Each American is entitled to one free credit report each year.  This free report will come from each of the three major credit bureaus and is the result of the 2003 Fair and Accurate Credit Transactions.  Before this act went into law, credit reports would cost consumers about ten dollars to get a copy.  However, now all major reporting agencies including Equifax, TransUnion, and Experian will have to provide a copy of a consumer’s report upon request from a centralized source.  There are several ways to visit this source and request your credit report.

 
Free Credit Score at TransUnion
 

Consumers also have the choice of receiving the three reports at the same time, or you can choose to get them at different times.

In addition to every American being entitled to one free credit report each year, there may be certain circumstances in which you can get another free copy without having to wait another twelve months.  For example, consumers can also get a free credit report if they have been denied a loan, job or insurance policy based on your credit report, you have applied for unemployment or you reside in state which allows you more than one free credit report each year.  For example, residents of Colorado, Maine, Massachusetts, Maryland, New Jersey and Vermont are already eligible for an additional free report.  In addition, residents of Georgia can get two free annual credit reports from each of the three reporting agencies.  However, many residents are unaware that they are eligible for more than one free credit report each year.  In fact, getting this second report is not as easy as getting the first and consumers must contact each of the three credit reporting bureaus in order to make a request.  While this might require a little extra effort, financial experts say it is worth it in order to make sure that all of the information on your credit report is correct and you won’t find any surprises which could hurt your overall score.

Getting a free credit report is easy and many experts say that consumers should get reports as often as possible and even try to time them so that one will arrive each quarter of the year.

Check out FreeCreditScore.com and annualcreditreport.com.  For those who don’t have a computer or prefer to do things another way, a request can also be submitted by phone and calling 1-877-322-8228.  Consumers can also make their yearly request by mail.  However, you will have to complete a form located on the back of the Annual Credit Report Request brochure and then mail it to:  Annual Credit Report Request Service, P.O. Box 105281, Atlanta, Georgia, 30348-5281.

One of the first things you must do when working to improve your credit score is to stop using the credit that you have.  Using credit unwisely is what got you into trouble in the first place, so in order to get out of trouble, you must put the credit cards away.  In addition, a large part of your credit score is based on how much debt you have compared to how much available credit you have left.  In order to improve this section of your credit score, you can’t keep spending.

The second thing to do is to immediately order a copy of your credit report.  Each American can receive a copy of their credit report each year and you are also entitled to another free report if you are turned down for credit or live in certain states.  These reports will show you exactly how much money you have on each card, where you have fallen behind and if there are any errors that may also be bringing your score down.  If you do find any errors, contact the credit bureau and work to have these fixed immediately and you may see a near instant rise in your credit.

Another important aspect to repairing your credit is to pay your bills on time.  Timely payments make up 35% of your overall credit score.  Simply making sure that your payments, even if they are the minimum amount, are in on time can help boost your overall credit worthiness.  In order to get your payments in, consider setting up automatic payments with each creditor so the money is automatically deducted every month.  Many banks also use bill reminder software so you can keep track of when each payment due date is approaching.  Of course, you can also write out this information on a calendar and make sure that your check is in the mail at least a week before the due date to allow for processing.

You can also improve your credit score by not spending all of the credit which you have available.  By being close to your credit limit, you will have a negative effect on your overall credit score.  By working to pay down some of the balances you owe, you will see an increase in your credit score.  Try attacking the card with the highest APR first while still paying the minimum on the rest of your cards until that one is paid off and you move on the card with the second highest APR and do the same.

In order to improve your credit, you will also want to stop applying for new credit. Each time an inquiry is pulled on your credit, your overall score will take a negative hit.  However, if you are shopping for a mortgage or a car, these credit pulls will not be counted against you.

Finally, if you need some help in getting your finances in order, there is no shame in that.  Many times, good people find themselves in over their head and may need some assistance in digging their way back you.  You might want to consider visiting a credit counselor. These are trained individuals who will see where your money is going and work out a plan in order for you to pay down your debt and repair your credit at the same time.  However, be aware of many credit repair scams that exist and be sure to pick a company with a good reputation.  You may even want to look at the Better Business Bureau to see if any complaints have been lodged against them and also ask any friends or family for a good recommendation.

Credit scores are more important than ever.  It is not uncommon for a company to check your credit before extending a job offer, nor is it uncommon for your insurance company to run a routine check every few months.  A good credit score can help you land that new job, get a good insurance quote and help get you a lower interest rate on a loan.  On the other hand, a bad credit score can do just the opposite and wind up costing you several thousand dollars in higher quotes and interest rates.

Despite knowing how important a credit score is, many people are still confused as to what is actually considered a good score and how it is calculated.  Your credit score actually comes from an algorithm or mathematical formula based on information in your credit report compared to information on millions of other consumers.  The number is then considered to be an indicator of just how likely you will be to pay back your debt.

A typical credit scale will run between 300 and 850, with the higher the number, the better.  Most consumers will have a credit score somewhere between 600 and 800.  In fact, only 2% of Americans have a score below 499, 5% have a credit score between 500 and 549, 8% fall between 550 and 559, 12% of the population is between 600 and 649, 15% has a credit score between 650 and 699, 18% are in between 700 and 749, 27% have a rating from 750 to 799 and 13% have a credit score above 800.  Typically, any credit score above a 720 will get a consumer the best rates on a mortgage and other loans.

Until recently, most Americans didn’t even know their credit score.  This is because the number was a closely guarded secret and lenders were actually forbidden from telling consumers what their score was.  This was because many thought that the common consumer wouldn’t understand where the number came from because the formulas were too complex and if people knew their score they may change their behavior in order to change their score making the whole model useless.  However, all of this changed when one company began giving out individual’s credit scores. Although, pressure caused the company to stop giving out the information at no cost, public outcry led to new legislation allowing each American a free copy of their credit report each year.

There are several factors that go into your overall credit score.  Making up 35% of your score is how you pay your bills.  The most emphasis is placed on your recent history or repayment. Paying your bills on time is the best followed by paying the late, having accounts sent to a collection agency and then filing for bankruptcy.

The total amount owed plus the amount of credit you have left will make up 30% of your overall credit score.  This is money owed not only on credit cards, but also on your mortgage, home equity lines, car loans and student loan debt.  Companies also want to know how much credit you have available as the thinking goes the more you have, the more you will tend to use it.

Your length of credit history will make up an additional 15% of your score.  The longer you have had a history of credit, especially with the same companies, the higher this portion of your score will be.

A mix of credit makes up 10%.  This means having revolving credit such as credit cards and installment credit like a mortgage and car loans.  The more variety the better your score will be.

Credit card applications will make up the final 10%.  This model compensates for those who are searching for a car loan or mortgage and can really only be damaged if you have prior credit issues.

There are also several factors that will not affect your credit such as your age, race, sex, length of employment at your current job, marital status, education, whether you own or rent and length of time at your current address.

Credit scores, however, are not perfect and that is why it is important to pull your credit report and make sure that there are no errors which may affect your ability to buy a house or a car.

There are about one hundred factors which go into a very complex formula to determine your final credit score.  Each of the big three credit reporting bureaus will also have their own way of determining your score, making each one slightly different from the others.  However, there are a few major items that you can control which have a large impact on whether or not you will be deemed credit worthy.

Taking up 35% of your overall credit score is your payment history. This information will include account payment history on all types of credit that you may have including credit cards, installment loans, finance company accounts, mortgage and retail accounts.  In addition, the severity of any delinquency will also be included as will the amount which is past due on those delinquent accounts.  Your payment history will also show the number of past due items as well as the number of accounts which are being paid as agreed.

The amount of money owed will also account for 30% of your credit score.  This information will include the amounts owed on accounts and the specific types of accounts in which you owe money.  Creditors will also be able to see the number of accounts with balances and the proportion of credit lines which is being used and the proportion of installment loan amounts which are still owed on.

Even the length of your credit history is taken into account when it comes to your overall credit score.  For example, the formula looks at the amount of time which has passed since the account was opened and the time since the last activity on the account.

New credit can also have a negative effect on your credit score.  If you have opened a lot of accounts recently, then your credit score is likely to be lower.  The formula takes into account the number of recently opened accounts, the number of recent credit inquiries, the time since the recent opening, the time since the inquiry, and any positive credit history after past problems.  However, if you are shopping for a mortgage, those credit inquiries will not be counted against you as it is assumed that you are shopping for the best interest rate.

Usually, most banks and other financial institutions will be ready to lend money to someone who has a credit score of 700 or above.  However, a credit score below 580 is considered to be poor and must work to bring it up to at least a 600.  At this level, it is considered satisfactory in many ways that most lending institutions will prefer. Of course, the higher your number, the better off you are going to be when it comes to trying to gain credit.

A lot of times, a poor credit score is the result of not paying bills on time.  In fact, it has been reported that 30% of those with poor credit got that way because they fell behind on getting in their payments in a timely manner.  In other cases, it can be difficult to raise a poor score due to errors on the report.  Therefore, it is important to get a copy of your credit score and report in order to determine if there have been some errors which you can have fixed to quickly improve your score.

There are actually a lot of myths which are out there concerning credit scores.  For example some myths include that checking your own standing hurts your score, all credit reports are the same, bad news comes off in seven years, FICO scores are locked in for six months and credit counseling will destroy your credit.  None of these are true and it pays to educate yourself on how credit scores actually work.

When you apply for credit or for a loan and are denied, you will be sent a letter listing the reasons why your application was not accepted.  In addition, you will automatically be eligible to get a free copy of your credit report if you were denied because of your overall credit score.  This will be true even if you have already received your one free credit report that all Americans are entitled to every twelve months.  If you are denied for a poor overall score, be sure to request your free credit report within sixty days of receiving the notice.  If the reason listed on the letter is wrong such as highlighting a delinquent account which is not yours, be sure to contact the issuer and the credit bureaus immediately for an explanation.

If you find that there has been a mistake on your credit report and this is the reason for being declined, it must be fixed immediately.  You can do this by writing a letter to all three credit bureaus and including any documentation you have in order to support your claim.  The credit bureau will then have to investigate your claim within a month of receiving your letter.  Once the mistake has been fixed, be sure to insist that the revised version of your credit report has been sent to any company which has recently pulled your credit.  This will not happen automatically, so you must take this step yourself.

If you have found that you have been denied credit, you will also want to get a handle on the credit that you do have.  If you have fallen behind in bills due to being laid off or some other hardship, you will want to call your creditors and explain your situation.  You may be able to work out a payment agreement or get your APR lowered so it will be easier to pay off what you owe.  It is best, however, if you do this as soon as possible when you realize that you are having financial issues in order to give yourself a better chance of working out a settlement.

When you are denied credit over lack or credit or credit problems in the past, you can also begin to rebuild your financial footing by getting a secured credit card  This card works just like a regular card, but it is backed by money that you have put down which is also your credit limit.  Another idea is to be added to someone else’s account as an authorized user.  Of course, this other person will need to pay their own bills on time and be willing to help you out.  As a result, be very cautious about what you spend in order to not harm the other person’s good credit standing.

Finally, be sure to stay on top of your credit card statements when they arrive.  Banks and other lenders will sometimes try to shorten grace periods, raise interest rates and implement new fees.  If you do not take the time to read over your statement, you may wind up paying too much on a monthly basis and find yourself falling further and further behind.

Most credit reports come from a credit reporting agency that gathers and then sells credit information.  Once the data is collected, it is then stored in giant databases where the credit reporting agency can then charge a fee for supplying the information. There are three major nationwide reporting agencies, plus several others who work on a regional level.

It was only until recently that individuals could get their credit report from one of the three reporting agencies.  Now, each American can get one free copy of their report each year.  In addition, there are a few other entities which are also entitled to look at your credit report.  For example, creditors who are considering extending you credit have access to your score.  In addition, employers can also pull your credit report to see how you handle money.  This can happen when you apply for a job or are being considered to a promotion, reassignment or retention.  Insurers can also pull your credit report when you apply for coverage and the government can also have a look when you apply for benefits.  Finally, anyone else with a legitimate business need can also do the same such as a landlord who needs to know if you can cover your bills.

A credit report will usually contain four types of information.  The first is any identifying information.  This means information such as your full name, any aliases, your current and previous addresses, social security number, date of birth and employers both current and past.

Of course, your credit report will also contain information on your credit history. This includes the types of credit accounts you have with retailers, banks and credit card issuers.  Also included will be information on whether you have a mortgage, student loans, revolving credit and installments loans.  The report will also show whether or not you are past due on any of those accounts, how much is past due, the total amount owed, your credit limit, any co-signers and your payment history over the last two years.

The credit report will also show any public record information such as any bankruptcies, liens, or monetary judgments.

Finally, any recent inquiries into your credit will also show up on your credit report. The more inquiries you have, the lower your overall credit score is going to be.  This is because if you apply for a lot of credit or open several new accounts within a similar timeframe, it makes you appear to be desperate for credit.

The information on your credit report comes from parties which have already extended you credit. For example, if a department store has issued you a credit card, they will be reporting information on how much credit you have, how much you have used and your payment history.

Checking your credit report often is highly recommended because it is not unheard of for there to be errors which can lower your score.  These errors are actually quiet common because of cases of mistaken identity, out of date information or a typing error.  If you find an error on your report, it is critical that it be dealt with immediately.  You can do so by contacting the credit reporting agency which then must look into the issue within thirty days, however, the entire process can last up to forty-five days.  Once the errors have been found and corrected, you can request it be sent to anyone who has looked at your credit within the last six months.

When looking for credit, be careful that you don’t apply for too much of it at one time.  This is because every time someone applies for new credit, the inquiries make the consumer look desperate.  However, if you have applied and been turned down, you may have a small window of opportunity to apply elsewhere as it might take a few days for the inquiry to show up on your report.

If you are looking for credit, another good idea is to get a copy of your credit report before applying.  When you do so, you will instantly know how your credit stands and you will know your chances of being approved.  Every American has the right to get a free copy of their report from all three reporting bureaus once every twelve months.  Once you have your report in hand, if there are any errors dragging your score down such as a delinquent account which is not yours, you can have the issue taken care of.  Once the problem has been fixed, then request that your report is reissued to anyone who has made an inquiry for credit worthiness.

If you need credit, one of the best things you can do is to keep the credit you have in good shape.  That means staying up to date on your payments and staying current with all of your open accounts.  In addition, you should always pay at least the minimum amount owed each month.  You should also be sure that you don’t spend too much of your available credit.  In order to make sure that your credit stays in good order, it is good idea to use only 30-50% of the credit you have available.

If there have been any problems with your credit in the past which are keeping you from getting new credit, be sure to get back on a good financial track as soon as possible.  For example, begin paying your bills on time and work to pay down your balance on the card with the highest interest rate first and then move on to the card with the next highest rate.

In order to get some credit, you may want to apply for a store credit card.  Often, these cards are easier to get than a major credit card even if you have a low score on your credit or have had problems in the past.  More than likely these cards will have a lower limit on them, but it will be raised if you show that you can manage your card effectively.  Once you rebuild or build your credit with these cards, it will be easier to get a major card further down the road.

Getting a secured credit card will also make it possible to build your credit.  A secured credit card is different from other cards because they will be backed by your own money.  You will make this security deposit which will also serve as the card’s credit limit.  This deposit is placed in a savings account and only used when you default on your payment.  After you’ve made payments for between six and twelve months, some cards will be converted from a secured one to an unsecured card.

In fact, some people may say that fixing your credit score is a lot like losing weight.  That means that there is no quick fix and you must be willing to stay away from any place that offers a fast fix as it is more than likely a scam and you could wind up losing even more money.

In order to get on the right track with your credit and improve your overall score, here are some steps that you can take immediately.  First, be sure to check your credit report.  By examining your report, you may find errors which have been dragging your score down over time.  In addition, make sure that there are no incorrect late payments listed and that the amounts owed on each account are correct.  If there are any errors, then immediately contact the credit bureau and the reporting agency.

Another way to begin to rebuild your credit is to stay on top of all of your due dates.  In fact, making payments on time is one of the biggest contributing factors to your overall score.  In order to make it as easy as possible to remember when all of your bills are due, take advantage of your bank’s payment reminders.  In many cases, you can also set up automatic payments through your credit card or loan in order to have a certain amount deducted from your account each month.

Finally, be sure to work toward reducing the amount of overall debt that you owe.  The first step to doing this is to stop using your credit cards.  Next, make a list of all of your accounts, how much you owe and the interest rate which is being charged.  Without destroying your budget, come up with a plan in which you pay more than the minimum payment on the card with the highest interest rate.  When it is paid off, attack the card with the next highest rate while still paying the minimum on the rest of your cards.

Other ways to improve your overall credit include reducing the overall amount that you owe. Up to 30% of your overall score is connected to how much money you have on credit cards.  The more outstanding debt you have, the worse off your credit score is going to be.  In fact, you should try to use no more than 30-50% of your overall available credit in order to have a good credit score.  If you are using a large amount of your available credit, don’t open new accounts just to raise your score.  In fact, this move could actually backfire and result in a lowering of your score.  In addition, with more accounts, you may be more likely to use that available credit just because it is there resulting in even more money being spent and the possibility that you will fall behind on that bill as well.

In addition, don’t close a lot of unused credit accounts in order to raise your score over the short term.  These accounts are not actually going to go away on your credit and may still affect your overall score.

If you are new to having credit cards, don’t open too many accounts over a short amount of time.  This will actually make you appear risky to card companies and have the affect of lowering your overall score.  In addition, having a mix of both store cards and a regular Visa or MasterCard will likely not raise your score.

When attempting to raise your credit score, remember the old saying that Rome was not built in a day and that it might take several months or even years to get your credit score back up. The important thing is to remember that if you stick to a budget and a game plan, you will eventually have a score to be proud of.

There are several different factors which go into determining your overall credit score. The higher the overall number, the better your credit worthiness is going to be.  As a result, you want to keep it as healthy as possible.  There are many ways to do this including checking your credit report on a regular basis in order to make sure that there are no mistakes or errors which may be harming your good credit.

There are actually several different credit scoring models which are in use, but the FICO credit score is the one that dominates the market.  In fact, 90% of all financial institutions use the FICO score when making a decision whether or not to extend credit to a potential customer.  A single consumer will have three separate FICO scores.  One is issued by each of the three major credit reporting bureaus including Equifax, Experian and TransUnion.

Each of these bureaus has their own particular formula for coming up with your credit score. This is why your score might be slightly different from one agency to another.  In addition, it is also possible that one company gets some slightly different information such as an error and that results in a lower score than what the other two companies report.  This is why it is so important to check your score on a regular basis to make sure that all of the information is correct for all of the credit bureaus.

In addition, different credit scoring models are used for different purposes. For example, the auto financing industry might use a completely different formula to determine credit worthiness than one used for installment loans.

For the most part, credit scoring models have long been kept secret.  In many cases, individuals and consumer advocates have had a hard time getting information on what factors are considered in the score and how much weight each factor carried.  It has only been recently that individuals could get a look at their own credit score.  Credit reporting companies maintained that they didn’t release scores because they felt that the formulas were too complicated for the average person to understand and if consumers found out their credit score they would change their habits in order to manipulate it.  However, recent legislation has made it possible for each American to get their credit report and score once a year for free.

There are some factors that will never go into helping to determine your credit score and worthiness.  This is because of the Equal Credit Opportunity Act which forbids creditors from taking into consideration sex, race, marital status, national origin and religion.  As a result, the mathematical formula is seen as superior to previous ways of determining credit worthiness where it was mostly decided by a loan offer.  These officers were often given too much discretion which created some bias issues among others.  Now, most lenders agree that the current credit scoring formula is a more consistent way in which to determine if an individual is worthy of credit.

There are several factors which go into an individual’s overall credit score including payment history.  This actually accounts for the largest portion of a score making it important to pay your bills on time each and every month.  Other factors include how much money is owed in total including credit cards, mortgage, student loans and car payments.  In addition, creditors will look at how much credit is still available.  Credit history and new credit are also both factors into a credit score. The longer you have had credit, the better you will be.  However, if you have had a lot of new accounts open recently, this will reflect poorly on your overall credit rating. These factors are just a few of the factors used in credit scoring.  In fact, the overall formula takes into account over one hundred different factors.