November 2013 ~ Personal Finance and Money Management

Saturday, November 30, 2013

How to Dispute Closed Credit Report Accounts With Experian

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You can dispute anything on your Experian credit report, including closed credit accounts. According to Experian, the fastest and easiest way to file disputes is online at the Experian website. In one session you can download your most recent Experian credit report, identify incorrect information, and file a dispute. You'll be able to return later to check the status of your complaint and review the results.

Instructions

Request a copy of your report directly from Experian, or refer to a copy that you already have that is less than 90 days old. You can order a copy at Experian.com. Find an identification number, called the "report number," on the front page of the report.

Review the report. Identify any inaccurate information regarding your closed credit accounts. Navigate to Experian's homepage. Enter "dispute" in the search box and click on the proper link for filing a dispute. Click on "Request A Dispute Online" to begin. The system will ask you for the report number from your credit report and your Social Security number. Follow the prompts to enter the information.

Begin your dispute. You will see all of your credit accounts listed, including the closed accounts. There will be options for disputing the closed accounts, as well as the others. Options will allow you to deny ever having paid the account late, or you can argue that the account never belonged to you. Click on the option best matching your reasons for filing a dispute. You will also be able to enter comments about the inaccuracies. Finish entering your disputes and follow the prompts to close the system. According to the Experian website, an investigation will begin immediately. Experian will contact your creditors about the dispute and your creditor will have 30 days to respond. If the creditor responds that the information is correct it will remain on your credit report. If the creditor does not respond, Experian will remove the information from your report, according to the website.

Wait for an email from Experian. The company will notify you when the results of the investigation are ready to be viewed and will send you a link to the results online. Click on the link to see the results. You can also return to Experian.com, re-enter the disputes area of the site and click on the link for "dispute status updates." There is no charge for disputing the information or reviewing the results online.

Credit Report Abbreviations

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You are entitled to receive one free credit report each year from each of the three credit reporting agencies: TransUnion, Equifax and Experian. This can be obtained from the individual credit reporting agencies or from AnnualCreditReport.com. When you receive the report, you will find your personal information, including past addresses, credit limits and balances and payment histories. There are several abbreviations used on your credit report.

According to the Consumer Credit Counseling Service, three abbreviations for account status are utilized. "O" is the abbreviation for an open account; "R" is the abbreviation for a revolving account such as a credit card; "I" stands for an installment account such as student loans or a house or car loan.

The credit reporting agencies use similar abbreviations for the payment status of each account. According to Tenant Data, Experian uses three abbreviations for a current account. "C" is current; "N" is current with a zero balance and no updates from the creditor; and "0" is current with a zero balance and updates from the creditor.

Past due accounts are indicated with Nos. 1 through 6. A "1" indicates that the account is 30 days past due; a "2" indicates an account is 60 days past due. This continues up to "6," indicating an account is 180 days past due.

Other codes are utilized for charge-offs and foreclosures. A "7" indicates the debt is a part of a Chapter 13 bankruptcy payment plan; a "9" indicates a debt discharged in bankruptcy; "G" shows that the account is in collection; "H" means the account is in foreclosure; and "L" indicates a charge-off. A voluntary surrender is abbreviated with a "J"; and repossession is abbreviated with a "K."

A dash or blank area indicates that no payment history was reported by the creditor.

According to the Consumer Credit Counseling Service, abbreviations for account ownership may be slightly different for each credit reporting agency. The standard abbreviation for an individual account is "I."; a joint account is abbreviated "J"; "A" indicates that you are an authorized user on the account; and "T" indicates that the account is terminated.

How Does Refinancing Car Loans Affect a Credit Score?

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When you refinance a loan, you are closing one loan and opening another. This can cause a temporary drop in your credit score. In a short period, though, you should be able to repair this.

A number of factors including inquiries into your credit, your outstanding loan balance, and how many loans you have opened determines your Fair Isaac Corporation (FICO) score. When you refinance, all three of these factors will temporarily negatively affect your credit.

You apply to refinance your loan. The lender does a credit inquiry, dropping your FICO sore a few points. Then, the lender approves you and you open a new loan, again dropping your score a few points. Finally, with your new loan, you owe more than 80 percent of the purchase price of your car, dropping your score once more. This last point is important. If you place a larger amount down, it will not affect your score.

Even though each of these factors can very briefly lower your score, you will ultimately be able to regain points within a few months of making your new loan payments on time. Each payment you make will help counter the effect of the new loan and credit inquiry, which were only small drops to begin with. As you pay more of your loan, your outstanding balance will decrease, further helping your credit.

What Guidelines Determine If One Can Get a Free Annual Credit Report?

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The federal government has several provisions in the Fair Credit Reporting Act for how consumers can obtain a free copy of each of their credit reports each year. Although your credit report does not contain your credit score, it lists all of your credit accounts and allows you to review and check the accuracy of the information that goes into calculating your score.

All consumers are eligible to receive one free credit report from each credit bureau during any given 12-month time period. Therefore, if it has been at least 12 months since you last received a free credit report from a particular bureau, you can get another free report from that bureau. The credit bureaus that provide free annual credit reports are Experian, TransUnion and Equifax. You must order your free credit reports through the Annual Credit Report website, which will determine whether 12 months have elapsed for each credit bureau.

Under federal guidelines, the credit bureaus must directly provide you with one free credit report per year, upon your request, if you are unemployed and are planning to look for work within 60 days. Potential employers might want to check your credit report, so if you get a free copy of your report before you apply for jobs, you can check its accuracy. If your report is inaccurate, follow the instructions listed on the credit report to dispute the errors and have them removed from your credit report.

If you are on any type of public welfare assistance, you can obtain one free credit report per year from each of the credit bureaus. As with the free reports due to unemployment, you need to order the reports directly through the credit bureaus. They cannot charge you for your first report each year if you prove that you are on welfare.

A few additional guidelines provide you with free copies of your credit report and do not limit you to one report per year. If you apply for credit, insurance or employment and are denied because of your credit, you are eligible to get a free copy of your credit report from each bureau during the 60 days following receipt of the denial notice. The notice contains instructions for how to get your free reports. If you have reason to suspect that your credit report is incorrect because of fraud, including identity theft, you can also obtain a free copy of your report at any time.

How to Raise Your Credit Score by 30 Points

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You can make a big difference in the interest rates you pay on loans by increasing your credit score by 30 points. Credit scores below 620 suggest that the loan is risky because the borrower is not responsible with credit. A score higher than 720 will put you in the "excellent" range, making you eligible for the best rates. Raising your score just 30 points can put you into the next higher tier. Combine methods of raising your credit score and you are more likely to get good loan rates. In fact, you may be able to raise your score more than 30 points in just a short period of time.

Instructions

Get a copy of your credit report. You can do this at AnnualCreditReport.com, but this free report does not include your score. Experian, Equifax and TransUnion are the three major bureaus that monitor your credit behavior. Your score may be slightly different among each of the three. Your report should list your open accounts, such as your mortgage, credit cards and student loans. It will also reflect your history for each one, such as whether you've been paying on time.

Dispute inaccuracies on your credit report. Scan your credit report to look for mistakes, such as open accounts that you've closed, balances owed that you've paid or incorrect credit limits. If you find these inaccuracies, send a letter to the credit bureaus detailing the mistake, along with documentation that supports your claim, such as a deposited check or a letter stating that your account is closed. The bureau must respond within 30 days.

Ask for a credit limit increase while paying down your balance. One factor that counts toward your credit score is the amount of money that you owe as a percentage of the total amount of credit you have available. If you increase the amount of available credit---without using it---you'll improve this percentage. You can ask over the phone. Some credit card providers even allow you to do this online. Increasing the available credit on an older account is better than opening new accounts, because the credit bureaus prefer to see an account with history. If you have a new account, it could temporarily decrease your score.

Pay your bills on time. Timely payments play a big factor in determining your credit score. If you have a history of late or delinquent payments, making consistent, timely payments will improve your record and gradually increase your credit score over time.

Use credit cards that you have held for a long time. Credit history plays a role in your score, but established accounts carry more weight.

Does a Forbearance Hurt Your Credit Score?

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When times get tough financially, it is easy to let your bills fall behind. In these times, your bank might be able to help you to get out of trouble. Forbearance is an option that can help you get your bills current and save your credit in the process.

Forbearance is a type of loan deferment that is usually offered in conjunction with student loans and, less commonly, mortgages. When your loan is on forbearance, you are not responsible for making monthly payments, giving you the chance to catch up on past due payments, or resolve other aspects of your financial situation that affect your ability to pay the loan in question. However, interest does accrue on a monthly basis during forbearance.

The most common reason why you'd want to apply for a forbearance is if you're having financial difficulty and you're unable to meet your monthly payments. In this case, placing your account on forbearance can allow you to save money and avoid a potentially disastrous situation in which you're consistently late and unable to catch up. Such a situation would not only result in late fees and collection activity, but it could also significantly damage your credit.

If you're having trouble meeting your student loan obligations, your problems may be much deeper than owing more money now. A late payment on your student loan can stay on your credit report for seven years, making it harder for you to obtain credit in the future. If you need to buy a car, or if you want to apply for additional student loans to continue your studies, the damage you do to your credit through your student loans can be a deterrent to your future plans.

Should you go on forbearance, the terms of this arrangement are not indicated on your credit report. However, the fact that you will go months between payment is noticed by credit bureaus, who may see this as a bad sign for your overall credit profile. That said, the overall impact of forbearance is felt in the late payments you won't be making. You'll only take a slight hit, if any, for not making payments as a result of an agreement with the bank, but the impact of several late payments could be devastating. Avoiding this route is a far better option than running late every month and destroying your credit for the future.

If you're interested in applying for forbearance, you should contact your student loan bank and see what types of options they provide. For example, Citibank offers forbearance to students whose monthly student loan payments are an excessively high percentage of their income, students who are having financial difficulty or students who are currently teachers in low-income areas. Each lender has different options, as well as lengths of time, you may be able to use forbearance benefits. To apply, you'll need to provide proof of your financial hardship, which may include pay stubs, student loan statements or a written statement describing your financial situation.

Employment History on a Credit Report

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Credit reports are not just for approving a borrower for a loan, they can also be a screening tool for job applicants or any other area that uses background searches. This occurs because credit reports also contain demographic information, such as a person's employment history. Jobs listed on your report, however, won't affect your credit standing directly, but can hurt other aspects of your life.

Lenders have the option of reporting information on a credit application to the credit rating companies, including information about your address and employer. Future employers may run a credit check, if you authorize it, and compare your stated employment history with previous employers listed on your credit report, according to Credit Builders Alliance.

Employment history has absolutely no effect on your credit report -- either good or bad, according to Experian, one of the major credit bureaus in the U.S. Employment history and salary were factored into credit scores during the 1980s, but the credit bureaus stopped this practice because salaries were self-reported and unverifiable. Also, employment says nothing about a person's willingness or ability to pay bills.

Employment history can factor into whether or not you get credit. Banks will look at your employment history to ascertain your financial stability. If you bounce around jobs every few months, the lender can consider you unstable and too risky to handle credit. Other people who pull your credit report, such as an employer or landlord, can also view a sporadic or unstable employment history as suspicious or risky.

Pull your credit report from each of the three major credit bureaus to review your employment history -- you get a free one each year from all three bureaus. If you find false employment data, you can dispute this information with the bureau or have it removed completely, if you do not want it on there. Most credit reports contain erroneous or outdated employment history, according to the "The Wall Street Journal."

Fast Ways to Clear Credit

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Trying to boost your credit score is a great goal to go after, but do not expect much to happen overnight. The credit scoring formulas offer relatively few ways to clear your credit history of bad items fast. Most negative items stay on your report for seven years and some items remain indefinitely.

Credit scores factor in the amount of debt you owe, but also credit utilization---the portion of credit debt used as compared to available credit. Maxing out a credit card costs 10 to 30 points on an average score and a little bit less on a poor credit score, according to Bankrate. Thus, paying credit card debt improves two variables in the credit scoring model at once.

A single negative item almost always tarnishes your credit report far more than a single positive item improves it. When you review your credit report and see a negative item, dispute it with the credit bureaus no matter how small. Individual hard inquiries---credit checks because you applied for credit---do minimal damage on their own, but become a very negative item once you have more than six on a report.

You should have at least one credit card and one active installment loan on your credit file to increase your mix of loans, worth 10 percent of your credit score, according to Liz Weston of MSN Money Central. Holding two revolving accounts for every installment account usually gives the optimal mix of credit for most borrowers.

Lenders stop reporting a credit card account to the credit bureaus if you do not use it. Thus, you should make a small purchase to make it active again. Also, ask your lenders for a higher credit limit to lower your overall credit utilization rate.

Stay away from self-proclaimed credit repair clinics; they cannot do anything for you. A credit repair company might even suggest illegal tactics, like using a fake Social Security number. Applying for credit under anything other than your Social Security number is file segregation and can be considered a felony.

How Not to Talk Negatively at an Exit Interview

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The exit interview is a tool for your employer. It helps the business learn how it is doing. Since you are leaving the firm, you have a unique position. You are not beholden and needn't fear reprisal. In an exit interview, it is not obligatory to discuss every ill event that transpired during your tenure. The goal is to be frank and helpful. Even if your experience was poor, there are ways of discussing it that can have a possibility of remedying the situation for those still there and those to come.

Sit down and makes some notes about your experience prior to entering into the interview, preferably in a relaxed environment that can help you reflect on your tenure more objectively. Note both the good and poor. Think about why things that worked did and the reasons behind the things that didn't.

The idea is to focus on improvement of the employer's operations. Even if you are unhappy, or have reason to be, the exit interview shouldn't be about retribution. If you faced an adverse situation, try to discuss it in neutral, terms, and stick to particulars. Back up your comments with ideas, if you have some, on how the employer might do better. This will be appreciated and increase the weight of your comments. Avoid personal comments.

You can speak frankly and should. If there is a serious problem, systemic or personnel related, the employer should know. That said, it is possible to discuss difficulties you may have faced objectively. That isn't being negative. If you had difficulty obtaining documents necessary to produce your work regularly, saying so isn't negative if you simply relate the information.

Even if the report of your exit interview is by an outside or otherwise neutral person, you never know who will see it. For instance, if a former boss or other executive should come across it, negativity in the interview may backfire. For instance, perhaps you have now accepted a new post. That doesn't mean things couldn't go awry. You may want an opportunity to reapply for a position. Further, word may be spread to others in your professional community, which could impact your reputation. These are good reasons to stay professional, direct and upbeat.

How to Dispute a Credit Report Issue

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The time to discover your credit report contains errors is not when applying for a loan or mortgage. It is essential to protect yourself and your credit rating by monitoring the credit report all three major agencies maintain, and disputing erroneous information if it occurs. While Experian, TransUnion, and Equifax may have procedures specific to the company or issue, there is a general process you can follow to dispute a credit report issue.

Instructions

Contact the credit-reporting agency either by mail or online, where you discover the error. Explain, in writing, the error you found, why you feel the information is inaccurate, and specifically state you are disputing the information. Include copies of supporting documentation, such as a utility bill displaying a correct address, a cancelled check or credit card receipt, or a "paid-in-full" receipt for a judgment or lien.

Maintain both a call log and paper trail of all written correspondence, phone calls, and emails. This can be a simple list or a computer spreadsheet that includes dates, times, names and titles of persons you speak with, and a description of the conversation.

Verify the agency updates incorrect information by requesting an additional copy of your credit report when the dispute process is complete. The Fair Credit Reporting Act requires credit-reporting agencies to provide this report to you free of charge.

Request the credit-reporting agency send a notice of correction to any person or agency that viewed your report in the preceding six months.

Which Accounts Are Not on a Credit Report Unless Past Due or in Collections?

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Consumers who are very serious about their credit score know that any account or past due bill can end up on a credit report, even overdue fines from the library. As time passes, more and more creditors send accounts to an outside collections company rather than deal with the hassle of collecting the debt themselves. To prevent this from happening, you should always pay a past due account.

As long as you have a legal liability to pay a bill or debt, it can end up in collections. This most often happens with monthly bills, such as rent, utilities and cell phone charges. What matters most is the account going to collections and the agencies finding out about it. Debt collectors often post account details to private databases for the agencies, but some actively report accounts to the bureaus.

The list of accounts that do not appear on a credit report until they go to collections or the company charges off the debt is endless. They include late fees from video stores and unpaid parking tickets. Governments often send unpaid fines to collections agencies, because it helps recover fines that citizens refuse to pay.

The Fair Isaac Corporation tweaks its formula and releases new credit scoring software every few years. In 2011, the latest version is FICO 08. The most important update for collections in this model is it ignores collection accounts with an original value under $100. This assumes that the lender upgrades their software; creditors that use older software will consider any collection account in their score calculations.

Never ignore a bill and let it go to collections. Creditors can see it even if the FICO scoring system ignores small collections and may hold it against you or require you to repay it. If you cannot pay a bill now, ask the creditor to set up a payment plan. Also, keep in mind that some nontraditional accounts are starting to appear on credit reports, and missing payments could lower your credit score, even if the account does not go to collections. In 2010, for example, Experian acquired RentBureau, so your rental history can affect your credit.

Does Escrow Shortage Affect Credit Score?

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An escrow account is a special cash account that your mortgage lender uses to pay your property taxes, homeowner's insurance premium, private mortgage insurance and homeowner's association dues, if applicable. Your lender projects the cost of these liabilities each year and divides the amount equally into 12 monthly installment payments billed as a part of your mortgage payment, relieving you of the burden of reserving funds for such expenses. However, an increase in your property taxes or other escrow expense could result in an account shortage, leaving your lender to foot the bill.

An escrow account is a cash account -- not a line of credit or a loan. You fund the account throughout the year and use funds in the account to pay property and mortgage-related bills when they come due. It is treated as a personal checking or savings account would be treated at a bank. A shortage of funding in the account to pay your tax and insurance obligations is treated as an overdrawn account, and your bank will subsequently notify you of the shortage and how to bring the account positive.

According to chartered financial analyst Dr. Don Taylor of Bankrate.com, a FICO credit score does not reflect information in your personal accounts, but your borrowing history. In other words, while defaulting on your principal mortgage payment will damage your credit after becoming 30 days past due, your escrow shortage will not affect your credit score so long as you work with your lender to balance the account.

If your escrow balance falls negative, your lender will likely give you two options for bringing the account positive. You may choose to pay the deficiency with one lump sum, or you may opt to spread out the deficiency over several months of mortgage payments by increasing your escrow payment each month. If a tax increase or insurance premium hike is to blame for the low funds, your lender will also adjust your future escrow payments to avoid a future low balance.

Your credit score may suffer if you do not abide by your lender's guidelines to bring your escrow account positive. Your escrow payment is a part of your monthly mortgage payment, and according to MSNBC.com, even if you send your lender a check for your payment amount prior to the adjustment of your escrow payment, your lender probably won't accept it. Most lenders will only accept a full payment. Once you miss a payment by 30 days, your FICO credit score will take a hit. Continuing to fall behind on payments by 60, 90 and 120 or more days will further damage your credit and could ultimately cause foreclosure.

How to Challenge Items in Your Credit Report

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Seventy-nine percent of consumer credit reports contain at least one error, according a 2004 report by the U.S. Public Interest Research Group (PIRG). Twenty-five percent of reports contain a serious error that could result in a person being turned down for a loan or line of credit. Since 1991, PIRG has researched credit report inaccuracies seven times, and each time, serious problems were found with the way credit accounts are reported. Your best defense against mistakes and inaccuracies is to obtain a copy of your credit report and challenge the inaccurate items.

Instructions

Obtain a copy of your credit report from all three major credit bureaus: Equifax, Experian and Transunion. Start by visiting the Annual Credit Report site listed in the "Resource" section. Identify the inaccurate items and write down the creditor, the claimed balance, the date and the credit bureau(s) that generated the report on which the item appears.

Gather documents to support your case, if possible. If the item is an unpaid balance or inaccurate late payment claim, find your receipt or bank record showing the payment and the date. Make copies of your supporting documents.

Write a letter to the credit bureau(s). For each item, you'll need to write a separate letter. Use the sample letter provided in the "Resource" section, but remember to transfer your information to it.

Wait 30 days for a response. By law, the credit bureaus must investigate your claim within 30 days and notify you of their decision in writing. If the creditor cannot disprove your claim, the item(s) will be removed from your credit report.

Follow up with another letter or a phone call to the credit bureau(s), if you have not heard back within 30 days. You can challenge an item as many times as you want--there is no limit.

Building Your Credit History

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After the credit crisis of 2008, a good credit score became more important than ever. Fortunately, even if you have yet to start your credit history, you can probably achieve an good credit score within a year or two. The biggest hurdle is probably getting that first loan, but you can circumvent the normal loan application process if you know someone with an active account.

To start your consumer credit history with the major credit bureaus you must obtain a loan from a creditor that reports to the bureaus. Ask your lender which bureaus he reports to. Most credit cards or other revolving accounts, such as home equity line of credit or installment loan, such as a student loan, should report to the major bureaus.

Most people purchase their home with a mortgage and to get one at the best rate you will need a good credit score -- likely north of 740 to get the best rate as of 2011, according to MSN Money. You can also usually obtain utility services, including cable and Internet, and a cellphone without putting down a large deposit or taking an expensive plan.

A good credit history includes more than just on-time payments. The credit score calculation looks at how much of the available credit on your revolving accounts you use and if you have more than one type of loan. Your credit score also includes how long you have managed credit and if you have applied for any new accounts recently.

Apply for a secured credit card. This requires a deposit on the credit limit, but also has the loosest lending requirements. You could cosign on a loan to start building history immediately and bypass the hard inquiry check that dings a score when you apply for a loan on your own. This also means the primary account holder could miss payments -- affecting your score negatively -- and make you liable for the debt. If your bank offers automatic bill pay, use it. Should you acquire multiple credit cards, spread the balance evenly over them instead of putting a large balance on one card.

How Often Can I Check Credit Scores Without a Penalty?

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When multiple companies make hard inquiries about your credit history, credit bureaus assume that you are planning to borrow more money. Because more borrowed money increases your liability as a consumer, credit bureaus could lower your score. However, there is typically no penalty for checking your own credit information, regardless of the number of inquiries you make.

The three major credit bureaus, Experian, Equifax and TransUnion, calculate credit scores based on the length of your credit history, whether you make your payments on time, the amount of money you owe, the type of credit you use and whether you have recently obtained or are planning to obtain new credit. To determine if you have new credit or are applying for new credit, the credit bureaus record inquiries that companies make about your creditworthiness.

A credit inquiry can be hard or soft. Only hard inquiries lower your credit score. Hard inquiries include mortgage loan applications, car loan applications, credit card applications, credit checks to obtain a lease and applications for student and personal loans. One hard inquiry typically decreases your credit score by five points or fewer. Additional inquiries within a short period might not have as much impact. Credit bureaus typically consider mortgage, auto and student loan inquiries obtained in a 30-day period to be the same as a single hard inquiry.

All major credit bureaus consider obtaining your own credit information to be a soft inquiry. Because soft inquiries don't indicate that the borrower is seeking new credit, they don't lower your credit score. Other soft inquiries include promotional inquiries made by companies offering new credit and inquiries made by your current employer or a potential employer. Information about soft inquiries is available only to you and doesn't appear on your credit report when another entity requests it.

Checking your credit information periodically allows you to identify and correct errors. If you check your credit report and find an error, you can dispute the error by contacting the credit bureau in writing. The credit bureau must investigate the entry within 30 days. If the creditor can't validate the entry, it must remove the entry from your report.

How to Raise a Credit Score Quickly & Legally

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A low credit score can make your financial life miserable. Borrowing becomes more difficult, especially for important purchases like a home or a new car. A low credit score even costs you money. If you do manage to arrange a loan, you will have to pay a higher interest rate. Although your credit score reflects your financial history over the long term, you can raise it quickly and legally.

Instructions

Find money to pay down your credit card debt.

Pay down your credit card debt. Kimberly Lankford of "Kiplinger" says this will help your credit score the fastest because a credit score derives about 33 percent of its value from the ratio of credit used to credit available. If you have a savings account, mutual funds or bonds, use some of that equity to pay off debt. If you don't have these assets, raise cash to pay off debt by holding a yard sale or selling surplus items on the Internet.

Improve your ratio of used to available credit by having your credit limits increased. If you have been paying bills on time, phone the banks and ask them to raise your limits. This will improve your ratio only if you avoid increasing the debt your carry.

Keep your monthly charges low whether or not you pay them off immediately. Liz Pullam Weston of "MSN Money" says even if you pay off the balance every month, huge charges will adversely affect your score.

Get a copy of your credit report and have errors against you removed. Weston says you should ask them to fix false reports of collections, unpaid accounts, late payments or low credit limits. However, because of a fluke in the scoring formula, removing outdated information (more than 7 years old) may help or hurt your score, she says.

Ask a lender to delete a single mistake from your history if you otherwise have a clear record. If your credit history reflects more than one problem in the past but you have had a good record for a year or more, ask your creditor for a favorable update to your credit history.

Practice the same prudent credit management techniques in the short term that will produce a good score in the long term. Don't put all your balances on one card, apply for more cards than you need or ask lenders to lower your available credit. And of course, to raise your score and keep it high over the long term, pay all your bills on time. Then you will continue to enjoy the easier borrowing and better interest rates that come from a higher credit score.

How to Dispute Credit Reports Online

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Many consumers do not realize the majority of people have errors on their credit report. These errors, many of which are sometimes unintentional can affect your credit score. The credit bureaus, Equifax, Transunion and Experian have taken steps to make the dispute process more efficient. One of those ways is to dispute any issues on your credit reports online. Follow these steps to properly dispute items or on your credit report via the web.

Instructions

Obtain all of your credit reports from the bureaus. It is important that you obtain all three credit reports from Trans Union, Experian and Equifax. Though you may see an error on Transunion, this same error may be or on your Experian report. You have the option of having your credit report mailed to you, but it is easier to set up accounts online with all three credit bureaus. Once you set up an account you can either purchase your credit report or by law, in many states, you are entitled to a free credit report each year--so you may not have to pay.

Locate any errors on your credit report. Carefully go through each credit report online and locate any errors. Since you are doing this online, right next to the account entry you will see a button that says 'dispute this item'. You will be able to either type in the error, or you have a series of disputes listed for you that you can choose from. Still include an explanation for the error as well, as it further strengthens your case for having the error removed.

Keep a record of your disputes. You can either print out your credit report and circle the accounts you disputed or you can jot them down on paper. The credit bureaus, based on the Fair Credit Reporting Act backed by the Federal Trade Commission, have 30 to 45 days to investigate and respond to your dispute. If they find the dispute is accurate, they will fix it on your credit report. If they do not respond to your request in 45 days, then the account or the error is automatically removed. Since all of this is done online you will get correspondence through your email address and they will also mail you.

How to Repair Bad Credit Solutions

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The Federal Trade Commission reports that there is one sure thing about credit repair: it cannot be rushed. The agency insists that the passage of time is the best remedy for bad credit, and that there is no such thing as a quick fix. You can repair your credit by adopting a long-term strategy -- and by ignoring so-called credit repair firms promising to quickly remove negative items from your credit report. The Fair Credit Reporting Act allows negative information to be listed on your credit report for a minimum of seven years, with the impact on your credit score lessening over time.

Instructions

Obtain a copy of your credit report from the Annual Credit Report website (see Resources). The site is authorized by the Federal Trade Commission to offer free credit reports under the terms of the Fair Credit Reporting Act. Order your credit score separately, for a fee, by following instructions included on your report.

Review your credit report for errors. The Federal Trade Commission reports that by law, incorrect information must be removed by the credit bureau if you file a dispute. The removal of wrong information could boost your credit score, according to MSN Money. Visit the credit bureaus' websites to enter disputes online (see Resources). Or get information for disputing by mail or telephone by clicking on the customer service or "contact us" buttons on the website.

Make payments to resolve any delinquent accounts listed on your credit report. Possibilities include old credit card accounts that were closed and sold to debt collection agencies, and other accounts that were closed and listed as charged-off on your report. Also resolve any judgments or liens, and make payments to bring all open accounts current.

Review your overall debt. MSNBC reports that you should pay down revolving balances as much as possible, while leaving the credit lines open. At a minimum, pay your credit card and other revolving balances down to no more than 30 percent of the credit line; 10 percent is even better, according to MSNBC.

Open additional credit lines over the course of a year. This will allow you to establish new accounts on your credit report with perfect payment histories. Apply for department store or gas station credit cards. Also apply for a secured MasterCard or Visa by depositing cash into a bank or credit union savings account. The bank will hold the deposit as security for the card. Make small charges on the cards, and pay in full each month.

Later, open a secured installment loan account by also depositing money into savings. Before opening the account, confirm that your payment history will be reported to the credit bureaus. Do this by speaking with a loan officer. Deposit the proceeds from the loan back into your savings account, and have the bank draft the payment each month from that account.

Pay all of your bills on time every month as you continue to repair your credit. Order a credit report and score every four months to track your progress. You're entitled to three credit reports every 12 months from Annual Credit Report. There is a fee for a credit score each time you order.

Differences in Credit Score Between Bureaus

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Credit bureaus gather, categorize and assess a borrowers history over a period of seven to 10 years. Currently, there are three major nationwide credit bureaus in the United States: Equifax, Experian and TransUnion. Although the 1974 Fair Credit Reporting Act (FCRA) regulates all three, it is possible for there to be variations in information from the three bureaus for one borrower. These variations can affect a borrowers credit FICO score, named for the Fair-Isaac Corporation that started scoring credit in 1958.

Credit bureaus only know what creditors report. A single creditor such as a car finance company or a credit card issuer can be very diligent and report information monthly to the bureaus. Creditors can also be less than perfect about reporting information. In such instances a balance due amount could be different between each report. Also, not all creditors report to all three bureaus. Subscribing to a credit bureau is a service the creditor pays to receive. As such a small creditor may only subscribe to one or two of the three bureaus. Differences between the three different reports will reflect the absence of information.

Credit bureaus are obligated by law to update and maintain credit histories. It is impossible, however, for the bureaus to be 100% accurate and diligent when managing millions of records. When a credit report item expires or is eliminated by the subscribing creditor there is a chance that the item is not removed from the report. Credit bureaus are allowed to report civil judgments for seven years. If one of the three bureaus, however, fails to remove the judgment entry on a report, it will be different from the other two reports that had the item removed.

Its important for borrowers to occasionally check their credit reports to ensure all information is accurate and up to date. Again, the FCRA demands credit bureaus verify information is correct or remove it from the borrowers report.

Although the FCRA regulates how credit bureaus manage the information on a borrowers report, all three bureaus have different policies regarding what is reported. As such the final FICO scores from each bureau can vary by several points.

There are competing credit scoring systems such as VantageScore, which arrive at different numbers than FICO. A borrower should not only know the various scores attached to a credit bureau report but also what are considered high (good credit risk) and low (poor credit risk) numbers. Different companies use different scales. A 700 score on a bureau report can mean different results depending on the different scoring systems. For example, Experian grades credit on a scale of 330-830, while Equifax and TransUnion use scales of 300-850. VantageScore uses a scale of 501-990.

What Is a High Credit Rating?

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A high credit rating will help you get approved for the credit cards and loans you need. It will also grant you the benefit of lower interest rates on any credit cards or loans you qualify for.

Credit scores range from 300 to 850. The higher your credit rating is, the less risk a lender incurs by loaning money to you.

Your credit rating is determined by the information contained within your credit report. Creditors will report the amount of your debt, the type of debt you have, and your payment history to the credit bureaus. A history that reflects small to moderate amounts of debt with regular payments will contribute to a high credit rating.

The information contained in your credit history will only appear for a set amount of time. Positive closed accounts will report for 10 years, while most negative entries are limited to reporting for only 7 years (See References 1).

Some creditors do not report to all three credit reporting agencies. Because of this, your credit score may vary depending on the credit reporting agency it is pulled from.

If your credits score drops for any reason, the interest rate on any credit cards or revolving lines of credit that you have may increase. This is because your lenders will regularly review your credit rating to ascertain that you are still a good lending risk. If you risk level increases, your interest rate is likely to increase as well.

Rules in Establishing Credit Scores

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You must have a minimum of six months of credit history in order to establish a credit score. Your credit history is compiled from the reports your creditors send to the three major credit reporting agencies--Equifax, TransUnion and Experian---about how you handle credit. You can establish a credit history with a bank, department store or gas station credit card, or with a bank, credit union, car or student loan.

You must have a payment history, so it is not enough just to have a credit card: you must use it and make payments on the outstanding balance. Your payment history includes whether you make payments on your credit card or loan on time, the number of late payments, how long past due your accounts are, how much is past due and how many accounts have been paid as agreed. Late payments will reduce your score. Your payment history accounts for roughly 35 percent of your credit score.

The amounts you owe on your accounts and the number of accounts you have with balances are counted in your credit score. Using or owing a large proportion of your available credit can decrease your score. Amounts owed account for about 30 percent of your credit score.

The length of your credit history influences your credit score. A longer history helps your score more than a short one. Length of credit history accounts for around 15 percent of the overall score.

The number of new accounts and the number of recent inquiries from potential creditors affects your credit score. Many new accounts and credit inquiries can lower your score but some inquiries do not affect your score: for example, inquiries that lenders make in order to review your account with them. This factor accounts for roughly 10 percent of the score.

Ten percent of your overall credit score depends on the types of accounts you have (mortgage, lines of credit, car loan, credit card, consumer finance).

Your age, sex, salary, occupation, race, religion, national origin, marital status, employment history and place of residence do not affect your credit score.

Are FICO Scores Entitled Once a Year?

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A majority of consumers incorrectly believe they are entitled to one free FICO score each year, according to a 2008 survey by the Consumer Federation of America. Obtaining your FICO score is critical to several areas of your life that are probably dear to you, such as finding an apartment and getting a cellphone contract. You will be able to see if for free from lenders, but only in certain situations.

The Fair Credit Reporting Act entitles consumers to one free credit report each year from the major credit bureaus. A credit report does not contain a FICO score, only information on loan accounts, public judgments and inquiries into your report. The FICO formula is an algorithm that uses information in a credit report to calculate the likelihood of a borrower to repay a debt. The credit reporting bureaus do not even sell the FICO, only a separate company -- the Fair Isaac Corp. -- sells FICO scores.

Despite the fact that credit reports are more powerful because they contain the only information that can change variables in the often utilized FICO algorithm, some politicians want consumers to see their scores for free. Sen. Mark Udall, D-Colo., tried to amend the credit act in 2010 to include credit scores along with the free annual credit report, according to Smart Money.

Plenty of alternatives to the FICO model exist, so a FICO might not be the score you need to worry about. A creditor might use his own formula, in which case you can probably never know your score with him. Some agencies report data not used by major bureaus -- called an alternative credit agency. These companies let you see your score for free but require monthly fees to verify payment data from lenders. Creditors may accept scores from an alternative bureau as a supplement to a traditional credit history or if you have no credit with the national bureaus.

Congress passed financial reform in 2011 with the Dodd-Frank Wall Street bill, which includes a provision to require some parties to show consumers their credit score if the creditor turns down an application because of a credit reason. As of March 2011, this bill has passed both chambers of Congress, but the final regulations have not been issued.

You can always ask the lender what your FICO score is during the loan application, but this does little to prepare for the application process. You want to boost your FICO score months before you start loan shopping.

Will Paying Off Installment Loans Improve Your FICO Score?

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Paying off installment loans, which have a preset payment schedule, on time will improve your FICO score, according to the Fair Isaac Corporation, creator of the FICO score.

Paying off installment loans on time improves your FICO score because it is included in the payment history in the FICO score calculation. As of 2010, payment history accounts for 35 percent of your credit score.

In addition to boosting your FICO score when you make on-time payments, installment loans increase the length of your credit history. How long you have used credit counts for 15 percent of your score in the FICO calculation, according to FinAid.

To maximize your FICO score, you should have a variety loan types, according to Edmunds. Utilizing different types of credit, such as auto loans and credit cards, counts for 10 percent of your score.

The Effects of a Lien on a Property on Your Credit Rating

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If you do not pay your debts voluntarily, your creditors have the right to seek legal recourse against you to collect the balance you owe. If the court sides with a creditor, it often grants the creditor a legal judgment which, in turn, gives the company the right to attach liens to property you own. Not only does this process give your creditor a security interest in your property, it also has a negative affect on your credit rating.

A common misconception concerning creditor liens is that these liens damage your credit score by showing up as derogatory entries on your credit report. In reality, liens are not inherently negative items. A mortgage lien, for example, is a lien you enter into voluntarily. Making timely payments to your mortgage lender helps, rather than hinders, your credit rating. A property lien by itself does not appear on your credit report and has no impact on your credit score. The circumstances surrounding the lien are what determine whether or not your credit will suffer.

A creditor does not need your permission to place a lien against your property provided it has a court ruling permitting it to do so. This court ruling, known as a judgment, is obtained when the creditor wins a lawsuit against you. It is the judgment, not the lien, that damages your credit rating.

When the judge hands down a ruling in favor of the creditor, that ruling becomes a part of the states public record. While not all public records appear on your credit report, derogatory records, such as judgments, typically do. When the credit bureaus enter a judgment into your credit file, you can expect your credit score to drop.

While a judgment is a severe negative mark in your credit file, there is no way to estimate how much damage it will do beforehand. This is because the exact formula used to calculate credit scores is a carefully kept secret. Because everyones credit information differs, one persons credit score may plummet after a judgment while anothers may suffer only moderate damage.

While the Fair Credit Reporting Act restricts most derogatory credit information to a reporting period of no more than seven years and 180 days, judgments are a exception to the rule. The amount of time the judgment remains in your credit file depends on how long your state gives your creditor to enforce its judgment. If the judgment enforcement period is less than seven years, the judgment will appear for a minimum of seven years. If the enforcement period is longer, the judgment appears for the duration of the enforcement period resulting in the judgment lingering within your credit file for much longer than other negative items.

You can generally remove a lien from your property by paying off the debt that created it. Paying off the judgment, however, does not result in the credit bureaus removing it from your credit record.

Do Foreclosures Damage Credit?

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You have some options when you cannot make your mortgage payment, according to the Federal Trade Commission (FTC) website. Some banks are willing to work with you if you call them and explain your situation. You may qualify for a loan modification if you meet certain requirements. Sometimes there is no way out, and you must foreclose. The loss of a home is devastating, and there are consequences for your credit rating too.

Foreclosure is the process through which you lose your house if you stop paying the mortgage. The house acts as collateral for the mortgage loan, so the bank or finance company can take it if you default on repayment. Typically foreclosure proceedings begin after three to four months of non-payment. The delinquent payments damage your credit even before foreclosure occurs. CNN Money staff writer Les Christie warns that being 30 days late on a house payment drops your credit score by 40 to 110 points, depending on the status of your other accounts and your beginning score. A 90-day late payment pulls the score down by 70 to 135 points.

Foreclosure causes your credit score to plummet 80 to 160 points, according to Christie. Lenders also see the loss of your home when they pull your credit reports to evaluate applications. A low credit score and major negative item like a foreclosure marks you as a bad risk for future loans, credit cards and other accounts.

You suffer several different negative effects from a foreclosure. Creditors will likely turn down your applications for new accounts or offer you loans and credit cards with high interest rates. Insurers look at your credit files when evaluating you for policies, and a foreclosure often subjects you to higher premiums. According to Loretta Sorters from the Insurance Information Institute as stated on CNNMoney.com, you will pay about $60 more per year for home insurance and $115 in additional auto insurance premiums with damaged credit.

Foreclosure stays on your credit report for the same time frame as most negative items, like late payments, financial judgments, collection accounts and auto repossessions. The Equifax, Experian and TransUnion credit bureaus report this discrediting information for seven years. The worst impact occurs during the first few years. You offset it over time by handling current accounts responsibly and establishing a new pattern of on-time payments for other bills.

How to Get a Free Credit Report Without Paying a Single Dime

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Under the Fair Credit Reporting Act you are entitled to access your credit report for free from each of the three major credit reporting agencies: TransUnion, Experian and Equifax. You are entitled to one free report from each company per year. There are hundreds of websites and services out there that claim to offer "free" credit reports and scores, but they have conditions such as entering credit card information or signing up for a "30 day trial offer". Many of these sites do offer helpful services, such as providing credit monitoring and score information. However, it can be frustrating for consumers who think that they are signing up for the free service. There are currently three ways to access your free credit report: online, by phone or by mail.

Instructions

Locate a computer with an Internet connection and a printer. If you do not have a personal computer in your home, ask to use a friend's or family member's computer or go to your local public library where they have computers for public use.

Go to the Annual Credit Report website. A link to this site is located in the "Resources" section below. Click on the link and you will be taken directly to the site. This is the only website that is supported by the federal government to provide free credit reports.

Once you are on the site, you will see an option that states "Start here to view and print your credit report now." Choose your state from the drop down menu and click on the "Request Report" button.

Fill out the information requested on the form. You will need to provide your name, date of birth, Social Security Number, current address and your previous address if you have lived at your current address for two years or less. Click the "Continue" button at the bottom of the page once your information is complete.

You will be asked to enter information regarding loan or credit information to verify your identity. For example, you may be asked to provide how much you pay each month for your car loan. Complete your verification answers and click the "continue" button at the bottom of the page. Choose one of the three credit reporting agencies to receive your report from. Making a selection will take you to your credit report. It is advisable that you print out your report and keep a copy for your records.

Call the Annual Credit Report Request Service at 1-877-322-8228 to order a copy of your credit report.

Provide requested personal information such as your name, date of birth, Social Security Number, current address and a former address if you have lived at your current address for less than two years. You will also be asked to answer one or more questions regarding your finances in order to verify your identity.

Receive your free credit report in the mail to your current address within 2 to 3 weeks.

Download the free credit report "Request Form" from the Annual Credit Report website. A link to the page where the Request Form can be downloaded from is located in the "Resources" section below. Download the form by clicking "Request Form" link under the "To Request your Credit Report by Mail" heading. A dialog box will pop-up asking if you would like to "Save" or "Cancel" the form. Click on the "Save" option. This will cause the form to download and save on your computer. The form should open automatically once the download is complete.

Print and fill out the form. You will be asked to provide your name, date of birth, Social Security Number, current address and a previous address if you have lived at your current address for less than two years. You will also have the option to choose which credit reporting agency you wish to receive your report from. Shade in the circle next to your chosen credit reporting agency.

Mail your completed credit report request form to the following address:

Annual Credit Report Request Service,
P.O. Box 105281,
Atlanta, GA 30348-5281

You will receive your free credit report by mail within 2 to 3 weeks.

Credit History Resources

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Credit reports provide information about your financial history, which provides you with a picture of your financial health. You require strong financial health to obtain loans and determine how much you will pay to borrow money. Your primary resources for your credit history are the three nationwide consumer reporting companies.

You credit history is recorded by a credit bureau. The three major companies in the United States are Experian, Equifax and TransUnion. However, the Federal Trade Commission advises to not contact any of these three companies to access your credit score. These three companies get information culled from various sources, so your information -- thus your credit score -- can vary.

The three credit reporting agencies created a central website to make it easy for Americans to get a copy of their credit report -- AnnualCreditReport.com (see Resources). You can call or write to request a copy of your credit report, and you can choose from which company you would like a copy of your report. You are entitled to one report from each agency every 12 months, so you should order a report every few months -- each time from a different agency -- to keep up to date on your credit report and score.

There is only one online resource to get your credit report and that is from AnnualCreditReport.com. The FTC warns anyone who sees websites claiming to offer a free credit report or credit scores to exercise caution, as only AnnualCreditReport.com is legally mandated to offer a free report. Since you provide your name, address, Social Security number and date of birth, these are valuable tools to fraudsters. Some sites may be legit, however, the FTC warns that strings could be attached and may not actually be free in the end after you sign up for one.

Credit reports are regulated by the FTC, which oversees the Fair Credit Reporting Act. It is designed to ensure that credit reporting is accurate and provides an accurate measure of creditworthiness. The Fair Credit Reporting Act allows anyone to access any information a reporting agency has about them. Agencies are required to disclose the sources of the information contained in the report when requested, once every 12 months.

What Are the Steps in a Refinance Loan?

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When a borrower chooses to refinance his existing loans, it is often so he can get a better deal. Lenders can often refinance mortgage, auto and in some cases personal loans --- mortgage loans are most commonly associated with a refinancing transaction. Regardless of the type, the borrower must go through a variety of specific steps to refinance a loan.

The first step for refinancing a loan is for the individual to find a lender who is willing to perform the transaction. A borrower must have an acceptable credit history and score by lender standards to get approved for refinancing. The lender commonly requires the borrower to fill out a preliminary information form or answer a series of questions over the phone to evaluate his creditworthiness for the loan and pull the applicant's credit history.

The next step is to examine the terms offered by the lender for refinancing the loan. The lender commonly issues a pre-approval notification based on the applicant's credit history and provides information about the rate, term and amount of money the applicant can afford to borrow for refinancing the loan. The borrower must choose a lender to proceed with after comparing the various offers.

After reviewing and confirming terms, the borrower must then complete the application process. The application asks more indepth questions about the borrower's current financial situation, including employment, assets and debts. Part of the process is to gather important documents that prove the various statements the borrower makes on the application. The borrower must also provide information about the property in question or previous loan being refinanced. In the case of a mortgage loan the lender schedules an appraisal to determine the market value.

The final step of refinancing is to close the new loan. At the point of closing, the lender is satisfied with the borrower's application, credit history and documents. The loan signing is held either at the bank, the borrower's home or a third-party location. The lender issues funds to the previous lender to close out that loan and initiates the new lending agreement with the borrower.

Does Requesting a Loan Increase or Hurt My Credit Score?

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As a consumer applies for a loan, he authorizes the lender to check his credit history. Several credit inquiries coming from lenders have less of an impact than several inquiries coming from credit card companies. Creditors are in the business of loaning money, but they also want to protect themselves from consumers who are bad credit risks.

When you apply for a loan, banks and credit unions pull your credit report to check on your creditworthiness. Rather than going to only one source and obtaining one credit report, they check with all three credit bureaus. These bureaus are Equifax, TransUnion and Experian. Because each credit bureau obtains credit information from different sources--your utility companies, credit card issuers or mortgage company, your score will be different from one bureau to the next.

You authorize lenders to ask about your credit history at the time you apply for a loan. These inquiries show up on your credit report, along with inquiries from companies you weren't aware were checking your history, according to My FICO. The only credit inquiries that count are the ones you authorized lenders to check.

When you apply for a loan and the lender requests your credit report, your score dips temporarily. When you rate shop with several lenders in a short time period, all of these inquiries will be included in your credit report. Because these credit inquiries all took place in a short period of time, the impact on your credit report is minimal. Credit bureaus typically treat multiple inquiries that take place in a short time frame as one single inquiry; this has less of an effect on your score.

When you open more than one credit account in a short period of time, you are exposing yourself and your creditors to a higher amount of credit risk. In contrast to a rate-shopping scenario, applying for, and opening several credit accounts will lower your FICO score by a larger amount.

For some people, one credit inquiry lowers their credit score by less than five points. Keep in mind that the range of FICO scores goes from a low of 300 up to 850. If your credit history is shorter, or if you have fewer credit accounts, credit inquiries have a greater effect on your credit score. Statistics indicate that consumers with six or more inquiries on their credit reports may be up to eight times as likely to declare bankruptcy than those with no inquiries, according to My FICO.

People who rate-shop before applying for a student, auto or home loan have their credit inquiries treated differently than those who are applying for credit cards. Their FICO scores will ignore the inquiries made in the 30 days before the report is scored. The person who finds and signs for a loan within that 30-day period won't see an impact on her credit score. Further, the FICO score looks for rate-shopping inquiries older than 30 days. Any of those that are found are treated as one inquiry.

How to Get Help to Fix Your Bad Credit

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Living with bad credit often results in higher interest rates on various types of financing. Some people accept bad credit as a way of life, and are perfectly OK with paying expensive finance fees. Yet, help is available to fix your bad credit. Different factors play a role in credit scoring. And knowing how to manage credit better can quickly boost a low score.

Instructions

Request credit reports from the three major bureaus. Use Annualcreditreport.com to get a copy of your personal credit reports annually. Credit reports reveal details on your credit history such as creditor names, account balances and payment history.

Write to dispute mistakes. Draft a dispute letter and send this letter to the credit bureaus to dispute any mistakes or errors on your credit report. By law, credit bureaus must investigate and delete erroneous information.

Use your equity. Contact your mortgage lender to see if you're eligible for a home equity loan. Maintain a good payment history with your lender to qualify for this type of loan with bad credit. Use the funds from the loan to pay off your outstanding debts and help raise your credit score.

Speak with a debt consolidation agency. Use a non-profit agency to communicate with your creditors and negotiate better rates. Send monthly payments to the consolidation agency, and they'll handle your accounts and distribute payments to your creditors.

Consider automatic payments. Schedule automated monthly payments with your bank or creditor to avoid late payments and a damaged credit rating.

Use a credit repair agency. Work with a credit repair agency to get derogatory remarks such as late payments, unfamiliar accounts, judgments and collection accounts deleted from your credit report.

Why Do the Credit Bureaus Differ on Credit Scores?

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Although most people think of a credit score as a single number, you have multiple credit scores. When you check your credit score through each of the three bureaus -- Experian, TransUnion and Equifax -- it is not unusual to obtain three different credit scores. There are a few reasons for the discrepancy.

Each credit bureau maintains a separate file of data related to your credit history. One of the reasons you might end up with a different credit score at each bureau is because your reports are not all identical. This could occur if you have a credit account that reports to just one of the bureaus, or if your lenders report the most recent data to the bureaus at different times of the month.

When your credit scores are different, it might be because scores are generated by different credit scoring models. The FICO score is one of the popular scoring models, but the credit bureaus have also developed different models, including VantageScore. To complicate matters further, the FICO score is on a scale of 300 to 850, whereas VantageScore ranges from 501 to 990.

Some lenders use a formula that differs slightly from the usual formula for that score. Consumer Reports lists FICO 98, FICO 2004, FICO 08, Industry Option FICO scores, NextGen FICO scores and FICO Expansion scores as six ways to calculate a FICO score. Some of these are specialized for different fields of lending. For example, the Industry Option FICO scores allows car dealerships to give extra weight to how a consumer has handled past car loans.

When you apply for a loan or a credit card, you never know which credit score the lender will obtain. For large loans, such as mortgages, the lender will likely pull a few different scores to see how they compare. Your best strategy is to check your credit report with each of the three bureaus and ensure they all contain a complete file of accurate information about you. You can obtain a free credit report from every credit bureau once each year through AnnualCreditReport.com. If the lender only pulls one score and it is not as high as you expected, ask the lender to pull another to see how it compares before making a decision regarding your application.

How Quickly Does Data Get on a Credit Report?

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Modern credit reporting almost always runs through computers, but updating data is not instant. It can take weeks or even months before an item -- negative or positive -- shows up on a credit report. If you are willing to pay extra, you can update some information on your credit report within hours.

The credit reporting companies have no regular schedule when they have to update data but instead try to list new information as soon as they receive it from lenders. Most creditors report new data on their accounts every month, but the reporting agencies usually wait 90 days before incorporating this data into their reports, according to Bills.com.

Lenders are not legally required to send any information to the credit bureaus, even if many do so out of courtesy. Some creditors, such as utility companies and apartment complexes, cannot divulge customer information or, more likely, do not have the proper equipment to report to the bureaus. Thus, you should always ask lenders beforehand if they report to the bureaus. If several months on an account with previous history, contact the lender and inquire if there are any problems. (ref 3)

You can update erroneous false information in as little as three days by using a rapid rescoring service. This does not work for legitimate items or items left off the report, such as an unreported account. Rapid rescoring companies deal only with lenders, so you must go through a certified creditor to purchase this service. This is often useful only o borrowers who want to get a loan or mortgage in the near future and have a score of less than 700.

The only way to know for sure if an item is on your report is to pull your credit report from all three major credit rating companies. You can monitor your credit through the year for free by pulling one report every four months. If you want to monitor your credit report several times a week, credit monitoring services let you check your report as much as you want.

Does a Low Credit Card Limit Hurt Your Score?

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You might think that not having a lot of available credit would improve your credit rating, because you cannot get into heavy debt, but this intuitive thinking is wrong. While a low credit card limit does not automatically damage your credit rating, a minimal balance on a low-limit account can cause dozens of points of damage. Also, a low limit may not give you enough experience handling credit.

A low credit card limit --- usually less than a few thousand dollars --- does not harm your credit rating, because the FICO scoring model does not factor in total amount of available credit into it your score. However, the FICO model give credit utilization, or portion of credit limit available, a significant weight in your rating. For example, a balance of $500 on a card with a $1,000 limit has a utilization rate of 50 percent --- the same as a card with a balance of $5,000 and a limit of $10,000. Maxing out any credit card costs up to and maybe more than 45 points, according to Ellen Cannon of Bankrate. The impact of a high utilization rate diminishes as a credit rating decreases.

If a low-limit credit card is your only account, you may not have enough credit history on your credit report to obtain a large loan like a mortgage, even when you keep a low balance and always pay the bill on time. Banks want to see an applicant that successfully manages multiple lines of credit with a significant balance.

Limiting the amount of money you can spend on credit may help your overall financial situation and credit rating. If you frequently overspend or make impulse buys, you may rack up thousands of dollars in debt --- total amount of debt counts for 30 percent of a FICO rating. A high balance may also mean you spend more than you can afford, which may lead to missed payments and possibly a collection account or civil judgment if the creditor thinks you cannot pay the debt at all.

Request a limit increase from your lender, but ask about its policy on credit checks. If the creditor runs a hard check on your credit, the inquiry takes up to five points off your FICO rating. Many credit card companies offer automatic limit increases every six months or so. You can lower the utilization ratio on a low limit card with a limit increase by spreading the balance over other credit card account you may own.

How to Bump Up Your Credit Score

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The critical necessity of a good credit score is now more important than ever. With the global credit crunch, banks and all financial institutions are requiring high credit scores for any type loans. Having a lower credit score can add up to big money over time when a higher interest rate is the only option. There are things that can be done to bump up your credit score and make life a bit less expensive.

Instructions

Make payments on time every time. This step is obvious but true. Always make the payments on time. Pay online or by phone and use an online calendar if necessary with reminders set for each bill due date.

Know the factors that make up your FICO score.
Payment History - 35%
Amounts Owed - 30%
Length of Credit History - 15%
New Credit -- 10%
Types of Credit Used - 10%

Apply for a secured credit card if you don't have a credit card. You will need some source that sends your payment history to the credit bureaus. See the resources link below for more information about secured credit cards. Don't open up too many cards, though. You don't want to be overextended.

Request your credit report and credit score. These are usually two separate processes. Many online sites offer to send you a credit report for free. Create a spreadsheet and track your progress and watch your credit score rise.

Buy a house if you can if you don't already own one. It might be difficult to get a competitive rate relative to your credit rating, but there are a few options. FHA mortgage loans are not as punishing as far as interest rates go. You may have to work with a mortgage broker to secure the best rate too. Making a regular, payment on a house that you can afford and is within a reasonable percentage of your income on time every month will go a long way in bumping up your credit score. But if the payment is a strain or if you are paying much more than you would renting, you might end up in more trouble so this really needs to be thought out. There are other ways to boost the credit score.

Don't close existing credit card accounts. This will actually ding your credit score. Keep it open and cut up the card or just charge $25.00 a month on it and pay the balance every month.

Get creative if you must. There have been a couple of examples in the press lately where adults had actual loan documents drawn up for a loan they secured from their parents. The company doing this reported the timely payments to the credit bureau and that helped bump up their credit score and got them back on track.

Don't piggyback on anyone else's credit. Some people do this on their parents' account to leverage their good credit, but if for some reason the parents' credit score goes south, the credit score of the child will suffer or vice versa. This is a risky venture and although it can work, the risks need to be weighed. The credit reporting agencies are vacillating in accepting piggybacking and reporting it so things are changing and in flux.

How to Repair Bad Credit Legally

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Credit repair cannot erase every negative item from your credit reports, but you have the legal ability to get rid of some of them. The Federal Trade Commission explains that consumers have a right to check their Equifax, Experian and TransUnion credit reports for free every year and file disputes for any errors. The credit bureaus must either verify the disputed items or remove them. Creditors reporting negative items that contain mistakes often ignore verification requests, which forces the bureaus to remove them. This cleans up your bad credit because other lenders no longer see them.

Instructions

Order free Experian, Equifax and TransUnion credit reports via annualcreditreport.com. The FTC explains that this site is the only official source for the no-cost reports mandated under the Fair Credit Reporting Act (FCRA). Orders can be completed online or through a toll-free telephone number.

Examine every bad credit item for mistakes. Scrutinize dates, lender names, account balances, credit limits, payment dates and anything else that might be incorrect. You can legally dispute a report entry as long as there is truly a mistake, even if it is minor, according to the Motley Fool financial advice website.

Circle or highlight every questionable item on each report and write a letter to each credit bureau stating that you are disputing those entries. Explain your reason for each dispute and ask the bureaus to investigate within 30 days. That is the allowed time frame under the FCRA. They must erase anything that is not verified within that time.

Mail your letters to each credit bureau via certified mail, and ask the post office to provide you with a delivery receipt. The bureaus allow online disputes, but the FTC recommends sending hard copies and getting proof of the delivery dates.

Review each credit bureau's response. You should receive these within 30 days when the investigations are complete, and they should include new credit report copies. The bureaus must tell you if they validated any of the items. Those will still show up on the reports. Any other bad items you disputed should be gone.

What Are the Credit Score Companies in the USA?

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One company in the U.S. has a credit scoring system so accurate and respected that it is essentially the only one that matters to lenders and consumers. Other firms in the U.S. imitate the Fair Isaac risk model, such as the major credit reporting bureaus. However, the major bureaus always try new ways to break the influence of the FICO model.

Although the American credit scoring system goes back the late 19th century, it was not until the late 1980s that the Fair Isaac Corporation (FICO) introduced the first algorithm to measure a person's willingness or ability to pay back a creditor. As of 2011 the FICO score is the dominant formula in the consumer credit industry. When someone mentions credit scores, he usually means the FICO score.

Before 2011 some of the credit bureaus sold FICO scores, but none of the major bureaus -- Equifax, Experian and TransUnion -- do any more. The credit bureaus collect data and FICO develops its scoring system based on that data. All three of the major agencies have developed their own models in conjunction with FICO, so FICO scores and scores from the bureaus tend to be very close. However, most lenders prefer the FICO algorithm, because formulas from the bureaus tend to have slight variations that can cause fluctuations in scores.

Other credit scoring and credit reporting agencies exist, but hardly make a blimp on the radar of the lending industry. Most of these companies are called "alternative credit agencies" and only verify payment histories that customers send to them. Also, some creditors do not use the services of any credit scoring company, preferring to use their own model. Insurance companies, for instance, tend to have custom-designed formulas that include driving history.

The major credit bureaus constantly research new formulas that could surpass the FICO score, because every time the bureaus sell one of their proprietary scores they must pay Fair Isaac a royalty fee. In 2011, the current such model from the agencies is VantageScore. The agencies claim this model can reduce variations in scores, but as of 2011 less than 10 percent of all lenders use this model and those that do often still purchase a FICO score.

How to Order a TransUnion Credit Score

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When ordering your TransUnion credit report directly through TransUnion or through the free annual credit report website, your credit score is not included on the report. In order to view your credit score, a price must be paid. The good thing about TransUnion is that when you order your credit score, the company also provides you with your score from the other two bureaus, Equifax and Experian.

Instructions

Visit the TransUnion website.

Click the "Personal" tab at the top of the page.

Select the option to get your credit score.

Complete the online application by entering information such as your name, address, social security number and date of birth. You will also be able to create a unique username and password to access your online account.

Enter your credit card information to purchase your score. Often, TransUnion will offer a free trial credit monitoring service. This service will allow you to see your credit score for free. Once the free trial period has expired, your credit card will be billed the $14.95 subscription fee. You can cancel your subscription anytime before the trial period expires to prevent charges to your credit card.

View your TransUnion credit score by logging into your online account.

How Much Can a Notice of Federal Lien Reduce My Credit Score?

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The Internal Revenue Service (IRS) will file a lien against your assets if you leave your federal tax debt unpaid. After filing its lien, the IRS notifies you via a Notice of Federal Tax Lien. A federal tax lien attaches to all property that you own and also appears on your credit report. Tax liens negatively impact your credit rating, making it more challenging to get approval for new credit.

Tax liens show up on your credit report as derogatory public records. While a tax lien will inevitably lower your score, the degree to which your credit rating suffers will vary. The Fair Isaac Corporation -- the organization responsible for calculating credit scores -- keeps the exact credit scoring algorithm a closely guarded secret. Thus, there is no way to estimate exactly how much your credit score will suffer from a federal tax lien. In general, however, the better your credit rating is, the more damage it will incur.

A tax lien only damages your credit for the amount of time that it appears on your credit report. Unlike other negative credit records, such as collection accounts, bankruptcies and judgments, the Fair Credit Reporting Act does not set a formal reporting period for tax liens. Because of this, an unpaid tax lien can remain on your credit report indefinitely.

Each credit bureau determines how long it will allow a tax lien to appear within your credit files. Experian, for example, removes unpaid tax liens after 15 years. Should you pay off your federal lien, however, the credit bureaus will remove the lien seven years from the date you paid it off.

A lower credit score makes getting approved for loans, credit cards and housing more difficult. An unpaid tax lien, however, poses an additional risk for lenders other than past evidence of poor debt management. Federal tax liens attach to all property you own even if you get the property after the lien was filed. Thus, a lender may turn down your application for secured debt, such as an auto loan, based on the lien itself rather than a damaged credit rating.

A tax lien negatively affects your credit score, but you can take action to reduce the damage your credit rating suffers. Paying the tax lien not only limits its reporting period to a mere seven years, but it also prevents you from posing a greater risk to future lenders.

While paying off a tax lien restricts its reporting period, the lien itself remains a negative entry within your credit history. Provided you pay your creditors on time and practice good debt management, the tax lien will have less of a negative effect on your credit over time. This is because the FICO scoring formula places less importance on older entries. Thus, you can re-establish a positive credit profile even with a tax lien on your record. Once the reporting period expires and your tax lien disappears, your credit score will improve considerably.

Saturday, November 30, 2013

Instructions

Friday, November 29, 2013

Account Status Abbreviations

Payment Status Abbreviations

Account Ownership Abbreviations

Factors

Example

Considerations

All Individuals

Unemployed

On Welfare

Other Free Credit Reports

Instructions

Forbearance Basics

Forbearance Benefits

Importance of Credit

Forbearance's Impact on Credit

Applying for Forbearance

Thursday, November 28, 2013

Why is Employment History on a Credit Report?

Impact

Considerations

Tip

Pay Off Credit Cards

Disputes

Add Credit Variety

Old Credit Cards

Warning

Wednesday, November 27, 2013

Prepare

Think Positively

Be Frank

Don't Burn Bridges

Tuesday, November 26, 2013

Instructions

Identification

Unusual Accounts That Go to Collections

FICO 08

Tip

Saturday, November 23, 2013

Accounts

Credit Scores

Balance

Warning

Thursday, November 21, 2013

Instructions

Starting a Credit History

Benefits

What Builds a Credit History?

Tips

Calculating Credit Scores

Inquiries

Checking Your Own Score

Considerations

Instructions

Wednesday, November 20, 2013

Instructions

Monday, November 18, 2013

Instructions

Input

Due Dilligence

Different Policies

Different Scales

Sunday, November 17, 2013

The Facts

Features

Time Frame

Considerations

Warning

Saturday, November 16, 2013

Payment History

Amounts Owed

Length of Credit History

New Credit

Types of Credit

Not Considered

Friday, November 15, 2013

Identification

Potential