June 2012 ~ Personal Finance and Money Management

Saturday, June 30, 2012

The Easiest Way to Rebuild Credit

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Rebuilding credit doesn't have to be a difficult task. In fact, many consumers have quickly and easily fixed their low credit rating by adjusting their credit habits. Minor changes in the way you deal with your credit history can add points to your FICO score. You can't immediately fix a bad history, but each month you'll notice a slight increase in your credit score. Before you know it, you'll have a higher score and you'll qualify for the best loan deals.

Instructions

Reduce or eliminate outstanding debts. Satisfying your debts by completely paying off the accounts can have a significant impact on your credit score. Rather than pay the minimum payment and carry a balance from month to month, use money from your savings account or tax refund to completely erase your balances.

Build a better relationship with your creditors. Skipped or late payments trigger harassing phone calls and threatening letters from creditors and, sometimes, creditors will raise your rate or lower your credit limit. Pay your statements on time to improve your payment record and rebuild your credit history.

Monitor your report. Sign up for a credit monitoring service or check your report at least once a year for mistakes that can bring down your score, such as unfamiliar accounts and inaccurate account information. Challenge errors on your report and ask creditors to remove mistakes.

Consider piggybacking. Rebuild credit with the help of another person. Your parent, spouse or someone else can call up their credit card company and include you as an authorized user on the account. Depending on how long they've had the credit card, this method can extend the length of your credit history, which adds points to your score. Your credit file will reflect their good payment history, which also helps lower your score.

How Do I Improve My FICO Score?

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Improving your FICO score can save you a lot of money over the course of time. When your score is high, your lenders will likely offer you favorable interest rates and loan terms. When your score is low, you may need to put up collateral to receive credit and your interest rates will be high. Make good financial choices when it comes to credit and you will see your FICO score improve.

Instructions

Discipline yourself to pay bills on time. Not only will you avoid late fees, but also your FICO score will improve. At least 35 percent of your overall FICO rating is determined by your credit history, which includes how timely you make payments.

Use 30 percent or less of your credit limit. Use your active credit cards regularly, even if only for small purchases, and pay the entire balance off each month. Avoid closing credit card accounts even if you do not need the extra credit line. The added available credit will improve your credit rating.

Maintain your credit cards for long periods to establish a good payment history with individual creditors. Your FICO score will improve if you carry a variety of credit. When you pay regularly on a mortgage, an auto loan and a college loan, for example, your credit rating will rise.

Order copies of your credit reports from Equifax, TransUnion and Experian (see Resources below). You are eligible to receive free credit reports once per year from each credit bureau. Initiate a dispute if you find inaccuracies on any of your credit reports (see Resources). A typical error occurs when a creditor fails to report a discharged loan on your report, or the credit bureau has your name is spelled incorrectly. You do not want to be mistaken for someone with a similar name. Correcting errors can markedly improve your FICO score.

Avoid foreclosure on your home, tax liens on your property and wage garnishments for such things as child support. Consider applying to execute a short sale with you mortgage lender if you cannot keep up your mortgage payments. This is when a lender agrees to take less money for a home than the amount owed on the mortgage. The impact of a short sale is less damaging to your FICO score than a foreclosure, which allows you to improve your credit score in less time.

How to Fix My Credit Report If it Is Showing an Incorrect Name?

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Your credit report has information about credit accounts you have opened and closed, loans you have taken out, and information available if you have been sued or filed for bankruptcy. If you find something wrong on your report, such as an incorrect name, contact the credit reporting company and ask for a correction.

Instructions

Make a copy of your credit report and highlight or mark the error.

Write a letter to the credit reporting company that issued the errant report. Tell the company that your report is showing an incorrect name and what it needs to be changed to. Ask to receive a copy of the corrected report.

Make a copy of your driver's license or other form of government identification. Put the letter on top followed by the credit report and identification copy and put them into an envelope to mail.

Mail the letter by certified mail with return receipt service so you will have proof that your letter was delivered.

How Is a Private Student Loan Reported on a Cosigner's Credit?

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The number of private student loans grows by 25 percent per year, compared to just 8 percent for federal student loans, and should surpass federal loan volume by 2025, according to the FinAid website. Getting a private student loan likely means needing a cosigner, unless you have a good credit score or can tackle a high interest rate. If you get a cosigner, both of you will have the account on your credit report.

The credit reporting agencies list a private student loan on a cosigner's credit report like it would any other loan, because the cosigner accepts responsibility to pay it if the original signatory fails to pay. If, for example, the original signer misses a few payments, the negative information goes on the cosigner's credit report. Likewise, positive information goes on both signers' credit histories, according to credit bureau Experian.

The lender always performs a credit check on a cosigner to ensure he can pay off the loan should it go into default. This incurs a hard credit inquiry, which takes about three to five points off of a credit score. Thus, a potential cosigner should not put his name on a loan if he plans to apply for other credit in the near future. Too many inquiries in a short span of time looks bad no matter what your credit score.

Any loan you cosign on also figures into your debt-to-income ratio. In addition to your credit score, lenders calculate whether you can afford the loan. Usually, a debt-to-income ratio over 36 percent makes you ineligible for a loan. Mortgage providers are the lenders most likely to be concerned with a debt-to-income ratio.

Before cosigning on a private student loan or any other account, ascertain the creditworthiness of the applicant or try to find some other source of funding. Federal student loans, such as the Perkins and Stafford loans, do not factor in credit score or even require a credit history, according to SallieMae, the nation's only financial services company specializing in education. If you do cosign the loan, figure out whether you can pay off the total loan in case the applicant cannot afford to put anything towards the loan.

Do Closed Accounts Affect a Credit Score?

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Myths abound about the effect of closing unused credit card accounts on your credit score. The truth is that the effect of closed accounts on your credit score often depends on your credit history.

It's essential to understand the significance of accounts to your credit score. While it would seem that having more credit available is a liability, MSN Money's Liz Pulliam Weston states, "the credit score looks at the difference between your available credit and what you're using... Shut down accounts, and your total available credit shrinks, making your balances loom larger, which typically hurts your score."

Closing an account with a good payment history can hurt your credit score years from now. "In the short run, you maintain that history," explains Bankrate's Leslie McFadden, "but once that comes off your credit report, you lose that good history." Good credit history is significant, considering that about 15 percent of your credit score is based on length of credit history.

While there is the misconception that having too much available credit means that closing accounts can improve a credit score, the truth is not as clear-cut. If you have a number of open accounts and a long credit history, closing one account is not necessarily detrimental. However, closing all of your oldest accounts could negatively affect your credit score down the line by giving the appearance that your credit history is not as well established.

How Can Biweekly Payments Help With a Mortgage?

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After establishing a new mortgage, a borrower has a number of choices to make regarding payment methods. He can pay online, in person or through the mail. One other option a borrower may have is to make biweekly payments. A borrower should explore how biweekly payments can help with a mortgage to decide if this arrangement works for him.

A normal mortgage arrangement requires the borrower to pay once per month. But with a biweekly arrangement, the borrower pays twice per month instead. He must divide the monthly payment by two and submit that amount every other week. For instance, if the monthly payment is $1,000 the mortgage borrower must pay $500 one week, then another $500 two weeks later and continue that action throughout the year.

Paying a mortgage biweekly deletes years off of the mortgage term. Instead of making 12 mortgage payments per year (the total amount due each month), the borrower makes 13. The extra payment goes toward principal, which reduces the loan balance more quickly (about six to eight years early). So paying biweekly helps relieve the borrower of the debt faster so that he can own the home outright and put his money toward other financial needs (like retirement or investing) sooner.

A biweekly arrangement could help keep the borrower disciplined when it comes to his mortgage. If paid weekly or biweekly, the borrower can simply set up biweekly automated withdrawals from his bank account (if available) on each pay day. This way the borrower does not have to store the money for his mortgage payment in his account until the next month and won't risk spending the money on other items during the month.

Unfortunately, not every mortgage lender permits biweekly payments. Some lenders attach prepayment penalties to the loan, so the borrower would have to pay additional monies if he finished paying the loan early. Some lenders simply prefer to receive a once-per-month payment. If allowed by the lending agreement, the borrower must sign up for a biweekly payment plan and get instructions for how and when exactly to submit payments. The bank may also charge an additional fee for this arrangement.

Help to Improve Credit Scores

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Loss of employment, unexpected medical expenses and economic downturns can all have an effect on your credit rating. The effects of a low credit score can include higher interest rates on loans and other types of credit, an increase in cost for some types of insurance, problems renting a home or issues obtaining a job. Help to improve your credit score can come from many sources, including the federal government and various private resources.

The Federal Reserve is the central bank of the U.S. Its primary function is to influence and help stabilize the monetary and financial stability of the country. One of the primary goals of the Federal Reserve is to improve credit conditions in the economy and protect the rights of consumers. As such, it offers a wide range of information, resources and links to various publications created to help consumers improve their credit score. Much of the information is available through the Board of Governors of the Federal Reserve website.

The Federal Trade Commission (FTC) was formed in 1914 and is the only federal agency with both consumer protection and competition jurisdiction. The FTC administers its duties through the Bureaus of Consumer Protection, Competition and Economics. The FTC offers information and resources for consumers related to improving credit scores, the Fair Credit Reporting Act and filing complaints against creditors or credit reporting agencies. There is also a database of information related to credit repair scams and identity theft.

Private credit counseling companies serve as middleman between consumers and creditors. They work to negotiate terms and agreements that allow consumers to pay off existing debt and possibly improve their credit situation. Reducing interest rates, eliminating late fees or over-limit penalties and reworking payments are tactics used by credit counseling companies on behalf of their clients. Credit counseling companies typically charge a fee for their services.

While many consumers view the various credit reporting agencies as the enemy, they can actually offer a wealth of information and help to improve your credit score. Each of the three major agencies, Equifax, Experian and TransUnion, offer information on how to dispute report details, update old information and understand your credit score. Customer service personnel can also help guide consumers through the steps necessary to help improve credit scores.

Can You Sue Someone for Pulling Your Credit History?

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Your credit history contains evidence of all your debts, your payment history and your identifying information. As such, it is a sensitive and highly personal document. It is your federal right to only allow your credit reports to be viewed with your express consent. When your credit report is pulled without that consent, this is a violation of your privacy and you have legal options at your disposal to help you remedy the situation.

The two types of credit pulls are commonly known as hard pulls and soft pulls. A hard pull is any credit pull performed by a company that appears in the "Credit Inquiries" section of your credit report. Soft pulls occur when you pull your own credit or when your score alone is pulled by companies for marketing purposes. These pulls do not appear on your formal credit report, yet may be visible to you when you monitor your credit history online.

The credit bureaus will display hard pulls on your credit reports for differing amounts of time depending on the agency. The time period varies from one year with Equifax to two years with TransUnion. Experian does not specify the amount of time that it allows hard pulls to remain on consumer credit reports.

The Fair Credit Reporting Act (FCRA) specifies that hard pulls can only be made on your credit report by companies that you have authorized to make the inquiry. These are known as "permissible purpose" pulls. Some legitimate reasons for placing an inquiry on your credit report are: to grant you a loan, to consider you for employment or at the request of the courts. Any company that plans to pull your credit report is required to notify you of this intent and most will ask for your signature as proof of written consent.

When a hard pull is levied against your credit report, it will usually cost your credit score a few points. One exception is when you are shopping around for a mortgage or an interest rate. In those cases, the credit bureaus will count all of the inquiries made within a 30 day block of time as one inquiry. Numerous inquiries within a short time period not only cost you points but they can hurt your credit worthiness--even if you have a near perfect credit score. Lenders will view multiple inquiries as "debt shopping." This increases the risk factor involved in extending credit to you.

Any credit inquiry can injure your credit score, even if that injury is slight. If you notice a company has placed an inquiry upon your credit report without your permission, you can write them a letter letting them know that non permissible pulls are a violation of the FCRA. Demand that they remove all evidence of the inquiry from your credit report. Send your letter certified mail, and give the company a time limit in which to comply. If they do not remove the inquiry, the FCRA gives you the legal right to file a civil suit to force them to do so. You are also allowed to sue for punitive damages.

Can a Debt Collector Make Inquiries on Your Credit?

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The Fair Credit Reporting Act regulates the information contained in your credit report. You also have control over who makes inquiries into the report if your state allows you to freeze the file. If your file is frozen, debt collectors may not be able to make inquiries on your credit. If your file is not frozen, debt collectors may access the information.

Credit reporting agencies, such as Equifax, Experian and TransUnion, may only supply a consumer's credit file information to companies having a legitimate reason. Debt collectors working for original creditors and debt buyers who have purchased delinquent accounts from original creditors are allowed access. Other parties with a valid reason for accessing the information include employers, insurance companies, potential lenders, federal government agencies and other third parties having your express permission. Consumers have the right to limit accessibility to databases used by lenders and insurance companies for the purpose of obtaining new clients.

Individual states determine if consumers have the right to freeze their credit file. A frozen credit file restricts access to the consumer, existing lenders and to government agencies. Debt collectors that are in the process of collecting a delinquent account and debt buyers that have purchased the account will continue to have access to a frozen file. Debt collectors that are checking a consumer's credit file prior to accepting or buying the debt may not make inquiries on the file.

The three primary credit bureaus divide credit inquiries into two categories -- hard and soft. Hard inquiries affect your credit rating, but these are authorized by you as a result of applying for a loan or opening a bank account. Hard inquiries typically result in a five-point credit score reduction for a six-month period. Soft inquiries are those made by credit card companies and other lenders when they are fishing for new clients. These do not affect your credit rating. When you check your credit, it is considered a soft inquiry. Debt collectors can fall into either category.

According to Experiean, hard inquiries that are initiated by the consumer are the only ones that impact a credit rating. A debt collector may fall into this category if you are negotiating a repayment plan or a settlement and give the collector permission to access your information. Debt collectors making inquiries that are not initiated by the consumer would fall into the soft inquiry category. All inquiries are added to your credit file, but not all inquiries are available to potential creditors.

Quick Ways to Build Credit Scores When You Have No Credit

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According to myFICO, a Fair Isaac Corporation (FICO) score is almost entirely based upon payment history, outstanding debt and length of credit history. Young people just entering the workforce typically have no credit history and therefore cannot be scored by a lender. Borrowers should start building their credit history by taking out small lines of credit or secured loans, charging purchases every month and making sure they make their payments on time. Consumers with a thin credit history should ask for credit line increases every six months and limit the balances on their cards.

Individuals without credit should ask their local bank if the institution offers secured credit cards. Secured credit cards are secured by amounts on deposit held as collateral. If the consumer stops making payments on his secured card, the bank can seize the funds from the collateral account to repay the debt. According to Wells Fargo, these credit cards have a $300 to $10,000 limit as of March 2011 and can act as a steppingstone to obtain an unsecured credit card.

Store cards typically offer individuals with no credit history a small credit line of $200 or less. Retail stores may limit purchases with the card to their own store or allow the consumer to use the card to shop at other stores. Store cards typically have few eligibility requirements due to the low credit amount, making them ideal for people looking to build credit.

According to Wells Fargo, consumers can receive a secured loan if they deposit money into a money market account. A certificate of deposit (CD) requires a depositor to place money into an account that cannot be removed without a penalty for a set rate of return. Consumers can typically borrow up to the maximum amount held in their CD and make monthly payments on the loan for the entire loan term or until they pay off the debt.

According to Experian, a borrower without credit can ask a co-signer to share the responsibility of a debt or credit line. Students who recently graduated college may ask an older friend or a parent with an excellent credit history to sign a loan agreement with them. Since the lender can collect from the co-signer if the borrower defaults, the lender will grant a loan or credit line to a consumer with no credit history as long as the co-signer has excellent credit. Payment history shows up on both the borrower's and the co-signer's credit report, allowing the borrower to build credit faster.

Does Paying Back Past Due Amounts Improve a Credit Score?

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Past-due amounts on bills lower your credit score significantly, since the MyFICO scoring company advises that 35 percent of your score comes from your payment history. You cannot wipe out past-due records simply by catching up your bills, but eliminating delinquencies improves your score if you continue to make on-time payments.

MyFICO cites catching up your past-due accounts as one of the most important ways to help your credit score. You rack up a long string of delinquencies when you carry a past-due balance on credit cards or other accounts. Your Experian, Equifax and TransUnion credit reports list each late account and the number of days your payment is past due. Catching up your bills does not erase the past bad entries, but it puts you in a position to pull your score back up by building up a current and future on-time payment record.

Credit card companies and other lenders do not let you keep your account open indefinitely if you stop paying or fall behind by several months. MSN Money writer Liz Pulliam Weston explains that creditors try to work out bills for about six months, after which they charge off the accounts as bad debt. You still owe the money, but the lender gets a tax benefit by charging off your bill. This activity goes on your credit reports and lowers your credit score, but you can still arrange payment with the creditor. Ask for removal of the charge-off if you reach a settlement, rather than just "paid" or "settled" status, or remove its negative influence on your score.

Some creditors sell their past-due accounts to collection agencies after charging off the bills. Debt collectors then add their own entry to your credit reports and pursue you for payment of the amount due. They can also add interest and fees if allowed by your original contract, according to the California Attorney General's office. Collectors often settle for a discounted amount because they pay less than face value for accounts. Make sure removal from your credit reports is part of any payment agreement. Your credit score increases somewhat when the collection account is gone, but the original charge-off entry still hurts it.

Your credit reports might show delinquent accounts even if you are not behind on any of your bills. Dayana Yochim of the Motley Fool website explains that eight out of every 10 credit reports may have mistakes, and the most common errors involve misreported delinquencies. You can review your credit reports for free every year through AnnualCreditReport.com and dispute past-due entries on accounts that are really up to date. Notify the credit bureaus through their online forms, and they will conduct investigations and fix the data, which brings up your score.

Help With Auto Insurance

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Auto insurance is a policy that you may have to maintain for the duration of vehicle ownership. If you're new to driving and owning a car, take a moment to learn a few basics of auto insurance. Seek help to ensure that you meet your state's minimum auto insurance requirements.

A driver on the road without auto insurance poses a major risk to other drivers, passengers, pedestrians and even the infrastructure of public roads. If that person is in a crash that damages property or harms individuals and cannot pay for it, that would leave the bill for someone else to manage. For this reason, many states require drivers to have auto insurance to register and drive a car.

You can simplify the process of finding auto insurance by visiting a website offering quotes from a number of insurers. You must enter your vehicle information, including the year, make and model, as well as information about you. Each potential insurer needs to research your driving history to evaluate your risk level and determine the estimated cost of the premium. The insurance company also considers your credit score and history in the policy evaluation and resulting quote. Select the insurer offering you the best rate with all of the options you require. You can receive policy discounts if you're a good student or have protective devices on the vehicle.

You have two main options for auto insurance when it comes to choosing coverage. You can select either a standard liability or comprehensive policy for the car. A standard liability policy is the minimum acceptable by most states. It provides basic protection for others on the road, including reimbursement for bodily injury and property damages. A comprehensive policy includes these protections as well as optional additional coverage for repairs or replacement of your own car in case of incidents. If you have a car loan, the bank will likely require you to maintain a comprehensive policy until you pay off the loan.

You should not allow your auto insurance policy to lapse unless you already have a new policy with another company in force. If you cancel insurance coverage you own the car, you could experience issues with your state department of motor vehicles. Driving the car without insurance could lead to expensive fines and even suspension of driver's license or registration privileges.

How Does Closing a Credit Card Account Affect Credit Score?

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Credit scores dictate the ability of a borrower to repay a debt. The higher the score, the better the risk for the lender. Closing a credit card will lower your credit score.

Closing a credit card affects your credit score because it lowers your overall available credit. It also lowers your score due to the shortening the length of your overall account history.

The impact on your score happens within 60 days of the account closing. However, the longer it has been since the account closing, the lesser the effect on your credit score.

Many borrowers close a credit card to limit the chances of identity theft or to limit temptation. These are both good reasons, and the ends may justify the means in these cases.

However, with the increase in identity theft cases has come increased security for credit card users. This should also be taken into consideration when thinking about shutting down an account.

To keep a credit card open, yet keep a low balance, simply use the card to pay one monthly bill. Pay the bill in full each month to avoid interest charges.

Authorization to Release Credit Information

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Information found on your credit report influences your credit options, insurance rates and even employment. Under the Fair Credit Reporting Act (FCRA), your credit report may be pulled only for permissible purposes and you have the right to dispute inaccurate information.

According to the FCRA, a credit-reporting agency may release your credit report to creditors, employers, insurance companies, government licensing agencies, investors and the courts. Businesses may also access your credit information if you initiate the transaction.

Employers must have your written permission before pulling your credit report. Authorization is usually received during the hiring process. Additionally, you have the right to know the name and contact information of any entity accessing your credit report.

Credit application inquiries do affect your credit report. Multiple inquiries over a short period may lower your credit score.

If you feel that your credit was pulled in error, contact the credit-reporting agency to dispute the information. You may also file a complaint with the Federal Trade Commission.

How do I Remove Charge Backs Off of a Credit Report?

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Removing chargebacks off a credit report is a crucial part of credit repair. A chargeback does not need to show up in your credit history because these charges are disagreements between you and store vendors for unfair purchases. When you know a purchase is erroneous, ask your card company to charge these funds back to the actual store, and you won't have to pay these costs. Unfortunately, this type of data tends to appear as a bill that is past due on your credit report, and will cause your credit rating to fall. If you find such a transaction in your credit history, you need to ask the credit bureau to eradicate the information.

Instructions

Obtain a copy of your credit history at no charge. Visit a government-sponsored website listed at ftc.gov/freereports to acquire this record of your credit. The information you receive will contain data from each of the major card organizations.

View the data and search for faulty information. When you find a chargeback, note the title of the store, the day of the transaction and the exact price of the purchase in question. You'll need to search through each section of the report to find any unpaid balances that have the same price as your disputed purchase.

Contact each credit card agency that lists the incorrect information on your report. Keep in mind that the same transaction will most likely show up on the records of each credit reporting agency, so make every effort to go through all of the data you receive. Once you have found the chargeback, simply go to the websites of the three major credit groups and let them know of these errors.

Send the credit card organizations the data they need. You have to provide all relevant documents to the three major agencies such as specific product purchase information, merchant dispute details and the date of chargeback acceptance. You will also have to send proof of purchase and any written communication between you and the store owner.

How Is Credit Score Measured?

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Your credit score is a three-digit number that creditors and lenders use to determine your creditworthiness. Credit scores are based on information within your credit report -- a document maintained by credit bureaus detailing your credit and loans accounts and your unpaid bills. Five key pieces of information are used to measure your credit score: payment history, amount of debt, length of credit history, types of credit and new credit accounts.

Payment history is 35 percent of your credit score. This measures your payment history on your credit cards, loans, mortgages and other credit accounts. Any public records like bankruptcy, foreclosure and tax liens will hurt your credit score. The number of past due accounts and number of accounts that are "paid as agreed" are factored into your credit score.

The amount of debt you owe is 30 percent of your credit score. The total amount you owe on all your accounts is considered, as is the number of your accounts that have balances. Your credit-to-debt ratio, which measures how much of your available credit, contributes to this part of your credit score.

Length of credit history is 15 percent of your credit score. This considers the amount of time since your first account was opened and the time since each type of account was opened. For example, the time since your first credit card and your first installment loan are used to measure your credit score. The length of time since your last account activity is added to your credit score.

Types of credit used is 10 percent of your credit score. This looks at the number of each type of account you have. Types of credit accounts include bank credit cards, retail store credit cards, mortgage loans and student loans.

New credit accounts are 10 percent of your credit score. This measures the number of accounts you've recently opened as well as the number of accounts you have that are new. Any recent credit inquiries made based on your application for a credit card or loan will help measure your credit score. The amount of time that's passed since you've opened your last account or had your last credit inquiry will influence your credit score.

All five categories of information are used together to measure a credit score. Only the information in your credit report is used to calculate your credit score, so your credit score will change as the information in your credit report changes.

Does It Help Your Credit to Pay Off Charged-Off Accounts?

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Charged-off accounts are bills that are written off by a lender as noncollectable. The lender gets a tax write-off for its charge-offs, but the process does not absolve your responsibility for repayment. Debt collectors can still pursue you, and charge-offs and collection accounts get added to your credit bureau records. Paying off charge-offs only helps your credit if you negotiate their removal from your Experian, Equifax and TransUnion credit reports.

A charge-off is a lender action that usually happens if you refuse to make a payment on a credit card, loan or similar account for at least six months. Your creditor does the charge-off for accounting purposes and tax benefits. Such bills are still legally owed until your state's statute of limitations ends, which means you can no longer be sued for the money. Lenders sell charge-offs to collection agencies to get some revenue from the unpaid accounts. Debt collectors can pursue you as long as they wish, although their right to file a lawsuit ends with the statute of limitations expiration.

Charge-offs are one of the main reasons credit applications get rejected, according to Bankrate.com. Your original late payments show up on your credit reports, along with the charge-off and the collection agency account if it gets sold to a debt collector. Late payments are bad, but charge-offs represent a total disregard for the debt, which makes you look very risky to other creditors. Charged-off accounts are part of your payment history for credit score calculation. This area makes up 35 percent of your score, so charge-offs are harmful to your creditworthiness.

Collection agencies focus on getting past-due account holders to pay their bills, so a willingness to send them money gives you bargaining power. The agency pays very little for unpaid accounts, so it is likely to agree to a reduced amount as full payment. Add the stipulation that the collection account gets removed from your credit reports after payment, and get this promise in writing. Negotiate with your original creditor if the bill was never sold to a debt collector. The lender will often agree to a lesser amount as well as to remove the charge-off from your credit reports because it was not expecting to get any money out of the old account.

Get your credit reports a month or two after paying your settlement amount to see if the lender or collection agency upheld its part of the agreement. The credit bureaus offer free reports every 12 months through AnnualCreditReport.com per federal law. Send a copy of the report and your agreement, as well as a demand for removal of the item in question, to the creditor or debt collector if the charge-off or collection account is still in your records. Dispute the item directly with the three bureaus, using the same documentation, if you get no response.

Charge-offs lose their effect on your credit over the years if you concentrate on rebuilding a positive history, even if you never pay off the old accounts. Bad debts can only stay on your credit reports for seven years before automatic erasure by the credit bureaus. Focus on paying your current bills on time and spend no more than 30 percent of your credit lines if you want to improve your score but cannot afford to settle charged-off bills.

Why Did My FICA Score Go Down Although I Pay Everything Early?

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You've tried to use credit responsibly and paid all your bills early or at least on time. Yet your FICO credit score has done down. There are several things that can cause this to happen. It helps to know how the FICO scoring system works so you can identify possible problems early and take corrective action.

A FICO score is a three-digit number ranging from 300 to 850 that summarizes the risk you present if a lender extends you credit. When one of the three major credit bureaus (Equifax, Experian, TransUnion) calculates your FICO score, they use the information on your credit history. Your record of on-time bill payments is the most important factor (counting for 35 percent) but it is not the only thing considered. Your total debt, the type of debts you haveand recent changes in credit accounts are all factors that play a pert in determining your score.

If your FICO score has gone down although you pay all your bills early, the first thing to check is the possibility of an error. Incorrect information can get on your report due to a clerical mistake, incorrect creditor reports, or identity theft. Under the Fair Credit Reporting Act you can get a free copy of your credit report (not including the FICO score) from each credit bureau once per year. The Federal Trade Commission maintains a website that explains your rights and provides a link to the authorized provider of free annual reports (See Resources ). If you find an error, file a dispute with the credit bureau and have the information removed or corrected. All three credit bureaus provide online tools for disputes and the FTC publishes an online guide, How to Dispute Credit Report Errors (See Resources).

One common mistake people who are otherwise very responsible about their debt obligations is to borrow too much for their income. If you've accumulated too much debt, this can really hurt your FICO score as total debt counts for 30 percent of the score. The type of debt also matters. Secured debt, such as a mortgage or car loan, is viewed more favorably despite the large amounts that are usual for such loans. Unsecured debt, including signature loans or credit cards, can bring down your FICO score if the amounts are excessive.

Most people who pay their bills on time don't open or close credit accounts very often. Although it's normal to apply for a new account occasionally or to close one you've paid off, try to avoid a sudden flurry of account openings or closings. Too much recent activity can take up to 10 percent off your FICO score. The good news is that the FICO score only tracks recent activity of this type. After a few months to a year, account changes drop off your credit history and your credit score will return to normal.

Another factor that can lower your FICO score is over-utilization of lines of credit (mainly credit cards). If you constantly keep your cards "maxed out" this results in a high utilization rate and lowers your FICO score. The solution to this problem is to start paying down the balances on your cards, thereby lowering the utilization rate. If your debt is excessive, this has the added advantage of lowering your total debt, so paying off credit card balances, or at least bringing them down, helps improve this part of your credit score as well.

Does a FICO Check Provided by a Bank Affect My Credit History?

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Smart borrowers know that some credit checks affect their credit score by a few points and can become a huge problem. If your bank provided you with a FICO score and credit check, there is a good chance this hurts your credit history. The circumstances surrounding the credit check and why it was pulled determine its true effect.

Only applications for a loan or a creditable service, such as rent or utilities, result in a hard inquiry. The lender may have shown you your FICO scoring during the application process for a loan, such as a mortgage, as a courtesy, but this still hurts your score. Some banks perform credit checks on accounts or for certain features, such as overdraft protection. This still negatively affects your credit.

Banks sometimes offer free FICO scores and credit checks to customers as a perk to keep them around. These are a soft check and do not hurt your score, because the major credit bureaus report them as a personal inquiry. The credit bureaus list personal checks on your report, but only to keep you informed of activity on your profile.

Lenders review accounts from time to time to make sure a person's credit score has not dropped, noted by an "AR" in the credit inquiry section of your credit report. These do not affect your credit score, even if the bank shows you the score, but the lender might lower your limit if he sees a significant drop in your financial situation. On the other hand, he might offer more credit if you improve your FICO score.

Ask the lender how a credit check will show up on your credit history before he shows you a score. As long as the check counts as a soft inquiry, it won't affect your history and saves you money. The credit bureaus almost always charge consumers to see their FICO score calculation --- you only receive one free credit report each year from all three bureaus --- because federal law does not require free credit score calculations.

What Is a Great Credit Score From Experian or TransUnion?

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Credit scores compile information from a consumer's credit history into a numerical representation of a borrower's creditworthiness. Many different credit scoring models exist, but lenders rely on the Fair Isaac Corporation, or FICO, score more than any other. The FICO score represents the likelihood a borrower will default on a loan or credit obligation in the future. Both Experian and TransUnion compile credit information from consumers and calculate a FICO score based on that information.

Credit reporting began over a century ago, according to Malgorzata Wozniacka and Snigdha Sen of PBS. The modern framework of credit reporting came into being with the passage of the Fair Credit Reporting Act, or FCRA, in 1971. FICO, established in 1956, became a major player in credit score reporting when Fannie Mae and Freddie Mac recommended lenders use FICO scores to determine credit worthiness. To enhance transparency, President George W. Bush signed a revision to the FCRA requiring Experian and TransUnion to make FICO scores available to consumers in 2003.

Consumers see numerous benefits to having a great credit scores. High credit scores generally translate to better interest rates on all monies borrowed, including mortgages, car loans, credit cards and personal loans. Additionally, great credit scores allow for easier approval of many types of credit, including mortgages and car loans. Credit scores may dictate the amount of documentation needed for loans; some mortgage companies require less documentation if consumers possess great credit scores.

According to the Fair Isaac Corporation, five categories, varying in importance, affect a FICO credit score. Those categories and their respective importance include payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and types of credit used (10%).

Fair Isaac Corporation credit scores range from 300 to 850, with most consumers falling between 600 and 750. According to Experian, a score above 700 suggests good credit management. Check-Credit-Score.org reports a score above 749 is excellent, while a score between 660 and 749 is good. The Credit Truth organization states an excellent score is 750 to 850, while a score from 700 to 749 is very good.

Some consumers mistakenly believe a great credit score determines whether they get a mortgage or loan. In fact, a great credit score is only one factor among many, including income level, employment status, residential history and down payment, to name a few. Contrary to popular belief, income level and employment status do not affect a credit score. Finally, some believe they can get their credit score free once a year. In reality, TransUnion and Experian only make annual credit reports free; the companies provide credit scores for a fee.

Are Pre-approved Credit Card Offers Bad for Your Credit?

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Pre-approved credit card offers bring new accounts right to your mailbox. Banks pre-screen your demographic and financial information through the credit bureaus and send you credit card invitations that include tailored offers like low promotional interest rates or balance transfer offers. Such offers do not affect your credit score directly, but they can lead to several types of indirect harm.

Pre-approved credit card offers result from soft inquiries by credit card issuers. A soft inquiry is a credit check for marketing purposes or your own review of your credit reports. It has no effect on your credit score, and lenders do not see it when they check your reports. Hard inquiries result from actual credit applications, and these do lower your credit score, according to the MyFICO scoring company website.

You add more available credit, and potentially more debt, to your credit reports and score when you accept a pre-approved offer. MyFICO explains that your owed balances are 30 percent of your total score, so getting a new card and spending most or all of the available credit, is bad for your financial records. You also hurt your credit if you accept a pre-approved card with better terms than an existing account, transfer the old balance, and close the original card. Your credit score favors accounts with longer histories, according to MSN Money writer Liz Pulliam Weston.

Pre approved credit card offers expose you to identity theft. Criminals steal offers from your mail, redeem them and max out the cards in your name. Then your Experian, Equifax and TransUnion credit files show a high balance and delinquent account, which pulls down your credit score until you catch and report the fraud.

Your current credit card issuer might agree to lower your interest rate to match pre-screened offers if you do not wish to open a new account. Bankrate.com writer Lucy Lazarony explains that you can request a lower rate over the phone. Tell the customer service agent that you are considering a competitive offer and would like an adjustment on your current account so you do not have to move your business. You have a good chance of success if you have always paid the account on time.

The credit bureaus must stop selling your information to credit card issuers if you opt out of their marketing programs. The Federal Trade Commission explains that federal law requires the bureaus to run a website, optoutprescreen.com, which lets you halt pre-approved offers online or through a toll-free telephone number (see Resources). You may stop the offers permanently or for five years, with an option to renew.

Do Leases Come Up on My Credit?

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Whether a lease appears on your credit report depends on what type of lease it is. In general, building leases do not appear on your credit, but vehicle leases do. Manage your auto lease carefully to make sure you help your credit instead of hurting it.

Apartment and house leases generally do not appear on your credit report because the landlord is not extending you credit, but just collecting rent on a month-to-month basis. The one circumstance in which a lease might affect your credit is if you move out and stop paying rent before the agreed date in your lease. In this case, the landlord can take you to court and obtain a judgment against you, which will appear on your credit report and lower your credit score.

An auto lease appears on your credit report almost exactly as an auto loan does. Often your credit report does not specify whether an auto account is a loan or lease. Each of your payments on the lease appears on your credit report. In addition, the leasing company often reports the residual value on the vehicle as the amount you owe on the lease.

When you first obtain a lease, the leasing company runs a credit check and, after approving you and beginning the contract, starts reporting the lease on your credit report. Both of these actions lower the portion of your credit score that considers new credit. After that, a lease mainly affects your credit through your payment history. Making late payments hurts your score just as much as making late payments on any other type of loan or credit card. Paying on time, having a lease for a long time and having a lease as an additional type of credit can all help your credit score.

A lease is a contract, and if you terminate your lease before it is up, this can seriously damage your credit score. Stopping payment and returning the vehicle to the leasing company is just like a voluntary repossession on an auto loan, which significantly lowers your credit score. To avoid damaging your credit, follow through with your lease or work out an alternative plan with the leasing company. You might be able to trade in a lease for a different one or work out an agreement to make reduced payments for a time while you get your finances in order.

Boost a Credit Report Fast

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Your credit reports are more important than ever. Mortgage lenders look at them when deciding whether to lend you money. They also use your credit score to determine the interest rates you pay on that money. Lenders study your credit reports before giving you a car loan or business loan. Even car insurers look at your credit score. Fortunately, there are steps you can take to provide a quick boost to your credit reports.

The fastest way to boost your credit score is to correct any errors that appear on your credit reports.

Three credit bureaus--Equifax, Experian and TransUnion--maintain credit reports on you. These reports detail your history of managing your money, paying off your debts and paying your bills on time. The better financial record you have, the higher your credit score--computed from the information contained in these reports--will be. Generally, scores of 720 or above are considered good.

If your score isn't at this level, you should first search for and correct any mistakes that are on your credit report. You can order one copy of each of your three credit reports from the website AnnualCreditReport.com. This site is run by the three credit bureaus, and you are allowed to order one free report from each of them every 12 months.

Once you get your reports, look for any credit card accounts that are listed open even if you have closed them. Look, too, for any late payments that are incorrect.

If you spot any errors, notify the credit bureau in writing. You can find the bureaus' mailing addresses on their websites. You can't write in or e-mail corrections. The bureaus only accept corrections in writing.

Once the mistakes are taken off your credit reports, your credit score should quickly improve.

Your next step should be to establish a new credit history. This means making it a habit to always pay your bills on time. Once you establish this new trend, your credit scores will rise.

You won't see instant results. But becoming a good consumer is one of the more effective ways to quickly boost your credit score.

Next, pay down your debt. If your revolving debt--the debt on your credit cards--is too high, your credit score will fall. To do this more quickly, make sure to always pay more than the minimum amount due each month on your credit cards. You might consider making two payments each month to cut down on the amount of interest you'll have to pay and the time it takes to slash your debt.

Unfortunately, there are many unethical companies who promise that they can instantly improve your credit. They can't. There is no way to "instantly" boost your credit. The best ways to quickly improve it are to pay down your debts, pay your bills on time and correct errors on your credit reports.

These companies are promising something that they can't deliver. What they do is what you can do on your own, only they'll take your money while doing it. Avoid these companies and boost your credit report on your own.

Does a Debt Settlement Program Hurt Your Credit?

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Debt settlement arrangements are often the final stage of getting your financial debts handled before bankruptcy. If lenders believe that you are close to bankruptcy or that they will not otherwise continue to receive any payments from you on the debt, they may be willing to take a lump sum of cash in order to settle the debt and write the off the rest of the debt. Before entering into an arrangement, you need to know how it will affect your credit rating.

Every debt settlement plan is different and lenders do not have to enter in to one. They can choose to follow the contract you signed when you took out the debt and this can include seizing assets connected to the loan, such as cars or your house. Lenders often more easily agree to debt settlement plans when they have no other means to obtain a payment from you, such as credit card debt and unsecured loans. An agreement would start with a proposal from you or your representative to give the lender a sum of money in exchange for releasing the debt. For example, if you owe $17,000 in credit card debt, you might offer the company $12,000 as a final payment. The lender knows that this is better than receiving nothing and may agree to it. Settlement plans require that you have the financial resources to pay out these debts, as no lender will agree to a plan where you continue to make payments.

Once you agree to a debt settlement plan and finalize it, the lender will report to all three major credit bureaus either that the debt has been "settled" or "settled for less than the full amount." The former delinquent payments will still show on your report for seven years, but no further delinquencies for these payments will show on your report. The debt will show as closed. Check your credit report two months after a debt settlement payment to ensure that the lender has reported this arrangement properly.

If you are at the point where you are contemplating a debt settlement arrangement, it is likely that your credit score has already declined. A settlement showing on your report will not immediately make your score better, as the former delinquent payments will remain on the report. This will result in a short-term decline in your score as the settlement was not a full payment and an inactivated credit item shows on your report. Your score should begin to recover quickly, however, as you will not show further delinquencies on the account.

If you have enough financial resources to make settlement arrangements with your creditors, it can help you avoid bankruptcy and result in a stronger credit score. You will also have more discretionary income in the future that you can use to pay down other debt. You also have the psychological benefit of having one less debt to juggle, and one less reason to avoid answering the telephone and the door.

Good Credit Scores for a Car

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Interest rates fluctuate, so the rate you're offered on a car loan can change from week to week. However, your credit score is an indication of whether lenders will give you their best loan rates at any given time. People with the highest credit scores usually get the lowest interest rates on car loans, which saves them significant amounts of money over the life of the loan.

According to Edmunds, data from the Experian credit-reporting company show that prime borrowers faced few problems getting car loans in the third quarter of 2010. The data classified people with credit scores of 680 or higher as prime borrowers. Such borrowers usually get automakers' and lenders' lowest interest rates on car loans because they're considered to be less risky customers who likely won't default on their loans.

Edmunds notes in an article, "Car Financing in a Recovering Economy," that car buyers who had scores ranging from 700 to 719 in 2010 could get a five-year loan with an interest rate as low as 5.24 percent at banks. Car buyers who have credit scores of 619 or lower are usually classified as subprime borrowers, and they may not qualify for loans. Even people who had scores ranging from 630 to 669 received more expensive loans in 2010. According to Edmunds, banks required car buyers with scores in that range to pay an average interest rate of 8.45 percent on five-year loans in 2010.

People who have lower credit scores may get better loan terms in the used-car market. Edmunds notes that Experian's statistics show the average credit score of used-car buyers is 683. The average credit score of new-car buyers is significantly higher at 769. It's difficult for people to get the best loan terms on new cars if their scores fall below 700. Interest rates for loans are generally higher in the used-car market, but people with lower scores have a better chance of qualifying for loans in that sector.

Car shoppers who don't have credit scores high enough to get reasonable loan rates should consider putting off a car purchase if they can. A Bankrate article titled "Check Your Credit First" shows how the cost of a loan is dramatically different based on the interest rate you receive. For example, a $20,000 car loan that's financed for five years with a 3.9 percent interest rate would have total interest charges of $2,045.71. The same loan amount financed for five years with a 7.9 percent interest rate would cost you $4,274.28 in total interest charges.

How to Build a Great Credit Score

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A good credit history opens doors to access to capital from a variety of sources. Credit scores are three-digit numbers, which range from 300 to 850, with 850 being a perfect credit score. Achieve a great credit score by seeking opportunities to make a significant impact with the accounts on your credit report. According to FICO, payment history, amount owed to creditors, length of credit history and applications for new credit are the biggest factors in determining your credit score.

Instructions

Contact the three major credit bureaus to obtain a copy of your credit report and score: Equifax, Experian and TransUnion. Not all of your monthly bills will be present on your credit score. It is important that you know which companies report your monthly payments so that you know which of your bills should be a priority each month.

Dispute inaccurate information on your report. If a late payment or other item appears on your credit report that does not appear correct, you can dispute the item by requesting verification from the creditor or by creating a case for identity theft. Items that are invalid must be dropped from your credit report, thus boosting your score.

Place your bills on an auto-pay schedule using a service offered by the creditors or your bank. This will ensure that all your bills are paid each month on time. Late payments will decrease your credit score each month. Inversely, paying bills as agreed helps your score more over a long time.

Use any surplus income or savings to pay down high balances, but don't pay them off. Maintaining a balance less than 30 percent of the amount of credit available is the best way to add to your score each month.

How to Make Your Credit Score Higher

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When you apply for a loan or line of credit, one of the first things the lender looks at is your credit score. This three-digit number encapsulates your history with managing credit. The higher your credit score, the more likely your application is to be approved and the lower your interest rate will be. A lower interest rate can save you hundreds, or even thousands, of dollars in the future. When you are getting ready to apply for credit, use a few strategies to increase your credit score.

Instructions

Obtain a free copy of your credit report through the Annual Credit Report service (see Resources).

Review your credit report for mistakes. If you find any, file a dispute by following the instructions printed on your credit report.

Stop applying for new credit until you absolutely need to. Each time a lender checks your credit report in response to your application, it is recorded as a credit inquiry, which temporarily reduces your score. When you actually open a new account, this also reduces your score.

Pay all of your credit card and loan bills on time every month. Your payment history makes up 35 percent of your credit score, and even one late payment can lower your credit score. If you have trouble remembering to pay bills, set up automatic payments or payment reminders.

Pay down your credit card balances as much as possible. Your credit score considers your credit utilization, which is the ratio of each credit card balance to the credit limit. Liz Pulliam Weston of MSN Money recommends getting each card's balance to below 30 percent of the card's limit, or to 10 percent or less for even more of a credit score boost.

Use each credit card regularly. An active account is better than an inactive account. In addition, account activity helps reduce the chance of the issuer closing the account, which can decrease your available credit and increase your overall credit utilization, which lowers your score.

How to Rebuild Credit With Retail Credit Cards

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Having poor credit can affect you in multiple areas of your life. You may be unable to finance a vehicle or home, be charged higher insurance premiums and interest rates and be unable to secure certain jobs. Rebuilding credit can take many months and even years, but the process needs to begin somewhere. It will require time, dedication and focus on your part. Retail credit cards are useful in the credit-rebuilding process. Handling retail or store credit accounts properly will create a positive account history on your credit report and will therefore begin to increase your credit score.

Instructions

Visit the Who Gave Me Credit Web site. Input your state and current credit score and determine what retail credit cards are being given in your area to people with similar credit scores. Apply for one to two retail credit cards for which it appears you will qualify. Avoid randomly applying for store cards, because each time you apply, you reduce your credit score and diminish your chances for a successful approval.

Calculate 30 percent of the card limit upon receipt of the credit card. Determine this amount by taking the credit limit and multiplying it by 0.30. If your store limit is $300, for example, 300 x 0.30 = 90. Never have a balance higher than this amount on your account. According to the Come Back Credit Web site, a balance of less than 30 percent of the credit limit is best for your credit score.

Make all payments on time. You do not need to pay the balance in full each month, but you should never miss the minimum payment due.

Allow a minimum of nine months to pass and then review your credit score. Depending on the level of your credit score increase, it may be possible to apply for other types of credit. If your credit score remains under 600, continue to make payments on time, keep your balances under 30 percent and review the score every six months.

How to Dispute Inquries on My Credit Report

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Your credit report is the basis for financial decisions lenders and creditors make on your behalf based on information contained within. Credit reports need to be reviewed on a regular basis to check for errors and inaccurate information. You have the right to dispute or question anything on your credit report that you believe to be listed in error. Disputing inquiries made to your credit report is a way to keep tabs on who has been reviewing your information.

Instructions

Request a copy of your credit report from each of the three main credit reporting agencies: Equifax, Experian and TransUnion. Review and read through all information contained in each report and highlight any errors you notice. Pay attention to credit report inquiries made to your credit and note the names of each individual or entity that made the request.

List all inquiries to your credit report that you do not remember or you are disputing. List the name and all contact information of the company performing the inquiry and list the date of the credit inquiry.

Write a letter to all three credit reporting agencies. List your full name, address, contact information and Social Security number. State that you are disputing inquiries made to your credit report by the following entities and then list each one and the date the inquiry was made. Make a copy of the letter before sending to each agency.

Mail the letters and follow up by phone or mail in six to eight weeks after sending your letter. Request a copy of your revised credit report to show that the changes and disputes have been noted on your account. Keep a list of the businesses and entities in question who made inquiries to your credit report without your knowledge or permission and monitor your report to see if they appear again.

Does a Car Loan Inquiry Hurt My Credit Score?

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After a potential lender pulls your credit report to check your score, the lending company shows up on your report as an inquiry. Inquiries generated in response to your application for credit do hurt your credit score after a short waiting period, but in most cases, the impact is minimal.

A car loan inquiry will reduce most people's credit scores by five points or less, according to FICO, the company that developed the most commonly used credit scoring model. The exception is someone who has a short credit history or just a few credit accounts. In this case, the impact might be more than five points because the credit report has less positive information to offset the inquiry.

Although inquiries show up on your credit report immediately, they will not begin to affect your FICO credit score until 30 days later. This is important because it allows you to compare interest rates between lenders when you are shopping for a car loan. Even though the first lender makes an inquiry, this inquiry will not affect your credit score that the other lenders see when they pull your credit report during the following month. This allows you to compare loans and interest rate quotes based on the same credit score.

The FICO credit scoring formula treats multiple inquiries for the same type of loan during a short time period as just one inquiry. This means that whether you have an inquiry from one car loan issuer or five on your report, your credit score will only decrease for the first inquiry. The time period for multiple inquiries depends on what FICO scoring model the lender uses. With the older scoring model, inquiries within a 14-day span are counted as just one inquiry. The newer scoring model lengthens the time period to 45 days to allow more time for rate shopping.

Having one inquiry on your credit report does not have a very significant impact on your credit score, compared to other negative information on your report. Late payments and credit cards with balances close to their limits hurt your score more than a car loan inquiry. However, having many separate inquiries that do not fall within the multiple inquiry category above can hurt your score. This is because FICO statistics show that someone with six or more inquiries on his credit report is eight times more likely to go bankrupt than someone with no inquiries.

What to Do With a Bad Credit History

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Carrying around a bad credit history is a heavy load. It can have immediate and serious consequences on your personal financial life, making it hard or impossible to qualify for house or car loans, and can even cause an employer to decide not to hire you. Despite radio and television advertisements to the contrary, there is no quick-and-easy fix to a bad credit history. The passage of time is the surest bet, though there are some proactive steps you can take to improve your credit now.

In general, adverse credit information stays on report for seven years. Some types of bankruptcy don't come off for 10 years. Waiting for your credit report to correct itself is a maddeningly slow process, but ultimately works. The key is that you don't acquire any additional bad credit items in the meantime, because any time a new late or missed payment goes in your file, the clock starts all over on that item. Take care that you order a credit report after the time span has elapsed to make sure that items set to expire actually are deleted from the record.

The first thing to do when it comes to repairing your credit is to order a report from the three major credit reporting bureaus, Equifax, Transunion, and Experian. Put these names in your files and don't lose them. They hold the key to your financial future. The good news is that they are required by law to provide you with a free copy of your credit report each year. If you haven't looked at yours in a while, do yourself a favor and order them. False bad reports and outright wrong information that negatively effect your credit happens frequently.

There is a dispute process in place in the event you find a negative item on your credit report that shouldn't be there. Write a letter to the bureau in charge of the erroneous report, and don't forget to send it certified mail with "return receipt requested" so you will have proof they received it. You might be tempted to think that your case could be helped by one of the myriad of "credit repair" companies. The truth is that attorneys for the Federal Trade Commission claim they have yet to find a legitimate credit repair operation that lives up to their claims.

The best way to improve a bad credit history is to never let it happen in the first place. Sounds simplistic, but those experiencing financial trouble tend to adopt a head-in-the-sand approach and hope the problems will disappear on their own. Here's a bit of advice: they won't. Call your creditors and discuss payment plans ahead of time. They spend so much time chasing bad debt, they'll treat you like a king just for keeping them in the loop. A simple phone call now could save seven to 10 years of waiting for a missed payment to stop terrorizing you.

What Will Happen to My Credit if One Mortgage Payment is Missed?

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Missing a mortgage payment can be detrimental to your credit score. Missing more than three mortgage payments can result in foreclosure proceedings. Also, your lender may demand the total due, including the missed payment and the current payment, be paid all at once.

A missed mortgage payment occurs when a payment is more than 30 days late. If possible, try to make a payment before it becomes 30 days past the due date in order to prevent negative information from showing up on your credit report.

Mortgage payment history affects your credit score more than other accounts such as car payments or credit card payments, according to the Broker Outpost. Therefore, it is always best to pay your mortgage on time and let another bill be late instead. A late mortgage payment may drop your credit score by 50 to 100 points, Bad Credit Advisor asserts. One late payment does not drop your score by quite as much, Mortgage Q n A argues, but once a payment becomes 120 days late, the score drops significantly.

If you know you cannot make a payment before the 30-day time limit, contact your mortgage lender. They may be willing to work out a solution so the late payment does not show up on your credit report, which will prevent the missed payment from affecting your credit score.

Laws About Credit Reporting

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Your credit report contains a vast amount of personal information.The Fair Credit Reporting Act (FCRA) regulates which companies may access your information, what information may be put in your credit report and what your rights are in regards to protecting that information.

Your credit report contains your credit history for the past seven years, longer, if you have filed for bankruptcy. Companies that extended you credit report this information, along with your payment history, to the three credit bureaus: Equifax, Experian and TransUnion. Late payments, delinquent child support payments, civil judgments, liens and bankruptcies are on your report, which also contains your name, address, prior addresses, birth month and year, and past employers. Information about your marital status, race, age and medical history cannot be included in your report, unless you give consent.

Anyone who can prove a legitimate business need may have access to your credit report. This includes employers, landlords, insurance companies, state and federal governments, and potential lenders. Employers are required to have your consent. If you are denied credit or an apartment lease due to information found in your credit report, you may request a free credit report within 60 days.

You are entitled to one free credit report per year from each of the credit bureaus. You don't have to order them at the same time. Order one every few months so that you have continuous access to your report. You may purchase your credit report at any time. Some companies offer 24 hour access, credit monitoring and updates for about $15 per month. Purchasing a monthly report can help protect you from fraud and help you maintain a high credit score.

If you find inaccurate information in your credit report, you may contact the credit reporting agency via mail, telephone or online, to report the error. All three bureaus have a website where you can easily dispute a charge or report an error. They have 30 days to conduct an investigation. In addition, be sure to contact the creditor responsible for the information. The bureau must provide the result of the investigation in writing. If the dispute is not removed, write a brief explanation about the charge, which the bureau will add to your report.

Each credit bureau may compile and sell marketing lists to creditors and insurance companies, which may result in you receiving pre-approved credit offers. These offers aren't viewed as regular inquiries on your report until you accept them. You may opt out by calling (888) 567- 8688 or by writing to each one of the credit bureaus.

What Type of Credit Builds Your Credit Score the Fastest?

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Once your credit and score have plummeted, it takes consistent work and effort to rebuild good credit. Considering credit scores are used for so many things, including many job applications, utilizing methods to improve your credit rapidly are essential.

The quickest way to boost your credit is to decrease the amount of money you owe to lenders. This includes mortgages, car loans and especially credit card debt. If you are able to pay down your balances, or pay all of at least one card off, your credit score should improve in as little as two months.

Many credit reports contain errors. Sometimes, you will spot a late payment from years ago that you do not recall. It is the responsibility of the lender to prove, within 30 days, that you did indeed default on this payment. If they can't prove it, the late payment is removed from your credit report, improving your credit score immediately.

Apply for a secured credit card for the sole purpose of rebuilding your credit card. Secured credit cards need a deposit, and your account limit is the amount of deposit. Use the card and make payments each month, on time, or in full. Good payment history will improve your credit score within six months.

Banks tend to be more lenient about extending credit cards to solely be used as gas stations. Apply for a gas card and pay religiously. The banks will report on-time payments to the credit bureaus and your credit score should show improvement in minimal time.

No matter which method you use, not increasing your balance owed and making on-time payments is vital to improving your credit score rapidly. Each report on your credit has a predetermined amount of time it can remain on your report; if it's still present after this length of time, contact the credit bureau or reporting agency to have it removed permanently. Once removed, your credit score will improve instantly.

The Long-Term Effects of Bad Credit

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Having bad credit puts you at a disadvantage in many areas related to borrowing and spending money. Your bad credit might be the result of a bankruptcy, foreclosure, expensive medical bills, a divorce or credit card overspending. Regardless of the cause, your bad credit will follow you for nearly a decade, or longer if you don't change your ways.

Traditional lenders, such as banks, credit unions, car dealerships and credit card companies, always check your credit score prior to lending any money or issuing credit. Your bad credit might cause the lender to reject your loan applications. Because of this, you might not be able to buy a house or car. Instead you'll find yourself renting a house and driving an old vehicle with high maintenance costs.

When you do manage to borrow money, you will likely end up paying high interest rates. Each additional percent in interest costs $10 more per year per $1,000 borrowed. On a mortgage, this can make a huge difference in the cost of the loan, both in monthly payments and total lifetime interest. When the monthly payments are higher because of bad credit, this can lead into a downward spiral, because you cannot afford the payments and continue adding negative information to your credit report.

Bad credit affects you in areas beyond borrowing money or obtaining lines of credit. Many employers pull your credit report when making decisions on hiring, firing and promotions, especially if the position involves working with money. Insurance companies often charge higher premiums for people with bad credit, because they have found that credit is correlated to the cost of claims. Landlords use credit checks to determine whether to rent to a particular tenant.

Most negative information on your credit report will stop affecting your credit score after no more than seven years. Some types of bankruptcy stay on your credit report for 10 years. This means that as long as you can get yourself back on track by putting positive information on your credit report, your bad credit score can turn into a good one in seven years, or at the most, 10 years. However, you need to get rid of your bad habits, such as carrying high credit card debt and purchasing things you can't afford, and start managing credit responsibly.

How Can College Students Build Credit?

1:44 AM No comments

Carrying a credit card debt while still in school can be risky, but college can also be a good time to begin building your credit, in preparation for living on your own after graduation. New federal laws have made it more difficult for college students to take out standard credit cards, but there are other ways for college students to begin building credit. Some of these are safer than traditional credit cards.

Having a credit card and making all of your payments on time is one of the easiest ways to build credit while in college, but there are some drawbacks. Many banks and credit card issuers offer credit cards to those in college, but students should beware that failure to make all of their payments on time could saddle them with poor credit ratings that can follow them for years. There are also new restrictions on credit cards for those under 21. The Credit Card Accountability, Responsibility and Disclosure Act of 2009, which came into effect in February 2010, prohibits credit card companies from giving anyone under 21 cards with limits of more than 20 percent of their earnings. If a student is not employed, they can now only get a credit card with a co-signer. The law also requires credit card companies to get a parent or guardian's permission before raising the students' credit limit.

A prepaid card works in a similar way to a debit card. You load up the card with cash and every time you swipe the card, money is deducted from your credit account. You can then add more money to the account. The difference between a prepaid credit card and a debit card is that some prepaid cards, such as the Account Now Visa card, report the activity on your card to the credit bureaus. This is a safe way to build credit while in college, but some prepaid card issuers charge high monthly and transaction fees so that you are, in effect, buying your credit rating.

Parents can help their children build credit by adding them to their own credit cards. The college student would be given a credit card in their own name, but all the charges would go on one account. Credit agencies will report activity on the joint card in both the students' name and the parents' name, so students can begin to build a credit history this way. Both users will be limited by the parent's credit limit. One drawback to joint cards is that the parent will be ultimately responsible for any debts run up by the student. Another drawback is that any late or missed payments made by parents will be reported on the students' credit history, so students' could end up with a poor credit rating.

Some types of bills may be reported to credit bureaus and can help you build a credit rating even if you do not have a credit card. Even if you live on-campus and have few bills to pay, taking out a mobile phone contract and paying it off promptly each month may help you build credit. Taking out a student loan and making all of your payments on time can also help you to build credit while still in college. Because student loans come with low interest rates, they are a cheap form of debt. If you have taken out a student loan with a co-signer, some loan companies will allow you to release the co-signer after a period of time, allowing you to build credit of your own.

Saturday, June 30, 2012

Instructions

Friday, June 29, 2012

Instructions

Wednesday, June 27, 2012

Instructions

Identification

Credit Inquiry

Considerations

Tip

Tuesday, June 26, 2012

Significance

History

Potential

What Are Biweekly Payments?

How Does It Help ?

Convenience and Discipline

Considerations

Federal Reserve System

Federal Trade Commission

Credit Counselor

Credit Reporting Agencies

Monday, June 25, 2012

Types

Time Frame

Permissible Purpose

Effects

Options

Sunday, June 24, 2012

Accessibility

Credit File Freeze

Inquiries

Conclusion

Saturday, June 23, 2012

Secured Card

Store Card

Secured Loan

Co-signing

Benefits

Charge-Offs

Collection Accounts

Considerations

Thursday, June 21, 2012

Understand the Purpose

Shopping for a Policy

Choosing Coverage

Cancellations and Policy Lapses

Wednesday, June 20, 2012

Significance

Time Frame

Considerations

Misconceptions

Prevention/Solution

Permissible Use

Considerations

Warning

Disputes

Sunday, June 17, 2012

Instructions

Payment History

Amount of Debt

Credit Age

Types of Credit

New Credit

Features

Definition

Credit Effects

Solution

Confirmation

Considerations

Structure

Errors

Excessive Debt

Account Changes

Utilization

Friday, June 15, 2012

Did You Apply for Credit?

Free Credit Check

Account Review

Tip