Jason Gluckman asked:




Credit rating scores are numbers produced by a mathematical formula according to the information contained in your credit report. This information is processed through special software and a score is arrived at. The score is used by financial institutions for evaluating an individual’s possible ability to pay back a debt.

Credit rating scores vary at different times depending on the changes or additions in your credit history. Every credit rating score is accompanied by a maximum of four reason codes. Reason codes indicate the reason why a consumer did not score high. There are various credit rating systems. Fair Isaac Credit Rating Score (FICO) is the most widely used system of credit scoring in the United States.

The scores depend on several factors including payment history, amounts owed, length of credit history, pattern of credit use, and types of credit in use. Factors that can damage your credit rating score include absence of credit references, late payments, and unfavorable credit card use.

Usually, credit rating score is a three digit number ranging between 375 and 900. The median score in the United States is about 720. Higher scores mean more financing options and better interest rates. Scores below certain numbers result in the rejection of credit. When you apply for a mortgage, home equity loan, car loan, line of credit, or business loan, the financial institutions first check your credit rating scores from the credit bureaus.

Credit rating scores significantly affect your ability to get credit. Borrowers now use the scores as a part of their general financial promotion strategy. Some insurance companies use your credit rating score to set your premium rates and some prospective employers use this to estimate your sense of responsibility.

Theodore

Taff Nelson asked:




Your credit rating is an extremely important part of your life, coming into affect any time you apply for a loan, mortgage, credit card, or any other type of credit. Those you’re wishing to borrow from, take a look at credit rating, in an attempt to judge if they should lend to you, and at what rate.

For individuals who are unaware of what a credit score is, a credit score is simply a history which contains information on your borrowing in the past, in conjunction with any credit agreements, and how you’ve managed those repayments over the last 6 years.

If you’ve ever had your application for credit rejected, this might be because either your credit rating wasn’t at a good enough level, or because something in your credit report alarmed the lender.

If you have an unsatisfactory credit score, or in case you have a decent credit rating, there are numerous ways that you may improve it, and it is these ways to improve your credit rating, which I’ll be mentioning in this article.

Firstly, I really want you to think about how you’d go about lending somebody else money. Let’s see things from the lenders viewpoint. I’m sure should you be going to lend a relative or friend money, you’d only do so under certain situations, you wouldn’t lend money to just anyone, as you’d most certainly never see it again. If we see things from this angle, we get a better idea of where lenders are coming from.

You need to have the capacity to display to these lenders that you’re stable. The less you move home or change bank accounts, the better. Also adding a landline telephone number on applications is viewed as much better than simply adding a mobile number, and if you’re eligible to vote, be certain to add yourself to your local council’s electoral roll.

When it comes to payment, it’s extremely important that you make any payments to credit card issuers, loan providers or mortgage companies in time, as any missed or late payments appear on your credit history. The same is true of household bills.

Lastly, don’t make too many applications for credit. The reason behind this is that it leaves a footprint, in that a mark is left on your credit report each time a company needs to access it. If too many of these footprints are left, alarm bells will ring for potential lenders. The easiest way around this is to cut down on the amount of credit applications you make, only making them when really required, and where there will be a high probability of you being accepted.

Shannon

Jed C. Jones Ph.D. asked:




There are a lot of myths floating around about how to improve your credit rating. Truth is, a better credit rating can save you $1,000s in annual debt payments.

Here I dispel 5 myths about improving your credit rating:

Myth #1: I do not stand to gain much financially by improving my credit score

The Truth: Even a 50-point improvement in your credit score can save you $1,000s in annual debt payments. Reason: a better credit score means you are eligible for lower interest rates on your loans and credit card debt, and lower rates can literally save you hundreds of dollars each month.

Myth #2: I should close as many credit cards as possible

The Truth: Actually, closing out your credit cards can actually backfire and worsen your credit score. This is because 30% of your FICO score factors in the amount you owe versus the total amount of credit extended to you. By closing cards, you hurt this part of your score. Pay down cards: yes, but close them: no.

Myth #3: I should reduce the types of debt I have to as few as possible

The Truth: About 10% of your credit score is based upon the diversity of debt instruments you have. Translation: it is better to have a few bank cards, a few credit cards, a few department store cars, and maybe an auto loan or a mortgage. Do not run out and close your department store credit cards, for example. Just pay down the high-interest cards and then put them away in a shoebox in your closet but leave the accounts open.

Myth #4: It is too late to fix errors and late payment issues from the past

The Truth: In reality, you can and should try to fix errors on your report and to reconcile late payments, even if those items occurred months or years ago. If you can prove that the errors you found are indeed errors, the Big Three agencies will remove them from your report immediately. Regarding late payments from the past, you can usually offer to make those payments even if it is now months or years since they were due. In exchange, ask the institution in question to remove the corresponding glitch from your report. Since 35% of your score is based upon your payment history, this can really boost your score.

Myth #5: I should not apply for more credit cards

The Truth: Actually, increasing the total credit amount extended to you can actually improve your score. This is even true for high-interest cards; just be sure not to actually use them after you receive them! And, watch out for cards with annual fees before you apply.

There are many myths floating around about how to improve your credit score. By educating yourself, you stand to significantly improve your credit rating.

Heather

Marc Chase asked:




You probably already have a good idea of how important your credit score is, and why you should do all you can to keep it looking as good as it can. If it’s not in tip-top form, you do what you can to improve your credit score, whether on your own or through credit repair services.

But what’s the best way to raise or maintain your score? What are the major pitfalls to avoid so you don’t end up in the credit doghouse? In the interest of helping you fix your credit before things get too desperate, here are 3 of the top credit score killers to avoid.

1. Avoid late payments. We all know that making a payment late (or missing it altogether) doesn’t look good on your credit report. What most people don’t realize is how badly even one missed payment can reflect on your credit report, sometimes deducting as many as 20 points off your score. The longer you go without making a payment, the faster your score will fall. Always try to make the minimum payment on your credit accounts, and ALWAYS on the due date.

2. Keep your accounts out of collections. If any of your late payment accounts goes into collections, then your credit report is really in for a world of hurt. Collections can drop your score anywhere from 70-100 points, depending on the account, making you look completely financially irresponsible in the eyes of creditors. This could translate into rate hikes and a door slammed in your face if you should ever try and apply for new credit. Again, this can be avoided simply by paying bills on time.

3. Make sure you don’t have too many inquiries. This last point is an often overlooked one, and while it’s not as detrimental on your report as late payments or collection accounts, having too many recent inquiries can add up over time if you’re not careful. Luckily, you only run the risk of having too many “negative” inquiries if you are actively searching for new lines of credit and are consistently rejected. This makes you appear desperate to any other lenders or creditors who take a look at your report, and that’s never a good sign.

Use this guide to help you dodge the minefield of bad credit pitfalls out there and keep your credit in to form.

Frederick

Tim Delamatter asked:




Introduction To Credit Restoration

Rebuilding Damaged Credit

Bad credit can happen to good people. Don’t despair.

As you do so, your credit score will improve, resulting in better credit offers and a substantial savings in money.

With patience and timely repayments, you’ll likely be able to build a new credit history that creditors will look upon favorably when making decisions about your ability to handle even more credit.

The key to having great credit is to understand the factors that can hurt your Credit Score or Rating.

Bankruptcies, tax liens, judgments, student loans, credit counseling, numerous inquiries, repossessions, collections, late payments and charge-offs bring your score down and hinder your chances of obtaining a new loan.

How It Works

Pull 3 separate credit reports from the 3 credit reporting agencies, Experian, Transunion, and Equifax, and dispute any and all negative items.

The entire dispute process is done online and does not generate any inquiries or put any negative marks on your credit report.

What to Expect

Results can be expected within 30 – 45 days and are mailed directly to you from the 3 credit reporting agencies.

Once these results are received, you can dispute any remaining items you find on your Credit Rating, usually the results from any disputes can be reached within the 30-45 days it takes to receive your report.

Why Your Credit Score is So Important

The credit scoring model seeks to quantify the likelihood of a consumer to pay off debt without being more than 90 days late at any time in the future.

Credit scores can range between a low score of 350 and a high score of 850.

The higher the score, the better it is for the consumer, because a high credit score translates into a low interest rate.

This can save literally thousands of dollars in financing fees over the life of the loan.

Only one out of 1,300 people in the United States have a credit score above 800. These are
people that get the best interest rates, it is a small minority.

On the other hand, one out of every eight prospective home buyers is faced with the possibility that they may not qualify for the home loan they want because they have a score falling between 500 and 600.

Mortgage lenders consider a score of 700 or above to be very good.

The Five Factors of Credit Scoring

1. Payment History- 35% Impact

2. Outstanding Credit Balances- 30% Impact

3. Credit History- 15% Impact

4. Type of Credit- 10% Impact

5. Inquiries- 10% Impact

Once your Credit Rating is on track, you can buy that house, buy the car you always thought you never could have, you can get a credit card to feel safe when that crunch at the end of the month comes.

Your Credit rating doesn’t have to be a ball and chain around your neck. Just follow these easy steps and in six months you’ll be on your way to Credit rating bliss.

Connie

Nataliya Yakushev asked:




Building positive credit as early as possible is the best thing anyone on the brink of independence can do for themselves. Getting a head start makes it easier to obtain a line of credit when you really need it further down the road. If you wait too long to take your first stab at getting a credit card, lenders can deny you for not having enough debt – even worse, that rejection will show up on your credit report and pull down your credit score. While the notion seems backwards, credit card companies don’t want to take a blind risk.

Establishing revolving debt, or debt that fluctuates each month, like a credit card balance, is extremely important to creating positive credit. Lenders want to see that you have a history of spending money and being able to pay off those debts in a timely manner. Getting a low-interest card and using it sparingly is the best route to personal revolving debt.

A short-term approach to financial freedom – like avoiding opportunities to build a solid credit history – can prevent you from getting credit when you really need it, hurting your future financially.

Debit cards aren’t always the answer

Many college students and young people out on their own for the first time rely on debit cards as a credit card substitute, but this practice can actually hurt them in the long run. While using a debit card does force you to stay within your means and helps you save money by avoiding interest fees, you’re not creating a credit history of any kind.

Don’t piggyback on someone else’s credit

Parents often add children or spouses as “authorized users” to their card. This gives the authorized user free rein to use the credit card with none of the responsibility for paying the bill, which lies squarely on the original cardholder’s shoulders. It’s an easy way for students to quickly earn a good credit rating. However, late payments will negatively affect everyone associated with the account, regardless of who’s responsible for paying the bill. A secured card account may be a better choice and help avoid a poor credit history.

Get a secured credit card

People having trouble obtaining a traditional, unsecured credit card might want to build their foundation with a secured card. A secured card requires cardholders to offer collateral upfront to guarantee payment. It allows you to save and gain a line of credit at the same time. If you provide $300 upfront, your secured card will have a $300 spending limit. When you choose to cancel, the company returns that initial deposit to you, minus any outstanding debt.(1)

“Secure Credit Card List: Add Accounts, Build Your Credit Report History, and Improve Your Credit Score (Increase Your Savings Too),” The Credit Scoring Site

Laurie

Clara Ghomes asked:




Credit reports of an individual are a record of all his/her past lending transactions such as borrowing money, repayments, information regarding late payments (if any) and bankruptcy. The credit rating or score is based on the credit report of an individual. These ratings help in determining the ease and difficulty with which a person would (or won’t) get credit from credit card companies, banks or any other creditors.

The US laws have allowed every person to request for a free copy of their credit report every year. It’s very beneficial to get a free report, but the opportunity could get wasted if one doesn’t know how to read them. It also could be frustrating if a person doesn’t have any clue regarding how to read or understand their credit report. Nowadays, these reports are many important with the number of identity thefts which are on a rise and regular checking of reports helps a person in dealing with any issues in the report.

A person can request his/her copy of free report from any of the credit bureaus- namely TransUnion, Equifax and Experian (or TRW). One can also go online to get a copy of their financial records. One should make a habit of checking their report every year. Also, the credit bureaus should be contacted in case of any occurrence of incorrect information in an individual’s report.

After receiving the copy, one should sit down and review the report slowly and carefully. Each line of the report should be analyzed to get all the information regarding the debts. Many documents also provide ‘key’ with which one can understand the meaning of the symbols and codes used in the report. Also, a copy of the report should be faxed to the accountant for identification of any tax implications.

Any information which doesn’t make any sense should be highlighted. One should remind themselves to search online for explanation regarding the unclarified information. Friends with adequate knowledge regarding this report can be contacted for advice. One can also try free credit counselling agencies if there is still problem in analyzing the report, why it exists and the information on the report. Also, one should immediately investigate anything that doesn’t look familiar. The information should be reviewed on a monthly basis.

There are also companies which offer services of checking credit reports and confirming information for a fee. But, going online to request free such report can help in viewing the information for free. Also, these reports don’t mention the credit rating of an individual; they just provide all the list of accounts to check that the information on the report is true and contains no errors.

Bryan

Lee Selders asked:




What you will need:

1. A black permanent marker,
2. A copier,
3. Envelopes,
4. Stamps,
5. A telephone.

1. Call all 3 credit reporting agencies and order your credit report-it is free. Your order will be automated.

Transunion: 1-877-322-8228
Equifax: 1-877-322-8228
Experian: 1-877-322-8228

2. When you get your reports make a copy (front and back) of each report.

3. You will notice that all of the creditors are in long strings across the long part of the page.

4. The ‘good’ reports are usually the first ones reported (but not always, you will have to scrutinize each report) .

5. Do not do anything with the good reports.

6. When you come to the ‘bad’ reports you will want to do one of the following:

a) If it is for late payments it will show 30, 60 or 90 days late. . . . . if it shows 30 days late you will take your black permanent marker and write across the entry “NEVER 30 DAYS LATE” or enter the number of days that it states payment has been late.

b) If it shows that you are in default of payments you will write across the entry “NOT MINE”.

c) If it is a notice of federal tax lien, write “NOT MINE”.

7. By writing this across the entry forces the reporting agency to verify that it is yours or that it was late.

8. If you have several ‘bad’ entries, do not do all of them at once, pick 3-5 for each mailing.

9. Make a copy of what you send for your records. (This will prove to be an important step as it will let you know what you have already done. )

10. You only need to enclose the page(s) of the corrections you have made for mailing back to the reporting agency, no cover letter or cover page is necessary.

11. The reporting agency will send you an updated report within 30 days and either strike it altogether, or they will state that it is verified to be correct.

12. If they say it is verified do the same thing that you did the first time and send it back.

13. Understand that they cannot verify since they have no first hand knowledge of who you are.

14. There may be other names on your report, make sure that you write through them “NOT ME”.

15. You may have to take some time with this, but it will eventually clean up your entire report.

16. Be diligent and even if you find you must send in for the same ones several times, they will eventually take it off.

Benjamin

Liz Roberts asked:




For many people, a credit report is something akin to a mystery novel.
It’s a little hard to understand, and you never know how it’s going to
turn out if you don’t read the whole thing. But you really do have the
power to take the mystery out of understanding what your credit report
is, how it affects your life, and what you can do to improve that all
important credit score. Let’s begin with some basic definitions.

Credit Report

This is a written record of your financial transactions. It details the
amount of your current debt, and how well you are repaying it. It also
includes a record of past debts, and how/if they were repaid. Every
open account you have will be listed, as well as any record of
bankruptcies, foreclosures and judgments.

Credit Score

Based on the details in your credit report, you will be given a
numerical score, that reflects your level of ‘credit worthiness’. This number
is based on:
The number and types of accounts you have open. How long you have held the accounts. How many late payments you’ve made, and just how late. Your current total accumulated debt. Any attempts you’ve made to open more accounts.

Every company you apply for credit with will examine this score, to
determine how likely you are to repay them any money they advance to you.
Would you like to apply for a home or auto loan? A credit card account,
or home improvement loan? Your current credit score will be the biggest
determining factor in whether your request is approved.

The Big 3 Credit Reporting Agencies
Equifax, based in Atlanta, Georgia. Experian, based in Costa Mesa, California. TransUnion, based in Chicago, Illinois.

Each of these nationwide credit-reporting agencies maintains a credit
report on you. Since you have no way to know which one of these agencies
a potential lender will contact, you need to keep track of the info
contained in all three reports.

How To Improve Your Credit Report Score

Your credit report is a living, breathing document, changing with every
entry made. If your score is bad now, there are a few things you can do
to improve it.

* Examine each report thoroughly to make sure there are no mistakes.

If you find a company listed with debt outstanding, but you know you’ve
paid it and have a receipt or cancelled check to prove it, you can make
a challenge to that item on your credit report. The company you are
challenging has up to 90 days to respond and defend the item, or remove it
from the report. You should resist the urge to make a challenge without
proper documentation of your payment.

* Close old credit card accounts.

Even if you aren’t actively charging on them, these old accounts that
remain open still add up in your total amount of credit available. This
total line of credit is compared to your income, and alerts lenders to
the fact that you can become overextended any time you choose.

* Never use more than 50% of your available credit.

Potential lenders want to see that you have money left over after
paying your debts. They take this as a sign of good money management skills.

* Add favorable items (tradelines) to your credit report.

You can boost your credit score by making sure that debts you are
paying on time now, or in the past, are listed in your credit report. These
accounts are referred to as tradelines in the industry. It is entirely
possible that a company you deal well with hasn’t even made a report in
to one or all three of the nationwide credit reporting agencies, so
it’s up to you to see that the good info makes it’s way into your report
to counteract the bad info.

Examples of tradelines:

* Installment loans

Car loans are a good example of an installment loan. Your current car
loan may already be in your report, but what about car loans past? You
can add a former car loan that was appropriately repaid onto your
current report, adding favorably to your overall score.

In-store accounts for items like refrigerators, washer/dryers, and
jewelry that are being paid for on an installment plan should also be
included on your credit report if you are making your payments according to
schedule. Many of these smaller stores only report to the credit
bureaus if an account is placed in collections, ask them to send in a report
of your payment history to add a positive tradeline to your credit
report. Make sure the creditor notifies all three credit bureaus.

* Mortgage Loans

Again, a current mortgage would likely be listed already, but if this
is not your first mortgage, and you have other successful mortgages in
your financial past, make sure they are listed. This all still weighs in
your favor. If you have paid your mortgage on time with an individual
who holds the lien to your home, you should get credit on your credit
report for it. Most individuals would be fairly baffled at your request
to add a manual tradeline to your credit report, simply write the three
credit bureaus and ask that they account be added and give your point
of contact’s name and phone number for verification. The bureaus will
verify the information and have it added to your credit report. Repeat
this process a few times a year to keep your information current.

* Secured Loans/Secured Credit Cards

These are types of tradelines that you have secured by putting up
something as collateral, such as your vehicle or home. You can obtain a
secured credit card by depositing a pre-determined amount of money in an
account with the individual company. You can then use that credit card to
charge up to that amount and your deposit guarantees the company of
being repaid, even if you miss a payment. Secured accounts are a viable
way to rebuild credit after a bankruptcy, as long as you pay on time.

* Utility Accounts

Do you pay your monthly utilities in full and on time? Then try to add
them to your credit report. Utilities usually only find their way onto
your report if you’re behind in your payments. Paying these items
faithfully each month should boost your credit record, but if your local
utility companies don’t actively report in to the credit bureaus via a
tape system the firm may decline your request to add your history to your
credit report. Most will comply and the benefit of having a positive
tradeline on your credit report makes it well worth the try.

While there is really no substitute for paying your debts on time each
month, it’s good to know that there are ways to improve your credit
report. The key is knowing what’s in your report, and making sure it’s
kept accurate.

Floyd

Peter Nisbet asked:


The importance of getting your free credit report cannot be overemphasized. In the current economic climate, with such a strong squeeze on credit, everybody’s credit rating is at risk, and even if you think you have a premium credit score, you might be in for an unpleasant shock. People are getting such shocks not only daily, but hourly throughout the USA.

However, before we discuss that, let’s have a look at what a credit report is and what information it gives you. It contains four parts basically: your personal details, your credit history, public records appertaining to your financial stability and finally, inquiries made by third parties as to your credit record. While you might not understand the need for this information, they are carefully examined by potential lenders.

To put it in general terms, your credit report is a record of your credit history and your financial stability. It contains financial details such as mortgages, loans, mail order agreements, credit cards, banking facilities and so on, and includes your repayment history, any late payments, missed payments, defaults and so on. It also includes any details of credit or loan applications you have made, and whether any have been turned down.

If your credit report is bad, you will either not be offered credit or will have to pay a higher interest rate than those with a good credit report. In some cases you will be refused credit. Hence the importance of knowing what your credit record is like. The same is true of your credit score that lenders use to assess your credit-worthiness.

The implications of a bad credit report include you being refused a credit card application, a loan, a mortgage, a car loan and any other form of credit. You could even be refused a mail order agreement or even a car hire. That is not the end of it, because the same could apply to your partner and your children if they reside at the same address as you. When your kids look for a mortgage of their own before being married, or seek a loan for their first car, they could be refused because of your poor credit record.

That is fine if the record is correct, because although it is bad for you, at least it will have been deserved. However, it has been estimated that up to 90% of credit records are inaccurate, and that a large proportion of people are being wrongly refused credit. Not an entire 90%, obviously, but a lot of people are being unfairly refused credit, and that could be you or your kids. You won’t know till you apply.

Why wait till then? Why not just get a credit report now, so that you know where you stand. It makes sense, and since it is free what are you waiting for? Did you know that anybody can see your credit report? In the USA, the Fair credit Reporting Act (FCRA) allows employers, creditors, landlords, insurers and any other business to have access to your credit report for purposes of credit, renting a home, employment or any other reason where your financial situation could be of interest.

These reports are available in the USA from three agencies: Experian, Equifax and TransUnion, and each has to provide you with a free copy of your credit report annually on request. Once you have a bad record on your report you have to wait 7 years to have it removed.

However, there are companies that help you to check up on your report and have any inaccurate data removed. You could easily have your next credit request refused due to inaccurate or false information. Identity theft or even mistaken identity is no longer uncommon. Nor is it uncommon for office staff to make typing errors and you to have something on your credit record that never occurred.

In today’s economic climate your credit is the one thing you must do all that you can to protect, so make sure you implement your right to a free credit report. There are companies that can get your free report from all three agencies, and then check it with you to make sure that nothing is untoward. With 90% containing inaccurate information, that might be highly likely. If so they can help you to get these false records removed.

It’s your credit, and it affects everybody living in your home. Get it checked out now with a free triple credit report. Also check up on your credit score at the same time.



Ernest