The Components of your Credit Report

A credit score is a number that is generated by a mathematical formula based on information that is in your credit report, compared to the information of other people. The resulting number is a highly accurate prediction of how likely you are to pay your bills.

Credit scores are used extensively and if you’ve gotten a mortgage, a car loan, a credit card or auto insurance, the rate you received was directly related to your credit score. The higher the number, the better you look to lenders. People with the highest scores get the lowest interest rates.

Scoring Categories

The scale runs from 300 to 850. The vast majority of people will have scores between 600 and 800. A score of 720 or higher get you the most favorable interest rates on a mortgage.

The Key Factors that Determine Your Score

1. Paying your Bills
   The most important factor is how you’ve paid your bills in the past, placing the most emphasis on recent activity. Paying all your bills on time is good, paying them late on a steady basis is bad. Having accounts that were sent to collections is worse. Declaring bankruptcy is worst.

2. Amount of money you owe and the amount of available credit
   The second most important area is your outstanding debt which means how much money you owe on credit cards, car loans, mortgages, home equity lines, etc. Also considered is the amount of credit you have available. If you hold possession of 15 credit cards that have a $10,000 credit limit, that’s $150,000 of available credit. People who have a lot of credit available tend to use it, which makes them a less attractive credit risk.

3. Length of credit risk
   The third of factor is the length of your credit history. The longer you’ve had credit, the more points you get.

4. Mix of credit
   The best scores will have a mix of both revolving credit, such as credit cards, and installment credits such as mortgages and car loans.

5. New credit applications
   The final category is your interest in new credit, how many credit applications you’re filling out. The model compensates for people who are rate shopping for the best mortgage or car loan rates. The only time shopping hurts your score, is when you have previous recent credit stumbles, such as late payments or bills sent to collections

Pre-marriage credit check can enhance wedded bliss

By Carolyn Bigda (www.chicagotribune.com)

This time of the year many couples are busy preparing for their upcoming nuptials. Cake? Check. Wedding dress? Check?

Credit Reports?

It's a worthwhile item to add to the to-do list.

Good credit can make all the difference in obtaining a low interest rate on a mortgage and other loans you will want to take out as husband and wife. And if there's credit trouble, the sooner you start repairing the damage, the better.

Here's what to do.

>Request your reports

As soon as possible request your individual credit reports from the three main credit reporting agencies: Equifax, Experian and TransUnion.

By law you are entitled to a free copy from each bureau every 12 months at www.annualcreditreport.com You'll have to pay $7.95 for a FICO score, the credit rating most lenders use, from Equifax. The other bureaus sell alternative scores.

If you plan to buy a home you also could make a trip to your bank or credit union for a mortgage prequalification. By doing so you'll learn how much house you can buy based on your credit and income, among other factors.

And should your credit need polishing, a loan officer can suggest tips.

"It's fairly common among younger couples that one spouse has good credit and the other has bad credit," said Marc Savitt, vice president of the National Association of Mortgage Brokers.To nab a lower interest rate the spouse with good credit could apply solo. But without two incomes on the application only a smaller loan likely would be approved.

Credit unions may be more lenient and concentrate on the better score in a joint application.

>Patching things up

Your FICO score improves the more distance you put between the present and any past credit mistakes. That's why it is important to identify problems before you apply for a loan.

"Credit can always be rehabilitated, but it can take some time," anywhere from nine months to two years, depending on the severity of the problem, said Evan Hendricks, author of Credit Scores & Credit Reports.

Some 65 percent of your credit score is based on your payment history and the amount of debt you owe. So paying your bills on time and paying down the balances will, over time, buoy your score.

The good news is that even after you are married you and your spouse keep separate credit reports. One's track record won't tarnish the other's.

One exception is if you take out a joint loan. In that case you are equally liable for the account. So pay late one month and the blunder shows up on both credit reports -- even if the payment was the other person's responsibility.

As a result Hendricks recommends focusing on improving your credit separately.

>Become authorized

There is one way to build credit jointly without having both spouses apply for a loan: naming an authorized user on a credit card.

An authorized user can make purchases with the card, and the account's record typically appears on that person's credit report. But the user is not responsible for the debt and would not have to pay any outstanding balances if, say, the original cardholder defaulted.

This arrangement is helpful if you have no credit history, because it's tough to borrow money, and therefore start building a record, without a file already in place.

But similar risks of a joint credit account apply. If one person fails to pay on time or runs up huge balances it could stain both credit reports.

Seven Steps for you in 2007

Get a jumpstart on 2007 with these seven tips. Following these guidelines will help you better your credit in the new year.

1. Create a cash flow budget - it is possible to attain good credit with minimal cash flow. By creating a budget of the cash you have available and changing your billing cycles so that they are spread out over the month, chances are better that you will be able to pay your bills on time.

2. Pay your bills on time and consistently - late and missed payments, especially accounts that have been sent to collections, have major impacts on your score. Since not all companies report to the credit reporting agencies, find out who reports and who doesn't, this will help you prioritize your bills. Also, find out when your credit card companies report to the credit bureau and change your billing cycle to ensure you pay your bill before they report.

3. Get a free copy of your credit report from all three credit bureaus – by law, everyone is entitled to a free copy of their credit report each year. Also, take the time to learn what your credit score is comprised of and what will impact it most.

4. Do not use a credit repair agency – there is nothing a credit repair agency can do for you that you cannot do for yourself. Education is key. Fix any errors you find on your credit report - 1 in every 4 credit reports have serious enough errors to cause a negative impact on the credit you are applying for.

5. Dispute negative debt with credit bureaus (only on closed accounts) - the collection agency has to respond within 30 days or else it will have to be removed from your credit report. Don't pay old bad debt accounts - it is best to pay off very recent collection accounts, however in most cases it is better not to pay off an old collection. Instead, let it drop off your credit report which takes seven years. If you pay off an old collection account it will show up as new activity on your report (for another seven years), thus lowering your score.

6. Look for times during the year where you may have extra money available and pay down your credit card debt (holiday bonus time or when receive your tax refund, etc) - it is important to keep the amount of revolving debt on any card at less than 25 percent of the available credit line, the closer you come to being "maxed-out" the worse your credit score will be.

7. If you are going to be opening up several lines of credit in 2007, space them out – taking out too many new lines of credit in a short period of time (90 days) raises red flags and makes you look like a greater risk factor. Close store cards that you have open. Store cards traditionally have low limits, making them easier to max out. Plus, since you can only use them in one place, they tend to effect your credit negatively.

Improving Your Credit Score

Your credit score is what lenders use to assess their risk in loaning you money. Your credit score is based on the information in your credit report, so first analyze your credit report and look for errors that could be effecting your score. Improving your score can help you get approved for lines of credit easier with lower interest rates, thereby saving you money.

Once you know your score, follow these easy tips to improve your rating:

1. Pay your bills on time consistently. Late and missed payments, especially accounts that have been sent to collections, have major impacts on your score.

2. Keep balances low on all of your credit cards. Maxing out your credit cards will lower your score, possibly by as much as 70 points.

3. Avoid opening or closing a lot of new credit cards at once. It may seem like a quick fix, however a significant amount of new credit will harm your score, and closed accounts can still have an impact.

4. Use the credit you have wisely. Manage your current accounts, by making payments on time and being aware of balances and limits, to prove to lenders you are responsible with your credit.

5. Moving debt around (e.g. consolidating the debt on your cards) without paying any of it off can lower your score. Keep your debt where it is and focus on paying it off.

6. Check your credit report often to spot errors quickly and track progress.

7. Avoid credit repair agencies that promise an instant fix. Rebuilding your credit takes time, and any agency that guarantees instant credit repair is only looking to exploit people in need.

5 steps to do-it-yourself credit repair

Blotches on your credit report cost you. But, don't despair. It's never too late to become credit worthy -- just get started, and remember that it won't happen overnight.

Here are 5 steps for improving your credit rating:

1. Order your credit reports

Find out what the top three credit bureaus -- Equifax, TransUnion and Experian -- are saying about you. It's likely that they're all slightly different. Yes, different! Creditors don't have to report to all three credit bureaus, so they typically report to the credit bureau to which they also subscribe.

Time and money is wasted, says Steve Rhode, president and co-founder of Myvesta.org, if you only order a report from one credit bureau. You can order a credit report from each bureau.

Costs vary from state to state, but in most states, it costs around $9 to get your report.

If you've been denied credit, insurance or employment because of your credit report, you are entitled to a free copy of your report from the reporting agency. The company you applied to must supply the credit bureau's name, address and telephone number. You have 60 days after receiving the denial notice to request your copy.

2. Examine your reports carefully

Nearly every consumer has an error on at least one credit report from one of the major credit bureaus, says Rhode. Credit bureaus generate your report on information they receive from your creditors; they don't verify.

Keeping your credit report a true reflection of you is -- like it or not -- your job. Get ready to clean and polish. Carefully look for everything from typing errors, outdated and incomplete information to inaccurate account histories. You'll want to make a thorough list of items you dispute and why. Be meticulous.

Here's how to read and understand your credit report.

If the negative information in your report is true, only time and improved habits can change that. Late payments and charged-off accounts remain on your report for seven years; bankruptcies for 10. Most creditors, however, look for a pattern of payment rather than focusing on one-time or rare occurrences; so consistent on-time bill payments will improve those blemishes.

3. Double-D strategy -- dispute and document

Remember, a bad report costs you money. So, it pays to be thorough! You can either complete the dispute form provided with your credit report or write a letter. Clearly identify each mistake and state why it's wrong. A recommendation is to send a photocopy of your credit report with the mistakes circled to the reporting credit bureau. Include copies of supporting documents.

Document, document, document. Keep copies and records of all the forms, letters and documentation that you send the credit bureaus, plus dates sent. The credit bureau must investigate any relevant dispute within 30 days of receiving your letter. Any item that is not verified as accurate by a creditor is removed.

Sometimes it's necessary to contact your creditors to resolve mistakes. Bankrate's 7 steps to fixing your credit report will help you tackle the serious errors.

If the credit bureau makes any changes to your credit file, it will send you the results and a free, updated copy of your credit report. Once a negative item is removed from your report, the credit bureau cannot put it back on unless a creditor verifies its accuracy and completeness -- and sends you written notice.

4. Solve and dissolve debt

Now's the time to devise a spending plan that reduces your debt and sets you up to pay on time, every time.

If you're having difficulty making payments, be proactive. Call your creditors and negotiate to keep your accounts current and from being reported as delinquent or "bad debt." You can ask for reduced monthly payments, or even change due dates to balance out your monthly bills.

The same strategy can be used for fixed-loan payments. Remember, though, that this is a short-term strategy. You'll pay more interest to extend the repayment schedule, but it allows you to stay current and save your credit rating. Use the extra money to pay off debts one at a time, gradually increasing payments to other debts.

Deal with any collection accounts. Unpaid collections are worse than paid collections. You can negotiate a pay-off settlement that reduces your bill, plus demand that all derogatory remarks are removed from your credit report or at least reported as paid in full. Be sure to get verbal agreements in writing before sending off your payment.

Slowly close out unneeded or unused credit accounts. Most experts recommend carrying between two and four major cards. But, be cautious when canceling because closing accounts can negatively impact your credit score, commonly called a FICO score. FICO considers the ratio of total debts to total available credit. A good rule of thumb is to keep your revolving debt to 50 percent of your available credit.

Remember that cutting up the card doesn't close out the account. Here's a step-by-step guide to smartly close out your account.

Other tips:

• Close out your newest accounts so that you don't lose your longer credit history.
• Close out accounts slowly over several months.
• Verify that all accounts you've closed are reported as "closed by consumer" for the best report.
• Even if creditors offer to raise credit limits, allow yourself only moderate credit limits.
• Keep your balances low and avoid revolving balances.
  

5. Add stability to your credit file


You can also work to add positive information and show stability in your credit file.

You may have been denied credit because of an insufficient credit file, yet you have credit. Some creditors -- such as, travel, entertainment, gasoline card companies, local banks and credit unions -- may not report your credit history to the credit bureaus. You can try asking the credit grantors to report your account information and monthly payment history to a credit-reporting agency. Not all will do that. So, in the future, before opening a new account, ask if your on-time payments will be reported monthly to a credit-reporting agency, recommends Myvesta.org.

If you have really bad credit -- perhaps even filed bankruptcy -- don't let your credit status go dormant. "The faster you begin to re-establish good credit, where you pay on time, every time," says Craig Watts, consumer affairs manager of the Fair, Isaac and Company, "the faster you'll improve your credit score."

Build a solid credit history. Secured credit cards offer people with no credit and those repairing their credit this opportunity. Shop around for the best deal available, but limit your applications. Credit bureaus look at how many new accounts you've opened, and the number of "inquiries" for new accounts that are listed. A sudden flurry of "inquiries" results in a lower score, because many times consumers anticipating money problems increase their credit lines. Inquiries made by creditors wanting to make "prescreened" credit offers are not counted.

Lastly, open a savings account at your bank. This shows creditors that you are working to save and that you have reserves to repay debts.


For more info and to order your credit report with FREE credit score please visit www.reliacredit.com

You may want to repair your credit score before you qualify for a home mortgage or car loan.

You may want to repair your credit score first before you qualify for a home mortgage or car loan. A better credit score rating also means you don't have to pay high interest rates on a credit card or higher monthly payments on a mortgage.
The higher your credit score the lower your monthly home payments will be. This is typically the same across the board when it comes to mortgages, car loans, personal loans, and credit cards.

If you still owe money to creditors and your not able to pay the monthly payments they ask for, you may need a budgeting clinic, a debt settlement service, and written 'no contact letters' to problem creditors. One or all three of these parts may affect the structure of repairing your own credit score. Your Personal Financial Stability is a direct result of your knowledge gained and expertise about your own credit score rating - at ReliaCredit.com

Most people know you can repair your credit score on your own, and most people truly desire to hire an honest and reputable service with all the expertise to educate and get the job done. The most important factor is knowing how to keep your credit score rating to perfection after it has been repaired.

Repairing your credit score is a structured process that needs the knowledge of a specialist. This process alone will require time and effort to properly repair your credit score rating. This will never happen overnight and does take time to plan and implement.

Please never think your credit score repair does not require knowledge, focus, and patience. Do not be taken by a scam and pay for a service that claims they will repair your credit score rating by tomorrow or the day after tomorrow. This is far from the truth and be cautious of whom you hire to do the personal and professional job you need accomplished. You're here to receive certain knowledge so you can obtain your personal financial goals at the next higher level.

Did you know that repairing your credit score is only a one-time deal you have with our services? As credit repair experts, we believe if you are serious about repairing your credit score, you will only need to do this once.

For more info and to order your credit report with FREE credit score please visit www.reliacredit.com