What factors influence my credit score?
Various factors determine your credit score, including the following:

• Payment History
• Outstanding debt
• Length of credit history
• Severity and frequency of derogatory credit information such as bankruptcies, charge-offs, and collections
• The amount of credit used compared to the credit available

• Whether or not you are a good candidate for a loan
• What type of interest rate you will pay

• Be informed of the most up-to-date information in your credit history.
• Correct any inaccuracies, to make sure that your credit data is a true depiction of your credit record and increasing your chances of receiving credit under the best possible terms

What is credit scoring?
Credit scoring is a method used by lenders to help decide whether or not you are a good candidate for a loan.
Lenders employ a credit scoring system to determine your credit score:

• Compares information in your credit report to the performance of consumers who have similar credit characteristics
• Examines many credit characteristics including your payment history, the number and kind of accounts you have, the number and frequency of late payments, and any collections or bankruptcies

How is a credit scoring model developed?
A lender creates a credit scoring model by using several criteria:

• Selecting a large sampling of customers
• Analyzing the data in their credit reports to determine which factors relate to creditworthiness
• Assigning a degree of importance to each of the factors, based on how accurate a predictor it is in determining who will repay their loan on time

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5 Quick Steps to a Better Credit Score
Learn how to manage your credit score and improve your creditworthiness

Think of your credit score as a picture of your credit risk. This picture reflects your risk at a specific point in time. A picture does not change; however, when you take another one, you will probably look a little different. Similarly, when your credit information changes, your score will also change to reflect the updated information.

There are steps you can take to ensure that each time a new “credit picture” is taken, it shows your best side. By observing the following guidelines, you can influence your credit worthiness for the better:

1. Be punctual- Pay all your bills on time. Late payments, collections, and bankruptcies have the greatest negative effect on your credit score.
2. Check your credit report regularly and take the necessary steps to remove inaccuracies – Don’t let your credit health suffer due to inaccurate information. If you find an inaccuracy on your credit report contact the creditor associated with the account or the credit reporting agencies to correct it immediately.
3. Watch your debt – Keep your account balances below 50% of your available credit. For instance, if you have a credit card with a $1,000 limit, you should try to keep the balance owed below $500.
4. Give yourself time – Time is one of the most significant factors that can improve your credit score. Establish a long history of paying your bills on time and using credit responsibly. You may also want to keep the oldest account on your credit report open in order to lengthen your period of active credit use.

5. Avoid excessive inquiries – A large number of inquiries occurred over a short period of time may be interpreted as a sign that you are opening numerous credit accounts due to financial difficulties or overextending yourself by taking on more debt than you can easily repay.
   
   

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Top 5 Credit Misconceptions

We have all heard the rumors…from neighbors, relatives or friends. There are a wide variety of myths floating around about what you should and shouldn’t do to improve your credit reports and credit scores. The buck stops here! FreeCreditProfile has exposed these urban legends to provide you and your informers with the truth about credit:

1. Your score will drop if you check your credit - Fortunately, this one is definitely not true. Checking your own report and score is counted as a "soft inquiry" and doesn't harm your credit at all. Only "hard inquiries" from a lender or creditor, made when you apply for credit, can bring your credit score down a few points. Worried about damaging your credit while shopping around for a loan? Multiple inquiries for the same purpose within a short amount of time (a few weeks) are grouped together into a less damaging period of inquiry.
   
   
2. Closing old accounts will improve your credit score- To close or not to close, that is the question. Many people advocate closing old and inactive accounts as a way for improving your credit. In most cases, closing accounts will actually have the opposite effect. Canceling old credit accounts can lower your credit score by making your credit history appear shorter. Think twice before closing the oldest account on your credit report. If you want to reduce your levels of available credit, ask for your credit limits to be reduced or close newer accounts instead.
   
   
3. Once you pay off a negative record, it is removed from your credit report- Negative records such as collection accounts, bankruptcies and charge-offs will remain on your credit report for 7-10 years after they are first posted. Paying off the account before the end of the set term doesn’t remove it from your credit report, but will cause the account to be marked as “paid.” It is still a good idea to pay your debts, it can improve your credit score, but the major improvement will come when the record expires.
   
   
4. Being a co-signer doesn’t make you responsible for the account - When you open a joint account, co-sign on a loan or become an authorized user on someone’s credit card, you are taking on legal responsibility for the account. Any activity on these shared accounts, good or bad, will show up on both people’s credit reports. If you co-sign for a friend’s auto loan and they don’t make the payments, your credit profile will be hurt by their actions and visa versa. The only way to stop this double reporting is to refinance the loan or to have the creditor officially remove you from the account.
   
   
5. Paying off a debt will add 50 points to your credit score- Your credit score is calculated using a complex algorithm that takes into account hundreds of factors and values. It is very hard to predict how many points you can gain by changing one factor. For a person with a high credit score, just one late payment can cause a significant drop. If a person has a low credit score, it may not cause a large drop at all. There is no magical way to improve your credit score, just keep paying your bills on time, reducing your debts and removing negative inaccuracies from your credit report. Good financial behavior and time are the two most important factors on your credit score.

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   Becoming Debt Free
   Five Steps to Become Financially Healthy.

   This year, choose a smart resolution that will positively impact your pocketbook and your peace of mind. Make a pledge to reduce your debt and boost your credit score. Lowering the amount of debt you carry can significantly improve your credit profile, reduce the loan rates you could receive and save you a lot in interest payments. It just takes a few easy steps and a little dedication to take charge of your debt.

   1. Get the Facts- Collect all your account, loan and credit information and go over the records with a fine tooth comb. Write down the monthly payment, debt amount, interest rate and term of each debt on a sheet of paper. Next, write down your total monthly income and list your estimated monthly expenses. Order your Credit Report and Credit Score online to get a baseline for tracking your improvements.

   2. Do the Math- Calculate how much you usually spend paying each debt and how much interest that debt collects per month. Define which debts need to be paid off first. Credit card debt and small loans should probably be paid before low-rate student loans and home loans. A "yes" answer to any of the questions below is a red flag for accounts that need immediate attention:

      Which debts have the highest interest rates?
      Are there accounts above 50% of their credit limit?
      Do you have any debts that are close to being paid off?
      Which debts have the highest annual fees?

   3. Negotiate and Consolidate- Start working on those high-interest credit card debts first. Call your creditors and negotiate lower interest rates or move your balances to less expensive credit cards. Accounts that are above 50% of the available line of credit can harm your credit score; pay off or move some of the balance to a different card. If you have a credit card debt that is too large to handle, consider taking out a personal loan from your bank for the amount. Your bank can probably give you a much lower rate and a more lenient payment schedule.

   4. Refinance - After taking control of your credit card and small debts, take a look at your major loans. Would it make sense to refinance your mortgage? Could you consolidate some of your other debts into the loan? What about cashing out some home equity to pay off a high-interest debt?

   5. Stick to the Plan - Now that you have lowered your rates and refinanced your loans, create a payment schedule and a monthly budget. See exactly how much you can afford to pay each month by subtracting your expenses from your monthly income. Divide the remaining amount between the accounts, paying the most to the debts with the shortest terms and highest interest rates. Create a payment calendar with the due dates and the payment amounts you just calculated for each bill. Sign up for automatic bill payment through your bank or register for online payments to keep you on schedule. To continue to keep your credit on track, register for Credit Monitoring online and you'll receive quarterly credit reports, credit alert emails and trending charts that outline how much your credit improves over time. Set goals for yourself and don't forget to celebrate when you reach debt-removal milestones!
      

   
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   Guard Against Identity Theft
   Stay informed to minimize your risk.

   Identity theft is the fastest growing crime in America. According to the Federal Trade Commission, the number of identity theft incidents reached 9.9 million in 2003. These crimes are estimated to have taken the average victim $500 and 30 hours to resolve.

   From stolen credit cards to total identity kidnapping, these ugly and prevalent crimes are hard to prevent and often difficult to correct. Although it is hard to truly avoid becoming a victim of identity theft, there are a few ways you can guard against this damaging crime.

   Types of identity theft
   Identity theft crimes range from purse snatchings to kingpin-style fraud rings. The definition of identity theft is a crime in which an imposter obtains key pieces of personal information, such as a Social Security number, in order to impersonate someone else. Identity theft can occur when someone takes your mail, steals your wallet or swipes your records from an institution. Most cases can be resolved fairly easily if they are caught early. Creditors and banks usually hold you responsible for only the first $50 of fraudulent charges. The most serious cases of fraud can take several years and many resources to resolve.

   Preventative measures
   In this world of smiling strangers, it can be tough to keep your identity safe. The best security policy is to be aware of fraud and cautious about where you share personal information. Check your account statements carefully each month and keep an eye out for suspicious activity on your credit report. A paper shredder can also be a powerful tool for making sure personal information and pre-approved credit offers don't end up in the wrong hands.

   If your identity is stolen
   If you suspect that your identity has been stolen, the first step is to get all the facts about the damage. Become your own detective-search your credit report and bank accounts for clues. Ask your creditors to immediately cancel any fraudulent charges and consider putting a security alert on your credit report. If the theft is serious, file a police report. If fraudulent records start to show up on your credit report, send letters of dispute to the reporting agencies with copies of documentation supporting your claim. Signing up with a credit monitoring service will inform you of changes to your credit. It may take a while to fully recover the security of your accounts, but it's crucial that you don't let the fraud escalate.
   
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   Related Articles:
   • Learn more about credit scoring
   • How to handle credit report inaccuracies
   • Learn what to do when you are a fraud victim
   • Learn how to better manage your credit
   • Credit Reports - 101
   
   
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