By now, you should have seen or at least heard of the government program ensuring every American has access to free credit reports. Every year, you can access your credit reports with Equifax, Experian and TransUnion free of charge through the government’s free credit report Web site.

Be sure to print copies of all three credit reports. While it seems logical that the three reports contain the same information, you’ll frequently find discrepancies between them.

This comprehensive credit report includes your personal information (employment history, residence, etc.), owed debt and payment history for any open and closed accounts. One thing that is not provided with your credit report is a credit score. Equifax, Experian and TransUnion require an additional payment to provide you with a credit score.

Nonetheless, some financial institutions, banks and credit unions, will provide your credit score if you ask. You can save money and access your credit score without having to pay any additional fee if your bank or credit union offers that complimentary service.

Breaking Down a Credit Report

Equifax, Experian and TransUnion use different formats for their free annual credit reports. It may take a minute to familiarize yourself with the layout. The three reports begin with your personal information. Here you’ll find information about yourself including your employment history, residential history, date of birth, your social security number and possibly your driver’s license information.

Mistakes in the personal section often occur in the length of employment. This is especially true if your employer changes owners. An example of a common mistake involves a company that changed owners four years ago. While you may have worked for a company for twenty years, you find your employment history shows four years because of the ownership change.

Next is information regarding your credit history. You’ll receive a list of your secured debt (car loans, mortgages, home equity loans) and your unsecured debt (credit cards, student loans). With each company is a record of the past two-year’s payment history. The goal is to show no late payments.

In the credit history section, verify the amounts of debt, the length the account has been open, that late payments were truly late and that you recognized each open and closed account. Late payments are something you do not want showing up in this section!

With luck, your public record’s section is empty. Foreclosures, bankruptcies, tax liens and court judgments appear in this section. Having an entry in the public record’s section is the kiss of death for most people. If you do have entries here, make sure they’re removed when the time limit has passed. Bankruptcy listings disappear after ten years. Tax liens and other negative credit entries can stay on your credit report for seven years. Federal and state laws dictate these lengths so they may vary.

Finally, the fourth section of a credit report includes all the inquiries people have made into your credit report in the past year. You’ll discover exactly who is looking at your records and when they last accessed it. This section includes “hard” and “soft” entries. Hard entries occur when you apply for a loan. “Soft” ones are those done by companies using your credit report to establish interest rates or offers. Typically, the hard entries are the only ones that will affect your credit score, so try to keep those to a minimum.

If your credit report has a credit score, it’s usually at the top of the report. Remember that you want a 700 or better. The average credit score in the U.S. is current at 692 (April 2009). If your score is lower than you would like, focus on easy ways to improve your score.

Reporting Errors

The most important thing to look for on a credit report is accurate details. Late payments drag down your credit score, so verify that any notification of a late payment was, in fact, late. If you have proof you paid on time, bring that to the credit reporting bureaus attention. This can help improve your credit score.

Also, look for accounts that you do not have. With skyrocketing numbers of identity theft, it is critical to verify the accounts listed are definitely yours. If you do find errors, contact both the creditor who reported incorrect information and the credit bureau that has the error in their report. Send a certified letter with return receipt to each of them and include photocopies of any documents you have as proof.

When it comes to credit scores, some things just don’t matter – and others matter a whole lot more than you may expect. Although the exact calculation used to determine your credit score may never become public knowledge, patterns have emerged which provide clues to the mysterious calculation based upon the whims of big-wig financial gurus. Unfortunately, this calculation changes often – without notice, and without much clue as to what, why, or how it changed. As a result, there are a lot of credit score myths floating around, so make sure you base your actions on the most current information available.

Bad News For Your Credit Score

Some of the biggest negatives to a credit score are bankruptcies, foreclosures, and tax liens. Each can take 200 points or more from your score, so be very careful to avoid these situations at all costs. Bankruptcies are the easiest to recover from, as these only stay on your report for 10 years. Although foreclosures last just 7 years, your chances of getting a loan are much slimmer than if you declared bankruptcy. Worst of all is a tax lien – if you pay it late, a tax lien stays for 10 years, but if you don’t pay it stays for 15 long years. Otherwise, if you pay a tax lien on time, it just hangs around for 30 days.

Credit Score Myths

Sorry to say it, but paying that electric bill on time every time won’t do a thing for your credit score – but if you’re more than 30 days late, the electric company might report it to a credit bureau. The only thing bills can do to your credit score is harm it if you don’t pay on time, and the same is true for almost any payment history. Another common myth is every credit request inquiry hurts your score, and that isn’t true either. In all actuality, employer and personal credit request inquiries don’t harm your credit score at all – only when creditors and lenders put in the request does it take a few points off of your credit score. Although factors such as your current income and employment history do not directly affect your credit score, lenders and creditors often use this information in determining your credit-worthiness.

Good News For Your Credit Score

Also contrary to popular belief, having a balance on your credit card is actually a good thing. The trick is to keep your balance lower than 30% of your total available credit line every month. The closer to zero balance you maintain every month, the higher your score will climb, but a zero balance is just as bad as a balance over 30%. It also helps a great deal if you have the same credit cards and other credit-based accounts for a long period of time, since your “credit age” also affects your credit score. The “older” you are, the better your score. Basically, those big financial gurus are trying to make an accurate system to judge your credit-worthiness. So all these picky tricky rules are in an attempt to make something solid, static, and simple out of a human being’s actions – which are very obviously not solid, static, and simple. Just think for yourself what would make good business sense to a lender, and helping your credit score will become second nature.

Points of Contact:

Debt Free America
888-225-5332

AFS – Non-Profit Credit Counseling
(866) 851-4305

Rapid Services
(516) 216-1421

Reduce or Eliminate Your Credit Card Debt
(866) 764-8079

Coastal Credit Solutions, Inc. – Credit Management
(866) 415-9649

Free Debt Counseling – MMI and CCCS
(866) 264-6103

Mark A. Zirogiannis, PC
(516) 333-6200

Lexington Law Firm
(866) 906-1265

Solve Debts
(866) 905-9656

Credit Care
(866) 462-1636

Bruce C. Bridgman
(888) 890-7379

Genesis Financial Management
(866) 496-2651

DTS Financial Debt Settlement Company
(866) 432-1466

Successful Solutions Financial Services
(866) 404-8464

Express Debt Settlement
(888) 771-3328

Rausa D J Attorney At Law
(800) 422-3328

A Professional Credit Services
(800) 645-2190

Yes! Though the Fair Credit Reporting Act has been around since 1970, a new amendment as of 2003 gives consumers the legal right to obtain one free credit report from each of the three credit bureaus each year.

You may receive a 3-in-1 report to compare and contrast your reports at the same time; or you may space them out every four months, getting free reports from Experian, Equifax and TransUnion.

Generally it’s recommended that you stagger your requests so you can monitor your credit more carefully. Monitoring your credit report is the best way to protect yourself from identity theft. You can also get a sense of how creditworthy you appear to lenders, which will help you if you’re applying for a mortgage, auto loan, student loan or credit card.

How Long Does It Take To Arrive?

If you request your credit report online, you’ll be able to access the information immediately. If you order your report over the phone, you will receive your report within 15 days. If you order by mail, you will also receive your report within 15 days of receipt. In rare cases, it may take a little longer to process your request if your identity needs verification or if your file gets lost in the heavy sea of incoming mail.

What Information Do You Need?

To get your totally free credit report, you’ll need to provide some personal information, such as: your name, address, date of birth and social security number. If you have moved in the last two years, you’ll need to include your former address too.

What Additional Offers Should You Buy?

One in four Americans have a credit report containing serious errors that is limiting access to credit and favorable interest rates. If you find you are one of them, then you can dispute these errors with your credit bureau. Thankfully, the process has been simplified. You can write a credit dispute letter, phone the credit bureau or even click a “dispute” button online. The best part is that this service is 100% free!

In addition to receiving your free credit report, you’ll notice there are a few other optional services that credit bureaus offer. Credit monitoring is useful if you have been a victim of identity theft or if you feel at-risk for identity theft. For instance, Equifax offers credit monitoring at $14.95/month, where they agree to check your credit report more frequently at scheduled intervals and alert you to any suspicious activity (new accounts, late payments, etc) within 24 hours. You’ll also receive regular updates and graphics regarding your credit status, as well as $20,000 in identity theft insurance.

You can also place a security freeze on your account if you believe your personal information has been compromised. Once the freeze is in place, no new accounts will be opened and no information can be reported to the bureau during this time unless you notify them. This service can be free for identity theft victims or it could cost up to a $20 fee to place on your account.

You will notice deals to get a 3-in-1 report but these will cost extra if you order them through the same site. Instead of needlessly spending extra money, you should instead contact a free report through each individual bureau.

One credit bureau service that IS worth paying for is your FICO score. Currently, you can peek at your credit report information but you will not get the actual FICO number, which is what lenders look at to determine what interest rate to charge you and whether they can offer you credit at all. If you plan on buying a car, a boat, a house or another loan, you should request your FICO score. You may pay anywhere from $6 – $15 to view your actual score.

There are three American credit bureaus that hold your financial records: Equifax, TransUnion and Experian. They collect information about you regarding how you pay your bills, how many loans you take out, how you repay those loans and how risky a borrower you are.

If you wish to take out a mortgage, student loan, auto loan, small business loan, new credit card, rent an apartment or get a new job, your Experian credit report might be pulled so a third party can learn more about you. By law, your creditors need only report information to one of the three credit bureaus, so you may find information on your Experian credit report that isn’t on the other two and vice versa.

How Can You Get Experian Credit Reports?

Each year, you may request a free copy of your Equifax credit report, TransUnion credit report and Experian credit report – either all at once with a free 3-in-1 report or spaced out every few months, whichever you prefer. To get an Experian credit report, you can visit their website and fill out a form to view your data immediately online. You may also call to order a hard copy sent to you by mail.

How to Read an Experian Credit Report

When you get your first credit report, it may all look like mumbo jumbo to you. Why are there so many versions of your name listed? What does “CHARGEOFF” mean? What does it mean by “potentially negative information?” Why is the same account listed twice? Look at your report shrewdly, as 1 in 4 reports contain serious errors.

The first section is “Personal Header Information,” which includes your full name, report number and report date, which you’ll need for reference if you call Experian.

Then you’ll see your “Personal Information,” which includes your name, date of birth, social security number, current and previous addresses, phone number and current employer. You’ll want to make sure all this is accurate. Sometimes you’ll see several variants of your name because different creditors report things based on what they have on file.

The “Potentially Negative Information” may lead creditors to view you ask a risky borrower. Here you can see if there are any serious mistakes. You’ll see the name of the creditor, their address, your account number and status, the claim filed date and whether it’s been resolved.

The “Credit Items” section will show past and present credit accounts. You’ll see creditor names, addresses, account numbers and statuses, when the accounts were opened, what your limits were, what your monthly payments were, your most recent balance and whether the account was delinquent or not.

“Accounts In Good Standing” will let a creditor know you’re a trustworthy borrower. You’ll see all the same information – creditor name, address, type/status of account, monthly payments, balance and date opened.

“Requests For Your Credit History” will let you know who has been checking your credit report. Usually you’ll see mortgage lenders, credit card companies, potential employers and insurance companies.

There are also some abbreviated codes you may need to know to understand your report better. For instance, “CURR ACCT” means that your account payments are current and you’re in good standing. “CUR WAS 30-2” means your account is current but has been late 30 days twice in the past. “PAID” means your account has a $0 balance and is not active. “CHARGEOFF” means that an unpaid balance has been reported as a loss by the creditor, who has given up trying to get the money owed from you. “COLLECT” means an account is severely delinquent and was sold off to a collection agency. “FORECLOS” indicates a property foreclosure, “BKLIQREQ” indicates debt forgiven in bankruptcy, “DELINQ 60” shows an account 60 days delinquent and “INACTIVE” indicates an account that has not been in use.

How to Dispute an Experian Report Error

Chances are you’ll find something is wrong on your report. The most common credit report errors include: incorrect name confused with someone else or was outdated (54%), credit accounts that were closed but remain listed as open (30%), incorrect reporting of loan nonpayment (25%), listing of the same mortgage or loan twice (22%), lack of positive payment history on a major credit or loan account (8%) and accounts opened without your consent by an identity thief.

To dispute your report, you can dispute information online for free, which is the easiest and most immediate option. All you have to do is click a “Dispute this item” button and enter an explanation of why you think that information is incorrect or inaccurate. You may also phone them at 1-888-397-3742 or write them a credit dispute letter, mailing additional proof to verify your errors (if you have it) to: PO Box 9532 Allen TX 75013.

Once you submit your disputes, Experian will correct personal information errors and duplicate errors. They will also submit a request to your creditors for more information regarding your accounts. If, within 30 days, the creditor does not respond with verification of your debts, then the information will simply be dropped off your account! If the creditor does send in the necessary proof, then your account will remain the same and you will be provided with an in-depth explanation. Winning a credit bureau dispute is the quickest way to improve your credit score!

Why should credit card companies, mortgage lenders, auto loan establishments and prospective employers have access to your financial history if you don’t? This was the idea behind the Fair and Accurate Credit Transactions Act of 2003, which said you’re legally entitled to get a free copy of your credit report from each of the three credit bureaus each year (so that’s three in total). Some people choose to get them all at once so they can compare them side-by-side to check for inaccuracies, while others prefer to space them out over the year to monitor their credit for suspicious activities / identity theft or signs of gradual improvement.

To get your Equifax credit report, you may do so online or call to order at 1-800-685-1111.

What Is an Equifax Credit Report?

Equifax is a global company — headquartered in Atlanta, Georgia — that collects financial data regarding your payment history. This company has operated for more than a century and works with businesses and individuals to help people manage their credit and stay protected from fraud. As one of the three national credit bureaus, you can get a report from them to see what’s on your report that may open or close doors to capital for you. There are no real differences between an Equifax credit report, an Experian credit report or a TransUnion credit report, although you’ll commonly notice items on one report but not another because creditors need only report to one of the bureaus, not all.

How to Read an Equifax Credit Report

get an equifax credit reportAt the top of your credit report, you’ll see the company’s contact information and your personal contact information. Be sure the last three jobs and addresses are accurate here. Sometimes your name or social security number may have gotten mixed up with someone else’s so check for that error too. Next you’ll see a summary of your credit history, including the total number of accounts, accounts that are 30 / 60 / 90 days past due, accounts that have been paid off, the oldest account, the newest account, etc. Then you will see your Beacon scorecard and the reason for having such a low or high score. The following section will detail the accounts that are in collections, which is usually a negative thing. Public records like court judgments, tax liens, foreclosures and bankruptcies will appear next – if you have them.

On the far right of your report, you’ll see codes for your payment history. For instance, “N” or “0” means you have no balance on your current account. Past-due accounts are indicated by “1” (30 days), “2” (60 days), “3” (90 days), “4” (120 days), “5” (150 days) or “6” (180 days). Then there are some codes you definitely don’t want to see: “7” (Chapter 13 bankruptcy), “8” (Foreclosure, deed in lieu), “9” (Chapter 7, 11 or 12 bankruptcies), “G” (collection), “H” (foreclosure), “J” (voluntary surrender) or “K” (repossession). Commonly, when a debt has been canceled by the creditors who have given up on collecting from you, there will be a letter “L” to indicate a charge-off.

What is an Equifax Beacon Score?

All of the credit bureaus derive their scores from the same algorithm, but each has their own name. Experian calls theirs the “FICO score,” TransUnion calls theirs the “Emperica score” and Equifax calls theirs the “Beacon score.” To calculate your credit score, the bureaus look at: Timeliness of bill payments (35%), Outstanding Debt (30%), Length of time your credit’s been active (15%), the Type of credit you possess (10%) and How many new credit accounts you’ve opened recently (10%). If your overall score is over 750, you have excellent credit. At 720 or higher, you have very good credit, although 660 – 720 is considered acceptable for most loans. Anything lower is considered poor.

How to Dispute an Equifax Error

In 2004, a USPIRG study found that 79% of all American credit reports contained serious errors. In 2007, the Consumer Data Industry claimed that only 2% of the credit reports had data deleted due to error. Here’s a ray of light: If you find an error on your credit report, disputing it is quite simple! Before contacting Equifax, have your credit report handy with the Report Confirmation Number circled. (You’ll find this number at the top of your report and it will allow Equifax to access your credit file easily.) Even if you don’t have this number, you may dispute by phone or online.

You may need supporting documents when you dispute. For instance, if your name or birth date was incorrect, you’ll need to provide a copy of your driver’s license. If your address has changed, you’ll need to send in a utility bill with your name and address on it or a copy of your driver’s license. If your social security number is wrong, you’ll need to send in a W2 tax statement or a copy of your social security card. If you want, you can provide extra records to show why a certain piece of credit information listed is inaccurate, but this typically isn’t necessary, as the onus is on the creditor to validate the debt. The process may take 30-45 days, but at the end of this time period, you’ll receive a credit file update.

A credit report is a summary of your financial history compiled by a credit bureau. There are three credit reporting companies in the US: Equifax, Experian, and TransUnion. Lenders use one or more of these to verify your credit history and determine whether or not to lend you money.

Creditors are required to report accurate information about you to the bureaus. The bureaus then translate all of that information into a single three-digit number. This number is your credit score. It tells potential lenders whether or not you are creditworthy. The higher the score, the more likely you are to get a loan at a favourable interest rate. People with low credit scores pay a premium to borrow money.

How to get your TransUnion credit report free of charge

Everyone is entitled to a free copy of their credit reports once a year. You can also get the reports free of charge if you’ve been a victim of identity theft, or if you’ve been turned down for a loan. Otherwise, TransUnion will charge you for it.

The easiest way to get a copy of your TransUnion credit report is online. You can also request the report by calling 877-322-8228 or in the mail by writing to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

What it all means

Your TransUnion credit report will contain a lot of information. Go over it with a fine-toothed comb to make sure that everything is correct.

At the top of the report, you’ll find your identifying information. This includes your name, current and previous addresses, your social security number, date of birth, phone number, and current and past employers. Under that you’ll see a summary of your credit history, including your credit score. TransUnion use the Empirica formula to calculate the score, which is slightly different from standard FICO model.

Under the summary, you’ll see a more detailed version of your credit history. This includes mortgages, credit cards, store cards, loans, etc. All of this information should be no more than seven years old. After that, it has to be erased. Then you have a list of any bankruptcies, tax liens, court judgements, child support arrears, etc. These things can stay on your credit report longer. At the bottom you’ll see a list of credit inquires. Every time you apply for credit, it’s noted on your report. Too many inquires will hurt your credit score.

What to do if there’s an error on your TransUnion credit report

It’s not uncommon to find an error on your credit report. It could be something small, or it may be full-scale identity fraud. The first thing to do is to contact TransUnion directly. You can file a dispute on their website or by calling 800-916-8800. You will then be asked to provide supporting information, such as cancelled checks, to prove your claim. Make sure you keep a detailed written record of all of your communications with the bureau. TransUnion will look at this information and make a decision. If your claim is valid, they will remove the erroneous information from your report.

Your credit score tells lenders how risky you are as a borrower. Check it annually for free, find and fix errors and get to work now to raise it.

The ads seem to be everywhere on TV. Somebody is offering to help you find your credit score. If you’ve never bothered to examine your score, you may be wondering what all the fuss is about. The truth of the matter is this: You should get your credit report, take a close look at it, repair it if you find errors and work at boosting your credit score if it’s low. Obtaining your credit report is one of the more important steps you can take to improve your personal financial situation and it’s absolutely free.

From valley low to mountain high

This three-digit number – from a Death Valley low of 300 points to a Mount Everest high of 850 – is used by creditors to determine how much of a risk they’d be taking in lending you money. It can be used also by prospective employers in deciding whether you’re trustworthy enough to hire and by landlords in letting you rent an apartment.

The top 20% of credit profiles receive a score over 780; the lowest 20%, under 620. Any score above the average mid-700s means you’re likely to be able to obtain a car loan, a home mortgage or other credit at a favorable interest rate. A below-average score generally means you’re going to have trouble. Don’t despair: You can raise a low score.

Factors that affect your score

Factors that affect your score and the importance placed on them differ from bureau to bureau. But all three utilize answers to the following questions.

* Have you paid your bills on time?
* How much do you owe compared with your credit limit?
* How long is your credit history? (The longer you have been using a credit card, for example, the more reliable you can appear to be.)
* Have you applied for new credit? (Trying to open too many new accounts raises suspicion.)
* Do you use many different kinds of credit? (A mix of credit cards and installment loans helps.)

Ways to boost a low score

Repairing your credit score can help you speed up credit approvals and lower your interest rates. This won’t happen overnight, but it will prove to be well worth the time and effort. Get started now. Here’s how to do it:

* Start paying your bills on time.
* Keep credit card balances low.
* Pay off debt instead of moving it around among several credit cards.
* Apply for and open new lines of credit so as to have a variety of them, but only when you really need them.
* Check your credit report regularly for accuracy. A simple letter to the credit bureaus disputing an error can go a long way toward fixing it.
* If you have let things slide to the point that a collection agency has become involved, settle up immediately.
* Don’t let friends and family members use your credit card unless you’re willing to assume responsibility for the charges they make and the fees they rack up.
* Consider a debt consolidation program. When you consolidate debts, you don’t have to deal with lots of creditors at many different interest rates; instead, you have one creditor and a single, potentially low, rate. Some people feel that one bill each month is easier to handle than many.

How to establish a credit history

If you have no credit and therefore can’t qualify for a credit card, you can, with permission, get yourself listed as an authorized user of another person’s card. Use the card with care, and within a year you’ll have a favorable credit history that should enable you to open your own account. Keep in mind that the person who agrees to let you be an authorized user must maintain a good credit score. If the primary card holder allows his or her score to fall, you could see your credit score fall as well.

If you’ve ever applied for a cell phone, tried to get a new job or moved into an apartment, you probably already know what a credit score is. In order to buy, rent or lease almost anything of value, you need to be considered trustworthy with money and reliable when it comes to making good on money that you owe. The way that most lenders find out how you handle debt is through your credit report, which delivers them a credit score that indicates how well you manage your money and debt.

Credit scores are valuable to lenders and may determine everything from your next car to your next job (employers also use credit checks as a means of checking up on your background) so get familiar with how your credit score is calculated and what the three-digit number means to your life.

The range of a credit score

The most common type of credit score is a FICO score. FICO scores range between 300 and 850. The higher your score, the more a lender will trust you with debt and believe in your ability to repay a loan. Typically, those who have a credit score that falls below 600 are believed to have poor credit, while anyone with a score over 730 is said to have excellent credit. But there is a middle ground where most Americans reside. Anything between 700 and 729 is above average, 670 through 699 is good and 585 through 669 is fair. The goal is to keep your credit score as high as possible in order to ensure that potential creditors seriously consider you for future loans.

Understanding your credit score

Knowing what your credit score is and how to improve it is very important in today’s economy. Watch this clip to learn more about credit scores.

How your credit score is calculated

Your credit score is calculated through many factors that all relate to how you handle money, manage debt and ultimately deal with credit. Here are just a few of the factors that help determine your credit score.

The amount of credit you have out in your name: Do you have 10 credit cards and a bunch of loans with overdue balances? Chances are it’s hurting your credit score. While it never hurts to maintain a healthy level of credit, you don’t want too many different types of debt on your credit report. It all goes into the equation when your score gets calculated.

Your overall reputation when it comes to paying down debt: Whether you pay debt back on time is important to creditors, so your credit score is partially calculated by how many late payment notices you’ve received or how consistently you’ve paid off your debt.

Any loans you have cosigned: If you’ve vouched for a loan for someone else in the past, this will show up on your credit report and affect your credit report.

Bankruptcy: Filing for bankruptcy essentially destroys your credit score and remains on your credit report for up to 7 years. This is why so many people say bankruptcy should only be used as a final option if you run into any financial troubles.

Everything else you own: From your house, which usually requires a mortgage, to your cell phone, which requires a monthly contract, there are plenty of things you use everyday that affect your credit score. If you were to sit down right now and make up a list of every bill you currently have in your name, you’d like find dozens of items in your life that help or hurt your credit score. It’s one reason you really need to educate yourself about your credit score and find ways to improve it over time.

Got a case of the credit score blues?

Worried about your credit score? This funny clip features a music video poking fun at credit scores. Of course, your credit score is important, but realize that everyone is going through the same battle you’re going through, too.

What a good credit score means to you

Whether you’re 18 and going off to college or 80 and enjoying your retirement, good credit is something that should be treasured. It opens up hundreds of doors in your life and allows you to do so much more than those with bad credit. And the best part about a credit score? It can always be improved. Making payments on time, trimming debt effectively and staying on top of your credit report are just a few ways you can prove how reliable you can be. It may not matter today, but someday when you go to buy a house, a car or even just a new cell phone plan, you’ll be able to do it because of your good credit score.

Your credit score is a figure lenders use to decide whether or not to give you credit or a loan, to determine your credit limit, and sometimes the interest rate you will pay. Landlords may also use it to decide whether or not to rent you an apartment. Services such as gas, phone, and electric may require a higher deposit if you have a lower score. It pays to get and keep your credit score as high as you can.

What’s your score?

If you are having trouble obtaining credit or a loan or renting, or if you are being hit with higher interest rates than others you know, your credit score may be to blame. To find out if this is the case, you need to get a copy of your credit report. The three nationwide companies that produce credit scores are Equifax, Experian and TransUnion. The Fair Credit Reporting Act requires these agencies to give you a free credit report once every 12 months if you request it. This can only be done through a central facility (by website, phone or mail) they have set up. Get a copy of your credit report from each of the three companies (they can vary) and go through them carefully. If there is anything you believe is inaccurate, contact both the reporting company and whoever provided the company with the incorrect information.

When is enough enough?

As far as credit cards are concerned, the fewer the better. There can be very good reasons for having a number of credit cards, but using them to increase your overall credit limit is not one of them—especially if you take out a number of new cards over a short period. The rating companies do not like this. They see it as risky behavior—and they’re probably right.

Pay your bills on time

Paying all your bills in full on time is the best way to get and keep a good credit rating. If you just can’t pay the full balance of your credit card, at least make the minimum payment on time. This can actually be better for your credit score than paying the full amount even a day or two late, which can be penalized in your credit score as well as costing you an exorbitant amount in fees.

Don’t transfer balances; pay them off

Don’t fall into the trap of transferring balances to a card promising a low introductory rate without very carefully reading all the fine print. Believe me, there’s almost always a catch, and the credit scorers are prone to see transferring balances as a bad sign. It is far better for your credit score to pay off your balances as fast as you possibly can.

Make a fresh start

Having paid out your outstanding balances, take out a few new cards that really suit your needs and offer the longest billing cycle. Then pay the outstanding amount each month on time. Your credit score will soar. If you can’t do that, look for cards with the best compromise between long billing cycle and low interest rate and pay off as much as you can of the balance each month on time.

Don’t spend to your limit

Credit rating companies start to get concerned if your balance is regularly more than about 25% of your limit, and will lower your score, which will lower the credit limit you can get, and so on.

Don’t go bankrupt

You may have seen ads suggesting the way out of all your financial difficulties is to go bankrupt. Don’t believe it! Bankruptcy is the absolute death knell of a credit score, and you must avoid it like the plague.

Don’t be foreclosed

Foreclosure is almost as big a disaster to your credit score as bankruptcy. Don’t let it happen! Act fast and act early—as soon as it looks like you may have trouble making repayments. Talk to your lender and try to work out a solution. Explore all avenues of government assistance.

Contacts

Annual Credit Report Request Service
1-877-322-8228

Fair Isaacs Corporation

http://www.myfico.com

Equifax

http://www.equifax.com

1-800-685-1111

Experian

http://www.experian.com

1-866-200-6020

TransUnion

http://www.transunion.com

1-800-888-4213

When people want to know how to manage their debt to increase their credit score, they often get stuck determining which kinds of debt impact their credit score the most. In reality, there are three kinds of debt: installment, revolving and open:

* Installment debt – A predetermined amount of debt to be paid off in equal amounts over a given period of time (for instance, leasing a car for $300 for 48 months). Each installment must be paid at the full, predetermined amount. The most common examples are mortgages and auto loans.
* Revolving debt –A debt in which the balance varies each month, and any unpaid amount is rolled over into the next month’s bill. The most common example is credit card debts.
* Open debt – Like a revolving debt, an open debt is based on a varying balance each month. These debts must be paid in full each month. Examples include cell phone, gas and electric bills.

Installment and open debts and your score

For installment debts, the amount you owe never changes. For open debts, you are in debt for a very short time. Since you will only be allowed to take out a predetermined or small amount, for these debts, the main influence on your credit score is whether or not you make your payments on time.

Revolving debt and Revolving Utilization

For revolving debts, the amount of debt you take out varies more than any other kind of debt, as does your balance after payments. Most people don’t pay off credit cards debts in full, and credit companies don’t expect you to do so. Instead, the credit bureaus have come up with the Revolving Utilization formula. To calculate this formula:

1. Add up the total credit limits of all your revolving debts
2. Add up the total balances remaining on these debts
3. Divide total balances by total credit limits

For example: Imagine you have one credit card with a $5000 limit that you owe $1500 dollars, and another with a $10,000 limit that you owe $3500. Your Revolving Utilization would be: $5000 ($1500 + $3500) / $15,000 ($5000 + $10,000), or 33.3%.

How this affects your credit score

Here are a few principles to keep in mind when considering the different types of debt:

Keep your revolving balances low – 30% of your credit score is determined by your Revolving Utilization ratio. While your credit limit will rarely change, the best way to keep this ratio low is to keep your credit card balances low in respect to the limit. You want to aim for keeping balances at 25% of the limit, and try to at least keep it below 50%.

Increase credit limits when possible – If you establish a good history of paying bills on time and keeping your balances low, credit card companies will be more likely to reward you with higher credit limits. This will lower your Revolving Utilization, and give a boost to your credit score.

Do NOT close unused accounts – It may make sense to cancel a credit card you no longer use frequently. However, doing so will almost certainly throw off your Revolving Utilization ratio, and can seriously hurt your credit score.

Don’t let creditors close unused accounts either – Credit card companies lose money off unused accounts, and will eventually close an account themselves if the period of inactivity is long enough. Make sure to charge something to all your accounts at least once a month. Ideally, you’d charge the card with the highest interest rate the least, and pay that debt off in full.