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.



Billy

Brad Stroh asked:


Get Your Credit Report & Analysis

It is very important to get your credit report and analysis. Why is this important? For one thing, if you’re thinking about buying a house or applying for credit for any other big purchase, you’ll need a clean credit report, and it’s always best to get your credit report and analysis before your lender does. This will give you an opportunity to clean up any discrepancies or errors, which are fairly common, and which can throw a monkey wrench in the works if not resolved.

Ideally, you should get your credit report and analysis once a year with each of the three credit bureaus:

• Bills can get them all – http://www.bills.com/creditreport

• Equifax – (800) 685-1111, http://www.equifax.com

• Trans Union – (800) 888-4213, http://www.transunion.com; and

• Experian (888) 397-3742, http://www.experian.com

You’re entitled by law to get your credit report and analysis for free from each of these three credit bureaus once a year. You can get all three at once or spread them out over the year. If you get your credit report and analysis more frequently than that, each report will cost no more than around $10 and in some states considerably less.

If you’ve been turned down for credit in the last 60 days because of something a lender saw on your credit report, you can get your credit report and analysis free of charge. Lenders are required by law to notify you of this right if they deny you credit.

When you get your credit report and analysis, review them carefully to make sure all the loans and credit accounts listed really belong to you, and that all the accounts listed as open are actually current loans or balances. If a loan you’ve paid off or a credit card that was cancelled is still listed as open, contact the credit bureau and ask for your credit report to be corrected.

What Is the Range of Possible FICO Credit Scores and What Do They Mean?

FICO credit scores range between 300 and 850. Ratings are as follows:

~ Excellent: Over 750

~ Very Good: 720 or more

~ Acceptable: 660 to 720

~ Uncertain: 620 to 660

~ Risky: less than 620

How Is My FICO Credit Score Calculated?

The formula used to calculate your FICO credit score includes information based on several factors:

~ 35% on your payment history

~ 30% on the amount you currently owe lenders

~ 15% on the length of your credit history

~ 10% on the number of new credit accounts you’ve opened or applied for (fewer is better)

~ 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)

In general, when people talk about “your credit score,” they’re talking about your current FICO score. But in fact there are three different FICO scores developed by Fair Isaac—one at each of the three main US credit reporting agencies. And these scores have different names.

WILL YOUR SCORES BE DIFFERENT?

FICO credit scores range from about 300 to 850. It’s important to get your credit report and analysis so you can understand what your FICO score is. Fair Isaac makes the scores as consistent as possible between the three credit reporting agencies. If your information were exactly identical at all three credit reporting agencies, your scores from all three would be within a few points of each other. But here’s why your FICO scores may in fact be different at the three credit reporting agencies. The way lenders and other businesses report information to the credit reporting agencies sometimes results in different information being in your credit report at the three agencies. The agencies may also report the same information in different ways. Even small differences in the information at the three credit reporting agencies can affect your scores. Since lenders may review your score and credit report from any of the three credit reporting agencies, it’s a good idea to check your credit report from all three and make sure they’re all right.

Usually when you get your credit report and analysis from the credit bureau it will include a form for reporting any inaccuracies. Give as much detail as possible, and if you have documents that back up your claim, provide copies. By law, the credit bureau must investigate your credit report claim, but even if they decide your credit report is accurate as it stands, you should continue to try to correct the report by writing a letter explaining your side of the story (not to exceed 100 words), which the bureau is required to provide to anyone requesting your credit report.

When deciding whether to approve credit, lenders take the following into consideration:

• Your payment history—do you pay bills on time?

• Have you had a bill referred to a collection agency?

• Have you ever declared bankruptcy?

• How much debt do you have outstanding compared to your credit limits? The closer your debt is to your credit limit, the less favorable.

• How long is your credit history? If you haven’t had much of a credit history yet, prompt payments are even more important.

• Have you applied for more credit lately? Too many applications for credit has a negative impact on your chances for approval.

• How many credit accounts do you have? Too many is considered a negative.

Information is retained in your credit report for up to seven to ten years. When you get your credit report and analysis, if you have negative items in your history, you can gradually repair your credit by consistently paying your bills on time from now on, paying down your balances, and not taking on any new debt. Lenders will take your improved record into consideration when deciding whether to approve credit, especially if you’ve been paying on time for at least a year.



Laurie