What Causes Credit Reports to Decline?

A credit score is a three-digit number used to evaluate your creditworthiness. A credit score is determined based on information included in a credit report. Each of the major credit reporting agencies uses a unique proprietary formula for converting the raw data in your report into a credit score, but they are all based on the FICO score so the same factors are generally used. In other words, certain activities or situations in your credit report will make all your credit scores go down.

Late Payments

The single most important factor that will cause the quality of your credit report to decline is late payments. Credit card companies and most lenders report a late payment once it is 30 days delinquent. Payments that are 60 days or 90 days delinquent or more have an even greater negative impact. Any lender can report a late or overdue payment to a credit reporting agency, which may choose to include it on your credit report. If there is an error in your report, you can dispute it. The agency must investigate the charge by law.

Adverse Public Records

Credit reporting agencies also get items for your credit report from public records. If you declare bankruptcy or have a judgment awarded against you by a court, this will produce a public record that will eventually be reported on your credit report. Other adverse records that will lower your credit score include wage garnishments, bank levies and the filing of a lien.

Amount Owed

Even if you're making all your payments on time, the total amount of debt you have will impact your credit rating. This is because the purpose of a credit report and credit score is to indicate your worthiness for a new loan. While you are burdened with other debt, your attractiveness to other lenders may decline. Of course, the amount owed is not always viewed as an absolute, but takes into account comparison with your total income and ability to carry debt. In other words, a $50,000 loan will have less impact on a billionaire's credit than on most other people.

New Applications

Requesting a new loan or line of credit can lower your credit score. Generally, though, this only happens if you make several requests within a short period, such as a few weeks. To a credit lender, frequent and repeated credit requests indicate a heightened likelihood that you are unable to meet your current debt obligations and are looking for additional credit as a means of making minimum payments. Your credit score also reflects the types of credit you have out, with a diverse portfolio that includes long-term debts such as a car or house being the most stable and attractive.

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How to Delete Old Inquiries in TransUnion

Make a point to delete inquiries on your credit report to improve your credit score. Credit inquiries on your TransUnion credit report can have a negative impact on your credit score. Credit inquiries from creditors to whom you have applied will have a greater impact on your credit score than inquiries from an existing creditor.



Most credit inquiries remain on your report for only two years. However, if you notice an inquiry on your report from a creditor you do not recognize or you want to remove an inquiry sooner, then you will need to submit a request to TransUnion and the inquiring creditor.

Instructions

1

Go to TransUnion's official website to order your TransUnion credit report. You will need to provide your Social Security number, but TransUnion offers an opportunity for visitors to receive a free credit report.

2

Review your TransUnion credit report to locate the name and addresses of the inquiring creditors. Highlight the inquiries that are causing the most damage to your score.

3

Prepare a removal request letter for every highlighted creditor. In the letter, include your Social Security number, date of the inquiry, and date of the request. Also, state whether you gave the inquiring creditor(s) permission to pull your credit score.

4

Send the removal request letter certified mail with return receipt requested. Keep track of the address to which the request letter is mailed and the date you mail the request.

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What Do Credit Report Ratings Mean?

Your three-digit credit score could separate you from other candidates when applying for a job and cost you thousands of dollars over your lifetime on loans and other services. Credit scores are a mathematical analysis of your riskiness as a borrower. If you take the time to understand what goes into a credit rating, you can use it to your advantage.

Identification

A rating from one of the three major credit rating companies---Equifax, Experian and TransUnion---quantifies how likely you are to default on a loan within the next two years, according to BankRate.com. The FICO model used by 90 percent of all lenders ranges from 300 to 850. The higher the score, the lower the chance of defaulting.

What is a Good Score?

Lenders can decide themselves what is a good score. In general, anything over a 720 is an excellent score and probably qualifies the borrower for the lowest rate. Good scores range from 690 to 720 and average ones from 650 to 690. Anything less and you may have a tougher time finding a lender or have to take on higher interest rates.

What is in a Credit Rating?

Anything that might tell a lender how you handle credit goes into the credit rating, such as how much of your available credit you need, how long you have used credit and the types of loans you hold. Monthly bills, such as cellphone, utilities and rent, do not go into a credit rating, because smaller companies usually cannot afford the monthly expenses required to report bills accurately to the rating agencies.

Considerations

The major bureaus do not share information, so scores can vary by company. Also, each demographic has its own scoring formula. People with a scant credit history, for instance, are only compared to other people in a similar situation, according to BankRate.com. Personal demographic information, such as race and age, do not go into calculating a score.

Tip

If a lender rejects you for credit, you can keep searching until you find a creditor that accepts your score. You should also actively try to improve your score. The bulk of your credit rating comes from paying your bills on time and keeping debt to a minimum. You should have at least one credit card to build history, but do not take out extra cards just to boost your score.

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How to Fix My Credit Fast

If you're thinking about buying a new car or obtaining a mortgage loan in the near future, it doesn't hurt to improve your credit score and receive the best rate possible. You can take several measures to boost your score fast. Your credit rating says a lot about your ability to handle debt and credit wisely. Lenders carefully review credit files before issuing loan approval. With these fast credit fixes, you can raise your credit rating and improve your chances of approval.

Instructions

1

Evaluate your report. Order your report and carefully check your file for minor and major mistakes such as name typos, erroneous collection accounts, late payments, judgment or other damaging entries.

2

Contact credit bureaus immediately. Circle reporting mistakes and send a letter to the credit bureaus requesting investigation and removal of mistakes on your credit report.

3

Get rid of your debts. Put a halt to shopping, vacations, eating out and other unnecessary spending, and put all your effort into paying off your debt and quickly raising your credit rating. If necessary, ask your employer for a raise, use personal savings, or work additional hours to generate cash.

4

Use inactive accounts. Fixing and improving your credit score entails using your credit cards and paying off the balances. Find your unused credit cards, use them for inexpensive purchases, and pay off the balance every month.

5

Negotiate the removal of negative remarks. If you're a long-time customer with a relatively good payment history who happened to skip or submit a late payment, contact your credit card company and negotiate the removal of delinquent or 30-day-late remarks. Highlight your previously excellent payment history and the reasons behind the delinquency.

6

Request a credit limit increase. Maxing out or going over your credit limit drops your credit rating. If nearing your limit, request a credit line increase to raise your available credit and help your credit score.

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How Are FICO Scores Calculated for Married Couples?

Calculating Individual Scores

The FICO score is the single most frequently used measure of credit risk in the entire world. It combines several factors to create a single scaled score for each individual between 300 and 850, with the higher numbers signifying better overall credit. The largest component in the FICO score is delinquent payments. More than one third of the credit rating is determined by whether a borrower has consistently made payments on time, or, if he has late payments, how many scheduled payments have been missed and how late they were made. The other major factor is how much outstanding debt and available credit is already out versus annual income. Considerations like the types of credit and length of credit history round out the FICO score, which was created by Fair Isaac Corp. in 1956.

Married Couples and FICO

Though in some legal situations a married couple might be considered a single entity, spouses maintain their separate credit scores throughout marriage, just as they must each have a separate Social Security number or driver license. The formula for calculating your credit score once you're married does not change, and the actions of your spouse in accounts that are not jointly held will not change your credit rating with FICO. For example, if your spouse has a credit card that's solely in his name, then late payments on that card will not affect your credit score and vice versa. Checks on your spouse's credit history, such as for a job application, will also not be reflected on your credit report.

Considerations for Married Couples

Though both spouses maintain their own separate FICO scores, the spending and borrowing habits of one spouse can certainly affect the other in both direct and indirect ways. For starters, any major purchase that's made in both names, such as a house or car, can be serviced by the lender at the lower of the two credit scores, meaning higher interest rates and potentially being turned down for the loan altogether. The credit score used to determine the terms of a mortgage will be lower than the higher score between the two. Spouses also tend to have joint credit or bank accounts, and delinquent payments or overdraft fees in these accounts will reflect in the individual FICO scores of both spouses.

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How Do You Get Rid of Credit Card Charge-Offs?

A credit card charge-off means that the bank that issued the credit card has written off the debt because it does not expect to receive payment, even in the future. If you have a debt that has been reported as a charge-off, this is a big red flag for lenders who examine your credit report when you apply for any kind of credit, from a mortgage to a car loan to a credit card. Removing charge-offs from your credit history is one step you can take to improve your credit score.

Instructions

1

Get a recent copy of your credit report. You are entitled to one free copy from each major credit bureau each year; you can get them from www.annualcreditreport.com. Find any charge-offs on your credit report.

2

Ask your creditor to mark the account "paid as agreed" if you have paid the account and it is mistakenly annotated on your credit report as a charge-off. According to Steve Bucci of Bankrate.com, "paid as agreed" is not viewed negatively on credit reports, but most banks and credit card companies will not do this for you if your account has been charged off due to your own lack of payment.

3

If you have not paid the amount in question, pay as much as you can. Call the creditor to see if you can negotiate the amount, and document all negotiations in writing.

4

Request a "paid" or "settled" annotation for the charge-off. While this is not as good as a "paid as agreed" annotation in terms of its effect on your credit report, it is not as bad as a charge-off. Credit card companies and banks offer "paid" or "settled" annotations if you have negotiated to pay a percentage of the amount, but not the full amount owed.

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Credit History & Medical Bills

Medical bills affect your credit history under certain circumstances, even though they do not involve revolving credit lines or installment loan payments. Walecia Konrad, a writer for "The New York Times," warns that such bills sometimes pop up on your credit records while your claims are still being processed by your insurance company. You can sometimes prevent or mitigate damage to your credit rating caused by these accounts.

Initial Reporting

Most of the accounts on your TransUnion, Experian and Equifax credit reports are directly credit-related. For example, your report includes your mortgage, any vehicles loans, retail and general credit cards and personal loans. The February, 2003 "Federal Reserve Bulletin" advises that certain non-credit accounts, like utility or medical bills, sometimes appear on your credit reports if the utility company or medical facility shares data with the credit bureaus. Reported doctor or hospital bills help your credit history if you pay them on time and blemish it if you are habitually late or default completely on the accounts.

Collecton Reporting

Medical bills that go to collection agencies appear on your credit reports even if the initial accounts were never reported. Debt collectors notify TransUnion, Experian and Equifax as part of their usual account-handling process. Medical collection accounts become part of your payment history when your credit score is calculated. Thirty-five percent of the score comes from that category, according to the myFICO score information site, so medical collection accounts weigh it down.

Legal Action

Medical facilities or collection agencies sometimes sue over unpaid debts. These creditors receive judgments if they win their cases, and the "Federal Reserve Bulletin" advises that the public court records become part of your credit reports. Judgments look bad on your credit history because they represent unpaid bills, and they also figure negatively in your credit score. Your state laws may allow the creditor or collector to garnish your paycheck or put a lien on property to collect the outstanding amount of the medical bill.

Considerations

You may be able to salvage your credit history before a doctor, hospital or other medical service provider sells your bill to a debt collector if you reach a mutually acceptable payment agreement. Konrad explains that doctors and hospitals get more money by settling with you because collection agencies only pay pennies for bad debt accounts. Strike an agreement with the debt collector if your bill was already sold, offering to pay the account in exchange for expunging the entry from your credit bureau reports. The negative medical account stays on in your credit files for seven years if you do not settle it, Jay MacDonald of the Bankrate financial site warns.

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How to Restore My Credit Rating

Your credit rating is very important to your financial life. It determines whether you are approved for loans, as well as the interest rates you get. Your credit can even determine your insurance premiums and whether or not you get a job. Mistakes can lead to a poor credit rating that can become costly. The good news is that you can restore your good credit if you practice financial discipline.

Instructions

1

Cut expenses and live within your means. Before you can begin restoring your credit rating, you need to establish a budget that allows you to track your income and your expenses--and make sure that you are living within your means.

2

Stop applying for new credit. Every time you apply for a new loan, your credit score is lowered. In order to restore your credit rating, you need to show that you are no longer applying for credit.

3

Pay down debt. Start with payday loans and credit cards. Move on to other consumer loans and student loans. Your debt load should be no more than 30 percent of your available credit for best results.

4

Make all your payments on time and in full. Missing payments will result in a lower credit rating.

5

Use credit wisely from now on. Once you have re-established your good credit rating (this can take anywhere from two months to several years, depending on the state of your credit), use credit wisely. Open new loans with caution, and make sure you borrow only what you can afford to pay off through reasonable installments. With credit cards, try to pay off the balance monthly, carrying a balance no more than two months if necessary.

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Who Checks Credit Scores?

Companies use credit scores to make financial predictions about potential customers. The scores are seen as indicators of whether a consumer will repay a loan or file an insurance claim. However, job seekers also may find that their credit ratings are being scrutinized if credit checks are part of a company's hiring process.

Creditors and Lenders

Your financial decisions and management of your credit and loan accounts mostly determine who checks your credit score. Creditors and lenders obtain copies of your credit reports and check your score when you apply for loans and credit cards or seek credit-limit increases on accounts you already have. A consumer who seeks to refinance a loan also is subjected to a credit check as the lender determines whether the consumer's credit rating meets the terms for refinancing.

Employers

Employers increasingly are scrutinizing job applicants' credit histories, especially when people apply for positions that involve handling cash or company finances. Some companies also run checks on their current employees. Employers may check the credit ratings of workers who are being considered for a promotion or reassignment. In any case, the U.S. Fair Credit Reporting Act prohibits employers from checking workers' and job applicants' credit ratings without their written consent. Therefore, people should carefully read job applications and employee contracts to avoid unintentionally authorizing a credit check, which may be outlined in an application or contract.

Insurers

The U.S. Federal Trade Commission (FTC) website notes that auto and homeowners insurance companies look at credit scores to determine whether to issue policies. Insurers use the scores to predict whether a consumer is a good insurance risk. According to the FTC, people with high scores usually pay lower insurance premiums. Insurers use credit scores and other information to predict a consumer's likelihood of filing an insurance claim. A Bankrate article titled "How Insurance Scores Affect Insurance Rates" reports that the Insurance Information Institute indicates that drivers with low credit scores file about 40 percent more claims than drivers who have high scores.

Considerations

Lenders and others who review your credit history may not obtain the same scores, because there are several types of scoring methods. Therefore, people who check their credit scores themselves may not see the same scores lenders, creditors and insurers use. The FTC says each company may develop its own scoring methods or use a scoring model developed by a credit-scoring company. In any case, consumers can maintain good credit ratings by paying their bills on time and not using all the credit available on their credit cards. A late-payment history and large amounts of credit-card debt often lower people's credit scores.

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How Does Credit Scoring Work?

A credit score is a numerical measure that gauges your creditworthiness. Mortgage lenders, automotive companies, credit card issuers and retail stores will check your credit score before approving your application for credit. Having a bad credit score can keep you from getting a loan or credit card, while a good score will allow you to get lenders' best interest rates and terms.

Background

TransUnion, Experian and Equifax -- the three major credit bureaus in the US -- each calculate credit scores using the Fair Isaac Company's "FICO" scoring software. The FICO algorithm uses the information on your credit report -- a document listing your collection accounts, bankruptcies, judgments, loans and credit cards -- to calculate your score, which can range from 300, representing terrible credit, to 850, representing perfect credit. Due to subtle differences in the credit bureaus' methodology, your score from each credit bureau will differ slightly.

Time Frame

The credit bureaus update your credit score on a monthly basis. If your creditors sent reports to the credit bureaus within the past month, your score will change. On the other hand, if your creditors did not send updates to the credit bureaus within the past month, your score will remain unchanged. If the credit bureaus receive no new reports on you within six months, they will shut down your credit files, and you will no longer have a FICO score.

Factors Affecting Score

Fair Isaac's algorithm factors in your payment history, the amount of debt you owe, the types of credit you have and the length of your credit history. Missing credit card payments, defaulting on loans, making late mortgage payments, short selling your home, going into foreclosure or filing for bankruptcy will all lower your credit score significantly. Also, applying for new credit and having a short overall credit history will drop your FICO score, according to Fair Isaac. In contrast, paying bills on time, using your credit card responsibly and keeping your revolving debt to less than 30 percent of your available credit will help raise your FICO score.

Good Credit

Companies consider credit scores above 725 to be "good credit," with a score above 760 qualifying you for lenders' best rates, says Steve Ely, an Equifax executive quoted on Bankrate.com in 2009. In contrast, having a score below 620 puts you in the "bad credit" category, making it difficult for you to obtain loans or credit cards, says Ely.

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How to Appeal a Credit Report

A credit report can contain incorrect credit information for any number of reasons. You can appeal credit information that you believe is incorrect. The process takes some time to allow for a full investigation. Based on the findings of that investigation, the credit reporting bureau to which you report the item will make a decision regarding the merit of your claims.

Instructions

1

Order your free credit report. Phone, mail and Internet orders are accepted. Charges do not apply; however, you are only eligible to receive one free copy of your credit report from each credit agency per year. Additional credit reports are also available through TransUnion, Experian and Equifax for a fee.

Annual Credit Report Request Service

P.O. Box 105281

Atlanta, GA 30348-5281

877-322-8228

AnnualCreditReport.com

2

Write a letter appealing information you think is inaccurate. Address your letter to the credit reporting company reporting the information. Be specific and provide the facts related to each charge. Request an investigation and ask that each charge be promptly removed or corrected. Verify your identity with your full legal name and current address.

3

Provide supporting documents, such as copies of receipts, invoices, or mail correspondence from a merchant or creditor related to the information on appeal. Provide a copy of the credit report documenting the charges in dispute. Notate the items by circling or highlighting each charge.

4

Track your appeal using a "return receipt" service (fees apply). The Federal Trade Commission strongly encourages consumers to send appeals via certified mail.

5

Review the investigation report, which, in some cases, can be processed within 30 days, and your corrected credit report. Look for the appealed charges to be changed or deleted, along with any statements about the appeal including the name, address, and phone number of the person or company that provided the information.

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How to Pay Off Derogatory Items on a Credit Report and Increase the Score?

Charge-offs, past-due accounts and other derogatory information are bad for your credit scores. Excellent scores that were once in the upper 700s can fall to the low 500s or even lower because of negative entries. The best way to reverse the free fall is to clean up the bad marks while continuing to pay everything else on time.

Instructions

1

Get a copy of your credit report. Free reports are available from the website Annual Credit Report, which is authorized by the Federal Trade Commission to issue reports without charge. Visit the site or call 877-322-8228 to order. Beware of copycat sites with similar names. Other sites offering free reports will also try to sell you services, while the Annual Credit Report site will never ask for money. After you have received your credit report for free you will be able to order your credit score from one of the three nationwide credit bureaus -- TransUnion, Experian and Equifax. There will be a charge for the score. Visit the websites to order.

2

Study your report and find the delinquent accounts you wish to pay off. Note the name and telephone number of the creditor or collection agency.

3

Call the creditors or collection agencies or write letters. Offer to settle the delinquent accounts for less than the full amount owed. That's called debt settlement, and is commonly used to resolve old delinquent accounts. Or ask the creditor to confirm the amount due and then pay in full. If you wish to pay less than the full amount, offer say, 20 percent of the balance in your initial communication and await a response. According to The New York Times, some companies will settle for as little as 20 percent of the balance. But generally, settlement agreements are for about half the amount owed. Also ask about a "pay-for-delete" option. This allows you to pay off the account in exchange for the creditor instructing the credit bureaus to remove the derogatory information from your credit reports. The creditor is not obligated to remove the information, but it won't hurt to ask. Having the derogatory information removed entirely could give an immediate boost to your scores.

4

Pay off the balances. Wait about 60 days and order another copy of your credit report. Notice how the derogatory information has changed. An item marked "Collection Account" may have been upgraded to "Paid Collection Account." Or the account may have been deleted by the creditor, per your request.

5

Get an updated credit score to chart your progress.

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What Impact Does Closing a Credit Card Account Have on a FICO Score?

Lenders depend on FICO scores more than any other credit score when evaluating your creditworthiness. Most of your financial transactions that end up on your credit report impact your FICO score in some way. Cancelling a credit card is no exception. While cancelling your credit card account may seem to be a logical step after paying off or transferring the card balance, doing so could damage your FICO scores.

Credit Limit Elimination

Cancelling your credit card eliminates the available credit you have on the card. The FICO scoring formula analyzes the remaining credit you have available on your credit accounts and compares your available credit to the total credit card debt you owe. This is called credit utilization. The lower you credit utilization ratio -- or the lower your debt compared to your credit limits -- the better your FICO score. When you cancel a credit card, you lose the spending limit on that particular card. This increases your credit utilization or debt ratio on your credit accounts and results in your FICO score decreasing. The negative impact on your FICO score is worse if you carry a balance on the card when you close the account.

Aging History

If the payment history associated with the account is positive, having the account appear on your credit report boosts your FICO score. Provided you make regular purchases and payments, your account will remain an updated part of your credit record indefinitely. Closing an account prevents it from being updated on your credit report. The longer an account goes without being updated by the creditor, the less effect it has on your FICO scores. Thus, the benefit your credit rating previously received from a history of timely credit card payments decreases as the account trade line ages.

Account Removal

When you close the credit card account, the Fair Credit Reporting Act's reporting period for removal begins, and the credit bureaus will remove your credit card account from your credit report after seven years. Losing a positive account on your credit report lowers your FICO score. If, however, a history of missed payments made the credit account a negative item on your credit report, losing the account history will benefit your FICO score.

Avoiding Future Damage

Cancelling your credit card to avoid the temptation of using the account could help you prevent credit damage. If you would otherwise charge substantial debt on the card that you couldn't afford to pay, cancelling the account may lower your FICO, but not as much as defaulting on a credit card debt would. A defaulted credit card debt not only results in a charge-off, but can also leave you facing a collection account or legal judgment on your credit report that would cause severe damage to your FICO score.

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Does Leasing a Vehicle Affect the Credit Score the Same as Purchasing a Car?

Leasing usually is the most expensive way to purchase a vehicle, and may ding to your credit rating. Purchasing a car can ding your credit rating too, depending on how you finance it. However, you can work a lease --- and sometimes and outright purchase --- to your advantage so that it improves your creditworthiness.

Identification

Leasing a vehicle almost always affects your credit score, because the dealer reports the account to the credit reporting bureaus as a loan. Purchasing a car only affects your credit rating when you use a loan to finance the vehicle. The credit bureaus do not track cash payments, because they do not help predict your willingness to repay borrowed money. A lease and loan affect a credit score in the same way.

Effect

Your credit score usually drops any time you take out a loan or lease. The dominant FICO scoring model weighs the average age of your accounts for 15 percent of your score, so a new account can drastically cut this if you do not have many accounts. Also, the lease or loan adds to your outstanding debt under the "Amounts Owed" category, which counts for 30 percent of your FICO score, and the credit application does a few points of damage. Overall, it takes about a year for a credit score to recover from a new lease or loan, according to Smart Money.

Benefits

If you have never had an installment loan before, a lease or loan can give your credit rating a significant boost, because using a mix of credit counts for 10 percent of your score in the FICO system. However, you must handle the account properly. Missed payments or worse, completely defaulting on the contract, can take over 100 points off of your credit score, which only ranges from 300 to 850 in the FICO model.

Tip

Avoid applying for any other accounts too soon after you take out a lease or loan on a car, because multiple inquiries or several new accounts within a year tends to lower your credit rating. This is where purchasing can help. Because a cash purchase does not affect credit, you can look for other loans, like a mortgage, without worrying that the lease or loan prevents you from getting a loan or increases the interest rate on it. Also, consider that a lease or loan adds to your monthly debt to monthly income ratio, which lenders often value as highly as a credit rating.

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Does It Hurt Your Credit to Have a Lot of Bank Accounts?

There is no limit to the number of bank accounts a person can have, so some people end up with many different accounts open at the same time. Normally, these accounts do not relate to your credit score. However, they may connect to your credit score under certain circumstances.

The Misconception

People typically are confused about whether a large number of bank accounts hurts your credit score because they do not know for sure whether banks report to the three major credit bureaus, Experian, Equifax and TransUnion. Banks do not report to the credit unions, so credit scores are not connected directly to the accounts you have in most cases.

ChexSystems

Even though banks do not report to credit bureaus, they do report to ChexSystems. ChexSystems is a credit reporting agency that keeps track of mishandling of bank accounts. For example, your bank may report to ChexSystems that you bounced checks or drove your account into the negative by not taking care of fees. Your ChexSystems score is not the same as your credit score. However, creditors sometimes look at these scores together to determine lending risk because the way you handle your bank accounts sometimes is a good indication of whether you will repay money borrowed against a line of credit. Subsequently, too many hits on your ChexSystems report may cause creditors to deny you credit. This can hurt your credit score indirectly if the credit requested is essential to making payments elsewhere.

Credit Inquiries

At some banks, a credit check is required to open an account. The banks that require this do it for the same reason that creditors look at your credit score -- they want to determine whether you will handle the account properly. Inquiries can show up on your credit report. One or two of these inquiries is not much to worry about, but many inquiries can pull down your credit score significantly.

Complexity

Any time you have multiple financial accounts, the task of keeping track of the account balances and activities becomes more complex. If you are not diligent with your accounts, the likelihood you will accidentally bounce a check or drive an account balance negative increases. If you do not pay what you owe related to these mistakes, banks may opt to send your account to an internal collections department or to an external collections agency. Anything that goes to collections shows up on your credit report and can lower your score.

Considerations

Typically, because banks do not report to the major credit bureaus, opening many different accounts will not impact your credit score. However, this depends on the bank and how you handle the accounts. It is possible for your credit score to decline if the banks require credit inquiries, you mishandle the accounts or creditors see a negative ChexSystems report. Usually, people only need three accounts at most. These include basic checking and savings accounts and an account for money that should be separate for tax purposes, such as Social Security or business funds.

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Financial Advice About Credit

Most adults will establish credit during their early adult years, and building a credit history allows these individuals to get financing to purchase a home or automobile. Sadly, some consumers do not understand the ins and outs of credit. As a result, they make poor credit decisions that ultimately destroy their personal credit score.

Debt Relief

Debt is a way of life, especially if you decide to buy a home or car. However, even if you can't live your days completely debt-free, you can aim to reduce balances on unsecured debts such as credit cards. Credit card debt has a major bearing on your personal score, and owing less than 30 percent of your credit limit is a key aspect in keeping a high credit rating. Plus, lenders and creditors reviewing your credit report will notice your low debts. This demonstrates self-control, which may prompt lenders to approve your application and assign a low interest rate.

Credit Report Inquiries

Creditors will request a copy of your credit report before approving your application and issuing a line of credit. Credit report checks show as an inquiry on your credit file and too many inquiries can lower your personal credit score. Keeping credit applications to a minimum helps you maintain a good credit rating.

Collection Accounts

Creditors will make several attempts to collect an old debt. Failure on your part to forward payment forces creditors to send your account to collections. Collection accounts that appear on your credit file hurt your personal score and may remain on your file for seven years. Avoiding collection accounts is one aspect to good credit. Rather than disregard collection attempts, work with creditors to create an affordable payment schedule.

Credit Report Information

It is imperative to know the contents of your credit file, since credit reports provide your credit history and creditors place a lot of emphasis on credit scores. Acquire this information by ordering copies of your report at least once a year. The website Annual Credit Report provides consumers with one free report a year.

Timely Payments

Forwarding monthly payments after your due date is a surefire way to destroy your credit rating. The amount you owe and your payment history play a major role in credit scoring. Mistakes happen and most people will submit at least one late payment at some point in their life. However, the problem lies with consistent lateness or a complete disregard for due dates.

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Credit Improvement Solutions

A tarnished credit score can cost you more in interest payments and increase the likelihood of a credit rejection. This can stop mortgage approvals and approvals for a car loan. Fortunately, effective solutions can help improve a bad credit score and make you a desirable candidate for financing.

Control Spending With Credit Cards

The way you use credit cards can either help or hurt your credit score. Using credit cards and then paying off the balance each month helps build a good credit score because debts remain low and you satisfy debts as agreed. On the other hand, carrying high balances and only paying the minimum each month can bring down your score due to high credit utilization. Keeping balances less than 30 percent of the card's limit helps keep a good credit score.

Stop Credit Applications

New applications for credit can further lower an already damaged credit rating. Every application you submit for new credit triggers a credit check or inquiry on your credit report. Inquiries do reduce credit scores, and it takes time to recoup these points. Putting in credit applications unnecessarily can prolong bad credit and slow down efforts to improve your credit. Hold off on new credit until you raise a low score, and then only submit applications if necessary.

Due Dates

Effectively increase a low credit score by simply paying bills on time. Lateness results in additional fees, and if you skip a payment altogether or send in a payment 30 days past the due date, creditors will update your credit file with negative information. Unexpected occurrences may prevent timely payments. Fortunately, some lenders and creditors offer skip payment options or extended due dates to accommodate borrowers. Speak with creditors and ask for assistance to avoid fees and a negative rating.

Report Inaccuracies

Frequently -- at least once a year -- check your credit report with AnnualCreditReport.com and report any inaccuracies or outdated information to your creditors. Ask them to review your account, and then correct mistakes on your report. Removing negative information can help improve a low credit score. You can also dispute errors by contacting the credit bureaus. Addresses of the three bureaus are included with each credit report.

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Advice on Staying Out of Credit Trouble

Staying clear of credit trouble will help you save money and give you the relief of knowing that you have good credit. Don't let setbacks deter you, because you can be free of bad credit. Even if you have collection items currently affecting your credit score, there is action that you can follow to stay clear of credit trouble in the future. Ordering a copy of your credit report and checking it periodically can help you stay informed of your credit status.

Credit Cards

Don't be enticed by credit card offers that seem too good to be true. Credit card debt is one of the biggest causes of credit trouble for consumers. If you already have credit cards, use them wisely and avoid using your cards to purchase expensive luxury items like televisions or electronics. Be patient and save for luxury items, or hold off on buying them altogether until you can afford to buy them without using your credit cards. If you have to use your credit card, it should be for emergencies, such as car or home repairs.

Bill Payments

Pay your bills on time. Paying bills late will harm your credit rating. In some cases, if you build good relationships with your creditors and a circumstance causes you to pay a bill late, they will give you time to pay without reporting it as a late payment on your credit report. If you know that you will be paying a bill late, call your creditor and request an extension; negotiate for additional time, without it affecting your credit status. Contacting your creditors directly can also keep your account from being referred to a collection agency and affecting your credit score.

Review Report

Order an updated copy of your credit report and credit score. Checking the status of your credit report periodically is the best way to stay informed of what items may be affecting your credit. If there are any items that are incorrect and are damaging your credit score, dispute them with the reporting agencies. For example, if you are divorced and a credit item belonging to your ex-spouse appears on your report, you may dispute this charge as not being yours. The credit bureau will research your dispute by contacting the creditor of the credit item that you are disputing and verifying whether or not the item is yours. If their research indicates that the credit item does not belong to you, the negative item will be removed from your credit report.

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Good Ways to Rebuild Your Credit

A financial disaster that destroys your credit rating might make you sheepish about using credit again. This is an example of the wrong way to rebuild your financial profile. The best way to rebuild credit involves obtaining a new credit account and avoiding your past mistakes.

Misconception

Never using credit again because you messed up your credit rating before won't do any good and may even lower your score, because it does not build new history on your report, according to Liz Weston of MSN Money Central. Opening a new account and showing lenders that you know how to responsibly handle a line of credit is the only sure-fire way to rebuild your credit history.

New Accounts

Assuming you have a terrible credit score -- below 620 -- you will probably need to apply for a credit card that has the lowest lending standards. Secured accounts and department stores usually meet this qualification. Ideally, you only want to apply for and use these kinds of accounts until you qualify for a traditional, unsecured credit card from a national bank. Store cards and secured accounts usually come with high fees and interest rates. In the case of a secured credit card, the bank requires a deposit on the entire limit.

Should You Pay Old Debts?

Borrowers with poor credit histories tend to have collect accounts or other unpaid debts. Paying these usually do not affect your credit. Repaying a charge-off account with the original lender could give your score a slight boost because the debt still counts against your total debt balance. However, paying old debts impresses future lenders, because it shows you have a willingness and desire to repay debts of any age or amount.

Tip

Credit repair clinics rarely offer good ways to rebuild your credit. More than likely this type of company will charge ridiculous fees for telling you to repay debts on time and other free information or offering illegal advice, such as faking a Social Security number. As long as you build positive payment history and do not carry credit card debt, you will eventually obtain a good credit score. Also, review your credit report. Slight errors in the credit bureau's databases can negatively affect you, such as the delinquency dates of a debts.

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How Inquiries Affect Credit Score Per Inquiry

Of all the negative items a consumer can have on a credit report, credit inquiries -- when a third-party or the consumer requests a credit file from one of the national credit bureaus -- usually do the least amount of damage. That doesn't mean they have no effect. Having too many inquiries on your credit report can cause a low credit score and rejection for a loan. Not all inquiries cause damage, but even those that do not can prevent access to credit.

Identification

Each inquiry does no more than five points of damage in the FICO system, according to the Fair Isaac Corporation. Also, while credit bureaus only report inquiries for two years, the FICO model only counts them during the first year. However, once the borrower accrues more than six voluntary credit inquiries -- such as from a loan application -- in a twelve-month period, the inquiries can collectively do more than five points in damage each.

Soft Inquiries

Involuntary credit checks -- called a soft inquiry -- are legal by some parties, such as "pre-approved" credit card issuers. Soft inquiries do not directly damage your credit, but can reduce access to credit, because lenders often run a soft report periodically to determine if the company wants to increase a borrower's credit limit or send out new offers. Since the FICO risk model factors in the outstanding debt to total credit limit available -- or credit utilization ratio -- on revolving accounts, a creditors decision to not increase, or to decrease, your credit limit could affect your score. A borrower with $500 in credit card debt and a $1,000 limit has a utilization ratio of 50 percent. A $2,000 limit increase during an account review would drop the utilization ratio to 16.7 percent.

VantageScore

The VantageScore system is a model developed by the major credit agencies to compete with the FICO formula. Some major credit card issuers already use VantageScore scores along with FICO scores. Inquiries carry more weight in the VantageScore model, because trends from the 2006 to 2009 recession showed that applying for and opening new lines of credit are a more significant risk to lenders than in the past, according to Lynnette Khalfani-Cox of Wallet Pop.

Tip

Most borrowers will see no drop in their credit score if they have a single inquiry on their report, two might have no effect either. Thus consumers should not apply for credit more than once or twice a year and only if they need a new loan. Also, all consumers should pull their report and look for unauthorized inquiries. A creditor only needs a person's drivers license to get all the information needed to run a report.

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Quick Credit Score Fix

Fixing a credit score quickly is useful when trying to qualify for a home loan or auto loan. A good score not only helps approvals, but the best rating gets you the lowest interest rate on financing. If you need to boost your credit score fast, you can follow several effective tips.

Lower Credit Utilization

Utilization refers to the balance on credit cards in relation to the actual credit limit. People who max out their credit cards or keep the balances close to the limit have a high utilization, and this can decrease credit scores. Paying off balances or at least bringing down the balance can quickly add points to a credit rating. MSN Money suggests keeping credit card balances below 30 percent of the credit limit. Stopping credit card use and paying higher minimums contribute to a lower balance.

Report Errors

Credit scores can dip due to conditions beyond your control. Someone can steal your personal identity and open credit cards in your name, or creditors can send erroneous updates to the three credit bureaus. Take a close look at your credit report and keep an open eye for errors such as unknown collection accounts, unknown credit accounts, liens, and past-due remarks. Report these errors to your creditors and ask them to update your report to quickly fix your credit score. Get your free report from Annual Credit Report (see Resources).

Use Credit Accounts

Credit scores can flat-line or stay the same if you don't use credit regularly. Using cash only and storing credit cards away are key to avoiding mounting credit card debt. But at the same time, failure to use credit may prompt creditors to report these accounts as inactive, wherein they stop updating your credit report. Occasionally take out an old credit card and use the card for a small purchase such as fueling your car, or use the card to pay bills and then pay off the balance at the end of the month. Creditors will report your good habits and credit scores will improve.

Rapid Re-scoring

Creditors and lenders update credit reports monthly. But if you need an immediate update to boost your credit score within a few days, talk to creditors about rapid re-scoring. This method is useful if you've recently paid off a credit card bill or detected serious errors on your credit report, and you want creditors to immediately update your report. Creditors charge a fee for rapid re-scoring -- about $50, as of 2011. Rapid re-scoring can improve your credit score within 72 hours.

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What Factors Will Make the Rate Higher With Lower FICO Scores?

Lenders will often charge you a higher interest rate or deny you credit for a loan or credit card based mainly on a low FICO score. When you apply for larger, longer-term loans such as a mortgage, other credit reporting factors may affect your interest rate and loan approval.

About FICO Scores

The three major credit bureaus in the U.S., Experian, TransUnion and Equifax use credit-scoring methods developed by the Fair Isaac Corporation or FICO. These methods may vary slightly from one credit bureau to the next. This often causes your credit score to differ slightly. The credit factors that affect the majority of your FICO credit score are payment history---35 percent, amount of outstanding debt---30 percent and age of credit accounts---15 percent.

Public Records

If a creditor sues you for an unpaid balance and the judge finds in favor of the creditor, this information appears on your credit report in the public records section. Other information that appears in this section includes federal and state tax liens, foreclosures and bankruptcy filings. Anything reporting in the public records of your credit report lowers your FICO score. Credit reporting agencies do not reveal exactly how much it lowers your score, only that the damage is significant. If the judgment has a zero balance, it may not completely prevent you from getting a loan, but it will increase the interest rate you pay.

No Credit History

If you have no credit history, you are in a situation where you may have a low score, but not because of bad credit. Lenders assess credit risk based on credit history. This assessment is how lenders decide whether to approve you for a loan and what interest rate to charge. Lenders having nothing on which to base their credit risk assessment when you don't have a credit history. As a result, they typically charge a higher interest rate.

Improving Your Score

The only way to get the best interest rate on any line of credit is to improve your FICO credit score. To do so, work to pay down your current outstanding balances on your credit cards and loans and try to make all your payments on time. If you have collections accounts that still have outstanding balances, you may want to contact the creditor to make payment arrangements to pay those balances off. Once your FICO score improves, lenders will charge you a lower interest rate on new lines of credit.

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Will It Affect Me if My Spouse Stops Paying a Credit Card?

If your spouse stops making minimum payments on his credit card, his credit score will suffer as the account becomes further delinquent and is eventually charged off by the bank that issued the credit card. If you are not listed on the credit card, the lack of payment should not have an impact on your credit score. However, you could be affected if the bank attempts to collect on the debt by placing liens against property you and your spouse hold together.

Credit Impacts for Spouse's Nonpayment

When two people marry, they hold separate credit histories, based on their past behavior. Credit scores are affected by a person's history of paying on time (or paying late), the amount of credit and number of accounts currently outstanding. Each person will continue to have a separate credit score, but if a couple co-signs on a loan (anything from a credit card to a car loan to a mortgage), all activity on the co-signed loans will affect the credit score of both people.

Joint Account

If this credit card holds the name of both you and your spouse, it will have a significant impact on your own credit history and credit score. The nonpayments by your spouse will affect you because your name is listed on the loan. Because of this impact, nonpayment should be avoided if at all possible.

Separate Account

If the credit card account does not carry your name, there may not be an immediate impact on your credit score. However, the damage done to your spouse's score could affect you in the future. Whenever a couple attempts to get a joint loan, the credit scores and histories of both people are considered. The lowered credit score of your spouse could lead to a higher interest rate on the loan or alter the amount you are able to borrow.

Account Closure

After your spouse misses a payment on the credit card's loan balance, the account will generally become delinquent when payment is more than 30 days overdue, although each bank has its own specific time line. If failures to make payment continue, the bank will eventually "write off" the debt, assuming no further payments will come. The account will also be closed and your spouse will no longer be able to use the credit card.

Liens for Credit Card Debt

Before a credit card lender can place liens or make other attempts to collect debt, the company must file a lawsuit against your spouse in court. Your spouse will generally have 30 days to answer the suit and admit or deny certain information. No liens can be placed against your spouse's property or any joint property until the company has received a judgment. It is important to respond to any lawsuit, since failure to do so could result in a default judgment, which could lead to your spouse's paycheck being garnished or liens being placed on his property or property you own jointly.

Liens

A lien is a legal claim by a creditor, in this case the bank issuing the credit card. The claim can be placed with a debtor's agreement or through a court judgment. The lien is intended to help the creditor recoup the initial loan.

Community Property States

According to the IRS, several U.S. states have community property laws: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Income earned by one spouse while living in these states is considered the property of both spouses. Property owned or purchased by one spouse in the marriage while living in these states is the property of both spouses. This means a lender or creditor may be able to seek liens on your paycheck, even if the debts from an unpaid credit card were accumulated by your spouse.

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How Much Does Satisfying a Judgment Improve Your Credit Score?

Your credit score takes many financial activities into account. All your credit-related accounts, such as major credit cards, gasoline and retail accounts, mortgages and other loans, appear in detail, including the balances and payment histories. This data figures into your credit score, as does any related court actions.

Definition

A judgment hurts your credit score because it results from long-term unpaid bills. The Bankrate financial information website explains that credit card issuers, finance companies and other lenders initially try to collect their money through telephone, email and mail demands. These creditors may sue you if you are not responsive, or they may sell the debt to a collection company. The collector can make its own collection attempts and sue you later or file a lawsuit immediately. All of this activity is added to your credit bureau records with TransUnion, Equifax and Experian and is reflected in your credit score. A judgment means the creditor or collection has sued and gotten a court order against you. The judgment is a public record and also becomes part of your credit reports.

Impact

Lenders who review your credit reports before approving applications may turn you down because of the judgment and the delinquency leading up to it. Judgments result from refusal to pay a debt, which makes you look like a risky borrower. The MyFICO website warns that these court actions also pull down your score, which is based on your credit report data. The exact amount of the drop depends on your previous records and the status of your other accounts, but Motley Fool money management website writer Dayana Yochim explains that judgments are equivalent in impact to 90-day late payments or repossessions.

Pay-Offs

Satisfying a judgment with a pay-off does not help you unless you negotiate a change in status on your credit reports. A paid judgment stays in TransUnion, Equifax and Experian files for seven years, so creditors still know that you had a defaulted bill, and it continues to hurt your score. The credit report entry must be removed to stop its score-reducing effects. Carreon and Associates, a credit repair website, recommends offering a settlement to the creditor in exchange for dismissing the judgment. Get the deal in writing before making your payment. The judgment should disappear from your credit reports, and your credit score should go up within 30 to 45 days of the time the creditor files dismissal paperwork. Actual score improvement varies, depending on your overall credit records. It may be significant if you have no other negative data on your reports, or the improvement may be minor if you still have many delinquent accounts.

Considerations

Your creditor automatically gets a default judgment if you do not show up in court. The Carreon and Associations site recommends being present and disputing the judgment's validity if there are any grounds to do so. Otherwise, you may be able to settle before the case is heard.

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Is a Credit Report an Asset?

A credit report is not an asset in the traditional sense, like a house, but you can leverage it like you would an asset. Creditors make most of their decisions using a mathematical formula called the FICO formula. If your credit report contains only positive information, this could make you a great customer to lenders.

Identification

Going by the traditional definition, a credit report is not an asset. Assets hold some intrinsic value and can be liquidated or sold for cash. Some common assets are cars, equipment, stock and cash. Credit reports contain information about your loans and have no direct monetary value to you, the consumer.

Leveraging Good Credit

Most lenders do not make informal judgments about your creditworthiness. The information in your credit report tells the lender how risky you are in the FICO scoring system. When the FICO formula rates you a low risk, you can leverage this into a loan or asset, such as a mortgage. Lenders fight for borrowers who always pay on time, because the chance of not getting repaid in the future is extremely low. When you score gets into the high 700s, you almost always receive the best rate.

Other Benefits

A strong personal credit report might be enough to obtain a small-business loan at a low rate, because handling personal finances usually translates to similar performance in managing a business. You will also have an easier time obtaining an apartment and utilities without paying a large security deposits. Insurance companies may even lower your premium for a positive report -- or raise it for a bad one.

Tip

Start building a credit history immediately if you do not have anything in your report with the major credit bureaus. A limited credit history or a report that has bad information is not an asset to building wealth and may even detract from it. The first step is to acquire a loan from a creditor that reports to Equifax, Experian and TransUnion. Meet your debt obligations every month and eventually your report becomes a valuable asset.

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Three Easy Ways to Rebuild Your Credit

A person's credit score is a numerical indicator of his past credit history. It is a number used by lenders to determine a potential borrower's ability and willingness to repay a new debt. The higher the credit score, the easier it is for a borrower to get a loan with excellent terms. Once a credit score is lowered by negative credit history, a few steps can be taken to help raise the score, or rebuild credit.

Check Your Credit Report

AnnualCreditReport.com is the only federally mandated website that allows individuals in the United States to check their credit report once per year for free. Use this site to check your credit report and look for errors. Each line item on the credit report lists the reporting credit agency or bureau. If there are any errors, contact the specific credit bureau (Experian, Equifax, or TransUnion) that lists the error to have that error removed. You may be required to provide documentation to remove the error. Please note that while your credit report will be free from this site, your credit score is not. A fee will be charged in order for you to view your credit score.

Pay Off Outstanding Negative Items

Look to see if there are any negative items listed on your report, such as judgments, liens or collections. Pay those items in full. Once they are marked as "paid in full" their impact will be less on your score. Also note if there are any loans or lines of credit that are currently overdue and listed on your report. Pay those up-to-date to lessen the impact of late payments on your score as well. There is no set formula for determining how much your credit score will rise based upon paying off outstanding negative items. The amount your score rises will be based upon your current credit, the mix of credit types you have, and the amount of time that your account has been marked "paid in full." The rise in credit score could vary from person to person and the credit bureaus keep the exact formulas for score calculation as proprietary information.

Pay Down Credit Card Debt

The lower your credit card balance in comparison to your credit limit, the less the impact on your score. Keep your credit card balance to less than 30 percent of its limit, even if you pay it in full each month, to lessen its impact on your score. Credit cards that are "maxed out" where the balance is close to the limit have a very negative impact on your credit score.

Set Up Automatic Payments

To avoid late payments in the future, and to avoid judgments, liens or collections, set up all loan payments on automatic drafts or payments each month through your checking account. This ensures that the bill is paid on time. However, make sure your checking account (or the account that the payment is drafted from) has enough funds to cover the transaction to avoid overdraft fees.

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How to Compare TransUnion Credit Scores

The three national credit bureaus---Experian, Equifax and TransUnion---each use slightly different versions of the FICO scoring method. If you have recently applied for a home or car loan, you may have noticed differences in your credit scores from each of the credit reporting bureaus. Your scores can vary due to different calculation formulas, and not all creditors report your activity to all three bureaus, so each of your credit reports may contain different information. For instance, when you compare TransUnion credit scores with your scores from the other two agencies, you may find a discrepancy of 30 or more points.

Instructions

1

Obtain a copy of your credit report from each of the credit bureaus. You are entitled to a free copy from each agency annually, and you can order your reports by providing your name, address, date of birth and Social Security number. The three agencies have established a central website at AnnualCreditReport.com where you can order your free reports, either separately or all at once.

2

Check the personal information section of your TransUnion credit report, as well as your other reports. The personal information sections should include your name, current and previous addresses with dates of occupancy, Social Security number and date of birth. Check for accuracy on all three reports.

3

Read the information in the employment history section. A TransUnion credit report will list your current employer with your date of hire, position and income, as well as any relevant previous employers and your reasons for leaving those occupations. Do the same for the other two reports and highlight any errors you find.

4

Examine the area of your TransUnion report that details your active credit accounts. Paid-off and past-due accounts will be included in this section, as well as your credit score. Compare your TransUnion report to the reports received from the other agencies, taking note of any differences in the reporting creditors, which can account for credit score differences.

5

Verify the remaining information. Look for items such as reported bankruptcies or judgments, any collections activity, current or past creditors, repossessions or charge-offs, your payment history over the past two years, all credit inquiries by lenders and any warning messages that may be attached to your credit history. Credit scores are calculated based on percentages, according to the importance attached to a particular category; for example, your payment history may account for 35 percent of your credit score.

6

Compare your TransUnion credit scores, which should be somewhere between 300 and 850, to the scores received by the other two agencies, and immediately inform the agencies of any errors found in your reports. Unfortunately, there will be no score given on a free report, but you can order a report that gives your credit score, directly from each credit bureau. Equifax charges $15.95 for your credit report and Experian charges $14.95. TransUnion now offers your credit score free through TrueCredit.com and Zendough.com.

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When Do Credit Card Companies Report to Credit Agencies?

When you open a credit card account, the card issuer reports this information to one or more credit bureaus. When you make or miss a payment, the issuer reports this as well. Different credit card companies use different credit bureaus and report at different times. In most cases, you should see a new account appear on your credit report within a month. In some cases, it takes longer.

Credit Bureaus

There are three main credit bureaus in the U.S.: Experian, Equifax and TransUnion. Some creditors use all three, others just one or two. Your credit report varies slightly depending on which bureau issues it. The bureaus also use different formulas to calculate credit scores. When analyzing your credit score, you should consider all three credit scores, not just one. Before applying for a credit card, consider finding out which bureaus the issuer uses. It can mean a difference between an approval or a rejection.

Credit Reports

Your credit report contains personal information, such as your name, date of birth, Social Security number, address, driver's license number and, possibly, the name of your employer. It also has a list of your credit accounts, credit limits, the amount you owe and whether the account is in good standing. If you've filed for bankruptcy within the past 10 years, it will be on the report, as will any liens and debt-related court judgments.

Credit Reporting

Credit card issuers report to credit bureaus every 30 to 60 days on average. If you've taken out a new credit card, it should show up on your credit report at the start of the following month. In other words, if you added a credit card in October, it will be on the report by the first week of November. Credit card companies should report both your balance and credit limit, though some (notably CapitalOne) do not. Without knowing your credit limit, the bureau uses your maximum balance to calculate your debt-to-credit ratio. This can make it appear you've used all your available credit--maxed out your credit line--when you have not.

Fixing Mistakes

You should check your credit reports on a regular basis, in case there are errors. Even a small mistake can cost you points on your credit score. You can obtain a copy of your credit reports free of charge at annualcreditreport.com once a year. If you notice an error, file a claim directly with the credit bureau. The bureau will investigate, and, if your claim is valid, it will correct the information within 30 days.

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