgment damages your credit rating, sometimes by more than 100 points.

Rental Payment History Reporting

In 2011, Experian acquired one of the largest rental history reporting companies in the U.S. -- RentBureau -- which means millions of rental payment histories now affect consumer credit ratings. However, it is only Experian that reports rental data, and creditors usually pull reports from all three major consumer credit reporting companies. Experian won't report missed payments in 2011 but will report delinquencies. Starting in 2012, any delinquency or nonpayment reported by RentBureau will appear on Experian credit reports.

Tenant Screening

Although nonpayment of rent frequently appears on a credit report, landlords still often use tenant screening companies. Tenant screening companies collect data on missed payments and public eviction records. Even if a landlord does not report to a tenant screening company, nonpayment of rent can still hurt you. For example, your previous landlord may give you a bad reference to future apartment complexes.

Tip

Talk to your landlord about repaying your rent debt. Most landlords will work with you on a payment agreement to avoid paying a collection agency to recover the debt or spend money on a lawsuit. You might, for instance, offer to spread payment on the debt over the next couple of months. If you are still on the lease, you might ask for a reprieve from rent for a month and then pay double after the next month.

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How to Erase Negative Credit

Erase negative credit information on your credit reports by contesting the accuracy of the information through a disputes process. Federal law gives you the right to challenge anything on your reports, and it is up to the credit bureaus to confirm the accuracy of the information. By law, the bureaus must correct any negative information or remove information that cannot be confirmed.

Instructions

1

Obtain your credit reports for free from the website annualcreditreport.com. Order by phone by dialing 877-322-8228. The three major credit bureaus--TransUnion, Equifax and Experian--established the website to provide free reports under the guidelines of the Fair Credit Reporting Act. You're entitled to one free report every 12 months from each of the bureaus.

2

Check your reports for negative information you would like to challenge. Then visit the websites for the credit bureaus to challenge the information. Look for a "Dispute Report" or similar button on the website. Click on that to begin your dispute. You can challenge the negative information for a variety of reasons. For example, an account listed on your report may not be yours, or you can declare that you never paid the account late or that the listed balance is incorrect. You can also put your dispute in writing and send it by standard mail to the credit bureaus. Be sure to include your contact information including full name, telephone number, and your Social Security number.

Equifax
P.O. Box 740241
Atlanta, GA 30374-0241
800-685-1111.

Experian
P.O. Box 2104
Allen, TX 75013
888-397-3742

TransUnion
P.O. Box 1000
Chester, PA 19022
800-916-8800.

3

Wait for the credit bureaus to contact you with their findings. You will be contacted by email or standard mail. By law, the bureaus have 30 days to investigate, during which time they will contact your creditors to confirm the information. Sometimes creditors fail to respond to the bureaus before the deadline, resulting in the negative information being dropped from your reports.

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What Are the Causes of a Low Credit Score?

Your credit score is a mathematical algorithm that takes certain factors into account when measuring risk. Knowing how your financial history accounts for this score can help you avoid the consequences of poor, often irreversible, credit.

Payment History (35 Percent)

Payment history is how you pay your bills. And not just credit cards, but mortgages and loans as well. Late payments, not paying at all, or having an account sent to third-party debt collectors are reported to the credit bureaus and drive your score down fast.

Credit Utilization (30 Percent)

This is the ratio of your current debt to your credit limit. A high credit balance raises credit utilization (bad) and paying off debt lowers utilization (good). Maxing out (100 percent utilization) and closing credit cards that have active balances can hurt your credit.

Length of Credit History (15 Percent)

The longer your credit history is, the better. An older credit history implies that you pay your bills, which improves your credit.

Types of Credit Used (10 Percent) and Credit Inquiries (10 Percent)

As of 2009, you can earn points for successfully managing different types of credit, such as installment, revolving (credit card), and consumer finances. However, multiple inquiries for a new loan or line of credit can lower your score.

Other Things That Hurt Your Score

When a creditor is forced to take legal action against you (judgment), write off your debt as a loss (charge-off), or if you file for bankruptcy, your score could be ruined for years.

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Credit Score Improvement Tricks

To improve you credit score, you need to understand how it is calculated. The most commonly used credit score, the FICO score, is calculated using an algorithm designed by the Fair Isaac Corporation. The score takes into consideration your payment history, length of credit, amount you owe, how much credit you have recently applied for and the types of credit you use. Having a good credit score can help you get loans at lower interest rates, saving you thousands.

Check Your Credit History

The Federal Reserve's first tip for improving your credit score is to order a copy of your credit history. Federal law allows you to get a free copy of your history once per year (See Resources). Dispute any items that are incorrect such as incorrect accounts, lower credit limits or items that are more than seven years old, 10 years in the case of a bankruptcy. Mail copies of any documentation you have to support your claim. The credit bureau will investigate and if the creditor does not refute your claim, either because you are correct or because it is an old account that is not worth the effort, the item will be corrected.

Pay Down Balances

The amount of money you owe, particularly on credit cards, and the percentage of your available credit that you are using accounts for 30 percent of your credit score. You should try to use less than 15 percent of your available credit. If you cannot pay down your credit cards, Bankrate.com advises spreading your balances over several cards so you use a smaller percentage of the credit limit on each card rather than having one card maxed out. Paying down your credit cards will not be as effective if you close the accounts after you pay them off because you reduce your available credit. For example, if you owe $5,000 on two cards that have a total credit limit of $6,000 and you pay off $2,000 and close one account with a credit line of $3,000, you are left with a total credit limit if $3,000 and total debt of $3,000 so you are using 100 percent of your available credit. If you left the card open, even though you were not using it, you would only using 50 percent of your credit limit and that unused card would still be reporting that your payments were current on your credit history.

Pay Your Bills as Agreed

Payment history is the most heavily weighted category in your credit score at 35 percent. If you have late accounts, get them current as quickly as possible and pay your bills on time in the future. Even if you cannot pay your bill in full, if you make the minimum payment your account will still be reported as current because you agreed to pay at least the minimum payment and you fulfilled that obligation. Your most recent payment history is counted more than your credit history several years ago so you can start improving your score quickly.

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How to Protest Items on Credit Report

Items on your credit report can stick around and cause problems for many years. If information on your credit report is inaccurate, you can file a protest and have it removed. According to the U.S. Fair Credit Reporting Act, any false or inaccurate information must be corrected or removed within 30 days. If a creditor does not respond to the challenge within that time frame, it is removed as well.

Instructions

1

Obtain a current copy of your credit report on the Internet or by submitting the request in writing. According to federal law, consumers can obtain a free copy of their credit report once each year.

2

Review all of the entries on your credit report and make notes about any false or inaccurate items.

3

Create a login online with each credit reporting agency and use the electronic dispute system to log general protests against any entry on the report. Alternatively, write a dispute letter to the credit reporting agency explaining the inaccuracies and send it to them via regular postal mail.

4

Repeat the electronic or written dispute process for each credit agency that lists inaccurate information on your credit report.

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Credit Score Improvement Guide

Credit scores are a numerical assessment of a person's creditworthiness. The scores are produced by three major credit agencies: Experian, Equifax and TransUnion. All three work from a basic system known as FICO, but interpret this in a different way and use different data, meaning each individual can have three different credit scores.

Check Accuracy

Under the Fair Credit Reporting Act, consumers have the right to get a free copy of their credit reports from the three major agencies once a year. Consumers also have the right to discover their exact credit score with an agency at any time, but can be charged a reasonable fee for this; the Federal Trade Commission suggests this should be around $8. Reports and scores can be ordered through a central website, www.annualcreditreport.com. Consumers who find an error should contact both the credit agency and the relevant credit issuer (such as a bank or credit card issuer) to request a correction.

Pay Bills On Time

Payment history makes up around 35 percent of a credit score according to Fair Isaac Corporation, which developed the FICO system. This takes into account both missed payments and any resulting court action. The score takes into account the amounts involved, but puts less weighting on older incidents.

Avoid Too Many Applications

Recent application history contributes about 10 percent of the total score. This means it is important to think carefully before applying for credit and, if possible, to leave a gap after an unsuccessful application. Not doing so can create a cycle of failed applications worsening a score and making another failed application more likely.

Check Usage Ratios

Generally the higher the proportion of your total credit limit that you use, the lower your credit score. This factor makes up about 30 percent of the total score. One way to do this is to pay off as much of your more affordable existing loans or balances as possible -- for example paying down a credit card before applying for a mortgage. Another method is successfully applying for an increase on an existing credit limit, which inherently makes the balance become a smaller proportion.

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Does Transferring Balances Affect Credit Scores?

Transferring balances from one credit card to another can help save money on interest, especially if you take advantage of 0 percent interest offers on new credit cards. Because the process of transferring balances sometimes involves new credit cards and does change your credit utilization on each card, it can affect your credit score.

Credit Utilization

The main way in which balance transfers affect your credit score is through credit utilization. Your utilization ratio is the balance on each card divided by that card's limit. The lower the ratio, the higher your credit score will be. Your credit score also considers your overall utilization ratio, which you calculate by adding up all of your credit card balances and dividing that by the sum of all your credit lines.

Example of Utilization

Say you have three credit cards, each with a limit of $5,000 and a balance of $3,000. Your utilization ratio for each card is 60 percent and your overall utilization ratio is also 60 percent. These ratios both hurt your credit score. If you get a new card with a limit of $10,000 and transfer your $9,000 of balances to it, that card will have a utilization ratio of 90 percent. This very high ratio will hurt your score. However, if you keep your other three credit cards open, their 0 percent utilization ratios will help your score, as will your overall utilization ratio of 36 percent instead of the 60 percent you had before.

Payment History

If you transfer all your balances to one credit card, this can help you stay on top of your monthly payments rather than letting one of the many payments slip through the cracks. Plus, your credit card will probably have a low interest rate that will make it easier for you to afford your monthly payments and reduce your balance. If you make your monthly payments on time each month, this will help your credit score over time by building a consistent payment history.

New Credit

Transferring balances among cards you already have will not affect your credit score as much as getting a new card and transferring balances to that one. When you get a new credit card, your credit report shows a credit inquiry, which hurts your score a little. The new account also reduces your score for a while, both in the portion of your score that considers new credit and the portion that considers your length of credit history and average account age.

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Can I Get a Bankruptcy Removed From My Credit Report?

The credit reporting bureaus list a bankruptcy on your credit file for 10 years, so it might be tempting to try to remove it before then. It is possible to remove a bankruptcy from your credit file, but only if the agencies list it in error. Some credit repair companies claim they can remove a bankruptcy, but they sometimes use illegal methods.

Identification

Once the bankruptcy has been on your credit report for 10 years, the credit bureaus automatically delete it from your file. If it is still listed after that period, you should file a dispute. It also is possible for another party's bankruptcy to be listed on your credit record by mistake. Again, you should file a dispute with the agency, obligating the agency to verify the bankruptcy data. You may have to pursue legal action if the agency continues to report a bankruptcy that does not belong to you.

Illegal Tactics

A credit repair clinic can help you with the dispute process to remove the bankruptcy, but be wary of companies that use illegal tactics. According to the Nolo website, common illegal methods include using the Social Security number of a dead person to apply for credit or breaking into the credit agency warehouse and switching files.

Considerations

Even if you remove a bankruptcy from your record, it might not improve your credit score much. If you filed for bankruptcy, you probably already had poor credit and numerous negative items on your report. Going through bankruptcy sometimes makes you more attractive to lenders, because it may discharge your debts or force a restructuring of debt payments to fit your income. If you manage your current debts properly, your credit rating could begin to improve within two years of your bankruptcy.

Tip

A consumer can add a 100-word explanation to any account on his credit report. You can use this space to explain why you had to declare bankruptcy, which a lender may take into consideration when assessing a loan application. For example, if you had a sudden medical disaster that forced you into bankruptcy, that information could affect a lender's determination of your creditworthiness.

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How to Access an Annual Credit Report

Checking your credit report at least once a year is one of the best ways to protect your credit rating and identity. Creditors occasionally make mistakes, and if they mistakenly report negative information on your profile, this can stop you from getting new lines of credit. Annual Credit Report provides each consumer one free report a year, and there are three ways to access your free report.

Instructions

1

Get a free report online. Go to the official website for Annual Credit Report and submit your personal information to gain immediate access to your free report. This agency provides one report from each of the three major credit bureaus.

2

Call the toll-free number to request your annual report. Dial 877-322-8228 and speak with a customer service representative for Annual Credit Report. State your reason for calling, and then provide the representative with the necessary information to verify your identity.

3

Submit your request for a free report using the postal service. Visit the Federal Trade Commission's website and download a credit report request form. Complete the form and then mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

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Can Having Multiple Addreses Affect Your Credit Score?

Along with payment information, creditors also report your address to the credit bureaus. A history of your addresses appears on your credit report. If your report contains multiple addresses, it's important to understand how this information affects your credit score.

Identification

Your credit score is a three-digit numeral. An algorithm calculates the score based upon the information contained within your credit report.

Considerations

A FICO credit score looks at five variables: how well you pay your bills, how much debt you have, the length of your credit history, the types of credit you have and how much new credit you've applied for. Personal information, such as your address, does not affect your credit score.

Misconceptions

The purpose of a credit score is to measure credit risks. A FICO credit score reflects behavior concerning your credit accounts. It does not factor in personal information, age, ethnicity, salary, where you live, the interest rate charged on a credit account nor any other data that is not predictive of credit risk.

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Fair Credit Reporting Act Disclosure

An FCRA disclosure is a document signed by a job applicant giving a potential employer permission to access her record with one or more credit agencies. Employers cannot access such records without such a disclosure, but can normally require such a disclosure as part of the application process. If the employer decides not to give the applicant the job as a direct result of the contents of the record, the employee must be given a copy of the record.

FCRA

The Fair Credit Reporting Act is the main legislation in the US governing the activities of credit report agencies and those who make use of them. It gives consumers the right to access their credit reports, the right to correct or dispute information, and a limitation of which organizations can access a report and under what circumstances.

Employers

While potential lenders have the automatic right to access a credit report, potential employers can only access a report with the express permission of the job applicant. This is obtained through a document known as an FCRA disclosure. Although the precise wording is up to the employer, the request must include certain key points informing the applicant that a credit report may be accessed; that the applicant has the right to find out which agency was consulted for the report; and whether or not the employer retains the right to access reports during any subsequent employment.

Adverse Action

An employer may take adverse action based of the information in a credit report by denying somebody a job or passing them over for a promotion. Before doing this, the employer must provide the employee with a copy of the relevant credit report plus a summary of the employee's rights under the FCRA.

Scope

In most cases, any potential employer can require consent to access an applicant's credit report as part of the hiring process. However, as of 2011, several states have started limiting this to positions where a credit record was specifically relevant, such as a job involving financial responsibility. Employers should take care to check with their state's law before asking for consent.

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How to Repair a Credit Record

Outstanding debts, bankruptcy and late payments have a huge impact on your credit history. A good credit record takes the hassle out of applying for loans. People with good credit can usually walk into a lender's office and easily qualify for a loan. But if you have a negative credit report, your finance options are limited and you may get stuck with a bad loan.

Instructions

1

Figure out what needs repairing. Knowing where your credit stands is key to repairing a damaged credit record. Pull your credit report from Annual Credit Report.com and look for derogatory entries such as late payments or collection accounts.

2

Keep accounts out of collections. Creditors will send unpaid accounts to collections, which reduces your credit rating. Prevent collection accounts and judgments by speaking with creditors and reworking payments.

3

Stay below your credit limit. Repair your credit record and low credit rating by paying down your debt. Increase the amount of your payments and quit using credit to help eliminate outstanding balances. Credit card balances should not exceed 30 percent of your limit.

4

Add positive information to your credit report. Pay off collections and charge-offs, and always send in timely payments to gradually increase your credit score. Creditors and lenders will report your debts as "paid" or "satisfied."

5

Get back on track with credit counseling. If overwhelmed by debt and credit problems and creditors are unwilling to work with you, solicit the help of professional credit counselors to help get your credit and finances on track. Pick a nonprofit agency to avoid fees.

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Is 808 a Good Credit Score?

Most people have a general idea of what a credit score is, but they don't specifically know what the number means. They don't know the range or what constitutes a "good" or "excellent" credit score. They might not even realize the advantages that a high score can get them or the ways in which a low score can impair their ability to get credit. If you know the ranges and what they mean, you'll know whether 808, or any other number, is a good credit score.

Range

FICO credit scores start at a high of 850 and can run all the way down to 300. The higher your score, the better your credit rating. This means that 808 would be considered an excellent credit score because it is so close to the top of the scale.

Benefits

An 808 credit score is high enough to earn special benefits. You won't have any problems opening new credit card accounts or getting loans. You'll be able to buy anything from furniture to a car to a house without any credit rating issues. You'll also qualify for the lowest interest rates. According to FICO, with an 808 credit score, you'll pay about 1 percent less in interest than someone with a 659.

Factors

Many factors go into achieving an 808 credit score. An excellent score requires a good payment history, with no late payments on your loans and other accounts. FICO says you must also have reasonable account balances as compared to your income. You must have long-term accounts that are in good standing and be using a good balance of account types, including both credit cards and installment accounts such as car or furniture loans.

Frequency

According to Tamara Holmes of Bankrate, only 13 percent of U.S. residents have a credit score exceeding 800. If your score is 808, you fall into this elite percentage of people with a top-tier score. The majority of people have a score between 799 and 750, with 27 percent of the population falling into that category. A score in the high 700s is still good.

Warning

Your credit score changes continually, based on your financial activities. If you have an 808 credit score, you'll need to maintain an on-time payment history and handle your accounts responsibly to maintain it. If you miss payments, open too many accounts or even make too many applications in a short period of time, your 808 credit score will go down.

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The Effect of Paid on a Credit Score

Collection accounts, which are unpaid bills that creditors referr to third-party recovery or collection agencies, have significant affects on your credit profile. These items stay on your credit report for seven years, damaging your chances of getting credit cards or loans. In addition, collection accounts reduce your credit score -- the three-digit number firms use when deciding whether to approve you for credit. You should consider this score when paying off collection accounts.

Background

When you pay off a collection account, it does not immediately drop off your credit report. Instead, your creditor will report the balance as "paid" to the credit bureaus, which will add "paid" notations stating that you fulfilled your obligations to those creditors. Although you no longer owe the balance, the paid-off collection account will stay on your credit report until its scheduled expiration date -- seven years after it first appeared on your report.

Your FICO Score Won't Rise

Paying off collection accounts will not raise your credit score, according to an article from the Fair Isaac Corp., the Minnesota-based company that developed the FICO scoring programs that the three major consumer bureaus use to calculate credit ratings. This is because the FICO algorithm measures two things on collection accounts: the presence of such an account on your credit report and the time it first appeared on your credit record.

Your FICO Score Won't Drop, Either

Although some people believe paying off an old collection account will cause your credit score to plunge, Fair Isaac states that is not the case. This is because the FICO program does not consider a collection account's payment status, so paying off an old past-due bill will not lower your credit rating.

Considerations

Even though paying off an collection account won't raise your credit score, it is still a wise decision. This is because, in addition to your FICO score, many lenders and employers look at the information on your credit report. Companies view paid-off collection accounts as better than those left unpaid, and may be more likely to give you access to credit if you have taken care of your debt obligations. In addition, paying old bills will get collection agents to stop contacting you.

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What Is the Average Unemployment Compensation in the State of Pennsylvania?

In the state of Pennsylvania, the Department of Labor and Industry administers the Pennsylvania Unemployment Compensation Law. Eligible claimants can receive unemployment regular unemployment benefits for up to 26 weeks. For new claims filed after January 2, 2011, the minimum weekly benefit allowance in Pennsylvania is $35 per week. The maximum benefit allowance is $573 weekly for claims filed after January 2, 2011.

Monetary Eligibility

Pennsylvania uses a base year of employment to calculate monetary eligibility. You must have earned a sufficient amount of wages within the first four of five calendar quarters before the date you apply for benefits. If eligible, the Pennsylvania Unemployment Compensation Law requires that the Department of Labor and Industry use the highest wage quarter to determine benefit potential.

Weekly Minimum and Maximum Benefits

To receive the maximum weekly benefit of $573, you must have earned at least $14,263 in wages during her highest quarterly wage period during the base period of employment. If you earned between $800 and $812 during the quarter with the highest wages, you will receive the minimum $35 weekly payment.

Partial Unemployment

Pennsylvania allows partially unemployed workers to continue receiving reduced weekly benefits if their work is limited to part-time hours and their wages are less than their weekly benefits. If your part-time work income equals or exceeds your weekly benefit amount, Pennsylvania does not allow you to receive benefits for those weeks. If your part-time earnings are less than your weekly benefits, Pennsylvania uses a reduction partial benefit formula. In this case, if you earn less than 40 percent of your benefits through part-time work, Pennsylvania will not reduce your benefits. If you earn more than the 40 percent limit, Pennsylvania reduces your benefits dollar-for-dollar for the amount exceeding 40 percent.

Dependency Allowance

Eligible claimants can receive up to $8 per week for dependents. Pennsylvania law allows eligible spouses to receive $5 per week as spousal dependency benefits and $3 per week for each dependent child. To receive the maximum allowance, you must live with your dependent spouse and be primarily or solely responsible for supporting him. A dependent child is a child under 18 or over 18 and disabled. If you are unmarried, you can claim each of her children as dependents, limited to $8 per week.

Considerations

Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.

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How Does Repossession Affect Your Credit?

Missing as few as two payments in a row could give a lender the legal right to take back property -- called repossession -- and probably severely damage your credit rating in the process. The importance of a repossession in determining your credit ratings diminishes over time, and you can get some of those points back by focusing on handling your other loans responsibly.

Impact

Negative items on your report that show a complete inability to pay, such as foreclosure and repossession, but fall short of bankruptcy lower your credit score by 85 to 160 points, according to CNN. The impact on your credit score, however, usually is less significant than the fact that you have a repossession on your report. Lenders view repossession as an egregious lack of responsibility, especially if the repossession happened recently.

Time Frame

A repossession affects your credit score for seven years, according to Bankrate. The FICO scoring model, however, gives less weight to items as time passes. A repossession has the greatest impact on your credit score during the first year or two after the incident and the least impact in year seven.

Voluntary Repossession

The credit scoring formula does not consider whether you give up your property voluntarily or the lender forces a repossession. Voluntary repossession only benefits you financially, because lower administrative fees are charged to get the property back. Keep in mind that you can still have an outstanding balance after a repossession if the car does not sell for the amount left on the loan. If you cannot pay the balance, the lender can obtain a public judgment, which further damages your credit.

Tip

Lenders might be willing to let you defer payments for a few months if you explain your hardship, such as losing a job or having medical bills. You could try to work out a revised payment plan based on your income. If the repossession has already occurred, you may try to work on other areas of your credit report to mitigate the damage. You should pay your other debt bills on time and try to eliminate existing credit card debt.

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Tips for Improving Your Credit Score

Whether you are just starting to establish credit or trying to recover from financial problems, improving your credit score is a worthwhile endeavor. The good news is that there is no magic involved. Credit scores measure your risk as a borrower, and if you reduce that risk your credit score will improve. If you have the self-discipline to manage your financial affairs responsibly, all you need is planning, knowledge of how credit ratings work and patience.

Short-Term Improvements

The first step to improving your credit score is to know what is on the credit histories maintained by the major credit bureaus and to make sure the information is accurate. Even the best handling of credit can be ruined by mistakes or false information because your credit score is calculated based on the data in your credit history. You have to pay to see your credit score but not the credit history. Once each year you can get a free copy from each of the credit bureaus from the FTC-authorized provider, Annual Credit Reports (see References). If you find incorrect information on your credit history, you can initiate a dispute or corrective action online at the website of the appropriate credit bureau (Experian.com, Equifax.com or TransUnion.com).

There are a couple of other things you can do in the near term to improve your credit score. One is to refrain from applying for new credit accounts or closing accounts. Doing this occasionally (once or twice a year) doesn't lower a credit score. Frequent changes of this type do because they are seen as a sign of poor money management. The second thing is to eliminate excess available credit. For example, if you have a credit card with a balance of $500 and a credit line of $5,000, ask the lender to lower your credit limit to $1,500. Having less available credit that you can access easily makes you a better risk and so improves your credit rating.

Managing Credit

Long-term management of credit is the real key to improving your credit score. By far, the most important step is to make sure you are current on all your monthly bills and continue to pay them on time. In the FICO credit scoring system used by all three credit bureaus, this accounts for fully 35 percent of the total score. The other major priority is to reduce your total debt if it is excessive, especially unsecured debt such as credit card balances and personal loans (your total debt counts for another 30 percent of the FICO score).

If you are having trouble making payments, consider a debt consolidation loan. This can not only help you stay current on your bills, but it can make it easier to reduce your total outstanding debt. It will take up to two years to see a significant improvement in your credit score because the length of time you make timely payments is a major factor. Effectively and consistently managing the use of credit over time is absolutely essential to having a good credit score. Good credit behavior over time makes you a better risk than anything else you can do.

There are some items that will seriously hurt a credit score and by law must stay on your record for years, so avoiding them is crucial. These include tax liens or judgments against you for unpaid debt, foreclosure and defaults on debt. Bankruptcy has a similar damaging effect but is treated somewhat differently.

Credit Repair

If your credit score is already low or you have declared bankruptcy, you will need a strategy of credit repair in addition to taking the steps discussed above. First, keep in mind that a credit bureau must have data to calculate a credit score. If you don't still have an active credit account (preferably two or three), you can start the repair process by obtaining a secured credit card. These cards require that you deposit funds with the card issuer to secure the money you borrow. As you make timely payments, the credit limit will be increased. More important, you will be establishing a record of responsible use of credit.

If you have a bankruptcy on your record, don't be discouraged. Within the FICO scoring system, bankruptcies are placed into a separate category. The bankruptcy will be there for years and initially will result in a very low credit score. However, over time your score is primarily calculated based on your use of credit after the bankruptcy. What this means is that you can start over. Good credit management can improve your credit score to reasonably good condition within a couple of years.

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Good Credit Rating Tips

One way to maintain a good credit rating is to follow the free advice provided online by major credit-reporting agencies such as Equifax, Experian and TransUnion. These companies maintain credit histories on millions of consumers. Therefore, when a creditor checks your credit rating, the information will likely come from one or all of these agencies.

Bill Payments

According to Experian's website, making bill payments on time is the single most important factor for maintaining a good credit score. In its tips on improving that score, Experian notes that late bill payments and accounts turned over to collection agencies that appear in a credit report have a "major negative impact on a credit score."

Credit Inquiries

Steer clear of offers to apply for new lines of credit that aren't necessary. Your credit score is checked when you apply for new credit cards, and such inquiries show up on your credit report. Creditors may view a large number of recent inquiries on your report as a sign that you need credit because of financial hardship or that you're racking up more debt than you can handle.

Debts

Equifax's personal finance blog notes that the kind of debt you have also can affect your credit rating. Debts from student loans are viewed as an investment in your future, and they can reflect positively on your credit report as long as you're not behind on the payments. Ultimately, investments in such things as education and a home are seen as better debts than those derived from running up credit card balances to pay for extravagances.

Credit Balances

High balances on credit cards will likely reduce your credit rating. TransUnion's website recommends using less than 35 percent of the available credit lines for your credit cards. Therefore, even if you have a credit card with a limit as high as $5,000, you should try to keep the balance you owe on that card below $1,750.

Negative Information

Get copies of your credit reports from Equifax, Experian and TransUnion, and clear up any inaccuracies or outdated information that could lower your credit rating. According to the Fair Credit Reporting Act, credit bureaus can report most negative information for only seven years. After that, such items must be removed from a person's credit file. All three credit agencies' websites tell you how to get copies of your credit reports and dispute inaccurate or outdated information.

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Does Paying a Settlement on a Collection Affect My Credit Score?

Any time an account enters collections or is listed as in collections, your credit score will be impacted. The actual numeric amount of that impact will vary based on the age, type and status of the collections account. While a settled account may impact your score less than one that is in active collections, it is still considered a negative and will potentially damage your score. Having any type of collections accounts on your report may negatively affect your ability to receive credit or raise the fees you'll pay for car and home insurance.

What Is a Settlement

When you have an account in collections, you have several options. You can pay the amount in full, ignore it completely or negotiate a settlement amount. A settlement amount is a figure that both parties agree on. As the debtor, you will pay this amount to the collections agency or creditor. It agrees to accept this amount as payment in full for the account. The account is then listed on your credit report as a "settled" collections account.

Settlements and Scores

A settlement may save you some cash, but it can actually damage your credit score. Two things happen when you pay a settlement: the account re-ages on your credit report, making it seem newer than it may be, and the account lists as a settled collection. Both of these issues can harm your credit. If you settle on an item that is over five years in age, you can actually lower your credit score, since this new activity will re-age the account, and make it look like a new collection. A collection account that is listed as "settled" will likely not improve your score, though a mortgage or auto lender may require you to settle any outstanding accounts before approving a loan.

Negotiating a Settlement

If you decide to negotiate a settlement with a creditor, you need to know the original amount due and what fees have been added. If the account has been purchased by a junk debt buyer, it may have added hundreds or thousands of dollars onto the account amount. Ignore these added fees and offer a settlement based only on the amount you owed the original creditor. Never give a creditor or collections agency access to your checking account; it could take out more money than you agreed to pay.

Pay for Deletion

The best way to pay for a debt and improve your credit score is to pay the collections agency or creditor only if they agree to delete the account from your report entirely. According to financial expert Dave Ramsey, you should always insist that the creditor delete the account from your credit report entirely before you agree to pay it. True deletion is the only way to prevent a collections account, even a settled one, from harming your score.

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Is a FICO Score the Same As a Credit Rating?

Many companies use credit reports to evaluate an individual's creditworthiness. The Fair Isaac Corporation score constitutes an imporatant component of the credit score. The FICO score serves as the credit rating.

Function

The FICO credit rating is a comprehensive score designed to measure someone's likelihood of repaying a loan. A higher FICO score indicates a better credit rating, while a lower FICO score implies a higher credit risk.

Time Frame

The FICO score takes into account an individual's credit activity over several years to determine his creditworthiness. According to the Lendingtree website, it can take years to raise a bad credit rating.

Considerations

Although many companies promise access to credit ratings, most do not provide a true FICO score. Instead, they provide "educational scores," which are rough estimates of a credit rating based on credit reports. Although these scores can give a general idea of a credit rating, they are no substitute for a FICO score, which is the only accepted credit-rating measure.

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Does an Unpaid Dentist Bill Affect Your FICO Score?

In 2010, a Salt Lake City, Utah, resident lost her home due to a 15-year-old unpaid dental bill worth $68. If you have an outstanding dental bill, you will probably not lose your home, but instead destroy your credit rating. Like any other debt, unpaid dental bills can go on a credit report if left ignored.

Identification

An unpaid dentist bill can affect your FICO score if the provider reports it to the credit bureaus or sends it to a collections agency. Once a collections account shows up your report, it will probably lower your score by dozens of points, because it is a seriously negative item -- in vein with other defaults like bankruptcy and repossession. The FICO formula is secret, and the actual impact on a score depends on other items on your credit score.

Should You Pay the Bill?

If the dentist has yet to report your unpaid debt or send it to collections, you might want to pay it off before he takes action. Once a collections account goes on a credit report, it sticks there for seven years unless it was listed in error. Paying a bill in collections does not help your score, but does look better to creditors than leaving it open. The best you can do for your score is pay the amount in full to avoid a settled account.

Paying the Bill

Medical and dental providers generally hope to avoid reporting delinquent bills and dealing with debt collectors. If you cannot pay a bill immediately, try to work a payment plan you can afford. You could borrow money from friends and family, sell an asset such as an extra car or borrow against or cash in a life insurance policy.

The Future

In September 2010, Congress attempted to pass H.R. 3421:Medical Debt Relief Act of 2010 to prevent credit reporting companies from listing paid dental/medical debt on a consumer report. This bill passed in the House of Representatives, but as of January 2011, remains stuck in the Senate.

Tip

It is common in the lending industry, especially among mortgage providers, to ignore medical collections accounts when calculating a FICO score or approving a loan. You should, however, check with the lender to see how he feels about the unpaid bill.

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How to Correct Credit Report Problems

Credit report problems are often the result of irresponsible financial behavior such as paying bills late, spending more than you earn and writing checks without sufficient funds to cover them. In such cases, the only way to correct the situation is to change your financial behavior. Sometimes, however, problems crop up on your credit report through identity theft or because creditors and financial institutions report incorrect information. You have the right to contest any information in your credit report that you believe to be incorrect.

Instructions

1

Write a letter to the credit reporting agency--Equifax, Experian or TransUnion--or to all three agencies, saying that you believe your credit report to be in error. Explain what specific information is erroneous and provide the correct information, including dates and amounts. Provide copies (not originals) of all documents relevant to the disputed entries, such as court records or payment receipts. Request that the agency correct the information on your credit report. These agencies must investigate consumer complaints within 30 days and notify the companies that provided the erroneous information if they determine that your complaint is justified.

2

Write a letter directly to the bank, credit card company or other business that provided the erroneous information. Attach copies of documents relevant to your complaint, such as payment receipts. Call the company or check its website to find the specific address and contact person to direct your correspondence to. If the company does not agree with your claim, it still must provide a copy of your letter along with any information that may negatively affect your credit report. If the company finds that your claim is justified, it cannot resubmit the erroneous information.

3

Send letters via certified mail and keep the receipts. Save copies of all correspondence related to correcting your credit report. If you speak to a representative of a credit agency who promises to make specific changes, ask for her name and write it down, along with the time and date when the exchange occurred. Keep detailed, professional notes documenting every step of your efforts to correct credit report problems, including a log recording the times and dates of all phone calls. This may help a lot if you decide to file a lawsuit and will help you keep up to speed with the status of your case regardless.

4

Check your credit report again after several months to make sure that the reporting agency has corrected mistakes related to complaints that they have upheld, or that they have included documentation verifying the fact that you have disputed information they may have declined to change. If a credit reporting agency fails to make the changes you have successfully requested, hire a lawyer who specializes in credit issues. Use your records detailing your petition process when preparing for your lawsuit.

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What Is an Acceptable Credit Score?

An individual's credit score is based on his history of managing credit and paying debt. Credit scores range from 300 to 850, with higher scores indicating the borrower is less of a credit risk.

Ranges

According to Bankrate, credit scores of at least 660 are considered acceptable by most mortgage brokers. People with scores of 620 to 660 may still get offers of credit, but lenders are wary of the increased credit risk.

Significance

Having an acceptable credit score is crucial for getting new credit. People whose credit scores are not in the acceptable range often have credit applications rejected or have to pay very high interest rates.

Tips

Get into an acceptable credit score range by getting current on all accounts and making payments on time in the future. Some other strategies include paying down credit card debt and making sure credit cards are not maxed out. Ideally each card should be under 30 percent of its limit.

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What Is the Downfall of Bankruptcy?

The decision to file bankruptcy protection is a serious one, and the fallout is often major. A bankruptcy can wipe out all your debts. While this may seem like a practical solution to high debts, it's smart to file bankruptcy as a last resort due to the consequences that follow.

Loss of Possessions

Prior to deciding to eliminate your outstanding balances, a bankruptcy judge will likely review your debts and personal assets to see if there's a way for you to pay your balances, or at least a percentage of them. If you own several real estate properties, vehicles or other items of high value, a judge may dismiss your bankruptcy or work out a deal with your creditors wherein they receive payment after you sell a few of your belongings or personal property.

Impact on Credit Rating

Don't expect to file a bankruptcy and maintain a fair credit score. Because bankruptcies release your debt obligations, lenders and creditors will update your file and make mention of the bankruptcy. The bankruptcy itself will stay on your credit report for the next 10 years. This single entry can destroy your credit rating, and it can take years to reverse the damage.

Approval for Financing

The biggest downfall of a bankruptcy discharge is the inability to acquire new credit accounts. Some sub-prime lenders may finance you after a bankruptcy, but acquiring a prime loan with desirable rates will be tricky. Every lender who checks your credit report for the next 10 years will consider your bankruptcy when approving your application. Rebuilding credit and improving your credit score after a bankruptcy can take the hassle out of getting financing in the future. After a while, some lenders will look past your bankruptcy and focus on your recent credit history.

Considerations

Although you can include all your debts in a bankruptcy filing, it doesn't guarantee the discharge of all your debts. The courts will notify your creditors and lenders of the bankruptcy, and they have the option of coming to your hearing and contesting the discharge of monies owed. Also, you cannot include federal student loans in a bankruptcy discharge. You must continue paying debts not included in your bankruptcy discharge.

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How to Understand a Credit Report Score

When you apply for credit or a loan, the first thing the lender looks at is your credit score. Some employers even look at job applicant's credit scores. Having good credit improves your chances of getting a loan and makes you eligible for higher credit limits and lower interest rates. You are entitled to a free credit report once a year from three major credit reporting agencies: Experian (www.experian.com), Transunion (www.transunion.com), and Equifax (www.equifax.com), which will give you your credit score. What does that number on your credit report mean, and what do lenders think when they see it?

Instructions

1

Find the FICO number on your credit report. This is a three-digit number between 300 and 850. This number rates your credit risk based on your credit and loan repayment data. Experian calls the FICO number "Experian/Fair Isaac," Transunion calls it "Empirica," and Equifax uses "Beacon."

2

Understand that the FICO number offers a quick summary of your credit. A rating over 680 is considered good by lenders, meaning you shouldn't have a problem getting credit cards or car and home loans. Below 680 is considered "subprime," which means that you'll be able to get credit, but you probably will pay higher interest rates.

3

Improve a credit score under 560. With a credit rating this low, you will not be able to get a loan for a home or car, and you will only be able to get credit cards with a security deposit or high fee. Some companies may not employ you.

4

Pay your bills and make your loan payments on time. An important part of your credit score is your payment history. If you pay all of your bills in full on time every month, and you make your school, home, and car loan payments on time, your credit score will increase.

5

Keep your debt at a minimum to increase your credit rating. If a lender thinks you won't be able to make your payments because you're currently paying off too many high credit card balances, your credit rating will decrease.

6

Consider the length of your credit history, the type of credit you have, and how often you apply for credit. A longer credit history can increase your credit score, as well as having different types of credit (for example school loans, credit cards, and retail credit). Applying for credit often, however, can lower your score.

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Does Buying a Car and Paying in Cash Fully Increase a Credit Score?

It may seem like somebody who can pay for a car with cash is good at managing money and should have a high credit score. However, cash payments do not affect a person's credit score.

Credit Report

Lenders report loan amounts, credit lines and payment history information to credit scoring bureaus. This information on an individual's credit report can be used to compute a credit score, which estimates how much of a risk it is to lend to that individual. Paying for a purchase in cash never affects a credit score because the payment is not included on the purchaser's credit report.

Benefits

Although buying a car with cash does not increase your credit score, it saves you money because you do not have to pay interest on the purchase as you would with a car loan. In addition, reselling the car in the future is simpler because you hold the title instead of it being with the lender.

Considerations

If you are looking to build credit, consider getting an auto loan, even if you have enough money to pay for the car in cash. Building a positive payment history on the loan and managing more types of credit will increase your credit score in the long run.

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Credit Report Questions and Information

Many people do not understand the importance of their credit report and how much it impacts their financial life. Everything from financing a car to renting an apartment requires some kind of credit check. Fortunately, basic questions regarding your credit report have straightforward answers that can help you improve your score.

How Often Can I Get My Free Credit Report?

You are entitled to a copy of your credit report from each reporting agency---TransUnion, Experian and Equifax---once every 12 months according to AnnualCreditReport.com, the official website endorsed by the Federal Trade Commission for your annual credit report. You may receive the credit report from each agency either all at once or spread over the year if you wish to monitor your report for accuracy and improvements.

Why Should I Check My Credit Report?

You should check your credit report each year to make sure that the information is truthful and accurate, because it impacts all of your major financial opportunities and obligations. Not only are mortgage lenders and credit card companies checking your credit report and score to determine your eligibility for a loan or card, but now employers are also checking your credit report as a determination of your financial situation and trustworthiness. If you find inaccurate information on your credit report, immediately contact the credit reporting agency in writing noting the inaccuracies and requesting an investigation.

What Information is On My Credit Report?

Your credit report contains a list of all debt accounts, including the date you opened the account and any late or missed payments for the past seven years. The credit report also notes if you are current with all of your debts as well. Bankruptcies are also listed but drop off after seven to 10 years, depending on the type of filing. All of this information is used by creditors, lenders, insurance companies and even employers to determine your financial health and trustworthiness.

Where is My Credit Score on My Credit Report?

Your credit report does not contain your credit score, a three-digit number that is a quick and easy indicator of your financial health as far as creditors and lenders are concerned. It is calculated using the information on your credit report including length of credit history, debt used to debt available ratio and frequency of delinquent payments. The AnnualCreditReport.com website says you may purchase access to your credit score through any of the credit reporting agencies.

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What Credit Score Is Needed to Get a Home Loan?

Mortgage lenders set their own individual standards for approving home loans, but generally you will need a credit score of at least 500 to be approved for a loan.

Types

Loans insured by the Federal Housing Administration are a favorite of borrowers with low credit scores. The FHA insures the loan, removing much of the risk for lenders. The Washington Post reported in 2010 that the FHA was insuring loans with credit scores as low as 500.

Considerations

Generally, borrowers with the highest credit scores receive the lowest interest rates. The credit website BCS Alliance says a credit score of around 660 is generally needed for a non-FHA loan, with scores of 700-plus necessary for the lowest rates.

Significance

Higher interest rates caused by low credit scores can cost you thousands of dollars in finance charges over the life of the loan. BCS Alliance says an interest rate that is just two points higher than the next lowest available rate could cost you an additional $72,000 over the life of a 30-year, $172,000 loan.

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Does Opening a Checking Account Hurt Your Credit?

Opening new credit card accounts or other lines of credit can hurt your credit score, but checking accounts do not affect your score---negatively or positively---unless you misuse the account.

FICO Score

According to Askmrcreditcard.com, your FICO score---the credit scoring model used by nearly all lenders---does not factor in how many bank accounts you own or their status.

Hard Pulls vs. Soft Pulls

Depending on the particular institution you banking with, if you choose overdraft protection the bank may choose to pull a "hard" credit report on you, which hurts your score slightly. Hard pulls are used for lines of credit, while soft pulls are for reference only and do not affect your score.

Careless Actions

Bouncing checks and going over your balance could lower your credit score if your financial institution reports it to a collections agency.

Showing Responsibilty

Opening a bank account usually helps your credit score because it shows that you are responsible enough to manage your money, are able to pay using electronic means and most likely have money available to pay some existing debt, according to Bankrate.com.

Banking History

Banks use ChexSystem, which tracks consumer banking habits, to look at your banking history. Opening and closing a lot bank accounts for incentives could hurt your application for credit or future bank accounts.

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Free Ways to Increase Your Credit Score

Your credit score is the primary tool used by lenders to determine whether to extend credit. Understand the factors that combine to determine your credit score and you can learn free ways to increase your score. You are entitled to at least one free credit report each year or more often if you have been denied employment or credit based on the report.

Pay Bills On Time

Pay your bills on time to increase your credit score. Your history of payments accounts for 35 percent of your overall credit score. The recent history is more important than payment history from several years ago. The longer you stay current with your payments, the more your credit score will increase.

Reduce Outstanding Debt

Reduce your outstanding debt to increase your credit score. Your total debt accounts for 30 percent of your overall credit score. Keep the balances on revolving credit low, and the balance-to-limit ratio for your debt will also be low. Balance-to-limit ratio is also known as the "utilization rate." A high balance-to-limit ratio can indicate a credit risk to potential lenders.

Manage Credit Responsibly

Manage your credit with a mix of credit cards and installment loans. The types of credit listed on your credit report account for 10 percent of your overall credit score. Credit cards and installment loans can raise your credit score if you pay your bills on time. Consumers with no credit cards are considered higher risk than consumers who have managed their credit responsibly. Don't open credit cards and take out loans just to increase your credit score, but having a credit card and paying the bills on time consistently will contribute to your credit score.

Dispute Wrong Information

Analyze your credit reports from all three credit-reporting agencies for incorrect information. You can order a free copy of your credit report from each agency, Experian, Transunion and Equifax, or go to annualcreditreport.com. It's also free to dispute incorrect information, such as accounts listed as delinquent that you paid on time or a judgment listed on your report by mistake. In most cases, you must provide documentation to back up your inaccuracy claim. All three credit-reporting agencies offer an online method for disputing errors. Removing incorrect negative information can significantly improve your credit score.

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How to Overcome a Negative Credit Report for Employment

Employers rely on more than just an interview when considering a new hire. Additional methods of gauging an employee's background include calling references and checking credit reports. If you have a negative credit report, you may need to take extra steps to explain your financial background so your report doesn't cost you the position for which you are vying.

Instructions

1

Inquire as to whether a credit report is used in consideration for the job and for what purpose. The employer needs your written permission to conduct a credit check, according to the Dallas Morning News. Determine why the company you are interviewing with is checking your credit so you can properly mount your defense. Some employers will pull your credit just to verify personal information, while others want to know about your financial history.

2

Don't volunteer more information than necessary. If the company considering you for employment asks about your credit report, explain that there are a few negative items that you are in the process of cleaning up. If no one asks pointed questions, don't volunteer the information. The less you say, the less you can incriminate yourself regarding your negative credit report.

3

Offer clarification on your negative credit report if asked--or if you are vying for a job that deals directly with cash. For example, perhaps some of the negative items are on your report from a divorce or a reckless period in your youth. Clarifying this for a potential employer will help them to see that you are still a fiscally responsible individual and can perform the position's duties.

4

Provide documentation regarding debt repayment. If your credit is negative and a potential position is on the line because of it, show proof that you are trying to pay off your debt. If a hiring manager sees that you are in the process of straightening up your credit, she may be more inclined to give you a chance.

5

Offer to submit to a criminal background check. Being in financial straits is much different than a history of financial crime. A company might be more willing to overlook your credit report if you've never committed a crime--particularly one that was financial in nature. This shows them that you are a trustworthy person who has hit a few financial bumps.

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What Does a Good Credit Score Get You?

Your credit score is a three-digit number determined by a complicated formula developed by Fair Isaac Corp. The three major credit reporting agencies, TransUnion, Equifax and Experian, use their own criteria for determining your FICO score, so it's important to check your score with each agency. FICO scores range from 300 on the low end to a maximum of 850.

Identification

Your credit score is determined by a variety of factors, including whether you make timely payments, the amount of credit used in relation to the amount of total available credit, the length of your credit history, and the types of credit you use, such as credit cards and installment loans. Each lender has its own guidelines for interpreting your credit score, but in general, a FICO score of 700 is considered as good, while 750 or higher is excellent as of 2011.

Lower Interest Rates

A good credit score normally gets you lower interest rates when you borrow money or open a credit account. In general, the higher the score, the lower the rate for which you qualify. In long-term debt obligations such as home mortgage loans, even one percentage point off an interest rate can make a significant difference in interest payments over the life of the loan. If you use credit cards frequently and carry a balance, a lower interest rate can also result in substantial savings.

Lower Insurance Premiums

Many car insurance companies use credit as a rating factor when determining your premium, as car insurers cite studies showing a correlation between bad credit and a greater tendency to file a claim. Even if your driving record is spotless and you're not in a typical high-risk category -- such as a being an inexperienced driver or living in an area with a high vehicle theft rate -- you can still expect to pay a higher premium if your credit score is low.

Improved Job Prospects

Having good credit may improve your job prospects. In addition to checking your background and references, some employers will also order your credit report. Employers may view a favorable credit score and history as a sign that you're able to manage your affairs responsibly, which they may perceive as a positive indicator of your job performance. If the job involves handling money, a good credit score may also indicate a lower risk of financial mismanagement in the eyes of a potential employer.

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Options for Getting a Repo off a Credit Report

Any type of repossession can take more than 100 points off of a FICO credit rating, but everyone gets a clean slate eventually, according to Les Christie of CNN. It is possible to expedite the process of removing a repossession, but this is not an option for everyone. Also, removing a repossession from a credit report may only work as a temporary fix to long-term financial management problems.

Wait It Out

You can wait until the credit bureaus can no longer list the account. The Fair Credit Reporting Act (FCRA) allows the credit reporting bureaus to list a repossession for six months after the first major delinquency -- the missed payment leading up to the repossession -- and seven years. This option takes the longest, but the repossession causes less damage to your credit rating with each passing day. Paying other debts on time and reducing the balances on them may negate the damage of the repossession within months.

Dispute It

You can dispute any account listed on your credit report under FCRA. Even if you legitimately defaulted on payments for the property, the lender must be able to verify the account to report it to credit bureaus. However, you have a better chance of removing the repossession because of an error, such as the federal credit reporting time limit expiring. To dispute the account, run your credit histories from the major bureaus for free via AnnualCreditReport. Write a letter to the bureaus stating why you dispute the repossession and provide evidence, such as a copy of your credit report showing that the account is older than 7 1/2 years. Send the letter by certified mail to have a record of the bureau receiving your complaint, because you may have to sue the credit bureaus to remove an erroneous listing.

Pay for Deletion

Include a provision about how the lender will report the repossession when negotiating to pay off the repossession. You want either a deletion or the company to report the account as "pays as agreed." Attaching a letter of "conditional endorsement" stating the terms of the agreement when you send a check to the creditor works more often than negotiating the reporting status at the start of talks with the creditor, according to CreditNet. You may need a lawyer to enforce the conditional endorsement. The creditor can always reject the agreement and attempt collection through the courts.

Tip

In the future, contact your lender when you think you may miss a payment. Lenders may offer to change the terms of your contract, such as pushing back your payment due date. Going to court and repossessing property entails expenses and time lenders usually want to avoid, and talking about problems early displays responsibility to the creditor.

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