Credit Scores Free

Figuring out exactly how credit scores work is problematic. Like nuclear fission, learning Chinese and setting the clock on your DVD player, credit scoring is not something that most people can easily master.

In the complicated world of credit scores there is one fact that pretty much everyone assumes is true: late payments are bad for your credit scores. Not only are late payments bad, but they are also assumed to be one of the worst things you could do to your scores. The first sign of a late payment on your credit reports signals impending credit doom, right? It turns out that this isnt exactly the case after all.

There are thousands of slightly different credit scoring models used today, each with a different purpose and formula. The most common credit scoring systems are set up to predict only one thing: how likely you are to have a 90 day late payment or worse in the 24 months after your score is calculated.

Credit scores are used by financial institutions, insurance companies and utility companies as an efficient way to predict how risky a customer you will be. If your credit score is low, it indicates that you are more likely to make late payments or file costly insurance claims. In turn, this means that the creditor is more likely to lose their investment by lending you money. Once you understand that credit scores predict this specific behavior, its a lot easier to figure out the best way to manage your credit.

Because scoring systems are so focused on predicting whether or not youll go at least 90 days late, surprisingly, an old 30 or 60 day late payment is actually not that damaging to your credit scores as long as it is an isolated incident. Only when your accounts are currently being reported 30 or 60 days past due on your credit reports, will your credit scores plummet temporarily.

If your 30 or 60 day late payments are an infrequent occurrence, this kind of low level late payment will damage your credit score only while it is being reported as currently past due. They shouldnt cause lasting damage to your credit score after this period passes unless you make 30 or 60 day late payments on a regular basis. In this case, the fact that you are habitually late with your payments will cause long term damage to your credit scores.

Its a whole new ballgame once you have a 90 day late payment, however. If you have been over 90 days late (even just once), the credit scoring models consider you much more likely to do it again. One 90 day late payment will damage your credit for up to seven years. From a scoring perspective, a single 90 day late payment is as damaging to your credit scores as a bankruptcy filing, a tax lien, a collection, a judgment or repossession. Being 90 days late causes you to be viewed as a possible repeat offender and a higher risk to creditors. Heres a summary of how late payments impact your credit scores:

30 days late This record will damage your credit scores only when it is reported as currently 30 days late. The exception is if you are 30 days late often. Otherwise, a 30-day late payment will not cause lasting damage.

60 days late This record will also damage your credit scores when it is reported as currently 60 days late. Again, the exception is if you are 60 days late often. Otherwise, it will not cause long term damage.

90 days late This record will damage your credit scores significantly for up to 7 years. It doesnt make a difference whether or not your account is currently 90 days late. Remember, the goal of the scoring model is to predict whether or not you will pay 90 days late or later on any credit obligation. By showing that you have already done so means that you are more likely to do it again compared to someone who has never been 90 days late. As such, your credit scores will drop.

120+ days late Late payment reporting beyond the initial 90 day missed payment does not cause additional credit score damage directly. However, there is an indirect impact to your scores. At this point, your debt is usually charged off or sold to a 3rd party collection agency. Both of these occurrences are reported on your credit files and will lower your credit scores further.

If you continue to miss your payments beyond 90 or 120 days, the following records may also harm your credit score:

Collections Collections are the result of late payments. There are two types of collections; those that have been sold to a 3rd party collection agency or those that have been turned over to an internal collection department. Regardless of which one shows up on your credit reports, your scores will suffer.

Tax liens Tax liens are obviously not preceded with late payments on any sort of account. However, when tax liens are reported on your credit files they have the same negative impact to your scores as any other seriously delinquent account. And, just because you pay off the tax lien or have it released wont increase your scores.

Settlements Settlements are deals made between you and a creditor who is trying to collect a past due debt. Normally, you and the creditor would agree on an amount that is less than what you really owe them. Once you pay them, they consider the matter closed and paid off. However, they will report that you have made a settlement for less than your contractual obligation. This will hurt your scores as much as any other serious delinquency.

Repossessions or foreclosures Having a home foreclosed upon or a car repossessed are both considered serious delinquencies and will lower your credit scores considerably for up to seven years. The assumption normally made by the consumer is hey, I gave the home or car back to the lender, why are they going to show me as delinquent? The answer youll get from lenders is that you signed a contract with them to buy a home or car and pay it in full over a period of time. You failed to do so therefore they consider you to be in default of your agreement with them and will report this on your credit reports.

Remember, the goal of most credit scoring models is to predict whether or not you will go 90 days past due or worse on any obligation. Whats missing? The scoring models are not designed to predict whether you will default for any specific pound amount. As such, having a 90 day past due of only 100 is as bad as having a 90 day past due of 10,000. The same goes for low pound collections, judgments or liens. The pound amount doesnt matter. The fact that you paid late is whats most important in the eyes of a credit scoring model.

Now that our late payment secrets have been revealed, lets look at what it means to you. You should still avoid making late payments whenever possible. But we now know that one 30 or 60 day late payment isnt the end of the world. Since 90 day late payments are the real credit score busters, you should avoid a 90 day late payment at all costs.

If you already have a 90 day late payment record on your credit history then your scores are already suffering. Be certain that the information is being accurately reported. If it isnt then you have the right to dispute it with not only the credit reporting agencies but also with the lenders who reported it. Your goal is to have the item corrected or removed, especially if it is in error. Once removed or corrected your credit scores will immediately recover.

A lot has been written in the past few years about the importance of both credit reports and credit scores. The credit report is a listing of all significant financial transactions by a consumer and whether or not those transactions were completed on time and as agreed. The score is a distillation of everything contained on the credit report, boiled down to a three-digit number. That number is supposed to indicate to a creditor or a lender, at a glance, whether or not the consumer in question is worthy of another loan.

Until recently, the three major credit bureaus, Experian, Trans Union and Equifax, all used different but similar systems to devise the credit score, which ranged from 300 at the low end to 850 at the high end. The different systems meant that a consumer checking his or her score with each of the credit bureaus would receive three different credit scores. This led to some confusion as to which score was the “correct” one. The bureaus have recently attempted to solve that problem by creating VantageScore, a unified scoring system that all three bureaus will use. This should result in a consumer receiving the same score no matter which bureau provides it.

But this hasn’t entirely stopped the confusion over credit scoring. Unlike the old systems 300-850 range, the VantageScore uses a different scale that ranges from 501-990. In addition to the numeric score, the VantageScore system will also provide a letter grade, ranging from A-F, as follows:

901-990 – A
801-900 – B
701-800 – C
601-700 – D
501-600 – F

Now the source of the confusion has changed. Many people have erroneously assumed that a score in the old system will be transferred to the new system. That means, to their way of thinking, that a top score in the high 700s or low 80s under the old system is now merely “average” under the new one. How, people are wondering, did a top score suddenly become mediocre?

The answer, of course, is that it didn’t and that comparisons between the old system and the new one are like comparing apples with oranges. The new system is completely different and will use a new set of criteria to create the new score from the ground up. A score in the 800 range under the old system will almost certainly become a score in the 900 range under the new one. Consumers have no reason to be alarmed, and in time, the new system will be better and more easily understood than the old one. After all, nothing tells you that you have done well better than being told that you have received an “A”.

Want to know how to get hold of your Credit Score for free? Here youll find some tips and advice from an attorney.

The first thing to know is that you need to be truthful, but still cover over the bleakest part of your finances and accounts. Go into detail on any sickness, discharge, accidents, recovery and back taxes.

When you need to consider a bankruptcy, consider carefully. It is best if you dont incur any other debt or credit after declaring, because if you do, you may not be able to discharge them in bankruptcy. Moreover, do not reveal where you are working or where you bank. You dont want this information to cause you trouble should someone get a judgement against you by providing this information youve made their task much, much simpler.

Cleanly answer the questions and queries but make no other comment. Rather than sending a check from your bank, get a money order or cashier’s check so as to protect the name of your bank. What you want to do here is make your Credit Score zero. When you want to consider an attorney, always bear in mind that though an attorney carries influence and can do a fine job, they cost a lot of money. In addition, do not hire one unless you are indebted a great deal and have a sensible chance of a very fine deal.

If you do have to pay a lawyer, sometimes what you set aside in arrangement is what you lose in the end. And when you are contacted by more than one creditor for the same debt, it almost certainly means the debt was sold a second time and you have avoided the first collector very well. In other words, youve made yourself hard to get a hold of, so the debt has been able to get incredibly old debt already. Moreover, many secondary and tertiary collectors at this phase might be willing to accept 40-55 cents on the pound and probably even less. When the collector agrees to resolve for less, be sure it is also designated on your credit report and statement.

In addition, you may have tax complication on the debt owed. And any write off of 500 or more is considered profits to you the consumer. The creditor will send you and the IRS a form towards the end of the tax year. So get out of your debt any way you can. If at all possible, struggle to work out a repayment plan to get out of your debts. And if it so happens that the interest rate is too high, and you cant practically get out of debt for the next 5 or 6 years, you might want to consider credit counseling.

Hang Up that Phone! Why Writing Letters to Fix Credit Works

The Fair Credit Reporting Act (FCRA) establishes procedures for correcting mistakes on your credit report and requires that your report be made available only for certain legitimate business needs.

Under the FCRA, both the credit bureau and the organization that provided the information to the credit bureau (the “information provider”), such as a bank or credit card company, are responsible for correcting inaccurate or incomplete information in your report. To protect your rights under the law, contact both the credit bureau and the information provider. It’s very important to follow the procedures outlined below. Otherwise you won’t have any legal recourse if you have a future dispute with the credit bureau or an information provider about inaccurate information that should be blocked from your report.

First, call the credit bureau and follow up in writing. Tell them what information you believe is inaccurate. Include copies (NOT originals) of documents that support your position. If you don’t have any paperwork from the creditor, send a copy of the police report and the ID Theft Affidavit. In addition to providing your complete name and address, your letter should clearly identify each item in your report that you dispute, give the facts and explain why you dispute the information, and request deletion or correction. You may want to enclose a copy of your report with circles around the items in question. Send your letter by certified mail, return receipt requested, so you can document what the credit bureau received and when. Keep copies of your dispute letter and enclosures.

The credit bureau’s investigation must be completed within 30 days (45 days if you provide additional documents). If the credit bureau considers your dispute frivolous (which may mean it believes you didn’t provide enough documentation to support your claim), it must tell you so within five business days. Otherwise, it must forward all relevant documents you provide about the dispute to the information provider. The information provider then must investigate, review all relevant information provided by the credit bureau, and report the results to the credit bureau. If the information provider finds the disputed information to be inaccurate, it must notify any nationwide credit bureau to which it reports, so that the credit bureau can correct this information in your file. Note that: disputed information that cannot be verified must be deleted from your file.

If your report contains erroneous information, the credit bureau must correct it. If an item is incomplete, the credit bureau must complete it. For example, if your file shows that you have been late making payments, but fails to show that you are no longer delinquent, the credit bureau must show that you’re current.

In addition, if your file shows an account that belongs to someone else, the credit bureau must delete it. When the investigation is complete, the credit bureau must give you the written results and, if the dispute results in a change, a free copy of your report. If an item is changed or removed, the credit bureau cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the credit bureau gives you a written notice that includes the name, address and phone number of the information provider.

Also, if you ask, the credit bureau must send notices of corrections to anyone who received your report in the past six months. Job applicants can have a corrected copy of their report sent to anyone who received a copy during the past two years for employment purposes. If an investigation does not resolve your dispute, ask the credit bureau to include a 100-word statement of the dispute in your file and in future reports.

Second, in addition to writing to the credit bureau, write to the creditor or other information provider to tell them that you dispute an item. Again, include copies (NOT originals) of documents that support your position, like your police report and the ID Theft Affidavit. Many information providers specify an address for disputes. If the information provider then reports the disputed item(s) to a credit bureau, it must include a notice of your dispute. If you’re correct that the disputed information is not inaccurate, the information provider may not use it again.

To take advantage of the law’s consumer protections, you must do the following things. First, Write to the creditor at the address given for “billing inquiries,” not the address for sending your payments. Include your name, address, account number and a description of the fraudulent charge, including the amount and date of the error. Send your letter so that it reaches the creditor within 60 days from when the first bill containing the fraudulent charge was mailed to you. If an identity thief changed the address on your account and you never received the bill, your dispute letter still must reach the creditor within 60 days of when the bill would have been mailed to you. This is why it’s so important to keep track of your billing statements and immediately follow up when your bills don’t arrive on time. Secondly, send your letter by certified mail, return receipt requested. This will be your proof of the date the creditor received the letter. Include copies (NOT originals) of sales slips or other documents that support your position. Keep a copy of your dispute letter.

The creditor must acknowledge your complaint in writing within 30 days after receiving it, unless the problem has been resolved. The creditor must resolve the dispute within two billing cycles (but not more than 90 days) after receiving your letter.

Avoid Credit Repair How to Keep your Nose Clean (and your Credit History too!)

Being smack in the middle of an attempt to repair a credit report isnt really a fun place to be. Fixing past credit problems takes time and dedication, and in some cases a complete change in how money is handled. This whole headache can be avoided by simply not allowing credit to spiral out of control in the first place.

There are lots of things that can harm a credit score. One of the most common negative items on credit reports are late payments. A person can have a squeaky-clean credit report and then miss one payment, and suddenly that credit report isnt so squeaky clean anymore. Being thirty days late on a bill, no matter what the reason, will show up on a credit report and drop the credit score down a few points. The notation of the late payment, by the way, doesnt disappear when the account is brought to current status. The history of that one late payment will haunt the credit report for years to come.

If so much fuss is caused by a single late payment it is easy to guess what multiple late payments will do. With every instance of a late payment, the credit score falls lower and lower. When a creditor looks at a credit report they can usually get a good feel for the persons likelihood of staying current with payments. The creditor will probably brush off the instance above with the singular late payment if its the only instance in an otherwise perfect report. Many late payments, especially those occurring at different times, will send a red flag to the creditor that this particular consumer isnt a safe bet. If creditors dont see an applicant as a safe bet then the consumer will not be offered the best interest rates available.

It isnt difficult to keep a credit report clean if you understand what items are seen as derogatory. Late payments are notated in varying degrees, depending upon the lateness of the payment. When a creditor looks at a credit report they can see if a bill was thirty days late or rather ninety days lateand there is a big difference. A single delinquency of thirty days suggests that the consumer simply forgot to pay the bill that month, but a few ninety-day delinquencies suggest a problem paying bills consistently. What is the moral of this story? Pay your bills on time, every single month. With all the bill-paying software available nowadays there really is no reason to allow forgetfulness to ruin your credit rating.

More is not necessarily better when it comes to credit lines. It is good to have a couple of open and active credit accounts to show prompt payment, but if a consumer has multiple credit cards open this puts up a red flag. Even if the cards have zero balances, the fact that there is available credit tips off the creditors that even though no money is owed on these balances right now, that may well change next week or the week after, affecting the consumers ability to pay. If all the credit cards are maxed out it is equally detrimental, if not more so. From a credit standpoint, it is best to carry only a couple of cards and to pay the balance off every month. If paying off the balance isnt feasible, then prompt payments are a must.

One other item, which many consumers dont realize is affecting their credit rating, is the number of inquiries on the report. Inquiries are notations at the end of the report, which list the creditors who have, by the request of the consumer, taken a look at the credit report. Every single time a person requests a line of credit, an inquiry is noted on the credit report. This list tells creditors a lot about the future spending habits of a customer. If the inquiry list is full of recent department store inquiries, a creditor may see this as a warning sign that the consumer is getting ready to wrack up some major debt. So think twice before filling out an application for credit. Rest assured that almost every financial move you make is notated somewhere, and can come back to haunt you if not managed well.

You may not find out how bad your credit really is until you apply for a mortgage. Then you will quickly realize that the low interest rates everybody raves about these days, the rates that are a big part of the rising prices of real estate across America, don’t apply to everyone. To be specific, they don’t apply to you! If you have bad credit, you are not going to receive the same low interest rates on your home loan that your neighbor with good credit will.

Why not, you may ask. Well, here’s the thing. If your credit score is poor, banks and other financial institutions consider you to be a risky business partner. In order to lend you money, they have to insure themselves against the risk that you may default on payments. They do this by offering you a higher interest rate so their end of the deal looks a bit sweeter. For you, though, it means higher monthly payments and that you can afford to borrow less money than if your credit was better.

If you don’t even know if you’re considered a credit risk or not, don’t you think it’s time you found out? This is one of the smartest moves you can make, business wise, as it affects not only your mortgage but the interest rates you get on your credit cards, car payments and virtually every financial agreement you enter into.

Checking your credit score

When banks and others want to ascertain what kind of credit risk you may pose, they will consult your FICO score before doing anything. The FICO is like a report card of your credit. Your FICO score is a three digit number ranging from 300-850. You actually have three separate FICO scores, one for each credit bureau – Equifax, Experian, and TransUnion. These may not show the same score, since not every creditor reports to all three credit bureaus.

In order to make sure you see the same thing that your eventual creditors are seeing, order all three of your fico scores. Study them carefully. You look at the total score, naturally, but you also want to scrutinize the details carefully. Maybe that rent check last year that you sent in one week too late was never registered properly. This will definitely affect your overall score.

If you do find any errors in the reports, make sure to contact those responsible for that specific record and ask them to correct the entry. If you are lucky, a couple of phone calls will make a real difference in your credit score!

A Credit Repair Glossary Important Terms You Need to Know

It can sometimes be intimidating when speaking with a creditor or collections agent if they keep throwing out terms that you dont completely understand. Oftentimes a consumer will be reluctant to ask questions for fear of appearing ignorant, and this combination can result in some confusing conversations. Here is a glossary of some of the more common terms a person may encounter when attempting to repair their credit.

ACH Debit This stands for Automated Clearing House. An ACH debit is a quick way for creditors to take funds from a bank account electronically. Many collectors and creditors will suggest this form of payment since it is much quicker than waiting for a check in the mail. Beware, however, of agreeing to this form of payment without first finding out the companys ACH policies; many creditors may continue to utilize ACH debits without first notifying the customer once they have been granted initial access to the account.

CCCS This stands for Consumer Credit Counseling Service, a type of company that pays bills for consumers. Some creditors may suggest a consumer seeks out this sort of organization if the consumer is having a hard time keeping up with bills. It is imperative, however, to make sure the CCCS chosen is a reputable one, or the bills might wind up even further behind.

Charge-off A charge-off is a sort of last resort from collectors. It means that the company has made repeated attempts to collect on the debt, and after a certain number of days with no payments the company has essentially given up hope of ever getting paid. The debt remains the legal obligation of the borrower, but the company does not actively seek payment. It is noted on the credit report as an unpaid charge-off unless the customer eventually pays the debt, in which case it is noted as a paid charge-off. Both notations are detrimental to credit reports, and should be avoided if possible.

Cosigner and Authorized User There is a big difference between a cosigner and an authorized user. Both have access to the accounts for purchasing, but only the cosigner is liable for payments. For example, if a boyfriend makes his girlfriend an authorized buyer on a credit card the girlfriend can then go and spend all she wants and cannot be pursued by the lender if the boyfriend defaults. If, on the other hand, the girlfriend is a cosigner, she is legally obligated to pay the debt if the boyfriend defaults, even if she didnt use the card.

FICO A FICO score is a credit score derived from the information on the credit report. FICO actually stands for Fair Isaac and Company, which was the first credit scoring company. If a consumer is told theyre being turned down because of a low FICO, the lender is referring to the credit score.

Inquiries If a creditor advises a borrower that there are too many inquiries on their report they are referring to all the companies who have taken a look at the credit report with the consumers permission. There is a list of inquiries at the end of every credit report, and the longer it is the more nervous a credit can become. Exceptions to this are many inquiries for a single purchase, such as with car buying or mortgage lenders. Too many inquiries can lower a credit score, so it is wise to limit credit applications.

Revolving This refers to revolving credit or credit on accounts such as credit cards where the available balance adjusts with purchases and payments. For example, a revolving balance on a credit card or line of credit may be $1000 until the cardholder makes a $100 purchase. The available balance then becomes $900 until a payment is made, then the available balance goes back up. Car loans and other types of loans are not revolving balances, as the proceeds are received in one lump sum and there is not a way to take more money out of the loan after making payments, with the exception of refinancing.

Credit repair doesnt have to be scarya consumer armed with knowledge and not afraid to ask questions will feel empowered and ready to tackle the credit repair aggressively.