March 2013 ~ Personal Finance and Money Management

Sunday, March 31, 2013

Beacon Credit Reporting

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Your credit score is based upon the data contained within your credit report. Lenders and other creditors often report your credit information to credit bureaus. Consumers have three different FICO scores, one from each bureau: Equifax, TransUnion and Experian. It's important to understand how credit reporting affects your BEACON credit score from Equifax.

In 1989, FICO and Equifax introduced the FICO credit score under the name BEACON, a trademark of Equifax. The BEACON score is simply the brand name for your Equifax FICO score, and nowadays most people refer to it as an Equifax FICO score instead of a BEACON score. The score is based upon the data contained in your Equifax credit report. The BEACON score does not include data from other bureaus. Each bureau uses its own proprietary scoring model to determine your credit score.

Your FICO score can range from 300 to 850. The higher your FICO score, the better your credit is. According to MyFICO.com, 35 percent of that score is based upon how promptly you pay your bills, 30 percent is the amount of debt that you have, 15 percent is the length of your credit history, 10 percent is the types of credit that you have and the final 10 percent is the level of new credit that you've applied for recently.

Since your FICO score is based upon data in your credit report, knowing what's in your credit report is important. Under the Fair and Accurate Credit Transactions Act (FACTA), once a year you can order one free copy of your credit report from the Annual Credit Report website. There you can request just your Equifax report or one from each bureau, including TransUnion and Experian. The website gives you a phone number and address if you'd rather order the report by phone or mail instead.

Errors on your credit report can negatively impact your credit score. According to Bankrate, one way to improve your FICO score is to correct any mistakes on it. The Fair Credit Reporting Act (FCRA) gives you the right to dispute mistakes in your report. You can file a dispute online at the credit bureau's website, by mail or phone. The bureau then has up to 30 days to investigate the dispute and correct the error or inaccuracy.

How Can People See Their Credit Score?

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Although people refer to their credit score in the singular, there are many different types. Each of the main credit reporting agencies calculates its own score according to the information it holds about you. Your credit score is not a fixed figure, but fluctuates as you take out more credit or make repayments. You can improve your score by changing the way in which you handle credit.

When referring to your credit score, most lenders mean the system developed by the Fair Isaac Corporation and known as the FICO score. This number is calculated from various sources and affects how much credit you can get and what you pay for it. It is also used by landlords and utility companies to decide whether to accept your application or the amount of deposit to require from you.

The FICO credit score is a figure between 350 and 850. A score greater than 700 is considered good. The two biggest factors in calculating your score are your payment history and the amounts you owe. Approximately 35 percent of your score is based on your payment history and 30 percent on the total credit you hold. The length of your credit history makes up 15 percent of your score, another 10 percent comes from new credit and the final 10 percent is calculated based on the types of credit you use.

You can obtain a free credit report once every 12 months from each of the main consumer credit reporting companies. Apply online on the Annual Credit Report website or request a report from them by mail. The Annual Credit Report Request Service is the official central site for the Equifax, Experian and TransUnion credit agencies.

Monitor your credit score during the year by obtaining reports from the three main agencies every four months. Read through the reports carefully and notify any errors to the agency and to the creditor. As of December 2010, each credit bureau charges between $8 and $10 for a report that includes your FICO score.

Be aware that some companies that offer a free or low-cost credit report and FICO score on their website automatically enroll you in a trial membership of their paid service. If you do not cancel the membership within the trial period, they will charge your credit card each month.

Does Not Paying Your Utility Bill Affect Your Credit?

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Many people move from one residence to another and forget to pay a final utility bill or simply do not have the funds to pay a utility bill at some point. Although most people realize that not paying a loan or credit card payment can negatively impact a credit score, many do not realize that leaving that utility bill unpaid can also end up lowering your score.

Your credit score, or FICO score, is comprised of three scores assigned to you by the three major credit reporting agencies: Experian, TransUnion and Equifax. Your FICO score can impact everything from your ability to secure a mortgage to whether you are offered a job or approved to rent an apartment. Your FICO score is based on how long you have used credit, what type of credit you have used and your payment history, as well as on the amounts you owe and whether you have recently acquired new credit.

Whether a utility company reports your payment history to the credit bureaus will vary from one company to the next. Large utility companies are more likely to report than smaller companies. Any company that chooses to report to a credit bureau must pay a fee for using the reporting service. For this reason, not all utility companies choose to report customer payment history. The only way to know for sure whether your specific utility company reports to a credit bureau is to ask.

Although not all utility companies regularly report to a credit bureau, an unpaid bill is likely to be reported by either a collection agency or a court. Most utility companies turn over unpaid bills to a collection agency for collection if the account remains unpaid after a certain period of time. Collection agencies almost always report to at least one credit bureau. The utility company may also choose to file a lawsuit against you in small claims court, or in a general civil court, for the unpaid bill. If a court enters a judgment against you for the unpaid bill, the judgment becomes a public record which is also reported to the credit bureaus. Therefore, even if your utility company does not regularly report to a credit bureau, the unpaid bill will, in most cases, eventually be reported by either a collection agency or a court.

If you are concerned that an unpaid utility bill has been reported to one of the credit bureaus, you can check your credit report one time per year free of charge on the annualcreditreport.com website. This is made possible through federal law, and the annualcreditreport.com website is the only website officially sanctioned to provide this service. There are, however, a number of other companies that can provide a report for a fee.

Can Being an Authorized User Negatively Affect My Credit Score?

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Becoming an authorized user is one of the best ways to own a credit card because you do not have a legal responsibility to repay the balance and it can be positive for your credit history. On the downside, being an authorized may negatively affect your credit rating and ability to gain credit if the primary borrower mishandles the account.

Being an authorized user can negatively affect your credit score because you and the primary borrower share the history on the account, so missed payments by the primary borrower damage your credit rating, too. Missed payments can take more than 135 points off of your credit score and stay on your report for seven years, according to Les Christie of CNN. On-time payments improve your credit rating.

Lenders will probably include the balance on an authorized account in your debt-to-income ratio. Debt-to-income (DTI) ratio is your monthly debt obligations divided by monthly income. Lenders usually do not offer credit when a DTI exceeds 35 to 50 percent with the new loan included. The creditor may have special rules for authorized accounts, such as only including them when the primary borrower is a relative or spouse.

Unless you completely trust the primary borrower to pay the credit card bill on time, you should avoid becoming an authorized user. You can probably get a credit card on your own so you can control the payments on the account. For example, secured credit cards have very high approval rates because the lender requires a security deposit against the credit limit. Retail and gas station credit cards also have high approval rates but hefty annual fees and high interest rates.

If an authorized account is your only option for obtaining credit and building a credit history, use the account until you build enough history so that you can obtain an unsecured credit card on your own. You can ask the primary borrower to contact the creditor and have it remove you as an authorized user. Follow that up by checking your credit reports for the authorized account for free from Annual Credit Report. You can ask the credit bureaus to remove you as an authorized user when you no longer have your name on the account.

How to Fix Showing Up Deceased on Your Credit Report

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Inaccuracies are far too common on credit reports, according to various studies cited by the Motley Fool. While most inaccuracies relate to late payments and accounts that don't actually belong to you, sometimes the credit reporting agencies mistakenly list your status as deceased. This makes it almost impossible for you to get loans. Fix this mistake by contacting the credit reporting agencies.

Instructions

Order free copies of your credit reports through annualcreditreport.com. Obtain a report from all three major credit agencies because they don't always contain the same information. The three agencies are Equifax, Experian and TransUnion. It's possible that only one or two of the three list you as a deceased person.

Write a letter to each credit agency that lists your status as deceased to explain that you would like the information about your death removed. Include a copy of your report and circle your deceased status. Also enclose copies of your personal documents, such as your birth certificate and your drivers license.

Send the letter and the documents by certified mail and request a receipt confirmation. Keep a copy of the letter and the documents for your record. The credit reporting agency will investigate the matter within 30 days and forward the corrected information to the business that reported your death. The information provider will then investigate the matter and contact you.

Send a letter and any requested documents to the source of the information to get the company to change the false detail. If your dispute is successful, the credit bureau will provide you with the written investigation results and a free copy of your report.

Contact a local media company about your problem if any one credit agency does not change your deceased status. The credit agency will likely respond quickly to avoid bad publicity.

Should You Pay to Increase Your Credit Score?

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The fastest way to increase your credit score is to pay off outstanding balances on credit cards and loans. Increasing your credit score is all about making payments on time to creditors consistently and communicating with them when you can't pay your bills.

Paying off your balances in full is the quickest and most effective way to increase your credit score.

Creditors like to see debtors keep their balances far below their maximum credit limit. If you can't pay off your entire balance, paying off enough of your balance to stay below 30 percent of your credit limit can help increase your credit score, according to MSN Money.

Having five credit card accounts with $200 each will hurt your credit score more than having one credit card with a $1,000 balance, according to Smart Money. Credit bureaus view consumers with multiple lines of open credit riskier than those with one or two lines of credit. If you have a lot of credit cards, pay them off and only keep one or two accounts open. Having fewer lines of credit can help increase your credit score.

If you can't pay your bills on time, it's important to communicate with your creditors so they don't send your bills to a collection agency. If one of your debts is sent to a collection agency, it will significantly lower your credit score, according to Smart Money. If you can't pay a bill on time, tell your creditors that you plan on sending your payment in as soon as possible. Sending in your payment a few days late is better than ignoring your creditors entirely.

Making your monthly payment on time helps increase your credit score. Making late payments is one of the main causes of a low credit score. Even if you only send your payment in a few days late, it can significantly increase your credit score. Myfico.com suggests setting up payment reminders with your creditors to avoid making late payments. The longer you pay your bills on time without making a late payment, the more your credit score will increase, according to Myfico.com.

Paying off installment loans can help raise your credit score, but it doesn't help nearly as much as paying off revolving accounts such as credit cards, according to MSN Money.

Steps for Preventing Identity Theft

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According to the research firm Javelin Strategies, more than 11 million Americans were victims of identity theft in 2008 and 2009, and the number continues to increase. Every time you fill out a form at the doctor, your credit card, insurance and social security information are available to anyone in the office who opens your file. Credit card companies and online merchants make money by passing your information along to third parties. Identity thieves use your information to finance large items and never pay for them, ruining your credit for years to come. It is possible to prevent identity theft.

Instructions

Protect online accounts--bank, credit card, bills--with strong passwords. Avoid using your name, birthday or pet's name and use something completely random as a password, utilizing symbols (if you can), numbers and letters.

Check statements frequently, daily if possible. Keeping tabs on every debit and credit transaction, along with outstanding checks and mysterious charges, will help you catch an identity thief faster and minimize damage to your credit.

Ask for your free annual credit report, which, according to federal law, is available to every citizen from each of the three primary credit bureaus--Equifax, Experian and TransUnion. If you've had your identity stolen in the past two years, consider having your credit monitored by one of the bureaus; however, the free annual report should be enough for the average person.

Ask creditors, employers and government agencies who ask you for sensitive information why they want it and who needs it. Leave it blank if you don't understand why certain information is being requested of you.

Shred personal and financial documents, whether bills, statements or old credit cards. Destroying unneeded but sensitive documents will reduce the chance of identity theft.

Protect your Social Security number. Decline the option to have it on your driver's license, don't keep your Social Security card in your car and be careful where you write it and who you give it to.

Will Debt Settlement Ruin My Credit?

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Although paying back your debt for pennies on the dollar may sound like a scam, debt settlement is a legal solution, but not one without consequences. The creditor is likely to report to the credit bureaus that you paid the debt, but for less than what you originally owed. This could ruin perfect credit, although it has less negative impact than not addressing the debt at all. Your credit rating helps determine whether you can obtain credit and whether you get favorable interest rates on that credit.

While debt settlement is always a negative mark on a credit report, it means less when you already have bad items on your file. A person with a credit score of 780 can expect his score to drop to the 655 to 675 range with a debt settlement, while someone with a 680 score usually ends up with a score of 615 to 635, according to Bankrate.

When starting with an excellent credit rating -- above 760 -- you take the biggest hit, because you go from the highest range of scores to the third-best range. Creditors usually assign interest rates based on score ranges, not individual scores. If you have an average score -- around 690 -- the drop resulting from debt settlement may keep you in the same category.

Lenders probably won't listen to a debt settlement offer unless you are delinquent on your debt. There is no reason for the bank to take a loss if you can make the payments based on the original agreement. Thus, debt negotiators may tell clients not to pay bills to force the creditor's hand. However, having seriously late payments and a debt settlement on your record probably makes you too risky for most lenders to approve you for a loan. The lender also is likely to close the account, which reduces your debt-to-credit ratio (also called credit utilization ratio) -- another part of the credit score calculation that lowers your score.

People drowning in debt have another option: credit counseling. This won't erase any of your debt obligations, but a counselor can try to talk a creditor into lowering your interest rate and/or monthly payment. Also, credit counseling has no effect on your credit score. Credit expert Elisabeth Leahmy of ABC News suggests you work with a nonprofit credit counselor associated with the National Foundation for Credit Counseling or Association of Independent Consumer Credit Counseling Agencies. These credit counselors are more likely to be interested in getting your finances back on track rather than collecting fees.

The Three Largest Credit Reporting Agencies

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When making a large purchase like a car or home, your credit history and score play a major role in obtaining financing. But, knowing your credit history and score are important for everyday finances as well. Checking your credit history throughout the year can uncover any fraud on your accounts and knowing your score can help you take steps to improve it if necessary. In a basic sense, your credit score gives a numerical value to your creditworthiness and is based on a number of factors, according to the My FICO website. Three major credit reporting agencies offer services that let users track credit history and view their current credit score.

Offering credit reporting services for individuals, corporations and small businesses, Experian also operates marketing and decision analytics departments, according to the Experian website. Experian's website provides free credit education with videos, articles and online workshops that help customers learn how to use credit wisely and improve credit scores. Products include credit monitoring, identity theft protection, credit checks and access to credit scores and history, all beneficial to protecting and improving personal finances. Experian also offers a free online dispute center for users who find discrepancies in their credit report and want to make the corrections.

Experian

475 Anton Blvd.

Costa Mesa, CA 92626

714-830-7000

experian.com

Catering to individuals looking to track credit histories and improve personal finances, Equifax features a large line of credit reporting services. According to the Equifax website, Equifax offers a free personal finance blog that features advice from professionals on credit, insurance, taxes, retirement and real estate. Customers can choose from several personal finance products like Debt Wise, a step-by-step system for paying down debt and saving money and ID Patrol, which consistently monitors your credit and alerts the user to changes. Free resources include an online dispute center and a mortgage lender database.

Equifax

P.O. Box 740241

Atlanta, GA 30374

1-800-685-1111

equifax.com

Started in the 1960s as a railroad company, TransUnion has expanded to offer credit reporting, marketing services and fraud and identity management for individuals and businesses, states the TransUnion website. Operated by TransUnion, the True Credit website features free helpful articles and resources on topics like credit and medical bills, teaching kids about credit and financing a home. TransUnion also operates ZenDough.com, a website that users can use to check and monitor their credit scores and history, learn how to improve scores and discover ways to avoid identity theft. Other products include identity theft protection and credit dispute services.

TransUnion

2 Baldwin Place

P.O. Box 1000

Chester, PA 19022

800-888-4213

transunion.com

Will Closing Out Old or Unused Credit Accounts Raise My Credit Score?

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It seems closing out unused credit cards should conceivably raise a credit score because it reduces your number of open accounts. This is not necessarily the case. In fact, the exact opposite may be true. Closing accounts may actually lower your score. With some advance planning, there are ways to minimize the credit effect of closing accounts.

If you are thinking about closing an account, consider the age of the account first. Payment history is an important component of a credit score, and the longer an account has been open, the more beneficial it is to the score. If you are closing accounts due to annual fees or high interest rates, consider contacting the lender to negotiate better terms, especially if you have been a loyal customer. It is much easier to keep a current customer than sign up a new one, so some lenders may be willing to negotiate.

Even if there is no balance on the account you plan to close, cancelling the account can cause your score to fall. This is because the overall credit utilization will increase. Credit utilization refers to the amount of available credit that you have versus how much is in use. For example, a cardholder has two cards with a $500 limit on each. One card has no balance while the other has a $250 balance. The debt utilization ratio is the $250 of debt divided by the $1,000 available credit. The result is a 25 percent utilization ratio. Cancelling the paid off card increases this ratio to 50 percent. If there is a balance on the account you close, the effect will not show up on your credit report until after you pay the balance.

Having no balance when canceling a card has little to no effect on credit. This is because the credit utilization ratio does not change when account balances are zero. A way to minimize the impact is by requesting higher credit limits. Since the available credit will decrease when an account closes, a higher credit limit will make up for the available credit lost.

It is best to pay off the card before canceling the account. This is to avoid having the lender raise the interest rate on the outstanding balance once it learns you will close the account. Contact the bank to verify there is no balance, and then request the closure. Follow up with a letter to verify your wishes. Cancellation may take up to a month. It takes longer to appear on your credit report. Ensure the report says the account was "closed at the customer's request."

Despite a potential lower credit rating, there are times when you need to cancel a card account. Credit cards with high interest rates are good candidates for cancellation. Accounts that charge exorbitant annual fees are also targets for closing. It is a good idea to close accounts that could be used by identity thieves or a former user, such as an ex spouse. A good time to cancel a card is when you open a new account or while taking advantage of a balance transfer offer.

If Creditor Closes an Account Due to Bad Pay History, Is This the Date of First Major Delinquency?

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Confusion regarding the date of first major delinquency of an account may cause you to believe that a debt will stay on a credit report longer than it should. If a creditor closes your account due to default, you need to calculate the first date of major delinquency yourself. When a debt stays on your report too long, you should dispute it with the credit bureaus immediately.

The date of first major delinquency is always the day you miss your first payment. For example, if you miss a payment on January 1 and the creditor sells the account to a debt collector on May 1, the date of first major delinquency is January 1. Using the date you first missed a payment ensures that a creditor cannot report a bad account for longer than the Fair Credit Reporting Act allows.

Your credit report does not list the date of first major delinquency. Instead, you see the date of last activity. The date of last activity has almost no bearing on your credit score and is merely for record-keeping purposes. A creditor can sell your account or change the last date of activity years after the date of first major delinquency.

The Federal Credit Reporting Act allows the credit reporting bureaus to list delinquent debt for seven and a half years. Most creditors write-off a bad debt when it collects no payment for 180 days straight. At the 180-day mark, the creditor can try to collect the debt or sell it to a debt collector. Either way, the actual reporting time limit starts on this day. Some public records, such as tax liens and bankruptcy, can stay for longer than seven and a half years.

If you believe that the credit bureaus and your creditors list a bad account longer than they should, dispute the item with the credit bureaus. Sometimes, creditors and collection agencies list a wrong debt to damage a borrower's credit rating longer and hope that this forces him to pay up. The credit bureaus must investigate your claim within 30 days of your initiating the case and creditors must verify the date on the account as well as prove its accuracy.

What Rebuilds a Credit Score?

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Your credit report follows you when you apply for new credit, rent or buy a house, need a new car and even when you look for a new job. People living with bad credit often feel like they have a heavy weight on their shoulders, one they may never lift, but you can rebuild your credit and get back on track.

Order a copy of your credit report from the three major credit bureaus: Equifax, TransUnion and Experian. You can get a free copy of each report through the Annual Credit Report website. Check each report for inaccuracies. Dispute any inaccurate information with the credit bureau by writing a letter stating why you dispute the information. Pay off any outstanding debts on accurate listings. While paying off a debt will not remove the negative listing from your credit report, lowering your debt will increase your credit score.

You must open credit accounts and use them to rebuild new credit. If you have severely damaged credit, you may need to open a secured credit card. With a secured credit card, you will put funds into an account. The creditor will then use those funds to extend you credit. Typically, your credit limit will equal the amount of funds you put in the account. The creditor will report the activity on the secured card to the major credit bureaus. You can also open retail cards or gas cards. A small personal loan will help you get a mix of credit and improve your credit scores.

Pay all of your bills each month by the due date. Paying your bills on time will help build positive credit. Do not overspend on your new credit card accounts. Try to pay the full amount due each month. If you do not pay the full amount due, keep the overall balance on the credit card account low. Carrying a high balance, or maxing out the card entirely, will hurt your credit score.

Do not apply for several accounts at once and do not open more credit accounts than you can handle. Submitting several applications will lower your credit score as the credit bureaus consider the number of recent inquiries you made. Do not open any accounts that you cannot afford. Falling behind on your payments or racking up too much unpaid debt will lower your credit score.

How to Get the Trans Union Credit Score Higher

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TransUnion is one of three nationwide credit bureaus--Equifax and Experian are the others. All three issue credit scores. If you are focused on only improving your TransUnion score you're probably preparing to apply for credit with a creditor that primarily pulls reports from TransUnion. Fortunately, the tactics you use to improve your TransUnion score likely will lift your other scores as well.

Instructions

Get a copy of your TransUnion report. You can get a copy for free from the website Annual Credit Report (see Resources), which was set up by the credit bureaus to offer free reports as required by federal law.

Follow instructions included in the TransUnion credit report to order your credit score separately through TransUnion.

Evaluate your score. The website Bank Rate says "good" credit begins at about 620, with scores of 750 or higher being ideal. Anything below 620 puts you in a so-called "sub-prime" category with tougher approval and higher interest rates and fees. Evaluating your TransUnion score will show how much work you have to do to get the number higher. For example, if you're already at say, 789, it may be hard to improve. On the other hand, if you're at 475 you have lots of room for growth.

Audit your TransUnion credit report. Dispute any inaccurate information on the report that could hurt your score, such as accounts that are reporting as past-due when they should be showing as current. Write a letter to TransUnion using the address on the report. Request that the inaccurate information be removed within about 30 days, as required by the Fair Credit Reporting Act. Or enter a dispute online (see Resources).

Look for all negative entries on the TransUnion report, including past-due accounts, collection items and charge-offs. Creditors generally close accounts and list them as charged-off once you fall six months behind. Collection items are charged-off accounts that have been sold to debt collectors. You must resolve the delinquent accounts to raise your TransUnion score. Bring all your past-due accounts current by making payments. Then focus on the charge-offs and collection items by contacting the creditors and debt collectors. Offer to make full payment in exchange for the negative entries being deleted from your TransUnion report. Having a pay-for-delete request approved is a long shot, but certainly worth the try. If the creditor or debt collector won't delete the item ask if they'll accept less than the full payment to resolve the issue. Negotiate a settlement amount that you feel is fair and send payment to close the deal. Then continue making timely payments on every remaining account on your TransUnion report. Order more copies of your TransUnion score every few months to chart your progress.

Removing Judgements From Credit Bureaus

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Judgments are placed on a credit report when a court holds a person responsible for an unpaid debt. These judgments hurt your credit score. This, in turn, can lead to higher interest rates on approved loans, or even declined loans. Credit card rates and approvals can also suffer as a result of a lowered credit score caused by judgments on you credit report. It is therefore beneficial to remove these judgments as soon as possible.

Instructions

Pay the judgment as soon as possible. It will take seven years for it to come off your credit report, but this is the best option available to most people.

Dispute the judgment with the credit bureau. If the credit bureau's information about the judgment is incorrect, it will correct your credit report as soon as it receives accurate information. If the credit bureau is unable to verify the judgment within a 30-day period, the bureau will remove the judgment from your report.

Contact the company to whom the debt is owed. Ask if it would be willing to dismiss the judgment if you are able to pay an agreed-upon amount upfront. This is often a portion of the debt which the company is willing to accept as "ready money," rather than risk losing the entire amount if you are unable to pay the judgment.

Hire a lawyer. Often consumer advocate lawyers are willing to take cases for nominal fees and can help get a judgment thrown out.

Will Credit Collection Services Negotiate Your Debt?

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Credit collection services buy debts from creditors who write them off for tax reasons, then make some money by selling them at a big discount. Debt collectors make money even if you only pay part of the bill because they paid so little for it. They will often negotiate the debt because they see a lump sum settlement as a fast profit, which eliminates further collection effort expenses.

Decide how much you can realistically pay to settle your debt. The collection agency may have paid as little as pennies on the dollar, according to MSN Money columnist Liz Pulliam Weston. Its agents may agree to accept as little as 50 percent of the total, which still means a hefty profit for the company. Insist on removal of the collection entry on your TransUnion, Experian and Equifax credit reports as a settlement condition. Erasure of the negative entry helps your credit score, although Brigitte Yuille of Bankrate.com warns that the original charged-off account still shows up.

Collection agency accounts make you look bad to lenders who pull your credit reports, since they show you are ignoring a bill. The damage does not last forever, even if you never negotiate a settlement. The Federal Trade Commission advises that most negative data in your TransUnion, Experian and Equifax files is purged after seven years. Weigh the benefits of debt negotiation with the amount of time before the collection account gets erased before you pay a collection agency. Payment may not be worth it if the debt is due to disappear within the next year or two.

Credit collection services have a limited amount of time to sue you for debt repayment. The statute of limitations varies by state, but it is usually somewhere between three and five years, although it can run as high as 10 years, according to Bankrate.com. Never negotiate a settlement for debts older than your state's limit (see Resources). The collector cannot take legal action against you if you refuse to pay or even acknowledge the debt, but you restart the collection period by making a payment, or even agreeing on terms, in many states.

Make the credit collection service put the terms of your negotiated settlement in writing before you hand over the money. Send your payment through certified mail, ask the post office for a return receipt and enclose a copy of the letter. This gives you proof that your payment was received and helps you enforce the terms of the settlement if the debt collector does not wish to honor them. For example, you have proof of payment in full if the collector demands more money or sells the account to another firm, and you can dispute the credit report entry if it is not removed as agreed.

What is the Perfect FICO Score?

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Beginning in the 1990s credit scores became a key tool for lenders to use in assessing the risk of potential borrowers. The FICO credit score is by far the most widely used but many people know very little about what the score means. Learn how the perfect FICO score is computed and how you can get your own credit score as close to the perfect FICO score as possible.

A FICO credit score is a number that represents your credit history and tells lenders how risky it is to lend you money. The score is based on a system created by Fair, Isaac and Company (FICO is an acronym for their company name). The score has a range from 300 to 850, with 850 being a perfect FICO score.

FICO isn't the only credit scoring system, though it is the most widely used. The credit scores you get from any of the three major credit reporting companies (Equifax, Experian and TransUnion) are FICO scores. Your score can vary from one company to another since each applies the FICO model to the information they have in your file. Keep in mind that your credit history and your credit score are different things. You are entitled by law to a free copy of your credit report each year from the credit reporting agencies, but it does not include your credit score. You have to pay a fee to see your FICO score.

Not all the people who use your credit score are lenders. Banks check it before opening an account for you and employers often check your credit rating before hiring you. Lenders use the FICO score to decide if they will lend you money and how much interest they will charge. A good FICO score is 640 or higher. That's the level at which you'll get the best mortgage interest rates from Fannie Mae or Freddie Mac. A score of 620 is acceptable, though you will have interest rates that are a little higher. Anything below 620 is considered "sub prime." This doesn't mean you can't get any credit, although it's very difficult if you're seeking to finance a home or other large purchase. However, there are lenders that will loan money to people who have far lower scores, but they will charge higher interest rates.

Fair, Isaac and Company don't reveal exactly how your credit score is calculated, but they have disclosed the major factors making up the score and how they are weighted. The most important is how promptly you pay bills, which counts for 35 percent of the FICO score. Next is the total amount of debt you owe compared to your income (30 percent). The type of debt you have counts 10 percent. Too much unsecured debt (like credit card debt) is a negative, while a home mortgage is not going to hurt your credit rating unless it's simply too large for your income. The depth (how many years you've been using credit responsibly) counts for 15 percent. Finally, frequently opening and closing credit accounts can count up to 10 percent off your credit score, especially if you apply for credit and are turned down.

To get a perfect FICO score, or even a reasonably good one, there are some things you must avoid. If you run into financial trouble, do not be more than thirty days late on any payments. If that proves impossible, call the lender before the 30 day mark is reached and try to make specific payment arrangements. If you do this, many lenders will not report a 30 day late payment provided you honor whatever agreement you make. Tax liens, judgments against you for nonpayment of debts or defaulting on a debt will stay on your credit record for years. The same is true of a foreclosure or bankruptcy. One of the most damaging things is a default on a student loan, because this will stay on your credit record for the rest of your life.

Steps to Improving Poor Credit

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Having a poor credit rating can harm your credit applications and even hurt your chances for certain job opportunities. And there are benefits to good credit---the best interest rates on mortgage loans, lower insurance premiums and easier loan approvals. Rather than live with "less than perfect credit," consider ways to bring up your score.

Some people with low credit scores are in denial or don't recognize the seriousness of their situation. They may avoid checking their credit report or score because they don't want to face the truth. However, improving a poor credit score involves acknowledging bad credit and habits that led to a low rating. Ordering your credit report is key to reversing bad credit. Your personal report summarizes your entire credit history and shows what lenders and creditors are reporting. Get your personal copy from AnnualCreditReport.com and consider areas that need improvement such as high debts and late payments.

If you haven't paid a creditor in weeks, months or longer, get on the phone and call them to setup a new repayment plan. Creditors and lenders are ready to work with you as long as you communicate your situation. They may lower your payment or change your due date to accommodate your finances. Start paying these creditors on time every month to rebuild the relationship and add positive information to your credit report.

Debt is another credit score killer, and carrying excessive debt on credit cards can prevent a high credit score. Fortunately, a better credit score often follows debt elimination. Debts make up 30 percent of credit ratings, and paying off your credit cards and reducing the balance on loans has a significant impact on your personal score. Debt elimination involves a plan of action---stop using credit cards, increase monthly payments and pay off new charges each month.

Sometimes, improving a poor credit history involves starting over and rebuilding credit from scratch. This is true if you've filed bankruptcy in the past. A bankruptcy can eliminate your debt obligations and leave you with an extremely low credit rating. Credit cards for people with bad credit have high interest rates, usually require a security deposit and have low credit limits. However, they're necessary to help you rebuild your FICO credit rating. Talk to your bank about these credit cards or research credit card offers online (see Resources).

Does Reducing My Credit Card Limit Hurt My Credit Score?

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The effect of reducing your credit card limit depends on how much debt you have and how you use your credit cards. In some cases, your credit score will drop when you reduce the limit on a credit card. However, there are other situations in which a reduced limit will have no effect on your score or will help you increase your score by managing debt more effectively.

About 30 percent of your credit score is based on the amounts you owe on all of your credit accounts. Part of this portion of the score looks at your credit utilization ratio, which is the proportion of your credit that you use compared to your credit limits. When you reduce your credit card limit, this can change both your utilization ratio on that card and your utilization ratio across all accounts. According to MSN Money, you should try to keep each utilization ratio under 30 percent to avoid hurting your credit score.

For example, say you have only one credit card with a balance of $2,000 and a limit of $9,000. Your utilization ratio is about 22 percent, which is within the target range. If your reduce your credit limit to $4,000, your utilization ratio suddenly jumps to 50 percent, which is likely to hurt your credit score. On the other hand, if your balance on the card was only $500, your ratio would only increase from 6 percent to 13 percent. Because both of these numbers are good ratios, you probably would not see an effect on your credit score.

If you carry debt on your credit cards, avoid hurting your credit score by keeping your limits high, if possible. However, your credit card company can cut your limit without your approval. If this happens, you can use one of two solutions to repair your credit score. The first is to pay down your credit card balance. For example, if you have $2,000 of debt on a card with a new limit of only $4,000, you can cut your utilization ratio to 30 percent by paying off $800, leaving just $1,200 on the card. The other option is to call your credit card company and ask for a credit limit increase. If you do not succeed the first time, call again every few months.

If you spend money on a credit card just because you have a high credit limit, you can actually help your credit score by reducing your credit limit. This is because the lower limit can keep your debt manageable so you can keep up with payments. Missed payments and collection accounts can do more damage than a high utilization ratio. For example, if you just consolidated credit card debt with a home equity loan and are worried that you might overspend on the cards again, cut their limits to keep your spending low and control the monthly payment amount.

How to Maximize Your Credit Score After Bankruptcy

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After bankruptcy, many consumers aren't sure where to start rebuilding credit. A credit score affects your ability to secure an auto loan, housing and even a job. Focus on behaviors that can boost a credit score. For instance, making timely payments and managing credit card balances mean a significant difference, according to MSN Money.

Instructions

Consider applying for a secured credit card. After bankruptcy, qualifying for a traditional credit card can be tricky. A secured credit card, which requires putting down a deposit, allows borrowers to rebuild credit.

Pay debts on time. Timely payments have a large impact on your credit score, according to MSN Money. If this has been a challenge in the past, take a new approach. Set up an automatic payment schedule through your financial institution's online bill-payment program. The payments come directly out of your account at the same time each month, eliminating the possibility of late payments.

Manage credit card balances. According to MSN Money, having a credit card balance that exceeds 35 percent of the total available credit is bad news for the credit score. Use the credit card for the sole purpose of rebuilding credit. Pay it off every month, and with time your credit score will increase.

Keep credit cards open. As you build credit, avoid the urge to close old credit card accounts. Keeping these accounts open shows the credit bureaus you're responsible. As a result, your credit scores benefit, according to Entrepreneur Magazine.

Why Are Credit Reports Important to College Students?

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College students are so inept at managing credit that the government had to step in and severely restrict their access to credit cards with the CARD Act in February 2010. Credit reports and scores are vital to college students because developing good habits during your youth will likely lead to better financial decisions in the future.

A good credit score and clean credit report will help a student obtain big-ticket items like a house and car after college. The average high school senior, however, scored just 57 percent on a financial literacy test given in 1999 by the Consumer Federation of America. Students would have scored even worse if the test had questions that related to situations they could expect to encounter in the real world. Learning about credit early can avoid mistakes, such as paying bills late.

Looking at a credit report and score correlates to a better understanding of how credit works and affects a person's life. Sixty-two percent of people who check their score know that landlords often run credit checks, much better than the overall average of 54 percent, according to the Consumer Federation of America. More people checking their score may have also lead to an improvement in financial literacy among Americans between 2007 and 2008.

Students who understand how credit works will probably show better spending behavior and avoid debt problems. The average student graduates with $1,000 in credit card debt and 55 percent of those students fear that they cannot pay it off, according to Iowa State University. This debt could pile up and stress a young graduate. Spending $1,000 freshman on a card with 20 percent interest, for example, will take six years to pay off and the interest charges will almost match the original balance when making minimum payments only.

Starting a credit profile in college benefits the student in the long run, so parents might consider cosigning a card with a low limit just in case they have to bail out the student. Students should read their contracts so they know when the teaser rate ends and interest charges start applying to any balance. Credit cards become dormant if the account holder does not use them for several months, so have the student put a small charge on the card each month, such as a phone bill, and pay it off before the grace period ends.

How Do I Get My Credit Rating Number?

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Anytime you apply for new credit, the lender pulls your credit report and uses your credit score to help determine whether to offer you credit and what interest rate you will have. The main credit score lenders use is called a FICO score and it ranges from 300 to 850. You actually have three FICO scores because each of the three major credit bureaus calculates the score separately based on the information it has on your credit report. You can obtain your credit scores from a number of sources, most of which will charge you a small fee.

Instructions

Go to the Annual Credit Report and get your free credit report from each of the credit bureaus. After receiving each report, you will have the option to purchase your credit score from the credit bureau. The Annual Credit Report website is the only authorized source of free credit reports, but it does not provide free credit scores as well.

Navigate to the FICO website and choose from one of the many options for purchasing your FICO credit score from one or more of the credit bureaus. If you would like, purchase your credit score in a package that also includes features such as monitoring your score constantly and sending you a notification whenever it changes or sending you your score and credit report every three months. FICO sometimes has promotions that allow you to sign up for a free trial of one of these services and view your score, but you will be billed for the service if you do not cancel before the free trial ends.

Visit the website of one of the three major credit reporting agencies, Experian, Equifax and TransUnion. Each website offers its own pricing and services, and they occasionally offer free trials of the services so you can get your credit score for free and then cancel the service before the trial period is over. Some of the credit agencies also offer their own credit scores that are different from the FICO credit scores that most lenders use, so confirm that you are ordering the type of score you would like to get.

Chapter 13 Vs. Chapter 7 on Credit

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Bankruptcy comes in many different types, but the Federal Trade Commission (FTC) explains that most consumers who cannot handle their bills file either Chapter 13 or Chapter 7. Both of these bankruptcies hurt your credit score and make it hard to open future accounts, especially in the initial years after your case is discharged.

Chapter 13 bankruptcy is designed to let you keep some of your possessions, and it requires you to repay some of your debt, according to the FTC. Chapter 7 bankruptcy is more comprehensive, erasing almost all of your debts and liquidating the majority of your assets. Both of these bankruptcies are picked up from court records by Experian, TransUnion and Equifax credit bureaus, which keep them in your credit record for 10 years.

Bankruptcy type does not matter in terms of credit score impact. The MyFICO credit score website explains that the number of accounts included in your filing, whether it was Chapter 13 or Chapter 7, is the most important factor. More accounts mean a worse drop in your score. Your credit records before the bankruptcy also have an influence. Your score goes down less post-bankruptcy if it was already extremely low before you filed.

Chapter 13 bankruptcy is not as drastic as a Chapter 7 filing, but financial adviser Dave Ramsey warns that both types must be disclosed to employers or creditors who ask about your financial background. Employment and loan applications often inquire about past bankruptcy filings. Ramsey warns that failure to disclose your Chapter 13 or Chapter 7 case on those applications may constitute criminal fraud. Human resource departments and creditors only care that you could not handle your bills and had to turn to the courts for assistance, not which case type you chose.

You need new accounts to rebuild your credit after a Chapter 13 or Chapter 7 bankruptcy. Start out with a secured credit card, MSN Money writer Liz Pulliam Weston advises, because approval is easy even with battered credit. The bank gives you a card when you open a savings accounts and deposit at least $200. The money is frozen as collateral, and your credit line equals your deposit amount. Eventually other lenders will take a chance on you when they see months of on-time payments on your secured card. Your bankruptcy has less influence as it falls farther in the past and gets overshadowed by good performance on all your subsequent accounts.

Why is My FICO Score Different at Different Companies?

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The Fair Isaac Corporation risk model (FICO) score is the most common type of credit scoring system in the U.S., but so secretive is the formula that not even credit professionals can predict everything in the algorithm. Add to this that the credit bureaus often give vastly different scores for the same and you have a recipe for confusion.

Technically, the scores you receive at any company other than the Fair Isaac Corporation are not a real FICO score. Fair Isaac stopped selling FICO scores in 2009, so Equifax, Experian and Transion--the three biggest bureaus in the U.S. as of 2011--only offer educational scores developed in partnership with Fair Isaac. While similar, the educational scores from the major bureaus have slightly variations that can compound into large variance between scores. Thus some people refer to bureaus scores as "FAKO" scores.

Lenders that just use the credit reports from the major bureaus and only the FICO formula to rate them can still come up with very different scores from all three companies, because the reports might contain different data. The bureaus sometimes overlook or never find out about certain accounts. Leaving a good account or negative item off a credit history could have an enormous impact on the FICO model.

Different scores from the bureaus or a poor FICO score may have no effect or boost your chances at receiving a loan. The FICO score, while highly common in the consumer lending industry, is the not the only one. Lenders might develop their own risk model that gives a drastically different score from the FICO formula. Some creditors might not use a credit score at all.

You will never know how anything affects the FICO formula, so it is better to work on building your credit history. Lenders may not care about a FICO score, but they will almost always look at your report to see if you pay other accounts on time and how much debt you carry.

8 Things to Know About Credit Scores and Credit Reports

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Your credit score and credit report are important to understand if you ever intend to borrow money or obtain credit. A credit report shows your credit history, both positive and negative. A credit score is a three-digit number calculated based on your credit history. Lenders and some employers use your credit report and score to determine your character and creditworthiness.

Many credit reports contain errors of some form. Not all errors are fraudulent, but it is important to regularly check your credit report to identify fraudulent activity and misinformation. Besides credit accounts that you did not open, your credit report may contain errors regarding your personal information. For example, your credit report may show an address that was never yours. Consumers can obtain their credit report free once per year through the AnnualCreditReport website.

There are three major credit bureaus that track your credit history -- Experian, Equifax and TransUnion. Your credit history is not necessarily identical on all three reports. You can grant permission to others to pull your credit report by signing an agreement.

Lenders look at both your credit report and credit score to make decisions on whether to grant you credit. The higher your credit score, the more likely you are to receive credit approval from a lender. Although the score is helpful, lenders also pull your credit report to see your positive and negative credit history to make more informed decisions. Lenders also may consider other information -- such as income and job security -- when determining credit approval.

Your credit score is directly related to your credit history. Your payment history makes up the largest portion of your credit score. For example, if you have a long history of on-time payments, you credit score is typically high if no other negative marks exist on your credit report.

The Fair Isaac Corporation's FICO score is used more often than any other credit score. The credit score range for FICO is from 300 to 850. The FICO score is calculated using a specific formula not made available to the public, although FICO reveals on its website the types of activities the formula considers when creating the score. A consumer with an extremely low credit score may need a cosigner to obtain credit from a lender.

Although FICO is the most common credit score, there are other credit scores that exist. In 2006, another credit score emerged name VantageScore. This company uses its own specific model to calculate credit scores. The range for VantageScore is 501 to 900.

Lenders are not the only ones who use credit reports to make decisions. Employers, especially those working with sensitive financial information, may use credit reports to determine whether a prospective employee is worthy of hire. Many utility and cable providers use consumers' credit reports to approve individuals to receive services.

Not only is your credit history reported on your credit report, but your personal information also is provided. Your name, Social Security number, current and previous addresses, phone number and credit limits are all listed on your credit report. All this information is consistently reported to credit bureaus by businesses your deal with.

How to Repair Credit ASAP

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Major credit repair is a long-term proposition. However, if you need to spruce up your credit by a few points to qualify for an upcoming loan, there are some steps you can take. Your credit rating takes into account payment history, amount of available credit, debt to income ratio, age of debt and the length of your credit history. Some of these can only be repaired with time, but you can take specific action to improve others in the short term.

Instructions

Get reports from all three of the major credit reporting bureaus: Experian, TransUnion and Equifax. You can order these from the bureaus directly or use a third party service.

Note any unresolved adverse actions, such as accounts sent to collections or outstanding late payments.

Contact the creditors on those adverse actions and resolve the debt. Insist on getting a fax or email saying you've done so the same day as you make the first payment.

Make as large a payment as possible on any credit cards that are maxed out. Credit card balances at or near your spending limit seriously reduce your rating.

Set up automatic bill pay with your bank, a service many banks offer for free. This will automate the process of paying bills on time, increasing your credit rating incrementally with each passing month.

Begin building habits of healthy spending and on time payments. While the steps above will patch your credit temporarily, only solid habits will build a strong credit history over time.

What Is a 680 FICO Score?

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Anyone who has taken out a loan or used a credit card has established a credit rating. This consumer credit rating is commonly known as a FICO score, a numerical value that reflects how lenders view someones credit history and thus their current desirability as a borrower. A FICO score of 680 lets lenders know specific things about a borrower with that rating.

The FICO score is a credit rating system that was created by the Fair Isaac Corporation as a way to represent a borrowers past credit history. The FICO scale rates borrowers by assigning them a score ranging from 300 to 850. A FICO score of 680 puts a borrower in the Good category on the scale. According to Experian as of July 2010, this would place the borrower slightly below the average score of 693.

On the FICO credit rating scale, higher numbers equate to better credit ratings. A 680 FICO score is in the middle of the Good range (660-699) on the scale. An individuals FICO score can determine the interest rate the borrower will get or if they might even be denied a loan or a credit card. A 680 FICO score means that the borrower should have little trouble being approved for loans, with the amount loaned dependent upon her income level.

According to Experian, as of July 2010, a 680 FICO score is slightly below the average score of 693. 680 is also below the median FICO score of 711. The median score means that half of all people rated are below 711 and half are rated above 711. A lender may focus on 680 as being below the average and median scores, and therefore base its offered interest rate on those aspects. As a result, a 680 score could result in a higher interest rate than might be obtained by people with above-average scores.

A FICO score of 680 is good, but borrowers with scores above 760 generally get the lowest interest rates. According to MyFico, a 680 score can mean a 0.4 percent to over 3 percent higher interest rate compared with someone whose score is 760, depending on the loan. This makes it important to work on improving the 680 score by paying off outstanding credit card balances and making sure all payments are made on time. This will gradually raise the 680 FICO score closer to the desired 760 range.

Borrowers need to know whether their credit reports are accurate, as this is the information that determines their FICO scores. The Fair Credit Reporting Act mandates that the three major consumer credit reporting bureaus-Experian, Equifax, and TransUnion-must each provide individual consumers with a free credit report once every 12 months. Free credit reports can be obtained from the official website (link in Resources), by calling 877-322-8228, or by writing to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

How to Fix My Credit Trade Lines

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Whenever you open a new credit or loan account, a trade line will appear on your credit file. Each trade line will reflect basic information about the debt, such as the date the account was opened, the amount of the debt, the name of the creditor and the creditor's contact information. The Fair Credit Reporting Act stipulates that if you discover errors in your credit report, no matter how minor, you can request that those errors be corrected.

Instructions

Obtain your formal credit reports directly from the credit bureaus, Equifax, Experian and TransUnion. You are allowed to pull one free credit report from each credit bureau per year.

Review all of the trade lines reflected on your report for accuracy. Look closely at the amounts listed that you owe, the dates accounts were opened and verify that the payment history reflected on each account is correct.

Call your creditors if you find any inaccuracies in your current open accounts. Creditors are able to modify their own trade lines without your conacting the credit bureaus. If an account is no longer open, however, you may no longer be on file. This will result in the creditor being unable to change any information that was reported.

Mail any documentation to your creditors that validates your claim that the information is inaccurate. Your most recent monthly statement should reflect accurate information that can be used as proof of a credit reporting error.

Give your creditors time to evaluate your information and correct your trade lines. You may call back at any time to investigate what is being done to correct your credit report.

Inform the credit bureaus of any inaccuracies you find on old, closed account trade lines or inaccuracies that current creditors refuse to remedy. You may choose to dispute the information in your trade lines by mail, telephone or online.

Allow the credit bureaus 30 days to investigate any inaccuracies in your trade lines. A credit bureaus must complete its investigation and mail the results to you within this time frame.

How to Check Credit Score & Find Out Old Debts

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In a struggling economy, loans are increasingly difficult to qualify for. Most companies now require a substantial down payment, or a high credit score to secure financing. It is important for consumers to keep an eye on their credit report and score to determine inaccuracies that may cause their credit score to drop. Under the Fair Credit Reporting Act, consumers hold the right to obtain their credit scores from each credit bureau, in addition to a description of how that value is reached. If old debt is a concern, now is a good time to contact the creditor and negotiate a settlement so derogatory credit can be removed.

Instructions

Order your credit report. This can be done online, by mail or by phone. You can order all three credit bureau reports combined free of charge at AnnualCreditReport.com, or you can order them individually from Equifax, Experian and TransUnion. Consumer individuals are entitled to one free credit report from each agency every 12 months.

Obtain your credit score. You can order your credit score along with your credit report for a charge, or you can purchase your credit score directly from the credit reporting agencies for a fee. Credit scores are calculated based on many factors, including number of accounts, amount of credit used, payment history and number of inquiries. Scores will differ among the three bureaus, since certain creditors only inquire or report to one agency.

View credit report and determine credit score. Review all of the reported information to determine if any errors or inaccurate information has been reported, so it can be resolved.

Assess old debts. When reviewing your credit bureau reports, old debts that haven't been recently paid will show as a "charge off" or "collection account." Old debts paid or charged off can include credit cards that have had any reporting in the past seven years, collection accounts, auto loan or repossession accounts, mortgage loans or foreclosure accounts, old medical bills that weren't covered under insurance. The old debts on your credit report will list the creditor name and contact information, so communication can be initiated and any issues can be resolved.

How to Boost Your Credit

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Your credit score provides a quick overview of your ability to handle credit responsibly. Lenders look at your credit score before approving you for car loans, home loans, phone contracts and apartment leases. Sometimes, employers will check your credit; a bad credit score not only costs you money through higher interest rates, it can also restrict your career opportunities. Boosting your credit score is the easiest way to save money on interest rates.

Instructions

Obtain a copy of your credit report; free credit reports are available through AnnualCreditReport. Under the Fair and Accurate Credit Transactions Act of 2003, consumers are entitled to one free credit report annually from each of the national credit bureaus-Experian, Equifax and TransUnion. You may choose to request all three reports at once, this is ideal for comparison, or space them out for updated information throughout the year.

Check your credit report for errors. Disputes must be filed with one of the credit reporting agencies. Disputes are more likely to remove errors if they are accompanied by documentation; if documentation is unavailable, it is still best to file a dispute since creditors must verify their claim.

Pay bills on time. Companies report to one or all three credit reporting agencies; the longer your account is paid on time, the higher your score will be. Also, a late payment has a lower negative impact than a missed payment. A single missed payment can decrease your score by thirty to seventy points.

Pay off or lower account balances. Higher amounts on "revolving credit," such as credit cards, imply to creditors that you may be living beyond your means.

Shorten the time frame when rate shopping for car or home loans. Multiple inquiries within a shorter amount of time reflects as rate shopping; longer periods of time between loan applications have a negative impact.

Be added onto someone else's credit account. If you know people with excellent credit scores, you can boost your credit if they add you under the "add a card holder" section of credit card accounts. Their credit score is now added to your credit profile. Convincing others to trust you with their credit account might be difficult if you have poor credit; a tactic to convince them to help you is to ask them to add you to their account but never give you the card or any of the account information.

How Often Can One Safely Check Their Credit?

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It's important to keep an eye on your credit report to ensure that the information is accurate and up-to-date. Lenders, landlords and even employers may use your credit report, which reflects your responsibility level, to make major decisions that affect your life, so you're wise to ensure it portrays you as well as possible. Because you need to check your credit report for validity, and because checking your own score does not indicate a risk of taking on more debt, doing so does not lower your score.

When you check your own credit report through a legitimate source, it's considered a soft inquiry and it has no negative impact on your credit score. You may check your report as many times as you'd like and it won't lower your score, but you need to get your report from a reliable source.

The Federal Trade Commission recommends checking your score once per year through the Annual Credit Report website, which is run by the three major credit bureaus: Experian, Equifax and TransUnion. Through the website, you are entitled to one free copy of your credit report from each of the credit bureaus annually. You may order your reports all at once or separately, over the course of the year. After receiving your free reports, you may go through the individual credit bureaus to check your credit score without any negative effects. The FTC warns against using other so-called "free" credit reporting websites, as they may later charge for other services.

Checking your credit report often may actually improve your credit score if you find any errors. Report any discrepancies immediately in writing to both the reporting credit bureau and the creditor in question. Write a letter explaining the issue and provide copies of any documentation you have. Credit bureaus must investigate the problem unless they deem it to be frivolous, and they usually do so within 30 days of receiving a complaint.

Even if you've recently made a payment to an account, that doesn't mean it will be immediately reflected on your credit report. Creditors report to credit bureaus at various times throughout a month-long cycle, so you may have to wait before seeing your actions reflected on your report. For example, if you've paid off a credit card and you pull your credit report two days later, the account may still show that you have a balance because the creditor hasn't yet updated the bureaus. Conversely, you should aim to keep your spending to 30 percent or less of your credit limit because creditors may report to the bureaus at any point in the month, not just at the end. Therefore, even if you intend to pay the card off at the end of the month, charging it up at any point could reflect poor financial management skills.

Are the Scores the Credit Card Companies Tell You the Real Score?

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Lenders typically use a credit score to help determine whether to extend credit. Your credit score helps lenders understand risk without reading your credit report in depth. Lenders may use different models for credit score reporting depending on what they are most concerned about. You can purchase a credit score through the credit bureaus, but this score usually is not the score lenders see when they run your credit.

Credit bureaus such as Experian sell credit scores to consumers as part of their credit monitoring services. However, MSNBC reports that these scores may not be the same as the FICO scores that lenders use to determine whether a person is a good credit risk. Experian, for example, uses its own formula to generate a credit score for customers. This score allows customers to get an idea of how credit-worthy they are but is not shared with lenders or used in lending decisions.

Different lenders may use slightly different models to determine your credit score. Many lenders examine your FICO or Vanguard scores, but there are actually about a dozen models lenders may use, according to Get Rich Slowly. Thus, even if you purchase or obtain a genuine FICO score, it may not be the same score that a particular lender uses to make credit decisions.

The score you purchase from Experian or other credit bureaus may help you determine your credit score but is less relevant than your actual credit history. Thus, focus more on the information in your credit report than on trying to obtain a score. The information in your credit history affects your score, and you can get an idea of whether you have good credit or poor credit by examining this information. You should examine this information regularly to make sure there are no errors or omissions that may negatively impact your credit score.

Even though you cannot find out your "real" score, you can still take action to boost your credit score. Pay all your bills on time and pay off debts to boost your credit score over time. In addition, dispute any errors in your credit report by writing to the credit bureau. Get Rich Slowly says you must contact the bank that generated the improper report in addition so that it does not re-report wrong information after you have it removed from your credit report.

Credit Reports Used by Lenders

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A lender will pull your credit report if you apply for a loan. It has a choice of three reports to view, TransUnion, Experian and Equifax. The information on your report will help the lender determine if you will be approved or rejected for the loan.

The credit reports used by lenders can look somewhat different from those ordered by a consumer. Lender reports can be more difficult to read, at least for the average consumer.

If a lender has your FICO score from a credit report, it should be approximately the same as the FICO score you obtained from a different source. A FICO is a credit score.

Lenders will take a look at your credit score. A score can range from 300 to 850. The higher your score, the better chance you have of being approved for a loan.

A lender will usually get your report from one of the three major credit reporting agencies. If it cannot locate any credit information based on information from one agency, it may utilize another one.

To get your credit report, a lender will need your permission. It will need you to fill out an application with your personal information, such as name, address, date of birth and place of employment. Signing the application gives the lender permission to access your credit report.

A lender can also reject your application request if you have too much debt. If you have too much debt, it could mean you cannot afford to take on another loan payment. If you have a variety of collection accounts, judgments, liens or past due accounts, a lender may decline your credit request.

How to Debeard Mussels

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Fresh mussels on sale at the seafood store are a treat, but then you need to take them home and prepare them. You notice a hairy protrusion coming out of the side of the mussel shell and you have no idea how to remove it or even what it is. It's the equivalent of a five o'clock shadow, commonly called the beard. It's a simple job to yank it out and your treat will be fresh mussels for dinner.

Instructions

Check out your batch of fresh mussels. Discard any that are open. This indicates that the bi-valve inside is dead.

Soak the mussels in a pot of cold water that has a cup of corn meal in it for an hour. All bi-valves continue to circulate water through their system and the theory of the cornmeal in the water is so that your mussels will take it in and the cornmeal will help expel any sand they have inside.

Set aside those that have a beard. These are the byssal threads that mussels use to attach themselves to rocks or piers. You may use your fingers or a set of pliers to grasp the beard and pull it quickly toward the hinge of the shell. The beard rips out of the mussel and should be discarded.

Use a stiff brush on the shell of the mussels to scrub away sand and other things that may be clinging. Immediately place the mussels in a cooking pot and proceed to cook them at a high heat until the shells are open.

Can I Get Items Removed From My Credit Report?

8:42 PM No comments

Having negative items on your credit report, such as unpaid debts, charge-offs and collections, can have a significant impact on your credit score. Negative items don't remain on your credit report forever, expiring after seven years in most cases. If the information on your credit report isn't accurate, however, you can get the inaccurate entries removed earlier.

To learn what is contained in your credit report and ensure all items on your report are correct, you should review your credit report from each of the three major credit bureaus -- Equifax, Experian and TransUnion. Federal law allows you to obtain a free copy of your report with each of the bureaus once per year through the AnnualCreditReport.com website. Although these reports do not contain your credit score, they do contain all the positive and negative reports of your financial activity used to calculate your score.

If information on your credit report is inaccurate or lists debts that do not belong to you, disputing the inaccurate entries can get them removed from the report. To dispute entries, contact the credit bureau that issued the report, either by phone, postal mail or a dispute form on its website. The credit bureau investigates disputed entries, asking the creditor to verify that the information is correct. If the information cannot be verified or the creditor doesn't respond, the credit bureau removes the entry.

If debts in your credit report are legitimate, you may still be able to remove them. Contact the creditor and try to reach an agreement to have the creditor remove the debt from your credit report once the debt is paid. Not all creditors are willing to do this, but some may agree if you pay off the debt in a lump sum or within a certain time frame. Make sure you get a copy of the agreement in writing before making the payment, and send this agreement to the credit bureau if the debt is not removed.

In some instances, old debts that have been paid off may include updated information that makes them appear more recent than they are. This may cause the debt to remain on your report longer than it should, which typically is seven years. If the debts listed have expired, inform the credit bureau of the error, and it will investigate the dispute and remove the listing if it can confirm it is older than seven years.

Tips to Get a Higher Credit Score

6:23 PM No comments

Having a good credit score is essential to personal financial success. Your credit score affects your ability to get a mortgage or a car. It can affect your career as well. Employers frequently ask to see a credit report since they believe your life outside of work shows your personality and your ability to be a responsible individual. Even if you have a great job, a bad credit score could put your dreams on hold. All home purchases require credit scores, and most car purchases do as well.

The best way to protect your credit score is being informed. Each year you have access to one free credit report on annualcreditreport.com, which provides credit scores from three credit bureaus: Equifax, Experian, and TransUnion. FICO provides its own credit score (see Resources). Be sure to use your free report before paying for one with a credit score company. Put your score in a visible place around your office or kitchen so that you are reminded of it before you make any major decisions.

Your credit score is comprised of five factors: payment history, amounts outstanding, length of credit history, new credit, and types of credit. If you keep all of your credit cards beneath 30 percent of their maximum balance, your score will be stable and acceptable to many potential lenders. Most lenders want to see your amounts outstanding beneath 35 percent, so 30 percent is a good goal since it gives you some space for error. Your payment history can be found on any of your account statements. Always keep old cards open so that your credit history remains intact. Do not take out new lines of credit since having more available credit than you need can hurt your score.

There are many ways to improve a low credit score. Refrain from opening new accounts as your credit score goes down dramatically for six months after you open a new credit card. Be sure to pay your monthly minimum payments on all of your cards since a missed payment will be detrimental to your score.

The best way to stay out of credit score problems is to plan your expenses thoroughly. This will help you avoid spending decisions that hurt your score. If you have an accurate budget each month and live within your means, your credit score will increase over time. Make sure that you go to an unbiased financial consultant if you do have credit score trouble.

How to Pay Off Collections to Raise Your Credit Score

8:58 PM No comments

Credit scores are used for everything from approving a car loan to hiring a new employee. If you have debt that has ended up in collections, it is certainly affecting your credit score. There are different strategies, though, to pay off these collections to raise your score. These include paying a lump sum, prioritizing recently reported debts and cleaning up all your credit reports.

Instructions

Check all your reports. Before you start to send checks to collections agencies, make sure you know everything that has been reported. There are three credit bureaus -- Experian, TransUnion and Equifax. Order a copy of your credit report from each one directly or via a third party service. You are legally entitled to a free report from one of the agencies via AnnualCreditReport.com (under Resources). Go through all the reports and make a list of all the items that have gone to collections. Dispute any that are in error.

Request item be deleted with payment. Negotiate with the collections agency to have the item removed from your credit report in exchange for full payment. You can negotiate by phone but make sure to get it in writing before you send payment. Collection agencies will record most phone calls so do not admit that you are liable for the debt on the record.

Pay off most recently reported collections. Bankrate.com reports that 35 percent of your credit score is calculated from how you pay your bills, placing the most emphasis on recent activity. Your credit report will show the date that the collection agency last reported a balance due. Pay these first. If you have an account sent to collections with a last reported date close to seven years ago, consider letting it go. A credit bureau cannot legally report a negative item after seven years.

Pay off the collections in full. If an account is in collections, making a partial payment is not going to take it out of collections. It will also update recent activity on the account, making it a greater negative factor on your report if the account had been idle for some time. Pay the whole amount due if you can. If you're able to secure a credit card, consider using it to pay off the collections account and then make partial payments on the account. The price of paying interest might be worth the increase in your credit score.

Dispute items after paying collections. Bills.com reports that credit bureaus only update their credit data every 90 days. After you pay a collections agency, the item on your report is technically in error. Dispute the item using each of the credit agencies online dispute form. The credit bureau will contact the collections company to request confirmation of the data within 30 days. This should help expedite the raising of your score.

How to Remove a Delinquent Account From a Credit Report

7:30 AM No comments

Delinquent accounts consist of credit accounts with late payments, marked by a 30, 60, 90 or 120 day notation on the payment history of the credit account. Late payments have a significant negative impact on your credit score and may prevent you from qualifying for loans and other credit accounts. You may be able to remove a delinquent account from your credit report if it is too old to be reporting on your account, over seven years, or if inaccurate information is present.

Instructions

Click the TransUnion link in resources to go to the dispute page for this credit reporting agency. Register for an account using the "First Time" button if you have not requested a TransUnion credit report in the past. Log in to your account on this page, once you have completed the registration.

Click "Credit Report" and "Report Inaccuracy." You should be on the dispute section of your credit report. Click "Submit dispute."

Look through the TransUnion credit report for your delinquent accounts. Click "Request Investigation" next to any item that needs to be disputed. Choose one of the dispute reasons provided and click "Submit."

Open the Experian page listed in Resources. This is the main dispute page for the credit reporting agency. Experian requires consumers to have an Experian credit report, with the credit report number, from the past 90 days. The dispute page provides a number of options to request an Experian report, with paid and free options.

Choose the option labeled "Yes, I have a credit report number." Enter the number from the credit report in the form provided. Other information that you need to fill in includes your Social Security number and current address. Click "Submit."

Scroll through the list of credit accounts until you find the delinquent accounts. Examine the account information to see if any inaccuracy or age may allow you to dispute the account. Click "Dispute this item" and click the appropriate dispute reason. Click "Submit your dispute."

Bring up the Equifax dispute webpage, found in Resources.

Type your name, current address, any previous places you've lived at within two years, your Social Security number and a credit report number. If you do not have a credit report number from Equifax, you can simply ignore this field. Click "Submit."

Choose the appropriate answer from the multiple choice questions used to confirm your identity. Click "Submit" when you have answered all of these questions correctly.

Look through your Equifax credit report for your delinquent accounts, in the negative accounts section. Click on the individual account link of each delinquent account. Check the information on the account to ensure it is accurate. If it is not, or if the account is too old to be included on your credit report, click "Dispute this item." Use the list of dispute reasons to state your problem with the account and click "Add Dispute."

Credit Score Factors and High Credit Card Limits

10:09 AM No comments

People in the lending industry may give you wrong advice on your credit score: that high credit card limits are bad. A high credit limit probably helps your score. Some of the most important credit scoring factors need a high credit card limit. The only potential damage is misusing your available line.

The Fair Isaac Corporation, which controls the most dominant scoring algorithm in the consumer credit industry, does not list "too much credit" or anything like it as a reason to ding a score, according to Liz Weston of MSN Money Central. Available credit only affects credit utilization -- the percent of how much your credit you have available. High credit limits keep utilization rates low, even if you have several thousand dollars in credit card debt.

Having a high credit card limit might entice you to spend more than you can afford. The FICO model uses the nominal value of your installment debts and revolving balances for the second most important category -- amounts owed. Overloading on debt could overwhelm your finances. Missing payments has a hugely negative effect on the most important part of the FICO formula: payment history.

There is always the possibility that future lenders will look at the accounts in your credit report and worry about a large limit. With so much credit available, you could take out a loan, run up a lot of credit card debt and default on both accounts. However, this is a rare thought in the minds of lenders. Data from FICO suggests that high credit limits are insignificant in comparison to a history of paying on time.

Always keep a low credit card balance, but use your account every month so the lender can report something to the credit bureaus. Some credit card companies cut limits on accounts with a large line of credit, especially when the borrower has a spotty payment history or does not use the account. Your creditor can cut your limit at any time for any reason and needs only to send you a letter announcing your new lower limit.

Sunday, March 31, 2013

Identification

Significance

Consideration

Prevention/Solution

Definition

Features

Free Reports

Paid Reports

Warning

Credit Scores

Utility Companies

Collections and Judgments

How to Check

Friday, March 29, 2013

In the balance

Debt-to-Income Ratio

Alternative

Make it Temporary

Instructions

Tuesday, March 26, 2013

Pay Off Your Balances

Pay Off Cards and Eliminate Them

Communicate with Creditors

Pay on Time

Pay Off Installment Loans

Monday, March 25, 2013

Instructions

Sunday, March 24, 2013

The Damage

How Bad Is This?

Considerations

Alternative to Settlement

Experian

Equifax

TransUnion

Before Closing an Account

Score Impact

Minimizing Impact

How to Cancel Credit Card Accounts

Reasons to Cancel

Saturday, March 23, 2013

Identification

Misconception

Federal Credit Reporting Time Limit

Tip

Friday, March 22, 2013

Clean Up Your Credit Report

Open New Accounts

Manage Responsibly

Warnings

Instructions

Instructions

Thursday, March 21, 2013

Process

Time Frame

Considerations

Warning

Wednesday, March 20, 2013

Identification

Types

Function

Features

Considerations

Tuesday, March 19, 2013

Overcoming Denial

Contacting Old Creditors

Resolving Debt

Starting Over

Credit Utilization Ratio

Examples

Solutions

Considerations

Monday, March 18, 2013

Instructions

Potential

Viewing Credit Report

Other Benefits

Tip

Saturday, March 16, 2013