What Is an OK Credit Score?

Your credit score ranges from 300 to 850 and represents how likely you are to default on money you have borrowed. Higher scores represent more creditworthy borrowers.

What Is an OK Credit Score?

An OK credit score usually falls between 650 and 700. About 15 percent of Americans falls in this range. About 27 percent has scores below 650, and about 58 percent has scores higher than 700.

Why Scores Are Important

Credit scoring helps lenders determine whether or not to issue you a loan, and what interest rate to charge you to account for the risk that you will not pay the loan back. The higher your score, the more likely you are to be approved at a lower interest rate.

Who Calculates Scores?

Scores are issued by three credit-rating bureaus: TransUnion, Experian and Equifax.

What Are Scores Based On?

Credit scores are calculated using information in your credit report such as how long you have had credit, whether you've repaid loans as agreed in the past, how much you owe, the types of credit you've used, and your applications for new credit.

Time Frame

The information in your credit score usually remains for seven years. Exceptions include Chapter 7 bankruptcies, which remain for 10 years, and inquiries, which only remain for two years.

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Does Overdraft Protection Affect My Credit Score?

Having overdraft protection for your bank account may or may not affect your credit score. Banks offer more than one type of overdraft protection; one does not affect your credit score, but may impact your consumer ChexSystems report. ChexSystems is the primary reporting agency for your banking history. Negative information on your ChexSystems report may impede your ability to open a new bank account.

Overdraft Protection --- Savings

If your bank offers overdraft protection in the form of an automatic transfer from your savings account to your checking account as needed to cover insufficient funds, your credit score is not affected. If there is insufficient funds in your savings to cover the overdraft and if you never correct the situation, your bank account will likely be closed. You will also incur a negative entry on your ChexSystems report. ChexSystems reports are subject to the same credit reporting laws as your credit report. The Fair Credit Reporting Act allows consumers to dispute incorrect information at any time and to have negative entries removed after seven years.

Overdraft Protection --- Credit Cards

Linking your checking account to a credit card as a means of overdraft protection will affect your credit score. The impact could be positive if you continue to make your credit card payments on time. Depending on the balance charged to the credit card, your credit-to-debt ratio may be negatively affected. Banks may only approve overdraft transfers in specific increments, such as $100. The impact of this small amount of money will not be detrimental to your credit-to-debt ratio.

Overdraft Protection --- Line of Credit

Overdraft protection in the form of a line of credit will affect your credit score as a separate credit account. A typical credit line for overdraft protection is $1,000. Even if you never access the cash, the available credit can positively affect your credit score. If you do use the protection, make timely payments and your credit score will reflect a positive payment history.

Credit Score

Payment history and outstanding debt are two of the primary factors that credit reporting agencies use in credit score calculations. Combined, these two elements affect 65 percent of your overall credit score. An on-time payment history is a positive factor; late payments and delinquencies affect the score negatively. Outstanding debt reflects the credit-to-debt ratio. Overdraft protection tied to credit cards will affect the credit-to-debt ratio when you initiate the transfer from the card to the bank account. Overdraft protection tied to a loan or line of credit affects your credit score as soon as you initiate the loan.

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How to Fix Your Credit to Buy a House

Maintaining a good credit history is important, especially if you plan to buy a home. Individuals with good credit can easily qualify for a mortgage loan, and they'll likely pay a lower interest rate. On the other hand, bad credit can result in a loan denial. But fortunately, bad credit isn't permanent. There are tricks to fix your credit score, which will help you qualify for a mortgage loan in the future.

Instructions

1

Get a copy of your credit report. Visit www.annualcreditreport.com and request a free copy of your credit report. Review the report and look for inaccurate information that could reduce your credit score. If errors are present, contact the creditor and dispute the remark.

2

Pay your creditors. Submit your monthly payments before or on the due date to avoid late fees and negative remarks on your credit report. Late payments reduce your credit score, and they make it difficult for you to obtain financing.

3

Reduce your debts. Maxed-out credit cards or a high debt-to-income ratio can lower your credit score. If you're planning to buy a home, make plans to pay off or pay down your debts. Use cash instead of credit, and double or triple your minimum monthly payments to get rid of debt.

4

Settle collection accounts. Paying a collection or judgment account doesn't always remove the remark from your credit report. Contact the reporting creditor and establish a payment arrangement. In return, ask the creditor to remove the negative remark upon receipt of full payment. The creditor may comply with your request.

5

Open a new credit account. If you've closed your credit accounts, apply for a new one. Get a secured credit card from your bank or another financial institution.

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Who Are the Three National Credit Bureaus?

There are three national credit bureaus in the United States. The Fair Credit Reporting Act, or FRCA, states that all three credit reporting bureaus must provide you with a free credit report once every 12 months. The Fair Issac Company, or FICO, credit scores can range from 300 to 850. According to the Federal Trade Commission, the three credit bureaus do not share files with each other so you must contact each one individually to obtain all three credit reports, or you can order them through the Annual Credit Report website (see Resources).

Equifax

Equifax is one of the three national credit bureaus. According to the Federal Trade Commission, to request a copy of your free credit report you "need to provide your name, address, Social Security number and date of birth. If you have moved in the last two years, you may have to provide your previous address."

Experian

Experian is another national credit bureau. To request a credit report from Experian, visit their website. Request a copy of your credit score to monitor the financial transactions conducted with your Social Security number.

TransUnion

Transunion is the third national credit bureau. Visit its website to request a free copy of your credit report.

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Three Ways to Start Building Good Credit

A good credit history will help you qualify for more credit cards, mortgages and loans, and receive the best rates on interest and fees. Fortunately, there are simple things you can do to start building a positive credit history whether you are just starting out or trying to rebuild a credit score.

Open a Checking and a Savings Account

Most lenders see active checking and savings accounts as a sign of financial stability, according to MSN. In fact, you will be asked if you have an open bank account on most credit applications including credit cards, loans and retail store cards. You can open an account at any local bank. You will need some basic information about your identity, such as Social Security number, address and employment information, and a small deposit to open each account. Most basic checking accounts come with a monthly maintenance fee, but many banks will waive the fee if you set up direct deposit with your employer or make a certain number of debit card transactions each month.

Open a Credit Card Account

Opening a credit card account will add to your available credit limits, your payment history and your debt ratio, all of which can help you build a positive credit history. Many credit companies have credit cards designed for people with a limited credit history. However, be sure to read the fine print on any credit card before you sign up. Some credit cards can carry high annual fees, interest rates and maintenance fees. If you are having trouble qualifying for a regular credit card, consider a secured card. With a secured credit card, you pay a deposit and the company issues you a credit card with a credit limit equal to your deposit. After several months, you can switch to a regular card.

Maintain Your Credit Card Account

Keeping your recurring balances low and paying your bill on time every month will go a long way toward building a good credit history. When you use your card, plan to pay it off in full every month or only carry a small balance. A large debt has a negative impact on your credit score. According to MSN, you should carry less then 30 percent of your total credit limit. Be sure to pay at least the minimum payment by the due date each month. Your payment history has a large impact on your credit score and even one late payment can lower your credit score.

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Reasons That a Credit Report Lowers

There are a number of factors that credit reporting agencies use in determining a credit score. While most consumers know that major events such as foreclosure or bankruptcy will damage a credit score, there are many smaller factors that can also cause a credit score to lower. By understanding these factors, a consumer can work to maintain or improve her current credit score.

Late Bill Payments

Paying bills late can cause a credit score to drop. In fact, a consumer's record of paying bills is the largest factor in the calculation of a credit score. While a payment that is late by a few days will have only a small impact, if any, consistently paying bills late or having bill in collections can be devastating to a credit score. The good news is that a consumer's record of recent bill payments has a larger influence on a credit score than payments made in the past. This means that a consumer with problems paying bills late in the past can reduce the impact of these late payments by diligently paying all bills on time.

Increasing Debt Levels

A consumer that uses all or most of his available credit will have lower credit scores than a consumer that does not. Even if the consumer is making all of the payments on the debt on time, the credit scoring models show the consumer as a greater credit risk. This means that a consumer who is accumulating debt, but not added to his available credit will see a decrease in his credit score.

Closing Old Accounts

The age of credit accounts is another factor in the calculation of a consumer's credit score. Older credit accounts show that a consumer has a record of being responsible with debt over time. By closing an old, unused credit card, a consumer may actually cause her credit score to lower. Though the impact might not be significant, the change may be enough for a lender to deny credit or only offer higher interest rate loan products to a consumer with a mediocre credit history.

Not Having Payments

A person that does not have any debt to make payments on will have little information sent to the credit reporting agencies. This lack of information will lead to a decline in the consumer's credit score. While running up debt just to have something to pay is probably not a good idea, a consumer who might need a mortgage or other loan in the future may want to consider using a credit card to make some small purchases from time to time. The consumer can then pay the account in full each month to provide current information on his credit report.

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Can You Get a Divorce in Georgia Without Going Through an Attorney?

Divorce is always a stressful time, and often the added financial burden of hiring attorneys makes a bad time worse. In Georgia, you are legally entitled to forgo the expense of a lawyer and complete the divorce proceedings yourself. These kinds of divorces, also known as "pro se" divorces, are less costly, but it is important to know that any mistake you make as you dissolve the marriage could cost you much more down the line.

Georgia Law and Divorce Lawyers

Pro se divorces, which are sometimes informally called "do it yourself" divorces, are legal under Georgia law. Although the law allows you to handle the divorce yourself, it does not give divorcing couples without legal representation any kind of break in the procedure itself. That means that you will have to complete all the court paperwork required for a legal divorce just as you would if you had a lawyer involved. You will simply have to do it all yourself. You will also need to represent yourself in court if you and your spouse cannot come to an agreement over the issues and need a judge to decide on things like custody.

Complex Issues

When you complete your divorce paperwork and submit it to the court, you will need to address a wide range of complex issues, from financial settlements to child custody. You will also have to give a reason for the divorce. Georgia law allows divorce for 13 different reasons, one of which is a "no fault" divorce option called "irretrievably broken," and 12 more that are "fault" options. Fault causes include adultery and drug abuse. You and your spouse will either need to agree to settlements on all of the issues or agree to allow a judge decide for you.

Considerations

Divorce law is complicated, and a lawyer can help you navigate the process in a way that best protects your assets and interests. Completing a divorce without a lawyer requires a great deal of cooperation as you work through questions of division of assets, child custody and spousal support. The more you have acquired as a couple over the course of your marriage, the more complicated the picture becomes. Even if you come to an agreement on all of the issues with your spouse, you will still need to submit detailed financial reports and extensive notes on your arrangements to the courts as part of your settlement. The paperwork preparation itself is a complicated affair, and making a mistake on the paperwork could delay your divorce or lead to problems down the line should you need to revise your settlement.

DIY Filing

If you decide to file for divorce without a lawyer, contact the Superior Court in your county of residence and request the forms for a divorce complaint. You may also be able to download forms from your county court's website. If you no longer live in Georgia, but your spouse does, file the divorce complaint in their county.

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How Are Consumers Divided in the Debt Industry?

In general, lenders classify consumers as prime (creditworthy) or subprime borrowers. A prime borrower has a good credit history and is afforded lower interest rates on loans. Your financial history is compiled and tabulated by a company called FICO (formerly Fair Isaac Corporation), which has created the widely-used FICO score. The FICO Score range is 300 to 850. The higher your FICO score, the greater your chances of being approved for a loan.

FICO Score

FICO, formerly Fair Isaacs Corporation, was formed in 1956 and created the FICO score, which is considered the industry standard for measuring consumer credit risk. About 90 percent of the largest financial institutions use the FICO score. Your FICO score is a three-digit number that determines your creditworthiness in the eyes of a lender and will affect your ability to borrow money and the interest rate charged to you. FICO scores are broken down in 50-point increments.

Score Evaluation

Given the prevalent usage of FICO's scoring methodology, the term FICO score is used interchangeably to refer to your credit score. However, lenders have the option of using their own credit evaluation methodology. Generally speaking, if you have a credit score above 720, you are considered a prime borrower or more creditworthy than a person with a lower score. You may still get a loan if your score is 650-699 but you may have to pay a higher interest rate. A credit score of 620 or lower is considered subprime.

Credit Approval

Although your credit score plays a significant part in a lender's decision-making process, other factors contribute to whether or not you will be approved for a loan such as your income, employment status and current debt obligations. Lenders develop their own proprietary credit risk metrics based on lending experience. Thus, the definition of a prime borrower can vary from lender to lender. In general, a lender's decision to extend you credit is based upon your payment history, which provides some insight into the likelihood the lender will recoup principal plus interest.

Obtaining A Copy of Your Credit Report

If your loan application was denied, you are entitled to a free copy of your credit report by writing to the credit bureau that was used to obtain your credit report. The three credit bureaus are Equifax, Experian and TransUnion. You can also visit their websites to request a copy of your report.

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Does Canceling Credit Cards Affect Your Credit Score?

Canceling a credit card will affect your credit score. The effects may be negative or positive depending on how long an account has been open, how much total debt there is and how many credit cards are canceled in a short amount of time. It's important to check your credit score after canceling a credit card to ensure credit reporting accuracy.

Benefits

Having many high-balance credit cards near or at their limit will lower your credit rating. Having too many open lines of credit with or without balances will also negatively affect your credit score. Under these circumstances it may be beneficial to cancel a line of credit.

Balances

Canceling a credit card after paying it off may hurt your credit score if other lines of credit have high balances. Canceling a credit card may lower your available credit-to-debt ratio, effectively raising tour lending risk factor.

Credit History

Your credit score factors in your entire credit history. Canceling older credit cards or lines of credit in good standing may alter the credit history unfavorably. A long credit history is beneficial, and canceling an older credit card changes the average age of your credit history.

Time Frame

Canceling too many credit cards in a short period of time will hurt your credit rating. This may indicate financial trouble to potential lenders. Canceling one credit card every six months is a better alternative.

Credit Report Accuracy

Individuals should make sure that their credit report states that they closed the account, not the lender. It lowers a credit rating when a lender closes the account. When canceling a credit card, it's best to get it in writing that the account was closed willingly.

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Credit Scores & Ratings

Credit scores and ratings refer to three-digit numbers that lenders and creditors use to assess creditworthiness. Scores and ratings range from 300 to 850, and countless factors play a role in your individual score. Understanding these factors will help you maintain a high rating and qualify for loans.

Purpose

Establishing credit and keeping a high rating and score helps you acquire loans from a mortgage lender, auto lender and other types of finance companies. Before lenders and creditors extend large funds and lines of credit, they assess your risk as an applicant. Having a good credit score -- the upper 600s and higher -- and no derogatory information on your credit file, such as a history of late payments, judgments, collections and bankruptcy, signal good credit habits. This helps you acquire easy financing and the most favorable interest rates on loans and lines of credit.

Consequences of Bad Scores

Bad credit can trigger a host of negative responses. Not only does a low credit score or rating disqualify you for some loans, but employers and insurance companies also review credit scores. Some companies will not consider applicants with a negative credit history and low score, and insurance companies may charge higher monthly premiums if you have a bad credit score.

What Determines Credit Scoring?

Knowing the various factors that impact credit scoring is key to maintaining a high score and rating. MyFico.com explains how different areas influence credit scoring. Payment history makes up 35 percent of scoring, while the amount you owe contributes 30 percent. Other factors that play a smaller role in credit scoring include the length of credit history at 15 percent, credit inquiries at 10 percent, and the types of credit accounts you manage at 10 percent.

Tips to Improve Credit Ratings

You can improve your credit scores and ratings by making wise credit choices. Start by paying all your bills on time each month. Reduce your balances on credit cards, or completely pay off balances. Keep credit card accounts open to maintain a long credit history. Don't apply for an excessive number of credit accounts. Each application for credit results in a credit check, and credit checks or inquiries can reduce your score. While you don't want to submit too many applications for credit, applying for one or two more credit accounts can help your score if you don't have a mixture of credit, or only manage one credit account. A good mixture can include a credit card and an installment loan.

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How to Fix Credit Report Scores

Credit report scores can increase or decrease your ability to secure financing. If you are planning on buying a home or financing a new automobile, raising your score not only helps you get approved, but your lender is more likely to give you a good rate on the loan. Rates affect the monthly payment -- the lower your rate, the lower the monthly note.

Instructions

1

Use credit cards to establish a positive credit history. Keeping credit cards locked away doesn't help your score. Building a better score involves using credit wisely. Pull out your cards a few times a month to make a small purchase.

2

Stop carrying a balance. While it's good to use your credit cards to help build a higher score, avoid carrying high balances from month to month. Get into a routine of using cards and then paying off the charges when your next statement arrives.

3

Take the hassle out of making payments with automated online systems. Forgetting to make a payment can affect your score and you're likely to pay a late fee. Keep your accounts in good standing by setting up monthly automated payments to your creditors.

4

Get copies of your credit report. Visit the website Annual Credit Report each year to obtain a free copy of your credit reports from the three major bureaus. Looking over your credit file periodically helps you catch fraudulent activity and errors that can lower your credit report score.

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Do Department Store Credit Cards Help Rebuild Credit?

If you've had problems managing credit, such as making late payments on a credit card or having an account placed in collections, your credit score likely suffered. With a low credit score, you'll have a hard time getting approved for top-rate credit cards and loan products. You may get approved for smaller credit card products, such as department store cards, which can help you rebuild your credit if used wisely.

Basics

A department store card works like a traditional credit card. You apply for the card through the department store. The store will review your application, including your credit rating and income level. If you're approved, the department store will give you a credit limit. You can use this limit to purchase goods at the department store and make monthly payments on your balance, or pay it off each month.

Improving Credit Scores

Opening a department store card will add to your total available credit, which can improve your credit score. Once you began spending on the card, you can also rebuild your credit by making monthly payments on time and keeping your balance low. MSN Money recommends keeping your balance below 10 percent of your available credit for the best effect on your credit score. Both your payment history and your total debt appear on your credit report, which effects your credit score.

Hurting Credit Scores

If you do not manage a department store card responsibly, you can damage your credit score even further. For example, if you do not make your monthly payments on time, the store may report this to the credit bureaus, which will lower your score. If you carry a high balance on the card, it will affect the total debt balance on your credit report, which will also lower your credit score.

Warnings

Some department stores may not report your card activity to the three major credit bureaus. Ask the department store's credit department if they report monthly to Equifax, TransUnion and Experian before applying for the card. If the department store does not report your activity, it will not help you rebuild your credit score.

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Do-it-Yourself Credit Restoration

Credit restoration involves taking steps to boost a low score. Improving credit helps you qualify for financing, and credit is necessary if you plan on acquiring a mortgage or auto loan. Different factors play a role in credit restoration, and successfully fixing credit entails knowing the factors that influence scoring.

Automated Payment

Reduce the likelihood of late payments with automated payments to your credit card companies and loan providers. With automated payments, you establish a date for creditors to withdraw payments from your personal bank account. This method works if you constantly forget to send payments by the due date, which can result in late fees and a damaged credit rating. Because payment history accounts for 35 percent of credit scoring, on-time payments are key to restoring a bad credit history.

Increase Payments

Increasing payments little by little helps pay down credit card balances and other outstanding debt. This not only reduces the amount of debt you carry, but paying down debt will boost your credit rating. Credit scores take into account the amount you owe creditors, and this single factor impacts credit scoring by 30 percent. Develop a routine of keeping balances on credit cards below 30 percent of the limit or paying off balances in full each month.

Work with Creditors

Past mistakes that trigger negative information on your credit report can also harm your credit report. For example, you may stop payment on an account, which results in a creditor sending your account to collections or placing a judgment on your record. Getting these items deleted from your report is key to helping restore your credit. Contact creditors to see if you can work out a deal to improve your file. Arrange to pay off the balance in full, and then ask creditors to remove negative information from your credit report.

Credit Report Mistakes

Credit reports may also include negative information that's not legitimate. For example, someone can take your name and Social Security number and open numerous accounts in your name; or a credit card company can send the wrong account information to the credit bureaus. No one's immune to credit report mistakes and identity theft, and restoring credit often calls for a proactive approach. Order your credit report at least once a year from Annual Credit Report (see Resources) and look for signs of identity theft such as familiar accounts. If denied credit, get an explanation from creditors and review your report to understand the reason(s) for the rejection.

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How to Submit a Credit Statement to a Credit Bureau to Improve Your Report

According to the Federal Trade Commission, "Nationwide consumer reporting companies sell the information in your report to creditors, insurers, employers and other businesses that use it to evaluate your applications for credit, insurance, employment or renting a home." In essence, these companies use your credit report to determine your credit worthiness. If you have found inaccurate information on your credit report issued from a credit bureau, you might contact that credit bureau to have this information changed.

Instructions

1

Write a letter to the credit bureau stating that a specific item of information of your credit report is inaccurate.

2

Identify each item on your credit report that you are disputing. State the facts about that item. Explain why you are disputing the information, and request that the information be deleted or corrected.

3

Enclose a copy of your credit report with the information that you are disputing circled. You should also enclose copies of documents that support your position.

4

Send the letter by certified mail, return receipt requested. Document everything, and keep copies of the dispute letter and all enclosures. After the credit bureau receives your request, it will usually investigate your claim within 30 days. Investigation entails the credit bureau's forwarding the information that you provided to the organization that supplied the information to the credit bureau. This organization must then investigate, review information and report back to the credit bureau. If the information finds that the information is not accurate, it must report to all three credit reporting agencies. These agencies must then correct the information in your credit file.

5

Request that your credit statement be included in your credit file. If the investigation does not result in deleted or corrected information, you can ask that your credit statement be included in your credit file and all future credit reports. For a fee, you can ask the credit bureau to provide your statement to anyone who recently received a copy of your credit report.

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What Can a Consumer Do If Denied Credit?

Completing and submitting your credit application can help you get the financing you need to purchase a car, furniture, even a home. But after careful review, a creditor or lender may decide to reject your credit application. As a consumer, you can take steps to address the problems that led to a rejection and improve your chances of getting an approval in the future.

Get Details on the Rejection

Being calm and asking for details regarding the rejection can provide clues as to why a lender or creditor rejected your credit application. Lenders are cautious with loans; and before taking a risk and approving an application for credit, they check your income and credit to ensure that you meet the criteria for a loan. Problems with your credit report, such as collection accounts and liens, are justifiable reasons for a credit denial. Additionally, a creditor may reject your application due to inadequate income or high debts. Ask for specifics so that you can take steps to correct the issue.

Credit Report

You're entitled to a free credit report after receiving a credit denial. Checking your report shortly after receiving a denial letter in the mail is key to figuring out the reason for a rejection. Lenders use your credit report to determine a loan approval. If problems related to credit reporting errors contributed to a loan denial, identifying mistakes and getting your credit report updated can help you qualify for a credit card, loan or other type of financing in the future. AnnualCreditReport.com provides consumers with reports from all three bureaus free of charge annually.

Identifying Your Role in a Rejection

You may feel angry and bitter after having your credit application rejected. But instead of making excuses or blaming the lender or creditor, take responsibility for your actions and recognize bad habits that could have led to a lower credit score and a rejection. These include habitual late payments, high credit card balances or excessive credit inquiries. Learn how to manage credit wisely first and then apply for credit.

Shop Around

Because creditors and lenders have minimum credit score requirements for financing, getting approved for credit can be as simple as selecting a different lender. One creditor may require a credit score of 700 or higher, whereas another may approve your application with a score of 680. If you already practice good credit habits, shop around and look for another bank.

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Can a Charge-Off Be Suppressed on a Credit Report?

A charge-off on your credit report is considered derogatory by lenders and can severely damage your credit score. If you have grounds for having a charge-off removed, it is always in your best interest to do so.

Facts

It is not possible to suppress a charge-off and lessen its negative effects on your credit score. You may, however, attempt to remove the charge-off from your credit report altogether.

Time Frame

Charge-offs will typically appear on your credit report for seven years but may be removed early under some conditions.

Inaccuracies

If the notation on your credit report that reflects the charge-off contains any inaccurate information, such as incorrect dates or amounts, you may dispute the validity of the charge-off and request its removal.

Effects

Once the charge-off is removed, all evidence of the original credit card account, including your payment history, will disappear as well.

Considerations

If the creditor can provide proof that the charge-off was reported accurately after it has been deleted, it may be reinserted into your credit file.

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The Best Way to Check Credit

The best way to check your credit is to obtain copies of your credit reports showing your credit activity--this way, you will be seeing the same information potential creditors will see when they pull your reports.

Instructions

1

Visit the website Annual Credit Report to view your credit reports and print them. Click on "Request Report" on the homepage and follow the prompts to see your reports. The system will guide you through a questionnaire designed to confirm your identity. You'll need your Social Security number and must answer questions about your background, such as previous addresses and credit accounts.

The three major credit bureaus--TransUnion, Equixfax and Experian--created the site to provide free copies of your reports. Under the terms of the Fair Credit Reporting Act you're entitled to one free copy of your reports every 12 months from each of the credit bureaus. The Annual Credit Report website is the only authorized source for getting your free annual reports under federal law, according to the Federal Trade Commission.

2

Review your credit reports. Look for inaccurate information, such as accounts that do not belong to you, or accounts showing incorrect credit limits or balances. Dispute inaccurate information by writing the credit bureaus at their addresses. You can also enter disputes online by visiting the websites (see Resources).

Equifax
P.O. Box 740241
Atlanta, GA 30374-0241

Experian
P.O. Box 2104
Allen, TX 75013

TransUnion
P.O. Box 1000
Chester, PA 19022

3

Review your credit scores, which will be included in your reports.

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What Is the Meaning of an Unsecured Loan?

When trying to borrow funds, you can choose to apply for either a secured or unsecured loan. It's important to learn more about unsecured loans and whether this is a smart choice for your own financial needs. Some lenders specialize in unsecured borrowing, but note that it is sometimes more difficult to get approved for this type of loan.

Definition

A secured loan is one that has an asset backing the borrowed funds, like a car or home loan. An unsecured loan is the exact opposite---the lender offers funds to the consumer without the presence of an asset to secure the loan. This means that in case of a default on the loan, the lender cannot repossess an item from the borrower, such as a home or car. An unsecured loan is a very risky proposition for a bank.

Types

Credit cards are one of the most common types of unsecured loans. The credit card company issues a credit line that the borrower can use without requiring collateral or property. Another type of unsecured loan is a commercial or business line of credit. The bank issues money for the company to use for business needs. However, in some cases, the lender may ask for collateral for a business loan. Though rare, some banks also offer standard unsecured personal loans (payable in equal installments) to consumers.

Benefits

One of the key benefits of an unsecured loan is that the borrower does not have to worry about losing property if the creditor puts the account into default status. He can simply access the funds for his needs while holding onto his assets. Applying for an unsecured loan is also usually a more simple process for a borrower compared to a secured loan since he does not have to provide detailed information about a piece of property. In some cases, the borrower must also get an appraisal to prove the worth of a piece of property for a secured loan---this isn't necessary for an unsecured loan.

Downside

Getting an unsecured loan also comes with one significant downside. For one, unsecured loans often come at a higher interest rate compared to secured loan. Lenders determine the rate for loans based on risk --- the higher the risk the higher the rate and vice versa. So due to the elevated risk that comes with approving an unsecured loan the rate is usually higher than other types of loans.

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How Long Do Collection Accounts Stay on a Credit Report?

Credit reports are records of your credit history, created and maintained by credit bureaus called TransUnion, Equifax and Experian. All of your credit activity shows up on these reports, including your payment performance on your loans, credit cards and other accounts.

Charge-Offs and Collection Accounts

Creditors expect you to pay loans, credit card bills and other debts by the due date. Payments received after that date are typically delinquent, although some lenders may give you a grace period. Late payments appear on your credit reports, along with the length of the delinquency. Unsecured accounts like credit cards eventually get charged off, according to MSN Money writer Liz Pulliam Weston, which means that the creditor no longer considers them as assets. Creditors often sell charged-off accounts to collection agencies, which buy them at less than face value and try to collect as much as possible to turn a profit. Charge-offs and collection accounts both appear on credit reports.

Time Frame

Creditors usually charge off accounts if the debtor does not make any payments for six months. They can sell them to debt collectors at any time after that point. Most negative items remain on credit reports for seven years, starting when the account first went into delinquent status, according to the Federal Trade Commission (FTC). Collection accounts show up as a separate entry, but they appear for the same length of time as the original accounts.

Fair Credit Reporting Act

You can confirm that a collection account is on your credit report by getting copies of your report from the credit bureaus' official no-cost site (see Resources). The credit bureaus jointly run the site to comply with the Fair Credit Reporting Act (FCRA), which entitles you to a free copy every year. Get copies from all of the bureaus, because they are independent companies and sometimes report different information.

Removing Errors

It is sometimes possible to remove collection accounts from credit reports before the seven-year period expires. For instance, you can legally dispute any entries that contain mistakes. Look for any information the collection agency may be reporting incorrectly, like the account's opening date or balance. If you find any errors, fill out the online dispute forms on the credit bureau websites. The FCRA obliges the bureaus to erase the account if the collection agency is unable to verify its information.

Payment

You can sometimes remove a collection account from your credit reports by paying it off, provided you make this a condition of repayment, according to Bankrate columnist Steve Bucci. Normally, the original entry showing the delinquent account remains on the records after payment. Bucci advises asking the debt collector to have the original creditor change the account status to "paid as agreed," as well as removing the collection entry, as a condition of repayment.

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How to Raise Your Credit Score Once You've Paid Off Your Debt

Debt is a large factor in your credit score. According to MSN Money, the amount of debt you have makes up 30% of your total credit score. After paying off debt, consumers typically see an improvement in their credit score. However, if you're interested in improving your score further, there are a few steps you can take. Focusing on using credit solely to improve your score can help.

Instructions

1

Review your credit report. Errors on your credit report might be pulling down your score. Order a free credit report online from Annual Free Credit Report (see Resources). You are entitled to a free report every 12 months. Look for inaccurate information, such as late payments, collections and accounts you don't recognize. If you find errors, contact the reporting bureau to file a dispute. Correcting this information may raise your credit score.

2

Avoid closing unused accounts. Paying off debt is a large accomplishment. However, getting on the phone and closing all your paid-off credit card accounts isn't the best idea. Leaving these accounts open will improve your credit score. The credits bureaus like to see revolving credit (such as credit cards and home equity lines) open with low (or zero) balances. It shows the bureau you have restraint with credit.

3

Start using old credit cards accounts. If you've paid off your debt, you probably aren't anxious to acquire new debt. However, if you're not using credit at all, you're missing out on raising your score. According to MSN Money, credit bureaus like to see consumers with a lengthy credit history. This accounts for 15% of your credit score. Use older credit cards for purchases and pay off those cards monthly. This will help boost your score.

4

Make payments on time. Once you start using credit again, make sure to pay off your account on time every month. Payment history is the largest factor when determining a credit score, according to MSN Money. It makes up 35% of your score.

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Does a Signer on a Credit Card Get a Credit Report Also?

A person is assigned a credit report if he takes out a line of credit or a loan with a lender or incurs an unpaid debt that is reported to a credit reporting agency. Generally, anyone who has any credit history has a credit report assigned to him. If a person signs for a credit card, he has a credit report, because he is taking out a line of credit from the company.

Taking Out a Credit Card

A person who takes out a credit card can be defined as the person who signs the contract with the credit card company that issued him the card. The person agrees to the terms of the card and agrees to pay back whatever purchases are made against the line of credit. However, the person can add names to the card, and these people also are authorized to use the card.

Name on Card

While a credit card generally has only a single signer, a single account may have several names on it. Cards may be issued for all these people, and all these people will have their credit histories affected by how the card is used, because all of them are attached to the card. If the credit card balances are paid late or not at all, all their credit scores will suffer.

Credit Reports

A credit report is issued to any individual who has taken out a line of credit. If a person signs for a credit card, the credit card company reports this line of credit to the three credit reporting agencies -- Equifax, Experian and TransUnion. If the person does not already have a credit report, one will be created for him. This credit report remains on the credit reporting agency's books until he dies, although positive and negative information on the report is erased after a certain period of time.

Considerations

The person whose name is on a credit card also is affected by the use of the card. A person at a young age can have a credit card. However, he may not be old enough to legally sign a contract. This can occur if a parent or other legal guardian takes out a credit card for him, allowing him to get an early start on building a credit history.

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Will Using a Debt Consolidation Company Show Up on My Credit Report?

Debt consolidation offers consumers a chance to get out of debt and on the road to financial success. Many consumers worry that using these agencies may damage already fragile credit scores. Consumers must review the credit report completely when using a debt consolidation company to verify that all information is reported accurately.

Debt Consolidation

Debt consolidation agencies work with clients to review spending habits, expenses and income. In this way they can develop the best strategy for the consumer. Some clients may find that bankruptcy or lifestyle changes are better options than debt consolidation. The interview process done at the initial stages of debt consolidation will help consumers determine this.

Debt consolidators negotiate with creditors for lower interest rates and sometimes modified payment terms. They also offer the consumer the convenience of making only one monthly payment.

Credit Score Reporting

Accounts included in debt consolidation show on the credit report with a statement reflecting their status as being under debt consolidation. Modified terms also reflect on the credit report as being paid at a reduced rate. Future lenders may view this negatively since the account was not paid in full. Some agencies close the accounts when the consumer starts the debt consolidation program. This lowers the amount of available credit, resulting in a credit report that appears maxed out. The other issue with this is that credit history, which is an important factor in determining your overall credit score, is affected when accounts are closed.

Benefits

Creditors who work with debt consolidators will experience an end to collection calls and damaging late fees. Credit ratings improve due to timely and current payments. Utilizing debt consolidation helps consumers start to build a positive payment history. Payment history is 35 percent of the FICO score so it is important to build and maintain.

Working with a debt consolidator helps consumers understand the importance of budgeting and time management.

Considerations

Credit counselors provide budgeting and debt management advice at no cost to consumers. These counselors usually work at nonprofit agencies and can assist consumers with creditor negotiations. Working with a credit counselor typically is not reflected on the credit report.

Consumers without extreme debt may be able to pay down debt faster by just paying slightly more than the minimum due each month.

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How to Dispute Wrong Information in Debt Collection

Disputing wrong information offered by a debt collector or in debt collection is important. A debtor should never pay a debt that could list a wrong amount due or even belong to someone else. Dishonest debt collectors may inflate balances or provide other misleading information about the status of collection accounts. Knowing your rights under the Fair Debt Collection Practices Act makes disputing collection accounts easier. Delinquent accounts usually move to collections status after the debtor misses three or four payments. Eventually, creditors may transfer or sell the accounts to debt collection agencies; in the process, mistakes are sometimes made as the accounts change hands.

Instructions

1

Review the initial written notice from a debt collector about a debt you allegedly owe. Federal law gives you the right to dispute any information in the notice within 30 days of receiving it from the debt collector.

2

Send the debt collector a letter stating that you're exercising rights under the Fair Debt Collection Practices Act and that you're disputing the debt as described in the debt collector's written notice. The law doesn't require you to be more specific than that about why you're disputing the debt. Simply entering a dispute by letter protects your legal rights. In your letter, ask the debt collector to send you proof of the debt, such as copies of billing statements, including the most current statement. By law, debt collectors must suspend collection efforts until they've provided verification of the debt.

3

Dispute other wrong information in debt collection by writing the credit bureau --- if the information is on your credit report --- and the debt collector. Get a copy of your credit report from AnnualCreditReport.com, the only site recommended by the Federal Trade Commission for free credit reports. Read instructions on the credit report for disputing the information by mail, telephone or online. Allow 30 days for the credit bureau to investigate and remove information if it agrees with your dispute. The debt collector may or may not respond. It's possible that a debt collector challenged by a creditor will simply stop collecting if it can't verify the debt. In that case, getting the information removed from credit reports represents a victory.

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How to Get a Good Credit Rating

Do you want perfect credit? Well, it's easy. Just pay all of your bills on time, every time. Never miss a payment. Never pay your bills late, not even by one day. If you're like most people, you have missed at least one bill payment at some point in your life. And, more than likely, you have inadvertently forgotten to mail out at least one check on time. Most people do not have a perfect credit score of 850. In fact, there are many who are not even in the 800-neighborhood. With a sound financial plan, and a little self discipline, you can improve your credit score.

Instructions

1

Pay your bills so that you will have positive marks on your credit report. Unpaid bills lower your credit rating.

2

Pay your bills in a timely manner. A bill that is even just 1 day late may adversely affect your credit rating. Mark the date that your bills are due on your calendar so that you don't forget. You may even want to set up automatic payments, making your bill-paying system worry free. Always pay at least the minimum required monthly payment.

3

Use your credit, but use it responsibly. You can't have a credit score without credit. But that doesn't mean you should go crazy charging everything that your heart desires. Treat your credit card the same way that you would cash. You can't buy more than what is in your bank account. Don't charge more than you can pay off in a month.

4

Don't max out your credit cards. Your credit limit isn't a monthly spending goal. Only charge up to 25 to 50 percent of your credit limit.

5

Diversify your credit. Make sure that you have "revolving accounts," such as credit cards, and "installment accounts," such as an auto loan or a home mortgage. A revolving account is one where you can carry a balance that can roll over from a specified period to specified period. An installment account is one where you make regular payments, in predetermined amounts, over a predetermined length of time.

6

Check your credit report once a year. Make sure that the information on there is accurate. If it is not, then challenge it.

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How to Cancel an Equifax Score Watch

Equifax is the oldest U.S. based credit reporting agency, having been founded in 1899. The company is headquartered in Atlanta, Georgia and maintains information on more than 400 million credit cards around the world. Equifax Score Watch is an added service of Equifax that provides credit card holders with daily monitoring, notifications of changes in your score, two credit reports and two FICO scores per year. The service costs $12.95 per month as of 2011 and can be canceled at any time.

Instructions

1

Call the Customer Care Team. All products of Equifax must be canceled through this team. A representative can be reached seven days a week from 8 a.m. - 3 a.m. EST.

2

Tell the representative that you would like to cancel your Equifax Score Watch. The cancellation will go into affect at the end of your current billing cycle.

3

Check your email that is on file with Equifax for the cancellation confirmation email. The email is typically sent within an hour of contacting the Customer Care Team.

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How to Take Something Off of Your Credit Record

Companies with which you have credit-related accounts, including not only credit cards, but also loans of all types, provide your account information and payment history to credit bureaus. The bureaus---Experian, Equifax and TransUnion---compile the information onto your credit report. If one of your creditors provides incorrect information or if someone else's credit information gets put on your credit report, initiate a dispute so the credit bureau will research the information and, if it is incorrect, remove it from your credit record.

Instructions

1

Obtain a current copy of your credit report from each of the three credit bureaus. You can get it for free by entering the requested information on the government-authorized Annual Credit Report website.

2

Review the credit reports and make a list of the incorrect information listed on each credit report. The credit reports might not be identical.

3

Open a word processing document and type the date, your name and your mailing address at the top of the page.

4

Write a paragraph identifying each error you found on your credit report from one of the bureaus. Include the account name, the specific information that is incorrect, why it is wrong and what the credit bureau should do to fix it. Print a copy of the letter.

5

Revise the letter, if needed, before printing a copy for each of the other credit bureaus. Each letter should only list the errors found on one particular version of your credit report.

6

Make copies of documents that support your position. For example, send a copy of your payment receipt to show that you did not miss a payment, even though your credit report shows a missed payment.

7

Mail the letters and documentation to the credit bureaus through certified mail. In addition, request return receipts so you can prove that the bureaus received your letters.

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What Is a Soft Credit History?

Your credit history shows your repayment of debts as well as any late payments or even bankruptcies. When someone looks at your credit history, it's called a hard or a soft credit pull.

Meaning

A soft pull is a check of your credit history that you can see on your credit report, but does not affect the score. Soft pulls or inquiries do not change any lending decisions and are mainly done for promotional purposes or as review.

Promotions in the Mail

Any time a credit card company wants to offer you a card, they did a soft pull of your credit to see if you meet the requirements for their card. If you accepted their offer, the new card would appear on your credit report as a hard inquiry and impact your credit rating.

Ordering for You

When you check your own credit rating with one of the major credit rating firms, you are making a soft pull. You can request one free credit report once a year from one of the major rating agencies (Equifax, Experian, TransUnion) or from AnnualCreditReport.com.

Other Soft Pulls

Your current lenders may conduct soft inquiry reviews on your account to make sure you are still credit worthy. Other soft inquiries can come from potential employers before they offer you a position.

Credit History Location

If you ordered your credit history, your soft inquiries appear in the inquiries section of your report. This section is broken up into hard and soft pulls and gives detailed information on the pull.

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How Does a Car Repo Affect Credit?

About Car Repos

A lender repossess a car when a borrower defaults on a car loan. A car repossession can have a very negative impact on a credit score. There is no set amount of percentage points that a credit score will be reduced by. However, a car repossession will lower a credit score significantly.

Types of Car Repos

There are two types of car repossessions: voluntary and involuntary. A voluntary repo is when the borrower voluntarily gives the car back to the lender. An involuntary repo is when the lender has the car repossessed without the borrower's consent. Both types of repossession negatively impact the credit score. A person who has a car repossession reported on her credit report can have a difficult time obtaining future loans, because the repo shows as a history of failure to pay off loan obligations.

Outstanding Loan Balance After a Car Repo

A car repossession can hurt credit in other ways also. When a car is repossessed, the lender sells the car at an auction, to try and recover as much money as possible. Usually the cars do not sell for a lot of money at the auctions, leaving a remainder amount still due by the borrower. The borrower is still responsible for paying off any remaining balance owed to the lender. The balance owed is reported as a debt on the borrower's credit report.

Judgement After Repo

If a borrower owes an outstanding balance after a repo and does not pay it to the lender, the lender may sue the borrower in court. If the lender wins a judgement against the borrower, the judgment can be reported on the borrowers credit report. A judgment will certainly have a negative impact on a credit report.

Damaged Credit After Repo

A repossession can affect a persons' credit for up to seven to 10 years. The reported repo, the outstanding debt and a possible judgment can each lower a credit score. The three items combined damage a credit score even further. A car repo can make it harder for a person to get future loans. In some instances, the person may be able to get a loan with a lender that specializes in bad credit loans, but the interest rates will be higher than average.

Avoiding a Car Repo

It is better to avoid a car repossession if possible. Try two ways to prevent a repossession.

1) Sometimes a lender will help a borrower get current on payments by altering payment times so that the borrower can get a new start. Different dates can be set on the payments to help the borrower get caught up. Or the loan can be reorganized so that the past due payments are forgiven and get added onto the end of the loan, making the loan current instead of past due.

2) Selling the car to pay off the loan is a better alternative than repossession. This is only a viable option if the car can be sold for at least as much as the outstanding balance due on the loan. If selling a car that has an outstanding loan, the lender or contract should be consulted first. Some loans have early payment penalties, meaning if the loan is paid off early, an extra fee will be charged. Some loans don't have early payment penalties and instead are cheaper if paid off early. If paid off early, interest is recalculated to reflect the shorter loan period, making the outstanding balance less. Depending on the loan, a sale of the vehicle could make the outstanding loan balance more or less than expected.

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How Paying Down Debt Can Change Your Credit Score

Debt is one of the main factors in determining your credit score. Paying down debt will reduce your debt-to-credit ratio, lower the total amount you owe, and improve your credit score. However, debt is only part of what goes into calculating the score. The best way to raise your credit score is through a combination of tactics.

Credit Score Calculations

The formulas used to calculate credit scores are kept secret. However, we do know what sort of information goes into the calculation and approximately how it is weighed. Thirty-five percent of your credit score is based on your repayment history from the last seven years. Recent missed payments matter more than ones from several years ago. Another 30 percent is your total debt. Ideally, you should not owe more than 30 percent of your available credit line. The length of your credit history makes up 15 percent of your credit score and new credit applications count for another 10 percent. The last 10 percent reflects the diversity of your borrowing habits.

Paying Down Debt

Paying down your debt will improve your credit score. It will lower your debt-to-credit ratio, as long as you don't cancel all your credits cards as soon as you've paid them off. Keep the oldest ones active, to improve the length of your credit history. You don't have to run a balance on them or pay interest, but do use the cards once in a while.

Other Factors

Paying down debt will do nothing to erase negative information from your credit report. If you've missed payments in the past, your credit report will reflect this for seven years. It doesn't matter if you've paid off the debt in full. Negative information carries more weight than positive information when it comes to calculating credit scores. The only way to rebuild your credit history after missing payments is to continue to make regular payments on time for 18 to 24 months.

Finding Out Your Credit Score

You can get a free copy of your credit reports from annualcreditreport.com. This is the only website authorized to issue free credit reports on behalf of the main credit bureaus -- Experian, Equifax and TransUnion. However, the free reports do not include credit scores. You can get an idea of the state of your credit history from the reports, but if you want to know the exact scores, you will have to request them from the bureaus via their websites. The bureaus charge a fee for this. If you are applying for a mortgage, you can ask the for the score.

Time Frame

You can ruin your credit score in less than a month. It will take much longer to repair it. Lenders report information to credit bureaus every 30 to 90 days. Your score will not improve faster than that. Unless you've paid down a very large amount of debt, it will not have a massive affect on your credit score. The exact number of points depends on your personal financial circumstances. However, if you need to improve the score by 100 points or more, be prepared to wait for at least a year.

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How Long Do Charge-offs Stay on Credit Reports if They Are Paid?

If you have debt that has been referred to a collections agency, you have a black mark on your credit report. A delinquent debt such as this is called a charge-off. You can pay a charge-off, and your credit report should reflect this, but the item itself will remain on your report even after it's paid.

Charge-Offs

Most lenders or service providers pursue you for a debt until it is 120 days, or four months, overdue, according to Bankrate. At this point, companies may hand the debt over to a collections agency, and they will tell the credit reporting bureaus to record a charge-off on your credit report.

Length of Reporting

The note of the charge-off will remain on your credit report, like most other negative information, for seven years. If you pay the debt in full, it will be noted as a paid charge-off rather than an unpaid one, but it will remain on your report for the full seven-year period and will have a negative effect on your credit score. If the charge-off is older than seven years, but still appears on your report, you should dispute this with the bureaus and have it removed.

Effect of Payment

Paying a charge-off will not have a material effect on improving your credit score once the delinquent debt is noted. The mere fact that you allowed a debt to go more than 120 days overdue is enough to have a downward effect on your score. Only the passage of time will provide an improvement in your score, as the charge-off gets older in your credit history.

Why You Should Pay

You can't improve your credit score directly by paying charge-offs, but you can put yourself in a better light with lenders. If you are applying for a mortgage or other major loan, most lenders insist that you pay off any outstanding charge-offs that appear on your credit report. Doing so shows you are making efforts to correct your past mistakes and are serious about improving your credit history.

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FICA Score Information

When it comes to credit scores, the one you may be the most familiar with is the FICO score. The Fair Isaac Corporation developed this score, and it is currently the most widely used credit scoring system in the U.S. Your FICO score can determine your eligibility for loans such as mortgage loans, it can help determine what type of interest you will pay on your loans, and a low FICO score can even affect your ability to gain employment.

Five FICO Categories

It's important to note that the actual algorithm that Fair Isaac uses to calculate your FICO score is proprietary. This means that only the people at Fair Isaac know the exact formula and they guard it very closely. That being said, what is known are the five factors that do go into the formula. They are your payment history, the amounts owed, length of credit history, new credit and types of credit.

Payment History

Your FICO score looks at your debt repayment history. All things being equal, making your payments on time will lead to a better score. If you do have late payments, different factors are taken into consideration. Those factors include the severity of the delinquencies (were you a day late or were you 120 days late?), the number of delinquencies (late on one credit card or late on multiple cards?), and if any of your late accounts have been put into collections.

Amounts Owed

With regard to amounts owed, FICO considers three factors. One factor is the number of accounts with balances (do you have one credit card or do you have 15?). A second factor is the proportion of credit lines used (your total credit card balance divided by your credit card limits). A third factor is the proportion of installment loan amounts still being owed (for example, if you borrowed $10,000 for a car, how much do you still owe on that balance?).

Length of Credit History

In this factor, FICO looks at how long your accounts have been open and how long it has been since activity has occurred on any of the accounts.

New Credit

The new credit factor includes several considerations. Such as the number of recently opened accounts (did you open a new credit card in the last six months or have you opened five new department store charge cards in the last week?). Or the number of recent credit inquiries (perhaps in addition to the charge cards, you also went to several automobile dealerships and asked them about getting a car loan).

It also takes into account the time since recent account openings by type of account. Account types include revolving credit, such as credit cards, and installment credit, such as a car loan.

Types of Credit

This means the number of different types of credit accounts you use. How many auto loans, credit cards, mortgages and other debt obligations do you have or have you had?

For a complete analysis of all the factors that go into calculating your FICO score, see Resource section.

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Free Help for Credit Card Debt Elimination

Help is available to people who want to eliminate their credit card debt. Some reach out to credit counseling agencies, whereas others use the equity in their homes, acquiring extra money with a cash-out refinance. While these methods are useful when getting rid of debt, some agencies charge a monthly fee for assisting debtors, and refinancing a home loan to eliminate debt involves expensive fees. However, there are tactics to get rid of debt for free.

Strategies to Get a Lower Interest Rate

The amount of interest you pay on credit cards each month plays a role in debt elimination. Interest fees are costly, and if you're only paying the minimum payment each month, the bulk of each payment only reduces the interest charges for the month, not the principal balance. Acquiring a lower rate on your credit cards helps you pay down the balance quicker because creditors will apply a larger percentage of payments to your principal. Different methods can help you get a better rate. You can take the direct approach and call your creditors to request a better rate. If this doesn't work, start comparing credit card offers and transfer your balance to a low-rate card.

Review Spending Habits

You can control debt by simply controlling your spending. Rather than buy every item on your wish list with a credit card, practice self control and save for major purchases. Buying items with cash alleviates high debts and interest payments. Credit use helps build a credit history, but if unable to control your spending with credit, it's best to put away credit cards. Disregarding offers for new lines of credit and placing all credit cards in a locked box helps curtail spending. Ask someone you trust to hide the cards or simply cut the cards in half.

Monthly Payment Amounts

Don't expect quick debt relief if you're only able to pay your minimum each month. Eliminating credit card debts will require forwarding higher payments until the debt dissolves. Understandably, not everyone is in a position to drop a lump sum on their debts each month. Still, it doesn't hurt to review your budget and think of ways to cut back. An extra $50 a month on top of a $20 minimum payment can reduce a $1,000 credit card balance in about 14 months.

Personal Sacrifice

Eliminating high credit card balances will involve some sort of personal sacrifice. Depending on the amount you owe, you may consider sacrificing your free time and acquiring part-time employment to bring in additional cash to pay off a large debt. If you normally take yearly vacations or enjoy treating yourself to an expensive luxury, you may forgo these and put the money towards debt elimination.

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How to Buy a Low-Cost House With Bad Credit

Having a low credit score not only affects the kinds of credit cards you can have, but it also impacts the amount of a home loan (if any) you may obtain. You'll also be subject to an increase of several percentage points to your mortgage rate. However, if you have found a low-cost house you simply must have, there are a few different options available to you, even with a low credit rating.

Instructions

1

Pay in cash. If you have enough money to cover the entire cost of the home, it does not matter how bad your credit rating is. By covering the entire price of the home yourself, you do not need to go out and obtain a mortgage. This might be your best option when your credit score is low.

2

Borrow money from friends and family. Although it is possible to put a strain on relationships by doing this (especially where a large amount of money is concerned), most individuals will not charge you an interest rate--and even if they do, it will likely be far lower than what the banks will give you. Make sure you come up with a payment period and timetable for returning the money to your friends and family.

3

Visit your own bank or credit union. Financial institutions are more likely to give you money if they know you. Apply for a mortgage and provide past tax returns (to prove you have income). Although the bank will see your credit score is low, they may offer you some sort of mortgage. Be aware your interest rate may be rather high (several percentage points above the current rate). This is because you are considered a higher risk at defaulting on the loan.

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What Affects Credit Ratings?

Your credit rating, commonly known as a credit score, is based on the information contained on your credit report. Only the information on your credit report affects your score, so if you have an account that does not appear on your report or if someone else's account or other mistake appears on your report, your rating might be affected. Your credit score is based on five major areas of your credit history.

Record of Payments

The biggest factor in your credit rating is your payment history on all types of credit accounts. The scoring formula penalizes you for missing payments, filing bankruptcy or settling an account for less than you owe, but the effects of these negative elements diminish over time. Types of accounts that do not usually appear on credit reports, such as utility bills and parking fines, can hurt your score if the creditor sends the account to a collection agency when you are severely delinquent. Paying your bills on time helps your credit score, which also considers how many accounts you have that are currently paid as agreed.

Account Balances

Thirty percent of your credit score is based on how much you owe on each of your accounts. Part of your score is based on how many accounts you have with balances and what those balances on each type of account are. Your score also reflects the share of your available credit that you are using. With revolving credit accounts, such as credit cards, the scoring formula penalizes you for using a high percentage of your overall available credit and for using a high percentage of your credit limit on an individual account. Therefore, you do better to have small balances on a few different cards than to have a large balance on one card and no balances on the rest. In addition, closing an empty credit line can hurt your score if you carry balances on other cards because it lowers your total amount of available credit.

Account Age

The longer you have been managing credit, the better. Your score increases as the time since your accounts were opened increases. Because the credit scoring formula considers your average account age, avoid opening new accounts all at once, because that could significantly lower the average age of accounts. In addition, try to keep your oldest accounts open and active so they stay on your credit report and continue to affect your score.

Mix of Credit

Lenders like to see borrowers who have been responsible in using many different kinds of credit. The two major categories are installment loans that have equal monthly payments over a fixed period, such as auto loans and mortgages, and revolving credit accounts that let you borrow from and repay money on a line of credit, like on a credit card.

Recent Account Openings

Someone who has been applying for and obtaining a lot of new credit poses a risk to lenders. This is because the individual could be having cash flow problems and is trying to borrow money to help solve them. The credit scoring formula penalizes you for credit inquiries, which result from a lender checking your credit report after you apply for credit. It also penalizes you for having new credit accounts on your report.

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Does Good Payment History Show Up on a Cosigner Credit Auto Loan?

Co-signers are often needed for certain borrows to qualify for a loan. The types of loan can be anything from an automobile loan to a mortgage. Co-signers take risks when agreeing to co-sign on any loan; however, when a co-signing agreement is handled well the co-signer can benefit from the process.

What is a Co-Signer?

A co-signor is someone who is willing to use his credit information to help another person qualify for a loan such as an automobile loan. People who have yet to establish credit and those with poor credit often need a co-signer. The co-signer not only allows the lender to use his credit to qualify for the loan but the lender will hold the co-signer responsible for the loan if the applicant defaults on the loan. The decision to co-sign for another person should only be taken after careful consideration and requires a great deal of trust in the applicant. You must feel secure in the fact that the applicant can not only afford to make the payments but will make the payments.

Positive Credit Reporting

When you co-sign for an auto loan, the applicant should take responsibility for paying the bill and at each payment the positive credit will be reported to not only his credit report but to yours as well. Co-signing for a responsible person can actually help your credit without requiring you to pay for the debt. The positive credit will be reported to the credit bureau the which the lender reports.

The Flip Side

While positive credit is reported to your credit report, the reverse also holds true. Anytime the applicant fails to make a payment, the negative information is also reported on your credit report. A borrower that mishandles the account can cause catastrophic damage to your credit report, especially if the loan is a large one such as a mortgage. An automobile loan may not be as high as a mortgage loan but can put a co-signer in a very difficult position if he has to make the monthly payment on the car. Not only can the applicant be sued for non-payment, but you can be sued as well. Creditors will pursue the co-signer as aggressively as the applicant.

Minimize Issues

Never take the applicant's word that payments are being made on time. Check the account monthly to make sure the payment has been made. A late payment cannot be reported to the credit bureau until it is 30-days late. By checking the payment monthly, you can see if the applicant has not made the payment, and you will have time to contact him and push him to make the payment before your credit is affected. Always be prepared to step in and make the auto payment if need be. Before agreeing to be a co-signor you should evaluate your financial situation and determine if you can afford to make the auto loan payments should the applicant default on the agreement.

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Legal Credit Report Improvement

Improving your credit report improves your overall credit score and can help you obtain credit cards, lines of credits and financing for a home. Raising your credit scores can also increase your chances for employment and or award you lower insurance premiums. The fastest legal ways of improving your credit reports involves direct and decisive action on your part.

Payment History

Avoid late payment history whenever possible. Devise a plan to make on time monthly payments to all your creditors. Make more than the minimum monthly payments if you can. Consider making a list of all your creditors along with the minimum payments due and their due dates. If you have past due accounts, catch up the ones that are the most past due while making minimum monthly payments on the others. Consider creating one to two days a month that are dedicated to your bill paying process or consider monthly payments automatically withdrawn from your checking account before the due dates to avoid late payments.

Reduce Debt

Consider the amount of debt you have and reduce it. Ideally, try to keep your balances on your credit cards low whenever you can. Too many credit cards open at once can lower your credit score. You really only need two credit cards, ideally two different major cards if possible, with good payment history to show strong credit. If you have several credit cards, consider closing the ones with annual fees unless they are the only major credit cards you have.

In addition, close the ones issued by retail stores that only allow you to use the card at certain stores. The only exception to this is if these are the only types of cards you have, you are still in the process of building your credit. This shows a creditor that even though you much credit history, at least you are responsible with the cards you have and you've been able to maintain them consistently.

Convert Debt

If you choose to keep the credit cards you have open and have student loans, medical bills or maybe some past due accounts also on your report, consider converting some of that debt into installment loans. This means getting a consolidation loan from a bank or other financial lender that will pay off some of those cards, the past due accounts and whatever other debts you can comfortably fit into it. Then you pay the lender back with specific monthly payments over a specified amount of time. Once the payments are finished, the debt is gone.

It also looks better on a credit report to have a mixture of installment loans and credit cards when necessary, than to have all your debt wrapped up in credit cards alone. When lenders see installment loans on your credit reports, it tells them that eventually the debt will be paid off, unlike an open credit card where the customer can charge up to the limit again and potentially weaken financial stability.

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The Best Credit Card to Repair Bad Credit

When your credit goes south, perhaps due to difficulty paying your loans on time or falling behind on credit cards, you may find that it takes much longer to improve your score than it does to hurt it. A poor credit history and low FICO score may disqualify you from traditional credit sources, but you may be able to heighten your credit score and reinstate a respectable credit history by applying for and using a secured credit card.

About

When you receive approval for a secured credit card, you must provide your credit card company with a monetary deposit that acts as collateral in case you default on your account payments. The money usually sits untouched in an account while you make payments on your credit card. If you incorporate responsible spending and payment habits on a secured credit card account, you can build your credit history in the same way that you can with an unsecured credit card. On the other hand, skipping or making late payments on the account could further harm your credit score and result in a loss of your credit card deposit.

Considerations

Before deciding which secured credit card is right for you, make certain that the credit card company you choose reports your payment history to all three of the major credit bureaus instead of just one or two. Future lenders may obtain your credit history from any one of these bureaus, rather than all three. If your secured credit card only reports to one bureau, your credit score and history could vary wildly between the three bureaus. Also, do not expect to obtain low interest rates and fees on your secured credit card. Most secured accounts integrate high annual percentage rates and excessive annual fees to maintain the account. To avoid falling victim to expensive interest rates, try not to sustain a revolving balance on your credit card and instead pay off your balance each billing cycle.

Expert Opinion

Justin Harelik, a bankruptcy adviser for Bankrate.com, suggests that secured credit cards can rebuild your credit quickly following a bankruptcy or series of other negative items on your credit history. He recommends requesting the highest possible credit limit on your card, while using very little of your credit line. This creates a lower debt-to-credit ratio, a factor that contributes to 30 percent of your credit score. As indicated by Harelik, responsible usage of your secured credit card should improve your credit score significantly within one to two years.

Timeline

Destructive credit histories are not indefinite. Within seven years, negative items on your credit history are expunged, hopefully replaced with a more positive and constructive credit history. Until these items fall of your report, they will become less and less damaging as more recent information becomes available on your secured credit card account payments.

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