Even though it’s more important than ever to be familiar with your credit score and what affects that crucial number, experts say a lot of Americans don’t know nearly as much as they should about what they do that can impact their score. WalletPop got on the phone with John Ulzheimer, president of consumer education at Credit.com to find out more. We also caught up with Barry Paperno, consumer operations manager for FICO, via email to ask him to spill some credit score secrets.

For instance, many people think that if they pay their bills on time, their credit score must be good. Right? Wrong, say our experts. Even if you always pay on time, if your cards are close to being maxed out, your score isn’t going to be as high as it could be, since borrowing up to the hilt looks like a risk factor to the credit bureaus. Surprised? Read on to find out five more credit secrets that can help you get the credit score you deserve.

1. Pay off revolving debt first. There are two different kinds of debt most of us carry: installment debts, which are generally secured by collateral (such as a car loan), and revolving debt, such as credit card balances. Since credit card balances are unsecured — the company can’t repossess the spoils of your last shopping spree if you don’t pay up — they’re viewed as much riskier in the FICO equation. As a result, paying off revolving debt boosts your credit score more than paying off a comparable amount of installment debt. “Paying off installment debt has such a small impact on your score,” says Ulzheimer. “Last year, I paid off a $284,000 mortgage and my score went up four points.” In other words, put that overtime check, bonus or tax refund toward credit card bills if you want the most bang for your high-score buck.

2. Payments to collection agencies don’t boost your score. By the time a debt goes to a third-party collection firm, the original lender (your credit card company, for instance) has already written off the loan as a loss and noted that delinquency on your report. While there are a host of good reasons — such as not getting sued and not being pestered with phone calls at all hours — to pay the bill once a third party collector has it, those payments won’t count toward your FICO score and won’t erase the notation of delinquency.

Likewise, if you get dinged with an insufficient funds fee at your bank and “retaliate” by closing the account or not putting any more money into it, you can get slapped with a collection action by your bank that will negatively impact your score. “In addition to bank account debt, such collection accounts can also arise from utility bills, parking tickets, and even library fines – and can often impact your score as much as unpaid credit card or loan debt,” Paperno warns. Bottom line: Pay those bills before they’re sent to a collection agency if you want to preserve your score.

3. Accentuate the positive. While you obviously want to make sure that black marks like missed payments don’t stay on your report any longer than necessary, it’s perfectly okay and even desirable to have old accounts that were in good standing still listed. For instance, say you paid off a car loan and never made a late payment on it. While you could lobby the bureaus to take that information off your report, it’s more beneficial to leave it on, says Ulzheimer. “This is a great example of when less is more. Don’t ask them to take it off if it’s in good standing.”

4. Opening and closing accounts can lower your score. “FICO’s research has found that opening a new account is predictive of increased risk, and opening any type of credit account or loan action can lower one’s score,” explains Paperno. The good news, he adds, is that your score will rise back to its original level within a few months if you keep the balance low and make your payments on time.

Closing cards can ding you because it skews your credit utilization ratio — that is, how much of your available credit you’ve used — when that line of credit suddenly vanishes. For this reason, experts say to use all your cards at least occasionally. An unused card does you no good if the issuer cancels it due to inactivity.

5. Borrowing more to pay down your debt is dicey. Despite the fact that Americans are often pitched offers of “consolidation” loans by their bank or mortgage lender, taking on more debt to eliminate your credit card bills is a risky proposition. “You’re borrowing from Peter to pay Paul,” says Ulzheimer. Since most consolidation loans are home equity loans backed by your house, failure to get a handle on your spending and pay off your debts as intended could have catastrophic consequences, he points out. “If you miss these payments, the down side is much more significant.” There’s also the fact, as we pointed out above, that opening new accounts can at least temporarily lower your score.

However, taking out an installment loan to pay off your credit card bills could prove beneficial — with one significant caveat. As Paperno points out, installment debt doesn’t drag down your score the way a bunch of maxed out credit cards can, so if — and this is the big “if” — you have the discipline to pay off your cards with that new loan money and stop using the cards until the installment loan is paid off, you could raise your score. But as Paperno points out, it takes a super-sized helping of discipline in order to make this tactic successful.

Source: walletpop.com

Most of us have been tricked by ads on the internet, radio, and tv about being able to check our credit scores/reports for free. There is an old adage that says nothing in life is free, while that is true for the most part, there are actually ways to get your credit report/score for free.

The Fair Credit and Reporting Act (FCRA) requires each of the 3 credit reporting agencies to provide everyone ONE free credit report every 12 months. As stated by the Federal Trade Commission, the only website you can go to access this free credit report is at annualcreditreport.com. This is absolutely the only site that is part of this program. But there is one drawback, this site only provides you a credit report/history, and not your credit score. You have to pay extra for the score.

Don’t fret, there are some other ways to get to get a free credit report and score. Many of the websites that offer credit reports have 30 day free trials. For instance, about a year ago I used freecreditreport.com, part of Experian. I ordered my credit report and score, checked it online, took notes, then called in a canceled within 4 hours of ordering the service. I was never charged a thing. Also, at one point, and I believe they still are now, American Express was offering a 30 day free trial to its card holders to receive credit reports and scores. Just login into your americanexpress.com account, and under other services sign up for the credit report/score program. Assuming you cancel the program within 30 days you will not have to pay a dime, and you will get your credit report and score from all 3 bureaus.

Another way you can sometimes get a free credit score is from your bank. Many banks use their own version of your credit score, some call it a soft score, meaning it is their own proprietary formula/score. I do know Bank of America uses this and it is factored into credit card application and mortgages with them. If you are nice to one of the branch employees, they will often share with you your soft score. While this is not your actual credit score, it will give you a very good idea of what your score is.

Also, if you meet one of these requirements you are eligable for a free credit report.

1) Denied credit, insurance, or a job due to information on your credit report. A notice stating which credit bureau supplied the report should be included in your letter of denial. You then have 60 days to request a free copy of your report from them.
2) Unemployed. You are entitled to one free report a year if you are unemployed and anticipate looking for a job within 60 days.
3) On welfare
4) Believe you are a victim of identity theft. Maybe you recently found a suspicious transaction, or lost your wallet. Place a fraud alert on your file and then ask for a free copy of your credit report.

Q: What is used to calculate your credit score?
A: Credit Scores are calculated based on the information that appears on an individual’s credit report the day your score is compiled. That’s why credit scores can vary , depending on when it is calculated. If you recently made a large payment to a credit card, then your score will likely be higher. Or, or you went on a spending binge, then your score will likely be lower. Other factors which influence credit scores include the number of inquiries from lenders, how long you have been credit active, and your payment history.

Q: How long do bankruptcies stay on credit reports?
A: Declaring bankruptcy makes a long lasting impact on credit reports. When a Chapter 7 bankruptcy is filed, most, if not all, debts are voided. This type of bankruptcy can stay on your report for up to 10 years. However, Chapter 13 bankruptcy, in which the debtor must repay some or all of the debt through a court-approved payment plan, remains on your credit report for 7 years.

Q: Can an employer get a copy of your credit report without your permission?
A: The Fair Credit Reporting Act (FCRA) restricts access to your credit file for your privacy. A prospective employer can only get a copy of your credit report if you give your permission.

Have you been deprived of getting a loan, mortgage or credit card?
Do you know how you can increase your credit score?

Your credit score can make or break your way of living or lifestyle in a lot of ways. Maintaining or keeping a good credit score, especially in times of economic hardships, is really quite extraordinary.

Most lenders looks into the credit score of those applying for loans, mortgage, or for credit cards. As it is part of the business, they want to know and double check the capability of the debtor to pay for the loan being applied for. The lenders are taking a lot of risk when they give somebody the use of their money.

Here are just some of the helpful guidelines in increasing ones credit score:
1. Avoid applying for credit much too frequently. Numerous credit applications will mean inquiry of ones file. A lot of new credit applications can greatly affect and lower the score.

2. Always pay all statement of accounts on time. Paying bills behind of schedule are always recorded in the credit report and can reflect a not so good paying habit. This will definitely lower the credit score.

3. Avoid high outstanding balance or debit in ones credit card and other existing credit can drop off the credit score. As much as possible, keep those debts low.

4. Catch up on missed payments. Its never too late to pay the bill.

5. Avoid closing unused accounts or credit cards. This will not help increase the score.

6. Avoid opening unnecessary accounts with the notion of increasing ones credit score by having a brand new credit card. This strategy will actually lower the score.

7. Having too few or no loan and credit account in ones name, is also measured as a credit risk to lenders. Maintaining a small number of credit cards showing a good credit standing, having a reasonable balances and limits, can help increase the credit score.

The rate of credit scores will be the deciding factor in the approval of a loan, the extent or amount of credit that will be offered, and the interest rate that will be added to the loan for the period or duration of the agreement.

Credit scores also significantly affect the rates or charges one will incur for the monthly payments. A low score will mean paying a higher interest rate on the borrowed money.

Also, if one wants to create a difference in applying for insurance premiums and employment, debtors must strive to increase their credit scores.

Some employment agencies, firms and industries check the credit scores of applicants and would-be employees before deciding on whether or not they would hire them. They would also look at credit activities, and employment and payment history.

Recently, most insurance companies do a background check especially on the credit scores of their clienteles. Through this, they will determine the cost of the insurance premiums, housing premiums, auto insurance, and others.

Credit reports can provide insights to employers and insurance agents a run-down summary about the attitude and behavior of a person.

Discipline is an important tool to maintain a good credit score. Increasing ones credit score takes time. It cant be quick and instant.

The better the person deals with his or her credit accounts to have a good and high credit score, the more assurance of saving more money in the bank there is.