January 2013 ~ Personal Finance and Money Management

Wednesday, January 30, 2013

Reasons for Low Credit Scores

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The use of credit affects many aspects of American life. Credit checks are often performed when you apply for a loan or credit card. Nowadays, your credit also can affect whether you'll qualify to rent an apartment or receive a job offer. Maintaining a good credit score is important if you want to receive the best interest rates and enjoy solid financial success. There are several key factors that can affect your credit score.

According to Fair Isaac, the inventors of the FICO credit scoring model, how you pay your bills accounts for 35 percent of your credit score. Late payments will drop your score, and the later the payment the worse impact it will have. In other words, a 90-day late payment is more damaging than 30 days late. Always pay at least the minimum amount on your credit accounts each month.

Another 30 percent of your FICO score is the amount of debt that you owe. The closer you come to the credit limit on your credit card, the more negative an impact it will have. Maxing out a credit card is dangerous because it places the amount you owe beyond the amount of available credit that you have and drops your score. Keep credit card balances as low as possible, or pay them in full each month. Also pay down the other types of credit that you have: car loans, mortgages and student loans.

Bankruptcies, collection accounts, judgments and liens on your credit report are items of public record that indicate you did not honor a particular debt obligation. In some cases, like with judgments, it also indicates that the creditor took legal action against you in an attempt to collect the debt. An item in this category will significantly lower your score. Payment of these types of items will not immediately undo the damage to your credit score.

Applying for credit places an inquiry on your credit report. New credit accounts for 10 percent of your FICO score, so applying for credit periodically is a good thing, but applying for numerous credit accounts within a short period of time will lower your score. A lot of inquiries indicates to lenders that you are searching for credit because you are in financial distress. Apply for new credit only if it's needed. Avoid signing up for instant store credit just to receive a small discount on a purchase if you want to protect your credit score.

Under the Fair Credit Reporting Act, consumers have the right to dispute erroneous information on their credit reports. By law, bureaus must investigate and correct inaccurate data on the report. You can file a dispute on the credit bureau's website, by phone or mail. The FCRA gives the bureau 30 days to respond to your request. Under the Fair and Accurate Credit Transaction Act of 2003, consumers are allowed one free report each year from the three major bureaus: Equifax, Experian and TransUnion. Congress established a website to facilitate the ordering process for consumers: annualcreditreport.com. You can also order the free report directly from the credit bureau website, by phone or by mail.

Does Settling With a Credit Card Debt Affect My Credit?

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When a person takes out a line of credit with a credit card company, he is required to make regular payments on the card at a previously agreed rate of interest. If the cardholder doesn't make these payments on time, he will face additional penalties. Sometimes, to get out of debt, the cardholder will attempt to negotiate a settlement with the company. An accepted settlement will usually hurt the cardholder's credit score.

A person's credit score -- the measure of his creditworthiness -- derives from his credit report. This report records all loans that the person has taken out in the past and whether he has paid them on time. The more consistently a person pays his bills, the better his credit rating. If a person pays a debt for less than the full amount, even if the settlement is agreed to by the creditor, this will hurt the person's credit score, as it makes him appear a greater credit risk.

When a person takes out a line of credit, this credit is noted on the person's credit report. In addition, any time that the person takes out a loan against this line of credit, this loan is noted as well, as are all repayments of the loan. This is because credit reporting agencies, which assemble these reports, are notified by the creditors that issue loans. So, a settlement will certainly be recorded on a person's credit report.

Even if a credit card company agrees to let a person pay less than the full amount he owes on a debt, the person, in the eyes of a credit reporting agency, will appear to be a riskier credit risk. By the agency's logic, if the person didn't pay the full amount he owed on one debt, he will likely not pay the full amount on others. Therefore, his credit rating will fall.

A creditor is not legally obligated to report a settlement to a credit reporting agency as a settlement. In fact, a creditor can report to the agency that the debtor paid the debt in full, even if he did not. Sometimes, as a condition of the settlement, the debtor will demand that the creditor report the settlement as paid in full or in another way that will not harm the debtor's credit rating as much.

How to Get Lower Mortgage Rates Based on Excellent Credit

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Having excellent credit does not necessarily mean you are eligible to receive a low mortgage rate. While your chances are high, a few factors can make obtaining the best possible mortgage rate more achievable. As with any loan product, it's important to always shop around and know your financial standing and credit history. Before beginning the application process, take several days or weeks to research different mortgage products.

Instructions

Purchase your credit report and score from each of the three national consumer reporting bureaus. As new credit information is reported, your credit score may change. Obtain your most current credit report and score from TransUnion, Experian and Equifax to verify your "excellent" credit rating.

Contact a lender with whom you have an existing banking relationship, meaning a checking, savings or investment account.

Show proof of a low debt-to-income ratio. Creditors view borrowers who have the financial means to cover monthly obligations, such as auto payments, health insurance and credit bills, more favorably than those who cannot -- sometimes irrespective of the borrower's credit score.

Provide a large down payment. Creditors view borrowers who are able to a make large down payment more favorably than those who cannot. A large down payment suggests financial strength and reduces the terms of your mortgage, which drives down your rate significantly. A conventional mortgage down payment can vary between three and five percent. Pay above five percent, if possible, but do not exhaust your finances. A down payment is a small percentage of the mortgage for which you are applying.

Itemize any liquid assets that you own. Examples of liquid assets include money that is deposited into a savings or checking account, money market fund shares, bonds, mutual funds, IRA/401k and the monetary value of a life insurance policy. Owning a high number of liquid assets may increase your chance of obtaining a low interest mortgage.

How to Fix a Credit Score From a Deceased Spouse's Bad Debt

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Your credit score can affect almost every aspect of your life. Having a bad credit score can impair your ability to get a car loan, a mortgage, even car insurance or a job. Unfortunately, if your spouse dies and leaves a lot of unpaid bills, debt collectors may try to make you assume your mate's debt, or write off the debt and try to attach it to your credit report. Here's what you need to do to fix this problem.

Instructions

Write to the debt collectors in question. If you were not a co-borrower with your spouse, ask them to remove your name from their records because you were not a party to the loan. If they refuse, you can demand that they prove that you owe what they say you owe. You'll need to ask for documents with your signature on them.

Contact the 3 major credit bureaus, Equifax, Experian and TransUnion.
You will want to make it clear that the debt collector is attempting to collect a debt that you do not owe. Provide documentation that shows that you are not listed as a co-borrower on your late spouse's debt-related paperwork. Also, get everything in writing or tape record any phone conversations you have with the debt collectors and credit bureaus.

File a civil suit. Before filing civil suits (such as in small claims court), you need to have exhausted all administrative avenues. This means making every attempt to resolve the issue directly with the debt collectors and the credit bureaus.

Contact the Attorney General.l in your state of residence and in the state where the debt collector does business. If you personally do not owe the debt collector money, he cannot attempt to collect on it.

Piggyback on someone else's good credit. The last way you can fix your credit score because of your spouse's bad debt is by rebuilding yours. If you know someone with good credit, you can be added as an authorized user on one (or several) of their credit card accounts. Check with the credit card company before you do this to make sure that they report all activity on the card to both the primary user and the authorized user's credit report.

How to Fix Your Credit Report Without a Lawyer

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You do not need a lawyer to fix your credit report. Having inaccurate or outdated information removed from your report is a simple process, and nothing about it requires legal advice. Your rights are clearly spelled out in the Fair Credit Reporting Act, and you can clean up your report in as little as 30 days. There are no other legal ways to fix your report.

Instructions

Get your credit report from annualcreditreport.com. The three nationwide credit bureaus--TransUnion, Experian and Equifax--operate the site to offer free credit reports as required by law.

Find inaccurate information on your credit report that should be removed. Examples could include an account that is not yours or an old credit card debt showing as delinquent, though you paid it off.

Find outdated, but accurate, negative information. This can remain on your credit report for up to seven years for most entries, 10 years for foreclosures or bankruptcies. Notify the credit bureau of any negative information that should no longer be listed.

Write a letter to the credit bureau at its address on the credit report and have the information removed. You can also file a dispute online.

How to Get Your Beacon Score

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If you have ever purchased anything on credit, such as a house or a car, chances are that you have heard the term Beacon score. According to Equifax, "...the BEACON FICO score is the score calculated when the Fair Isaac model is applied to the Equifax credit file." Your Equifax Beacon score ranges from 300 to 850.
In addition, this three-digit number determines your interest rate and monthly payments on credit cards, mortgage rates and other forms of credit. Before you apply for credit, it is wise to know your Equifax Beacon score, so that you have an idea about where you stand credit-wise. So how do you get your Beacon score? Read on for more details.

Instructions

Visit the Equifax website. Order the product called Equifax Credit Report with Score Power, which will give you your Beacon score along with a breakdown of what your Beacon score means.

Fill out the customer information form. Provide your basic information, including your complete name, mailing address and email address.

Complete the identity verification. Provide your date of birth, Social Security Number and telephone number. In addition, you must create a username and password to complete the identity verification process.

Provide your payment information. Choose your credit card type and provide your credit card information.

Receive your Beacon score. You will receive your Beacon score summary. According to Equifax, your summary will include sections on "amount of debt, amount of new credit, payment history and length of credit history."

How Filing for Unemployment Affects Your Credit

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Collecting unemployment benefits does not directly affect your credit report or your credit score. However, the fact that you are unemployed might negatively affect your ability to get new creditm because your income is limited and unstable.

Everyone is entitled to check her credit report once each year, free of charge. You can do this at AnnualCreditReport.com. This site allows you to receive your reports from the three reporting agencies: TransUnion, Experian and Equifax.

These companies take reports from all of the banks or loan agencies that have loaned you money. They will track how much debt you currently have in comparison with your available credit, and they will highlight any negative reports to your credit.

Your credit report is simply a record of how you have handled your debt. If you are late with a payment or didn't pay a bill, the company to which you owe money will report that to one of the three agencies so other lenders can see it.

The reporting agencies do not track your current employer, salary, or similar information.

When a lender extend you credit, the lender considers more than your credit score and your credit report. It needs to know that you aren't about to take on more debt than you can repay. Because of this, the lender is going to want to know your monthly income.

Unemployment benefits are a form of income, but they eventually run out, so the lender will view them as unstable. This will make any lender reluctant to lend any large sumy, such as for a home mortgage or a vehicle loan, until you establish something more stable.

Once you do find a job, or begin a business with regular income, the lender will look at you as though you were never unemployed in the first place. Things happen, and people lose their jobs from time to time. As long as a person demonstrates that they can be trusted to repay their debts, and as long as they show a solid income stream, lenders will be happy to consider you.

It could happen that losing your job causes you to default on one or several loan payments. In this case, your credit would be damaged as a result of being unemployed.

In such a scenario, the damage might not be so terrible, as you could explain to future lenders that the defaults were the result of a job loss in a terrible economy. This should dissuade some lenders, who otherwise might be reluctant to lend to a person with a history of missed payments.

How to Get a Paid Credit Account Off Your Credit Report

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Your options are limited for stripping paid-off credit accounts from your credit report. The Federal Trade Commission reports that positive credit information can be reported indefinitely. However, any information that is wrong must be removed if you dispute the item with the credit bureaus. Most credit information that is negative, such as late payments, can remain on your credit report for seven years, according to the FTC. Federal law requires the credit bureau to investigate anything you dispute on your report.

Instructions

Obtain a copy of your credit report from the Annual Credit Report.com website. The site was created by major credit bureaus TransUnion, Equifax and Experian to offer free credit reports as required under the terms of the Fair Credit Reporting Act. You're entitled to three free reports every 12 months -- one from each of the credit bureaus.

Review your report to find the paid credit items you would like removed. You must have a legitimate reason for having the information removed, such as it is wrong or outdated.

Write a letter to the credit bureau to dispute the paid credit information based on its lack of timeliness or accuracy. Mail the letter to the credit bureau at its address on the credit report. Return to AnnualCreditReport.com to order credit reports from the two other bureaus. Send letters to those credit bureaus as well. Allow about 30 days for responses while the credit bureaus investigate your claim. By law the information must be removed if it is wrong or outdated. Otherwise it will remain.

Will Debt Consolidation Affect My Husband's Credit Score?

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Debt consolidation is the process of taking out a large, low-interest loan and using that money to pay off several smaller, high-interest debts. You can consolidate debt yourself by applying for a loan directly with a bank, or you can go through a company specializing in consolidation. If done correctly, debt consolidation can improve your husband's credit score. If done incorrectly, it can be financially devastating and ruin his credit history for years to come.

If you're thinking about debt consolidation, you've probably seen those commercials promising to save you money by combining all your debt into one easy monthly payment. It sounds too good to be true and, for many people, it is. If you are heavily in debt and behind on your payments, you are not going to get a low-interest loan. Most likely, you will get a loan with an APR of 20 percent or more, plus massive fees. To get a low interest rate, you will need to have a good credit history or put your house up as collateral. If you are not in a position to do this, debt consolidation is not a good option. You are likely to end up owing more than you do now -- and end up with a lower credit score as well.

There are several good reasons for consolidating your debt. It's much easier to keep track of a single monthly repayment than a dozen smaller ones, each with a different due date. If your credit history is healthy, but you find yourself with high-interest debt, you may be able to get a loan at a significantly lower rate. If you're sure that you can keep up with the payments, you can reduce that rate further by getting a secured loan, using your house as collateral. By managing the loan well, you can actually improve your credit score over time.

It's tempting to use a debt consolidation service to sort out your financial matters, but it's also expensive. Fees can be as high as 10 percent, money that you cannot afford to waste. Even the not-for-profit companies have to earn their money somehow. Instead of charging you, they charge lenders. The lenders pass those fees on to you. If you think you can qualify for a low-interest loan, talk to your bank yourself. You can save thousands of dollars and get a much better deal. If your bank refuses you a loan, debt consolidation is not for you. Any loan you get through a debt consolidation service will not be a good deal.

There are other ways to pay off debt that do not involve the risks associated with debt consolidation. Make sure you make at least the minimum monthly payment on all debts. This will help your credit score. Whenever possible, pay more than the minimum. Focus on the high-interest, expensive debts before moving on to the lower-interest ones. By paying off your debt, you are decreasing your debt-to-credit ratio and raising your credit score. If you find yourself falling behind on payments, don't hesitate to contact the lender and request an affordable payment plan. Lenders would rather get their money back slowly than have you default on the entire debt.

How to Calculate Your Credit Score From a Credit Report

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Your Fair Isaac Corporation score, or FICO score, often referred to as simply your "credit score," is a measure of your creditworthiness. In other words, your credit score tells others how trustworthy you are, to help them decide whether they want to lend you money. There are only three credit reporting agencies, and they all calculate the score differently. So in order to find your true score, or your composite score, you'll need to get all three scores and average them. Luckily for you, federal law mandates that you be provided with a free credit report once a year if you request it.

Instructions

Visit the AnnualCreditReport Web site, which is the only authorized source of free credit reports under federal law. (See Resources.)

Choose your state from the drop-down list and click the red "Request Report" button.

Fill out the Web form you are presented with and click "Continue." You will receive your credit reports from all three agencies.

Once you have the credit scores from the three agencies--Equifax, TransUnion and Experian--add them all up. For example, if your scores are 500, 600 and 700, their sum is 1800.

Divide your answer from the previous step by 3 to find your composite credit score. In the example, 1800 / 3 equals 600, a fair credit score.

Does Paying Off All Creditors Improve Your Credit Score?

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Improving your credit score can help you get approved for loans and credit cards at lower interest rates. Paying off your debt can be an effective way of improving your credit score. However, not all debt payments will have the same effect on your credit score.

One of the factors that makes up your credit score is the credit utilization ratio. This is a comparison of the amount of debt you have accumulated in relation to the available credit you have. For example, if you have $1,000 in debt on a credit card with a $10,000 credit limit, you have a 10 percent credit utilization ratio. The credit scoring formulas consider your credit utilization ratio when calculating your credit score. The lower the credit utilization, the more it helps your score.

When paying off your debts, making regular payments is important. Late payments hurt your credit score significantly. Once you get the balances on your accounts down to around 30 percent of their credit limit, this will boost your score. According to Bankrate, a credit utilization under 30 to 35 percent is a solid credit utilization ratio. Aiming for 25 percent or lower makes it appear you know how to handle your money. People who frequently max out credit cards (a 100 percent credit utilization ratio) tend to get into financial trouble.

If you pay off credit accounts, resist the temptation to close out your account, if possible. Consider paying off the balance and leaving the account open. When you close out an account, this lowers the amount of available credit you have. This, in turn, would raise your overall credit utilization ratio and lower your credit score. If you close out the account that has been open the longest, this also will negatively affect your credit score, because the length of time you have held your credit accounts is also a factor in credit scoring. Accounts open for a long time help your credit score more than new accounts.

When you have several accounts, pay attention to the credit utilization ratio on each card. If you have money available to pay down a balance, choose the one that is closest to the 30 percent threshold. Pay down the balances systematically so they get below that threshold, and it will slowly raise your credit score. Once you pay off the account, leave it open so you can maintain a low credit utilization ratio and a longer credit history, both of which help your credit score. Make payments to all creditors by the due date. Your payment history is the biggest factor in determining your credit score.

Does Paying Off a Mortgage Early Help Your Credit Score?

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It seems like a total given that paying off your mortgage early would mean good things for your financial health. However, what makes sense in terms of dollars doesn't always translate to an increase in your credit score. Paying off a mortgage is a perfect example. The reality is that paying off your mortgage early would only nominally help your credit score and may in fact weaken your score.

Your overall credit profile is made up of five factors. In order of most to least important, your credit score accounts for your payment history, your level of outstanding debt, the average age of your accounts, the number of inquiries on your credit report and your mix of credit accounts. Having a mortgage impacts your payment history, your level of debt and your credit mix -- that is, your ability to juggle accounts with large monthly payments.

By paying off a mortgage early, you help yourself in two of these three credit score areas. Paying early usually means you've been consistently paying on time, which is the most important factor in any credit score. In addition, paying off all that debt significantly brings down your total amount of outstanding debt. The only problem is that by paying early, you take a mortgage - perhaps the most difficult debt to pay - out of your credit mix.

If you pay off your mortgage early, you may see an increase to your credit score, but the bump isn't as big as you might think. First, you no longer benefit as much from the credit mix component of your score, which counts for 10 percent of your overall score. In addition, if your overall level of debt reaches zero as a result of your mortgage being paid off, your score will almost certainly decline. While it's true that having no debt is good for you, the FICO credit scoring model sees zero debt as a potential risk factor, even if you've just demonstrated your ability to manage debt.

Credit scores have become a huge part of modern life, causing some people to obsess over them at the expense of common sense. In the case of paying off a mortgage early, you have to think practically. The point of having a good credit score is to save money. Even if your score goes down, you'll save thousands of dollars in interest payments. Don't worry about the hit to your credit score; just be happy your mortgage is paid off and you have thousands in extra money to use.

Will Settling Unpaid Bills on a Credit Report Help a Credit Score?

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Paying your debts may be the right thing to do, but it can be a bad idea when it comes to your credit score. Paying off old debts or settling a debt for less than the amount owed may get creditors off your back, but the ramifications to your credit report may be worse than the hassles with creditors.

When it comes to your credit report, it's important to understand what settling means. If by "settling an unpaid bill" you mean paying it in full, that can help your credit score. Debt "settlement," however, means something vastly different for both you and your credit score. For you, it means settling a bill for less than you owe. For your credit report, it means bad news.

Settling an unpaid bill for less than the amount owed may satisfy the creditor you owe, but it will not satisfy future creditors and won't help your credit score.

A debt settlement may seem like the best way to satisfy creditors or collection agencies, but a settlement hurts your credit score in more ways than one. It is often marked as a debt settled for less than amount owed, which tells potential creditors you cannot be trusted to pay debt in full. And because any activity on an old debt "re-ages" the account, it makes old unpaid debts appear more recently on your credit report.

Paying an old debt off in full may seem like a sure fire way to make creditors happy and improve your credit score, but that's not always the case.

If the debt is being reported with a balance attached, paying it off may help your score. However, if it's being reported as a "0" balance, or is being reported by a collection agency, paying it off may not do as much to help your score.

As if paying unpaid bills were not confusing and difficult enough, there's another factor to consider--who's reporting the debt.

MSN Money's Liz Pulliam Weston explains: "What matters most is what the original creditor says on your credit report. The status and amounts owed shown on that entry will figure more heavily in your credit score than what a collection agency reports."

In other words, repaying a debt may only help your credit score if you're repaying the original creditor. If the debt has already gone to a collection agency, repaying the debt may or may not help you at all.

If your credit report is full of charge-offs or unpaid bills, debt settlement may seem like a good option. If you choose to go the settlement route, Weston offers this advice: "As part of your negotiations, push to have the creditor or collection agency either stop reporting the account altogether or demand that the account be reported as 'paid in full' rather than 'settled.'" Doing so may not improve your score, but is less likely to damage it.

How to Make Sure You Get It in Writing That Debt Collectors Will Drop From Your Credit Report

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Aside from your Social Security number, your credit score is the most important number associated with your identity. Your credit score determines your worthiness for obtaining credit cards, automobiles, mortgages and even jobs. Having negative information on your credit report has disastrous ramifications on your credit score and can deprive you of opportunities in life. If you have any negative items on your credit file, do anything you can to get them removed. However, once you get the collector to agree to remove the information, be sure to get it in writing.

Instructions

Order your free credit report from annualcreditreport.com. This will allow you to see exactly what has been reported about you. It also enables you to be as specific as possible, leaving the collector with no wiggle room.

Provide evidence that the creditor's information is wrong and that the negative information is inaccurate. Send this information by mail to the creditor and wait for a response.

Follow up with your creditors throughout the dispute process. Call to make sure the dispute was received, and write down the date the dispute was received. You should also receive a notification from the creditor stating the date of receipt. Use this date to hold your creditors accountable if they take their time resolving your issue.

Call your creditors about a month after your dispute is received. The dispute should be reviewed by this point with a determination made. You should get a notification of the creditor's determination in writing regardless of the outcome, but ask for a copy to be mailed to your home. This is proof of the creditor's decision and should be used against the creditor if your credit report is still showing inaccurate information.

How Can I Rebuild My Credit Rating After Declaring Personal Bankruptcy?

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Filing a bankruptcy gives you the chance to start over and repair your bad credit history. While you can expect your credit rating to plummet after a discharge, the low ratings are temporary. It's possible to raise your low credit score and rebuild your credit within a couple of years.

Instructions

Open a secured credit account with your bank. Contact your bank immediately after your discharge and take steps to obtain a secured credit card to begin rebuilding your credit. Secured credit cards are cards that require collateral in the form of an upfront deposit (between $300 to $500).

Continue to pay your auto loan. If you reaffirmed your auto loan, continue to make timely payment to your lender to help bolster your low credit rating. Late or missed payments can cause further damage.

Acquire a small loan. Obtaining and satisfying or paying off debts helps improve your credit after declaring a personal bankruptcy. Use personal collateral such as vehicle title to receive a small loan, and then pay off the loan completely within a relatively short time span.

Pay your bills on time. Get rid of bad habits and aim to pay your bills on time each month to avoid creditor harassment and further credit damage. Mail payments a day or two after receiving the statement to prevent late arrivals.

Carefully manage your debts. Avoid maxing out new credit cards or carrying high credit card balances. Debt to income ratio refers to the percentage of your monthly income that's used to pay monthly debts. Pay off debts each month to keep a low debt-to-income ratio.

How Do I Get a Personal Credit Check?

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Personal credit reports are important in order for someone to borrow money or rent certain things in which credit checks are necessary. There are many services which will do credit checks by phone, online and even in person. The first personal credit check of the year is free but subsequent credit checks may cost money. However, some companies will try to enroll you in programs which will, in turn, charge you for this information.

The three national credit reporting companies--Experian, Equifax and Trans Union--have set up www.annualcreditreport.com, a central website where you can order your free annual credit report. There is also a toll free number you can call and order this report, as well as an address in Atlanta, Georgia, where you can mail a request for your credit report. The credit report should be mailed to you within 15 days, and this is the only website where a credit report must be given to you for free, by law.

To receive your annual credit report one time for free, you need to provide the credit reporting agencies with specific information like your name, address, social security number and date of birth. If you have recently moved--like within the last two years--you may have to provide your previous address. You may be called and asked questions by each credit reporting company because each one deals with different types of credit, ranging from credit card bills to mortgage payments. They only need this information to help you get your free annual credit report.

Outside of annualcreditreport.com, there are no websites that must give you your credit report for free, by law. In most cases, these credit reports are given out for free by these companies, but there are strings attached, namely by signing you up for a monthly subscription service that is difficult or painstaking to cancel for people who accidentally sign up for it. These sites will also try to sell you things or collect your personal information so they can sell that or send you a lot of spam. Most of these places are scams, and it would be best to forward any email, pop-up or piece of information about ones other than annualcreditreport.com to the FTC at spam@uce.gov.

What Is the Official Site for Annual Free Credit Report?

2:10 PM No comments

With so many services promising "free" credit reports, it can be hard to differentiate between a misleading service and the real thing. The one place to go for a free copy of your report is a website, AnnualCreditReport.com, which is the only authorized source under federal law.

AnnualCreditReport.com is a service jointly set up by the three major credit-reporting agencies: Equifax, Experian and TransUnion. To get your free report, just go to https://www.annualcreditreport.com and follow the instructions.

You are entitled to a free copy of your credit report from each of the three credit agencies once every 12 months, according to the Fair Credit Reporting Act. You can request all three reports from AnnualCreditReport.com.

Inspecting your credit report at least once every 12 months will let you find out about any fraudulent activity on your credit cards and can help you prevent identity theft. It can also help you determine if there are any inaccurate items on your report.

There are plenty of impostor sites and scams that offer "free" credit reports, according to the Federal Trade Commission (FTC). These sites usually come with strings attached, such as signing up for a paid membership plan.

In 2009, the FTC countered popular commercials promising "free" credit reports with a commercial of its own. While the commercial does not specifically mention the sites by name, it parodies their approaches.

What Is a Credit Score Based on?

11:19 PM 1 comment

A person's credit score helps determine whether a bank, credit card company or other lender will offer credit or a loan to a potential client. The higher a credit score, the better; a credit score may even affect employment, as many companies now check credit scores as part of the hiring process.

Paying bills on time is one of the most important things an individual can do to improve a credit score; neglecting to pay a bill by its due date will hurt the score.

Having multiple credit cards or loans near the maximum lending amount will affect a credit score. Credit debt that is over 20 percent of a person's income raises concerns for many lenders, thereby lowering a credit score.

The longer a person has had credit in good standing with numerous lenders, the higher the credit score.

Having too many accounts open, regardless of their balance, may negatively affect credit reports and scores.

If a person closes too many accounts in a short period of time, it reflects poorly on a credit score.

Multiple inquiries (or too many in a short period of time) often will hurt a credit score.

How to Easily Raise Credit Score 100 Points Or More

3:49 PM No comments

Having a high credit score is crucial when you are trying to get a new loan for a car or maybe a house. Most lenders will look at your credit score to determine if you are worthy of approving a loan for.

Instructions

Your credit report will show if you have been late on any payments to any loans you have or and credit cards. Your report will also show were you currently live and where you have lived in the past. It is important to have a high credit score but you also want to make sure that your the information on your credit report is accurate.

When a lender checks your credit report they usually will get the report form the three main agencies, Equifax, Experian and Transunion. It is important that you get your report from them at least once a year so you can check to make sure everything is accurate.

The good thing is that you are entitled to one free credit report every year form each agency so this makes it easy to keep track of.

If you find that there are some things on your credit report that you do not agree with then you can file a complaint with the credit agencies and they then have to verify the information in question. They will contact the person who reported the information and by law they have 30 days to respond. If they do not respond then the item must be removed from your report.

Remember that when you are monitoring your credit report that you always make sure that it is accurate.

What Your FICO Score Means

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The FICO score is used to assess the credit worthiness of individuals. The Fair Issac Corporation initiated this credit-scoring method. An individual's FICO score is a number between 300 and 850. The higher the score, the more financially stable the individual is deemed to be. Individuals with higher scores are able to obtain loans at lower rates of interest because based on their history, they are more likely to repay the loans on time.

The FICO credit score is computed by taking into account several factors. The most important factor is how prompt the person is in making monthly payments. When there are no defaults on mortgage repayments, credit card payments and utility bill payments, the person's credit score remains high. The FICO score also takes into account the amount of debt the person holds. The types of credit owed by the individual are also analyzed. It is always beneficial for the person to have different types of credit such as mortgage payments, credit card and car loan repayments. The person's credit history is also analyzed. Individuals having longer credit histories are considered to be more financially stable.

In the United States, there are three main credit reporting agencies: Equifax, Experian and Trans Union (See Resources). Each agency computes the FICO score differently by giving different weight to different factors and produces its own score. You can get a copy of your credit report whenever you want by contacting the credit reporting agencies, although you will likely have to pay for it. On the other hand, you can receive a free copy from each of the agencies reports annually by going to annualcreditreport.com.

When an individual wants to obtain loans in the market, the lender reviews her FICO credit score before deciding on whether or not to sanction the loan. A FICO score of below 620 is considered low and highly risky. Individuals with this score or less are considered to be high risk to default on their loans or to pay late

The lender evaluates the risk involved and accordingly fixes the rate of interest on the loan, with those with low credit scores paying higher interest rates.

The FICO credit score keeps rapidly changing. For example, one late credit card payment could lower the score by 50 points or more. If the person defaults further, the score is bound to decline further. On the other hand, If he starts making prompt monthly repayments and pays down debt, his score starts improving.

Can Medical Bills Go Against a Credit Report?

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Credit scores are numerical estimations of a person's likelihood of paying off a debt in a timely manner. The three main credit agencies are Equifax, Experian and TransUnion. They adjust the credit scores of consumers by considering past accounts' payment histories, proportion of available credit to current accounts and personal income, and that of the consumer's spouse.

The two main types of debt are secured and unsecured. Secured debt gives the lender claim to property that can be seized if the debt is not repaid. Unsecured debt does not give the lender this power, so settling a delinquent account can be more difficult, often involving legal action. For this reason, unsecured debt tends to be more expensive, in terms of interest paid, and more difficult to obtain, in terms of credit score requirement.

Because medical treatment is a service rendered, rather than a piece of property purchased, any unpaid debt is unsecured. There is nothing that can be repossessed. The granting of credit is typically based on credit rating, however it is illegal to refuse medical care in the U.S. where it may be a matter of life or death, even if a patient cannot pay. While this situation does save lives, it can also cause collection problems for medical facilities and credit problems for patients.

There is little choice to be made when faced with serious medical problems, but to assent to treatment. However, this does not change the fact that the patient or parents of minor patients is ultimately responsible for payment of the debt. Serious medical problems can also negatively impact the earning power of individuals, which can further reduce the ability to pay off debts. Because of this, medical bills that are unpaid or paid late have the same impact on credit score as other unsecured debt. Some creditors, especially those who finance major purchases, may choose to overlook such debt, especially if a period of late payment has since been addressed and the borrower is deemed unlikely to die or become crippled by a chronic condition. Consult a professional before making any major financial decisions.

Some measures can be taken to mitigate the damage done by medical debt. While medical establishments are generally for-profit ventures, they are sometimes sympathetic to the financial problems of patients. Many decline to report delinquent accounts to reporting agencies as long as regular payments are made to the account, even if the payments are small. Bankruptcy can effectively "reset" a consumer's credit. This may not be immediate and the process takes time. However, few bankruptcy courts refuse relief to people who face serious medical debt. Medical expenses exceeding 7.5 percent of annual income are also tax deductible, providing some offset to the burden.

Does Not Paying Medical Bills Affect Credit?

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Doctors are in the business of providing medical care, not bill collecting, so they do not typically report unpaid accounts to the credit bureaus. A bill does not affect your credit unless it shows up in your TransUnion, Experian and Equifax credit bureau records. Some doctors sell bad debts to collection agencies, and most debt collectors transmit information to the bureaus. Your medical bills hurt you if they wind up with one of those agencies.

Medical bills encompass a wide range of health-related obligations. These accounts include doctor and hospital bills and bills for lab tests, medical procedures, diagnostics and surgery. Insurance may pay some of these bills, leaving you responsible for the balance, or you may be liable for the entire owed amounts yourself if you have no coverage. You usually get a statement alerting you to the unpaid amount after your insurance company handles its portion of the account, but you may not realize a bill is not paid until you get a dunning notice from the service provider or collection agency. Your doctor or hospital might accept payment arrangements or your bill might go to a collector.

Collection agencies share information with the credit bureaus, including unpaid medical accounts. A debt collector may call you and threaten to report the bill to TransUnion, Experian and Equifax. You are entitled to one free credit report every 12 months from those three bureaus, which lets you check if the collector followed through with the threat. Order the reports from AnnualCreditReport.com, the only official free source. The medical bill hurts your credit if it is listed on the reports.

Your credit score depends on the data on your credit reports, which is distilled into a three-digit number. Certain types of information are weighed more heavily, according to the MyFICO scoring firm. Your payment dates are particularly important, since 35 percent of your score comes from your payment history and a collection account represents an unpaid obligation. Lenders who check your credit reports for credit line increases or new accounts see the medical bill and count it as negative information when they make their decision.

The simplest solution is to pay the collection agency with an agreement that it erases the account from your credit reports. Insist on this condition because a paid-in-full collection account is still bad for your credit score. You may be able to remove the account from your credit reports without paying it if the debt collector made a mistake in the entry. You may challenge any items with errors in them, according to the Federal Trade Commission. TransUnion, Experian and Equifax are obligated to erase the collection agency account if the debt collector cannot prove its data is correct. Otherwise, the medical bill drops off your credit reports on its own in seven years.

Will Moving a Lot Hurt My Credit Score?

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Whether a member of your family is in the military or you simply want to see more of the world, frequent moves are a fact of life for some consumers. Unfortunately, moving frequently can carry consequences beyond a lot of packing and unpacking. Not only does evidence of your move appear on your credit report, in certain situations moving frequently can hurt your credit score.

Each time you move and change your address information with your creditors, those creditors report your new address to the credit bureaus. The credit bureaus keep an extensive record of your past addresses to help identify you. Your addresses appear in the "Personal Information" section of your report. Information in this section does not contribute to your credit score. Thus, simply changing your address has no impact on your credit rating.

If you neglect to update your address with a creditor or the creditor does not accurately record your new address, the company may continue sending your monthly bills to your old address rather than your new one. This could result in you leaving bills unpaid simply because you did not receive them. Unfortunately, payment oversights that occur as the result of a move still appear as missed payment notations on your credit report. Each payment you miss can drop your credit score by more than 100 points.

If your frequent moves are the result of evictions or a foreclosure, your credit will suffer as a result. Foreclosures are public records that appear within your credit history as derogatory entries while evictions show up on your credit as money judgments if your landlord sued you for unpaid rent. Both evictions and foreclosure records demonstrate to future lenders that you did not reliably pay your rent or mortgage payment and were forced out as a result. These entries result in severe damage to your credit scores.

Breaking a lease in order to move when the lease does not carry a lease-break provision can also hurt your credit. Unless a lease-break provision is present, you are responsible for paying rent whether or not you live there. Your inability to pay the debt you owe after breaking a lease could result in the landlord turning your debt over to a collection agency or suing you for the balance resulting in either a collection account or money judgment on your record, both of which adversely affect your credit rating.

If you move out of the country, you may choose to close several of your accounts before you do so. Unfortunately, while closing U.S. accounts may prove convenient, doing so often hurts your credit rating. Keeping your accounts open and frequently updated with timely payments helps you maintain a good credit score. When you close your accounts, you limit the amount of available credit you carry, which lowers your score. Closing positive accounts also causes them to begin to "age off" your report. Once the credit bureaus remove positive accounts, your credit score may suffer as a result.

How to Negotiate Credit Card Rate Reductions

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Paying 20 percent interest or more on a credit card raises your minimum payments and makes paying off the credit card difficult. Negotiating a lower interest rate on your credit card is doable. Naturally, credit card companies want you to pay a higher rate because this increases their bottom line. However, if you're serious about eliminating your debt, asking your credit card company to lower your interest rate is one of the first steps. A lower rate reduces the interest incurred on the card and more of your monthly payment goes toward decreasing the principal.

Instructions

Use extra money to bring down the balance on your credit card. Credit card companies are more likely to negotiate a lower rate if you don't carry high balances.

Start increasing your monthly payments. Credit card companies will review your account history before agreeing to lower your interest rate. Making higher payments or paying more than your minimum each month shows you're determined to control your debt and they may reduce your rate.

Pay on time. Interest rates typically increase when a borrower habitually sends late payments. Make sure payments arrive before or on the due date to qualify for an interest rate reduction. Pay by telephone or via online payment systems.

Call your credit card company. Getting a lower interest rate on credit cards often involves asking the company to review your account and consider a reduction.

Discuss your history with the representative. Once on the phone with your credit card company, mention your history with the company, such as how long you've been a cardholder. Highlight your good payment history, if applicable. Speak with a supervisor if the representative doesn't have the authority to lower your rate.

Take your business elsewhere. Expressing your plans to cancel the account and apply for a low-interest credit card may persuade a credit card company to offer a rate reduction.

How to Access Your Free Credit Score Report Online

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No matter what you do for a living or how many assets you own, it is important to keep an eye on your credit rating. The status of your credit report will impact everything from the interest rate on your mortgage to your ability to get a loan. Your credit report can even impact your employment prospects and your car insurance rates, since many employers and insurance agencies routinely check credit reports as well. Fortunately consumers are entitled to a copy of all three of their credit reports each year, making it much easier to spot errors and attempts at identity theft.

Instructions

Consider staggering your requests for credit reports. All consumers are entitled to a copy of their credit reports from all three credit reporting agencies--Equifax, Experian and TransUnion. By requesting a copy of one report every four months you can spot problems early.

Log on to the annualcreditreport.com website. This is the only official website for consumers to check their credit reports for free. There are other free credit report websites, but they often charge subscription fees that make their services anything but free.

Choose your state from the drop-down box on the main screen and click the "Request Report" button. Enter the information requested on the next page. You will need your identifying information, including your name, address and Social Security number.

Select the credit report you want to receive. You can choose one or all credit reports from the three major credit reporting agencies. Click the confirmation page to be transferred to the website of the appropriate credit reporting agency.

Answer the verification questions as they are presented. This step is used to ensure that only the rightful owner of the credit report has access to it.

How to Increase Your Credit Score After Paying Debts

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One of the most important pieces of advice given to a person with a bad credit score is to pay down all of your debt so you have a clean slate. However, once you have your debt gone, you may wonder why your credit score doesn't magically rise. After you pay off your debt, there are still a few things you need to do to get your credit score to go up.

Instructions

Continue to use your credit cards. Credit scores are based on how well you manage your debt. Once you pay off your debt, you will have nothing to manage, meaning that the score will not change very much from where it ended up. Use an older card for the best results as credit bureaus will look at the older credit before they look at newer credit.

Keep your limits low. When you are using the cards again, don't get sucked into your old spending habits. Spend what you need to spend and pay off as much of the card as you can. A good rule of thumb is to keep the amount of debt on any card to less than 30 percent of the limit.

Check your credit reports to see what limit your creditors have listed. If they are listing your credit limit as less than what it actually is, this can hurt your credit score. Call them to make sure they are listing the correct limit on the reports.

Ask for good will on your cards. If you have been an exceptional customer and have diligently paid your credit bills, they may forgive a late payment, which will help raise the credit score.

Look for any major discrepancies in your credit report. These are not limited to incorrect limits, but can also include accounts that are listed with anything other than "current" or "paid as agreed," negative items which are older than seven years or accounts that were included in bankruptcy that are are still showing delinquent.

Can Foreign Collections Affect Your Credit Report?

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Don't think you can incur debt in another country and skip out on paying the bill simply by returning home. Just like in the U.S., the foreign creditor will eventually turn your debt over to a collection agency and debt collectors will soon come looking for you. Depending on the type of debt and how much you owe, a foreign debt could end up on your credit report and damaging your good credit record for years to come.

All creditors whose accounts appear on your credit report are able to file those reports because they hold contracts with the credit bureaus that give them the ability to update consumer credit records. A credit reporting contract isn't free. Prospective creditors must undergo a lengthy application process, pay a membership fee and purchase expensive corporate software allowing them to compile and send their reports.

Part of the application process for a reporting contract requires the creditor submit to a on-site inspection by credit bureau representatives. Even if a foreign collection agency were willing to take the time and expense necessary to acquire an American credit reporting contract, the credit bureaus will not send a representative to inspect an international business.

A foreign collection agency's inability to report a debt on your credit report directly does not mean that the account won't show up there. Foreign creditors have the option to hire U.S.-based collection agencies to conduct collection activity in their stead. Provided the U.S. based collection agency the foreign collector hires holds a reporting contract, your foreign debt will show up on your credit record by way of the U.S. collection agency.

The Fair Credit Reporting Act, not the laws of the country where you originally incurred the debt, governs the amount of time any collection account can appear on your credit report. Thus, the credit bureaus must delete the account seven years and 180 days from the day you stopped paying your original foreign creditor -- not seven years and 180 days from the date the U.S. based collection agency first acquired your debt or originally reported that debt to the credit bureaus.

Just because a foreign creditor can pursue you for an unpaid debt does not mean that it will. Whether a foreign creditor will hire a U.S.-based collection agency depends on the company's individual policies and the amount you owe. The more you owe, the more likely the foreign creditor is to put forth the expense of tracking you down and hiring an international creditor to pursue you for the debt.

Who May Check Your FICO Score?

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Your FICO score, sometimes called your "credit rating," is a numerical measure of your credit history and creditworthiness. A FICO score of 850 represents perfect credit, while a rating of 300 is the lowest possible score; the median score is 723, according to Dana Dratch, a columnist for Bankrate, a consumer and individual financial information website. Besides yourself, several entities can access your FICO score.

Businesses will often check your credit report and FICO score before making a hiring decision. Companies do this because they believe applicants with higher credit scores are more responsible, better at managing money and have higher degrees of competence than those with low credit ratings. To check your credit, a prospective employer will contact one -- or sometimes all three -- of the consumer reporting agencies and request your information. The Fair Credit Reporting Act, a federal law, requires them to obtain your permission before obtaining your credit report and FICO score.

Banks and lending agencies will check your FICO score before approving you for a mortgage, car loan, home equity line of credit, private student loan or other form of loan. Lenders do this to reduce their risks -- someone with a high credit rating has a much lower chance of defaulting on a loan than someone with a poor FICO score. If your score is high, a lender will probably approve your loan application. If you have a poor FICO score, a lender will deny your application, or approve it with a higher interest rate.

Credit cards function much like short-term loans: you can use your card to make purchases, but you must begin paying them back during your next monthly billing cycle. If you refuse to pay, your card issuer must pursue you and try to collect what you owe, causing the company to lose money. For this reason, credit card companies will check your FICO score before approving your card application. Your good FICO score will help you get a card with a higher credit limit, lower interest rates and more rewards, while a poor score will leave you with a rejection or a very high interest rate.

The largest component of your FICO score is your "repayment history" -- your record of paying bills on time, every time and in full. Landlords' and rental agencies' livelihoods depend on timely, complete rent payments. For this reason, many landlords and rental housing agencies will check your credit before making a decision on your apartment or rental home application. A poor FICO score will likely result in a denial, keeping you from renting a home or apartment unit.

What Kind of Loans Will Improve Credit the Most?

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Consumers looking to improve their credit scores have a range of options. Beyond the standard tools such as on-time payments, amount of credit utilization and length of credit history, specific types of loans will improve scores the most. Part of this depends on individual circumstances; the kind of loan generally matters little to people who have and maintain pristine credit histories, while those with low scores can benefit the most from such loans. As always, discipline and consistency remain paramount considerations.

A mortgage loan can demonstrate stability as well as equity that accumulates each month, key factors looked at by potential creditors and reflected in credit scores. Those consumers who borrowed to the absolute limit or overpaid for homes are susceptible to missed payments and foreclosure without an adequate financial cushion, which makes it essential to have sufficient equity (at least 20 percent) and steady income to cover payments.

You generally take out automobile loans for terms of 36 to 60 months. Rather than put a large down payment on the car of your dreams, which creditors do not see, take out a larger loan than necessary and make higher payments than required each month. This will quickly reduce the balance versus the original amount, which improves a credit score faster than making the minimum payments on a smaller loan and taking longer to pay off the principal balance.

Your scores drag lower if you have only credit cards or concentrations in just one type of loan. Consumers who maintain a mix of loan categories will fare the best when trying to improve their credit. These include installment and fixed-payment loans, credit cards and secured loans such as for homes and cars. Creditors and the major credit-rating agencies look favorably on this kind of variety provided as always that they are managed responsibly.

These loans types can quickly improve scores in the short-term, but only if their credit utilization remains low. For consumers who may not have the discipline to avoid overspending, high balances compared to credit lines will measurably dampen scores. However, those who limit their usage and keep balances to under 25 percent of available credit will demonstrate to creditors that they do not need the credit at their disposal, representing a good credit risk that leads to higher scores.

Information on Do It Yourself Credit Repair

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Your credit score is calculated using a formula created by the Fair Isaac Corporation using information found on your credit report. Your score takes into account your payment history, the different types of credit you have used, the amounts you owe, the length of your credit history and how much new credit you have recently applied for. Many companies offer to fix your credit score so that you can get loans or the preferred interest rates. However, you can improve your score on your own.

Your credit score is based on information in your credit report so if your credit report contains errors your score will be negatively affected. Each year you should order your free credit report. Even though it will not give your credit score, you can see any negative information that might harm your score. If there are errors, locate evidence that you have such as statements that you can use to prove your case. When disputing a claim, write down everything you do and everyone you talk to. Though you are unlikely to end up filing a lawsuit, keep in mind that should your case get that far every step you have taken will be scrutinized so you should be careful to keep a professional tone. Once the credit bureau receives your dispute, they must investigate within a month so you will generally know the results within two months.

If for some reason you cannot even make the monthly payment when it is due, you should alert your creditor to this and see if the company can help you by changing your payment schedule. Many companies would prefer to change the schedule rather than having to send a collections agency after you because of the fees collections agencies charge. Your credit score will be spared a large drop of you can avoid having your account be sent to collections. In addition, if you have had a fairly good relationship with one of your creditors, consider asking if they would be willing to remove a delinquency from your record.

Making a budget and sticking to it will help you make payments on time and pay down your debt. Your payment history accounts for 35 percent of your credit score so by making sure your accounts are current you will be repairing your credit. When you have a budget, you are better able to see where you spend your money and how you can minimize your costs to pay off your debt more quickly. When budgeting for debt payments, identify the account that is charging the most interest. Make only the minimum payments on your other accounts and devote as much money as possible to paying off the account with the highest interest rate first.

How to Get a Charge-Off Removed After 7 Years

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A charge-off on a credit report will remain on that report for seven years. A charge-off is a debt that the lender considers a loss to the company. This does not mean that the debt will go unpaid. Often this type of debt is sold to a collection agency. But even if you pay the debt in full through the collection agency, it will remain on your credit report as a charge-off for up to seven years.

Instructions

Understand the type of charge-off. A charge-off might change if the debt is paid to a charged-off debt or a charged-off settled. All forms will negatively affect your credit score.

Get a copy of your credit report from each of the three credit bureaus, TransUnion, Equifax and Experian. Notice if the charge-off is still being reported by looking for the creditor's account and the status of the account.

Contact the creditor to request the charge-off be removed. This step is particularly important if you have paid off the debt in full. Creditors are more likely to remove it at that point. If it has not been seven years yet, but you have paid off the debt in full, you can still request that the charge-off be removed.

Report the error to the credit bureaus if it has been seven years or longer since the last reporting of the charge-off. Visit each of the credit bureau's websites (see Resources below) and request that the charge-off be removed.

For the fastest results, file a claim online with the credit bureaus. The credit bureau will then investigate the claim and if it determines that your claim is accurate, the charge-off will be removed from your credit report.

Wait 30 to 60 days and check your credit report again to ensure the charge-off has been removed. The credit bureaus will send you an explanatory letter through the mail outlining their decision to remove the charge-off or to keep it on your report.

Monitor your credit report annually by requesting a free copy of your report from each of the credit bureaus. Follow the claim process as outlined at the credit bureau's website for any discrepancies you find.

Can Judgements Be Removed From Credit?

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Failing to pay back a debt could mean the creditor sues you, probably resulting in a judgment, and ruin your credit score. If someone sues you to obtain a judgment, you might be able to negotiate to remove it. At a bare minimum, dealing with the debt is better than letting it sit.

Vacating a judgment means the court removes the judgment from your record because it was improperly awarded to the creditor. Judges may vacate the judgment due to a reasonable excuse for not showing up for court, such as being out of town or having an illness at the time. You can also try the meritorious excuse, or valid defense, such as being a victim of identity theft and not having liability for the debt. Receiving poor quality service is another possible defense.

The judgment creditor might dismiss its case if you agree to pay in full. Have the creditor give you in writing an agreement to report the judgment as "dismissed" rather than "paid," because a dismissed case looks better to creditors than a paid judgment. Dismissed judgments basically say the debt is void, while paying insinuates you legally accrued the debt. Even a dismissed judgment, however, stays on a credit report for seven years.

You can dispute the judgment with the credit bureau in the hopes that it cannot verify the validity of it in 30 days. Courts can be slow about sending in the proper paperwork and if it works, you avoid the pain of a judgment on your record for free. Also, check the statute of limitations on debt in your state. If it passes, you are not legally obliged to pay the debt nor can it be reported.

You may want to settle the debt before it goes to court if you legally own it. Once a judgment hits your credit report it stays for seven years. Also, you will probably have to pay it anyway, possibly through garnishment of your wages or bank account. In some states, judgments are renewable before their expiration date, so they could theoretically haunt you forever.

What is Equifax Reporting?

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Equifax is one of the three major credit reporting bureaus. The other two are TransUnion and Experian. These three agencies keep records of your credit history and then assign you a score based on those records. When an item is reported to Equifax, the agency determines whether it is a positive which increases your score or a negative which decreases your score.

Equifax assigns you a credit score, called your FICO, because it was developed by the Fair Isaac Corporation. This score is what lending institutions and credit card companies look at when you apply for loans or a credit cards. Credit scores are a signal of your financial health. For example, if you filed for bankruptcy, that is the most negative item you can have on your credit report. Equifax, under the Fair Credit Reporting Act, must keep that notation on your credit report for up to 10 years.

While there are five components of your credit score, two combine to make up 65 percent of your Equifax credit score. Your payment history your ability to pay on time accounts for 35 percent, while the amount of debt owing is another 30 percent the more you owe, the lower your score. The length of your credit history makes up 15 percent so younger people with a shorter track record are hurt in this are. Obtaining new credit accounts for 10 percent, as do other factors, such as having a mix of credit types.

Credit scores range from 350 to 800. Most Americans are in the 600 and 700 range. At minimum, you want to have a credit score of at least 600, otherwise, lenders may consider you to be too much of a risk. A higher score gets you, for example, a better deal on your mortgage. Those with better scores, which shows lenders that your are financially responsible, will pay lower interest rates because banks feel there is not as much risk associated as opposed to someone with a lower score.

If your credit score needs to be repaired, you need to work on creating positive news in your credit reporting. Contact Equifax for a copy of your credit report. Review it to ensure there are no errors. Then, look at the components of your score and work on fixing those. For example, if you are constantly missing payment deadlines, work towards paying on time. Set up automatic bill payments if you are forgetful. Reduce your debt levels to around 30 percent, meaning if you have a credit limit of $10,000, try to keep your amount owing to around $3,000 or less.

Equifax began in 1899 by brothers Cator and Guy Woolford as Retail Credit Company in Atlanta. It grew for may decades, opening offices across the country (300 by the mid-1960) and changed its name it Equifax in 1970, which comes from the phrase "equitable factual information." Equifax is the largest credit bureau in the United States, according to its profile. It provides this same information to clients in Canada and many countries in South America and Europe. The company is based in Atlanta.

What Is the Highest FICO Score You Can Have?

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Borrowing money is fundamental financial activity that allows average consumers to buy homes, cars, education and other goods and services. When you take out a loan or a credit card, lenders use your FICO score (also called your credit score) to help determine how risky it is to lend to you. Your FICO score can impact the interest rate you receive on loans.

FICO scores get their name from the Fair Isaac Corporation, which developed formulas used to calculate credit scores. FICO scores range from 300 to 850; 300 is the worst FICO score possible and 850 is the highest score you can have, which is also known as a perfect credit score. Credit scores are based on a variety of credit information, such as the length of your credit history, whether you have made debt payments on time in the past and how much debt you currently hold.

A FICO score of 850 is rare. According to the Fair Isaac Corporation, the majority of people have credit scores somewhere between 600 and 800. The MSN Money website states that less than 1 percent of the U.S. population (about 1 million people) actually has a perfect credit scores of 850. According to Bankrate, about 13 percent of American have credit scores of 800 or higher, while about 15 percent have credit scores lower than 600.

Most people never achieve a 850 FICO score, but there are certain steps you can take to increase your score. First, you should always pay your debts on time. Missing a debt payment can quickly derail a good credit score. Keeping your credit card balances as low as possible also tends to boost your credit score. The MSN Money website recommends that you avoid making too many credit card inquiries, because they can hurt your score. A long credit history tends to help credit scores, so your score may rise naturally over time if you are financially responsible.

While 850 is the highest FICO score possible, achieving a perfect score is more superficial than practical. Scores in the high 700s and 800s are still considered good scores, and lenders may be willing to give borrowers with scores in the high 700s their lowest interest rates. According to MSN Money, there usually is not much, if any, difference between a perfect credit score and a score in the high 700s when you are seeking a loan.

Explanation of a Good Credit Rating Score

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Credit scores help lenders, employers and landlords quickly assess if you are a good credit risk and can keep your financial affairs in order. Credit-scoring companies use information from your credit reports to determine your score, and each has different criteria for its calculation. However it is calculated, a good credit score is always the product of long-term, responsible use of credit.

A "good" credit score depends on both the credit-scoring system, as well as the criteria set by individual credit grantors. In the FICO credit-scoring system, scores above 700 are generally considered to be good, with scores over 720 very good, according to Elizabeth Razzi for the Kiplinger website. The VantageScore system is different, with scores between 800 and 899 rated as "B" credit and scores over 900 as "A" credit, according to the Experian website.

Credit card companies, mortgage lenders, banks or landlords may have their own standards for what a "good" credit score is, so the FICO and VantageScore measurements are simply guidelines. If you are concerned about whether or not your credit score is high enough for a particular lender, ask about which credit criteria they use.

Just because you have a high credit limit doesn't mean you should use all of it. Credit-scoring systems consider your balances and can lower your score if you are too close to your limits. It doesn't matter that you make your monthly payments on time, credit-scoring companies evaluate your use of credit separately from your payment history. You protect your credit score by keeping your balances under 30 percent of your available credit. In the FICO system, your use of available credit makes up about 30 percent of your score, while the VantageScore treats how much of your credit you use and your balances as two separate factors, totaling 32 percent of your score.

The longer your credit history, the better. While there are horror stories about college students getting into debt because of student credit card programs, it's actually a good idea to start using credit early. Responsible credit use in college can make it easier for a person to get a mortgage or automobile financing later.

Making credit card payments on time is crucial to developing a good credit score. It's also good for your overall financial health. Late payments can cost you in credit card fees. In addition, if other creditors observe late payments on your credit report, they may raise your interest rate or lower the limits on your accounts. FICO bases a full 35 percent of your score on your making regular, on-time payments, while the VantageScore system counts your payment history as 28 percent of your score.

A mix of different credit types can improve your credit score. For example, it's a good thing if you can show responsible payment records on credit cards, personal loans and your mortgage. When you have more than one type of debt, you demonstrate to other lenders that you can manage different financial obligations.

Asking for credit can lower your credit score, so be careful about opening new accounts. Credit score companies perceive new inquiries as the potential for your taking on more debt, so your credit score can suffer when you apply for a new card. Be careful when applying for an apartment, a car loan or even a bank account. Credit checks can cost a few points off your score.

Why Care About Your Credit Score?

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Your credit score is a three-digit number that determines your credit-worthiness. There are three credit bureaus that track and rate your credit history -- Equifax, Experian and TransUnion. Each bureau compiles your credit score using a proprietary formula, that takes into account your payment history, percentage of available credit compared to your total credit line, and the length of your payment history. Your credit score is referenced by potential employers and prospective landlords, among others, and those are just two of the reasons to care about your credit score.

Your credit score is, of course, a determining factor in whether or not you will be approved for a mortgage. It also determines your interest rate, which can make a difference of tens of thousands of dollars over the life of your mortgage. If you're a renter, your credit score may also be an element in whether or not you are approved for a lease and the amount of your security deposit. Utility companies may also reference your credit score to determine if a deposit is needed when turning on service.

Prospective employers look at credit scores for several reasons. Financial institutions that are hiring use it to gauge the potential for someone to commit embezzlement or fraud. Employers may also use it to separate candidates that are otherwise equal. Employers may also use your credit score to gauge whether you've been honest about your salary history and if you'll have any significant distractions on the job.

Any time you apply for credit, your credit score is used to determine whether or not you'll be approved and what the credit terms will be. This includes credit cards, car loans and lines of credit. It's still possible to qualify for credit with a poor credit score, but the interest rates may be high.

Car insurance companies check your credit score, to determine whether or not you're an acceptable risk. They also take your credit into consideration when deciding your insurance rate. Cell phone companies and utility providers may also check your credit score to determine whether or not to provide service and whether you'll need to put down a deposit.

Can Reduction in a Home Equity Line of Credit Affect My Credit Score?

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A home equity line of credit is a type of secured revolving credit that uses your home's equity -- the value of the home minus mortgage owed -- as collateral. In certain cases, your lender may decide to reduce your home equity line of credit because of a drop in your income, an increase in your debts or other factors inhibiting your ability to repay the loan.

Credit scores, also known as a FICO scores, are based on a variety of factors, including amount of debt, payment history and length of credit history. According to My Fico, 30 percent of your score is based on amounts owed, including your proportion of debt to credit. Ideally, you should use only 30 percent of your available credit. A reduction in your home equity line of credit will raise that percentage and have a negative effect on your credit score.

Although a reduction in your home equity line of credit throws off your credit balance, you can take action to mitigate the effect it has on your score. Start by paying your bills on time. Payment history is the largest factor in your credit score, and maintaining a flawless payment record will help you maintain a solid FICO rating. Paying down your home equity line of credit balance will reduce your debt-to-credit ratio, raising your credit score.

Your FICO score factors in all your lines of credit, including credit cards and overdraft protection credit lines. You can attempt to restore your debt-to-credit ratio by contacting your credit card companies and banks and asking for an increase in your existing credit lines. If your creditors grant your request, it will increase your amount of available credit and lower your debt-to-credit ratio. This will have a positive effect on your credit score.

Your overall credit status will determine how much damage a drop in credit score will have on your financial life. For instance, if you already have a strong credit history, a slight drop in your score is unlikely to have much effect on things such as mortgage or credit card interest rates. However, if your score is teetering around 620, the lower limit of prime credit, any reduction in your score will reduce your chances of gaining access to credit.

Although a reduction in a home equity line of credit will typically lower a person's credit score, it may have a beneficial effect for light credit users. If you use little of your available home equity credit, a line of credit reduction will raise your debt-to-credit proportion closer to the optimal range of 30 percent. This will actually serve to raise your credit score, as it will improve the amounts-owed factor of your score.

How to Build a Killer Credit Score

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Your killer credit score can be described as a score of 800 or more. The maximum attainable is 850. To build a killer credit score, you need to get your score regularly. Choose to get your score from FICO (Fair Isaacs Corp.). It's the score most lenders rely on when assessing your suitability for credit. Your FICO score is compiled using data from the three credit reporting bureaus: Experian, Equifax and TransUnion.

Instructions

Go to MyFICO.com (see Resources). You need to see your current score and understand how it is produced if you are going to build a killer credit score.

Choose your product from MyFICO: check it, compare it and track it. Make your choice, and then click "Buy Now". Follow the simple online instructions. Once your ID is verified, you can view you score online and work out ways of building a killer credit score.

Check your credit score. Look for errors. Errors affect your score and can be rectified quickly (see Resources). Check areas where your score is low. Credit cards that are inactive lower your score. If you use your credit cards regularly and wisely, you score will start to increase.

Start using inactive credit cards. Card companies report to the credit reporting bureaus monthly. You score will increase over a few months.

Keep outstanding balances below 50 percent. Credit reporting companies use a roll over credit system that monitors your outstanding balances. Your score increased when you use your card but keep the balance less than 50 percent. Don't close older cards. Keep them active. So long as you use them and keep the balances in check, you increase you credit score.

Apply for credit only when necessary. Multiple applications concern lenders and your score can reduce. Apply for credit two or three times a year. Make sure you maintain up-to-date payments on all lines of credit. You need several years of on time payments for all credit facilities to increase your credit score to a killer level.

Maintain good credit for a long period. Close to 20 years is good. It show responsible behavior, gains you trust and gets you a killer credit score.

Why Does Someone's Credit Report Drop Every Time it Is Checked?

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You may have heard that credit inquiries --- that is, someone looking at your credit report --- will have an effect on your score. In certain circumstances this is true, but not every inquiry has the same effect, and usually a drop in your score due to an inquiry is short-lived.

If you apply for a new credit card, the prospective lender will check your credit report and score. This is the typical inquiry that will have a depressing effect on your score. The effect of one of these types of inquiries is slight -- amounting to five points or so. However, if you apply for several cards in a short amount of time, the effect is cumulative and can be more serious. This is because if you are applying for a large amount of new credit, lenders see you as a riskier borrower, more likely to default.

Often credit card companies will look at your report without your permission in order to send you an unsolicited offer. These types of inquiries have no effect on your score.

If you are about to take out a major loan, such as a mortgage or a car note, you may ask for quotes from several prospective lenders in order to get the best deal. All of these companies will check your report before giving you a rate. The credit bureaus are able to distinguish this type of rate shopping from other inquiries, and will treat all of these events as one single inquiry, with a minimal impact on your score.

It's very important not to be deterred from checking your own credit report by fears it may affect your score. The credit bureaus do not penalize you for looking at your report, and your score will be unaffected. You can check your report from each of the three major bureaus -- TransUnion, Experian and Equifax -- once per year for free.

If you apply for a new job or want to rent an apartment, often the prospective employer or landlord will look at your credit report to get a picture of your financial responsibility. This type of inquiry has no effect on your score. The same is true if you ask for an insurance quote and the insurance company checks your report.

Wednesday, January 30, 2013

Late Payments

Too Much Debt

Public Records

Too Many New Accounts

Errors on a Credit Report

Credit Score

Credit Reporting

Settlement

Considerations

Instructions

Tuesday, January 29, 2013

Instructions

Instructions

Sunday, January 27, 2013

Instructions

How to Get Your Beacon Score

Check Your Credit Report

Employment Is Not Considered

When You Want to Borrow

After Unemployment

Unemployment and Defaults

Instructions

Friday, January 25, 2013

When Not to Consolidate

When to Consolidate

Doing it Yourself

Alternatives

Thursday, January 24, 2013

Instructions

Credit Utilization Ratio

Paying Down Balances

Closing Accounts

Considerations

Composition of a Credit Score

Paying Off a Mortgage Early

How Your Score Can Change

To Pay It Off or Not to Pay It Off?

Wednesday, January 23, 2013

Define Settlement

Debt Settlement

Full Payment

Who's Reporting

Considerations

Monday, January 21, 2013

Instructions

Instructions

Sunday, January 20, 2013

Annual Credit Report.com

Information to Provide

Imposter Websites

Joint Service

Your Rights

Benefits

Imposter Sites

FTC Fights Back

Saturday, January 19, 2013

Payment History

Too Much Debt

Length of Credit

Too Much Credit

Closing Accounts

Inquiries

Thursday, January 17, 2013

Instructions

Factors Influencing Credit Score

Credit Reporting Agencies

Credit Score

Credit Score Fluctuations

Monday, January 14, 2013

Types of Debt

Medical Debt

Credit Impact

Solutions

Sunday, January 13, 2013

Definition

Credit Reports

Effects

Solutions

Address Record