You may think your life is private, but when it comes to your financial life, it isn’t. Details of both your present and your past are stored in databanks at the three major credit reporting bureaus: Equifax, Experian, and TransUnion.

All this data is kept and used to compile your credit report – and from that report, the bureaus compile your credit score.

Although there are dozens of different credit scores for different purposes, the one that affects you most often is the FICO score. This is a score based on a formula developed by the Fair Isaac Company, and its function is to predict the likelihood that you’ll pay your bills on time- or not.

Your FICO score can be accessed almost instantly – which is why you can apply for credit in a retail store and be accepted or rejected within minutes.

The FICO score compiles the known information about your financial habits and turns it into a 3 digit number between 300 and 850. The higher your score, the better your chances of getting the credit you want – and getting it at the lowest interest rates available.

Credit reports and credit scores have evolved over the years. 40 or so years ago credit bureaus were small, local companies. They gathered information from your local creditors – and they also gathered information from local newspapers and “gossip lines.” Back then, you’d better not get a DUI or let the newspaper take your picture when you’re misbehaving, because it would go in your credit file! At that time, consumers could go to the credit bureau and pay a few dollars for a look at their own credit reports.

Then data collection became centralized and the small credit bureaus shut down. And policies changed a bit. When credit scoring became popular, the scores were hidden from consumers. Only the person or company that considered giving you credit could know your scores!

In 2001 that changed due to pressure from consumer groups and the U.S. Congress, so now every consumer has access to his or her FICO credit score directly from the credit monitoring agencies – for a fee, of course. And, as a result of new laws, each bureau must supply consumers with a copy of his or her credit report, without scores, once per year for free.

Why should you care about your credit scores?

Several reasons – the most obvious of which is that your credit scores directly affect your ability to get credit when you need it. Then, they directly affect the interest rate you’ll pay for that credit.

Low scores indicate to creditors that you’re a poor risk, so they will either deny you credit or make you pay dearly for it.

Credit scoring has contributed to the end of “personal” banking, in which your local banker granted credit based on your reputation in the community and the banker’s personal knowledge of you. Now, except in a few cases, the decision has been taken out of his or her hands and depends to a great extent on your credit scores.

However, when it comes to borrowing money, credit scores are not the only consideration. Other factors, such as job stability, income, the size of your bank account, the size of your down payment, and the reason why you are seeking credit are also considered. So, even with a high credit score, it is possible to be turned down for a loan.

The interest rate you’ll pay…

There’s a huge difference between the interest rate you’ll pay with high credit scores and low credit scores.

For a mortgage loan, there could be a difference of as much as 3 percentage points – which translates to about $200 per month on every $100,000 you borrow.

In car loans, the difference in interest rates is even more dramatic. For instance, if your credit score is under 600, you will pay in the range of 18 ½ %, while a credit score of 720 or above would allow you to buy the same car with an interest rate of about 6 2/3%. In other words, you’ll pay almost three times as much interest if your scores are low.

The payment on a 4-year, $20,000 car loan goes up about $10 per percentage point, so with good credit you’d pay about $475 per month, while bad credit would get you a payment of nearly $600.

Why do lenders look at all three credit scores?

When you access your credit report and credit scores, you’ll probably find that while the numbers are similar, each credit bureau will report a different 3-digit score. This is because some creditors report to one bureau and not the others. Thus, the information they use to determine your score is different from one bureau to the next.

This is why most mortgage companies use your middle score in making their determination.

A few points make a difference…

It’s interesting to note that when credit decisions are automated, just a point or two can make a difference in the interest you’ll pay. Banks have their “cutoff points” that determine the interest rate they’ll offer you.

Even with good credit, you may pay 1/8% less if your average score is, for instance, 720 rather than 719. Thus, it pays to keep your credit scores as high as possible.

Credit scores affect even more aspects of your life.

Do you want to carry a cell phone or watch satellite or cable TV? Your credit scores will determine whether you are allowed to do so. When those companies give you a “free” cell phone or install “free” equipment to access television programs, they want assurance that you’ll continue to pay throughout your one or two year contract with them. They’ll use your credit scores to determine that risk.

If you want to rent a house or an apartment that’s handled by a management company, you’ll probably have to give them permission to access your credit scores. They’ll decide whether or not they want to rent or lease to you based on your credit scores. Poor credit might mean you’ll leave in the middle of the night – owing back rent.

When you apply for a job, many employers will require that you grant them permission to see your credit report and credit scores. They’ll judge your reliability and trustworthiness based on the scores. In some sensitive jobs, low scores automatically mean you won’t be hired – or you will be fired!

How are credit scores compiled?

As we mentioned, there are dozens of different kinds of credit scores, each with a different purpose. Each has its own formula, and that formula is a trade secret.

But the credit bureaus have let us in on the general break-down of information that is used to determine a FICO score.

The most weight, 35%, is given to your past payment history. Lenders want to know if you pay your bills on time, and if you’ve had collections, bankruptcies, or foreclosures. If you do have negative items on your credit report, the most recent incidents do the most damage to your credit scores.

After 7 years, most negative information rotates off your report. Bankruptcies and foreclosures remain for 10 years.

Next, they want to see how much you already owe, so 30% of your score is based on how much credit you have available and how much of it you are using. If you have a pocket full of credit cards and most of them are at their limits, your scores will go down. If you keep that same pocket full of cards below 25% usage, your scores will go up.

Creditors like to know that you have a long history of being responsible with money, so the next 15% of your score is based on the length of time you’ve had credit. This is why we tell consumers not to cancel old credit cards, but to use them from time to time.

If you’re running around trying to get credit in numerous places, creditors see that as a bad sign, so 10% of your score is based on new credit and new credit inquiries. If you want to keep your scores high, don’t apply for several new credit cards within a short period of time, and don’t let a car dealer or mortgage lender access your credit report until you’ve made the decision to buy. Several inquiries from car dealers or lenders within just a few weeks will count as one inquiry, so it is safe to shop once you’re ready to buy.

Lenders also want to see that you can handle multiple credit accounts, and different kinds of credit. So the final 10% of your score is based on the types of credit you have. It’s best if your credit report shows experience with both installment loans and revolving credit accounts.

Raising your scores…

As you can see, keeping your scores as high as possible is in your best interests, and most of the factors that affect your credit scores are in your control.

You can:

* Pay your bills on time
* Limit spending to keep credit card balances below 25% of use
* Keep all your old credit accounts open
* Refuse to allow creditors access to your credit report until you’re ready to buy
* Refrain from opening multiple accounts in a short time frame
* Carry both installment and revolving credit accounts

The one thing you can’t do immediately is create a long history of credit use, but you can continue to build a good history that will serve you well in the future.

One more important step…

You can and should access your own credit report often to make sure there are no mistakes that could adversely affect your credit scores. While you can get a free credit from each of the credit bureaus each year, we believe you should be checking at least quarterly, and that credit monitoring is a good safety precaution.

Industry experts admit that up to 70% of all credit reports do have errors, so read your report carefully.

Some errors, such as a misspelling, won’t harm you. But if you have old negatives that haven’t been removed, or if a data entry person has accidentally entered someone else’s negative information under your Social Security number, you need to correct the error.

In addition, it’s important to watch for the red flags that signal identity theft. If your credit report shows that “you” have a new address or a new employer, or have applied for credit you know nothing about, look into it right away! Catching identity theft earlier can make repairing it far easier.

CreditScoreQuick.com

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Maybe you are out of work like many other Americans. Reports claim that un-employment is up, and then they claim it’s down. Regardless of this debacle of current employment information, one thing is for sure. There are lots of people across the country out of work. This means when you are looking for a job it’s more competitive. With a credit report coming into play during the hiring process it’s imperative that your report does not show patterns of irresponsibility.

According to the Society of Human Resource Management nearly 60 percent of employers check your credit now.

Typically a credit check is done by employers hiring people that handle money. In some cases employers will check your credit to profile you. This means they are looking at your history and whether this history show’s poor character that would affect work ethic.

Your credit report also shows your work history. There is evidence that 40 – 50% of applicants lie on their resume whether they be white lies or whoppers. So you can see why employers need verification of everything, hence a credit report provides some of this leg work.

So in a nutshell it’s really not worth allowing your credit to go down the toilet. With your credit being a ticket to most things these days, such as employment, better rates & terms on loans, insurance, and bottom line savings it’s apparent to be aware of what is on your report.

You never know when your current employer may give you the pink slip….. When this happens at least you know where you stand with your credit. If your credit is in the toilet like mentioned you will be better prepared to fix any issues on your report.

I can understand why employers look at your credit. Its makes sense to me. Imagine that you are looking at two applicants, both with the same backgrounds. After reviewing both applicant profiles, you discover that one particular applicant has a history of credit issues. Who would you hire?

So its no secret that your credit is a factor these days with just about everything you do. If you have not checked your credit lately under the (FCRA) Fair Credit Reporting ACT you get access to your free credit report from Experian, Equifax and TransUnion once a year.

Be prepared you never know what’s around the corner.

CreditScoreQuick.com

Q:

Can a creditor report to the 3 credit bureau’s an opening date that’s 6 years old. They dated a 6 year old debt as an opening date of 2010 instead of 2004.

Guthrie, FL

A:

Hi Guthrie, I see this all the time. Especially if you have collections on your credit report that get sold to other collection companies. The  date opened comment seems to get messed up quite frequently. Yes, they are suppose to report the original date you opened the credit card. You can call the creditor and have them update this information correctly with the credit bureaus. If a call does not correct the open date comment on your report, you can dispute this information with the credit bureau that is reporting this information wrong.

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There are many ways to improve your credits scores. Some of these tips do require savings. Nether less there are ways to increase those scores fairly quickly. Here are some tried and true ways to get this done.

•    Pay Down Credit Card Debt
•    Increase your Credit Card limit
•    Pay off collections and charge-offs
•    Become a authorized user on a credit card
•    Pay off a debt

Pay Down Credit Card Debt
Amount owed on debt makes up 30% of your overall score. If you were to pay down your credit card debt you would see a boost in your credit scores. Example:

Visa Card
Balance owed: $4,000
Card Limit: $10,000

Master Card
Balanced owed: $6000
Card Limit: $13,500

American Express
Balance owed: $1,200
Card Limit: $10,000

Total Credit: $33,500
Total Utilized: $11,200

Your credit utilization is 33% of your credit limit. This would be a perfect example of how to increase your credit scores fairly quickly. Paying down the balance on Master Card or your Visa Card would work. The lower you can get that credit utilization number the higher your scores will increase.

Increase Your Credit Card Limit
The same principle applies here. Your credit utilization comes in to play. You could ultimately increase your credit card limits on your cards that have the highest utilization of credit. Granted FICO looks at the total number, your utilization of credit on each card is a factor. This is our least favorable solution.

Pay off Collections & Charge-offs
You can review your credit report if you have collections and charge-offs on it. Figure a budget to take care of the most recent collections on your report. Settle on those collections and you will see an increase in your scores. Once those collection balances report a zero balance you will see your scores increase.

Become an authorized user on a Credit Card
New credit makes up 10% of your score. Utilizing a family member’s good credit will help your score. This solution is for individuals that cannot get credit in their own name. Remember if their credit utilization is high, it may cause issues.

Pay Off Debt
Paying off your credit card debt is another part of the credit utilization scenario. So if you completely pay off your credit card balances this will increase your scores. Note: don’t close your credit cards as this could drop your credits score.

By following the mentioned practices you have have your credits scores increased within 30 to 60 days.

CreditScoreQuick.com

Identity theft is the illegal use of someone else’s personal information or property such as a social security number to obtain credit or money.

Here are signs of identity theft.

•    Receiving calls from debt collectors about services or merchandise you did not buy.
•    Getting credit cards in the mail that you did not apply for.
•    Not receiving your bills or other credit related mail. If you did not receive a bill, this could mean that a identity thief has taken over your account and has changed your billing address.
•    Inaccurate or fraudulent information showing up on your credit report
•    Getting denied for credit or offered bad terms for no apparent reason

How to find out if your identity has been stolen

In most cases most consumers find out about identity theft after it’s already happened.

•    You may find out when you get something in the mail about a house you never owed, a job you never had or a apartment you never rented
•    You may find out when you apply for a car or mortgage and discover that you have problems with your credit worthiness.
•    You may find out when a collection companies start calling you at home for work for past due debts that you have never incurred.

Items you should monitor regularly

You can avoid identity theft by early detection. You should keep an eye out for any strange activity my monitoring all your information regularly.

Your credit reports. Your credit report will contain information about you, including all your accounts with creditors. Under federal law you have access to your free credit report every 12 months. If identity theft is taking place with your name, it will show up on your report. To get a copy of your credit reports go to www.annualcreditreport.com

Financial statements. Always monitor your financial statements such as bank statements, investment accounts, credit card statements, etc…. regularly for charges you did not make.

CreditScoreQuick.com

We all know that no credit is better than bad credit. But have you tried getting a loan lately with no credit? Or have you tried getting a loan while your bills and rental is in somebody else’s name? Well, I will be the first to tell you that it’s extremely hard if not impossible to get a loan with the mentioned scenarios.

There are some situations where you might be concerned about acquiring new credit after being burned, because of bankruptcy and divorce. Maybe you are young and need to establish credit. And finally there are those who just have everything, such as lease agreements, cell phones, car loans, and utility bills in somebody else’s name. Let’s face it, you need credit and that credit needs to be in your name.

It will initially cost you money to get the electric, cell phone, and rental etc… in your own name especially if you have bad credit or no credit. Most utility companies and cell phone companies may require a large deposit initially. But it’s a part of establishing credit.

Now keep in mind that none of these services report to your credit report unless you don’t pay them and they go to collection. When I say establishing credit, I am talking about alternate lines of credit to get a mortgage loan. Example, if you are trying to get a FHA loan and have no credit, you can use one of the mentioned services as an alternate line of credit for government loans as long as the bill is in your own name and the payment history is on-time. Government loans allow you to get a letter from one of these companies stating you have been on time for the last 12 months with payments. This is considered what is called an “alternate line of credit.” Now there is one issue, you must have credit scores to get a loan in this current market. This requirement is with banks, not FHA or VA.

So let’s recap here. If you had issues in the past with credit, get re-established. It’s a must to get loans in today’s lending market. If you are young and you have zero credit, go here. If all your bills are in someone else’s name, get them in your name. Having no credit or credit in somebody else’s name does not help your credit, it actually hurts it.

CreditScoreQuick.com

Many of us believe that if we could become rich then all of our troubles would magically disappear, but this isn’t necessarily the case. The rich have problems too, even when it comes to their credit and credit scores. This might seem a bit ridiculous seeing as how these people might make more in a year than many of us do in a lifetime, however; there are a multitude of factors that can come into play as to why rich people still have credit issues.

But this begs the question, if you’re rich, do you really need good credit anyway? Can’t you just buy whatever you need in cash, leaving all the trouble of maintaining a good credit score, applying for loans, and waiting expectantly to see if you’ve been approved, for those with lesser incomes?

It’s a good question, and one not without some merit. And there are arguments for and against the rich needing good credit, many of which hinge upon a person’s personal financial situation, lifestyle and needs. Let’s start with why a rich person might still need good credit.

The Liquid Issue

There are numerous aspects to the argument as to why the rich still need good credit. First off, the fact that someone is considered rich doesn’t necessarily mean that they are cash rich. The definition of what makes someone rich is often in the eye of the beholder. How and why someone is considered rich might be based upon their income level, their personal property holdings, their worth based upon business ownership or company stock holdings, or an inheritance in the form of a trust fund.

However, things like stock, a business, a trust fund, or property may not be easily convertible into liquid cash, making the need for credit often necessary for making basic purchases. In such situations, credit might also be needed for items such as homes, boats, cars, and other large purchases for which a regular income, even a hefty one, might not provide enough cash to buy outright. But there are other reasons as to why the rich might still need good credit.

The Rich Like to Stay Rich

In the majority of cases, the rich are probably looking to stay rich, and in many instances, they didn’t become rich by making poor financial decisions. This means that the rich may prefer good credit because good credit often means cheaper credit. With a better credit score they might be likely to getter better rates on their credit and have larger credit lines available to them to make the purchases, investments, and take advantage of opportunities that can make them richer and allow them to maintain the lifestyle to which they are accustomed.

Time is Money

To many wealthy individuals, time is money. Not only can having credit and the availability of credit cards at their fingertips make their lives easier and more efficient, it can save them time. Stopping at the ATM machine numerous times to reload on cash, or writing checks for purchases can be time consuming and inefficient. It can also leave a bad impression on business partners or clients. Therefore, having access quick and easy credit for everyday purchases can leave time for more important matters like making more money.

That being said, there are reasons why the rich might not be bothered with the need for good credit.

Cash Savvy

It could be that some of the rich out there just don’t need to be troubled with worrying about good credit. They might have a large enough income or enough liquid cash not to have to worry about their credit scores. And even if they did need credit, having a poor rating that results in higher interest rates may not bother them since they would be rich enough to pay ridiculously high amounts for the credit.

It might also be that they already have the large ticket items they desire and can meet everyday expenses with the cash they have on hand. If they have ample incomes or plenty of money in the bank, and items like homes, boats, cars, etc. are paid off or can be paid for in full, the need for credit just might not be there.

A Moving Target

For some rich people, maintaining good credit could feel like putting a target on their back. With the prevalence of identity theft these days, someone with a good credit score can be a prime target for criminals looking to steal pertinent personal financial information. With this financial information in the wrong hands and a good credit score, it might be even easier for criminals to utilize a rich person’s identity for medical, credit card, bank, mortgage or similar fraud.

David is the co-founder of a leading credit card comparison website in Australia including a range of business credit cards that allow you to earn rewards as you make purchases.

The FDCPA was put into place because of abusive, deceptive, and unfair debt collection practices by debt collectors. Here is what you need to know to protect yourself.

Ceasing Communication- If you notify a debt collector in writing that you refuse to pay a debt or you wish to cease communication with the debt collector, the debt collector must cease all communication with you.

Communication with 3rd parties – A debt collector may not communicate with 3rd parties stating you owe a debt. The debt collector can only call 3rd parties trying to find your address and phone number or place of employment.

When a Debt collector can call you – A debt collector cannot call you before 9 a.m. or after 8 p.m. your local time.

Harassment or Abuse – A debt collector may not in any way harass, oppress, or abuse you in any way.

Example:
• The use of violence or criminal means to harm you, your reputation, or your property
• The use of obscene or profane language.
• The publication of your personal information other than to the consumer credit reporting agency.
• The advertisement for sale of any debt to coerce payment of debt
• Telephone calls that repeatedly or continuously with intent to annoy, abuse, or harass any person at called number

False or Misleading Representation – A debt collector may not use any false, deceptive, or misleading representation as a means to collect a debt.

Example:
• False representation that the debt collector is represented by the United States or any branch of local or national government
• False representation that the debt collector is an attorney.
• False representation that nonpayment will result in arrest, imprisonment, seizure, garnishment, attached to the sale of any property or wages unless such actions is lawful and the creditor intends to take such action via courts.
• The threat to take action that cannot be legally taken or that the debt collector did not intent to take.

Validation of Debts – The debt collector must notify you within five days after initial communication the following
• The amount of debt
• The name of creditor to whom the debt is owed
• That you must dispute the debt within 30 days or the courts will assume you agree to the debt
• If you dispute the debt in writing within 30 days the debt collector must verify the validity of the debt, by providing name and address of original creditor.

I have touched on some of the key points from the Fair Debt Collection Practices Act. I hope this helps with any concerns you may have in regards to debt collection practices.

If you feel a debt collector has violated any of these laws you may contact your states attorney general office or FTC. Some states do have their own debt collection laws outside the federal laws of the FDCPA. A collection company could be violating federal law (FDCPA) and your local state debt collection laws. Your attorney general will be able to inform you of your rights.

If you are trying to get in touch with your attorney general for your state, use the Consumer Action Website at http://www.consumeraction.gov/state.shtml

To get in touch with the FTC to file a complaint go to: http://www.ftc.gov/ftc/contact.shtm

CreditScoreQuick.com

Do You want to Boost Credit Scores or Get Out of Debt?

Consumers today have two separate goals when it comes to credit. Some just want to get out of debt. Others want to boost their credit scores so that when it comes time to make a major purchase, they’ll pay the lowest interest rates.

That’s why consumers should think about the consequences before taking advice from credit counselors or well-meaning friends. Good advice geared toward getting out of debt may be the direct opposite of good advice that will increase your credit scores.

The way credit scores are created can be puzzling to many. While it seems like using very little credit would make you a more credit-worthy person, the opposite is true.

Lenders want to see that you have credit and you handle it well. Thus, when credit counselors advise consumers to close out credit cards, they’re giving credit score crippling advice. The only reason a consumer should cancel a credit card is if they have no self-control and will ultimately charge it “to the max.”

Why? Because a good portion of your credit score rests on how much credit you have available compared to how much you use. Creditors like to see that you are not so desperate that you’re using all your credit.

But then comes another strange twist…Using one card to its maximum will hurt you, even if you have six others with no balance.

That’s why debt consolidation will help you get out of debt but lower your credit scores. When you receive a promotion from a credit card offering you an low interest credit card, as low as zero for the first 6 to 12 months, it may or may not be a good idea to transfer all your credit card balances to that card.

What you should do depends upon your financial goals.

If you can discipline yourself to continue paying the same amount to that one card that you’ve been paying to all cards combined, that move will obviously help you bring your debt down quickly.

However, using one card to its limit will lower your credit scores. Eventually they’ll come back up – if you maintain that discipline and use the low interest or interest-free period to reduce your balance.

Credit card companies don’t really like to carry accounts that are unused for months and years at a time. They’re earning nothing, but bearing the cost of record keeping. To offset this cost, some are now charging annual fees just for keeping an account open. The good news is that some of them will waive that fee if you use the card occasionally.

Thus, it can help your cash flow and your credit scores if you use each of your credit cards once every 2 or 3 months. To have the annual fee waived and still avoid paying interest, pay the balance in full when the statement arrives.

CreditScoreQuick.com

There obviously is some confusion that a credit score and a credit report are the same. I have seen some top credit experts and media outlets claim they are synonymous. Well, they are wrong. They are two very different items being reported on your personal credit file.

Your credit score is assessed by the FICOs scoring model used by Experian, TransUnion and Equifax. The three national credit bureaus then sell those scores to Lenders and others. The three credit bureaus have a license agreement to use the FICO score model and thus report those scores on their own credit file.

The credit score that you receive from Equifax, TransUnion and Experian is assessed based on the information being reported to each bureau independently by creditors. This is why the bureaus have different information on your credit file. Some creditors may not report to all three credit bureaus.

Remember these credit reporting agencies are independent of each other and don’t share your information with each other unless it is a fraud alert.

The graph below shows how Fair Isaac determines yours credit score with their FICO algorithm that the bureaus currently resale to creditors.

A credit report is information that is gathered by Experian, TransUnion, and Equifax. The three credit bureaus gather information that is reported to them by companies that have extended credit to you.

Your personal information such as your social security number, current and past residential address, birth date, and previous employers will be in this file.

Credit history will also be reported. Credit history is the majority of this record which includes accounts opened with creditors, payment history, authorized users, credit limit, revolving credit history, open dates, closed or inactive accounts, and payment terms.

Credit inquires are also reported on your credit report. A credit reporting agencies will show an inquiry when your report is showed to a 3^rd party such as banks, credit card companies, landlords, and insurance companies.

A public record is part of this report as well. This record is obtained from government sources such as courts, which include bankruptcies, child support, and judgments.

You can easily see how a credit score and a credit report are different. Both do however work in conjunction with each other to determine your creditworthiness.

Now it is possible to have a credit file with no credit score. However you cannot have a credit score with no credit file. A credit history must be present to determine a score. Typically this history must be at least 3 to 6 months  before FICO will calculate a credit score.

Author: Mike Clover

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