What Happens If Your Mortgage Goes Missing on the Credit Report?

A credit report contains information about your history as a credit user. Your credit report is integral to your ability to obtain credit, but can also be used for rental applications and employers make check it before offering you a job. If your credit report doesn't contain information about your mortgage history you can take steps to change the error.

Credit Report Inspections

All consumers have the right to view a copy of their credit report once a year without charge. Each consumer has three credit reports maintained by the three consumer credit reporting companies: TransUnion, Equifax and Expirian. Errors can appear on one or all of these reports, and just because one has correct information doesn't mean the others will as well. Erroneous mortgage information can appear on one or all of your reports.

Impact

The effect that any information has on your credit report differs from case to case. Creditors use your credit report to determine your credit score, a number that represents your creditworthiness. Your score is based on several factors, such as your payment history, amount of money owed and the average length of your credit accounts. If you have a good history of paying your mortgage for a long time, that missing information may hurt your score. On the other hand, if you've gone through a foreclosure and that is missing, the absence of your mortgage may raise your score.

Errors

You have the right to change incorrect information on your credit reports. After inspecting the report and identifying the error, you can contact the credit reporting company and ask it to remove or correct the error. You must be able to prove there is an error by providing written copies of documents that support your claim. If the company refuses to correct the error you can contact the Federal Trade Commission to file a complaint.

Lenders

Your mortgage lender probably reports your mortgage information to at least one of the three credit reporting companies. When errors appear on your report, you also can contact your lender and inform it of the mistake. A lender may be able to get the information corrected more quickly than you as its information is what the credit reporting companies rely upon.

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How Long Do Public Records Stay on Credit Report?

Each item on your credit report, including a public record, is subject to the reporting periods outlined in the Fair Credit Reporting Act. After the reporting period for each public record expires, the information must be removed by the credit bureaus.

Facts

Public records almost always consist of debts that went through the court system. Public records have a negative effect on your credit score.

Time Frame

Paid tax debts, judgments, Chapter 13 bankruptcies and foreclosures will remain on your credit report for seven years. A Chapter 7 bankruptcy will appear for 10 years and an unpaid tax debt can appear on your credit report indefinitely.

Misconceptions

Although a judgment may be renewed by the original creditor prior to the date the judgment expires, the judgment will still be removed from your credit report after the initial seven-year reporting period.

Considerations

If you review your credit history and discover a public record reporting in error, you may dispute the information with both the information provider and the credit bureaus. This will result in the information being removed prior to the expiration of the reporting period.

Warning

Paying a debt that appears as a public record will not result in the negative information being removed from your credit report. Nor will it improve your credit score.

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My Credit Report Is Screwed Up

Credit reports play a critical role in a person's financial life. These reports include information, available to creditors, about a person's lending history. The contents of a credit report, which are used to form the person's credit score, determine whether a person is eligible for various loans and, if so, at what rate of interest. Therefore, if a person finds an error in his report, particular one that lowers his score, he should hasten to correct it.

Credit Report Laws

Credit reports are maintained by private companies called credit reporting companies. While these companies are not obliged to change the information in these reports if it is correct, they are obligated by federal law to correct erroneous information. The three major credit reporting companies -- Equifax, Experian and TransUnion -- all have slightly different methods of correcting errors, although all require that individuals write letters informing them of the errors.

Letters

A person wishing to correct his credit report should send a letter to one of the three main credit reporting agencies. This information will then be passed on to the other two. The company will likely provide a specific form that the person needs to fill out and sign. The company may correct the report immediately, or it may first contact other parties to verify that the change is factually correct.

Credit Scores

A person's credit score is affected the minute that information on the report is changed. Once the error has been corrected, the person's credit score immediately reflects the new information and either goes up or down, depending on its nature. Although credit reporting companies are legally obliged to correct errors, they are not financially responsible for making them: a person cannot sue if an error caused him to face higher rates on a loan.

Considerations

Not all information on a credit report is necessarily worth going to the trouble of correcting, as not all information affects a person's credit score. For example, if a credit report incorrectly lists a person's previous address -- particularly in a small way, such as through a typo -- the person's credit score will not change if the error is corrected, making the change unnecessary.

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How Long After You Pay Off Your Debt Will Your Credit Score Go Up?

Your credit score will increase if you manage your debt responsibly. Paying off consumer debt, such as credit cards and installment loans, can raise your score in approximately 30 days, assuming the creditor reports it immediately to the credit bureau.

Time Frame

Creditors update your file with the credit reporting bureaus every 30 days. If you pay the debt right after they've reported, it will take well over 30 days -- closer to two months -- for the bureaus to generate your new score.

Expert Insight

The Federal Trade Commission and myFICO.com agree that there's no "quick fix" for credit worthiness. Accurate negative information, such as late payments, bankruptcy and foreclosure, appear on your report and affect the score for seven to 10 years. Their impact lessens over time, especially with proper credit management.

Warning

Not all creditors report to all three major bureaus -- Experian, Transunion and Equifax -- and some don't report to any of them. Paying off a debt does not guarantee your score will increase. Check with the creditor to find out which credit bureau it reports to and when.

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Consumer Credit Risk

Consumer credit is any borrowing used to finance non-capital purchases. A good way to consider consumer credit is borrowing for anything except a house or real property. Consumer credit can be the easiest credit to receive but also the easiest to ruin. Managing credit and maintaining credit is a vital part of working and living in a modern economy. Although there are some people able to have a quality lifestyle with no credit or borrowing, they are very few. Most everyone at some point will have to consider what sort of consumer credit risk they may be.

History

A consumer's credit history is very important to someone considering offering a credit card or personal loan. How people have handled their credit in the past is a very good indication of what they will do in the future. Assessing credit history is dictated by the federal Fair Credit Reporting Act (FCRA) and limits just how far a creditor can look into a borrower's past. Action, however, at intervals of the past one, three or seven years can weigh heavily in determining how much a risk a borrower will be.

Income

Of course, income also affects a person's credit risk. All debt must be paid with present and future income. If the income is too low to service the debt, then the risk is too great. Some borrowers will attempt to earn extra money with additional work, but creditors weight how long and how much the borrower can sustain such a work schedule.

Existing Debt

No matter the income of the borrower, if there is already debt drawing off some of the money, then how much will there be for new debt? Also, existing debt can indicate how "borrow happy" someone is. The credit history and the existing debt may show a borrower has just borrowed money from several sources and is now wanting more. This can indicate a deepening financial situation that the available income cannot overcome.

Stability

The borrower's work and lifestyle history can also affect the credit risk. If the borrower has been on the job for several years, it indicates steady income. If the borrower has had several jobs in just a few years it could indicate another job change is imminent. Such instability can affect the ability to pay the debt. Also, a borrower's home and address stability can affect credit. Moving around from place to place for reasons not related to job requirements (a military man or management professional may have to move regularly for work) can mean the borrower may be hard to find in a short while. This makes lending money more risky.

Trustworthiness

Consumer credit is usually unsecured. This means the only guarantee the lender has for getting payment on the debt is the borrower's trustworthiness to make the regular payments. All the factors considered when determining credit risk will be used to assess the borrower's sincere desire and ability to pay back the debt.

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How to Increase FICO Score With Credit Card Utilization?

A borrower's credit score is a reflection of his credit history. It is a numerical representation of his ability and willingness to repay debt. By using credit cards, a borrower can raise or lower his credit score quickly. Through the proper use of credit cards, a borrower can raise his FICO score and give himself the opportunity to procure more credit at lower interest rates in the future.

Instructions

1

Note the credit limit of your credit card(s). Do not carry over 30 percent of the limit at a time. The lower the credit card balance versus the limit, the better the impact on your score.

2

Avoid opening new credit cards to take advantage of low balance transfer options. New credit lowers a credit score, as well as a lender checking your credit report.

3

Pay your credit card (and all debt payments) on time. 35 percent of your credit score is made up of your credit history. On-time payments will help to keep your hard-earned score high.

4

Use each open credit card once a month in order to keep the tradeline open. Open tradelines add length to your credit history, which in turn increases your FICO score. To keep it open but avoid new debt, simply charge one necessity to your card each month and pay it in full at the end of the month. For example, use your card for one budgeted grocery store trip a month and "pretend" the funds came from your checking account and not the credit card. Pay off the card in full once the bill arrives to avoid interest.

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The Five Best Ways to Improve Your Credit Score

A good credit score is your ticket to easy credit approval and low interest rates. Your score comes from credit report data compiled by TransUnion, Experian and Equifax, so if you improve your financial management practices, your reports reflect more positive information. Good credit bureau records translate into a credit score improvements.

Pay Bills on Time

Your bill payment records contribute 35 percent to your credit score, according to the MyFICO scoring company, so the best way to improve your score is bringing any late accounts up to date and ensuring that all future bills get paid on time. Put reminders on your calendar for bill mailing dates or set up automatic payments from your bank account. The current prompt payments eventually outweigh past delinquencies and pull up your score.

Lower Revolving Debt

Too much credit card debt lowers your credit score, so MSN Money writer Liz Pulliam Weston recommends paying down what you owe until you reduce the amount to 10 percent of your total available credit limits. Thirty percent is acceptable, but 10 percent has the best effect on your score.

Use Older Credit Cards

Your FICO score improves when you keep older accounts active. The length of your overall credit history influences your score. Pulliam Weston recommends occasionally using all of your cards to generate current record records. Do not rack up large balances or that will offset the positive effect. Charge inexpensive items you can readily pay off.

Diversify Your Accounts

Your credit score improves if you have a mixture of account types, rather than just credit cards or loans. Open a credit card if your only accounts are installment obligations mortgages and auto loans. Get a small personal loan if your credit use is currently restricted to revolving accounts. Pulliam Weston advises that the best source for installment credit is your current bank or credit union. Do not open too many accounts all at once or you will hurt your score.

Eliminate Reporting Mistakes

Many credit reports contain obvious mistakes, like incorrect payment dates that make up-to-date accounts look delinquent. MSNBC writer Bob Sullivan warns that 25 percent of consumer credit reports are inaccurate. Some mistakes are less obvious but still hurt your credit if you do not correct them. For example, Pulliam Weston warns that under-reported credit lines make your debt to available credit ratio look bad. AnnualCreditReport.com gives free report copies on request every year from TransUnion, Experian and Equifax. Review them and complain to the credit bureaus about every potentially harmful error. A consumer protection law called the Fair Credit Reporting Act requires the bureaus to investigate and fix or delete mistakes.

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Does Having More Credit Cards Raise or Lower Your Credit Rating?

You usually need a credit card to have an excellent credit rating, but additional credit cards can wreck your credit score. Like anything in your credit report, you control how a credit card impacts your credit score. As long as you keep a low balance and at least make the minimum monthly payment, more credit cards usually help your credit score.

Identification

Opening more credit cards usually has a negative short-term effect on your credit rating but a positive long-term effect. You usually need several credit cards on your credit history to have a good mix of credit. However, the inquiry for a new credit card lowers your credit rating by up to 5 points and new accounts lower the average age of all of your accounts, worth 10 percent of your credit score, according to the Fair Isaac Corp.

Considerations

Once you acquire more than seven revolving lines of credit, such as home equity lines of credit and credit cards, your credit score takes a hit, according to Dayana Yochim of The Motley Fool. How many points you lose depends on other data on your credit report, such as debt load and missed payments.

Credit-Utilization Ratio

The portion of your total credit limit you use--also called credit utilization--can be a huge factor in whether you have good credit. You should not use more than 35 percent of the credit limit on any one card or the aggregate limit across all revolving lines of credit, and a credit-utilization ratio of less than 10 percent does the least amount of damage. For example, if you max out a credit card and have a credit score above 780, you may lose more than 45 points and probably not less than 25, according to Ellen Cannon of Bankrate.

Tip

Most consumers have an optimal revolving line of credit to installment loan ratio of 2:1, according to Dawn Allcot of MintLife. However, you should not take out more credit cards to support your lifestyle. If you already have a high credit-utilization ratio, more credit may be a bad thing. Also, you can lower your credit-utilization ratio without a new line of credit by asking your lender for a limit increase.

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What Are Credit-Based Insurance Scores?

When you buy insurance, your premiums are impacted by a number of factors such as your driving record, your age and the level of coverage that you select. A factor that can play just as big of a role in your insurance premiums is your credit score. Insurance companies use a special credit-based insurance score to help calculate your premiums.

Credit History and Insurance

Those unfamiliar with the insurance industry may not know why credit scores have anything to do with insurance. Many insurance companies believe that there is a direct correlation between a poor credit history and the likelihood that you will file an insurance claim. Those who have high credit scores file fewer insurance claims. Because of this correlation, insurance companies charge you less in premiums if you have a high credit score. Insurance companies use a score that they calculate instead of the one that you see on your credit report.

Components of Insurance Score

Your insurance credit score is made up of several variables. One of the most important variables is your previous credit performance. This is also known as payment history and it looks at how well you pay your bills. The amount of debt that you have is another important factor when calculating your score. The insurance company also looks at the length of your credit history and what types of credit you have access to and use.

Changes in Premiums

Once you buy your insurance and have a specific premium payment, this does not necessarily mean that your premium is set in stone. In fact, many insurance companies regularly change their customers' premiums when they experience a major change in their credit histories. If you go through something that negatively affects your credit, such as a bankruptcy, you may have to deal with an increase in insurance premiums. This could affect your auto, home and other insurance premiums.

Lowering Your Premiums

If your insurance premiums are higher than you would like to pay, you do not have to simply live with them. You can take the necessary steps to improve your credit and lower your insurance premiums. This will not happen overnight, but you can make a difference over a period of a few months or years. For example, if you pay down your debt and make it a priority to always make your payments on time, you can significantly improve your credit score.

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Can Leasing an Apartment Improve Your Credit Score?

Although failure to pay off a lease can hurt your score quite dramatically, paying your installment on time does not help your credit score, because the FICO model does not factor in rent or utilities. You can, however, use a good payment history on an apartment lease to acquire a loan in lieu of a good credit score.

Potential Effects

If you break an apartment lease and the landlord pursues legal action or sends your bill to a collections agency, it will appear on your credit report as a negative item. The effect of breaking a lease on your apartment depends on the size of the lease and the rest of your credit history. A better credit score reduces the impact of a collections account. Collections accounts, however, are the second worst offense on a credit report.

Benefits

If you do not have a credit score or have a very limited credit history, creditors may consider alternative methods of judging your creditworthiness. A good rental history and no late payments helps establish that you pay your bills on time.

Consumer Reports

An alternative to the credit report based on financial history is a consumer report, which relies on vendors, apartments and utility companies to report on-time payments, according to the Privacy Rights Clearinghouse. As of 2010, PayRentBuildCredit and First American Credco are some of the major players in the nontraditional credit score industry.

Tip

It is probably easier to build up your FICO score rather than relying on alternative reports, because most lenders use the FICO model. Consider taking out a small loan and making sure to pay the installment each month. If you already have a credit card, do not use more than 30 percent of its limit.

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How to Get Financing With a Low Credit Score

Your credit score comes from data on your credit reports. The Federal Reserve Bank of San Francisco explains that things like your loans, revolving credit accounts and the way you repay them factor into the score. You end up with a low number if you get too many accounts, use your entire credit lines or have problems repaying your balances. The bad score gets in the way of future credit applications, although there are ways to still get financing even with a checkered financial past.

Instructions

1

Order your TransUnion, Equifax and Experian credit reports before applying for financing. The Federal Trade Commission (FTC) explains that you get them free once every 12 months through annualcreditreport.com. The credit bureaus sell additional copies if you already used your free reports for the year.

2

Remove as many negative items from your credit reports as possible. Your low credit score goes up for every bad entry that gets erased. Review the entries for mistakes that give you reasons to file disputes. Divorcenet, a legal website, recommends disputing every error, no matter how small, because the negative information gets wiped out if the credit bureaus cannot confirm it within 30 days. All three bureaus have online dispute pages with secure forms to submit challenges.

3

Apply for financing with a bank, credit union or other financial institution with which you already do business, especially if you have a long-term relationship. Banks and credit unions are sometimes more forgiving of credit problems for their existing customers.

4

Apply for financing with lenders that specialize in subprime loans if you cannot get approved at your current financial institution. Subprime lenders overlook your problems in exchange for charging higher than average interest rates, according to the Lending Tree loan website. You can usually refinance the loan within a year or two if you make all payments promptly and handle any other accounts responsibly, too.

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Does Applying for a Student Loan Forbearance Cause Your Credit Score to Drop?

Making student loan payments can be very difficult for borrowers who have financial hardship. Lenders offer a few options, including repayment plans based on your income, or in extreme cases, forbearance. When you apply for forbearance, the lender evaluates your situation and determines whether it is willing to temporarily reduce the amount of your loan payments due or suspend payments.

Forbearance Status

Having a student loan in forbearance status does not affect your credit score at all. There is nothing in the credit score formula that accounts for whether a loan is in forbearance. In fact, part of the point of forbearance is to allow you to stop making payments without hurting your credit score. Therefore, if you need forbearance, do not hesitate to apply. Keep making payments on your student loan as scheduled between when you apply and when you receive confirmation that your forbearance has been granted. Missed payments during this time will hurt your credit score.

Related Factors

In most cases, you apply for forbearance when you cannot afford to make your student loan payments. This might be because of unemployment, severe financial hardship or medical problems. If you have missed any student loan payments before applying for forbearance, these will appear on your credit report and cause your credit score to drop. Your credit score might also drop if you used a high percentage of your available credit on credit cards to help make ends meet while you were making student loan payments before forbearance.

Loan Balance

The one way in which a forbearance might cause your credit score to decrease slightly is through the part of your score that considers the balances you owe. Not only do the absolute balances count, but also the current balance in relation to the amount you initially borrowed. Because interest accrues on your loan during forbearance, this will increase the amount you owe, which could slightly decrease your credit score.

Tips

When you are truly unable to keep making your student loan payments, forbearance will give you some breathing room while you get your finances in order. It is convenient that you can do this without damaging your credit. However, forbearance is not a long-term solution. You will need to get a better job, cut your discretionary spending or reduce your living expenses so you can eventually repay your debt. If you have federal student loans, look into repayment plans based on your income or occupations that offer full or partial loan forgiveness.

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How to Remove Short Sale From Credit

If you sold your house through a short sale, you probably were facing foreclosure and convinced your bank or mortgage company to allow you to sell the home for less than what you owed on the mortgage. The term "short sale" doesn't appear on your credit report, according to Experian.com. Instead, the transaction is listed as "settled," meaning that you resolved the balance on the mortgage by paying less than the full amount. That's a red flag to other lenders, who may feel you cannot be trusted to pay your debts in full.

Instructions

1

Print a copy of your credit report from the website AnnualCreditReport.com, which was established to provide free credit reports as mandated by the Fair Credit Reporting Act.

2

Check the date of the short sale or settlement on your report. Legally, a negative entry, such as a foreclosure, short sale or settlement can be listed for seven years. You can have it removed if it has been listed on your reports for longer than seven years. Challenging outdated information is your only legal recourse for removing negative information from your credit report, unless the information is inaccurate.

3

Write a letter to the credit bureau at the address on the credit report. Point out that the short sale listed on your report does not belong to you (the information is inaccurate) or is outdated and should be removed. Or enter a dispute online (see Resources). Expect a response in about 30 days.

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How Badly Does a Bad Report From a Credit Card Company Affect Your Credit?

Getting behind on your credit card payments is easy to do, either by carrying a growing balance or even by simply forgetting the bill in the bottom of a drawer. However, late credit card payments can be reported to the three major credit bureaus and can impact your credit rating and your score. While the bureaus do not publicly disclose their formula for score calculation, there are several important factors that will help you minimize the damage to your credit score when your credit card payment is late or goes into default.

Late Payments

Credit card companies will report payments that are 30 days or more late. A payment that has gone 60 days late will be reported again and its status will be updated monthly on your credit report. Payments that are 60 days late decrease your credit score more than 30-day late payments. Even when you make the payment, the tardiness will still show on your credit report.

Older Payment History

A derogatory report for an overdue payment to your credit card company will have less impact on your credit score as more time passes. Recent events are considered more damaging so, for example, if you've only have one 30-day late payment; your score will automatically begin to increase again over time.

Errors on Report

Errors can sometimes occur on credit reports and you may find that your credit card company has reported a late payment when you have proof that it was not late. If this occurs, each of the three major credit bureaus has a contact address where you can explain the situation. They will investigate and, if they find that there is no support for the derogatory report, they will remove the item from your credit report and your credit score will immediately rise.

Seven Years

If the derogatory report from your credit card company is accurate, the only cure is time. Your credit score will begin to rise as the event gets older and it will completely drop off your report in seven years. All late payments, collections and judgments will disappear after seven years, while bankruptcies will stay on the report for longer at up to 10 years. If all of your other payments remain current, your credit score will slowly rise over the course of the seven years and will jump when the derogatory report falls off.

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Do Apartment Credit Checks Lower Your Score?

One of the few times an apartment credit check appears on your credit report is when you first apply for the dwelling, and it usually lowers your score. However, unless you applied for several credit accounts in the past year, an apartment credit check will have almost no impact on your credit.

Identification

An apartment credit check lowers your score, even though rental history does not appear on your credit history. Any time you request credit or a creditable account, such as for an apartment or utilities, the Fair Isaac Corporation (FICO) scoring formula used by most lenders dings your score up to five points and sometimes has no effect.

Potential Damage

Even though a few points off a credit score may not seem like much (the FICO model ranges from 300 to 850), six or more inquires are a seriously derogatory item and do more damage to your score as a whole than individual inquiries. Inquiries stay on your report for two years, but only affect it for one year.

Considerations

The FICO formula lumps all credit inquiries to certain types of loans, such as auto loans and mortgages, together as one inquiry if you apply within a short period of time, but not for apartment credit checks. Thus, you should not apply for apartments more than once or twice a year. If you face constant rejections on rental applications, you probably have credit problems and need to repair your credit history.

Tip

You can overcome bad credit when apartment hunting by having someone cosign on your apartment or offering to put up a larger deposit. Some apartment complexes advertise that they do not perform credit checks. Either way, run your credit reports for free from Annual Credit Report and look for negative events, such as late payments and collection accounts. You can also leave comments on your credit report to explain negative items and write a letter to the landlord about circumstances beyond your control, such as unemployment.

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Does Defaulting on Your House Affect Your Credit?

A default on a mortgage loan means that you did not honor the terms of the loan agreement for one reason or another. Often the reason for default is an inability to make the required mortgage payments. Once you default on the loan, the lender will pursue a foreclosure on the property and this can impact your credit in a number of ways.

Credit Scores

A foreclosure will appear on your credit report as a public record and this will negatively impact your credit. A FICO score ranges from 300 to 850. The higher the score, the better your credit rating. Thirty-five percent of that score reflects your payment history. A foreclosure indicates that you defaulted on one of your financial obligations. According to MSN Money, a foreclosure will drop your credit score anywhere from 85 to 160 points, depending upon what your FICO credit score is at the time the foreclosure appears on your credit report.

Significance

A foreclosure can impact your credit score in another way. After a foreclosure, a lender will sell the home. The difference between what the lender gets for the home and how much you still owe on it is called a deficiency. Some states are recourse states, meaning the lender has the right to sue you to obtain a deficiency judgment against you. This judgment is also a public record and will appear on your credit report. How much a judgment lowers your score depends upon the other items contained within the report.

Credit Report

A foreclosure doesn't just impact your score the moment it appears on your credit report. It continues to negatively affect your credit for many years to come. Under the Fair Credit Reporting Act, a foreclosure can remain on your credit report for seven years. In addition, if a judgment is obtained against you, that judgment can also remain on your credit report for up to seven years from the date issued by the court. If you live in New York, however, a paid judgment can remain on the report for up to five years.

Statute of Limitations

In addition to adversely affecting your credit for seven years, a foreclosure can haunt you in other ways. Judgments have a statute of limitation all their own. If the lender obtains a deficiency judgment against you, the lender may be able to seize your bank accounts or garnish your wages many years after the judgment was issued. So although you may not have any money or property right now, the lender could still come after assets and cash you acquire in the future. In Ohio, for example, the statute of limitations on judgments is 21 years.

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Is it Better to Pay a Revolving Debt or a Mortgage?

Revolving debt, such as credit cards and lines of credit, usually have higher interest rates than larger, secured debts such as mortgages. To keep your credit score high and overall interest rates low, pay down revolving debt first.

Significance

If a borrower has to choose which debt to pay down first, he should eliminate his revolving debt and then begin to make extra payments on his mortgage, once revolving debt is paid in full. If credit card balances are less than 30 percent of the credit limit, the impact on the credit score is minimal.

Function

Revolving debt is meant to be short term, while mortgage debt is meant to be long term. By eliminating revolving debt first, the borrower can apply extra income to the mortgage debt to pay it down sooner.

Types

Revolving debt can come in many forms, such as credit cards and lines of credit. It can be secured or unsecured. A mortgage can have a fixed or variable rate and can have a term of 10 to 40 years.

Considerations

Revolving debt can increase quickly yet is paid down slowly when only paying the minimum payment. To decrease the chances of this happening, a borrower should pay off the balance in full each month on all credit card debt, if at all possible.

Misconceptions

Paying down a mortgage will not help a borrower's credit score until the amount owed is quite small compared to the original loan amount. However, for every extra payment made per year on a 30-year mortgage, the borrower knocks 7 years off of the life of the loan, saving thousands in interest.

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What Are the Things That Will Reduce Your Credit Score?

Your credit score acts as a numerical rating that sums up how responsibly you've handled credit in your life. The highest score possible is 850, and the lowest is 300. Generally, scores higher than 700 will qualify you for premium rates while scores lower than 500 risk outright denial on many loans. Scores in between often get approved, but at progressively greater cost in terms of interest and fees.

Late Payments

Though not every creditor reports every late payment to the credit bureaus, those that do get reported will count against your score. If you catch up on payments, that may also be noted. However, the bonus for catching up will not cancel out the penalty for being late in the first place.

A single late payment is no big deal, but a long history of late payments on different accounts will seriously reduce your score.

High Debt Amount

Exactly how much debt you've accumulated isn't important. A lawyer with $10,000 of debt is doing fine. A college student with the same amount is stretching it. What lenders care about is your accumulated debt compared with your current income, and especially your monthly minimum debt service compared with how much you take home.

If you have a lot of debt as compared to your monthly paycheck, don't expect to easily accumulate more credit.

Kinds of Debt

A credit profile with $50,000 in credit card debt looks worse than a credit profile with $150,000 in mortgage, auto loans and a small credit card balance. If you have a lot of consumer debt as opposed to investment debt, your score will suffer.

Adverse Reports

Adverse reports or collection actions can seriously harm your credit rating. Examples of this kind of action include bankruptcies, bills sent to collection agencies and loans or leases you've defaulted on.

Not only can these items harm your numerical score, but many lenders may require you to prove that you've resolved the reported item before giving you any credit at all.

Improving Your Credit Score

When it comes to improving your score, some factors just have to be waited out. The length of your credit history and amount of new debt will only be cured by time. However, establishing a regular pattern of paying your bills on time will improve your score every month. Also resolve all adverse reports on your credit report. This may not improve the actual numerical score but will help when negotiating with lenders who check the report.

It sometimes helps to take out an appropriate, easily paid off loan and start making payments. Get a small credit card and assign one of your monthly bills to it, then set up your bank to pay the credit card off automatically.

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Five Important Keys in Building and Maintaining Good Credit

When you borrow money, your creditors begin making regular reports to the credit bureaus that detail your credit activity. Other lenders use information on these credit reports to determine your character, and you may find yourself unable to obtain more credit if your credit report contains negative information. Credit scoring systems are not as complex as many people think, and you can build a good credit history by following some simple steps.

Build Credit

Many lenders refuse to lend you money until you have a credit history, but you cannot build a credit history if you cannot obtain credit. To resolve this issue, you can ask a relative or friend to cosign on a loan or credit card application. The lender approves the loan on the basis of both applicants combined credit scores. Alternatively, you can take out a cash-secured loan, which uses a savings account as collateral. You can get a cash-secured loan if you have bad credit or no credit because the lender gets to keep the cash in the account if you fail to repay the debt.

Pay Your Bills

Few, if any, factors have more of an impact on your credit than your payment history as this accounts for about one-third of your credit score. Credit bureaus keep track of the number of times that you miss a loan payment by more than 30, 60, 90 or 120 days. Every late payment causes a drop in your credit score, and multiple late payments can cause your credit score to plummet. Therefore, you must pay your bills on time if you want to establish and maintain good credit.

Keep Balances Low

The amount of money that you owe has an impact on your credit score. Creditors are unlikely to lend you more money if your existing debt payments already account for a high percentage of your monthly income. Credit bureaus keep track of your balances on revolving credit lines such as equity lines and credit cards. If you keep high balances on these products, it gives credit bureaus the impression that you are struggling financially and your credit score drops as a result of this. Therefore, keep balances on revolving debt low to avoid hurting your score.

Credit Applications

If you want to improve your credit score, you must use different types of credit rather than just using a single form of credit such as a credit card or an installment loan. The type of credit you use accounts for about 10 percent of your credit score, and credit bureaus reward diversity with high scores. However, every time you apply for new credit, you cause your credit score to drop by a few points. Therefore, keep credit applications to a minimum to avoid harming your score.

Monitor Your Credit

Thieves constantly try to commit fraud by opening up new credit accounts with stolen information, and your credit score could drop as a result of a thief establishing new debt under your name. Furthermore, creditors and credit bureaus sometimes make mistakes when compiling credit reports, and a mistake could negatively impact your credit score. Federal laws entitle you to a free annual credit report from each of the national credit reporting bureaus. Obtain your free credit report, review the report and, if necessary, contact the bureau to correct any errors. If you do not monitor your credit report, the actions of others could cause your score to drop dramatically.

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How to Check a Credit Record

Make sure you check your credit record often. Your credit record is held by three credit reporting bureaus: Equifax, Experian and TransUnion. The information may be different in each report so get all three. Lenders check a credit report each time credit is applied for. They use the information in the report, plus the credit score, to assess suitability for credit. Poor credit records result in applications being declined. Checking a credit record gives you the opportunity to find errors that may affect your credit. You can also work out ways to improve your record.

Instructions

1

Apply online to AnnualCreditReport.com (see Resources). You can check all three credit records for free once per year. AnnualCreditReport.com is sponsored by the three credit reporting bureaus. It is the only official website where you can check a credit report for free.

2

Use the drop-down box to select your state. Click the button "Request Report." Enter your details in the application form. Check your entries carefully. This information is used to identify you. If inaccurate information is entered you will not be able to check your credit record.

3

Retype the alphanumerical security code at the base of the application form into the box. Click "Continue." Select the credit record you want to check. You can check all three records. Click "Continue." Your information and identity will be verified. If correct you will be asked to enter a login name and create a password and password reminder. Click "Enter." You can now check you credit records instantly.

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What Does NR Mean on a Credit Report?

Most credit reporting agencies are moving toward using plain English on reports, but some still use a "secret" code for shorthand notation. If you find an "NR" on your report, this can never really hurt you but it could cost you valuable missing positive information. Often, you can just wait for an "NR" status to resolve itself, but you may need to get lenders involved to receive some kind of status.

Identification

"NR" means that the credit bureau received no information on the account for that month. This almost always results from a lender not reporting information to the bureau about that billing cycle. Alternatively, it could just be a place holder for months in which the account was not active, according to Next Advisor.

Effects

If you have good payment history, an "NR" on an account means you miss out on an item that could boost your score. Alternatively, the lender may be doing you a favor by neglecting to report information to the credit bureaus that could damage your credit. Sometimes, when you fall behind on a payment for a month or two, the lender may forgo informing the credit agency and instead let you catch up on payments.

Considerations

Lenders usually update accounts every month. When you see an "NR," it may just mean that lender is taking a little longer than usual to report the status of your account or the credit agency may still be processing that information. If the lender has reported information about your account in the past, you probably just need to wait a month before new data appear.

Tips

Contact your lender if it does not update your account. When a lender "forgets" to update an account with bad information, it is best to accept this kind gesture in silence. You should not, however, rely on lenders failing to report late payments to protect your credit. When you become chronically late on your bills, the lender may get fed up and report this negative item to the credit bureaus.

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How to Read Individual Credit Reports

There's no escaping your credit report. This document is used to determine everything, from whether you can rent an apartment to whether you should be trusted with a particular job. While your credit score moves up and down as your financial situation changes, your credit report acts as a snapshot of your life and how you manage your finances. Although it can be pages long, all credit reports essentially include the same information, making them easy to read.

Instructions

1

Check to ensure that the identification portion of the report is correct. This section will list your name, Social Security number, date of birth, current address and spouse's name if you're married. Credit mistakes are often due to someone else's information being included on your report, particularly if your names are the same. If you see anything that is unfamiliar, dispute it with the credit bureau.

2

Go through each piece of credit information, looking for discrepancies. The credit history section is the heart of your credit report, the reason you are assigned a particular credit score. Go over each account listed to ensure that their information is correct. First, you'll see the name of the company you have done business with, then the account number, a code for who is responsible for the account, the date the account was opened, how many months the account holder has reported it to the credit bureau, the last time you used the account, the highest amount of debt your ever owed, repayment terms, the balance owed, any amounts past due, the status of the account, and the last time the information was updated by the creditor. This is the portion of the credit report that demands discipline on your part. It's easy to simply skim over it, but checking each of the 11 points reported for accuracy can make a difference in your credit score. For example, you may have an account that has been closed for years but still shows as being open, or a debt that is paid in full, but shows as owing.

3

Verify each item in the collection accounts section. This portion of the credit report says whether you've had accounts referred to collection agencies in the past seven years. It will include the name of the agency and the amount owed. In some cases, your report will also list the collection agency's contact information. If you see anything that is incorrect, file a dispute with the credit bureau. It has 30 days to verify. If it is unable to verify it, it must remove it from your report.

4

Closely examine the courthouse records or public records section. This is where record is kept of any tax liens, bankruptcies, collection account, overdue child support and judgments against you. Because the credit bureaus collect this information from so many different sources, it is especially important to make sure that it doesn't have you confused with someone with a similar name or Social Security number.

5

Scan the additional information section. Here you'll find a list of your previous address and past employers. While this information may not seem as critical as some on your report, a mistake indicates that someone else's information has been included on your report and should be rectified.

6

Check to see who's been asking about you in the inquiry section. This portion of the report will provide you with a list of businesses that have accessed your report in the past 24 months. If any of those inquires are unfamiliar to you, do some investigation. You want to know who they are and why they're looking into your credit. No one should be checking your credit report without your knowledge. The credit bureau might be able to help you find the proper contact information.

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What Do You Need for a Pre-Credit Report?

According to Credit History Care, pre-credit reports are something that potential employers and lenders often perform to analyze an individual's credit history to gauge financial stability and responsibility. It also consists of individuals sitting down with a lender and going over income and expenditures to determine what type of financial options are available. According to Credit.com, pre-approval is an essential step to getting a loan. Becoming pre-approved is essentially a lender's unofficial promise that you're qualified to borrow a certain sum of money. There are several things you need to present to gain pre-approval.

Pay Stubs

In order to be approved for a loan, the lender must know that you are able to pay it back. That's why you need to present your most recent pay stubs to the lender while you meet about receiving pre-approval. The loan amount that you will qualify for directly correlates to your household income each month. For example, a house that earns $2,000 per month won't qualify to borrow as big of a loan amount as one that earns $10,000 per month. When purchasing something like a car or home, payments are typically made over a number of years, so the lender must know that you'll be able to pay back the loan amount over time, as well.

Tax Returns

According to Credit.com, another thing needed for pre-credit approval is tax returns and W-2 forms for the past two years. This lets the lender know that you've been properly filing and paying taxes. It also gives the lender an idea of whether or not additional household income is put toward paying any additional taxes each year, which could affect the loan amount a customer qualifies for.

Bank Statements

Bank statements let a lender know how much of a household's earnings go toward monthly expenditures. This gives the lender a better idea of whether the customer will be able to provide the monthly payment that often comes with a loan. It also allows the lender to look into the savings accounts of customers. This helps them recommend a down payment, which is often required when financing things like a car or home. Other things you might be required to present include stocks and investment information.

Large Expenditures/Additional Income

Other things to bring to a pre-approval meeting are records of large expenditures -- such as cars or properties that are presently being paid off -- and documentation of credit card balances and student loan debt. These factors all help the lender judge what type of loan you best qualify for based on what expenses your money goes toward each month. Additionally, if a customer has a second job or earns Social Security benefits, documentation should be presented to the lender.

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Fast & Easy Way to Rebuild a Good Credit Score

Your credit score is based on the information in your credit report and determines your ability to obtain loans and lines of credit, according to a 2006 article in Entrepreneur Magazine. A low credit score makes it difficult or impossible to get credit and results in higher interest rates. People do not always know how to rebuild a credit score and may even take actions that end up lowering the score yet again. Find out how to rebuild a good credit score and obtain a loan with reasonable terms for your next car or mortgage.

Instructions

1

Get all three of your credit reports from the major bureaus and go through them carefully to find any inaccuracies in them. Mistakes could be affecting your credit and causing a low score without you even being aware of it. Request a correction of such mistakes and the credit bureau will make a decision within 30 days. This can help raise your credit score significantly and quickly.

2

Stay current on all your bills. If you are not current on your bills right now, set up payment plans and get caught up as soon as possible. This will improve your credit score over time, but will also provide proof to potential lenders that you have changed your ways and are now handling your finances in a responsible manner.

3

Keep your credit card balances at approximately one-third of the limit. If you are going to charge an item, use a card that will not be put over this level by charging the item. Debt spread over several cards that are not full is better for your credit score than an equal amount of debt all on one, maxed-out card. Avoid accruing enough debt to raise your debt-to-income ratio above 20 percent.

4

Apply for credit only as needed. Applying for many different credit cards or loans makes you appear desperate and lowers your credit score. Avoid applying for additional credit while you are trying to repair your score.

5

Stay in your current home and at your current job. Living in the same home for four or more years and working for the same employer for at least five years adds points to your credit score. This is a simple way to give your credit a boost if you are near the cutoff points on these time guidelines. You can also avoid a worsening credit score by avoiding a move or job change while trying to rebuild your credit.

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How to Build Credit with a Co-Signer

Credit is something everyone needs at some point in life. You may need credit to purchase a car, a home or a boat. You may even need it to take a vacation, pay for medical expenses or home renovations. The important thing to know is that you cant really get the credit you need in the future if you do not build your good credit now. You have to earn your creditworthiness by using credit. Pay your bills and credit cards on time every month to show that you are dependable, reliable and responsible when it comes to finances. The best way to begin building credit is to have a co-signer vouch for you. Companies may not want to give you credit if you have no credit history, but they will base your creditworthiness on the credit of the co-signer when the two of you sign for a loan. They are more likely to extend you credit. That will result in building great credit for yourself if you keep up with payments.

Instructions

1

Find an item you want to purchase on credit. It can be as small as an article of clothing or as large as a car.

2

Get a co-signer. Usually a co-signer is a parent or family member who wants to help you begin to build credit. He will let you piggyback on his creditworthiness.

3

Discuss the impact that co-signing may have on his credit. If you die, become disabled or in any way are unable to pay the loan, the co-signer is 100% responsible for the debt.

4

Apply for the credit together. You will need to give your personal information and social security number. Your co-signer will need to do this as well.

5

Get a credit check with one of the main credit agencies: Transunion, Experian or Equifax. Your credit--and that of your co-signer--will be thoroughly checked. See the links to these agencies in the Resources section.

6

Sign the credit paperwork. Both you and the co-signer will sign the paperwork and documents. These will agree that you owe this debt and will pay it back.

7

Watch your credit build. You can monitor your credit report. Watch your credit score rise as the credit granting company reports positive information about you to the credit reporting agencies.

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How to Increase a Trans Union Credit Score

Credit scores come from one of three main credit reporting agencies: Equifax, Experian and TransUnion. Knowing how to increase your TransUnion credit score will likely increase your scores from the other reporting agencies, too. Inaccurate credit reports can reduce your credit score and affect your ability to get loans. Credit scores will also affect the interest rates for those loans.

Instructions

1




Obtain your credit report from TransUnion. Call or go online to determine the preferred method for requesting the report. Take notes if you call, keeping track of the names of people you talk to. If there are any errors, contact the reporting agency. The reporting agency is the only institution that can have the error removed. Be prepared to provide proof of the error.

2




Reduce the balances on your credit cards. Having balances near the limits will lower your TransUnion credit score.

3

Consider getting a second mortgage or using your line of credit to pay off a credit card balance. The amount owed on a second mortgage will not reflect negatively on your credit score like a balance on a credit card would.

4




Obtain a loan for a new car instead of paying cash. The loan will help you to build a credit history, although you need to make sure you keep making payments on time. Like with a second mortgage, car loans don't reflect negatively like credit card balances.

5

Continue making payments over time. A history of credit and making payments plays a large role in determining the credit score from TransUnion.

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What Is a Y Credit Score?

People born during the 1980s and early 1990s are labeled "Generation Y." They also are referred to as "Y'ers" or "echo boomers." Generation Y is found to have lower credit scores than other generations, according to a 2010 article written by Sam Simpson Brafton that appeared on the Consolidated Credit Counseling Services website.



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Job Trouble

Although Generation Y'ers are better educated than any other group of people, many have trouble finding stable, high-paying jobs. Because they cannot find good jobs, their credit scores suffer from being unable to pay their bills.

Lack of Saving

Generation Y'ers also have trouble saving money. They often move out of their parents' house at an early age and begin supporting themselves. However, without a stable job, it's difficult to pay the bills, much less save any money. This is often reflected in their credit scores. They have no savings and high amounts of debt.

Student Loans

Many people in this category are burdened with an overload of student loans. To go to college, many from Generation Y had to take out student loans, and the responsibility of repaying those loans follows. These loans hurt a person's credit score, because they increase the person's debt.

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Can Old Debt Affect Your Credit Score?

Debt never disappears if you do not pay it off. The company might write it off to get a tax benefit, but then it usually gets sold to a collection agency, which may sue you or sell it to other debt collectors. It does eventually fall off your credit reports, but it affects your credit score for many years until that happens.

Reporting Time

Old debt usually gets charged off if you refuse to pay. For example, MSN Money writer Liz Pulliam Weston advises that banks usually write off credit card balances within 180 days of delinquency. The bill often gets sold to debt collectors and appears for seven years on your TransUnion, Equifax and Experian credit reports. Collection agencies can add their own entries, which remain for the same time period. The old debts lower your credit score until their automatic erasure in seven years, although newer information has a bigger influence.

Credit Score Effects

Many factors, including old and new debts, affect your credit score to varying degrees. Old debt, including charged off bills and collection agency accounts, are part of your payment records, which are 35 percent of your score, according to Fair Isaac scoring company's MyFICO website. You offset the old debt's effects by keeping revolving account balances low and paying current accounts by their due dates. Lenders are more interested in your current financial state than long-ago mistakes.

Considerations

Old accounts are often removable through the dispute process spelled out by the Fair Credit Reporting Act if there are any errors in the credit report entries. Get free credit reports through AnnualCreditReport.com and find even a small inaccuracy to dispute with TransUnion, Equifax and Experian. The credit bureaus are required to attempt validation with the lender, but Divorcenet.com explains that many such inquiries are ignored. The lender may even be out of business if the debt is several years old. Failure to validate means the entry gets pulled from your credit reports, raising your credit score.

Warning

Old debt has a statute of limitations that differs by state. The creditor or collection agency can no longer sue you when the statute has passed. The NOLO legal website warns that unscrupulous debt collectors buy old debt and make false threats to elicit payments. They may tell you they will put an old bill back on your credit reports and hurt your credit score, but they have no legal right to do so. Tell them you know the law and will dispute any credit report changes and report them to your state attorney general if they follow through.

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How to Rebuild a Good Credit Rating

A bad credit rating will affect everything from your ability to get a loan to finding housing or a job. If you've made some mistakes with credit in the past, there's no need to have to pay for them for the rest of your life. You can easily rebuild a good credit rating by making some changes to your habits and lifestyle, and with a little knowledge on how credit ratings work and what you can do to improve yours, you'll be eligible for great rates on loans, better interest rates on bank account, and great credit references for housing and employment.

Instructions

1

Get your current credit score. There are a number of legitimate sites on the Internet that can calculate your credit score, but it's best to purchase a detailed report from each of the three credit agencies: TransUnion, Experian, and Equifax. These will give you the most information on what accounts your have open, how much you owe, your credit history, and your personal information on file.

2

Look over each credit report and make sure that all your personal information is accurate and matches. Something as simple as two different addresses on two different credit reports can harm your ability to open a bank account or obtain a loan. If any of the information is incorrect, contact the credit agency by U.S. mail or online to find out how to get it fixed. They will usually have you fill out a form and send it back to them.

3

Check your credit history and make sure that all the accounts listed as yours are accounts you have opened. Make note of anything that is delinquent, and if you find any mistakes, contact the credit agency to get it fixed. If your oldest account is only a few years old, this will affect your credit, but don't worry about that for now.

4

Create a plan to start paying off debt. Two of the things that affects a credit rating the most are the amount of debt you have versus the amount of credit you have, and your debt to income ratio. If you have a lot of debt, start planning on how to pay it off, and don't use the card until it's paid off. If you have too many credit accounts open with too much debt, cut up the card when it's paid off, but don't close the account. Closing the account removes it from your credit history, and will have a negative affect on your credit rating.

5

Look at the other things that could be affecting your credit rating. These are usually the length of your credit history and the amount of credit you have. If you have a short credit history, this will be improved over time, which is why it's important to not close any accounts. If you don't have much available credit, don't open a new credit card unless you have paid off any others you currently have, and you've changed your spending habits. Opening a new credit account will not help if you start spending on it again.

6

Continue monitoring your credit score using free web tools. Some tools can help you estimate how your credit score will improve if you open or close on an account, allow an account to go delinquent for 3-12 months, or declare bankruptcy. Set a reminder on your calender to check your credit rating at least twice a year, or every 6 weeks if you have a poor credit rating. Over time, you will see your credit rating rise.

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Repairing Bad Credit Yourself

If you're tired of credit rejections or higher interest rates on your credit accounts, perhaps now's the time to fix your credit score. Credit scores affect several areas in your life. Your score determines if you can get new credit, the interest rate on new credit and even the premiums paid to your insurance providers. Fixing credit doesn't involve hiring a credit repair company. Learn how credit works, and explore techniques to improve bad credit habits.

Bad Marks on Credit Report

Bad or negative remarks on your credit report will take points off your overall score. Fix credit report mistakes by contacting creditors and asking them to update your file with accurate information. Detect credit report errors by getting your free reports from Annual Credit Report at least once a year. Check each creditor entry for accuracy. Look at the account balances and the account status. Creditors reporting higher balances in error or reporting your account as delinquent in error can harm your score.

Pay Off Balances

Paying off credit card balances and other installment loans can quickly improve your bad credit rating. The debt you owe makes up 30 percent of your credit score. Stop living off credit cards and establish a plan to effectively get rid of balances. Pay more toward your debt each month, and use credit as a last resort and only if you can pay off the balance within a few weeks.

Fix Payment History

Don't let poor payment habits destroy your credit rating. Repairing credit yourself includes paying your creditors on time every month. Regardless of past credit habits, start fresh and begin submitting timely payments. Go the extra mile to prevent late arrivals, such as setting up automated payments each month or submitting payments online. Because payment history makes up 35 percent of credit scores, it's imperative to communicate with creditors and bills collectors if you cannot make a payment by the due date. They may grant an extension without penalty to assist you.

Warnings

Beware of credit repair companies that offer to fix your credit by eliminating bankruptcies, collection accounts and liens from your report. Credit repair isn't a free service, and enrollment requires a monthly fee. Unfortunately, credit repair companies cannot guarantee results, and they may suggest illegal activity such as encouraging you to create a new credit identity.

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How to Obtain a First Class Credit Rating

Having a first class credit rating will qualify you for the best rates on mortgages, auto loans and other types of loans. But to obtain a high rating, you have to use credit responsibly and know the ins and outs of credit. There are several ways to obtain the best credit score. Regardless of whether you have no credit history or a poor credit history, simple changes can add points to your FICO score

Instructions

1

Contact your bank or credit union and complete an application for a secured credit card. These cards are ideal for anyone with no credit history or bad credit. To qualify, you'll have to pay a security deposit.

2

Pay attention to due dates. Missing a payment or sending a late payment reduces your FICO score. Keep a calendar nearby and jot down your due dates. Submit payments before or on the due date to maintain a first class rating.

3

Maintain a low balance. Maxed out credit cards lower your credit rating, and this can result in higher interest rates on loans. If possible, pay your credit card balances in full each month.

4

Check your credit report. Credit reporting errors and identity theft can have a negative impact on your credit record. Order a copy of your report once or twice a year to check for erroneous remarks.

5

Keep unused accounts opened. Regardless of whether you use a credit card, do not close the account. This can shorten your credit history and decrease your credit score.

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Why Does a FICO Score Go Down With Each Credit Check?

Whether or not a lender approves you for a loan, applying for credit lowers your credit score. This is not done to prevent people from searching for credit, but because of data that suggests bad borrowers tend to apply for credit. It is possible to get credit and sidestep the application, but you will need someone trusted to help you.

Identification

The Fair Isaac Corp. is the preeminent researcher of borrowing habits, and the company's FICO scoring system is the most widely used in the U.S. Fair Isaac's data finds that a borrower with six or more credit inquiries on his report is eight times more likely to declare bankruptcy than a borrower with no inquiries. A single inquiry, however, only does one to five points of damage, so it basically has no effect until you apply for a lot of loans.

Not All Credit Checks are the Same

Not all credit inquiries damage your score -- only those associated with a desire to get more credit. When a credit card company pulls your report without a request from you, this does not hurt your score and is known as a "soft inquiry." Other soft inquiries might come from an employment background search or insurers.

Rate Shopping

Hard inquiries do not always count against your score. FICO recognizes that some loans are highly likely to require several application to get the best rate, also called rate shopping. Borrowers have a 45-day window to put in an as many applications as they want and have them all count as a single inquiry. Student loans, mortgages and auto loans are usually the only type of credit to get this treatment. Also, inquiries only count against your score for 12 months after they hit your report.

Tip

Not all lenders use the most updated FICO formula. Older FICO models only give a 14-day rate shopping window, so put all of your applications in as soon as possible. You can get credit and avoid the hit from a credit inquiry if someone is willing to list you as a joint account holder or co-signer. Keep in mind that if the primary account owner defaults on his payments, you also have that bad credit on your record.

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Why Does Checking Credit Lower Your Score?

How a credit check affects your credit score depends on who is making the inquiry, how many inquiries are made over a period of time and what the credit check is for.

Facts

Inquiries for new lines of credit lower your score slightly as a way to show potential lenders that you may be taking on more credit than you can handle.

Soft Inquiry

A soft inquiry is when you check your own credit score, a current lender rechecks your score or when a creditor offers you credit through "pre-screening." These inquiries are not seen by outside sources and don't affect your score.

Hard Inquiry

Hard inquiries show up on your credit report when you apply for new lines of credit. Hard inquiries are visible by potential lenders.

Timeline

Credit checks will stay on your credit report for two years and multiple inquiries in a short period have a more negative impact on a credit score than inquiries that are spread out over time.

Considerations

Multiple credit checks made within a month or less have little or no effect on your credit score when the inquiries were made for home, student or car loans.

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How to Find Out What Accounts Are Open on a Credit Report

Open credit accounts are those that are currently active, whether the open account is a credit card or a collection. Identifying open accounts allows you to see how many accounts are being heavily considered in your credit score. You will also get an idea of what collection accounts you need to take action on.

Instructions

1

Navigate to annualcreditreport.com.

2

Request a credit report from the three credit reporting agencies through the Annual Credit Report website. The three largest consumer credit reporting agencies in the United States are Transunion, Experian and Equifax, and these agencies offer a free annual report through annualcreditreport.com for most states. Use the drop down list for your state and click "Request Report." Enter your personal information on this page and click "Continue." The website sends you to each credit reporting agency's website in turn for you to access your free report.

3

Scroll through the list of accounts on the credit report from each credit reporting agency. The credit report can list the open accounts in several different ways, as each credit reporting agency has its own credit report template. The Transunion credit report displays an open account with either "Open Account" in the status field in the account information or does not provide a closed date for the account. Experian reports closed accounts in the notes of each account. Equifax provides a field for the date the account is opened and closed. If an entry is not present in the closed field, the account is still open.

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How to Fix & Repair a Bad Credit Report

Defaulting on credit cards and loans or routinely sending in late payments damages your credit rating. A low credit score makes it difficult to get approved for different types of financing. If you have bad credit, you can take steps to boost your score and improve your credit report.

Instructions

1

Lower your existing debts. Pay off credit card balances to improve your FICO score. Creditors will report lower debt balances to the credit bureaus. Eliminating debt quickly adds points to your rating.

2

Deliver payments to creditors on time each month. Creditors report late payments to the credit bureaus, and too many of these on your record lowers your credit rating and makes it harder to acquire new credit.

3

Communicate and negotiate with creditors. If personal problems or tragedies contributed to a poor payment history, inform your creditors. They may waive late fees, extend due dates or agree to remove delinquencies from your credit report if you pay off a debt in full.

4

Look for errors on your report. Pull your credit report at least once a year and read through the document to make sure creditors are submitting accurate information. Annual Credit Reports offers one free report a year.

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What Is the Minimum Amount That Can Be Reported to the Credit Bureau?

A single dollar might be vital to your credit score by keeping your accounts active and reported to the credit agencies. The credit bureaus report anything that lenders send to them, so there is no amount too small for a credit report. In some cases, the credit bureaus have an effective minimum of $0.

Installment Loans

Unlike other types of loans, once you pay off an installment loan the credit bureaus cannot report any more information on the account and consider it "paid as agreed." Thus, it has an effective minimum reportable amount of $0. This can hurt your credit score, because the FICO scoring algorithm counts the mix of loans, such as having a mortgage, credit card and auto loan, when rating consumers as a risk.

Revolving Loans

Credit cards and other revolving loans last for years and sometimes indefinitely. Issuers of cards can report a balance of $0 to the credit bureaus and still have the account count toward your credit score. The danger in this is the creditor declaring the account inactive. An inactive account hurts your credit score, because you lose the credit limit on the card. The FICO formula weighs your outstanding debt to available credit ratio in your FICO score calculation.

Misconception

Consumers should not take out an installment loan just to boost their credit score or keep a creditor reporting to the bureaus. You lose up to five points just applying for new credit and increase your debt-to-income ratio---another important part of your financial profile to future lenders. Also, carrying a balance month to month hurts you. The balance accrues interest, whereas paying the bill off before the grace periods keeps a card active and the balance is reported to the bureaus.

Tip

People wanting to maximize their credit score should use their cards every once in a while to keep an account from becoming inactive, suggests Craig Watts, a spokesman for Fair Isaac. Some credit card providers also charge fees of up to $90 for dormant accounts.

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