We are a country in debt. Not only is our government in debt, but we, as Americans, are in debt ourselves, and the problem is just getting worse! Recent studies have shown that ninety percent of Americans have at least one credit card – and they are using that card – A LOT! You might need life counseling to empower you to change your money habits.
In this blog, i will teach you about credit and how to raise and improve your credit sore, fix your credit and have a better life.
The average family carries a balance of between $7,000 and $10,000 on all their credit cards. Over $1,000 per family goes on interest every year. And that’s just the average – some people owe much more!
Overall, Americans spend over $1 trillion every year on their credit cards, and owe more than $500 billion of it. If debt continues at the current rate, then one family in a hundred will be forced into bankruptcy. Over 90% of Americans’ disposable incomes are spent paying back debts.
When you add credit card debt to the regular bills we have to pay each month, which can tax anyone’s budget. As a result, some bills go unpaid and others are paid late.
Both of these instances can damage your credit sometimes so much that you think there’s no way you’ll ever be able to get out of debt and get credit for something important like a home or a car.
The truth is that you can get out of debt and repair your credit nearly to what it was before you had credit problems. It takes some time and a little work on your part, but it IS possible.
Loan approvals and such depend on your credit score. That number is what determines if you can get credit, what your interest rate will be, and how much money potential lenders will give you. A good median score is 750, but the higher your score is, the more financially sound you are.
While it’s always a good idea to try and stay away from credit, not everyone has a hundred thousand dollars lying around to buy a home or twenty thousand to buy a car. Heck, for some people, scraping together five thousand dollars for a good used car is difficult. That’s why we need credit. So we can buy that which we cannot afford.
Where the trouble comes in is when people begin to buy everyday items such as groceries and clothing on credit cards.
Then those bills begin to get bigger and bigger until pretty soon, they’re paying the minimum amount due which will take forever to pay off. Plus, a lot of people just continue charging things even when they have a large balance on their account.
Your credit score defines who you are to businesses and you want it to be as high as it can be. It doesn’t matter how bad your credit is now. There are ways that you can raise your credit score no matter how low it is now.
Don’t despair; just get started – right away!
First Things First - Your Credit Report
The very first step you need to take when trying to raise your credit score is to find out what your score is and what it means. Legislation called the FACT Act was passed that allows all Americans to get one free copy of their credit report
every year.
This report lists all of your debts you’ve had and your payment history on those debts.
It will tell you where you owe money, how much you owe, and how you pay (on time, 30 days late, etc.). All of that information is compiled together and then analyzed.
After the analysis, a number is assigned to you as to what your credit fitness level is. Potential creditors then look at your credit score and decide if you are going to be able to pay back the amount of money you are requesting to borrow.
Obtain Your Free Credit Report
There are three major credit reporting agencies that will offer you the one free credit report you get each year. They are Experian, TransUnion, and Equifax. You can contact each of them directly in the following ways:
 Equifax – Online, you can find them at www.equifax.com. You can also order your free credit report by mail. However, they only offer this option for free to residents in the states of Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey, and Vermont. All other states are required to pay a $10 fee.
If you do want to do this by mail, send your request to Equifax Information Services, LLC; Disclosure Department; P.O. Box 740241; Atlanta, GA 30374. You can also call them at 1-800-685-1111.
 TransUnion – Their web address is www.transunion.com. As with Equifax, you can also make your request via mail by getting a copy of their mail request form online and sending it to the address provided. You can also call them at 1-877-322-8228.
 Experian – www.experian.com is where you can make a request for a credit report from this credit reporting agency. As with TransUnion, you will need to download a form from their website if you wish to request your credit report by mail. By phone you can call 888 397 3742.
There are also a myriad of websites who will also allow you to download your free credit report from their websites, but they ultimately will just be forwarding you to one of the above websites anyway.
However, they are worth checking out for the information that you can find on them.
Here are a few:
ï‚· www.annualcreditreport.com
ï‚· www.freecreditreport.com
ï‚· www.creditreport.com
ï‚· www.freecreditreportinstantly.com
The main thing is that you will want to get your free credit report in order to find out where you stand and how far you have to go to repair your credit. Most of the time when you download your credit report, you will be able to view and save it instantly. Save it to your computer’s “My Documents” file if you can. That way you’ll be able to print it out and refer to it as much as you need.
Also, some of these sites offer low-cost memberships that will alert you if a new item comes onto your credit report. Their services will offer many different things, but purchasing a membership is strictly voluntary and probably not necessary if you want the straight truth.
Once you get a copy of your credit report, it’s important to know how to read it. There are going to be an awful lot of numbers, abbreviations and terms you've never seen before. Trade lines, charge-offs, account review inquiries -- how do you read this thing?
Even though you get one free credit report each year, experts suggest that if you are serious about improving your credit score, you need to examine a report from each of the three major credit reporting agencies. This will, however cost you a small fee from the other two, so keep that in mind.
Why do they suggest you have all three?
Creditors can pick and choose which credit reporting agency they want to report to. Some will report to all three, but many won’t. You may find that what is included on one report isn’t on another.
The reports will have different information because it's a voluntary system, and creditors subscribe to whichever agency they want -- if any at all.
A credit report is basically divided into four sections: identifying information, credit history, public records and inquiries.
Identifying information is just that -- information to identify you. Look at it closely to make sure it's accurate. It's not unusual for there to be two or three spellings of your name or more than one Social Security number. That's usually because someone reported the information that way. The variations will stay on your credit report. If it's reported wrong, leave it because it might mess up the link. Don't be concerned about variations.
Other information in this section might include your current and previous addresses, your date of birth, telephone numbers, driver's license numbers, your employer and your spouse's name.
The data in this section is often used to verify your identity or to confirm that the information you provided for an application is accurate. Small variations in this data between the three bureaus are normal as each agency may have their own recording procedures.
The personal information section of your credit report may also include a "consumer statement." This is a statement that you asked the credit reporting agencies to add to your report. Commonly, this statement is used to explain a
record on your report.
For example, "The Smith Bank account from 2004 was a shared account with my ex-husband." This statement does not impact your credit score but may help you clarify a situation to a potential creditor or lender and improve your chances to obtain credit.
The next section is your credit history. Sometimes, the individual accounts are called trade lines. Each account will include the name of the creditor and the account number, which may be scrambled for security purposes.
You may have more than one account from a creditor. Many creditors have more than one kind of account, or if you move, they transfer your account to a new location and assign a new number.
The entry will also include:
 When you opened the account
 The kind of credit (installment, such as a mortgage or car loan, or revolving, such as a department store credit card)
 Whether the account is in your name alone or with another person
 Total amount of the loan, high credit limit or highest balance on the card
 How much you still owe
 Fixed monthly payments or minimum monthly amount
 Status of the account (open, inactive, closed, paid, etc.)
 How well you've paid the account
On Experian's report, your payment history is written in plain English -- never pays late, typically pays 30 days late, etc. Other comments might include internal collection and charged off or default. Charged off means the creditor has given
up, thrown in the towel. Basically, the company has made efforts to collect the debt, realized that it’s not going to be paid, and subsequently wrote it off.
Other reports use payment codes ranging from 1 to 9; an R1 or I1 on a report is an indication of a good payment history on a revolving or installment account.
Often, the code key will be listed on the report so you can better understand what the codes mean, but they may not.
Credit accounts are divided into five categories: real estate, installment, revolving, collection and other. Here is a better description of each category:
Real Estate: First and second mortgage loans on your home.
Installment: Accounts comprised of fixed terms with regular payments, such as a car loan.
Revolving: Accounts with opened terms with varying payments, such as a credit card account.
Collection: Accounts seriously past due that have been assigned to an attorney or collection agency.
Other: Accounts where the exact category is unknown. This could include 30-day accounts, such as an American Express card.
Your credit report lists a summary of the details and terms for each account. This summary includes information about the account number, condition, balance, type and pay status for each account. The summary for collection records is slightly different.
The following information is for real estate, installment, revolving and other type records:
 Creditor: The official account name. This name may be different than you expect if your account is managed by a larger financial corporation.
Account Number: This is an identifying number for your account.
Typically, this would be a credit card number for a credit card account or a loan identification number for a mortgage.
A portion of the number is hidden for security reasons. A partial account number is all that is needed to file a dispute about the record.
 Condition: This is the account’s status as open or closed, according to the most recent update from your creditor.
 Balance: The amount you presently owe on the account based on the last reported activity. Very recent activities may not yet have appeared in the bureaus’ computer system so this balance may be a few days out-ofdate.
 Type: The account's specific type. Some common types are real estate, automobile, educational and credit card accounts.
 Pay Status: The account's payment status, according to the most recent update from your creditor.
For each account, the report also displays an illustrated payment history over the last 24 months. There will be a key at the top of this section describes each payment history symbol and what it indicates for your account. Green boxes marked "OK" show that your payment was made on time.
Most credit reports also give you more in-depth information about specific accounts. This is also an important part of the credit report you’ll want to review for accuracy.
The following information may be reported for your account in this section:
Past Due: The amount of payment overdue as of the most recent reported activity. Very recent payments may take a few days to appear on your credit report.
 High Balance: The most you have ever owed on this account. In the case of a credit card, this is the highest balance you've ever charged. For a mortgage, it is the initial amount of the mortgage.
 Terms: This is the number of payments you have scheduled with a creditor. Most commonly this applies to loan accounts. For example, an auto loan may have a repayment plan scheduled over 36 months and a home loan may have a repayment plan scheduled over 360 months.
 Limits: For a credit card or other revolving account, this is the maximum amount you are approved to borrow.
 Payment: This is the minimum amount you are required to pay each month toward the account.
 Opened: The date the account was opened.
 Reported: The last date when any activity for this account was shown.
Activities include payments, credit card billings and changes in your terms. Very recent activity may not yet show on your account, since it takes time for it to appear in the credit reporting agency's system.
 Responsibility: This indicates your responsibility for the account. For example individual, joint or co-signer.
Late Payments: A summary of your 30, 60 and 90 day late payments over the past 7 years. Please note that the figures in the seven year history include any late payments shown in the two-year history.
 Remarks: Notes about the status or condition of your account.
Collection accounts are accounts that are seriously past due and have been transferred to an attorney, collection agency or creditor's internal collection agency. As your debt is transferred between different agencies, you may see several records on your report for the same debt.
Only one record should be marked as open at a time. All the collection records and the original debt record will expire from your credit report at the same time.
Collection records use a unique summary format on your credit report:
 Creditor Name: The official name of the company that is currently attempting to collect the debt.
 Account Number: An identifying number for your account with the collection agency. This is not the same as the account number on your original debt.
 Original Creditor: The name of the original creditor where you accumulated your debt. This could be an account that is listed on your credit report (such as a credit card) or an account that is not listed on your report (such as a library, video rental or cell phone company). If this creditor was a medical office, the name may be masked for your privacy.
 Responsibility: This indicates your responsibility for the account. For example individual, joint or co-signer.
Condition: The current status of your collection record. For example open, closed or paid.
 Original Balance: The amount of debt owed on the original account before it was transferred.
 Date Opened: The date the account was transferred to the collection agency.
 Date Reported: The date of the collection agency's last update to this account record.
 Remarks: Notes about the account as reported to each credit reporting agency. For example, this section may note that the collector has been unable to locate you or that you have not yet paid the debt.
The next section is the part you want to be absolutely blank. The public records section is never a good story. If you have a public record on there, you've had a problem that has required litigation. It doesn't list arrests and criminal activities; just financial-related data, such as bankruptcies, judgments and tax liens. Those are the monsters that will trash your credit faster than anything else.
Here are definitions of the eight types of public records you could see listed on your credit report:
 Bankruptcy: A legal filing that relieves a person of responsibility for all or some of their debts because they are unable to pay.
 Tax Lien: A claim filed by a local, state or federal tax agency against a person who owes back taxes.
Legal Item: A general filing. This is most commonly a judgment against you in civil action.
 Marital Item: A legal filing related to a marital or divorce issue.
 Financial Counseling: A public record indicating that a person has participated in financial counseling.
 Financial Statement: A type of lien filed by a creditor against a person's property. This can be filed when a loan is secured against personal property.
 Foreclosure: A record indicating that a mortgaged property has been taken over by the creditor because the borrower has defaulted on the loan.
 Garnishment: A record indicating a court order to withhold some or all of a person's wages to repay a debt owed to a creditor.
The summary information listed for each of these types of public records can vary. Here are some definitions of common record categories:
 Type: The type of record. For example a tax lien, bankruptcy, garnishment, or judgment.
 Status: Current status of the record. For example released, filed or dismissed.
 Date Filed/Reported: Date when the record was initially filed or created.
 How Filed: The role that you played in the public record. Usually the record is filed either individually or jointly.
Reference Number: Identifying number for the record.
 Released/Closing Date: Date when the record was closed, released or judgment was awarded.
 Court: The court or legal agency that has jurisdiction over the record.
 Plaintiff: The plaintiff in the case of a legal judgment.]
 Amount: Dollar amount of the lien or judgment.
 Remarks: Notes regarding the public record as reported to the credit bureaus. If the public record is a bankruptcy, three other fields will be visible.
 Liability: The amount the court found you to be legally responsible to repay.
 Exempt Amount: The dollar amount claimed against you that the court has decided you are not legally responsible for.
 Asset Amount: The dollar amount of total personal assets used in the court's decision. The Asset Amount can include items of value that can be used to pay debts.
The final section is the inquiries. That's a list of everyone who asked to see your credit report. Any time anyone gets into the report, it'll post an inquiry. That means if you try to apply for a credit card, it’s listed as an inquiry. Have you been shopping for a car?
Every time a dealership runs a credit report, it shows. If you call the credit bureau and ask for a copy, it will be on there. It's a very detailed entry record. Generally, this is great for the consumer. Inquiries are divided into two sections. "Hard" inquiries are ones you initiate by filling out a credit application or taking your child to the orthodontist. "Soft" inquiries are from companies that want to send out promotional information to a pre-qualified group or current creditors who are monitoring your account.
You may have heard that a large number of inquiries can have a negative impact on your credit score, but you're probably OK. The vast majority of inquiries are ignored by the FICO scoring models. They're not the steak in the steak dinner, so to speak.
For instance, the model has a buffer period that ignores inquiries within 30 days of getting a mortgage or a car loan. It also counts two or more "hard" inquiries in the same 14-day period as just one inquiry. You could have 30 in two weeks and it only counts as one.
However, on the other hand, having a lot of credit inquiries on your account could also show potential creditors that you are trying to live your life on credit which means you might not have the means to pay back the debt.
This is especially true if you’ve been applying for a lot of credit cards. And there are always many opportunities to apply for a credit card.
Of course, you know about all of the offers that come in the mail. They usually read “You’ve Been Approved!” as an enticement for filling out the application.
This is not always true with pre-approval offers, so proceed carefully. I usually shred them up and forget them.
Establishing Good Credit
So you don’t have any credit to speak of, but you have big plans for the future. Maybe you’re a fresh college graduate or a young person eager to buy your first new car.
If you have never had to use credit before, first of all BRAVO! Of course, it’s best to pay cash for the things you need so that you don’t have to worry about credit card payments, loan payments, or interest rates.
But if you’re young, the chances of you needing credit in the future are very real. Someday you might want to buy a house.
Perhaps you’ll want to buy a new car. Chances are pretty good that you won’t have the cash outright to buy these high ticket items which mean you’ll need credit. Plus, it’s always good to have a little credit since many utility companies will look at your credit to turn on your power bill, for example, without a deposit of some type.
When you’re starting fresh with no credit history at all, here are a few ways to get a good start on establishing good credit:
1. Pay your bills on time, especially mortgage or rent payments. Apart from extreme circumstances like bankruptcy or tax liens, nothing has as big of an impact on your credit history as late payments.
2. Establish credit early. Having clean, active charge accounts established many years ago will boost your score. If you are averse to credit, on principle, consider setting up automatic monthly payments for, say, utilities and phone on a credit card account and locking the card away where it's not a temptation.
3. Don't max out available credit on credit card accounts. Lenders won't be impressed. Instead, they are much more likely to assume that you have trouble managing your finances. Beyond one or two credit cards, it starts to get complicated.
4. Don't apply for too much credit in a short amount of time. Multiple requests for your credit history (not including requests by you to check your file) will reduce your score. If you are hunting around for good loan rates, assume that every time you give your Social Security number to a lender or credit card company, they will order a credit history.
5. Be neat and consistent when filling out credit applications. This will insure that all your good deeds get recorded in a single file, as opposed to multiple files or, worse, someone else's file. Watch out for inconsistencies in use of "Jr." and "Sr."
6. Check your credit history for errors, especially if you will soon be requesting a time-dependent loan, like a mortgage.
One great way to start establishing credit is to apply for a store credit card (Sears, JC Penney, etc.). Once you get the card, make a few small purchases and pay them off completely. Do this a few times over the course of a year and you’ll find yourself with some established credit with an excellent payment history. DO NOT go overboard and buy more than what you can pay for, though.
You can also apply for a secured credit card. These cards ask that you place a certain amount of money in your account for which you will receive a charge card.
Then you can make purchases up to the amount of money that is in your account. Credit reporting agencies treat these cards just like regular credit cards and look to them as a responsible way for you to establish a good credit history.
You will have to have a checking account to establish credit. This lends to your credibility with lenders and shows that you are able to manage your money effectively.
When applying for a credit card of any type, be sure to ask if they report to any of the credit reporting agencies. As we’ve said before, they are not required to do so, and if they don’t, having one of these cards or loans won’t do you a lick of good even if you do make your payments on time.
You can also establish credit by making a purchase or applying for a loan with a co-signer. A co-signer is a person with good credit history who is basically telling the lending company that they will be responsible for making sure you make your payments on time. Often a co-signer is a relative such as a parent.
This can be a risky proposition for them, so know that they are putting their own credit history on the line just to help you out, so don’t let them down.
When applying for a loan, such as a car loan, it can also be helpful if you have a large down payment to make thus lessening the amount of money you have to borrow. This shows the lending company that you have the ability to save and they are more likely to take a chance on you based on this factor alone.
 Apply for a store or gas credit card and make a few charges
 Ask a loved one to co-sign on a loan
 Find a respected secured credit card company
 Open a checking account
 Don’t apply for too many credit cards in too short of a time
 Check your credit report for any errors
 Go slowly
 Don’t overspend
Make sure your lender reports to at least one of the credit reporting agencies
 MAKE YOUR PAYMENTS ON TIME!!!!!!!
Of course, the last one is the most important in establishing credit. If you don’t make your payments on time, it won’t make a hill of beans worth of difference what you are trying to do. This is what makes your credit history worthwhile –
making on time payments and showing you are responsible with your credit and
your creditors.
So, what if you’ve already had credit, but you’ve made some mistakes over the years finding yourself with bad credit? Is all hope lost? The good news is – NO!
Repairing Your Credit Score
Don’t despair if you find yourself with a less than desirable credit score and credit history. You are human and can make mistakes. It’s natural. The key to this is recognize that your spending habits are out of control, your credit has been damaged, and then vow to never get yourself back in the same situation after you have gotten your credit repaired.
First, get your credit report. Get one from all three agencies. You get one free and then you’ll probably have to pay around $10 a piece for the other two. It’s important to get reports from all three agencies so that you have a full picture of your credit history.
Some companies only report to one agency. Some report to all three. But if you are committed to repairing your credit, you need all three so that you don’t miss anything.
Then go over those credit reports carefully. See the section above on how to read these credit reports. Check to see that there are no errors such as a bill you’ve paid but that is still being shown as owed.
People at credit bureaus are human too and make mistakes just like you! If you don’t call attention to these mistakes, no one else will. We’ll cover correcting those mistakes a little bit later.
The next part involves pulling out those accounts that are delinquent and making a re-payment plan. Unless you are declaring bankruptcy, you’ll still need to pay your debts and doing so can go a long way towards improving your credit history.
Creditors will see that you are doing the best you can to get back on your feet and this improves your credibility.
Dispute Errors in your Credit Report
The next step in credit repair is to dispute incorrect information on your credit report. Errors on your credit report can drag you down.
Here’s how to dispute errors in your credit report:
Get a copy of your full credit report in hand, check your identity information and make sure they are all correct (Social Security number, phone number, spelling of your name and address), and credit history.
Read and review the list of debts, credit cards, outstanding debts, and major purchases. If you see any mistakes, errors or incomplete information or questionable items, make a copy of the report and highlight the error.
Gather proof:
Put together all the information that you have to back you up, such as bank account statements, and make copies of these as well. This is important! The credit bureaus won’t do anything without proof.
Write a letter to the specific credit reporting agency that shows the falsehood or error, whether it is Experian, Equifax, or TransUnion. Explain the mistake and include a copy of the highlighted report along with your documentation.
Although certain bureaus now let you submit disputes online, it’s not a bad idea to send this letter by certified mail, and keep a copy for yourself.
The reporting agency by law has 30 days from the receipt of your letter to respond. The FTC provides advice on contacting the credit bureaus about discrepancies.
Here again are the contact numbers and web sites for the three credit bureaus: Make sure you reach out to them after you send your letter to make sure they remove all errors from your credit report.
TransUnion: 1-800-916-8800 – www.transunion.com
Equifax: 800-685-1111 – www.equifax.com
Experian: 1-888-397-3742 – www.experian.com
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