NationalCreditReport.com, a leader in credit report, credit score and credit monitoring services, reminds consumers that there are many things that might seem like a good idea when working to get a good credit score, but consumers should do their research before taking any steps that might cause credit report damage.

“There are some common mistakes that people make when they are working to repair or raise their credit scores,” said Samuel S. Ambrose, Vice President of Marketing and Operations of NationalCreditReport.com. “Things that seem harmless like closing credit card accounts can actually lower your score with the 3 major credit bureaus and affect lending decisions by the financial institutions that obtain your credit report for review.”

The 3 major credit bureaus (Experian™, Equifax™, and TransUnion™) collect information such as bill payment trends, outstanding debt and number of open accounts and use that information to calculate your credit score.

“This seemingly smart move could really cause credit report damage,” said Ambrose.

According to Ambrose, many people attempting to clean up their credit report close longer-standing credit card accounts that they no longer use. Since the 3 major credit bureaus give you points for the length of your credit history, closing a long-standing card could actually hurt you. A better move is to keep that card and use it sparingly to keep it active. Attempt to pay it off in full each month.

Charging too much on one credit card can also make it harder for you to get a good credit score because you’re using a larger portion of the credit granted to you. You don’t want to come close to your limits on your cards. Spread your charges among a few different cards to avoid credit report damage. Set up automatic bill pay if you think you might have trouble remembering to make payments on time.

Another mistake that can cause credit report damage is applying for more credit than you really need. Having many inquiries by creditors can cause your credit score to drop slightly.

Finally, it is not just negative information that can hurt your credit score. Many people make the mistake of not having any or enough credit history. In order to be viewed as a good credit risk by potential lenders, you have to have some proof that you are good at paying your debt on time.

At the company’s website, www.nationalcreditreport.com, consumers can sign-up for a free credit score and a free, seven-day trial of its Triple Safeguard Credit Monitoring™ service. The company also offers consumers the opportunity to purchase their credit report and score for one low price with “no strings attached.” Interested customers can visit www.nationalcreditreport.com/nostringsoffer to buy their credit report and score without being enrolled in a credit monitoring service.

About NationalCreditReport.com
Since 2004, NationalCreditReport.com has specialized in providing credit information and credit monitoring services to consumers to help them understand their credit report and score. NationalCreditReport.com encourages consumers to check their credit report on a regular basis.

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It can happen to anyone: Miss just a credit card payment or two and the next time you check your credit score, you’re stunned to find a low number that makes lenders shun you.

But with patience and discipline, you can move that score from the depths to the stratosphere.

We talked to several people across the country who dug themselves out and brought up their credit scores in a big way — sometimes in just one or two years.

We asked them to pass along their best tips to share with folks who might be dealing with the low-score blues.

Melissa Chinwah
Homewood, Ill.
Credit score before: 348
Credit score after: 702

Tips for Maintaining a Good Credit Score

Credit score danger zone

Rock bottom: After getting divorced, Chinwah, an office manager, was shocked to find that her credit score had sunk to an average of 348, with the lowest reported score among the three bureaus at just 316. There were 43 collections and a repossessed car on her report — “Not one thing was positive, except for my student loan,” she said. “I started to look for housing for me and my two small children and no one would even look at me.”

Turning point: Melissa started researching the ins and outs of her credit report on the forums at MyFICO.com, where people shared their tips for raising their credit scores. For example, she learned that being 120 days late on a payment is basically the same as being repossessed, according to a credit bureau. “The average layperson doesn’t know these kinds of things,” she said.

Her motivation: “The motivation was I needed a place to live,” she said. “I was 44 years old at the time, and I had to start all over anyway.” When Melissa’s credit score reached 648, she applied for a mortgage and bought her dream house.

Lessons learned: Melissa approached building her credit like a part-time job. “Every day I would promise myself I would look at my score on my lunch break, and I would make myself do something, like write a goodwill letter,” she said. Melissa wrote a lot of letters and made phone calls to lenders after paying her debts, asking them to remove blemishes from her report. She was persistent in her efforts over the course of two years and was successful in getting at least 15 collections removed.

Her best advice: “Patience is one thing you must have,” she said. “There’s no magic pill, no magic wand. You have to sit down, make those phone calls and pay your bills.”

Paul Seago
Apopka, Fla.
Credit score before: Less than 500
Credit score after: 785

Rock bottom: “I got out of graduate school in 1998. By 1999 and 2000, paying bills on time wasn’t that important to me, so they’d pile up,” said Seago. “And I’d be 30 days late or 60, sometimes 90. A couple of those piled up. All the sudden I thought, ‘Look, I’m going to want to buy a car someday, get married and buy a house.’ I couldn’t do those kinds of things with the score I had.”

Turning point: “One of the first things I did was start paying everything on time,” said Seago, president of the Apopka Area Chamber of Commerce. “I set up a auto bill pay so I’d never be late again. The easiest thing to do is start paying your bills on time. The late payments came off eventually. Then I’d pay extra on my bills — more than the minimum — so my debt ratio would go down. I got rid of all my store cards and kept all my major credit cards.”

His motivation: “I just buckled down and wanted to get [my score] turned around,” he said. “At some point, I’d be married and looking at a house, and I could just see that played out someday, sitting down with a mortgage broker looking at my credit and [the broker] saying, ‘Yeah, you can’t have a house.’ I probably looked at my score every four months, and I’d see it go up. It’s like when you’re dieting and you see yourself losing a bit of weight.” Seago is now married and in the process of looking for a house.

Lessons learned: Seago researched credit score advice online and in magazines. His major focus was on making payments on time. “If you find yourself in trouble and you’ve got a low score, you can’t spend your way out of it,” he said.

His best advice: “No. 1, as simple as it sounds, is just pay on time. Pay a little bit extra every month to get that balance down. And don’t get any more cards. Do whatever you’ve got to do to pay them off and keep your balances down.”

Fiona James
Baton Rouge, La.
Before: 422
After: 512

Rock bottom: She knows she’s got a long way to go before her credit score can be called excellent, but she also sees that she’s come a long way from when things were their darkest. “When I first went to college, everyone was offering me credit cards,” said James. “A few years later, I was getting behind on bills and not being able to afford certain things and taking out loans. I went to get a vehicle in 2008 and realized my credit score was way low.”

Turning point: James started following the advice in the book “Good Debt Riches,” by Elon Bomani. She had a lot of cards with small amounts of debt and began paying those off, slowly working on lowering her debt.

Her motivation: James was motivated by her need to get reliable transportation so she could work at her two jobs. “I went for six months without a vehicle,” she said. “It was actually quite difficult.”

Lessons learned: “I applied some of the basic principles of paying off creditors where I had a small balance, then began to work out payment arrangements with other creditors,” she said. “I also invested in a secured credit card that reported to all three major credit bureaus and made sure to pay them on time and off each month.”

And though she’s managed to lift her score nearly 100 points, she knows that her work isn’t nearly done. “Each day, I am still working towards repairing and rebuilding my credit as well as becoming financially sound,” she said.

Her best advice: “I would honestly have to say first and foremost to have faith that you can do it,” she said. “The end results are far greater than what you’re dealing with at that particular time.”

Tips from the top
We also talked with David C. Jones, president of the Association of Independent Consumer Credit Counseling Agencies, and Gail Cunningham, vice president of public relations for the National Foundation for Credit Counseling, to get their best tips for building credit.

Here’s what they had to say.

* Check credit reports regularly. At least once per year or three months in advance of applying for a loan or credit, check your reports, which are free annually through AnnualCreditReport.com. “Dispute any incorrect entries,” Cunningham said. “Make sure it’s about you and only you.”
* Pay on time. It seems simple, but paying on time is the highest weighted component of your credit score, accounting for 35 percent of the score, according to Cunningham. “If you’re a procrastinator, unorganized or if you travel for work, set up automatic bill pay in an amount that will at least pay your minimum [payment] by the due date,” she said.
* Don’t max out your credit. Aim to use no more than 30 percent of your available credit to avoid costly fees and being put into a risk category. It’s also a good idea to pay down your cards. “As your cards are paid down, it is likely that you will see an improvement in your credit score, as the computation takes into account your ability to repay your debt more easily,” said Jones.
* Be careful about closing unused accounts. Have a few credit cards paid off that you don’t want to use anymore? You might be better off keeping them open. “Closing unused accounts will lower your overall available credit and negatively impact your credit utilization ratio,” explained Cunningham.
* Resist paying for everything on credit. “Chances are that using cash more often will make you a better steward of the money you have each month after paying necessary bills,” Jones said. “As your spending patterns improve, so will your credit score.”

Source: foxbusiness.com

“Figures provided by FICO Inc. show that 25.5 percent of consumers — nearly 43.4 million people — now have a credit score of 599 or below, marking them as poor risks for lenders. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use,” according to the AP. Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com.The recession, tight lending practices by banks, and unemployment have caught up to the consumer credit market, and the trend is likely to worsen.

Banks, particularly regional and community financial firms, are struggling with defaults on both residential and commercial mortgages. To stay out of the clutches of the FDIC, they have become remarkably cautious about lending, even to people with good credit scores.

The number of people who have been unemployed for over six months is now in the millions and nearly 25 million Americans are out of work. This population is not likely to see their credit scores repaired for years.

The young, for years targets for credit card companies, are unemployed at higher rates than people over 25. That means that this “feeder” population for credit cards is falling and some of these people noe have no credit scores at all.

Another trend that has hurt credit scores immensely is the disappearance of home equity loans which were once taken out by huge numbers of Americans who had houses worth more than their mortgages. Now, more than 11 million mortgages in the US are underwater. People are abandoning homes that are being foreclosed upon. Either of those actions severely damages credit ratings.

One of the long-term effects of low credit scores is a likely long-term drop in consumer spending. People often cannot afford to buy things by paying cash. And austerity is the rule of the day.

Douglas A. McIntyre

Millions of Americans have seen their credit scores fall amongst the lowest levels possible. FICO is reporting that almost 44 million people, 25.5 % of consumers, currently have a credit score less than 600. A credit score this low makes a borrower a very high risk for lenders. These low credit scores will make it almost impossible for these consumers to obtain a mortgage, auto loans, or credit cards. Over the past two years the amount of people with credit scores below 600 has gone up by 2.4 million people.

A very important group to look at is those with moderate credit scores, 650 to 699. The amount of people in this bracket is currently 11.9 percent of consumers, down from 12 percent in 2008. While the drop off is not that significant it is worth noting that the average number of consumers with these credit scores is usually 15 percent.

The consumers with moderate FICO credit scores could be in the most trouble when it comes to lending. Consumers with scores below 600 most likely would not try to borrower but those with moderate scores may try to obtain loans. In previous years these were seen as good credit scores for obtaining loans but standards have toughened and these scores aren’t as good as they once were. These tightened standards may make it much tougher for these people to obtain loans, especially with the best mortgage rates.

There are some positives when looking at the trends in our consumer’s credit score. The amount of consumers with an 800 credit score, a perfect score, has gone up recently. Currently 17.9 percent of consumers have a perfect score. This is significantly larger than the past average with is about 13 percent. These consumers with good credit scores should have no trouble obtaining any type of loan.

It is pretty easy to ruin a good credit credit score but it can me very difficult to fix credit scores.

Source: totalmortgage.com

If your credit score slipped during the recession, it might cost you more to insure your vehicle.

Credit scores can be a factor in setting auto insurance rates in Michigan, the Michigan Supreme Court ruled Thursday. (See the Detroit Free Press story.)

The same is true in Connecticut. Insurers can use information from credit reports and credit scores to measure a person’s potential risk when that person applies for coverage. Insurance companies have data to back the belief that credit scores are an indicator of an applicant’s ability to pay premiums and how likely that applicant is to file claims, according to a report by the Insurance Information Institute.

The rules about using credit information when calculating insurance premiums vary from state to state. Georgia, Illinois, Utah and Washington don’t allow insurers to decide to cancel a policy, or to deny a renewal, based solely on a person’s credit, according to a May 2009 report by the Connecticut Office of Legislative Research.

So, why should credit history be relevant in determining risk? That’s explained in the summary of the Office of Legislative Research report:

Insurers reason that actuarial studies show a high correlation between insurance scores and loss ratio. Essentially, applicants with lower scores are more likely to file loss claims. Because the companies are taking a risk in insuring applicants, they must be able to accurately predict the premiums to charge in order to financially cover applicants in the event of a loss. Insurers use many different scoring models, which they generally keep secret because they compete to offer the lowest prices to consumers.

Source: courant.com

College students may have seen their credit score drop due to a variety of reasons or they may simply have no credit history which might disqualify them from borrowing certain types of loans. However, many college students worry that this bad credit score they may have acquired will prevent them from obtaining the student loans they may need to pay for their college education. Yet, there are student loans available for individuals with a bad credit score.

Usually, student loans will fall into two categories, private or federal, and both of these loan sources can be a great way which a student can supplement other financial aid or simply meet the cost of their college tuition. However, private student loans often will require a credit check and this may either disqualify someone from borrowing a student loan from a private lender or there may be a high interest rate associated with this type of college loan for someone with a bad credit score.

Federal student loans, on the other hand, are often available to the majority of college students and can be acquired by anyone, no matter their credit score. Federal student loans can be more affordable, as they often have a very low interest rate, but they also have other factors in place that would prevent them from disqualifying a student who has a bad credit score from borrowing. For instance, the class rank the student holds in college will factor in as to how much money they can borrow as there are set amounts for the maximum limit of student loan aid one can obtain each year they are in school.

Many students will fill out a FAFSA form so that they can see what types of federal aid they may qualify for and this can lead students to not only student loans, but in some cases federal student grants. While federal student loans, again, can be very affordable when it comes to interest rates and repayment plans, there are various ways in which a student loan repayment schedule can be tailored to fit into almost any one’s income.

It is often advised though, that students should seek out scholarship and grants before turning to student loans. While a bad credit score may not disqualify someone from obtaining a federal student loan, being able to exit college with little or no student loan debt is going to be more beneficial for someone with a bad credit score, especially when it comes to getting out of debt and building a good credit history. In some cases, scholarships and grants can meet the majority of college costs and can lower the amount that one must borrow, so before turning to bad credit student loans, those entering college should try to find as much financial aid from other sources outside of loans as they can.

Source: rwbpress.com

A high credit rating makes it easier to obtain a mortgage, credit cards and auto loans, plus better interest rates, which will save you money in the long run. Here’s what you can do to increase your credit score:

1) Correct credit report errors
You’re allowed one free credit report each year. If you haven’t done it yet, request yours online at AnnualCreditReport.com. Check it carefully for any mistakes, such as past-due or unknown accounts.

2) Pay attention to credit card limits
Avoid charging any one credit card up to (or close to) its limit, even if you pay the balance each month. It’s smarter to spread charges on a few cards. Why? Credit agencies look at all your unused credit from all cards, plus that of individual cards, when calculating your score. That’s why getting close to the limit on one card can ding your score despite having plenty of available credit elsewhere.

3) Don’t cancel credit cards
You earn points for accounts with longer histories, so avoid closing and opening new accounts often. Even if you’re eager to close an account you worked hard to pay off, resist the urge. It’s better for your credit score to keep it open and either never use it or use it only occasionally, depending on fees and terms.

Source: kivitv.com