How to Build a High Credit Score

Building and maintaining a high credit score can be challenging under the best of circumstances. But knowing what variables the credit rating agencies look for can make the process much less difficult. Although the exact formula for determining your score is a secret, getting a good score requires more than just eliminating all of your debt.

Instructions

1

Control your spending. This is still the most important aspect of maintaining a good credit score. Don't give in to impulse buying, especially with big-ticket items like cars or boats. Be certain that you can comfortably fit the payment of anything you buy into your budget.

2

Keep at least some of your old credit card accounts open, even if you're not using them any more. The rating agencies will consider the number of accounts you have open, and if you close out all of your old accounts, then your ratio of outstanding debt to your total credit lines will diminish as will your score.

3

Limit the amount of money you spend on your credit cards. Never max out your credit card or revolving debt if you can help it. Try and limit your balances to no more than two-thirds of your credit limit. The rating agencies will look favorably on this and increase your score over time accordingly.

4

Make your payments on time, and pay off your credit card balances in full each month, if possible. This will not only prevent you from paying interest on your balances but will also improve your score over time. Avoid late payments, as a single late payment can make a sizable difference in your score.

5

Find out your credit score by pulling your credit reports from the three rating agencies. You can do this each year at the Annual Credit Report website. This is the only site that allows you to pull all three of your reports (from Transunion, Experian and Equifax) for free each year. Each agency will assign you a credit score from 350 to 850, based upon the amount of debt you carry and your record of paying it off on time. Each score will probably differ slightly; the middle score is often what lenders will use to determine whether you qualify for a loan. Check your reports to make sure that everything in them is accurate and current. Report any discrepancies to the appropriate rating agency immediately if you find items on them that are inaccurate.

6

Purchase identity theft protection to shield you from identity theft. Identify theft can ruin your credit score for years to come and cost you a great deal of time and money to deal with. Many financial institutions offer this kind of protection.

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How Long Does it Take Once I Pay a Collection Bill for it to Show As Paid on My Credit Report?

Creditors typically make monthly reports to the credit bureaus. In instances where you have paid off a delinquent debt, the debt should show as having been paid within about 30 days of the pay-off date. However, in some instances creditors fail to notify credit bureaus about paid-off debts, and even if the debt shows as having been paid, you may not see a big rise in your credit score.

Errors

Under federal law, the three major credit bureaus -- Equifax, Experian and TransUnion -- have to provide you with a free annual credit report through the website annualcreditreport.com. This law exists so that you have the opportunity to review you credit report and notify the bureaus of any errors. When you default on a debt, your creditor may sell the debt to a collection firm. That firm then reports the debt to the credit bureau and this could cause the debt to appear twice, once with the original creditor and once with the collection firm. When you pay it off, the collection agency version of the debt may show as settled but the original debt may still show as unpaid. Resolve this by sending copies of your payoff receipt, details of the original loan number and a letter of explanation to each credit bureau. Bureaus normally rectify issues within 30 to 45 days.

Seven Years

When you default on a debt, it causes your credit score to drop, but the debt also shows up on your credit report in a number of ways. Firstly, it shows up as a 30-day late pay. Credit bureaus also record it as being late at the 60-, 90- and 120-day marks. If the creditor writes off the debt as a loss, it shows up as a "charge off," and it also shows up as a debt that you currently owe. When you pay it off, it appears on your report as "paid" rather than delinquent, but a record of the charge-off and the late payments remain on your credit report for seven years.

Credit Score

A number of factors affect your credit score, including your balances as a percentage to your available credit and your monthly payment history. The credit bureaus rely more heavily on recent credit activity rather than past events. Therefore, if you pay off a years-old delinquent debt, it may have little positive impact on your credit score because your most recent credit activity has a much greater impact on your credit score.

Considerations

It can take months to pay off a delinquent debt and ensure that it shows as paid on your credit report. Furthermore, you may see little or no change in your actual score once you settle the debt. However, while debt settlement does not always drastically improve your credit score, it can make it easier for you to get a bank account or to sign up for any kind of contract service. Many banks and service providers refuse to offer you new accounts until you have settled your delinquent debts. A bank can even refuse to open a checking account in your name until you have settled your past-due debts. Therefore, your payment history as well as your actual credit score can have a major impact on your life.

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How to Check a Credit History in India

Everything we do financially can have an effect on a credit rating and, as with most things in life, going down is easier than going up. It is important that you check your credit history at regular intervals to make certain that it is correct. Inaccurate files can mean refused credit. It is only recently that it has become possible to check your personal credit history in India. The service is not free, and only one agency is appointed to offer this service.

Instructions

1

Apply in writing. This is the only way currently available to check your credit history in India. You must complete the official request form, which can be downloaded in the Resources section.

2

Provide original documentation to get your credit history. Copies will not be acceptable. These include passport, voters' identification paper or a Permanent Account Number, which is produced as a 10-digit alphanumeric listing on a plastic card (similar to a credit card) and is issued by the tax department of India.

3

Provide original documentation proving your place of residence; these may include your latest bank account, electricity or telephone statement.Copies are not acceptable.

4

Purchase a demand draft to the value of Rs 142/- and make it payable to the Credit Information Bureau (India) Limited to be payable in Mumbai; this fee is not refundable. A demand draft or "DD" as it is referred to, is the method that most Indian banks use for transferring money. You will need to obtain an application form from your bank to purchase a demand draft.

5

Ensure that all the documents are placed in one envelope together with the fee and mail to CIBIL, P.O Box 17, Millennium Business Park, Navi Mumbai -- 400710. Your credit history report will be sent to you by mail upon receipt and verification of the completed information.

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Does Paying Off a Defaulted Student Loan Restore Credit History?

If you default on any debt, you will receive negative notations on your credit file. Paying the debt afterward does not undo the damage to your credit report. In the case of some defaulted student loans, however, it is possible to repair your credit history by bringing the loan current.

Types

Student loans can be categorized as either federal or private. Federal loans are distributed by the U.S. government and private loans are distributed by private institutions such as banks.

Loan Rehabilitation

If you want to bring your defaulted federal student loan current, you must undergo loan rehabilitation. This requires you to make at least nine payments on time to bring your loan out of default. If your student loan is private, you may need to do no more than catch up on your payments.

Credit History

Once you successfully complete loan rehabilitation for your federal student loan, all evidence of your previous late payments will be removed from your credit history. Each payment notation on your federal student loan will update to "paid as agreed."

Considerations

You may be able to negotiate with your private lender to remove some or all of your late payment notations once your student loan is no longer in default. A private lender, however, is under no obligation to alter your credit report.

Warning

A defaulted federal student loan will prevent you from being eligible to receive government-backed mortgage financing such as Federal Housing Administration and Department of Veterans Affairs loans.

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How to Stop Unwanted Inquiries on Your Credit Report

Whenever an individual or company pulls up your credit report, it appears as an inquiry on your credit report. Hard inquiries are those by a potential lender that you initiate through an application for credit, and these affect your credit score. Soft inquiries include checking your own credit report, having an employer or landlord check your credit report, and inquiries for preapproved or prescreened credit card offers. You can take steps to stop unwanted inquiries of both types.

Instructions

Stop Unwanted Hard Inquiries

1

Apply for new credit only when you need it. Because an application generates a hard inquiry that affects your credit score, you should consider whether you want new credit enough to have an inquiry.

2

Ask your credit card company if it pulls your credit report before raising your credit line. If so, avoid the inquiry by not requesting a credit line increase. Some credit card companies will periodically increase your credit line without checking your credit report.

3

Do not apply for a checking account if the bank must make a hard inquiry to give you the account. You can ask what its policies are before applying for the account.

Stop Unwanted Soft Inquiries

4

Visit the official OptOutPrescreen.com, which allows you to remove your name from the list of people who can receive prescreened credit card offers, each of which generates a soft inquiry on your credit report.

5

Click on the "Click Here to Opt-In" or "Opt-Out" button at the bottom of the page.

6

Select the option next to "Electronic Opt-Out for Five Years" and click "Submit."

7

Type your name and address into the appropriate boxes. You can also type in your date of birth and Social Security number, which help improve the chance that the website will be able to find your record and remove you from the list. Click "Confirm" when you are done.

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What Is a Bad Beacon Credit Score?

As of 2010, none of the three major credit reporting companies sells the FICO score used by most lenders, but they do provide credit scores based on the FICO model. Experian, for instance, sells the Beacon score. The Beacon score has the same numerical range as the FICO model, and it weighs the variables in its credit score formula much the same way the FICO formula does. Thus, a bad Beacon score means you probably have a poor rating at the other credit rating companies.

Identification

The FICO and Beacon scores range from 300 to 850, for a 550-point spread. The average score in the U.S. was a 692 in January of 2011, according to Experian. Having a score below 692 does not mean you have a bad score. Lenders decide whether to approve someone for a loan and what interest rates to charge based on several factors, although credit score is one of the most important factors. Usually, anyone with a score below 620 is considered a bad credit risk, according to several reports provided by the Credit Scoring website.

Interest Rates

A poor Beacon score likely disqualifies you for most loans. You may have to go to a sub-prime lender, which compensates for your added credit risk by offering its worst interest rate available. In 2008, for instance, the difference in interest rates between the best and worst scores was about 4.3 percent. On a 30-year, $100,000 mortgage, this adds up to an extra $110,325 over the life of the loan, or $307 per month.

Other Effects

A poor Beacon score negatively impacts areas of your life other than your financial activity. Landlords may deny you a residence because you are more likely to break your lease than someone with good credit. Insurers could deny you coverage or raise your premiums, because people with poor credit tend to make the most claims. You could fail to land a job if the employer believes your credit report shows a low amount of integrity and financial duress than could compromise the position.

Tip

Equifax, Experian and TransUnion -- the three main credit reporting bureaus -- provide each consumer with a free credit report each year through AnnualCreditreport.com. You should note any erroneous negative items on your report and attempt to remedy the situation by filing a dispute. If you have missed payments, make it a priority to pay on time. Also, shop around. A Beacon score that's unacceptable for one lender could be acceptable for another.

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How to Obtain All Three Credit Reports

Credit is one of the most important financial aspects of adulthood. Credit worthiness determines whether someone can obtain a loan, travel or receive a good rate on auto insurance. One way that lenders and financial institutions determine someone's credit rating is to pull a credit report. For the consumer, obtaining all three credit reports from Experian, TransUnion and Equifax before obtaining a loan will prevent any uncertainty when a lender pulls the report.

Instructions

1

Gather your personal information and be prepared to enter into a computer or present it over the phone to request a report. Make sure that your Social Security number, prior addresses, employers and salary information is accurate and up to date.

2

Visit the Equifax website and choose from a variety of options based on need. Here you can obtain a three-in-one report---this pulls information from all three reports, including Experian and TransUnion, for around $30. The report also contains a credit score. In addition, Equifax offers services such as ID Patrol, which, for around $15, notifies the member if his credit information is showing up on the Internet or elsewhere. There is also a Credit Watch Gold service for around $10 a month that alerts a member of any changes on his report and offers unlimited credit reports all year. In addition, a score watch, for around $10, sends a free FICO score to the member's email and suggests the best time to apply for a new loan when rates are at their lowest.

3

Visit the Experian website. Here you can pull your credit report at any time. This site offers a combination of all three reports, FICO scores and fraud protection alerts. Prices start around $10 for just an Experian report or around $40 for all three reports.

4

Inquire at TransUnion to obtain a credit report through its website. Here you can pull all three national credit bureaus, or just the TransUnion report. One beneficial service TransUnion offers is credit monitoring. This ongoing service is around $15 a month and gives you unlimited access to your credit report and score, as well as notification of changes and new account openings. TransUnion also delivers a financial analysis using charts and graphs.

5

Obtain all three credit reports for free once a year at AnnualCreditReport.com. This is the only location that offers 100-percent free credit reports for consumers once every 12 months. Be sure to have personal information ready before filling out forms.

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