Rapid Credit Reporting

Claims from companies that they can fix a credit score in hours are usually bogus, but only a few companies are qualified to potentially repair your credit report within days through rapid re-scoring. Rapid re-rescoring, however, is not a commercial product so you will have to go through a qualified agent. Also, they cannot fix everything on your report.

What is It?

A rapid re-scoring service cannot fix legitimate items on your credit report, only incorrect items. If, for example, you are a victim of identity theft and someone takes a loan in your name, a rapid re-scoring service could remove it from your report in 72 hours. Normally, the process of disputing an item and verifying it takes up to 90 days before the credit agencies update the report.

Finding a Re-scoring Service

Only about 200 companies in the United States offer re-scoring service, because the credit bureaus only trust a few firms with this function, according to Financial Web. Private consumers cannot access a re-scoring service, only qualified lenders, such as mortgage providers and banks. Thus, you must find a lender with a relationship with a re-scoring service. This service costs between $25 and $50 per item in 2010.

Benefits

The consumers that benefit the most from rapid re-scoring are those shopping for a loan immediately or in the very near future. The cost to correct a negative item pales in comparison to what you might save on a loan. Saving just 0.1 percent on a $100,000 mortgage, for instance, saves $100 per year.

Tip

Using a rapid re-scoring service does not guarantee you will see an improvement in your credit score, because dozens of variables go into the credit score formula. Also, you usually must have evidence that any item is truly a mistake. This typically means having a letter from the creditor clearly stating the item was reported in error, according to MSN Money Central. Re-scoring services can contact a lender for you, but this will prolong the verification process.

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Credit Score & Bankruptcy

The most widely-used scoring system utilized by credit reporting agencies is the FICO (Fair Isaac Corporation) credit score. Scores can be up to 850 and are calculated from various credit data contained in your credit report. The data is reported in five categories; each accounts for part of your overall credit score. The effect of bankruptcy depends largely on your entire credit profile prior to filing for bankruptcy protection. You will be required to complete a credit counseling course from a government-approved organization within the six-month period prior to filing for bankruptcy protection.

Effects

A number of factors influence how much your credit score decreases after bankruptcy, including the length of your credit history, your credit score prior to filing and which, if any, debts were kept separate from the bankruptcy. The more credit accounts included in your bankruptcy, the more your score will be impacted. Someone with previously stellar credit may suffer a huge drop in her credit score. Someone who already has several negative marks in his credit history may notice a less significant drop in his credit score.

Chapter 7 Bankruptcy

Chapter 7 is a liquidation bankruptcy -- most, if not all debts get discharged. Generally, a Chapter 7 bankruptcy remains on your credit report for up to 10 years from the filing date. According to MyFICO.com, this only pertains to the Public Records section of your report; the individual credit accounts in the bankruptcy are removed after seven years.

Chapter 13 Bankruptcy

Chapter 13 is a reorganization bankruptcy -- debts get repaid over three to five years. Chapter 13 bankruptcies remain on your report for up to seven years from the filing date. However, they may be less damaging than Chapter 7 bankruptcies to your credit score as long as you do not default on your repayment plan.

Considerations

Some attorneys and financial experts believe that a Chapter 7 bankruptcy can improve a damaged credit score. Your debt-to-income ratio will dramatically improve; your negative payment history will be gone and replaced with "Discharged in Bankruptcy," of which the effects will fade over time; and if you continue to make payments on secured debts not included in the bankruptcy, you are building a positive payment history.

Rebuilding

Normally, your FICO credit score is partially determined by comparing your credit profile to other people in the general population. Following bankruptcy, your credit is compared only to others who have filed bankruptcy so in essence, you may be able to improve your rating faster after bankruptcy. To rebuild your credit profile faster, open credit accounts with major banks, as their approval carries more weight. If some time has passed, ask for an increase of your credit limit to raise your available credit (but do not use the extra credit) and check your free annual credit reports from AnnualCreditReport.com. If your reports have errors, remove them.

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Will Paying Off My Debt Help My Credit Score?

Your credit score is a three-digit number from Fair Isaac Corp. or one of the three major credit bureaus. It has a major impact on how easily you can borrow money and get insurance policies. You do not directly control your score, as it is calculated with data from your TransUnion, Experian and Equifax credit reports, but you can do things, like paying off debt, that have a lot of weight in the scoring formula.

Effects

Your debt load affects your credit score, and revolving accounts like credit cards have the biggest influence, according to the MyFICO scoring website. Focus your balance reduction efforts on your credit cards by paying extra money on them, and pay any installment loans like mortgages, car payments and personal loans as agreed. The declining revolving account balances raise your score. The Motley Fool website recommends putting the most money onto your highest interest credit cards for the best debt-lowering impact.

Weight

Debt load is the second most important factor in credit scoring formulas, outweighed only by payment history. MyFICO explains that the money you owe and the specific types of accounts that have balances make up 30 percent of your credit score. This area also includes the original balance on installment loans compared to how much you have paid and the proportion of your available credit that you have used on revolving accounts.

Other Strategies

Combine other credit score -aising strategies with debt reduction for the best effect. MSN Money writer Liz Weston recommends monitoring your credit reports by getting free copies from annualcreditreport.com every year. Dispute mistakes that hurt your credit score, like prompt payments that show up as late. The credit bureaus accept complaints through their websites. Set up automatic payment for as many bills as possible to avoid delinquencies, which take a big toll on your score. Use credit regularly, but pay off as much as possible every month to keep from building your debt loan back up once it reaches a manageable level.

Warning

Leave credit cards open after you pay them off or you risk hurting your credit score. Old accounts give you a long-term credit use history, which helps your score. The unused credit also offsets other debts you owe because scoring formulas weigh your owed amounts against available credit lines. The Board of Governors of the Federal Reserve System explains that banks cannot legally charge a fee for account inactivity, but they can close the credit card. Avoid closure by buying things with the card every few months and paying the full balance immediately.

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How to Secure All Three FICO Scores

Most consumers realize they have a credit or "FICO" score, but many fail to appreciate its importance. Your FICO score is one of the most important numbers in your financial life. Your FICO score determines what loans you can get and how much interest you'll pay. In some cases, employers are even using FICO scores when making hiring decisions! That's why it's so important to regularly check your FICO scores from all three of the major credit rating bureaus. You're entitled to one free credit report from each agency per year.

Instructions

1

Contact Equifax, the largest of the credit rating bureaus, by calling 1-800-685-1111 or by writing to: Equifax Credit Information Services, P.O. Box 740241, Atlanta, GA 30374. Be prepared to provide your full name, date of birth and Social Security number. You can also contact Equifax via their website.

2

Contact Experian by calling 1-888-243-6951 or by writing to: Experian, 475 Anton Blvd., Costa Mesa, CA 92626. Again, be prepared to provide your full name, date of birth and Social Security number to receive your Experian FICO score. You can also contact Experian via their website.

3

Contact Transunion by calling 1-800-916-8800 or by writing to: Transunion Consumer Relations, P.O. Box 2000, Chester, PA 19022-2000. Provide your name, date of birth and Social Security number to receive your Transunion FICO score. You can also contact Transunion via their website.

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How Much Does Opting Out Hurt Your FICO Score?

Congress overhauled the credit card industry with the 2009 Credit CARD Act, which allows people to opt out of term changes 45 days in advance of them taking effect. Opting out of changes to your credit card agreement could hurt your FICO score, but the severity of the damage relies on other information on your credit report.

Prescreened Offers

If "opting out" refers to removing yourself from the list of creditors who tender credit offers without an application, it will have a neutral impact on your credit score. Prescreened offers run a "soft pull" on a person's credit history, which means the inquiry was not initiated by the borrower, and thus, not an application for credit.

Opting Out of Term Changes

The act of opting out of changes to a card's terms and conditions will not hurt your score unless failing to agree to the new contracts requires closing the account. If you have to close your credit card account, it will hurt your credit utilization ratio and possibly your mix of accounts. Lowering your overall credit limit could make it appear you need a higher percent of your credit than you really do. Also, if you only have one card, closing it will reduce the variety of your accounts---10 percent of your credit score.

Is It Worth Opting Out?

If you can withstand the temporary hit to your credit score and do not plan on needing credit for the foreseeable future, you can probably opt out safely to avoid higher interest charges. On the other hand, if you are shopping for a mortgage or other large loan, you want the highest score possible to get the lowest rate, so accepting the changes could be in your best interest. Just a half-point on a $300,000 mortgage, for example, would outweigh any increase on, say, a $2,000 balance on a credit card.

Tip

You could transfer the remaining balance on a card instead of opting out. Credit card companies often allow new accounts to transfer balances from other cards at zero percent for six to 18 months. Also, if you cannot pay off the balance immediately, you will continue making payments under the old terms on the card, which could include discretionary rate increases.

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Credit Cards to Help Get Your Credit Up

Even people coming out of bankruptcy should start using credit cards to help rebuild their credit history, suggests experts such as Justin Harelik of Bankrate.com. Credit cards only help build credit when the borrower uses them responsibly or else they could do far more harm than good. As long as the borrower thinks he can handle new credit he can almost always find a card.

National Versus Small Banks

All credit cards are basically the same from a credit scoring viewpoint. However, it is better to have an account with a national bank, because such banks almost always report to the three national credit bureaus and tend to charge lower fees and finance charges, according to the BCS Alliance. Also, future lenders respect lines with big-name banks rather than community financial institutions or debt repair companies. Consumers with bad credit scores can expect to have only retail store or gas cards and secured accounts -- backed by collateral -- available to them.

Use Strategy

Opening a new account always lowers a credit score a few points. With credit cards the percent of the credit limit a consumer uses plays a big part in the FICO scoring model used by most lenders. Thus borrowers should be careful about accruing a balance on their new card, especially the first month, because most borrowers put the annual fees on the account during the initial billing cycle. On a retail or gas card, which tend to have small limits, the fee can cause a high credit utilization ratio immediately.

Considerations

Once a consumer acquires over seven credit cards the FICO system dings the score a little bit, according to The Motley Fool. Also, it will probably take about six to 12 months of positive payment history before the new card adds a significant amount of points to the borrower's credit score.

Tip

Secured cards work best when the borrower cannot qualify for an unsecured card. Once the consumer builds a sufficient amount of payment history the creditor will likely turn the account into an unsecured line or offer a unsecured card. Before a consumer goes for any card, he should ask the creditor to which bureaus it reports. Unless the lender reports to Equifax, Experian and TransUnion, the borrower is not maximizing the amount of history the account builds.

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What Is a Good Credit Score?

A person's credit score is used for many things these days. Employers often use a person's credit score to determine if he is trustworthy for a job. Landlords use a credit score to determine if a person is going to pay his rent. Mortgage companies and other lenders use it to decide if a person is a good credit risk. But how many people actually know what a good credit score is? Depending on the purposes and other factors, the answer to that could vary.

Identification

The higher a person's credit score, the better it is and the more opportunities she will have for getting credit. The highest credit score a person can have is 850, according to the FICO score scale. Few people have a score of 850, which is excellent.

However, the range of a "good" credit score is between 660 and 749, but this figure is different depending on what type of company you are dealing with. For instance, a car finance company may be more lenient than a credit card company because there is a form of collateral in the value of the car if you decide to stop making your payments. Every company is different, though, and some of them will look at your particular situation in addition to your credit score before making a final decision.

Benefits

People that have a credit score that is in the "good" range typically do not have many problems when it comes to borrowing money or obtaining financing for a mortgage, car or other loan. In addition to getting loans and financing with less trouble, a good credit score results in a lower interest rate. Depending on what type of loan the person receives, the interest rate could mean a difference of thousands of dollars over the life of the loan. An excellent or good credit score also opens up more opportunities for a person as she can often apply for and obtain personal loans for emergencies, home improvements and other reasons.

Types

Credit scores are typically calculated by three major credit bureaus: TransUnion, Equifax and Experian. Many people will have different credit scores through each of these bureaus because different creditors report to different bureaus. For instance, those pesky school loans you have may only report your payments (or lack thereof) to the Equifax bureau. As a result, Equifax will have a different overall credit score for you than the other two bureaus. Some creditors report to all three bureaus. When a creditor determines if you have a good credit score, it will check all three bureaus to make a decision. If all three credit scores are good, there should be no problem obtaining financing.

Warning

A good credit score is ideal. However, there are many warnings to heed even if you do have a good credit score. People with a good credit score can easily fall deep into debt if they are not careful about the money they borrow and their payments. A couple of late payments on a new car that you obtained financing for could result in a lowered credit score. Getting too many credit cards or charging too much on your current credit cards could lower your good credit score in a matter of months. Don't let your good credit score become more of a detriment than an advantage by getting too much credit.

Considerations

When trying to determine if you have a good credit score, the credit bureaus look at several factors regarding your past and current financial situation. One of the main aspects they consider is the financial responsibility you've exhibited. They check to see how often you've paid your bills on time and how often you pay them late. Late payments will negatively affect your good credit score. They also look at how much debt you have in relation to your income, or your debt-to-income ratio. A high amount of debt with a low amount of income will negatively affect your good credit score, too. The length of time you've had credit and the number of times you've applied for credit recently can also affect your good credit score one way or the other, depending on the answers to those questions.

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