There are two kinds of credit inquiries, one of which can hurt your (Fico) credit score. We shall look at how to remove inquiries from credit reports, especially when they are not authorized. But what exactly are the two types of inquiries?

First, there is what is commonly known as a “soft inquiry”. When you request your own credit file, this creates a soft inquiry. Likewise, when a credit card or other creditor-type company is checking you out for marketing purposes (the result of which is junk mail), this creates a soft inquiry. More on How to Remove Inquiries from Credit Report

In today’s world our credit score is everything. Creditors and bankers approve or disapprove loans based on your credit worthiness. It is also something that will determine your credibility to certain employers or landlords.

If you have a good credit rating you will be able to apply for loans and/or credit cards easily. And, ultimately, isn’t that the goal? It will also mean that you will have more chances of getting certain jobs. You will be able to pay your bills on time.
More on How to Deal with Bad Credit Reports

You may find them cute or annoying. Either way, it’s okay. I personally find them both cheesy and annoying. But this post is not about that. It is about the truth, or more appropriately, the lies behind free credit report commercials.

As you probably know, the “free” could come attached with something else: a catch if you like to call it that. But it can be a little tricky when it comes to a credit report, as you can actually get this for free. So what’s the catch? We’ll get to that in a moment.

More on Free Credit Report Commercials Lying to You – Plus How to Get Your Free Credit Report

Most consumers do not know that three-figure number that potentially has a six-figure impact on your life. We are talking about your credit score. And most lenders will not give it to you. They will only tell you whether you’re approved or not approved for a loan or credit card. So, how do you find out credit score, your own that is?

First of all, you should know that scores differ among the top three credit reporting bureaus, sometimes by a large margin. Why do they differ? The main reason is that different creditors report to one or two of the bureaus though some do report to all three.

More on Find Out Credit Score Now – Where and How to Do This

A credit score is a statistical appraisal of your creditworthiness. It’s a swift and uncomplicated means for banks to assess whether or not you can pay back loans.

There are several factors that go into calculating your credit score, including:

1. How you pay your bills

2. How extensive is your credit history

3. What’s your credit limit on credit cards and how much of it you use

4. What type of credit you have (is it is mixture of auto loans, credit cards and mortgages or all credit cards? 

5. How much credit and what types have you applied for recently

What is a good credit score? In general, a good credit score is somewhere between 650 to720. An excellent credit score is above 720. Those are the numbers you need to strive for to get the best interest rates.

How to Boost Your Credit Score

Your first step toward improving your credit score is paying your bills on time. Your bill payment history, particularly your recent history, accounts for a percentage of your credit score. So paying bills on time can be a big boost in improving your credit score.

Next, outline your credit cards with the highest balances and compare to the available credit on the card. Pay those first. For example, if you own a credit card with a  $1,000 balance and $2,000 available credit and another card with a $3,000 balance and $20,000 available credit, you’d want to pay down the card with the $1,000 balance first.

This is because your credit fico score is based upon how much credit you use as a fraction of the credit available to you.

Preferably, your credit balances should be no more than 40% of the credit available to you.

Finally, don’t close out credit card accounts. It’s advantageous to leave the accounts open and not utilize them than to close them out.  This shows responsibility to creditors on how you manage your credit wisely.  Based upon the credit bureaus statistical appraisal, it drives your credit score up!

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What is the best way to improve credit score? This article will not only answer that question, but offer tips on how to improve your credit score as fast as possible.

Side note: This article assumes that you already know your credit score. If not, you can purchase (unlike credit reports, credit scores don’t come free) it from either MyFico or Equifax. Why these two? Because they are the only ones that offer the true FICO score that is most widely used by lenders.

The biggest chunk of your credit score (65%) is based on two main factors:

1. Payment History (35%): This is the most important factor. Paying your bills on time raises your score. Late payments hurt your score often by significant margins.

2. Amount of debt (30%): This is the second most important factor in determining your credit score. Your debt to credit ratio plays a large part here; you want to keep it low.

Of the two factors above, the only one you have some control of is the No.2. Only time can take care of the No.1.

So, the first thing you need to do is to start paying your bills on time. Eventually, any late payments will sink into the background and decrease in importance. Also to note here is that new adverse information is most damaging to your score.

The fastest way to improve your credit score is by reducing your debt to credit ratio.  Your total debt should be between 10% and 30%. And yes, you do need to keep some debt in order to show regular and timely payments.

Your debt to credit ratio can be reduced by one of several methods:

1. Paying down your credit cards. This is not the easiest or fastest route as funds may not be readily available in the short term. For many, paying more than minimum amount due without using the credit card(s) might work, albeit slowly.
 
2. Requesting credit limit increases: This is a quicker option, but depending on your credit history, your creditors may decline to increase your limit. Not only that, but they will often run your credit, which will generate a hard inquiry (which causes points lose).

3. A commonly used method is to open a savings or cash deposit account (CD) for $500 to $1000 (the more the better if you can). You then borrow an equal amount against it. You can take the same money you borrowed from and open another account with another bank and repeat the process. There is no limit as to how many times you can do this, just make sure you can afford the payments.

4. A better way to improve credit score is to have new accounts added to your file. You want to be fairly sure that you will get approved, so go for pre-approved credit cards; you know, like the ones that come in junk mail. The downside is that the limits offered are often small and they usually come with other fees such as application fees, annual fees etc.

5. Now the best method. A very practical and easy method for raising your credit limit and reduce your debt to credit ratio is to get a merchandize card. Some merchandize cards can start you with a handsome limit ($2000 to $5000 and sometimes more) with no credit check or annual fees. As long as they report to the bureaus, these cards can help improve your credit score almost immediately. The challenge here is finding out which cards report to the bureaus, offer best rates, and are not scam.

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The credit reporting system as it stands is inherently corrupt and flawed. It is also unfair and prone to errors. Abusive practices continue, despite the Fair and Accurate Credit Transaction Act (FACTA) that was meant to protect consumers.

The credit system was never created to help you, but to make money for the lenders. It is driven by one motive, profit.

Imagine this. Two individuals need drugs. One of them is sick and the other one is addict just looking for a “fix”. The former needs drugs to stay alive; the other uses them to ruin it (most of the time affecting many others).

Now, let’s say both have accumulated debts that they simply cannot pay. Both will equally get their credit files damaged. Is that unfair or what?

Did you know that it took intense pressure from congress and interest groups for Fair Isaac (the creators of the FICO credit scoring system) to disclose its credit scoring model? You were not supposed to know something that has such a heavy impact on the quality of your life.

Lenders and the bureaus don’t care about you. Lenders have one thing on their minds; to find as many excuses possible to charge you more for loans and credit cards. Meanwhile the bureaus make a great deal money selling the lenders information about you.

Some of the tactics lenders use so as to hit you with higher interests rates include “universal default” clauses and failing to report your true credit limit(s).

Universal default is simply means that a lender can increase your interest rates when you get late on another non-related item (even if you’re on time on all other payments!).

Now, by increasing your interests rates (sometimes doubling or tripling it), the creditor has just made it difficult for you to keep your payments up, or worse, made you likely to default or declare bankruptcy. How brilliant is that?

Some creditors fail to report your limit. Others report your balance as limit so as to keep your balance to limit ratio high, which brings down your score. In turn this keeps your credit rating at “sub-prime” level, which means high interest rates.

Another nasty practice that continues unabated, despite being against the law, is re-aging of derogatory accounts. This is mainly done by collectors, whereby they re-set the date of your last transaction to a later date.

Re-aging extends it beyond the seven year statute of limitations (after which it should cease to show on your report except in certain special circumstances).

Credit bureaus also allow debt collectors to place hard enquiries (the type dings your score) on your report. Cases have been reported where deleted accounts were re-inserted into credit reports, without the consumer’s knowledge (which is against the law).

What’s even worse is when paid-off accounts get reported as delinquent many years later, such that the consumer may have long forgotten the respective account.

What should you, the consumer, do? The answer is knowledge. An educated consumer is the bureaus’ and lenders worst nightmare. Armed with the right knowledge, you can use the law and lenders’ (including debt collectors) to your advantage.

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Discover how you can legally make creditors, credit bureaus and collectors clean up your credit file by turning the tables in your favor. Check out The Credit Secrets Bible now.

When fixing your credit report, certain mistakes could upset all your efforts or, worse, lower your credit score. Following is a list of some common and not-so-common credit repair mistakes you should avoid:

1. Disputing open, active accounts: Every account you dispute with credit bureaus, whether good or bad, often gets removed from your report until verified. Open accounts give you history; therefore by disputing these could lower your score. Not good. Not only that, you also potentially reduce your credit history, which also accounts for part of your score.

2. Making late payments while on your credit repair path will negate your efforts. If you know that you are not in position to start paying your bills on time, don’t start credit repair just yet. It will not be worth the effort. Late payments are devastating to your score.

3. Don’t close open accounts. One of the biggest myths out there is that closing accounts is good for your credit report. Not quite. What creditors look for is how well you can handle debt. As No.1 above, old open accounts help build your credit history and shows stability as well as ability to handle debt responsibly.
 
4. Avoid “pay nothing now” offers, often offered by auto repair and furniture shops. This type of credit lowers your score, as it indicates potential financial troubles. These types of credit often lower your score.

5. Avoid obtaining new credit accounts. New credit is considered less favorably than old. Too many new credit accounts indicate greater risk. Also, every credit enquiry dings your score. For people with bad credit and need to re-establish good credit, secured credit may be the way to go. Just make sure that the creditor will not run your credit before extending it to you, and that your payments will be reported.

6. Don’t consolidate. Contrary to what you may have heard, debt consolidation is not such a good thing. For one, if you consolidate all your credit card debts into one credit card, that credit card will likely have a high utilization rate (balance to limit ratio), which is not good. Secondly, if you use a consolidator, you will be required to close your open accounts, which will end your history as well as lower your score. Thirdly, most creditors frown upon it, as it indicates inability to manage credit.

7. 100 word statements are best avoided. There is a space on your credit report offered for you to explain your situation, or make comments. This can be a two-edged sword as it can bring to attention something that might otherwise have been missed, possibly to your disadvantage. Use this space only if feel you absolutely must (seek advice of a reputable credit counselor).

8. Disputing too many entries the same time: In a rush to clear bad entries from their report, many people rush and dispute one too many entries with credit bureaus. This generally raises a red flag. If you have lots of adverse entries, pick three to four to start. The latest entries are most damaging, so it is wise in most cases to start there.

9. Avoid canned dispute letters: Copying credit dispute letters off the internet is a dead give away that your dispute may not be legitimate, or that you’re using credit repair techniques. Use them as templates if you must, but write in your own words.

10. Patience, patience: Another mistake many people make is to follow one dispute with another too soon. Again the problem here is rushing. This resets time for the disputes to 45 days, up from 30. Obviously, you don’t want this. Allow at least 45-60 days between disputes.

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Fix your credit: tips and strategies banks, bureaus and collectors don’t want you to know. Check out Credit Secrets now.

Unless you’re a Hollywood rags-to-riches story, have won the lottery or inherited a fortune, buying a nice car, home, or other big-ticket item is hard without a good credit score. Just what is a good credit score?

Though what is considered a good credit score may differ with each lender, certain ranges are considered favorable to most lenders.

Also, your rating (another term for score) will often differ with each credit reporting bureau. This is partly because creditors do not always report to all the bureaus and partly because two of the bureaus have their own scoring criteria.

Since all bureaus might give you a different credit score, one should err on the safer side and go with the score that most lenders use.

The credit score that most lenders us is the FICO score. Only two companies offer this score, the originator of this system Fair Isaac Corporation and Equifax credit bureau. The websites to obtain your FICO score from MyFico and Equifax respectively.

Now, let’s take look at the different credit score ranges in order to have a better understanding of what constitutes a good score (or poor one for that matter).

FICO scores range from 300 (the lowest) to 850 (considered perfect). The higher your score, the more you’re considered less of a debt risk, and therefore worthy of the friendliest terms (read low interests rates and fees).

As with almost everything else, most people fall within the median range when it comes to credit ratings. The smallest number falls on either poor or perfect. Let’s break it down farther:

720 and above: This is considered great credit, and qualifies you for the best loans and interest rates. Lenders will be fighting over you, which is a good thing.

700 – 719: This is considered excellent credit. You might be able to get very good loans and interest rates, but there’s still room for improvement.

660 – 699: Good credit. You might qualify for good rates, depending on the lender and the strength of rest of your report. Still, you will probably not get the best interest rates.

620 – 659: Considered weak or border-line credit. The rest of your file needs to be very strong to get reasonable rates. Your interest rates will be higher and terms a little more stringent.

Below 620: This is considered poor credit. You may still get loans, but they will cost you. Most lenders will only lend to you if you have a cosigner. Terms might be very stringent for you.

You’ve probably heard the saying “There’s no free lunch”. May be not some University of Illinois students.  Seeing an ad free a free sandwich at Subway on a certain day, a bunch of them responded (free hoagie, mmm…).

Free hoagie there was, okay. But you had to sign an application for a credit card…

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