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The 5 Most Important Things To Know About Your Credit Score

Credit Score highlighted in yellowThe most import thing you need to know about your credit score by far is … your credit score. That’s because it’s what rules your credit life. If you have a good credit score (more about this later), the gates of credit will open wide to welcome you and you’ll get the most favorable interest rates – whether it’s a credit card, a mortgage or a personal loan. But if you have a poor or bad credit score, ouch! You may have a tough time getting any credit and when you do it’s likely to come with an interest rate that could cause you to fall over in shock.

While you may know your credit score, did you know it’s only one of your many credit scores and that no single credit score is your “real” one? If you’re really on top of things you might know that if you have a high balance on one of your credit cards this will lower your credit score – even if you pay off the balances on your other cards every month. And you might even know that if you miss just one payment it can lower your credit score by 25, 50, 75 points or more.

All this is important but they’re not necessarily the most important things you should know about your credit score as they are:

1. Your credit report(s) is the key

Your credit report from Equifax, TransUnion or Experian is what’s used to calculate your credit score — whether the information is right or wrong. This is why it’s critical that you get and review your credit reports to make sure all the information in them is correct. You can get your reports free from each of the credit bureaus once a year or all at once on the website Since the credit bureaus don’t share information it’s very important that you get all three. Also, you can’t know which report will be used to compute your credit score so you need to make sure all three reports are accurate. Data breaches and identity theft have become a way of life these days. If you don’t review your credit reports regularly you may not know you’ve been victimized. It’s also possible that one (or more) of your reports contains errors. If you spot this or anything that looks like identity theft you need to contact the relevant credit bureau immediately and dispute the information.

2. Your credit score isn’t engraved in steel

Your credit score can change as information can be added or removed very quickly. And the changes can be either positive or negative. If you have a poor score this can a reason for hope that your score will change. On the other hand it also means you need to be alert.

It’s always possible that a mistake could damage your score or, worse yet your score could be trashed by identity theft. If either of these happen you need to know about it immediately so that you can take the appropriate action.

3. Your can rebuild your credit

Have you had serious problems with your credit in the past? Then the good news is that you can rebuild your credit. While this can be seriously frustrating there are almost always things you could do to move your credit in the right direction. For example, you could get a secured credit card with a small limit and use it carefully. Also, as negative information about how you’ve used credit becomes older it generally has less of an impact on your credit scores and will eventually disappear from your credit score calculation.

Man climbing range of credit scores

4. You can know if you have a good or bad credit score

As you read earlier in this article you don’t have just one credit score. Lenders can choose from among many different credit scores and each has its own credit score range. The reason this is important is because when you get your credit score you need to know the various ranges so you can understand how your number fits in. For example, your FICO score ranges from a low of 300 to a high of 850. You also have a VantageScore with the same credit scoring range. However, the VantageScore Scale (versions 1.0 and 2.0) ranges from 501 to 990 and your PLUS score goes from 330 to 830. But in any case, regardless of which scoring model your lender chooses, the simple fact is that the higher your score the better. As an example of this if your FICO score is 830, this puts you just 10 points away from the highest possible score and you would be considered “super prime.” On the other hand if your VantageScore Scale score is 840 that’s not as great because it leaves you 150 points shy of the maximum score. But given the fact that both your FICO score and VantageScore basically range from 301 to 850 is possible to see where you stand by category as follows.

• Excellent Credit: 750+
• Good Credit: 700-749
• Fair Credit: 650-699
• Poor Credit: 600-649
• Bad Credit: below 599

So the answer to the question what is a good credit score is any score above 700.

5. You can improve your credit score

Since a bad credit score will cost you thousands of dollars in interest, increase the cost of your auto insurance and maybe even keep you from renting a house or apartment it’s important to know what you can do to improve it.

a. Make sure your credit reports are accurate

As noted above, there could be erroneous information in one of your credit reports or even worse you could be the victim of identity theft. If you do find errors in one of your reports you need to dispute it immediately. Each of the three credit bureaus has a form on their website for this purpose but it’s much better to do it in writing. You should send your letter certified and return receipt requested so that you will have proof you disputed the information. When you file a dispute with a credit bureau it will contact the company that provided the information and ask that it be verified. If the company that provided the information doesn’t respond within 30 days or can’t verify it, the credit bureau must remove it from your credit report.

b. See where you stand

Once you’ve learned that your credit reports are accurate the next step is to get your credit score – assuming you don’t already have it. The only place you can get your true FICO score is on the website but it will cost you as you will be required to sign up for its monitoring service at $19.95 a month. But it’s not critical that you get your FICO score. You could get your score free at sites such as and And no, neither of these will be your true FICO score but they will be close enough for you to know where you stand.

c. Determine why you have a low score

All credit scoring models include a “reason code” or “score factors” that explain why you lost the most points in your credit score calculation. If you check these out you’ll know why you have a low score and can create a plan to improve it.

d. Create a plan and stay with it

Once you know why you have a low credit score you can make a plan to improve it. There are usually three reasons why you have a low credit score. The first is that you have a lot of credit card debt. The second is negative information in your report because you did not use your credit wisely and three is a mixture of these.

If your problem is that you have more credit card debt than you should, there is a quick and easy answer – providing you have enough money to pay down some of your debts. The second biggest component in your credit score is called credit utilization or your debt-to-credit ratio. If you can improve that ratio by reducing your credit card debt you should see an improvement in your credit score practically overnight. Unfortunately, if the problem is that you have negative information in your credit report it’s going to take time and changes in the way you handle credit to improve your score. If you have unpaid debts or debts that have gone to collection you’ll need to address them. You’ll also want to start adding new more positive information to your credit reports to make up for the damage you’ve done in the past. What this amounts to is making sure you keep your credit card balances low and always make your credit card payments on time.

To know more about all five components that make up your credit score and which ones you could work on, be sure to watch this short video courtesy of National Debt Relief.

2 Ways Your Credit Score Is Compromised By Your Kid

poor credit scoreNot everyone makes the connection between their credit score and their kids. And when it comes to your credit, what you don’t know about your credit score can really hurt you. This is why you may want to pay attention to what this article will try to tell you.

Some people may be surprised to know how much their kids can do to harm their credit report. Of course, they can only do that with your consent but sometimes, we fail to realize how much of our credit history they can actually influence.

This is the reason why you need to view parenthood as a financial decision too. While you need to be physically and emotionally ready to have kids, you also have to consider your finances as well. Not only will you experience a bigger expense list, you will also be responsible for the financial well being of the child. You need to instill in them the right values and behavior so they can take care of their finances well.

Your kids will really start out not knowing how to take care of credit in general. If you are not careful with that, you may not only jeopardize their future, but also your very own credit report.

According to, the national average credit score in the country is not too great to begin with. Based on the FICO score, the average is at 691, from a range of 300 to 850. Based on VantageScore, the average is at 749, from a range of 501 to 990. While the average is not really bad, it is not great either. And if you want to maximize your future financial opportunities, it is best for you to be on your guard when it comes to your credit report.

2 ways your children can ruin your credit history

So you may be thinking, how can your kids affect your credit history? How can they destroy your score if you are the one making financial decisions at home?

You would probably think that it is all on how your kids influence what you need to buy. Any good parent would want to provide their child with the best things that money can buy. In fact, there is a survey that revealed how some parents are willing to be in debt just so they can buy their kids new items this Holiday. The debt here is none other than credit card debt. While the intention may be good because gifts will make our kids happy, the means is could be better. For some parents, they experience a lot of financial difficulties because they failed to learn how to say no to their child.

It is true that this particular scenario could ruin your credit score but it is not one of the two ways that your kids can really trash your score. There is actually something much worse than that.

Cosigning loans

First is co-signing loans. Here is the background about these type of loans. You as the older one is sure to have a great credit history behind you. Since you have used your credit cards in the past or taken other loans and paid it off responsibly, your score would reflect that you can be trusted with debt. That means you will most likely be approved of a loan. That is not the same for your child. As young as they are, they do not have a credit history yet. That means the lenders have no data to look at to gauge whether your child will be a responsible borrower or not.

This is where you, the responsible parent with the great credit history will come in. You will co-sign the loan with your child so they can be granted the loan that they need. In most cases, this is the scenario of parents with children who are about to enter into college.

While helping out your child with loans is a great support to give them, it will put your credit score in danger. In a page about co-signing loans on the website of the Federal Trade Commission,, it is explained that this will make you responsible for the debt as well. In case your child is not able to pay it back, you will be expected to pay the full amount plus any late charges or fees associated with it. And if your child fails to tell you that they are not able to pay off the co-signed loan, your credit score may have already dipped without you knowing about it.

Credit card use

The other way that your credit score can suffer is through your credit card. Some parents make their kids a supplementary user of their card – especially when they reach their high school years. This is a great way to teach your kids how to manage credit. However, it can put your own score in danger. After all, you are still the primary card holder. If you do not monitor what your child buys through the card, you might be in trouble already. We all know the devastating effects of credit card debt on credit reports. Do not let your kid ruin yours by racking up too much debt on your card. Let this be a great lesson for them and not are lesson to you about trusting your kid with your credit card.

How to teach kids about credit reports

The very first financial lesson that your child will learn is going to come from you. Whether this is something that you will sit down and talk to him about or let him see through your habits, they will get the first lesson from you.

It is even possible for you to teach them about credit reports yourself. This is especially true if you have a joint account with them or you listed them as authorized users of your credit card. You may want to show them a copy of their credit report. According to, minors are allowed to get a copy of their credit report by the time they reach 13 years of age. Parents can also request this as long as they provide proof that they are the legal guardian of the child.

The main reason why you want to do this is because of child identity theft. It is rare that kids will request a copy of their credit report. This is probably why some criminal choose to use their identities. You want to avoid this by checking on your child’s credit report every now and then.

But even without the report that is on your kid’s name, you can show them your own credit report. Then explain to them the importance of having a good record on your report. You need to tell them that your credit score is an important qualification to have for the future.

This is only one of the personal finance lessons for kids that you need to go through to prepare them for adulthood. If you teach them about credit, you can help them understand the value of money. It helps to go through a couple of videos on the Internet to help you explain things to them.

National Debt Relief have a couple of videos that you can use – like the video below. Here are some tips that will help you lower your credit score by 100 points.

4 Possible Reasons Why You Have A Credit Report Error

magnifying glass on credit reportIf you find a credit report error, you need to act on it fast. The after effects of the Great Recession left a lot of Americans suddenly concerned about the state of their credit. And you really should be. Your credit report holds a lot of weight on your financial life – especially when you are relying on loans to get your ahead on your financial goals. So if you ever find an error in your own report, make sure you know what to do.

According to a report published on, the FTC (Federal trade Commission) revealed that one in every five consumers found an error in their credit reports. That means an estimate of 40 million consumers encountered problems with their reports. 5% or 10 million consumers had severe credit report mistakes that could make them pay more in terms of loan interest rates.

The same report mentioned that consumers found a lot of errors in their credit data. This includes finding an entry that did not belong to them. That could mean identity theft problems. On one side, some people said that they had a more simple credit report error – merely needing an update.

4 ways you can get an error in your credit report

But regardless of the error that you find, you need to correct that. But before you can deal with an error in your credit report, you need to find out what caused it in the first place. There are a couple of reasons to lead your data to be ruined – one more severe than the other.

Here are 4 reasons why you have a credit report error.

  • Your own mistake. We are all bound to make mistakes – even when it comes to our own information. This is why you have to be very careful about how you will fill out application forms for credit accounts or any loan that you want to make. Sometimes, there are cases when you need to write on the form by hand. If your handwriting is all over the place, whoever will encode your data might make a mistake. So make sure that if you are filing out something or providing your information, you double check what you are placing. Because that may end up as a serious error in your credit report. Try to be consistent in the information that you will provide. If it is your mistake, then you may want to call the financial institution that you submitted the information to so you can correct the mistake. You may have to call the credit bureau too so you can update your information.
  • The bank, lender, creditor, or similar entities’ mistake. These are the mistakes that are sent by the people you provided information to. These are the ones that submit the information to the credit bureaus. If it was not yours, then you may want to check out if the bank or the entity that submitted your information made a mistake. In the event that they are responsible for the credit report error, it might be harder for you to track if they did correct the mistake or not. Sometimes, you may have to go through the investigation to prove that they did make the mistake or not – at least, that depends on the institution. In any case, make sure that you follow up your case until the mistake in your credit report is edited. There are also cases wherein you are in the midst of a dispute and the creditor or utility company marked it off as a late payment or something. You may want to resolve this so your records can be corrected.
  • The credit bureau’s mistake. If you find a credit report error and you are sure that you did not make a mistake and the same is true for the bank, then it is probably the fault of the credit bureau that is collecting your data. These bureaus collect millions of data and despite a sophisticated database, they are bound to make mistakes too. They can mix the files or misreport your information. The repercussions of these errors could be severe – so make sure you dispute the mistake as soon as possible. At any case, their process is not fail-safe so always be on your guard.
  • The case of identity theft. If none of the other three checks out, then you may be a victim of identity theft. This is when someone else takes your personal and financial information to buy things and make you pay for it. In other words – they will steal from you. According to an article from, there were 13.1 million cases of identity theft reported in 2013. In fact, they claimed that one American falls victim every two seconds. The thing about this is, only you can spot this credit report error. As long as it is done under your name, the credit bureau will put it in your report. But if you send them a letter to dispute an entry, that is the only time they will investigate. If you do not file a dispute, then the record will stay on your report and the crime will go unpunished.

The key to correct an error in your credit report is to know about it first. If you are not aggressive in your credit monitoring, these mistakes will not be corrected. No matter how careful you are with your money, a tarnished credit report can haunt you and keep you from pursuing your financial goals.

Problems that could arise when your credit report has errors

If you have a credit report error, you could be facing a couple of problems. Here are some of the things that you could encounter.

  • Wrong credit score. According to, people only bother to check their credit score when they are about to buy a home. If you do have an error in your credit report that you did not correct, you might find that it is enough to ruin your chances of getting your dream home. That wrong entry in your report may be responsible for you having a low credit score. We all know that a low score could mean the disapproval of your loan. If you are approved of the loan, you may be asked to pay a higher interest on it. Not only that, insurance companies can also ask you to pay higher premiums. These look into your credit score so make sure you keep it high by correcting any error that you see on your report.
  • Paying for debts you do not owe. In case your credit report error is caused by identity theft, you might find yourself paying for an account that you never borrowed. This is especially true if it took you a long time to discover the theft. The longer it takes for you to report an error, the harder it will be to prove that you did not open that credit account. Debt effects can be very devastating – much more if it was a debt you never got in the first place.
  • Missing out on opportunities. A credit report error can also make you miss out on a lot of financial opportunities. For instance, employers usually look at your credit report before hiring you. Potential business partners also look at this data to determine how well you manage your finances. A bad credit history could bring your reputation down.

In the end, that one credit report error could end up leading you to a lot of financial problems in the future. Make sure that you monitor your credit report regularly and dispute any incorrect information that you find – and do it immediately.

Wake Up, People! You Absolutely Must Know These Things About Your Credit Score

Video thumbnail for youtube video 6 Tips For Simplifying Your Financial LifeA study done in 2013 revealed some amazing facts about how ignorant many Americans are regarding their credit scores and credit reports. For example, 2/5ths of those surveyed did not know that credit card companies and mortgage lenders use credit scores to determine their eligibility for credit. Another 2/5ths incorrectly believed that personal characteristics such as marital status and age are used to calculate credit scores. Between 25% and 33% did not know when it is that lenders must inform borrowers of the credit scores used in their lending decisions. More than 25% do not know how to raise or maintain their scores. And 36% incorrectly believed that credit repair agencies are usually or always helpful in improving credit scores and correcting errors in credit reports.

Wake up, people!

If you don’t understand credit scoring and credit reports you could be facing big trouble. If you’re not aware of this, you definitely need a good credit score to qualify for an auto loan, a mortgage and other financing. And if you make just one misstep such as forgetting to pay a credit card bill, you could be on the slippery slope to serious credit problems.

Do you know who compiles your credit reports?

Your credit reports are compiled by the three major credit bureaus – Experian, Equifax and TransUnion. The information they use comes from banks and the financial institutions with which you do business and includes every credit contract you’ve ever had related to debt. Debt collectors even report to the credit bureaus. So if you have an old unpaid medical bill, this could pop up on your report and damage your credit score.

In addition, the three credit bureaus collect information from public records on tax liens, court judgments and bankruptcies. Any time you apply for any type of credit (called a credit inquiry), this will be reported to the three credit bureaus. In turn, the credit bureaus provide your credit report to the lenders when you apply for new credit.

Banks and credit card companies aren’t the only ones that access your credit reports either. Cell phone providers, landlords, insurers and utility companies will also ask for a credit report in determining whether or not they want to deal with you.

What about employers?

According to the Fair Credit Reporting Act, employers can check your credit reports but they have to get your permission to do this. Of course, if you’ve applied for that dream job and your prospective employer has asked to check your credit reports, you’ll probably feel pressured to say yes. If you say no this would be as good as saying that you have poor or bad credit. And under no circumstances are employers or prospective employers permitted to check your credit score.

The inverse ratio

There is an inverse ratio to credit scores. The higher your score the lower the interest rate you will be charged on an auto loan, a personal loan, credit card, and a mortgage. Even your auto insurance will cost less if you have a high score. Conversely, the lower the score, the higher your interest rates will be.

One freebie a year

You can get a free copy of your credit reports once a year. This is a perk that was legislated by Congress a few years ago. There is a website,, where you can get all three of your credit reports either simultaneously or one at a time. Alternately, you can get your credit report free from each of the “big three” credit bureaus. You should get these reports and review them carefully to make sure they do not contain errors. If you do find an error in one of your reports you need to immediately dispute it with the appropriate credit bureau. What some people do is get their report from one of the credit bureaus every three months, which is a way to monitor their credit and immediately spot any fraud.

Man climbing range of credit scoresThey won’t include your credit score

Your credit reports will contain a lot of information but they won’t include your credit score. While there are a lot of different credit scores floating around the most important one is your FICO score as this is the score that most lenders use in determining whether or not to extend you credit. You can only get your FICO on the website

Where else to get your credit score

Getting your credit score used to be a fairly big job. But it’s becoming much easier. You can get your score free on websites such as and and from the three credit reporting bureaus. These won’t be your true FICO score but should be close enough to give you a good idea of how you stack up. Whatever your number is, don’t fixate on it. The important thing is to understand how you stand in the range being used. FICO scores range from 300 to 850. This means that a score of 800 would put you in the range of very good or excellent credit. However, the VantageScore, which was developed by the three credit reporting bureaus, has a range of 501 to 990. It also assigns a letter grade to scores. If you were to have a VantageScore of 800 you would be ranked as C or Prime, which wouldn’t be as good as an 800 FICO score.

It’s becoming easier

If you have a Discover card you’re probably seeing your credit score every month on your statement. The credit card companies, 1st Bankcard and U.S. Bankcard have said that they will soon be sharing FICO credit scores and related information with their customers. This is in response to the US Consumer Financial Protection Bureau (CFPB), which has been urging the credit card companies to do this because it believes the more information a consumer has, the better a job he or she will do in managing their credit. While this has not yet proven to be true, it certainly can’t hurt for people to be able to see their credit scores every month and whether they’re getting better or worse.

How your score is calculated

No, your age, marital status, number of children or any other personal information is not used in calculating your credit score. It is based on six factors: Your payment history, debts owed, length of credit history, amount of available credit, types of credit and your credit inquiries.

If when you get your credit score you find that it’s either poor or bad there’s nothing you can do about your payment history. History is, after all, history. You also can’t do anything about your length of credit history. However, there is one factor you could get to work on – which is your debt-to-credit ratio. It’s calculated by dividing your debts owed by the amount of available credit you have. For example, if you have available credit in the amount of $10,000 and $5000 in debts owed, your debt-to-credit ratio would be 50%. Since this accounts for 30% of your FICO score this is an area where you could do something to affect it positively. The two alternatives are to either pay off some of your debts or ask one or more of your creditors to increase your credit limits. Do either one of these and you would lower your debt-to-credit ratio and this should have a positive effect on your credit score. If you’d like more tips for improving your credit score, watch this short video courtesy of National Debt Relief.

The net/net

What all this boils down to is that your credit score pretty much rules your credit life. And since your credit score is based on your credit reports – or how well you’ve used credit – the best policy is to always use it sensibly.

How To Improve Your Credit Score Without Making Yourself Crazy

how debt relief affects credit scoreYou do know what your credit score is, right? If not, now would be a good time to learn what it is. The reason for this is simple. Your credit score rules your credit life. If you have a poor credit score you may not be able to rent an apartment, buy a house or a car or get new credit cards. You may have to pay more for your home and auto insurance and for any loan you are able to get.

So what the heck is a credit score?

For many years the only way a lender could determine whether or not to loan you money was to sit down and plow through your credit reports from the three credit reporting bureaus. As you might imagine this was a very time-consuming process. The people at what was then called Fair Isaac Corporation (now known as FICO) felt there had to be a better answer. Its solution was to turn all of those credit reports into a single three-digit number – your credit score. How FICO pulled this off is based on an algorithm that’s known only to it. If you don’t know your FICO score you can get it at for $19.95 or for free if you take out a free trial subscription to its Score Watch program. It’s also possible to get a version of your credit score free – though it won’t be your true FICO score – from the three credit reporting bureaus or from independent websites such as or If you have a Discover card you’re probably already getting your credit score each month along with your statement.

What lenders look for

When a potential lender checks your credit score it generally views it in ranges as follows:

  • Between 700 and 850 – Very good or excellent credit score
  • Between 680 and 699 – Good credit score
  • Between 620 and 679 – Average or OK score
  • Between 580 and 619 – Low credit score
  • Between 500 and 579 – Poor credit score
  • Between 300 and 499 – Bad credit score

If you have a credit score lower than 580 you need to improve it and you can – by following these tips. And they’re easy enough that following them won’t make you crazy.

Pay your debts on time

On the face of it this may seem too simple but if you create an history of consistently making your payments on time, this will boost your credit score. If you have a car payment, credit card balances, a mortgage or student loans make sure you don’t miss your payments. If you do, your account could be turned over to a collection agency and trust us, you don’t want this to happen. A debt collector can be your worst nightmare as many of them are so tenacious they make a pit bull look like a kitten in comparison

Pay off your credit cards

Here’s another simple thing you could do and that’s pay off your credit cards. If possible, pay off your full balance or balances and then go a month without using your cards. This stops you from having to pay interest, saves you money and will, of course, increase your credit score.

Fix errors

To err is human but to fix mistakes in your credit reports is divine. One recent study revealed that nearly 25% of us have errors in our credit reports that could be affecting our credit scores. You need to get your three credit reports from the credit reporting agencies – Experian, Equifax and TransUnion and go over them with a fine tooth comb. If you find errors you will need to write a letter disputing them to the appropriate credit bureau. Your letter should identify each of the items in your report that you are disputing. You will need to include whatever documentation you have that proves your case and explain why you are disputing the information. Make sure you also request that the erroneous item or items be removed or corrected. It’s best to send your letter by certified mail, return receipt requested, so you can prove that the credit-reporting agency received it. Be sure to keep a copy of your letter and your documentation.

Moderation in all things

This phrase was attributed by the Greek philosopher Aristotle to Chilo, one of ancient Greece’s Seven Sages. It basically means nothing in excess and this is especially true when it comes to credit cards. Most experts say that you should only use 20% or less of your available credit. In other words, if you have credit cards with a total credit limit of $1000, you should keep your balances under $200, which will be very good for your score.

Up your credit limit

If that 20% doesn’t give you enough credit to satisfy your monthly needs, contact your credit card issuer and ask it to increase your limit. This will keep your usage ratio low while allowing you to spend more. As an alternate to this, you could keep smaller balances on multiple cards to maintain the right ratio.

Resist the impulse to open more accounts

One of the problems with credit cards is that it is simply too easy to open new accounts. Just about every time you check out at a store you’ll be offered the opportunity to get a new card. Also, the credit card issuers are offering more and more incentives to open their cards such as cash back and airline mileage. But each time you apply for a credit card it dings your credit score by at least two points. Plus, the more credit cards you have the more tempted you might be to use them.

Adult WomanHang on to your older cards

Here’s a tip that’s pretty darn simple. Just hang on to those older cards. If you have been making your payments on them, this is a good indicator that you are a responsible user of credit. In the event you feel you have too many credit cards and need to close a few accounts, close the newest ones first. Also, make sure you use those older cards occasionally so that your account will look active.

Time will go by

If you were forced to declare bankruptcy because of out-of-control spending or bad luck such as an unexpected illness or loss of a job, you will just need to let time pass. It can take seven or even 10 years for that bankruptcy to drop off your credit report. The good news is that if you let time pass and that bankruptcy drops off your report, your credit score will improve significantly.

How about a secured card?

In the event you are waiting for something to drop off your credit report such as a bankruptcy or an item that went into default, you might get a secured credit card. This is where you make a cash deposit to “secure” the card. You can then use it until you’ve depleted your deposit at which time you can either add more money or simply throw away the card. But the important thing is that if you use it wisely, it will help you rebuild your credit.

The net/net

The bottom line is that it if you follow the simple tips you’ve read in this article, you can increase your credit score and have better credit without making yourself crazy

Minneapolis Tops The Cities With The Best Credit Score

man jumping with a chart behind himWe all know that you could be hurt by a bad credit score. That is why a lot of financial experts say that you also have to keep an eye out for your credit report. You want to always know the state of your credit ranking so you can see if you need to improve it or not.

When you have a good credit rating, that means you have been displaying good credit behavior. It tells others that you are creditworthy – which simply means your debt is at a reasonable level, you pay your dues on time and you know how to manage your debts. Having a high credit score will prompt lenders to give you a good interest rate on any loan that you want to borrow. That is because they are sure that you do not pose any risk – that you will not run away without paying your debts.

Minneapolis have better credit management skills

When it comes to having a good credit standing, Minneapolis ranks as the top city with the highest credit score average. According to the press release published on, residents of this city averaged at 702. This score increase by two points since 2010. This is based on the VantageScore that ranges between 300 to 850. The city is followed by Boston with 694, San Francisco with 689, Seattle with 679 and New York with 678. Phoenix is noted to be the city with the highest score increase – jumping from 647 in 2010 to 654 in the latest study done by Experian.

It has to be noted that these cities that ranked the 5 highest credit score does not necessarily have the highest or lowest debt ranking. Of the top 5, Seattle has the highest debt average per consumer at $27,279. It is followed by San Francisco with $25,828, Minneapolis with $25,626, Boston with $25,413 and New York with $25,396.

The fact that Minneapolis does not have the lowest debt average per consumer (a spot held by Detroit with $23,604), and yet has the highest credit score average shows us a couple of truths about credit ratings.

  • A low debt amount does not necessarily give you a high credit score. Detroit has a credit score average of 667 – a far cry from the 702 of Minneapolis. Although the latter has $2,000 more debt, it does not affect how the consumers in this city is properly managing their debts.
  • A high debt amount is still a factor in pulling down your score – but credit behavior still weighs in the end. Seattle, although it has a high debt amount, still landed in the top 5 credit score average. But if you look at the complete top 20 list from Experian, the city with the highest debt, Dallas ($28,240) has a credit score of 648. This proves that a high debt amount may not entirely be the cause of your credit score downfall but it does have a strong pull.
  • The debt amount is still outweighed by the credit behavior in helping you get a high score. Seattle is the perfect example for this. It is only $1,000 less than the highest average debt per consumer in Dallas but the credit score difference is more than 30 points. also provided data about the top states with the best credit score average. On top of the list is Minnesota, the state where Minneapolis belongs to. This state has an average of 718. It is followed by North Dakota with 715, South Dakota with 714, Vermont with 712 and New Hampshire with 711. It is interesting to note that the whole state where Minneapolis is included seems to be doing a good job when it comes to maintaining a good credit score.

How to maintain a good credit rating

But what does it take to get a good score? If you have a bad credit rating now, you do not have to fret because there are ways to fix your credit score.

Here are three important things to remember.

Borrow money wisely.

Being wise about credit goes beyond not borrowing when you need it. You have to learn how to borrow only what is necessary. A lot of people base the amount of loan that they will apply for on how much they are capable of paying. This is wrong. You only borrow what you need, nothing more. If you want to buy a home and you will qualify for a $1 million mortgage, do not take it. If a 3 bedroom apartment only costs $500,000, that is the amount that you should borrow. If your income takes a hit and your monthly cash inflow is lessened, your debt obligations will remain the same. Where will you get the amount that you need to pay off your debts?

Practice proper payment behavior.

Another important habit in credit management is your payment behavior. In the FICO Score, it is 35% of your overall score. When you pay your dues on time, this will reflect well in your score. It can keep your number up and that is always a good thing for lenders. When they see a lot of late payments, that will be a red signal for them that you do not possess the best payment behavior. You are a high risk borrower and that will prompt them to impose high interest rates on you.

Monitor your credit report.

It is not enough that you keep your score low. It is also a must that you make it a habit to monitor your credit report. You might be exhibiting good judgement and the right payment habits but that does not mean your score is already in good condition. One incident of identity theft without you knowing it can make your score plummet. It will also leave you with a huge debt to pay off. This is why you must review your credit report as often as you can.

Here is a video from Bank of America that will help you understand what a good credit score really is.

New way to compute your credit ranking

The way that credit scores are being computed is always being improved. Recently, FICO, the leading provider of consumer credit scores have announced that they refined how medical debts and collections will be computed and reflected in the credit rating of consumers.

The news found on revealed the changes in the FICO Score 9. They are as follows:

  • Better way of assessing the collection information of every consumer and those with a thin credit history.
  • Bypassing of any paid collection accounts.
  • Differentiating of medical and non-medical collection accounts.

These changes hope to lessen the impact of medical collections on the credit score of consumers. This change is meant to make the computation more precise for lenders. After all, medical debt is not something that can be compared directly with mortgage loans, credit card debt and student loans. It is a debt that you oftentimes do not have a choice in – because it literally means choosing between life and death.
It is also a great improvement, the way this new formula allows consumers with a thin credit history to be judged more accurately about their payment behavior. It will give the new credit holders a better chance at getting a good deal on their first few loans.

Three Ts Of Debt Consolidation Denial

Problematic consumerDebt consolidation is a financial options offered by numerous lenders in hopes of being able to encourage the borrowers to pay back debts. The program makes it easy for the borrower to make the payments and get up to date with the lender. It is also a very valuable tool of lenders and even the government in addressing delinquency and default in debt and loan payments. It helps consumers solve multiple loan problems as well.

The lenders offer the program to be able to close several loans of the borrower to enable them to concentrate on one payment amount every month. It also pays-off the other loans and does not reflect settlement in the credit score. As most people have become aware, settlement damages the credit score by reflecting that the borrower was not able to make the payments and had to settle with the lender to pay off the debt at a reduced amount.

As consumers troop to different lenders to be assessed for debt consolidation, they are hopeful that their application would be approved to be able to do away with the nuances of payment for several types of loans. It can also give them a little more elbow room when the monthly payments goes down to be able to start building up the emergency fund or put more for retirement amount.

Debt consolidation denial

As the consumers sit down and wait for the approved loan amount to consolidate their several loans, new interest rate to be used and the new monthly payment, the loan officer might get back to you with a denied application. There are debt consolidation techniques but at this point, this is tough if you are already counting the ways how debt consolidation will work to your advantage. Some of the most common reasons for this debt consolidation denial are:

Too many loans

The lender might be under the presumption that you are adding on more loans to your existing debt. As soon as they fire up the computer, they will see all your existing financial obligations and might deny your application for the loan. They might be quick to the draw and draw the conclusion that you will not be able to meet all the payments if they approve the loan.

As your objective is debt consolidation, you would need to explain to the lender that the very reason you are taking out the loan is to pay off the other existing loans. It is not to add up to your existing financial payments. If they realize your plan, they just might approve of the loan. Again, this is still not an assurance of approval because some lenders are skeptics and will assume the worst – that you are just trying to squeeze out a loan with no plan of repayment.

This is not always the case but it is a possibility. If the lender would not agree to your plan, you can look for other lenders that would be open to your financial objective. It is not the end of the world if you get rejected by one lender. It is actually an opportunity to do a financial audit and see where you can make some improvement before approaching another lender to talk about debt consolidation.

Too low income

One of the primary things the lenders will look at is your ability to pay. This includes income from employment or income from a business a venture. If you are denied because they conclude that you do not have enough cash inflow to meet the payment requirements, then you can double check your income sources. You might have overlooked one source or forgot to declare income that is coming from an investment.

If your lender still determines that your income is not enough, it would be best to sit down and go over your income and expense budget. There might be something that you need to closely look into like missed payments or missed income. It might be the reason that you are still in debt – you need better money management.

Too risky Credit score

As you approach private lenders to take out a loan to consolidate your debts, another consideration is your credit score. This is especially tough because if there is already financial hardship, chances are your credit score would have already been affected. And the same reason why your credit score is suffering is what you hope to correct with your debt consolidation.

This is a tough call for the lender because the lower your score, the higher your risk, the lower your chances of being approved for the loan. One way lenders would agree to granting you a loan is if you agree to a high interest rate. This is meant to cover their investment risk and be assured of earning enough in the beginning to cover risk of payment default.

These are the most common benchmarks of lenders to assess if you are a good candidate for debt consolidation. If there are any denials on your loan application, look to check these three items and talk to your lender on how to go about your debt consolidation target.

Here is a video on debt consolidation:

Steps after debt consolidation

If you are successful in getting a debt consolidation loan, this is a great start in getting your finances back on track. This could help you make your monthly payments easier, send out lower check amounts for payments and not miss out on any loan or debt payment. But with debt consolidation, here are some things that a borrower would need to look into.

  • Pay-off loans. It is important to use the loan meant to consolidate your debt to do exactly just that – debt consolidation. You need to pay off all loans in order to enjoy the benefits of consolidating your debt all in one payment. Investments are a good idea but not for this specific purpose. If the target amount does not pan out, you will be in deeper financial hole. You will be stuck with your original loan payments with the addition of the new loan meant for consolidation.
  • Focus on payments. When you start debt consolidation payments, you need to keep at it and try your best not to go into delinquent or default payment status. Debt consolidation is meant to help you get out of debt but if you do not make the payments, you will fail to reap the advantages of making single monthly payments for all your previous loans.
  • Extra payments. Using debt consolidation usually carries a long repayment period. One great financial move is to make extra payments to your loan. If the lender will allow it, send it to principal payments. Even is suggesting thsi move to pay down mortgage loan. This will result into shorter payment term and save you payment in interest in the future. It will also make you feel better that you are lowering down the actual amount of the money you borrowed rather than the interest.

Debt consolidation is a great financial option for people trying to streamline monthly payments. This is usually more advantageous for consumers that are able to meet at least all the minimum payments on all the debt and loan payments. It guarantees one monthly payment ensuring that the borrower is able to manage payments monthly and not miss out on any financial obligation.

4 Things to Know Before Remarrying in Retirement

Happy old couple looking at a cameraRetirement can come sooner than most of us expected. After a few decades working in an office, the time will come that we will retire that suit and probably trade them in for gardening clothes. Some are excited just thinking about retirement. They are already preparing a long list of things to do immediately right after retiring. But for some, they are anxious about retirement. Getting used to 40 hours a week minimum in the office seems an awful lot of free time.

Retirement also brings a good question in second marriage. As retirees try to prevent retirement funds from retiring before them, marriage is another issue. Divorce or death of a spouse is inevitable and for retirees, this is just as a reality as most for most of their younger counterparts. But their age and situation in life makes it just a little more complicated than most. Having a new partner in life can be quite a challenge after the initial feelings settle down.

Divorce is all too common in the country. Survey from shows that 3.4 out of 1,000 gets divorced. This may seem small but multiply that with the current population and you get a lot of people leaving marriage. Retirees are not an exception whether leaving the marriage because it is not working anymore or the other partner dies. But some find another partner to spend their retirement with and this is where it gets tricky especially when it comes to finances.

Finding love the second time around in retirement

Finding love or companionship for retirees can and does happen. Love is not only for young people. Older citizens can love just the same as their younger counterparts, if not more. But talking about retirement and marriage should always include the topic on financial management. Money and finances should be talked about before tying the knot again in retirement. came out with an article about retirees finding love again and in the midst of pension, remarry. There are a few complications in marriage with retired people because of children, stepchildren, assets, credit, debt and other things that may not have been present during the first marriage.

Here are some things the retirees need to look out for before walking down the aisle again.

Discuss finances

Soon to be re-married couples talk about a million things before they tie the knot and one important topic is finances. More than knowing each others favorite food and places to travel to and if they will get a dog or a cat, sitting down and talking about finances is important to make the marriage work. It has a few more challenges because of the state in life the partners are in.

It now includes pension, savings and emergency funds. It could also include investments outside savings that needs to be talked about. Having a transparent line of communication and making sure the other is updated and in the same page as you are with the finances is important to make the new marriage works.

Expenses should be part of the discussion as well. If there are debts still being paid, bills and other utilities and other living expenses should be properly discussed to make the relationship work. It will be quite hard to live a normal day to day life when you do not even know who will pick up the bill for the cable, groceries or book that ticket for that vacation in Hawaii.

Credit reports

Credit reports is a reflection of how well you manage your finances. It shows a quick picture of your payment habits with just a number. It can say a lot of things about you as a borrower and reflects your level of financial literacy as well. Credit reports are important as well in maximizing other loan and credit opportunities that you might need in the future.

This is another topic that should be discussed before remarrying at retirement age. Check your credit score and talk about it with your soon to be spouse. If you find any errors, report them right away so you can fix your credit report. Talk about the financial struggles you had along the way and try to learn from them as a new couple. You can even talk about how you saved for retirement in spite of debt.

Important documents

There are documents that you might have prepared a long time ago that you would need to update when you remarry. Changing beneficiaries in your will and other documents is one them. It is best to talk to your lawyer about the changes needed with your new marriage and how to go about updating the information on legal documents you have.

Pre-nuptial agreement

A lot of people look at pre-nup agreements as a protection for the wealthier spouse. It is meant to separate the finances of the two prior to entering marriage. There are advantages to having a pre-nup at retirement age and it is best to talk about it with your soon to be spouse if you are both comfortable with it. Look at it as doing it for the kids, if any, because it could be the spark of nasty discussions down the road.

Here is a video about remarrying after retirement:

Marriage after retirement

Just as you are thinking of work ideas during retirement, you should also be working on some possible problem areas retirement brings to marriage. Here are a few of them.

  • Unemployment brings low self esteem. Some people have put too much premium in their work that retirement decreases their self-esteem thinking they are not doing anything worthwhile. They feel a big empty space has carved up into their lives and there is nothing they can do about it.
  • Health. Retired people are usually more prone to health related issues because of old age. There are more complications for older people and treatment might be longer and more expensive.
  • Lifestyle. Two people coming into a retirement status and having to find themselves together for 24 hours a day for 7 days a week are finding it challenging to merge their lifestyles together. Over the years, each partner has built up a routine around specific interests. The problem is that these interests might not be the same or even compatible with their partner.

In light of these problems surrounding a married couple in retirement, here are a few things that they can do to address them:

  • Find a hobby – Retirement should be based on a financial target and not by age. If done correctly, the  lack of self esteem may originate from not having to do anything anymore and not the paycheck. The best thing to do is to either look for a hobby that you can enjoy doing or better yet, expand a hobby you already have. It is best to include you partner into it and see if you both can enjoy incorporating it in your retirement years.
  • Regular check-up. Prevention is always better than cure. Visit your doctor regularly most especially when you get older. This is not only to address any possible medical situation that is creeping up but to give you peace of mind as well.
  • Thinking of your spouse. Building a lifestyle outside the interests of your spouse might have happened because of all the time away from the house and into work, Now that you are retired, it is a good idea to create a new one that factors in both of your interests. Take into account the the things that both of you like to do and build on that. She might love to cook and you’re the best salesman in the neighborhood. You can start a small business where your wife cooks and you sell them to your neighbors. It does not have to be the same, they can also be complementing each others interests and strengths.

Retirement is an exciting part of your life. If you find yourself re-marrying at this point, your finances should be one important consideration and topic before saying “I dos.”


10 Credit Management Questions Your Teen Should Know How To Answer

young woman looking at credit cardAs a parent, you need to understand that it is your responsibility to teach your children the right financial lessons. From saving to budgeting to spending, these are concepts that you need to make sure they understand.

When your kid gets older and starts to understand more about life, you need to introduce them to more financial concepts. For instance, there are credit card rules to discuss to your college kid. You should also begin discussing student loans with your high school student. While it may seem too early to teach them about credit management, it is a reality that they will face once they enter their college life.

An article published on discussed a study done by EverFi and Higher One. These two organizations are strong advocates of financial literacy. They conducted a study that involved 65,000 college students to prove that being taught financial concepts in high school can affect their money management behavior in college. The study revealed that those who took financial literacy classes in high school displayed signs of being more financially responsible. They were found to make better decisions about debt, paid their dues on time and did not go beyond the limit of their credit cards.

This proves that starting them young with financial lessons like credit management pays off in the end. With the rising financial problems of young adults because of student loans, you should understand that they need to be educated immediately. That will help them make better decisions about their debts.

10 questions that your teen should be able to answer about credit

You may be asking, why are we concentrating on teens? Well, they are at a mental stage that allows them to understand debt and the reason why people use it. Not only that, this is the perfect time to prepare them for the financial responsibilities that they will face once they are in college. If student loans are imminent in their future, then you have to make sure they understand credit management.

As part of the lesson to manage debt, your teen needs to learn about credit card debt and credit scores. To help guide you, here are the important questions that your teen should be able to answer on their own.

  1. What is a credit card? It is a purchasing tool that consumers can use in lieu of cash. Instead of using your money, you are using the money of the creditor. That means, this amount has to be paid back in full.

  2. How can you use credit cards without ending up in too much debt? The best credit management tip to stay away from credit card debt is to avoid carrying over a balance to the next billing cycle. That will keep you from paying finance charges that is just a waste of you money. Make sure to pay the bills in full within the grace period to avoid added payments.

  3. What are interest rates and finance charges? The interest rate is also known as an APR (Annual Percentage Rate) that is used to calculate the finance charge that will be added to the debt carried over to the next month. That is considered as profit for the credit card company. If you do not carry a balance, then you do not have to worry about this.

  4. What is the ideal amount of credit cards to own? 2 should be enough for you. One is a card that you can use on groceries or in a retail shop that you regularly buy items from. The other is a low interest card that you can use for emergencies. Anything beyond this is excessive.

  5. How should a credit card be used? Since this credit management lesson is for a teen, let them know that the credit card should only be used for emergencies. If they plan to use it on unnecessary expenses, they have to make sure that it will be paid off immediately to avoid incurring additional fees. That is a waste of money. A good rule is, if they cannot afford to pay a non-emergency expense in cash, then they should not use credit on it.

  6. When a credit card debt is paid off, should it be closed? It makes sense to close a credit line you’ve paid off but understand that it will affect your credit score. It will make it lower so if you do not have to, just keep your cards and practice credit management to keep it from accumulating debt.

  7. What is a credit score? This is a number that is calculated to measure your creditworthiness. It speaks of your credit management behavior. If you have a bad record of payments, then that will give you a low credit score. This is computed based on 5 factors: your payment history, debt amount, credit history, type of debts and new accounts.

  8. How can I view my credit score? You need to get your credit report from any of the three major credit bureaus: Equifax, TransUnion and Experian. You can get a free copy from the Annual Credit Report website. Once you have downloaded the most current copy, you can use the free credit score calculators found online. This is the cost free way to go about it. Of course, you can order your credit score from the three major credit bureaus for a fee.

  9. Why is a credit score important? A credit score can influence the interest rate that will be imposed on the future loans that a consumer will have. A good credit score will allow them a low interest on a home or car loan. It can even help them get a good job, rent an apartment in a respectable neighborhood and even low premiums on insurances. Know what this score is all about because what you don’t know about your credit score can hurt you.

  10. What is a good credit score? This will depend on the company that is computing it. FICO scores have a range of 300 to 850 so a score of 750 and above is a good score. A VantageScore has a range of 501 to 990 so anything about 900 is a good score. Make sure you know where the credit score is being computed to know what the good credit score is.

Here is a video from National Debt Relief that discusses why credit scores are important. This can help you with the concepts that you need to point out to your teenager.

How to prepare your incoming college student from debt situations

Given the scary debt that young adults are burdened with right now, you have to make sure that your kid is protected from a financial future that is filled with debt. The best way to do that is by educating them – especially about credit management.

An article published on discussed how most students are really unaware of what they are signing up for – especially when it comes to student loans. In most cases, the councilor in school will not provide them with the whole debt situation.

This is an important role that parents need to complete because financial difficulties can affect even the studies of college students. According the same study featured by USA Today, which is originally published on, research shows that financial troubles cause students to go through mental stress, academic failure and the eventual withdrawal from school.

Because of that fact, you need to equip them with the right knowledge that will help them make better decisions about their finances. It also helps to set a good example by practicing the right credit management skills yourself.

For problems with student loans, National Debt Relief recently launched a program that helps borrowers deal with this type of debt. It is a consultation service that will help consumers get into the right program that is based on the details of their student loan debt and their financial situation. The company charges a one time flat fee that is placed in a secure escrow account. The service includes assistance in the paperwork that will help consumers enter into a student loan repayment program. If the consumer is satisfied with the paperworks, that is the only time that the company will receive their payments. Take note that they will never charge an upfront or maintenance fee for this service.

What You Need To Know About The New FICO Score That’s Coming Soon

What You Need To Know About Debt ManagementThe Greek philosopher Diogenes once said, “There is nothing permanent except change” and this is true in the world of lending as it is in the rest of our lives. Lending is constantly changing, which means that the way we are scored needs to be updated periodically and in line with this here comes the latest – FICO Score 9.

Does the term “credit score” frighten you?

Even though you may be afraid of the term “credit score” it’s important that you know yours and how it affects your personal finances. Lenders generally look at credit scores as follows:

Between 700 and 850 – Very good or excellent credit score
Between 680 and 699 – Good credit score
Between 620 and 679 – Average or OK score
Between 580 and 619 – Low credit score
Between 500 and 579 – Poor credit score
Between 300 and 499 – Bad credit score

When you apply for any kind of credit, the first thing the lender will do is look at your credit score. As you can see from the ranges shown above, if you have a credit score of less than 580, the odds are that you will be turned down or, best case, charged a very high interest rate. If you don’t know your credit score it’s critical that you get it before you next apply for credit – or you could be in for a very unpleasant surprise.

What a credit score means

Credit scores are a three-digit representation of how creditworthy you are. Landlords, creditors and other creditors use it to decide if you should be given a credit card or a loan and how likely it is that you will repay the money. To put this another way, your credit score is a way for lenders to predict how risky you would be as a creditor.

Now comes FICO Score 9

While there are literally dozens of different credit scoring models, the first and most popular is the FICO score. It was developed by a company then called Fair Isaac Corporation as a way to simplify the whole credit granting process. Prior to FICO lenders were required to sit down and carefully analyze your credit report line by line. Plus, they had to review your reports from the three credit reporting bureaus because they could be and often were different. As you can imagine this was both tedious and time-consuming.

The updated model

The models for scoring created by FICO are considered to be the gold standard in terms of deciding consumer risk. Virtually all the credit granting businesses use them. For example, in 2013 alone lenders bought from FICO an amazing 10 billion scores to decide who would be granted loans or credit cards. However, things change over the years and FICO generally keeps creating new models to tackle these changes and do a better job of predicting how creditworthy a person would be. The newest in this long line of credit scoring models from FICO is FICO Score 9 and is to be released this summer.

Much the same as Score 8

FICO Score 9 will be much the same as FICO Score 8. However, FICO said in a recent press release that it will have better “predictive power” and will consist of a better representation of a person’s creditworthiness. Andrew Jennings, who is FICO’s chief analytic officer was quoted as saying, “Our innovative, multi-faceted modeling approach incorporates a more exhaustive characteristic selection process to build a score that is even more effective across a wide variety of situations.” To put this in simpler terms, FICO Score 9 is to do a better job than FICO Score 8 of predicting how risky you are.

Improved consistency

As noted above, there are three credit bureaus that provide scores to both lenders and individuals. They are Experian, Equifax and TransUnion. One thing that has made it tough for lenders to get the maximum value out of the credit scores they purchase is that there is sometimes a wide variation between the three bureaus regarding an a person’s score. In fact, when a lender orders a credit report it is not uncommon that each bureau provides a somewhat different score. These inconsistencies can sometimes be quite large, which makes it confusing for both creditors and individuals. So, according to FICO one of the biggest improvements that will come with FICO Score 9 is that these differences will be less apparent, which will make it faster and easier for lenders to decide whether or not they want to issue credit to an individual.

Many new scoring models

This change coming from FICO is just one of the many new scoring models that are on their way. The new ones are expected to focus on individual industries. As an example of this, there will be different scoring systems between credit cards, auto loans and mortgages. This is due to the fact that lenders are searching for ways to grant credit to new customers while still adhering to a number of historically important guidelines.

Watch for more news

FICO will have more details about Score 9 as it comes closer to releasing it. You should pay close attention to this so you’ll know how you might or might not be affected by these changes and your ability to get new credit.

Check your credit reportCredit Report

While it’s important for you to know your credit score it’s equally important for you to see your credit reports. The law entitles you to a free copy of each of your three reports once a year. You can choose to get them from each of the credit bureaus or altogether on the site People who are credit wise generally get one of their free credit reports every four months. This represents a way to kind of monitor your credit without having to pay a company to do it. Reviewing credit reports isn’t much fun but it’s important that you look over each one carefully. A study released last year by the FTC (Federal Trait Commission) showed that nearly 20% of us have credit reports that contain errors and that 5% of us have errors so serious they are affecting our credit scores.

What to look for

When you go over your credit report the negative items to look for include late payments, skipped payments, defaults, bankruptcies, charge offs, tax liens and collections. If you find any of these in one of your credit reports it’s important to make sure they are legitimate and not errors. If you do find errors you can dispute them with the appropriate credit bureau by writing a letter and enclosing whatever documentation you have to prove your claim. The credit bureau will then check with the institution that provided the negative item and ask that it be verified. In the event that the institution cannot verify or fails to respond within 30 days, the credit bureau must remove it from your credit report, which could lead to a nice boost in your credit score.
If you do need to dispute something in one of your credit reports, here’s a video on the right way to construct a  dispute letter.

In summary

Your credit life is ruled by that little three-digit number called your credit score. It’s critical that you know your credit score especially before you apply for a big loan such as an auto loan or mortgage. You need to get and review your credit reports so that you can dispute any errors that could be affecting your credit score. And finally, be sure to watch for more information about FICO Score 9 so you will know how it might affect your credit score and your financial life.

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