How To Build Credit The Right Way

How Can I Remove Negative Entries From My Credit Report? Here are 4 effective ways to remove negative items from your credit report: Check for Inaccuracies & Submit A Credit Dispute Letter Write A Goodwill Letter Asking To Remove The Negative Entry Negotiate With The Creditor & “Pay For Delete” Have A Credit Professional Remove The Negative Item Check For Inaccuracies & Submit A Credit Dispute Letter Before you try anything else, you should first make sure the negative entry on your credit report doesn’t have any inaccuracies. Studies have shown that most people’s credit reports contain errors. The trick here is to look for any errors whatsoever on each negative entry. Just because the entry itself is accurate doesn’t mean the details about the entry on your credit report don’t contain errors. In fact, you’ll find out that it most likely does. The first step is to get a copy of your credit report and closely look over each entry and check each detail against your records. You should check the following things: Account number Balance Date opened Account status (e.g., Closed) Payment status (e.g., Collection) High Balance Credit Limit Anything else that appears to be inaccurate Every time you find an error, note what is inaccurate along with the accurate value. Then you can proceed with a credit dispute letter . You’ll want to write a detailed dispute letter that outlines everything you have found. You will send this letter to the credit agencies asking them to correct the inaccuracies or remove the entry. The best part is that many times they can’t verify each detail about the entry, so it’s removed. Write A Goodwill Letter Asking To Remove The Negative Entry If disputing the negative entry doesn’t work (that is, either there weren’t any errors or the credit agencies verified them as accurate), your next step should be writing the creditor or collection agency asking them to remove the negative entry out of goodwill. This is most effective when you’re trying to remove late payments, paid collections, or paid charge offs. A goodwill letter is really easy to write and you can use my goodwill letter template as a starting point. You will basically explain your situation to the creditor or collection agency. While this may seem like a long shot, you’d be surprised how often it works. This is especially true if you’re a current customer because they want to keep your business. Negotiate “Pay For Delete” If you have any unpaid collections or charge offs, the best way to get them removed is to negotiate with the creditor or collection agency and offer to pay the unpaid debt if they agree to delete the negative entry from your credit report. This is very effective as long as you get everything in writing. Therefore, never do this over the phone. Have a Credit Professional Remove the Negative Item If you’re the type of person who would rather have a professional handle it and just be done dealing with it all on your own, I suggest you check out a company called Approved Credit Restoration Inc Learn More at their website here: https://www.ApprovedCreditRestoration.com

YOU MIGHT THINK CLOSING a credit card or other account might remove it from your credit report automatically. But while closing an account prevents you from using it, that doesn't mean it disappears from your credit history. Credit reports include information for both open and closed accounts. As long as they stay on your credit report, closed accounts can continue to impact your credit score. If you'd like to remove a closed account from your credit report, you can contact the credit bureaus to remove inaccurate information, ask the creditor to remove it or just wait it out. How Closed Accounts Affect Your Credit Credit scores are based on several factors: your payment history, how much of your available credit you're using, the age of your credit accounts, the types of credit you're using and how often you apply for new credit. The impact that a closed account has on your credit depends largely on the type of account involved and whether you still owe a balance. With a credit card, "closing an account causes you to lose the available balance on that card," says Rod Griffin, director of public education at Experian. "That results in an increase in your utilization rate, or balance-to-limit ratio." That could hurt your credit score, as a higher rate of use in relation to your credit limit is a sign of risk, Griffin says. Installment loans are a little different, since they aren't revolving accounts like credit cards and don't have an effect on your credit utilization ratio. Once a loan is paid in full and the account is closed, you lose the benefit of continuing to make regular on-time payments that have a positive impact on your credit score, but the payment history remains. Regardless of whether it's a loan or credit card, a closed account can still affect your score. According to Equifax, closed accounts with derogatory marks such as late or missed payments, collections and charge-offs will stay on your credit report for around seven years. Closed accounts with a "paid as agreed" status, on the other hand, can stay on your credit report for up to 10 years from the date the lender reported it as closed. When Should You Remove a Closed Account From Your Credit Report? There are different situations when it makes sense to remove a closed account from your credit. What you must weigh in the balance are the potential credit score implications. "If the account has negative or derogatory information, then the closed account is likely harmful to your credit, and removing it will probably increase your credit score," says David Chami, managing partner for the Price Law Group, a debt relief agency. "If the account is one with a positive history, removing it is probably not in your best interest." Josh Rubin, owner and CEO of Sacramento, California-based marketing firm Post Modern Marketing, found out firsthand how removing closed accounts can impact credit. In August 2018, he paid off his remaining $15,000 in student loan debt in full. When he checked his credit in September, his score had dropped from the high-700 range to 640. After he paid off the loan, his servicer not only closed his account, but also removed the entire payment history from his credit report. The servicer was within its rights, as creditors aren't required by law to report borrowers' account information to the credit bureaus. But it was Rubin who paid the price. "I thought it wouldn't be bad since I'm in less debt now and should technically be less risky," he says. "Apparently, that's now how credit rating agencies see it; they see I've now got a shorter history and only a couple of lines of credit, so I'm more risky to them." In Rubin's case, he didn't ask for the closed loan account to be removed from his credit, but his situation serves as an example of why removing accounts from your report is something to approach with caution. Losing the positive payment history associated with that account hurt his score in a big way. Rubin says he's now in the process of getting the servicer to restore his payment history in the hopes that his credit rating will recover. If you have a closed account with a positive history, you may be better off leaving it alone than trying to get it removed. On the other hand, you may be hoping that removing a negative closed account from your report will boost your score. In that case, you need to know what your options are. Removing a Closed Account from Your Credit Report There are a few steps you can take to remove closed accounts from your credit report. If one doesn't work, move on to the next. Dispute inaccuracies. Write a goodwill letter. Wait it out. Step one: Dispute inaccuracies. "The Fair Credit Reporting Act only requires credit reporting agencies to correct or delete inaccurate information," Chami says. And even then, it doesn't happen automatically. You must first successfully dispute the information in question to have it removed or updated. All three credit bureaus – Equifax, Experian and TransUnion – allow consumers to initiate disputes online or by certified mail. When initiating a dispute, you'll need to provide certain information to the credit bureau, including: Your name Account number Nature of the information you're disputing Supporting documentation to show why the dispute is valid From there, the credit bureau must investigate your claim with the creditor or lender in question, usually within 30 days, and notify you in writing of its findings. If the disputed information is inaccurate, by law it has to be removed or corrected. Once an error is removed from your credit report, the credit bureau can't add it back in unless the lender or creditor proves that it was accurate. That process can take care of negative information related to errors, but it may not remove a closed account from your credit report entirely. And if you're seeking a removal based solely on negative activity, that's likely to be a dead end if the information is accurate. There are, however, some other paths you can pursue to get a closed account removed. Step two: Write a goodwill letter. A goodwill letter is essentially a polite way of asking a creditor or lender to remove a closed account's history from your credit report. It's not the same as a dispute, since presumably you're asking for the removal of negative information without contesting its accuracy. And the creditor has no legal obligation to remove accurate information. Writing a goodwill letter may be more effective when there are extenuating circumstances – for example, if you defaulted on a credit card or loan because a serious illness or injury kept you out of work for an extended period. In addition to considering forces that were beyond your control, creditors may also weigh your previous payment history and whether you've made any good faith attempts to pay since you defaulted. Some debt collectors will consider requests to pay for deletion of the collection account when consumers make a full payment or settle for less than the full amount. But pay-for-delete agreements are problematic because debt collectors aren't required to remove the account even if you pay them to do so, and even if the collection account is removed, the original account with a derogatory history will remain. For example, if you stopped paying a credit card bill for a year and the issuer sent your account to a debt collector, you could pay the debt collector to remove the account. Even if it follows through with the agreement, only the debt collector's account would disappear. The original issuer account would still remain and continue to reflect your year of missed payments. Step three: Wait it out. If the negative information you want removed is accurate and the creditor isn't interested in removing it, you may be out of options. But closed accounts don't last forever. Depending on how patient you can be, you could just wait for a closed account to fall off your credit report. In the case of negative account information, it's important to understand the timing. "Any negative information in the payment history will be deleted seven years from the original delinquency date of the debt," Griffin says. Essentially, the clock starts ticking on negative items when they're first reported on your credit, not when the account was closed. Depending on how old the account is, it may be close to being removed from your report anyway, in which case you could just bide your time. Reviewing your credit report can give you an idea of when closed accounts may be removed. "We recommend consumers check their credit reports a few times per year to check for accuracy and potential identity theft and fraud," Griffin says. You can get your report from each of the three credit bureaus for free once per year through AnnualCreditReport.com. Enrolling in free credit monitoring services can help you track credit accounts and your credit score from month to month. Practice Good Credit Habits Going Forward If you had a credit account closed because of late payments or default, getting it removed from your credit report is a step in the right direction. From there, you can focus on practicing credit habits that are designed to promote a positive score, including: Paying bills on time each month Keeping credit card and other revolving debt balances low Paying off debt balances Keeping unused credit accounts open Limiting how often you apply for new lines of credit One final tip: If you're struggling to keep up with credit card or loan payments, don't keep creditors in the dark. Reach out to them at the first sign of trouble to see if they offer hardship payment plans or deferments so you can avoid negative information on your credit report.

WHAT ARE THE NATIONAL credit bureaus? The big three – Equifax, Experian and TransUnion – collect and maintain data about your financial life that is contained in your credit report. They use this data to assign you a credit score. Your credit score can affect everything from your odds of approval for credit cards to your interest rates for loans. Equifax, Experian and TransUnion track many of your financial transactions, as well as your: Credit card and loan balances History of payments on credit cards and loans Number and type of accounts Bankruptcy filings Each major credit bureau uses this information to determine your credit score. By law, the bureaus – also known as credit reporting agencies – can provide information about you to many types of businesses, including: Lenders Employers Volunteer groups Government agencies Landlords Banks and credit unions Payment processors Retail stores Debt buyers and collectors Insurance companies Telecommunications and utility providers Gaming casinos that extend credit or take checks The notion that multiple credit reporting agencies are keeping tabs on your spending might seem like an invasion of privacy – and maybe dangerous, especially after the massive Equifax data breach and a recent series of other highly publicized data breaches. But there is no practical way to avoid having your transactions documented, says John Ulzheimer, a credit expert who has worked at Equifax and FICO. "Live with the fact that you're going to have a credit report," he says. "It's better to understand how they work than to sit there and complain about them." How Many Credit Bureaus Are There, and What Do They Do? The big three credit bureaus dominate, although many smaller credit reporting agencies track your financial behavior. The Consumer Financial Protection Bureau maintains a list of dozens of smaller agencies, plus the main ones. The so-called "fourth bureaus" have popped up to serve niche markets, says Thomas Nitzsche, manager of media and brand at nonprofit credit counseling agency Money Management International. Some might track rental payments, while others track payments to payday lenders. Equifax, Experian and TransUnion each keep a credit report on you. But what do your reports contain? Your day-to-day financial activity makes up the bulk of your credit report. If you apply for a credit card, loan or line of credit, the lender likely will alert one or more of these agencies. That information then will appear in your report. "There's no requirement to report to all three credit bureaus," Ulzheimer says. "As a lender, you can choose to report to one or two, or none, or all three." Most big lenders report to all three credit bureaus, Ulzheimer says. But smaller lenders might alert just one of these agencies. Two other types of information find their way into your credit file and can negatively affect your score. First, debt collectors sometimes report information about you to the credit bureaus, such as your failure to pay bills. For this reason, you cannot assume that delinquent payments on utility or cable TV bills – or even an unpaid gym membership or magazine subscription – will not appear on your credit report, Nitzsche says. "If you do fall behind on those, after a few months, they can go to a collection agency," he says. "At that point, the collection agency can report them." Finally, credit reporting agencies may turn to public records, such as bankruptcy filings, to collect data. In recent years, some items in your credit report that once greatly affected your score – medical debts, civil judgments, paid collection debts and tax liens – no longer carry as much weight with the bureaus, Nitzsche says. "From a consumer standpoint, it's obviously a good thing," he says. How Do the Credit Reporting Agencies Use Your Information? As each credit bureau compiles your financial information, it goes into a credit report that serves as the basis of your credit score. To calculate a credit score, the agencies must "marry a credit report with a scoring model," Ulzheimer says. The primary scoring models – FICO and VantageScore – are "the King Kong and King Kong Jr. of the scoring industry," he says. FICO created and owns the oldest and most widely used scoring model. FICO allows the credit bureaus to use its algorithm to generate credit scores, says Ulzheimer, who has worked at FICO. The company determines which factors – such as the amount of credit available to you and your payment history – weigh most heavily on your score. "The bureaus don't have any influence over the weighing of information in your FICO score," Ulzheimer says. "FICO has control over that because they are the ones that built the model." Because each agency feeds data from its own credit report to the FICO model, scores can vary from agency to agency. There may not be much difference if reporting is fairly consistent, but scores could be very different if there are, for example, collection accounts on one agency's report but not another. "Your credit score is likely to be different across the three because the data isn't going to be the same," Ulzheimer says. Equifax, Experian and TransUnion joined forces to create their own credit scoring model, VantageScore, as an alternative to FICO. How Can You Protect Your Credit? Check your credit report at least yearly. Although "you don't have the right to not have a credit report," Ulzheimer says, you still can make sure the information in your report is accurate. "Consumers have the right to challenge things," he adds. Federal law requires each of the major credit bureaus to provide you a free annual copy of your credit report. You can request this report at AnnualCreditReport.com, which is operated by the three bureaus. In addition to these yearly reports, you can request a credit report when: You have been denied credit, insurance or employment, or were the target of another adverse action, based on a credit report. Your credit report appears to be inaccurate because of fraud. You need access to a credit report to place an initial fraud alert. You are unemployed and plan to look for a job within 60 days. You receive welfare benefits. Your state's laws grant you free access. If you find an error on your report, alert the proper credit bureau, and request that the item be removed. Then, check your other credit reports to see if the error appears. Each credit bureau may take up to 45 days to investigate and respond to your dispute. "That consumer might be successful in getting something removed from one of their credit reports but not successful in getting it removed from the other two," Ulzheimer says. Do You Need a Credit Freeze? A credit freeze can provide an extra layer of protection for your report if you are worried about becoming a victim of identity theft. "Freezing your reports at the big three is really the step to take," Ulzheimer says. Doing so prevents thieves from opening accounts in your name. But opening legitimate accounts while your credit is frozen is almost impossible. Thanks to a federal law passed in 2018, you can freeze and unfreeze your credit for free. Parents can request a free freeze for their children under age 16. A guardian, conservator or someone with a valid power of attorney can get one for dependents as well. You must contact each of the three major credit bureaus to freeze your credit. If you request the freeze online or by phone, the credit bureau must place it within one business day. Once the credit freeze is in place, it will remain until you ask each bureau to lift it. If you want to lift a freeze and make your request online or by phone, the credit bureau must do so within one hour. If you ask to add or lift a credit freeze by mail, the credit bureau must complete your request within three business days of receiving it. What Is the Danger of Ignoring Your Credit Report? When you're going to make a major purchase, such as a new car or home, do not wait until the last minute to check your credit report for errors, Nitzsche says. "Sometimes it takes a matter of weeks or months to get things resolved," he says. "So you really don't want to wait until the heat of the moment." Even checking your credit report once a year is not often enough, Ulzheimer adds. "That's woefully inadequate," he says. "Once a year is terrible. I want to see what's on my credit report every month." Sign up for a service that will let you access your credit report as often as you'd like. You may have a credit card with unlimited access to your report as a benefit. "So many companies are willing to give them to you for free," Ulzheimer says. Finally, paying bills on time is paramount to keeping your credit score strong. Automate payments as often as possible so you don't forget to pay a bill, Nitzsche says. "Don't rely on your memory to help you out," he says. "Those due dates creep up, and you might miss a reminder."

There are few numbers in life that matter as much to your financial well-being as your credit scores. Whether you’re applying for a credit card or buying a home, these three-digit numbers can go a long way in determining whether a lender will do business with you. The problem is, there are so many credit scoring models out there. How can you keep track of them all? And what should you do if your scores differ between credit-reporting agencies (also known as credit bureaus)? First things first: It’s perfectly normal for scores to differ slightly between agencies. It’s up to lenders to decide which information they report to the major credit agencies — and which agencies they report to in the first place. Since your FICO Scores depend on the data listed on your credit reports, you might not see the exact same score from every credit-reporting agency. Of course, there may be other reasons for any discrepancies in your scores; more on that later. The good news? Many agencies look at similar factors when calculating your credit scores. So long as you make payments on time, keep your credit card balances low and don’t go wild opening new credit card accounts when you don’t need them, you should be in good all-around shape. So, listen up (and note that the following discussion only relates to credit in the U.S.). Let’s start with your FICO credit scores. In the old days, banks and other lenders developed their own “score cards” to assess the risk of lending to a particular person. But the scores could vary drastically from one lender to the next, based on an individual loan officer’s ability to judge risk. To solve this issue, the Fair Isaac Corporation (formerly Fair, Issac, and Company) introduced the first general-purpose credit score in 1989. Known as the FICO Score, it filters through information in your credit reports to calculate your score. Since then, the company has expanded to offer 28 unique scores that are optimized for various credit card, mortgage and auto lending decisions. OK, but what about my other credit scores? FICO Scores are just the tip of the iceberg. You may have dozens of other credit scores you’re not aware of. The other main scoring model you’ll run into is the VantageScore. The three major credit-reporting agencies — Equifax®, Experian®, and TransUnion® — teamed up in 2006 to create the independently managed firm VantageScore Solutions, which just released the fourth and latest version of its credit scoring model, the VantageScore 4.0. (The previous version, VantageScore 3.0, is still widely used.) Common Question When will lenders start using VantageScore 4.0? VantageScore 4.0 will be available to lenders this fall. However, it can take time and money to switch to a new model, and lenders may not immediately make the change. Some lenders also don’t use VantageScore credit scores. For example, Fannie Mae and Freddie Mac still require the use of FICO Scores (often older versions of FICO Scores) when underwriting mortgages. We know this is a lot to take in, but don’t panic. While each of these credit-reporting agencies calculates your credit scores differently, they all focus on how responsible you are with the money you borrow. Everything you need to know about the new VantageScore 4.0 credit scoring model Why are my credit scores different? There are a few reasons why you might get different credit scores from FICO and each of the three major credit-reporting agencies. Here are some of the most common situations: Scores are from different dates. Since your scores might change at any time, it’s important to compare credit scores from the same date. Scores are calculated using different scoring models. Keep in mind, there are dozens of credit scoring models out there that may calculate your score a little differently. Scores are calculated using different credit reports. Some lenders report to all three major credit agencies, but others report to only one or two. This means a credit agency may be missing information that helps or hurts your score. We recommend you periodically check your credit reports for errors, which could affect your scores. You can check your TransUnion® and Equifax® credit reports for free on Credit Karma, and your Experian® report on www.AnnualCreditReport.com. Why do my FICO credit scores differ? Credit scores are like thumbprints: No two scoring models are the same. Like we mentioned before, FICO periodically updates its credit scoring models so there are multiple FICO Score versions. They feature unique formulas that cater to, say, credit card issuers, mortgage lenders or car salesmen, each placing importance on different factors. If you’ve had a car repossessed or missed a payment on an auto loan, for example, your FICO Auto Score may put extra weight on those factors. Note that your base FICO Score will likely also account for a missed car payment, but it may be weighted differently. Though your scores may vary, they’re all based on the information provided by the credit-reporting agencies. So, focusing on what’s in your credit reports could help you build your credit across the board. Credit score ranges Think of your credit scores as a report card that gauges your creditworthiness. The most common scores range from 300 points to 850 points. The higher your score, the better. In the case of FICO Scores, if you consistently score above 800, it’s like getting straight A’s. The national average FICO credit score, a “C” if you will, is 695. Your guide to credit score ranges What’s the best credit score? There’s really no such thing as a “best” or “worst” credit score — they’re just different, and different lenders may use different credit scores. With that said, FICO Scores are used in over 90 percent of U.S. lending decisions, so your FICO Scores may have more sway over your financial life. On the other end of the spectrum, some credit scores are meant only for educational purposes and are rarely, if ever, used by lenders when making credit decisions. Bottom line It can be difficult to keep track of all your credit scores, because there are so many out there, and each score changes over time. These complicated facets of credit scores are exactly why we developed Credit Karma. We hope to provide you with an easy-to-follow point of reference on your credit health. Best of all, it’s always free to check your VantageScore 3.0 credit scores and credit reports from two major credit-reporting agencies with us. What’s more, checking your credit scores and reports on Credit Karma will never hurt them.

The Credit Report Actually, we should say “credit reports,” because there are three. The United States has a trio of national credit bureaus – Experian, TransUnion and Equifax – that compete to offer the most comprehensive information to their customers. Those customers could include mortgage lenders, car loan providers, insurers, collection agencies, landlords and potential and current employers. And you. Unlike your credit score, your credit report provides detailed information on your financial history with loans, credit cards and charge cards. If you’re delinquent on any of your bills, your credit reports will likely show it. It also gives the reader information on the number of accounts you have open, their outstanding balances and a host of other details. Each report may be slightly different. That’s why it’s important to look at all three when judging your credit health. Depending on the lender's methodology, your activity may or may not find its way to all of your reports. In other instances the information may be incorrect or missing altogether. A business doesn’t have to report to all of the bureaus – or to any of them, for that matter. And it’s not necessarily the bureau’s fault if the information is incorrect or missing. The lender may have erred in reporting or transmitting the data. You’re entitled to a copy of your credit reports from all three bureaus once every 12 months. Even better, they’re free. The Big Three sponsor a site, AnnualCreditReport.com, that provides applications for getting your reports. Other websites may offer the reports to you as part of a promotion or as part of a paid membership. Some may try to trick you into thinking you’re on the official site. Don’t fall for it. Make sure the web address in your browser says “annualcreditreport.com” and don’t go to the site from another link. Type it directly into your browser to avoid fraud. The Credit Score Many lenders, especially credit card companies, don’t much care what is on your credit report. They’re not interested in digging through all the data and judging how much of a credit risk you represent. Instead, they pay somebody else to do it for them. Although there are other scoring companies, such as VantageScore, the Fair Isaac Corporation (FICO) so dominates the field that the terms “credit score” and “FICO score” are often used interchangeably. Whichever company is calculating it, your credit score – in essence, a “snapshot of your credit report,” as Bethy Hardeman, senior manager for product marketing at Credit Karma, a credit advisory website, puts it – summarizes your creditworthiness (much as your grade summarizes your performance in a course). The higher your score, the less risk you represent. According to FICO, your payment history represents the biggest part of your score. The amount you owe is a close second, and the length of your credit history is a distant third. You can have a score as low as 300 and as high as 850. However, it’s nearly impossible to have a perfect score. Remember those three credit bureau reports? FICO calculates a score based on each of them. Different lenders also use different scoring models – not necessarily just from FICO – so people generally have have multiple credit scores. Unfortunately, you aren’t entitled to automatically receive your credit scores for free, the way you are with your credit reports. You might have to pay for them. The Dodd-Frank Act gives you the right to see your credit score from any creditor that used it to make a credit decision. Many credit card companies and other financial institutions now provide it free of charge, as do advisory services such as Credit Karma. Beware, though: Some websites and services may offer a “free” score, but it often comes with expensive membership fees or other conditions that you don’t want. The Bottom Line Without the credit report, there would be no credit score. Your credit score is important, but if you really want to dig into your credit and review your history, you need your credit reports. If you’re looking to raise your credit score, the first step is to clean up the reports: Correct any errors and pinpoint the weak spots (such as where your biggest outstanding balances are). Bear in mind, though, that any positive change to your credit score takes time, despite what those breathless mail and email notices offering to “raise your FICO score within weeks!” may claim.

When you apply for a loan, you expect the lender to pull your credit report. After all, you’re borrowing money. It makes sense that your lender wants to see what kind of risk you present. But what about other types of companies? You might be surprised to discover that, even if you’re not borrowing money, certain companies may be looking at your credit report. The following are examples of the types of companies that might be checking up on your credit. 1. Credit card companies A credit card company can look at your credit report when you apply for a card. However, if you’re a customer, that company can look at your credit report anytime, according to the Consumer Financial Protection Bureau. Additionally, prospective creditors can access certain information in your credit file to determine whether to make you what’s known as a “prescreened” offer for a new credit card. Prescreening is allowed under the federal Fair Credit Reporting Act, but you can opt out of prescreening. We break down the process in “The Secret to Stopping Unwanted Credit Card Mail for Good.” 2. Insurance companies The Fair Credit Reporting Act also allows credit reporting companies to release your credit report in association with “offering insurance coverage or setting insurance premium charges,” says the Consumer Financial Protection Bureau. While federal law allows insurers to prescreen you for offers, it also gives you the ability to opt out of prescreening. 3. Employers As part of a background check, employers can request a copy of your credit report. The Fair Credit Reporting Act allows credit reporting companies to release your report for employment purposes. However, the employer must get your written permission to pull your credit report beforehand. You can refuse, but that could be grounds for the employer to reject your application, according to the Federal Trade Commission. Related: 8 Common and Costly Homebuying Myths 4. Telecommunication companies When you sign up for phone, TV or internet service, the service provider might check your credit. It’s not exactly a loan, but some companies want to make sure you’re likely to pay your bill, says James Garvey, the CEO of credit-building site Self Lender. “The telecom provider wants to check if the customer owes money to the provider itself or to another telecom provider,” Garvey tells Money Talks News. 5. Public utilities Signing up for water, gas or electricity? You might need to submit to a credit check, says Logan Allec, a certified public accountant and the founder of financial education website Money Done Right. “Utility bills are generally paid in arrears, meaning you’re billed for usage after the fact,” Allec tells Money Talks News. “In a sense, these companies are making you a short-term loan. They let you use $50 of water last month, and you have until a certain date to pay them for it.” If you have a low credit score, Allec points out, the utility might not have confidence in your ability to pay bills on time and might charge you an upfront deposit. 6. Government agencies and courts “You may think that the government should have no business requesting your credit,” says Allec, “but sometimes they actually have a good reason to.” Allec points out that when you apply for government assistance, you might be subject to a credit check to see if you truly qualify. Additionally, the Fair Credit Reporting Act permits credit reporting companies to release your credit report: In response to court orders In response to subpoenas For certain child support awards and enforcement purposes 7. Landlords Looking for new digs? Your landlord-to-be might want a peek at your credit report, says Leslie Tayne, a New York City-based lawyer specializing in consumer finance and debt. She points out that renting an apartment is a long-term agreement, and many landlords want to be sure that you won’t cause trouble. “While rent is not typically reported to the credit bureaus, your credit report can give an indication of your overall likelihood to pay bills on time and your financial responsibility,” Tayne tells Money Talks News. In some cases, she says, if you have a poor score, you might have to provide a larger security deposit. 8. Assisted living facilities and nursing homes Expect to be subject to a credit check when applying to live in an assisted living facility or nursing home. “These facilities treat applications like applying for an apartment, especially since costs are typically high,” Tayne says. “Having good credit shows the facility that you’re responsible with your payments and that you’ll use whatever funds you have to pay for the stay.”

A credit score is a three-digit number that lenders use to determine whether you’ll get approved for financial products like credit cards and loans. Credit scores typically range from 300 to 850, but there are dozens of versions — from base scores to industry-specific scores — that make it tricky to know which one you’re being evaluated on during the application process. You may check your score with your credit card company or on a personal finance site only to find it differs on another, making it hard to know what credit score range you fall in and which products you have the best chance of qualifying for. And when a lender pulls your credit score, they may request it from a different credit bureau — Experian, Equifax or TransUnion — and/or request a specific version that varies from the one you checked. Most credit scores weigh the same factors, such as payment history, utilization rate , length of credit history, number of new inquiries and variety of credit products. However, there may be score differences for a variety of reasons, which CNBC Select breaks down below. 6 reasons why your credit score differs Credit scoring model used: There are several models out there for scoring your credit history. But typically, lenders use one of the two main credit scoring models — FICO or VantageScore. Both companies evaluate the same main factors of your credit history like payment history and utilization rate, but use their own formulas to weigh each factor. Score version: There are dozens of credit score versions that are broken up into base scores and industry-specific scores. Base scores, such as FICO® Score 8 or VantageScore 3.0, show lenders the likelihood you’ll repay any credit obligation. Industry-specific scores represent the odds you’ll repay a specific loan, such as the FICO® Auto Score 9 used in auto loan decisions. Credit bureau: Credit scores are calculated using data listed on your credit report, which comes from one of the three major credit bureaus — Experian, Equifax or TransUnion. Your score differs based on the information provided to each bureau, explained more next. Information provided to the credit bureaus: The credit bureaus may not receive all of the same information about your credit accounts. Surprisingly, lenders aren’t required to report to all or any of the three bureaus. While most do, there’s no guarantee that the information will be the same across the board, creating potential differences in your scores. Date scores are accessed: If you view your credit score at different times, there may be discrepancies since one score may be outdated. Errors on your credit report: Your credit score can reflect any errors that appear on your credit report. If errors only appear on one bureau’s report, then your credit score from that report may differ from another that has no errors. You should dispute errors on your credit report right away to avoid harm to your credit score. Which credit score matters the most? While there’s no exact answer to which credit score matters most, lenders have a clear favorite: FICO® Scores are used in over 90% of lending decisions. While that can help you narrow down which credit score to check, you’ll still have to consider the reason why you’re checking your credit score . If you’re accessing your credit score simply to track your finances, a widely-used base score like FICO® Score 8 works. This version is also helpful for gauging which credit cards you qualify for. If you plan to make a specific purchase, you may want to review an industry-specific credit score. FICO lists the specific scores that are used for various financial products. FICO® Auto Scores are ideal if you want to finance a car with an auto loan, while it’s good to check FICO® Scores 2, 5 and 4 if you plan to buy a house .

The truth is, the dealers don’t really care about the score that you can readily show them on your phone because it’s not the same thing as the score they will pull when they run your credit because they operate on different credit scoring models. Here is a closer explanation of what we mean.   Credit Karma operates using the VantageScore system For those not in the know, your credit score is dependent on three different credit bureaus: TransUnion, Experian, and Equifax. And while it’s imperative to know your credit score from all three of them, sites like Credit Karma only show you scores from two of them, mainly TransUnion and Equifax.   Why? Because Experian wants you to pay to see your score from and it’s typically lower than the other two. If you just want to check your credit from time to time and get an idea of what it is, then checking Credit Karma is a good way to do it.   According to Investopedia, Credit Karma uses the VantageScore system because it’s accurate, however, it is very general. The Credit Karma website details what factors the VantageScore system accounts for when looking at your credit. These factors include:   Your payment history The length of your credit history What credit lines you have (credit cards, loans, mortgages, etc.) Your credit limits How much debt you have How many hard inquires you have   These factors represent a general outlook of your current credit situation, but the model that the dealerships and bank lenders go by when you apply for an auto loan is a little different.   Auto lenders most commonly use the FICO Score 8 system When you submit your credit information to a dealership or directly to a lender to apply for an auto loan, the information they pull from the credit bureaus is typically under the FICO Score 8 scoring model.   The FICO Score 8 model follows a lot of same credit-granting guideline as other models, like the VantageScore system, but it’s more “sensitive” to certain aspects of your credit such as:   High credit card usage: If you high balances on your credit cards Isolated late payments: If you were at least 30 days late with any of your payments Amounts owed on your credit lines Payment history Credit mix: The FICO Score also looks at your balance between credit cards, auto loans, mortgages, etc. New credit inquiries: Although new credit inquiries don’t weigh heavily on your FICO score, they are taken into account.   While the differences between the FICO Score 8 and the other systems like the VantageScore might seem minimal, auto lenders have historically used the FICO Score model 8 for loan approvals, so that one would be better for you to keep in mind.   Why dealers don’t care about your online credit score Ultimately, the next time you’re at a dealership and you happen to flash them your Credit Karma score after they pull your credit, don’t be surprised if they don’t bat an eye at it. The scoring models are different and the score that they pull is more in line with what the actual lenders are looking at in order to prove that you’re creditworthy enough to lend a large sum of money to.    

Do you know your personal credit score? What about your business credit score ? Many people don’t know either. What’s more, most people don’t check their credit score before applying for a credit card, business loan, or personal loan. Some are shocked later on to discover that errors hurt them — errors they may have been able to correct had they paid attention. Repairing credit has many benefits, including getting more financing, with lower interest rates and favorable loan terms. When you repair credit, it also puts you in a better position to achieve your goals. Whether your goals are personal, such as buying a new home, or business, such as expanding your facility, better credit scores increase your options. That’s why the time to fix bad credit is now before you need to borrow money or bid on a new project. These tips for how to fix your credit will enable you to make positive changes in a short amount of time.   1. Check Your Credit Reports You must know your credit score to fix bad credit, and the best way is to check your credit reports using Experian, Equifax, or Transunion. You can get a free credit report for personal credit — many companies make that available — but business credit scores are another matter. First, the three credit bureaus — Dun & Bradstreet (D&B), Experian, and Equifax — each have different scoring models and types of reports. Second, most are not free credit reports for a business. For instance, a single standard credit report from Experian costs $39.95, while Equifax prices start at $99.95.  2. Identify and Dispute Any Errors Don’t just access these sources to review your credit score. Examine the factors credit agencies use to determine the rating and investigate those that affect your score specifically. Errors are common. In fact, 25% of these reports do contain serious errors. So check them carefully. Removing negative information is an essential part of your credit repair efforts. Identify any apparent errors you find and dispute them with the bureaus and the creditor or information source. You can file disputes on each of the credit reporting agencies’ websites.  Personal information – problems with name, address, phone number, Account problems – these could be accounts belonging to someone else, closed accounts showing as open, accounts set up as a result of identity theft, or accounts incorrectly reported as late or delinquent or showing incorrect balances, Inaccurate information – including non-existent bankruptcies or foreclosures, Data errors – problems with how your credit was handled either by the credit agencies or another party, Incorrect inquiries – Checks on your credit that might negatively affect your credit rating In the dispute, identify and clarify each mistake, gather your documents, explain your reasons for disputing the information, and ask that it be removed or corrected. Tip: Collect documentation prior to contacting a credit bureau to challenge items on your credit report. Credit bureaus require you provide proof of any errors in order to remove them from your credit report. As a result, you must present credit card statements, court documents or whatever else necessary to verify a credit report is in error.  3. Monitor Your Credit Score Regularly Monitor your personal credit score regularly to check for changes. Your goal should be to get your score to 633 or above. You may be amazed to see the difference even small steps toward improvement can make. The reporting agencies update scores routinely, so check at least once a month. Also, some credit reporting agencies will send email alerts any time your score changes. Sign up for those if available. Personal credit monitoring services typically make suggestions for how to improve your credit score, and some even track spending. As with any other metric, establishing a baseline and then monitoring changes will put you on a path to credit repair improvement.  In addition to individual credit reports, business credit reporting agencies offer annual subscription plans, which allow you to check your credit history, credit report, and score for one price. Charges can run into the hundreds of dollars, but it’s a way to stay apprised of your score and evaluate your credit repair activities. That can come in handy when you need to finance commercial real estate, office equipment, or fulfill another business need. Tip: Just like with your personal credit score, check your business credit reports for accuracy. You can also contact the business credit bureaus and add information to your business profile, so the bureau has a more complete history. 4. Make Payments on Time Nothing affects a credit score more adversely than a history of late payments. Payment history makes up 35% of your FICO Score, according to Experian, and FICO Scores are used in 90% of credit decisions. Late payments also stay on your credit report for up to seven years. Plus, their presence on a credit report, including the total number, how late they were, and how recently they occurred, are correlated with future credit risk. People without a late payment are much more likely to pay on time in the future.  Now your credit card or loan statement may say a payment is past due after 15 days. However, for credit reporting purposes, a payment isn’t considered past due until after 30 days. Once you pass that deadline, your creditors can choose to report you to the credit bureaus, impacting your creditworthiness. Make it a priority to pay your creditors on time every month. Even if you made payments late in the past, you begin to build credibility that will result in higher credit scores in time. Tip: Track your payments carefully paying those closest to passing the 30 day mark first. Setting reminders is an excellent way to ensure you never miss a payment. There are several ways to do this: Calendars on your computer or mobile device, Text or email reminders from your bank or credit card lender, Automatic payments via your business bank account. Regarding the last option, make sure you have sufficient funds to cover the draft. Overdraft fees will eat away at your balance and could hurt your credit score rather than help it. )  5. Don’t Have a Separate Business Entity? Establish One Credit bureaus can’t track your payment history if they don’t know your company exists. That’s why its best to make your business a separate entity. You can do that in several ways: Set up a corporation or LLC – These structures will help you minimize personal liability for the business. Get an EIN (Employer Identification Number) – You get this from the IRS, and it’s required if you have employees or are an S corporation. Get a D-U-N-S Number – A D-U-N-S Number is a unique identifier Dun & Bradstreet assigns to track financial transactions of businesses. It means D&B has validated your company, something lenders and vendors rely on when deciding whether to do business with you. Get a business phone – Having a business phone number builds credibility. Plus, you’ll need it to register for a D-U-N-S Number. Open a business checking account – Commingling business transactions with personal is a recipe for trouble, especially during tax time when you have to look for deductions. That’s why it’s imperative to maintain a strict separation between personal accounts and business accounts. Tip: Deposit all business revenues into the business bank account and pay yourself a salary or transfer funds from the business account to your personal account — not the other way around,  6. Lower Your Credit Utilization Rates Small business owners need to keep credit utilization rates on both personal and business credit cards low. Under 30% is recommended. That’s important because credit utilization is the second most important factor in credit scores, right after payment history. Your credit utilization rate is calculated by taking the total of all your credit card balances and dividing it by the sum of all your credit card limits. It’s to your benefit to keep your credit utilization under 7%. That puts you in the“very good” credit score range of 740-799. Even better, holding it between 1 and 3% can give you an “exceptional credit” score of 800-850.  Do not have 0% credit utilization, however. You aren’t building credit if all your credit cards show no balance. In fact, your score could be lower. So use both your business and personal credit cards and lines regularly, but pay them down or off early every month. 7. Increase Your Credit Limit by Opening New Credit Cards One way to lower your credit utilization rates is by applying for another card. This generates a hard inquiry, which lowers your credit score in the short-term, but the added credit amount will increase your score in the long-term. This, in turn, helps your credit repair efforts and offset credit card amounts that exceed the 30% recommended limit by increasing your available credit limit. A problem arises, however, if you run up the balance on the new card. Your credit utilization percentage goes back up as do your credit balances. But as long as you don’t increase your credit card balances, an upturn in your credit limit should reduce your utilization rate and improve your credit scores.  Tip: Beware! Don’t apply for several credit cards within a short period. Too many “hard” credit pulls will damage your personal credit. 8. Pay Down Business Debt Another way to lower your credit utilization rates is to pay down as much business debt as possible. Consider this simple strategy for credit repair. Either pay down the account with the highest annual percentage rate or pay off the lowest balance. Say you pay on two accounts. One charges an annual percentage rate of 20%. The other boasts a much lower annual percentage rate of 9%. Pay down the balance on the account with the higher percentage rate first. This decreases the overall interest owed and improves your credit history. On the other hand, say you have new credit, Perhaps you just bought a new laptop for $500. Consider paying off this low balance first. You may need to make minimum payments on your other accounts. However, paying down this balance fast looks great on your credit report.  9. Open a Business Credit Card Account A business credit card gives your company credibility and helps establish good business credit or improve business credit ratings. It’s also another way to separate business expenses from personal. Putting all your business transactions on a card intended for that purpose comes in handy during tax time, making figuring out deductions a much easier task. Just as with a personal credit card, make small purchases with the new credit card and pay the account off in full each month. Do this for several months to establish a track record of timely payments on new credit. This process demonstrates creditworthiness when you need funding to grow your business. Just make sure the new credit card company is one that reports to a business credit bureau. Here’s another reason to get a new credit card for your business. Even though your personal credit score will be affected short-term due to the hard inquiry, the business line of credit is separate from your personal credit. That means whatever happens with your business card should not affect your personal credit score. 10. Learn to Build Your Business Credit Establishing a business credit history is a challenge for startups and smaller businesses. This is why setting your business up as a separate entity is so important. Fleshing out your business credit history is too.  Learning how to build business credit is vital to fixing a bad credit score, so start taking actionable steps to achieve that goal right away. Tip: A useful first step is to purchase business credit reports, to see if and how your business appears on these. Also, create? ?a? ?profile? ?with? ?the? ?three business? ?credit? ?bureaus: Dun & Bradstreet, Experian, and Equifax. 11. Add Positive Trade References Another credit repair strategy is to do business with “trades” that report to business credit agencies. Not all vendors and suppliers share payment data, but the bureaus can tell you which ones do. To calculate its PAYDEX score, Dun & Bradstreet requires a minimum of three trade references which you can add. Having a low score can result in higher interest rates, smaller loan amounts, or the inability to raise capital. That’s why you want to add “positive” references, those that will help you build good credit. 12. Keep Older Credit Accounts Open Pay off existing debts when you can, but don’t close the account. Your oldest accounts are valuable. The reason is that length of credit history is a major factor credit agencies use to determine your score. The older these accounts are, the better. That’s particularly true if you haven’t had any recent slip-ups such as late payments or delinquencies.  Another way old accounts help is by again reducing your overall credit utilization. You will have a lower credit utilization percentage if the account is open but has a zero balance. Different credit bureaus weigh the importance of credit age differently. FICO factors it in at 15% of the total score, for example. Regardless, keeping those old accounts open will help boost your score. 13. Diversify Your Credit Mix How much credit you have, the balances owed, payment history — all of that factors into your score. Your credit mix does too. It counts for as much as 10% of your overall rating. What’s a credit mix? It’s the variety of credit you have in your profile. Essentially, there are only two types of credit that apply: installment and revolving. Installment credit includes things like mortgages, car loans or term loans. They have a fixed end date with payments due every month. Revolving credit includes credit cards or lines of credit. These are accounts that have no fixed end date or set amount due each month. Ideally, you want a mix of both. It demonstrates that you can manage multiple types of accounts. Having only one or the other will make it harder to increase your score.  14. Get Authorized to Use Someone Else’s Account Becoming an authorized user on another person’s credit card account can give your score an immediate boost. Just be sure it’s with a person who has a better credit score than you! There is a risk for the person authorizing your use. According to the law, authorized users are not the persons responsible for repaying the debt. That burden falls to the primary user. Also, this form of “piggybacking” credit doesn’t necessarily help the authorizer build his or her credit so much as it does the person with a low score. 15. Apply for a Secured Bank Loan If you are unable to get a loan based on your creditworthiness, apply for a secured bank loan. A secured loan is based on collateral, such as a car, CD, savings account, or equipment. If you are unable to make payments, the lender can seize your asset, which means you take on additional risk. But, timely payments over a long period can benefit you with a higher credit score. 16. Negotiate to Remove Delinquencies One way to remove a negative mark on your credit such as a delinquency is to contact the creditor to try and negotiate a partial payment. In turn, the creditor agrees to reclassify the debt as “paid.” Assuming you strike a deal, get the agreement in writing and pay only once it’s in hand. 17. Get an Immediate Credit Boost Experian offers a way to improve your FICO Score “instantly,” according to the website. It’s through a program called Boost , a free opt-in service that allows users to add cell phone and utility bill data to their credit history. It works by connecting the bank account they use to pay those bills to Experian. Assuming payments are made on time, users should see an immediate score increase. Credit Repair Pays Off It will take time and focused effort, but you can repair your credit and improve your credit scores. However, you must make it a priority to repair your credit stick with it. Follow the steps outlined above, and you will see. The benefits will pay off in the form of the capital you need for business growth. In the meantime, if you need options while your credit scores are low, contact Approved Credit Restoration at 602-456-0427 or https://www.ApprovedCreditRestoration.com