Credit Scores & Employment

Your credit score is an important number. Mortgage lenders rely on this three-digit number to determine if they'll give you a home loan and at what interest rate. Auto insurers use the number to help determine your car insurance rates. Credit card issuers use it to determine if you qualify for their cards. And, increasingly, employers consider these three-digit numbers when they're making hiring decisions.

How Credit Scores Work

Your credit score encapsulates how you've handled your finances in the past. If you have a history of making your car payments late or forgetting to pay your credit card bills entirely, then your score will be low. Your score will also be low if you run up large amounts of credit card debt. If, though, you always pay your bills on time and you don't have mountains of revolving debt -- and you've never filed for bankruptcy protection or lost a home to foreclosure -- the odds are good that your credit score is high. Most lenders prefer to work with consumers who have credit scores 720 or higher on the popular FICO credit-scoring system.

Employers and Credit Scores

A growing number of employers are checking the credit scores of job applicants when making hiring decisions. About 60 percent of employers in 2010 checked applicants' credit scores for some hiring decisions, according to a survey by the Society for Human Resource Management. This is up significantly from past years. A 2003 survey by the Society for Human Resources found that just 35 percent of employers were checking the credit scores of job applicants.

Why Employers Check Credit Scores

Employers say they check credit scores because high scores show that an applicant has made wise financial decisions in the past. For some jobs, this is important, employers say. For instance, applicants for an accounting job should be financially savvy enough to earn a high credit score. Critics, though, say that this process hurts people who truly need jobs. Those with low credit scores often get them because they don't have enough money to pay their bills. If employers deny them a job because their scores are low, then these people will still not have enough money to pay their bills.

Boost Your Credit Score

You can boost your credit scores so that you don't have to worry about whether a potential employer is checking your credit. To gradually but steadily increase your score, pay all your bills on time and cut down on your outstanding credit card debt. If you take these two steps, your credit score will improve. Don't expect instant results, though. Your score will take several months to improve.

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What Causes the Credit Score to Go Down

Increasingly, lenders place a significant weight on credit scores when consumers apply for a loan. According to the Federal Trade Commission, a growing number of insurance providers also utilize the information in credit histories to determine who may be too risky to insure. Knowing what contributes to a quality credit score and what causes the credit score to go down can facilitate building a solid credit history, resulting in offers of better interest rates and lower insurance premiums.

Payment History

According to the experts, the most substantial factor in calculating a credit score is payment history. Delinquency or late payments have a major negative impact. For example, the most commonly used credit score, the FICO, (a registered trademark of the Fair Isaac Corporation), assesses credit risk based on a weighted percentage of factors. Payment history contributes to more than one-third of a FICO credit score. Other major factors that can drastically reduce a credit score are foreclosures, liens, garnishments and, especially, bankruptcies, which remain on the record for up to 10 years.

Types of Credit

The types of credit accounts an individual maintains affect the credit score. The more diverse types of credit accounts -- including credit cards, store cards, installment loans, personal loans from a finance company, as well as debit card usage -- the higher the score. Conversely, the less diverse the accounts, the more the score will go down. Having too many credit accounts negatively affects the FICO score, just as having too few lines of credit does. On the other hand, opening several new credit accounts to diversify lines of credit, can have negative consequences, because the longer credit accounts have been established, the higher the score.

Total Amount Owed

Total debt liability plays a significant role in the calculation of credit scores. For consumers who carry large balances, overall credit scores are lower. Thus, large amounts of debt make the credit score go down. Having a large line of credit, but not using it all has the opposite effect. Lenders think a consumer can afford debt if it is available but not maxed out.

Number of Inquiries

Numerous inquiries into a credit record can cause the overall score to go down. Credit card companies and other lenders look at credit histories to prescreen candidates for new offers. The number of inquiries of this type does not affect credit scores. Frequent monitoring by lenders with which the consumer has an established loan doesn't affect a score either. In addition, looking at your own credit scores do not cause them to go down. Montana State University Extension Service advises people who intend to apply for a large loan in the near future to check their credit scores six to 12 months prior to applying in order to have time to raise the score before dealing with a lender.

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How Can I Report a Loan to the Credit Bureau?

Small businesses often want to report customer payment history to the national credit reporting bureaus, but this service can cost thousands of dollars a month. Individuals and small businesses can report to the credit bureaus on the cheap and sometimes for free. However, joining a national credit bureau usually is the best way to report loan payment history.

Reporting as a Consumer

As a consumer, you usually want the credit bureaus to report all of your accounts in good standing, because having as many positive accounts as possible is the only way to attain an excellent credit rating. If you notice an account omitted from one of your credit reports, you can ask the credit agency to list it. However, the agencies only do this if the creditor has a subscription to their service and proof of payment, such as canceled checks. Thus, you can only report a loan to the major credit bureaus when your lender forgets to or for some reason won't report your particular account.

Reporting for Small Business

The major credit reporting agencies have stringent reporting requirements. For example, a business must have at least 500 accounts to subscribe to the credit reporting bureaus. Thus, it may be impossible for your business to directly report to the agencies. However, firms called "credit reporting service companies" can report your accounts for a fee. At the very least, if your company has enough accounts to report to the credit bureaus, you can either sign up for the subscription service or contract some of the work, such as formatting your data, to a credit report service company.

Joining a National Credit Bureau

If you want to join a national credit bureau, you must call the agencies individually and ask for an application. Consider the benefits and disadvantages of subscribing to the bureaus. You will need computers and extra manpower to report accounts, which may not outweigh the benefits of motivating customers to pay on time to avoid damaging their credit.

Tip

You can sell a debt to a collection agency or file a lawsuit -- both likely result in the account appearing on a debtor's credit report because the agencies actively search for public records and collection account lists from debt collectors. Civil judgments and collection accounts usually only damage a score, so this method is useless if you want to report positive data. You could self-report a loan to an alternative credit agency. Alternative credit bureaus report anything you can prove, even a loan between family members, but alternative reports might not carry as much weight as a traditional credit history.

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How to Get a Rapid Rescore on a Credit Report

It can be disheartening to learn that your credit score is low when you are trying to apply for a mortgage or other loan. While you can't instantly fix the mistakes you've made in the past, you can fix mistakes that are on your credit report. If your credit report has any errors, you can have the credit company fix those errors, which can result in a rapid rescore on your report. You can improve your credit score in just six weeks.

Instructions

1

Bite the bullet and order a copy of your credit report. You need to see why your credit score is low. The U.S. government allows you to receive one free credit report per year. The only official place to order your free report is AnnualCreditReport.com. When you order the free report, you do not get to see the credit score--this is an additional fee. Other sites will give you a free report and score, but will force you to sign up for a credit monitoring system with a monthly fee.

2

Look through the report to find any mistakes. One of the most common errors that you'll find is unauthorized credit checks. Whenever you get credit card offers in the mail, these companies have often checked your credit report. Also look at the accounts that are listed on the report. Are there any that are still open even though you had closed them? Are all the dates correct? Are your balances correct?

3

Notify each of the three credit bureaus about the mistakes on your report. Write a letter to the credit bureaus detailing the errors on your report and asking them to correct these errors. Make sure to send these letters by certified mail so that you can verify that the companies received your letters.

4

Follow up if you have not received a response in six weeks. The credit bureau must look into your dispute and respond with the results within six weeks. If six weeks pass and you have not heard back from the credit company, call to find out where your account stands. Prompt attention on your part will speed your rescore.

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How to Get Information Off Equifax

You can receive your credit report from Equifax for free once every 12 months. Monitoring your credit report allows you to keep track positive and negative changes and catch any fraudulent activity. Getting your credit information from Equifax is fairly easy. If you want to know your credit score, however, you will have to pay a fee.

Instructions

1

Visit the Equifax website and click the area that says free annual credit report.

2

Select your state from the menu and enter the information. You will need your full name, date of birth, social security number, current address and previous address if you have moved in the past two years.

3

Select Equifax from the list of three providers.

4

Confirm your information is entered correctly on the Equifax page. You will have to answer security questions to verify that your account is not being accessed by someone else.

5

Submit your order. You can now view and print your report.

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Easy Ways to Fix Credit Report Mistakes

Errors and mistakes listed in a credit report can have serious consequences on your financial future. It is vital that consumers pull copies of credit reports yearly to review for accuracy. Any errors noted should be corrected right away. To correct errors on your credit report, you must follow one of three options.

Credit Reports

Credit reports are a comprehensive record of the way you have maintained your financial accounts. A score is assigned to your credit report and is based on the information listed within your credit report. The more negative information in your account, the lower your credit score. A credit report with a lot of negative account information will result in a lower credit score, which will further result in lack of credit you can obtain, higher interest rates, higher insurance premiums and possibly the inability to rent or obtain certain jobs.

Mail a Letter

Mailing a letter is one way to dispute negative and incorrect items on your credit report. A dispute mailing address is listed in your credit report. Write a brief letter explaining that you have reviewed your credit report and found mistakes. List each mistake and include the information regarding the account. Ask that the item be corrected so your report is an accurate picture of your financial history. Mail the letter to the address in the credit report.

Call

Call the credit bureau in question. The dispute phone number should be listed in your credit report. Follow the prompts to reach a live operator who can handle your dispute. Tell the operator all of the mistakes you found in your credit report and she will initiate a dispute to update or correct the information.

Online

Visit the credit bureau online. Enter the requested personal information and credit report number. List each account on your credit report that you wish to dispute. Submit the dispute and the information is electronically sent to the credit bureau and the investigation will commence.

Dispute Process

The credit bureau in question will start the investigation once you have provided the information. The bureau contacts the creditors and asks them to verify or correct the information. The creditor must respond within a certain time frame, or the credit bureau will delete the entire account. Be careful when disputing a mistake on an otherwise positive reporting account because you risk the entire account being deleted if the creditor doesn't respond. A deleted positive account can lower your credit score. An example of this would be you have a credit card that has never been late and is 10 years old, but you notice the balance is a few dollars off what is actually on the card. A difference of a few dollars on a balance is not going to affect your credit score, and if you dispute this and the creditor fails to respond you now have lost the entire trade-line that affects your credit utilization and the age of your credit file, and may result in a drop of your credit score.

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How to Report Payment History to the Credit Bureau

Your credit report may not accurately reflect your payment history, since not all credit accounts are reported. Most creditors supply information to the credit bureaus; however, some creditors, such as credit unions, local retailers, gasoline creditors and medical offices, often do not.

Instructions

1

Have a current credit report. Go online to AnnualCreditReport.com to obtain your free online credit report from the three nationwide credit reporting agencies: Equifax, Experian and TransUnion. Print the reports from all three credit bureaus.

2

Compare your list of debts with each credit report. Make sure there are no errors. If you notice inaccuracies, submit online dispute forms to each credit bureau.

3

If you have debts that do not appear on your credit report, contact each creditor and request that the accounts be added to each credit-reporting agency.

4

Contact each credit reporting agency and request that your unreported debts be added to your credit file. Keep copies of all correspondence, and never send original documentation.

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How Much Impact Does a Charge-Off Have on a Credit Report?

If you have been pushing bills aside for few a months due to loss of job or other misfortune, a charge-off might be right around the corner. Now is the time to find out just how this situation will affect your credit.

Credit Score

One of the worst impacts charge-offs will have on your credit report is a sharp decrease in your credit score. The more charge-offs you have, the lower your credit score.

Timeframe

Charge-offs typically occur after six months of nonpayment. These notations are recorded on your credit report for up to seven years after your initial delinquency.

Taking Action

Once you have paid your delinquent accounts, credit notation will change from "unpaid charge-off" status to "paid charge-off" status. This won't immediately increase your credit score, but will look better in the eyes of new potential creditors.

Negotiations

To get a charge-off removed from your credit report you can try negotiating a payment plan with your original creditor. Make sure you get something in writing from your creditor to confirm the agreement.

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Can Employment Background Checks Hurt Your Credit Score?

Information in your credit file at credit bureaus affects the calculation of your credit score. Employers who do background checks generally need information that goes beyond what they would be able to determine from your credit score. Nonetheless, some employers perform credit checks on employees and job applicants to gauge financial responsibility.

Credit and Background Checks

Credit checks and employee background checks involve different processes. Employment credit checks usually go through credit bureaus, which maintain consumer files that show whether a consumer pays bills on time, where the consumer has worked, and other information related to a person's finances. Employers use background checks to determine if someone has a criminal history or is currently facing charges in a court case. Employers use employment-screening services to do background checks, rather than credit bureaus. Therefore, a background check by itself generally has no impact on your credit score.

Inquiries

The credit industry refers to a credit check by an employer, creditor or lender as an inquiry because others ask, or inquire, to receive a copy of your credit report. The Fair Isaac Corporation created the FICO credit score. The company notes that inquiries do appear on consumer credit reports. However, the only inquiries that affect a FICO score are the ones that result from applications that consumer submit to open new credit or loan accounts. Therefore, a credit check done by an employer wouldn't affect your FICO score.

Credit Check Rules

The U.S. Fair Credit Reporting Act requires employers to get written consent from a job applicant or employee before performing a credit check, according to the Small Business Administration. An employer may decide not to hire or promote someone based on information in a credit report, even though the credit check won't affect a person's credit score. In such cases, employers are required to provide an applicant or employee with a copy of the credit report. The applicant or employee can contact the bureau that issued the report and dispute any incorrect information.

Considerations

People who don't work with cash, valuables or finances at their jobs may not need to be overly concerned about employment credit checks, according to an "MSN Money" article by Liz Pulliam Weston. That's because some companies are more concerned with verifying a job applicant's identity or checking into criminal histories than in checking credit ratings. Therefore, a recent criminal history may be more likely to prevent someone from getting or keeping a job than a low credit rating.

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Does a Pre-qualification Affect Your Credit?

Your credit score plays a major role in a lender's decision of whether or not to issue you credit, so keeping your score as high as possible is important. Pre-qualifying for credit generally does not affect your credit score unless the lender pulls your credit report at your request. If you are concerned about your score, try to pre-qualify without a credit check.

Credit Inquiry Basics

If a pre-qualification does affect your credit, it is through generating a credit inquiry. Every time a lender views your credit report, the lender's name appears in the section of your credit report that lists inquiries. This section is further divided into hard inquiries and soft inquiries. Hard inquiries are those you initiate by applying for credit, and these hurt your credit score, usually by five points or less per inquiry. Soft inquiries are not related to credit or were not initiated by you, so they do not affect your score at all.

Mortgage Pre-qualification

Before shopping for a home, many potential buyers get pre-qualified by a lender, which is a process by which the lender helps determine how much money the buyer seems qualified to borrow. Most pre-qualifications do not include a credit check, but the lender will probably ask the borrower about his general credit habits to estimate the credit score. If the lender asks for your social security number, ask if he will run a credit check before you give it to him. Do not provide the number if you do not want a credit check. If you ask the lender to run a credit check during the pre-qualification, this will result in a hard inquiry that will slightly lower your credit score.

Mortgage Considerations

Lenders will need to check your credit score to give you an exact quote on an interest rate because the rate is mostly based on your history with managing credit. Therefore, if you want to get interest rate quotes during the pre-qualification process, prepare to allow hard inquiries on your credit. Thankfully, the credit scoring formula recognizes when you are applying for just one loan with multiple lenders and only penalizes you for one inquiry, provided they are all within a two-week time period. In addition, an inquiry does not begin affecting your score until 30 days later, so each lender should see the same credit score.

Pre-qualified Credit Offers

Another type of pre-qualification is for credit offers that you get in the mail. These are often for credit cards but sometimes are for personal loans or other types of borrowing. You do not need to worry about these pre-qualified, pre-screened or preapproved credit offers because you did not initiate them. Any credit inquiry that you did not initiate by applying for credit does not affect your score.

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How Does a Co-Signer Show Up on Credit Report?

Credit is generally extended to consumers based on information contained in their credit reports. Information on a credit report will not only reflect loans that a consumer is directly responsible for paying, but also loans for which they have signed as a cosigner. A cosigner is not responsible for paying the loan as long as the loan is not in default, but the obligation that they may have to pay will be there until the loan is paid in full.

Significance

A cosigned debt will appear on the cosigner's credit report much like any other debt. Delinquencies and other negative information, as well as positive payment information on the account, will appear on the cosigner's credit report.

Primary Borrower Impact

The credit report of the primary borrower may also reflect the presence of a cosigner on the cosigned account.

Effects

The presence of negative information will impact both the primary's and cosigner's credit reports negatively, making it more difficult to obtain new credit for the cosigner.

Considerations

The appearance of the cosigned account will also impact the cosigner's ability to obtain new debt even if the account is kept is good standing as the balance will be figured into the cosigner's debt ratio since they may at some point become responsible for paying the debt.

Misconception

Cosigning for a loan does not have to automatically preclude the consumer from obtaining new credit, though proving that the loan is being paid by the primary consumer may be required before new credit can be extended.

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How to Remove a Freeze on Your Credit Report

If you are worried about someone getting access to your personal information or believe you might be a victim of identity theft, then placing a security freeze on your credit report can thwart many of these attacks. The freeze will prevent anyone from accessing your credit report without your consent, and identity thieves will not be able to open new lines of credit. Once you have cleared up these issues or fixed any security threats, you will need to request that the freeze be removed from your account.

Instructions

1

Decide if you want a temporary lift or if are ready for a permanent lift on your credit report. You can request a temporary lift if you need to allow a specific lender access to your account or if you need to apply for credit. All three of the major credit monitoring companies---Equifax, Experian and TransUnion---offer a temporary lift through their websites. They can also be contacted by phone or sent a request by mail.

2

Go to the credit monitoring websites and use their webpage to lift the freeze. Every state has different laws and fees regarding a credit freeze, so be sure to navigate to the right state using the link provided. You will need to have your personal information at hand including Social Security number, address and the personal identification number that you received when you put the freeze on your account. This process will need to be done for any of the three credit monitoring companies with which you placed a freeze. If you are unable to do this using the Internet, continue with steps below.

3

Call the credit monitoring companies to lift the freeze:

Equifax: (800) 685-1111
Experian: (888) 397-3742
TransUnion: (888) 909-8872

You will need your personal information and the personal identification number just like you would if using the website. The freeze should be lifted within three days of confirmation.

4

Send a request by mail:

TransUnion
Fraud Victim Assistance Department
P.O. Box 6790
Fullerton, CA 92834

Experian Security Freeze
P.O. Box 9554
Allen, TX 75013

Equifax Security Freeze
P.O. Box 105788
Atlanta, GA 30348

Each of the three credit monitoring companies has certain requirements to be sent with the request. Check on the cost and specifics as dictated by state laws.

5

A permanent lift of the freeze works the same way as a temporary freeze, and it can be done through the Internet, phone or by mail. You need to specify that you wish the lift to be permanent and then follow the same procedures mentioned above.

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What Effect Does Debt Negotiation Have on Your Credit Score?

Debt negotiation is a useful tool for consumers who are seeking a way to resolve outstanding debts or bring delinquent accounts current. If you're considering debt negotiation, you should first be aware of the potential impact to your credit score.

Short Term

Part of the debt negotiation process requires that you default on the debts you wish to negotiate. With the first missed payment, your credit score may drop as much as 100 points.

Long Term

Negative information can remain on your credit report for up to seven years, although the weight of this information may decrease as the accounts age.

Reporting

Negotiated debts that are reported as "paid in full" rather than "settled in full" are not as damaging to your credit score.

Time-Barred Debts

Time-barred debts are those that are deemed uncollectible due to their age. Negotiating payment for a time-barred debt can negatively impact your score, as paying the account renews its date of last activity.

Recovery Time

It may take your credit six months to two years to recover from the impact of debt negotiation, depending on the type of credit you are able to obtain and how wisely you use it.

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What If Someone Illegally Looked Up My Credit Report?

The Federal Fair Credit Reporting Act, along with some state laws, limits who has the right to view your credit report and for what reason. If someone breaks the law by looking at your report without a legitimate purpose, you can sue for any money you lose as a result and possibly for more than you lost.

Legal Users

The Fair Credit Reporting Act identifies the people who have the right to view your credit report. The list includes you; businesses deciding whether to grant you credit; employers making job decisions; landlords and insurers you want to do business with; and various government and law-enforcement agencies. In many cases, you have to give consent before they can get the information. As of 2011, four states limit the right of employers to look up credit reports and similar bills have been proposed in other states.

Handling Information

The law also includes guidelines on what happens after someone checks your credit. If someone makes a negative decision based on information in your file -- to deny you credit, a job or an apartment, for instance -- she's required to tell you. She must also tell you the credit information that influenced her decision and provide contact information for correcting errors. These requirements can be waived: Employers who do their background checks in house, rather than hiring investigators, are exempt, for instance.

Finding Out

Even though it's illegal, it's possible someone can get your information when they're not authorized. Divorcing spouses, private investigators or nosy neighbors might all want to peek at your file. One way to check is to order an annual report from each of the three major credit bureaus, available free through the Annual Credit Report website. Your report will include all requests for your credit report made in the previous two years. Regular annual checks will alert you if someone's snooped who shouldn't have.

Penalties

If you discover someone has used your report illegally, you can file a complaint with the Federal Trade Commission. You can also sue the violator for damages equal to any losses you've suffered, or $1,000 -- whichever is greater -- plus attorney fees and court costs. You may be able to add punitive damages. The credit bureau can also file its own lawsuit. If the illegal action resulted from negligence rather than an intentional action, you can only sue for financial damages and court costs.

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What Happens to Credit Ratings With a Balance Transfer?

Transferring a credit card balance to another card with a lower interest rate is a useful way to lower your costs and put more of your money toward paying off your debt. The effect of the balance transfer on your credit score depends on your situation and how you execute the transfer.

Opening a New Card

Many credit card companies offer low introductory interest rates on balance transfers for people who sign up for a new credit card. However, opening a new card will hurt your credit score. First, when you fill out a credit card application, the credit card company checks your credit, which generates an inquiry on your credit report. Unless you have a very thin credit file, the inquiry should hurt your score by five points or less. When you get the new credit card, this adds a new account to your file, which will temporarily hurt your score as well. The effect varies depending on how many older accounts you have in your credit history.

Credit Utilization

The major way in which a balance transfer can affect your credit score is through changing your credit utilization ratio. Your credit score penalizes you for using a high percentage of your available credit, both on each individual card and overall. Therefore, if you get a new card with a credit line of $4,000 and transfer $4,000 onto it from another card, your new card will be maxed out, which will hurt your score. However, adding additional credit to your report will also increase your total overall credit and decrease your overall utilization, which helps your score. For example, if you used to have one card with a balance of $5,000 and a limit of $8,000 and now you have a total limit of $12,000 with the same $5,000 of debt, your overall utilization has decreased from 62.5 percent to 41.7 percent.

Closing the Old Card

If you close your old card after transferring the balance off it, this can hurt your credit score. This is because the empty credit card with lots of available credit helps lower your overall credit utilization. Therefore, unless you absolutely cannot trust yourself to have a card with an empty credit line, keep the credit card until you have paid down your debt. Cancel the card only if your overall utilization will still be under 30 percent after you cancel the card.

Payment Tips

Step carefully while you are making the balance transfer to ensure that you do not miss any payments. Even one late payment can have a significant negative effect on your credit score, especially if your score was excellent before. Keep making payments on your old credit card until you have confirmation that the balance transfer has been completed. It is especially important to make on-time payments on a new card with an introductory interest rate. If you miss a payment, your rate could skyrocket to the penalty rate, which will make your balance much more expensive to pay off and could cause further damage to your credit if the monthly payments are more than you can afford.

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FICO vs. VantageScore

If you've ever applied for a credit card, mortgage or car loan, chances are the decision was probably based on a FICO score, the model most widely used by lenders for decades. VantageScore now aims to change that by introducing an alternative. But are the two scores different? And, most importantly, should this alternative matter to you, the credit consumer?

FICO

FICO is a credit scoring model originally developed in the 1950s by Fair, Isaac and Company to help lenders assess and predict your creditworthiness. FICO isn't a credit reporting agency: Instead, the company provides software that applies mathematical formulas to the data in your credit file to calculate your score. FICO produces several different scoring models to help lenders assess a variety of risks, ranging from your capacity to assume a mortgage or other debt to how likely you are to file bankruptcy.

VantageScore

VantageScore is a relatively new entrant into the consumer credit-scoring market. The company was established in 2006 as a joint venture by the three major credit reporting agencies to develop a scoring model to compete with FICO. Prior to VantageScore, if you requested your credit score from each of the three reporting agencies, it wasn't uncommon to receive three different scores because of variations in the contents on file with each bureau. According to the company, VantageScore applies an identical scoring model at all three agencies, thus reducing score variability due to differences in your files' contents and, therefore, providing a more accurate depiction of your creditworthiness. VantageScore is marketed and sold by all three bureaus through individual licensing arrangements.

Scoring

FICO scores range from 300 to 850 and weigh five categories of data in your credit file as follows: payment history (35 percent), amounts owed (30 percent), length of credit history (15 percent), new credit (10 percent) and types of credit used (10 percent).

VantageScore scores range from 501 to 990 and weigh six categories of data: payment history (28 percent), utilization (23 percent), balances (9 percent), depth of credit (8 percent), recent credit (30 percent) and available credit (1 percent). Additionally, VantageScore assigns one of five grades to each range of scores: "A --- Super Prime" (901-990); "B --- Prime Plus" (801-900); "C --- Prime" (701-800); "D --- Non-Prime" (601-700); and "F --- High Risk" (501-600).

Other Comparisons

Both VantageScore and FICO assess your previous credit history and attempt to predict your future credit risk over an ensuing two-year time period. Both have the capacity to render scores, even if you have a "thin" credit file, meaning if your credit history is limited or you don't use credit consistently --- both of which can be important factors in your credit score. VantageScore states that its model doesn't penalize thin files to the extent that FICO does. You should note, however, that this statement originates from VantageScore and, therefore, may or may not be subjective. Despite the similarities, FICO's scoring model continues to be more compatible with the automated underwriting systems currently used by many lenders, as well as by government-sponsored enterprises such as Fannie Mae and Freddie Mac.

Considerations

It may prove difficult for you to conduct an accurate comparison of your FICO score versus your VantageScore because their rating scales differ. Additionally, all three major credit reporting bureaus continue to use FICO's scoring model to render some of their individual credit scores. This could potentially cause confusion if you request your credit score from any one agency versus specifically requesting your VantageScore.

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How Can You Raise Your FICO Score As Soon As Possible?

Fair, Isaac and Company developed the FICO score, a numeric score upon which many lenders make lending decisions. Based on such factors as how much credit a consumer utilizes and the amount of debt the consumer has, banks and others use a FICO score as an evaluation of risk. A person with a high FICO score will get the best interest rates on loans, while someone with a low FICO score may have trouble getting a loan altogether. Improving a FICO score as quickly as possible requires a concerted effort.

Instructions

1

Request a free copy of your credit report each year from the three credit reporting agencies to determine where you are at. The report contains all of the information used to figure your FICO score. Check your report to make sure everything in it is accurate and to protect against identity theft.

2

Make all of your payments on time. In calculating your credit score, about 35 percent is related entirely to your bill-paying history. Making timely bill payments for a few months will begin improving your score. Bills that go beyond 30 days late hurt your score. Late payments that exceed that point hurt your FICO score even more, and bills that go to collections are the worst of all.

3

Keep your credit history as long as possible. While you can't go back in time and open accounts earlier, you can extend your credit history by not closing old credit card accounts. Many credit card issuers will close your account if you haven't used it recently enough, so make it a point to pull out the card once a month and use it to make a small purchase. Then pay the balance right away. Doing so will lengthen your credit history and show that you use credit responsibly.

4

Use no more than about 30 percent of the credit you have available. If your credit limit is $10,000, for example, do not carry a balance of more than $3,000. Pay down your balances as much as you can, focusing first on revolving credit. Credit cards are a good example of revolving credit. This type of credit affects your FICO score more than installment loans, which consumers take out to buy cars, for example. Lenders pay particular attention to the amount of credit you use and view consumers who use a small percentage of what they have more favorably.

5

Stay in touch with your creditors, especially if you are falling behind on paying your bills. It does not take many missed payments to put a ding in your FICO score. Contact your creditors, and tell them why you are having trouble paying your bills. Since they want to ensure they are paid back, they will likely work with you to become current on your payments. Once you have asked for and received help, make sure to keep your account current. It will help your FICO score and reduce the amount you owe.

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How to Obtain the FICO Score Lenders Use

FICO scores, named for the Fair Isaac Corporation that developed it, are the credit scores most lenders use to ascertain your suitability for credit cards, auto loans and home loans. Your FICO score also affects the rate of interest payable on a loan. The higher your FICO score, the lower the interest rate. FICO credit scoring is used by the three credit reporting bureaus: Equifax, Experian and TransUnion. Getting your FICO score can allow you to monitor changes as you find ways to help improve it.

Instructions

1

Apply online to get your FICO score. Its fast and can be viewed instantly. Go to the myFICO website (see Resources). Click on Buy Now. You can get your FICO score from Equifax, TransUnion or both. FICO scores may be different for each agency. Select which one you want, or select both. It costs $15.95 for or $31.90 for both. Click "Continue."

2

Click Create account." Enter your details accurately in the application form. Create your login and password. Pick your secret question.

3

Click Continue. Review your application details. Check for errors. Click Continue. Enter your payment card details and click Submit. Your application, payment details and identity will be verified before you can get your FICO score.

4

Click Continue and wait for Application Successful to appear. Click View my score. Enter your login and password details. View your FICO score instantly.

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Improving FICO

A FICO credit score is the three-digit number that summarizes for lenders the risk that you present as a borrower. The FICO credit scoring system is used by most lenders and all three major credit reporting agencies (Experian, Equifax, and TransUnion). Perhaps you've had some financial problems that have lowered your FICO score, or maybe you're just starting to establish credit. Either way, improving FICO is something you need to plan for and work at. FICO scores range from 300 to 850. Scores of around 680 or higher are considered good.

Using Credit

FICO (an acronym for Fair, Isaac, & Co., the company that developed the scoring system) measures several specific credit behaviors. By knowing what FICO measures you can make sure you use credit in ways that improve FICO. First and foremost, you must pay bills on time---this counts for more than anything else in the FICO scoring system. A rare payment a few days late won't hurt much; however, any payment that is more than 30 days late can take up to 100 points off the FICO score.

Keep the amount of debt you owe well within your ability to pay. If you have excessive debt for your income, consider consolidating debts so you can keep payments current and reduce the total. The type of debt also matters, especially credit cards with large amounts of available credit. Asking lenders to lower credit limits to eliminate available credit will improve FICO. Avoid applying for or closing credit accounts any more than necessary. Frequent account changes (especially if you are turned down) will lower a FICO score. Finally, be patient and consistent. Part of the FICO score is based on how long a record of good (or poor) use of credit you have. It may take a couple of years of timely payments to rebuild a sagging score.

Dos and Don'ts

One way to improve FICO (or at least to prevent damage) is to contact the lender when you run into trouble. Many lenders will refrain from reporting a late payment if you can make and keep an arrangement to bring an account up to date within a reasonable time. Maintaining a stable employment history and a regular savings/investment program also helps to improve a FICO. If you have been forced to declare bankruptcy, it will take several years to rebuild your credit. A good way to start the rebuilding process is to get a secured credit card (one for which you make a deposit as collateral) so you can begin creating a record of on-time payments.

Certain major problems count as negatives that will stay on your credit history for years. These include defaults or court judgments against you for unpaid debts, tax liens, and foreclosure. Bankruptcy will remain on your credit history for up to 10 years. Don't neglect to monitor your credit history for accuracy and contact the credit bureau(s) to have any erroneous information corrected. You are entitled by law to a free copy of your credit report once a year from each of the three major credit reporting agencies (see link below).

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Do Non-Sufficient Funds Affect Your Credit?

Let's say you were strapped for cash and rashly decided to try to float a check. Unfortunately, the check hit your account before your deposit did and now you've incurred a non-sufficient fund fee. The fee hurts and so does the bounced check; but the impact to your credit score isn't the same as the impact to your banking credit.

Banking Relationship

Bouncing a check, swiping that card one too many times, pulling out cash you don't really have --- they all result in the same thing: a non-sufficient fund fee. The fee arises when the bank penalizes you for pushing your bank balance into the negative. Non-sufficient fund fees don't affect your credit score, but they do hurt your relationship with your bank and negatively impact your ability to borrow money in the future.

ChexSystems

The way you handle your banking affairs, including how often you get dinged with a non-sufficient fund fee or your accounts go into the negative, is reported by your bank to ChexSystems. ChexSystems is a financial, consumer reporting agency. It isn't a credit bureau but negative information reported to it can impact your financial future and lasts up to five years. You can be barred from opening other bank accounts or banned from writing checks.

Fees and More Fees

On top of hurting your reputation, going into the negative hurts your wallet. Banks charge up to $40 each time a transaction goes beyond your means, regardless of how much the transaction was worth. Three or more "oops" means up to $100 and more in bank fees, which takes away money you need to pay other bills. If you can't pay the fees, the bank can eventually close your account and report the action to ChexSystems.

What Can Hurt

Defaulting on a loan with the bank, or closing an account on which you had overdraft protection can negatively impact your credit score. Overdraft protection is essentially an as-needed loan, there to deposit money into your account whenever your spending is less than discreet. Closing your account of this nature is the same as closing a credit account.

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Do Timeshares Affect Your Credit?

Timeshares allow you to own a portion of a property to use for vacation purposes. The properties are typically condominiums in resort areas. You purchase a time-share in one-week increments. Most of the companies that finance timeshares report your payment history to credit bureaus. If you fall behind on your loan or maintenance payments, it can have a serious effect on your credit.

Timeshares

Since you are only buying a small percentage of the property, in theory, the cost should be very reasonable. Unfortunately, most timeshare properties turn out to be quite expensive. In addition to high interest rates, you can have high maintenance fees that go up every year. If you get far enough behind, the finance company can start foreclosure proceedings on your timeshare. If you do not make up the payments and the foreclosure is completed, the finance company can file a court action and obtain a judgment.

Collection Procedures

If the finance company obtains a judgment it can garnish your paycheck or go after your assets. It can even record a lien against your primary residence. Timeshares can destroy your credit. Judgments and foreclosures remain on your credit report for seven years. Late payments on timeshares have the same effect as late mortgage payments. Poor credit can prevent you from financing your home or purchasing an automobile.

Alternatives

There are several alternatives to purchasing a timeshare property. If you check your local newspaper's travel section, you can usually find excellent vacation packages. These often offer heavy discounts, and many include airfare. The discounted packages can cost considerably less than a timeshare.

Warnings

High-pressure salespeople often sell timeshares at seminars. The timeshare company invites you to a free meal and presents you with an offer that is only good for the day of the seminar. The presenters do not show you a copy of the agreement until you purchase the property. You are legally entitled to a rescission period that allows you to cancel your purchase. This varies by state and can be as little as three days. Most people do not read the fine print in time to cancel.

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How to Fix My Credit After Divorce

Divorce is difficult under the best circumstances and separating finances during and after a divorce may reflect unfavorably on your credit report. Lenders, insurance companies and even employers may use your credit report to evaluate your reliability in financial situations. While there is no "quick fix" for your credit score, reestablishing a solid history of borrowing and repayment will improve your credit report, resulting in more favorable loan terms and opportunities. The sooner you establish positive credit in your own name the faster your credit score will improve.

Instructions

1

Continue paying on existing joint accounts. You are still liable for the debt, and delinquent payments will reflect negatively on your credit score. Do not depend on your former spouse to make payments, even if he agreed to pay.

2

Separate existing joint accounts as soon as possible. If you or your spouse is unable to pay off a joint account, request that the account be closed to prevent any new charges. Additionally, remove your ex as an authorized user on any accounts and request that your name be removed as an authorized user on any of his accounts.

3

Send copies of court-ordered payment decrees to your creditors and credit-reporting agencies. Ideally, your assets and liabilities were divided as part of the divorce decree. If the judge ordered your ex-spouse to pay off all or a portion of a particular debt, notify creditors. Include proof of any payments for which you are responsible, in addition to your former spouse's liabilities.

4

Request a copy of your credit report from all three major credit-reporting agencies. By law, you are entitled to a free copy of your credit report from Experian, TransUnion and Equifax once a year. Obtain a copy of each by calling 1-877-322-8228. Check the report for errors and contact the credit-reporting agency and your creditors to correct inaccurate information. Be aware that you may still be liable for joint accounts. However, if you were only an authorized use on your former spouse's account, you have no obligation to pay.

5

Establish a personal credit history. Department store cards, bank loans and credit cards all help rebuild your credit. You must use the accounts and pay the bill on time to build a solid payment history. Keep your balances low and pay more than the minimum amount due to give your credit score a boost.

6

Apply for a secured credit card, if are denied a loan due to bad credit. Like a debit card, your card use is limited to how much money you put into the account. Plan to pay off the entire balance each month, as secured credit cards have notoriously high interest rates. Once you establish a solid payment history, apply for an unsecured, lower-interest-rate credit card.

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Reasons for an Adverse Action on an Existing Line of Credit

If you've gotten a notice in the mail that your credit card now has a lower credit limit, higher interest rates or a smaller grace period, you are not alone. Millions of Americans have been shocked to find that adverse action has been taken against them on their existing credit lines and that the excellent credit scores they had didn't quite protect them. There are several reasons that this may happen and only some of them are directly the fault of the person who owns the credit line.

Problems with the Broader Economy

The first and most common situation is that the economy has changed. In 2008, when the Great Recession began, many credit issuers drastically cut back on the credit lines they offered their customers and increased interest rates. This was not done just to individual credit holders, but in many cases across the board. That's because the banks were worried in the wake of the subprime mortgage bust that people would have less ability to repay their debts.

Problems with One Credit Line Affect Others

Even if you have maintained a perfect record with one credit card company, that is not a guarantee that your credit account will not be suspended or otherwise adversely affected. That's because most banks are constantly monitoring their customers' credit reports. When they see that you are in trouble with another lender, they fear they may be next. In order to protect themselves, they will often lower your available credit line.

Changes in the Law

Sometimes, changes in the law affect credit terms. For example, in 2009, Congress passed legislation which reduced the ability of the banks to charge fees and raise interest rates on credit cards. The result was that many credit card companies said they would be forced to reduce or eliminate some of the perks that they offer their customers. While this may not seem as drastic as the adverse actions listed above, this is also something that may affect your credit cards, albeit not your credit score.

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How to Get Help With Fixing Your Credit Rating

Improving your credit rating takes persistence. Your credit didn't become negative overnight, so improving it will take a bit of time and effort. Credit repair is really a lifestyle change and not a quick fix from a formula. The new financial habits you form during the credit repair process could help you live a life of financial freedom. Consider some steps to take to improve your credit rating.

Instructions

1

Budget: There are many free budgeting tools online for the beginner. Dave Ramsey, host of a nationally syndicated radio show, offers comprehensive personal finance resources on his website, daveramsey.com. Have a list of your income and expenses so that you can make a plan to repay your debts and improve your credit score. Include savings in your budget, no matter how small. Eventually, your savings will build and you can pay for emergency expenses with your cash and not incur credit card debt.

2

Credit report: There are also numerous free online sources to obtain your credit report; however, be sure to use the official site---annualcreditreport.com---where you can obtain your free credit report annually from the three nationwide consumer credit reporting agencies: Equifax, Experian and TransUnion. Verify your identity and print or save your credit report. Occasionally, you might need to request your credit report in writing, which could delay the process. Confirm the report for accuracy and dispute any errors. Be familiar with the Fair Credit Reporting Act so that you will know your rights.

3

Public records: Public records consist of judgments, foreclosures, bankruptcies and medical or other collections. These are typically listed in the beginning of your credit report under public records. This is the most important place to begin the credit repair process, because creditors take these debts seriously. Contact each creditor. Be polite and respectful. Ask to make arrangements to pay your debts. Creditors are usually willing to settle for pennies on the dollar. Keep a log to record your conversations and transactions, and get any settlements in writing. Request and keep receipts when debts are paid or settled in full.

4

Past due accounts: Begin making payment arrangements with your most delinquent accounts first. Negotiate with your creditors and respectfully request lower interest rates and fee waivers. Creditors will usually be willing to work with you, especially if you are making a serious attempt to repair your credit. You might need to request a hardship repayment plan. Make a goal to pay off your smallest debt first, and then use that money to undertake the next largest debt and persevere until you are current. Keep the commitments you make to the creditors, or the interest and fees will likely be back with a vengeance, and your credit score will drop.

5

Credit card limits: Lowering your credit card limits might improve your credit rating; however, lower only a few cards at a time or you'll end up lowering your score instead of raising it. Outstanding credit card balances should not be more than 30 percent of your maximum credit card limit, so start paying your cards down below this threshold or contact a few creditors and ask for a lower credit limit.

6

Older credit cards: Your credit score is partly based on the age of your credit accounts and how they have been handled. Your probably have some older credit accounts and cards that are in good standing. Whatever the cost, don't allow these to become past due. Use these accounts once in a while to maintain your good credit rating with them.

7

Re-establish credit: Re-establishing new credit can also help raise your credit score. Apply for new credit, but start small. Go to a local store and apply for credit. Apply for new credit only about once every six months, or the numerous credit inquiries will lower your credit score. Work your way up to a nationally recognized major credit card such as American Express. If, even one time, you are unable to pay your balance off in full at the end of the month, cut your credit card up and pay it in full immediately.

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Foreclosures & Credit

Your credit rating comes from data in your TransUnion, Equifax and Experian credit bureau files. This trio of bureaus sells credit reports to lenders, employers and insurance companies making decisions about you, and your credit score is based on the same data. Negative things, like late bill payments, repossessed cars and house foreclosures, make you unattractive to creditors, insurers and hiring professionals.

Definition

A mortgage is a secured installment loan, meaning that you pay a set amount each month for a specified length of time, and your repayment is guaranteed by the house you purchased. Foreclosure happens if you cease making payments and your lender goes through the legal process to take possession of the property. It sells your home and holds you responsible for any difference between the selling price and your loan balance, which is know as the deficiency.

Time Frame

Mortgage lenders do not foreclose as soon as you miss one payment, although every late or skipped payment appears on your credit reports and brings your score down. The Home Loan Learning Center explains that banks usually tack a late fee onto your account when your delinquency goes past 15 days. You are expected to catch up the full amount, including fees, once you miss two payments. Lenders consider foreclosure once you have missed at least three payments. If you lose your home, your credit reports show the foreclosure for seven years.

Effects

Foreclosure is a very serious credit blemish because it shows that you neglected an important financial obligation. It figures into the "payment history" part of your credit score, which is 35 percent of the total, according to the MyFICO scoring firm. The foreclosure causes its worst damage within the first few years, so offset it by paying all your other obligations on time and keeping the lowest possible debt load. Lenders pay more attention to recent activity, so a near-perfect current record offsets an old foreclosure.

Considerations

Banks prefer not to foreclose on a home because they incur costs which they must pursue you to recover, and they must invest time and effort into selling the property. The Bankrate website advises calling your lender as soon as you know you cannot make your payment. Some banks let you skip a payment and make it up in installments over several months. Your lender may modify the loan by rolling your delinquency into the balance and adjusting the terms to accommodate it. Explain your situation and let the bank explain your options.

Alternative

Some lenders agree to a foreclosure alternative called a short sale. The bank allows you to sell the house for a predetermined amount that is less than what you owe on your loan. It accepts that amount as payment in full and does not pursue you for the deficiency. A short sale hurts your credit because it reflects a settlement rather than paying the entire loan amount. Some banks agree to report your mortgage to the credit bureaus as paid in full if you negotiate that term up front.

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Credit Repair After a Short Sale on Rentals

A short sale helps you prevent foreclosure, but it still counts as a negative item determining your credit rating. You do a short sale when you sell your home for less money than you owe the mortgage holder. Your bank or finance company must agree to the sale terms, and it accepts the reduced amount rather than forcing you to pay the full loan balance. You can usually improve your credit after the short sale.

Effect

A short sale is not explicitly noted in your credit bureau reports, but your mortgage holder marks the loan as "settled" rather than "paid in full," according to Maxine Sweet of the Experian credit bureau. This alerts other lenders to the short sale and is considered negative when they evaluate your future loan applications. Your credit score also takes a hit due to settled accounts. You may have trouble getting credit or be forced to pay high sub-prime interest rates, especially if you have other late, settled or charged-off accounts.

Status

Check your credit rating status after your short sale by ordering free credit reports from Experian, Equifax and TransUnion, which are the three big credit bureaus, through AnnualCreditReport.com. The bureaus work cooperatively through that official site to comply with the Fair and Accurate Credit Transactions Act, which makes them provide free reports once every 12 months. Note how your mortgage holder reported your short sale, make a list of any other negative information and look for mistakes in all the bad entries.

Repair

Credit repair involves forcing the credit bureaus to remove as many bad items as possible from your credit reports, which is done through the dispute process mandated by the Fair Credit Reporting Act. Alert the bureaus to every mistake you found in your credit report by writing a letter to each of them, requesting removal of the errors. The law gives the bureaus a limit of 30 days to either verify or erase any entries you question because of legitimate errors, even if the inaccuracies are small. Experian, Equifax and TransUnion will remove any entries that are not validated by the creditors, and they may erase some items without investigation if they are busy, according to the Divorcenet website. These removals help your credit, even though you still have a short sale in your records.

Warning

Some credit repair company ads claim an ability to erase everything negative on your credit reports, including short sales, but the FTC warns that all such promises are false. No one can legally expunge accurate information from your reports. Unscrupulous repairers either charge you and do nothing or dispute every bad item on your reports, including the short sale. The credit bureaus reject these blanket disputes immediately because the law excuses them from investigating obviously frivolous claims.

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How to View Your Credit Score

It's advisable to view your credit score regularly. Your credit score determines your ability to obtain a line of credit. Higher scores make getting credit easier. You will benefit from preferential interest rates. Monitoring your credit score gives you greater confidence when you need to apply for credit. Regularly checking your score enables you to track any changes. Credit scores alter, depending on the way you manage credit. Viewing your credit score lets you know if something adverse happens, and then you get to rectify it quickly.

Instructions

1

Apply online to view you credit score. Instantly view your credit score from all three credit reporting bureaus, Equifax, TransUnion and Experian. TransUnion offers a 30-day free trial. You can continue to monitor your scores after the 30-day trial by paying $14.95 a month. You can pay to get your score from Experian and Equifax. Check their websites for offers.

2

Click the link to TransUnion (see References). To apply to view your credit score, click "See Your Credit Scores Now," then complete the online form ensuring your details are correct. Read the terms and conditions, and click "I Accept." Enter your card payment details. This is for identity verification purposes. You will not be charged until after the 30-day free trial. Click "Continue." Review your application details, click "Submit."

3

Open your email box. You will have a login name and a link. Click the link. Enter your login name. Create a password and password reminder. Click "Enter" to view your credit scores.

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The Best Way to Check Your Credit Score

Your credit score is a reflection of the information held within your credit file. The age of your accounts, credit utilization, inquiries, types of credit and payment history are all factors in your credit score. Your credit score determines things such as: the interest you pay, whether you can qualify for credit cards or loans, insurance premiums, and whether you meet criteria for certain jobs. Every consumer should review their credit file to ensure there aren't errors. Credit scores range between 350 to 900.

Instructions

1




Internet address

Enter the web address http://www.myfico.com into your web browser. Click the tab that says: "FICO Scores & Credit Reports."

2

Select the option for "FICO Standard." Select the credit report and score you would like to order. Your choices are TransUnion and Equifax. Click continue.

3

Register for an account. Once you have registered for your account, enter your payment information and select continue.

4

Wait a few moments and you will be taken to a page with a link to your credit reports and scores. You can view both of the credit reports and scores. Print your credit report for future reference.

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How to Remove a Fraud Alert From Experian

The Federal Trade Commission (FTC) recommends several standard steps for victims of identity theft. Its first suggestion is placing fraud alerts on your credit reports, so that criminals can't use your information to create new accounts in your name. These alerts warn lenders not to open new accounts without carefully checking the applicant's identity.



The FTC advises extending these fraud alerts for the maximum allowable length of seven years. However, you may need to remove them sooner. Experian, one of the three credit bureaus, has a standard procedure for removing fraud alerts.

Instructions

1

Photocopy, or scan and print, two documents that show your current address. Maxine Sweet of the Experian credit bureau's public education department states that you can copy your driver's license or recent utility bills. Experian requires these documents as proof of your identity.

2

Write a letter specifically requesting that Experian remove the fraud alert from your credit report. Sweet advises that the letter must include your name, address, Social Security number and date of birth.

3

Place the letter and photocopied documents into an envelope and mail it to Experian. The credit bureau's current address for such requests appears on its website (see Resources). It will review the letter and remove the fraud alert provided you have included the necessary information and documentation.

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Does Your Credit Report List Requests for Your Credit Report?

The credit bureaus know everything about your financial history, even how many times you look at your own report. However, the bureaus protect you from discrimination unless the request for a credit report is made for a lending decision you initiate, called a hard inquiry. You want to check your report frequently for hard inquiries, because they can be as bad as anything else in your credit history.

Identification

The national credit bureaus list all credit inquiries on your credit report, usually under the credit report summary section. They divide the inquiry portion into hard and soft checks. Soft checks never hurt your score in any way and lenders will never know how many you have, even if they pull your report. The bureaus hide soft inquiries so lenders cannot make informal judgments about them, such as suspecting someone of worrying about a low score by checking it too much.

Importance

You can mostly disregard soft inquiries unless you care about who sends you pre-approved credit card offers. The biggest concern is hard inquiries, because they lower your score a few points for each one. Once you have more than six hard checks in any 12-month period, expect significant harm to your credit score, and lenders might be afraid you are hunting for credit because of some immediate financial disaster.

Time Frame

All credit inquiries disappear from your credit file after two years, according to the Fair Isaac Corporation. Hard inquiries, however, only impact your FICO score during their first year on your report. Unlike other negative items, hard inquiries impact your score by the same amount as long as they stick to your report.

Tip

Always dispute a hard inquiry if you never gave the creditor consent to run a check, because every point counts when applying for a loan. Five points, for example, could put you just out of reach of the upper tier of scores. You can also ask the creditor listed in the report to delete the inquiry. Most will oblige because they do not want to bother searching for the authorization document.

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How to Create a New Credit Bureau File

Despite rumors on the Internet, the only legal way to secure a new credit file is by obtaining a Federal Tax ID number. This number is almost exclusively extended to businesses for the purpose of separating business owners' information from business information. Creating this new credit file is a lengthy process, but can offer advantages to a business.

Instructions

How to Create a New Credit Bureau File

1

Operate a strong, profitable business. Without a fully operational business, the federal government will not grant you a Federal Tax ID number. While the extension of a federal ID number is not contingent upon the success and profitability of your business, it must be a legitimate business. Be sure to file as an LLC, Sole Proprietor or S-Corp.

2

Apply for a Federal Tax ID number. A link is provided under References. The application requires you to disclose the name of your business, the nature of the business, the chief executives, the stakeholders and shareholders, if any, and any personal information relevant to the business.

3

Maintain a strong business. Commercial credit works in nearly the same fashion as personal credit--that is, lenders are far more willing to lend to companies with strong, positive credit histories. Most lenders will not lend to a business that is less than three years old, and almost never will lend to a business that has no credit history.

4

Apply for smaller lines of credit. Obtaining business credit cards is the easiest way to begin developing a credit profile for a business. The application process is far less rigorous when applying for unsecured credit lines, and therefore you will most likely not need to disclose the majority of your financial statements. Use business credit cards liberally, but be sure to pay on time and keep your balances low.

5

Apply for larger lines of credit against the business itself. Be prepared to surrender all financial documents proving the viability and financial health of your business. With secured and unsecured credit history under your business' Federal Tax ID number, you'll have a second open credit line.

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How Does a FICO Score Work?

Application

Consumers apply for credit from lending institutions, credit card companies and/or department stores. Applications for lines of credit will include name, Social Security numbers, date of birth, employer and current address. Consumers who have never applied for credit may need co-signers to get their credit history started.

Lenders

Lending institutions contact one of the three major credit-reporting agencies if the consumer is applying for credit in the United States. Most countries have a credit agency equivalent that houses the credit record of the consumer. Consumers who move from one country to the next don't have portable credit ratings. It may be necessary for the consumer to work in a country for a significant period of time before applying for credit.

Lender Communicates with Fair Isaac Corporation

The credit-reporting agency uses the FICO decision management tools to develop a score for each consumer. Fair Isaac is the brain child of an engineer and a mathematician. The use of the tool dates back to the 1950s. It has evolved over time to become an instrument that gauges consumer behavior on past history.

FICO Formula

FICO uses mathematical algorithms that aggregate past payment history, defaults on loans, court decisions and available credit on each line of credit. Scores may vary from one agency to the next because of the information that each agency has garnered. This is why is it crucial to check all pertinent agencies annually and update all information.

Lender Decision

The credit reporting agency uses the information supplied by FICO and the consumer to make a decision about credit. Inquiries may by lending institutions are called hard inquiries and may decrease the consumer's FICO score if multiple inquiries are made. Inquiries made by the consumer are called soft inquiries and don't affect the FICO score.

Consumers Control FICO Score

Paying off and closing credit cards will not automatically increase a FICO score. The score is based on a formula that uses available credit to determine credit worthiness. FICO scores of 720 and above place consumers in a position to have better interest rates on loans, making homes and cars more affordable. Paying bills late or defaulting on a loan will lean to negative items on a credit score. Having more than a third of the total line of credit charged on a card may also lower credit scores.

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How to Settle Credit Card Accounts & Credit Scores

Settling credit card accounts, and thereby improving your credit score, can be accomplished with only a few short phone calls and letters. Collections agencies and credit card companies tend to use intimidating language that give the impression that the only method to discharge a debt is to pay it in full, but the reality is that all debts are entirely negotiable. Get all agreements with your creditors in writing and you will be well on your way to a high credit score.

Instructions

1

Order your credit reports from the three major credit bureaus (Transunion, Equifax and Experian). Look at all your credit card accounts and check for any that are late, delinquent or charged off to collectors. Your credit reports will have contact information for each creditor listed next to the account entry.

2

Contact your creditors with which you have late or delinquent accounts. Credit card companies are not likely to provide you with a favorable settlement unless your account is at least 60 days late. If your account is current, they have no real incentive to settle the balance of your credit card. You may contact your creditors by phone, but request that any agreements you make be provided to you in a letter.

3

Request a "pay for delete" for the late or delinquent account in return for a payment of at least 10% of the existing debt. If the person you talk to on the phone balks at making a deal, ask that they transfer your call to a supervisor with authority to settle debts. Once you have arrived at an acceptable settlement, request that the agreement be mailed to you. Once you receive it, send payment as requested along with a copy of the agreement. Check your credit report later to ensure the entry has been deleted.

4

Ask for a "paid in full" settlement if the creditor refuses to delete the entry from your credit report in return for a settlement. You will not be required to actually pay the account in full to get this entry on your report. This will boost your credit rating less than getting the entry deleted, but it's better than nothing.

5

Request a "pay for settlement" if the creditor declines to delete their entry from your credit report or refuses to change their entry to "paid in full." This will be less beneficial to your credit score, but it will be superior to leaving a delinquent account unresolved on your credit report.

6

Monitor your credit report to ensure that your creditors have updated their entries according to the agreements you achieved with them. If they don't update their entries within 60 days, or update them incorrectly, file a dispute with each credit report where the errors appear. Each of the credit bureaus provides a web form for filing an error if you look at your credit report online. If you receive your credit report in the mail, follow the error disputation instructions included. Send copies of your debt settlement agreements, if the credit bureaus request them, to support your dispute.

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The Best Bank Cards for Your Credit Score

Although the credit reporting agencies do not widely publicize this fact, some credit cards are better for building a good credit history and thus, a good credit score, than others. If you are trying to start a credit history, however, you usually can't afford to be picky about your accounts. More important than the type of credit card you own is how you use credit.

Identification

Credit cards from a bank or credit union are the best way to build your credit score. The FICO scoring algorithm dings your score a few points for only having retail or gas station accounts, according to Leslie McFadden of Bankrate. On the other hand, credit utilization -- credit limit used divided by the limit available -- is more important for banks cards than retail accounts.

Name Recognition

Creditors can see which lenders you use. While not having a bank card probably won't wreck your credit score, lenders may consider this when making a credit decision. Thus, it is generally better to have a bank card from a large, national bank than a small, community bank. The thinking is if a big successful company is willing to take a risk on you, then you are probably a good customer.

Considerations

How much debt you carry and if you pay your bills on time has a much larger impact on your credit score than the type of card you use. Also, you want a card that reports to Experian, Equifax and TransUnion -- the three major credit reporting firms in the U.S. As long as your lender reports to the three major bureaus, you can have excellent credit without a bank card.

Tip

If you are starting a credit history, you probably only qualify for retail, gas station and secured credit cards on your own. Secured credit cards are usually the easiest way to get a card from a national bank, because the limit is backed by collateral, so lenders rarely have a reason to reject an application for a secured card. Do not be fooled by prepaid cards that claim to report to the major bureaus. The bureaus do not report prepaid accounts; instead, the prepaid card company sends the payment history to an alternative credit bureau, which a lender may not accept.

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How to Cancel Your TrueCredit.com Account

Signing up for the TrueCredit free trial allows you to see your credit report and score from TransUnion. Failing to cancel the TrueCredit service after the free trial period ends means you'll have to pay approximately $30 (as of June 2011) for the first month after the trial period and $15 for each month thereafter. In return, you can check your credit score and report from each of the credit bureaus. You are also automatically enrolled in a credit monitoring service. If you're only interested in the free trial, though, you must cancel your TrueCredit account before the trial period ends.

Instructions

1

Call the TrueCredit customer service number. As of June 2011, you can call the toll-free number 800-493-2392 to reach a TrueCredit representative.

2

Press or say "2" when you hear the recorded menu option to discontinue your credit monitoring benefits.

3

Tell the TrueCredit representative you want to cancel your account. Listen to any "upgrade" or "upsell" offers and politely decline if you are not interested.

4

Check your email address after your conversation with the representative to make sure you receive the cancellation confirmation email from TrueCredit.

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How to Obtain a Free Annual Copy of My Credit Report

Under the Fair Credit Reporting Act, an individual is entitled to a copy of his credit report at no charge annually. Designed to encourage individuals to make certain that the information in the credit reports is accurate, the FCRA allows an individual to check a credit report to make certain that the information about bill payment history or bankruptcy filings is accurate. After all, having the wrong information in a credit report can affect everything from future employment to whether or not you can get a bank loan.

Instructions

1

Visit annualcreditreport.com to get your free copy of the credit report online. Once there, you will discover a secure online form that you must fill out. You will be asked for your full name, your date of birth, your Social Security number, your current address and your previous address. When you have filled out that information, you will be taken to a page that will have TransUnion, Experian and Equifax listed. These are the three nationwide credit reporting agencies that will be providing information to you.

2

Select whichever credit report you want to view. Under the law, you can see any or all of these once a year at no cost. From there, you will be taken to a site for which credit reporting agency you wished to examine. Once again, you will be asked a series of questions designed to confirm your identity. When you have successfully verified your identity, you will be taken a page that displays your credit history, including all bank accounts, credit accounts and mortgages, as well as payment history.

3

Call 1-877-322-8228 if you wish to obtain your free credit report via the telephone. An automated system will walk you through a series of questions to confirm your identity. Upon confirmation of your identity, your free copy of your credit report will be mailed to you. This process usually takes about four to six weeks.

4

Print out the form entitled "Annual Credit Report Request Form" obtained at the Federal Trade Commission website (see Resources) for your credit report to be mailed to you and if you do not wish to order over the phone. Fill out the information requested on the form and mail it to the address that is listed. After the form is processed, your credit report will be mailed to you. This process usually takes about six to eight weeks.

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