The Vantage score was created by Equifax, Experian, and Transinion to rid themselves of the constraints the FICO score imposed upon them. They wanted to be free from what they perceived as an unfair monopoly that FICO possessed.

The VantageScore is calculated using the same methodology as the FICO score, but adds a few additional metrics in the mix.  It also assigns a letter grade to your score as well.  FICO scores range from 300 to 850. VantageScores range from 510 to 990. For each 100 point spread on the VantageScore, a letter grade is assigned. For example, 900–990 scores an A.

The reporting metrics are similar, but when compared the weighted items in the Vantage reports will significantly change the consumer’s score.

VantageScores are not yet widely used, but some lenders are comparing VantageScore to the FICO to determine which is the better option.  The lender will disclose the scoring system they are using if you ask.  Experian only makes vantage scores available to the public, while TransUnion, and Equifax use FICO. It appears as if Experian acted as the sacrificial lamb in 2009 by stopping all sales of FICO scores to consumers.

They have been the first to stop, in what is believed to be an effort to set the stage, and bring Vantage to a more widely known name.  Due to the complexities in changing systems and underwriting patterns, lenders have not yet adopted Vantage as an acceptable scoring model.

In general, bankers are reluctant to change so it is expected that the VantageScore will not catch on quickly.

As the VantageScore was not created to benefit the consumer, we can expect that utilizing it will benefit the credit reporting bureaus. What these benefits will be are not clear at this time. What we do know is that if the VantageScore gives lenders the ability to charge us more interest, then they will utilize it when it serves their interests. For consumers, this means that they need to strategically plan for both risk-scoring models when working on their credit scores.

FICO Metrics                                       VantageScore Metrics

35% payment history                           32% payment history

30% outstanding balances                  23% amount of credit you’re currently using

10% types of credit you hold             15% credit balances

15% credit history length                    13% length and depth of credit history

10% recent history                                10% new credit accounts and inquiries

7% total available credit

Most auto, homeowner and other property insurers use a credit-based insurance score to determine how likely it is you’ll file a claim, according to the American Insurance Association. It’s similar to how mortgage lenders, banks and other gatekeepers of credit rely on a credit score to figure out the probability you’ll default on payments.

FICO, TransUnion and LexisNexis are among the major providers of insurance scores. About 90 percent of auto insurers and somewhere between 85 percent and 90 percent of homeowners insurers use credit-based insurance scores. LexisNexis says more than 300 insurance carriers use its scores. Transunion’s market share is unknown.

Insurers will use the score, plus other information, to determine what insurance rate you will be offered. For example, auto insurers will consider your driving record and the state where your car is registered, while mortgage lenders will take into account a house’s location and construction materials, among other factors.

Health and life insurers don’t use the credit-based insurance score from FICO. Four states — Massachusetts, California, Hawaii and Maryland — don’t allow one or more types of insurers to use credit-based insurance scores.

Your insurance score

How is your insurance score calculated? Generally, it’s based on information found only in your credit report. However, it’s important to remember the insurance score is not the same as your credit score. While the math behind the two scores often yields similar results, it is different.

Some factors that drive a credit score are similar to the ones that drive the insurance score, but the weight or influence of those factors is different.

For example, payment history makes up 35 percent of FICO’s credit score; amount owed is 30 percent; length of credit history is 15 percent; and new credit and mix of credit are each 10 percent. That pie is sliced another way for insurance scores. Payment history accounts for 40 percent of the score, while mix of credit is reduced to 5 percent. The rest is the same.

LexisNexis uses payment practices, adverse public records and collections (excluding medical), credit utilization, recent credit activity such as credit inquiries and new accounts, length of credit and the number and types of credit.

TransUnion’s scores are weighted toward age of credit account and stability, which includes a responsible mix and use of credit.

Are insurance scores a fair assessment?

“These scores have been studied by the (Federal Trade Commission). It concluded that insurance scores do add a significant degree of risk assessment.

Checking your insurance scores

Insurers don’t have to disclose these credit-based insurance scores to consumers. FICO does not provide access to its insurance scores. However, consumers can obtain their LexisNexis auto or home insurance score through its website for a fee. Consumers can buy their TransUnion insurance scores at TrueCredit.com.

The best way to insure a higher insurance score is to polish your credit report. That means paying your bills on time, keeping credit card balances low and only opening new credit cards or loans when necessary. Keeping credit reports free of score-killing errors is also a smart move.

So, it makes sense that people with higher credit scores would generally have higher credit-based insurance scores.  Those who pay their bills on time are more likely the ones who keep up with car repairs or home maintenance.

Everybody really seems to have fallen in love with prepaid credit cards; many going so far as to use them as an alternative to real credit cards.  Most people think of prepaid credit cards as a sort of extension of retail gift cards and tend to treat them as such.

You know you  really only use your cards when you go out shopping at the same 7-8 locations anyway, so why not invest in a card that only allows you to spend the money you put on it and nothing else?

Because it may not be the best idea for your credit history, and it certainly won’t help you improve your credit score.

Stuck at the Kiddie Table

Those prepaid cards may seem like the right choice for your wallet, especially since anyone can pick one up, as opposed to having to qualify for a regular credit card.  They also come with the same fraud protection as a “real” credit card.

But while it may seem like you’re doing your finances a favor, you’re actually not making any progress at all – especially if you’re trying your hand at rebuilding your credit and improving your credit score.

All prepaid credit cards operate like debit cards, which don’t show up on your credit report and so don’t affect your credit score in any way.  In that sense, you’re essentially foregoing using real credit cards to help rebuild your credit and have planted yourself firmly at the kiddie table, while the rest of us use real credit cards to help rebuild our credit.

Secured IS the Way to Go

Prepaid cards don’t help your credit rating in any way and are generally useless the minute they run out of cash, so why bother with a one-and-done useless piece of plastic in your wallet, when you can use a real credit card to keep paying your accounts and help build up positive credit?

Maybe some of the features of a prepaid card are just too enticing to pass up, or you don’t want to worry about a lot of the trouble credit cards can potentially bring to the table.  If you want to work towards making real strides in your efforts at rebuilding your  credit or debt relief, but don’t want to deal with some of the hassles of regular credit cards, consider trying a secured credit card.

Much like a prepaid card, a secured credit card requires a deposit before you can start using it, but unlike debit and prepaid cards, the money you use for purchases is loaned to you instead of taken out of a pre-paid balance.  The cards also report to the 3 major credit bureaus just like regular credit cards, meaning if your aim is to reestablish or build new credit, a secured credit card can help you do that.

You can inquire about them at any bank, credit union or online and use them to start building or repairing your credit profile now.

Consider this example. A credit card company, who charges outrageous fees and inflated interest rates to high-risk consumers, wants to market to people with less than average credit. The methodology is that these consumers will be willing to pay more to have a credit card because their credit is poor. People with harmed, bruised, or sub-prime credit are the people who make the banks the most amount of money in fees and interest. Which credit information can the credit bureau charge more for Honda or the credit card company? The answer is the credit card company. Since the credit card company stands to make a tremendous amount of money from their data, the credit bureau charges them significantly more.

 “The worse the score—the more money the credit bureaus make!!!!”

With that being said, it would follow that the credit bureaus have no incentive to correct inaccurate data. After all, the worse the credit score, they more money the credit bureaus make on selling it. In addition to selling the bad data, the credit bureaus also make money on the dispute process. If you were the credit bureaus, what would you do? There are numerous cases, which have been compiled in a government study, “Automated Injustice”, it has been uncovered that all three credit bureaus actually profit from credit reporting errors.

The automated dispute system requires that the consumer log onto the dispute site and enter in the information regarding the erroneous items.  The customer dispute is then converted to a two–three digit code.  The code is then forwarded to the reporting agency for investigation.

In reality, what it does is strip the consumer’s legal rights, while making it easy for the credit bureaus to further their agenda.  At first glance, the online disputing system appears to be a benefit to the consumer.  The only benefit to the consumer is the ease and convenience of filing an online dispute instead of actually writing a letter to dispute the item.  That part is a benefit, but disputing your items online is actually a great disadvantage to the consumer due to the part of the process that appears on the surface to be a benefit.

The 30-day time limit—The FCRA imposes a 30–day time limit on the dispute.  If the item is not responded to within that time limit, it must be removed from your credit file.  Using the automated dispute system makes it very easy for the credit-reporting bureau and reporting agency to not only respond, but to respond without having to do a full investigation.

Paper Trail—Using the automated dispute system does not create a paper trail for the consumer track the details of the dispute.  As a result, the consumer does not have a paper trail if they have to take further legal actions for non-compliance by the credit bureaus.

Limited Dispute Reasons—Due to the electronic coding system, there is an inherent limitation for disputing.  The coding system is limited to the codes that are in existence.  There is no place for you to send all relevant information about the dispute to the furnisher of data. Under the FCRA, all relevant information must be transmitted to the data furnisher.  The online dispute system circumvents that requirement.

Expeditious Dispute Resolution—The Fair Credit Reporting Act section 611a(8) changes the standard requirements and protections afforded to the consumer by the FCRA when the consumer uses the online dispute process.

In the FCRA “Expeditious Dispute Resolution” section states: “The agency shall not be required to comply with paragraphs 2, 6, and 7 with respect to that dispute if they delete the trade line within 3 days.”

Paragraph 2 requires the credit-reporting agency to forward your dispute and all related documentation you provide to the creditor.  The online dispute process does not allow for any paperwork or documentation to be provided, nor considered in the process.

What consumers are not aware of is credit–reporting agencies delete an item without forwarding your dispute to the data furnisher, the data furnisher will re-report this item in the next reporting cycle.  The data furnisher will most likely not be aware of your dispute therefore they may simply re-insert the item.  There is a standard notice that is required to be sent prior to any reinsertion of a deleted item, however based on the law, if you dispute online, the credit reporting agencies DO NOT have to follow that part of the law. The Credit reporting agencies DO NOT have to send you a notice prior to reinsertion if you dispute online.  This information that would protect consumers from their federally granted rights being stripped from them is barely accessible UNTIL NOW!

Paragraph 6 requires the credit-reporting agency to provide you with written results.

Paragraph 7 requires the credit–reporting agency to provide you with the method of verification on request from the consumer.

As you know from review of “Method of Verification” section, this tactic is a powerful tool in the dispute process. If expeditious dispute resolution is used, the right to utilize this tactic is eliminated.

No real investigation

The dispute system was created to provide the consumer recourse when there is an inaccuracy on their credit report.  The way the system has turned into an automated dispute process is fundamentally flawed.  There are no real investigations, but rather an automated process of sending and receiving information between the financial institution and the credit reporting agencies.  The process barely satisfies the FCRA regulations and frequently violates the law.

The investigations usually involve the reporting agency comparing the information in their computers to what is reported in your credit file.  Typically the bureau accepts what the reporting agency tells them.  This term is referred to as Parroting and the reporting agency is simply repeating the information they have been asked to verify.  There is no additional investigation to review records or contact the consumer.

Less than 30 days

If you’ve only missed your due date by a few days, you’re still less than 30 days late. Your credit card issuer or creditor typically charges a late fee (which may not show up until your next bill), but at this point, nothing goes on your credit report. Send your payment before your next due date and the credit bureaus will have no clue you were late.

30-89 days late

Once you’re 30 days late, however, the credit card issuer or creditor will typically update your credit report to show that your payment was late. If you catch up on your payments, your account status will go back to current, but the late payment still remains. On the other hand, if you miss your payment again, making you 60 days late, your credit card issuer or creditor can charge the maximum late fee. After that, your interest rate can  increase to the default rate.

90 to 180 days late

Between 90 and 180 days late, the late notices continue to be added to your credit report, resulting in a major decrease in your credit score. Late fees are also added to your account each month. Your creditor will send letters and make phone calls trying to get you to bring your account current. In the beginning, they send gentle reminders “Please make your payment.” As you become more delinquent, the late notices are more serious. Some credit card issuers may offer to settle your account after it’s passed 90 day late mark.

Charge-Off

If you haven’t paid your account in six months (180 days), most creditors charge-off the account. That means they take the account off the assets list in their accounting books and count it as a loss. Despite the account being charged-off, creditors still want you to pay what you owe. A charge-off is one of the worst things that can happen to your credit report and one of the hardest items to repair.

Collection

Many accounts are sent to a collection agency upon unsuccessful collection attempts and  after they’re charged-off. The collection agency has its turn at trying to get you to pay the debt. The collector will also add an entry to your credit report.

Lawsuit/Judgment

At any point in the delinquency, the creditor or the collector has the right to sue you for the debt you owe. The lawsuit itself won’t be added to your credit report, but if the creditor wins a judgment against you (meaning the court orders you to pay up), that judgment will go on your credit report in the public records section.

Late payments stay on your credit report for seven years from the date you became delinquent. You may be able to remove some of them earlier by using credit repair strategies like pay for delete and goodwill letters.

Your Big  Break

If you have had credit problems and are in search of the best credit repair technique to boost your credit scores, here it is. The latest release of the FICO analyzer provides an amazing score boosting opportunity. It’s not a magic trick, but a means of rewarding those who prove their worth. Here is the latest, greatest and most powerful way to boost  your score in light of past credit woes.

New Accounts After Bad Choices are GOOD

This amazing credit repair technique taps the mysterious power of FICO. You made some major errors in the past. Now is your time to prove you can get back on the bike and ride. Your credit score is not just about your history, it is a way to rate your ability to manage the process of borrowing. This includes opening accounts, repaying promptly, and managing responsibly. And FICO is just waiting to reward those who can show that they are still in the credit game.

The Easy A

Are you worried that you will be denied for new credit? Worry not. Secured credit cards are the perfect credit improvement option. A small amount of collateral, usually two to three hundred dollars per card, will guarantee approval for some powerful plastic capable of shaking your credit score world. The best of these little secured cards will not always consider your credit history, will report to all three bureaus, and will not even indicate a secured status.  The key is to keep the balance at 10-30% of the limit.

Card Management Secrets

Once you have your new secured credit cards in hand it is up to you to manage them for the best results. And make no mistake, it is easy to blow it and miss your credit improvement opportunity. You must make your payments on time, and you must keep your balances down. Everything you do with your new cards will communicate something to the scoring model. For credit improvement purposes you should only use 10-30% of the card limit.

Pay Day

For most people attempting to regroup after a tough time, one to two little secured cards could be worth over one hundred points within three to six months of the initial reporting date. It could be more or less depending on the overall depth and content of your credit report. A boost like this can make a life-changing difference. This type of improvement could qualify you for superior auto financing or even that mortgage you’ve been dreaming of. In the long run, you may wish to phase out the secured cards in favor of lower cost unsecured cards, but that should be easy, as you will begin to see offers arriving before you know it.

It takes many years to build up a great credit score, but somewhat  little effort to trash it. Unfortunately, sometimes it is the actions you take to manage your credit more responsibly that lower your score.  Obviously, late and missing payments affects your score negatively, as it should.

Debt Load Management

If you have several credit cards and loans, but aren’t using them, you might naturally think that getting rid of available credit and loans would show how responsible you are.  Surely this will get you a nod of approval from the credit police, wouldn’t it? Actually, the opposite is true. Closing card accounts lowers your available credit, so the ratio between any debt you have and the amount you can make use of becomes higher. This is known as your debt to credit ratio, or debt load.

Say you have three credit cards, each with a $2,000 credit limit. That means you have $6,000 available to you. If you charge $2,000 on one card, your debt load is now $2,000 from $6,000, or 33.3% . So now you have a monthly payment, and realize that by the time you get it all paid off (depending on your interest rate), you are going to pay $2,400 for $2,000 worth of stuff you didn’t really need after all.

You’re thinking like a grown-up now. Proud of your new awareness, you cut up one of your other cards since you will never be so frivolous as to charge $6,000 worth of stuff. You call the bank and close the account. Good job.

And now come the consequences of your good thinking. Having closed one of your accounts, you now have only $4,000 available credit, so your same debt now equates to a 50% debt load. Your credit score takes a hit. More responsible = less creditworthy in the eyes of the system.

Debt Settlement

It is often possible to settle an account with a lender and pay off the balance with an amount much less than what was due. If you come into a chunk of cash and can use it to get rid of some debt, it’s very advisable that you do so and if you can get a reduced payoff, that’s great; however, if the company reports the settlement to the credit bureaus, it may lower your credit score.

Credit Shopping

If you lose your house (or other property) in a foreclosure or go bankrupt, your credit score takes a major beating. Ironically, there are many credit cards and car dealers who now consider you a prime customer because you are free of your former payments…but beware; they usually offer you interest rates that ought to be illegal.

If you apply for several cards (even if you don’t get them all) or shop for a car at a bunch of different places that all run your credit to give you the finance terms, then your credit score is penalized for excessive  credit shopping.

• Defaulter behavior. Frequent, significant and late payments 30 days, 60 days, 90 days late. Don’t believe a 30-day-late payment won’t hurt. It may not completely ruin your credit but it’s damaging and can remain on your report for years.

• Collection activity. When the lender gets tired of your defaulter behavior it will call out the hunters — a third-party collection agency. The collection agency will report collection activity to the credit bureaus and again, seven years of bad luck.

• Charge offs. If the lender gives up on your collection case, acknowledging you’ll never pay the bill, it charges off the debt and puts your credit report on notice for seven years.

• Public records. Bankruptcy, foreclosures, tax liens, judgments and the like are score killers for your credit rating. Judgments are good (or, from your viewpoint, bad) for seven years, even if you pay them off. Bankruptcies can dog your credit report for 10 years and unpaid tax liens never go away.

• Settlements. If you pay a portion of a debt to your lender in a settlement you can get a settlement notice on your credit report card for seven years. Credit cards and other debts, likewise can be settled, with negative impact to your credit report.

• Foreclosures. If you can’t or won’t pay your mortgage the lender will eventually foreclose and relieve you of your home. Another seven year negative notification will drag down your score. The same applies when you give the home to the lender in a deed-in-lieu of foreclosure.

• Repossession – When you don’t pay your vehicle loans a bounty hunter will be coming your way. He or she is not coming after you, but your vehicle, and that’s often without notice after attempts to collect payment. Yes, It’s all legal. The repo person can take your property down and your credit score will follow.

By Ellen Cannon • Bankrate.com

Everyone has wondered how much damage maxing out a credit card or opening a new card does to their credit scores. Well, MSN.com personal finance columnist Liz Pulliam Weston has found out. She asked FICO, the company that created the credit score, to explain what happens when someone does one of five common things. FICO provided their points deductions for 680 and 780 scores. Here’s what they told her:

Credit score deductions

You can see that bad behavior really kills a good credit score. Since credit scores reflect you as a credit risk, all of these behaviors for a good scorer could be signs of trouble to FICO. The results are given in a range because FICO is still a little nervous about revealing too much about its proprietary scoring. But the range is fairly tight, and we can clearly see the disparate impacts of the different actions.

A guide, not a guarantee

I have to make this clear: Your mileage may vary. People with the same credit score can have very different credit profiles: more or fewer accounts, a different mix of accounts, a longer or shorter credit history, use of more or less of their available credit, etc. Because of those differences, the same action — maxing out a card, say — can have different effects on people with the same score, depending on the details of their individual credit profiles.

If you want to estimate your FICO score, Bankrate offers this tool. This time of year, with department stores offering discounts for opening a new card, it’s tempting to take advantage of it. But that new card will also cost you points. Think twice about it — that 10 percent discount today could cost you much more if your FICO score decreases.

Questions? Comments? E-mail plastic_rap@bankrate.com.

Too young to have credit. Generally, you have to be at least 18 years old to be approved for a credit card or a loan. New changes to the credit card law require that credit card applicants under age 21 have their own source of income or have a co-signer to be approved for a credit card.

Not enough income. Credit card companies are now prohibited from giving a credit card to anyone who doesn’t have sufficient income to pay back the credit card balance. On top of that, they have to ask only for your individual income, not your household income as they’ve done in the past. Credit card applications don’t state the monthly income requirements to qualify for a credit card. So when you write in your income, you don’t know whether it’s enough to get the credit card or not.

Too much debt. The amount of debt you have is another factor that banks take into account for your credit card or loan application. Even if the amount of debt you have isn’t taking a toll on your credit score, it could still keep you from being approved. If the bank thinks your current balances would make it hard for you to pay back a new credit card or loan, they’ll deny your credit card application.

No credit score. Having no credit is not the same as having bad credit. While there are some credit card issuers who’ll approve applications who don’t have a credit history yet, there are others who require you to have some positive credit history before they will give you an account.

Work history is too short. Some credit card applications will ask how long you’ve been at your current job. They’re looking to see if you have a steady employment history since job instability has an impact on your ability to repay your credit card balance. If your employment history is short, your credit card application could be denied.

The reason is in the mail

If you’re applying for a credit card over the phone or through the mail, you won’t get an instant reason why your application is denied. You may not even find out that you’re denied until you get a letter in the mail several days later. The letter will tell you the specific reason that you were denied and you may be surprised to learn that it wasn’t because of your credit. In fact, the bank may not have checked your credit at all. But, if you were denied because of something in your credit report, you’ll get a chance to order a copy of your credit report for free. On top of that, new changes to credit laws also let you get a free credit score, too, if your credit was a factor in the decision.

Getting Joint Credit

Now that you’re married, there may be times when you apply for a credit card or loan with your new spouse. For example, you may get a joint credit card if they can’t qualify for one alone, to help them repair their credit, or to make household accounting more simple. Unfortunately, your spouse’s bad credit may keep you from qualifying for the best credit cards and you could wind up with a high interest rate, high fee credit card.

Applying for mortgages or car loans together will also prove difficult. Lenders have various ways of considering a joint applicant’s credit score. They may take an average of your scores or they may consider only the lowest credit score. Rarely, if ever, do they only count the highest credit score. This means you could qualify for a smaller loan, have a high down payment requirement, or have to pay a higher interest rate on the loan.

Adding Your New Spouse To Your Accounts

There’s a possibility that your new spouse has bad credit because they have bad credit habits. If you add them to your credit card accounts, their bad credit habits will reflect negatively on your credit history. For example, if your spouse runs up a high credit card balance, your credit score will be impacted. If that spouse misses a credit card payment, the late payment will go on your credit report. Look for a credit card that lets you give a spending limit for authorized users and take responsibility for the credit card payment to protect your account.

A spouse’s bad credit and bad spending habits can continue to affect you even if you don’t add them to your accounts. For example, you may have to continually bail your spouse out of financial situations because they’ve made the wrong choice. Or, if your spouse misuses household funds, that could leave you with less money or no money to take care of household expenses, or to pay your own credit cards and loans.

Divorce and Credit

Unfortunately, a divorce won’t eliminate issues with credit. You should continue to monitor and pay on any joint accounts even after a divorce, regardless of any court-ordered payment assignments. Banks will continue to hold you responsible for payments on any accounts that have you listed as a co-signer. Telling the banks your spouse is supposed to pay won’t keep them from putting late payments and delinquent notices on your credit report. It’s best to completely separate accounts in a divorce and try to take your name off any accounts that you no longer have to pay. Otherwise, try to pay off the account or make the minimum monthly payment to protect your credit.

Give your child guidance on how to manage their credit.

College seniors graduate with an average credit card debt of more than $4,100, according to a study by Sallie Mae. And the average balance for all college kids is $3,173, the study showed. From tuition and books to food and gas, college students are using credit cards to pay for EVERYTHING (don’t forget designer wear).

You may wonder how all that debt will look on a credit report, when the individual being reported on doesn’t even have a steady source of income yet. How will starting their professional and personal lives already in debt affect their long-term financial health?

It’s NEVER too late – or too early – for you to start giving your kids guidance on how to manage their credit. Before your college-aged child gets their first credit card, make sure they understand how credit actually works and how they credit report affects their ability to get loans – and possibly even a job – in the future.

You can try several different tactics to help guide your child toward a better understanding of credit, here are a few:

Introduce them to their credit report.

As an adult, they may choose to review their credit report on a regular basis. As a young person who’s just starting to use credit, they should also look at her report. Not only will it help them understand the basics of their credit score and what factors determine it, checking their credit can help catch any fraud. Identity thieves have been known to target people with very little credit history, such as kids.

Help them open a checking account.

With a joint account, you can monitor how they use their debit card. It’s also an opportunity to teach an important basic financial skill – how to balance a checkbook.

Lead by example.

If you’ve been able to avoid high credit card debt, help your child understand the steps you took to do so. Clue them in to how smart credit use has helped your credit report, and how in turn, your good credit has helped you make purchases that have enriched your life – like the home you share. If you’ve made mistakes, let them see the consequences you face; they may be able to learn from your mistakes without having to repeat them.

Permit them to have a credit card.

One that you’ve co-signed for, early on. As the responsible adult on the account, it’s up to you to show them how to responsibly use credit. Make sure they get the bill – and pays it off – every month.

Make sure she understands the importance of reading the fine print on credit card offers. Penalties and fees can run up the balance on a teen’s credit card almost as quickly as imprudent spending.

Finally, don’t despair if your college student already has a credit card (or more than one) with a balance on it. Help her view this as an opportunity to improve their credit score. Sit down together and create a plan for paying off the debt. Think how good it will look on her credit report if she demonstrates their ability to manage debt before they graduate from college.

The truth is that it’s all those things – and much, much more.

Having financial prowess means you have the knowledge and comprehension to make informed decisions about your finances, whether it’s in terms of investments, savings or simpler things like personal budgets.

Consider these tips to improve upon your financial prowess.

• FREQUENTLY Review your credit report. With any big undertaking, you need a good place to start: Your credit report is the perfect starting point on your journey to better financial prowess. Because you’re entitled to a free credit report each year, it’s also an easy place to start. Once you get the report, you should not only check it to see what shape your credit is in, you should look carefully for any mistakes or discrepancies. Having good credit can help you go far in your financial life, so making sure that your credit report is clean and accurate is critical.
• Organization. Is your financial paperwork more piled than filed? The seemingly endless stream of paper that comes with bank accounts, credit card, retirement accounts and other financial products can get overwhelming pretty quickly. Learn what you need to keep, how long to keep it and what you can throw. But before you throw anything out, make sure that any personal information is destroyed, to prevent fraud.
• Manage your credit and debt. If, after you have reviewed your credit report, you were shocked by the amount of debt you saw, it’s time for a credit reality check. Start by making a commitment to only use money that you have, and begin a plan to start paying down your debts. Set up automated payments whenever possible, so that you always pay on time. Paying late can have a long-lasting negative impact on your credit report.
• Borrow smart. Whether you want to buy a house, a car or some other big-ticket item that requires borrowing, it’s critical to know what you’re getting into when you borrow money. Know the difference between adjustable and fixed rate mortgages when buying a home; learn about interest rates and any associated late fees.Cultivating an interest in financial news can only help you improve your financial prowess.

Give your score a boost.

The Balancing Act

In a tough economic climate and high gas prices, keeping your credit card balances under the limit is tough. Simply maintaining a balance that’s close to your limit could weigh down your credit score. If you carry a balance on your credit card, you need to make sure the difference between your credit limit and your current balance is 50 percent or less (preferably 30%). Not using all of your credit is a signal to card companies that you’re managing your credit properly.

No Tardies

If you see trouble on the financial horizon, nip it in the bud. Making a late payment could affect your interest rate, not just on the credit card you’re paying late, but on all your credit cards. If you know you’re going to have trouble making payments, get in touch with your lender or creditor and try to work something out. I am hearing more and more that lenders and credit card companies are willing to look at alternatives for you. Since one late payment could lower your credit score – and stay on your credit report for seven years – preventing disaster before it happens can protect your credit.

Diversity is KEY                     

People don’t realize that 10 percent of your credit score is determined by what types of credit you use. That’s determined not only by how you manage revolving debt like Visa, MasterCard, and department store credit cards, but also how you handle fixed payments like your mortgage payments and car payments over time. Instead of putting long-term purchases on credit cards, try taking out short-term, one to two-year loans in order to build a diversified credit portfolio. In addition to receiving lower interest rates and more flexible payment terms, consumers who use loans over cards also build positive credit and may gain better credit terms in the future.

 Set Priorities

Those who are already in the plastic prison can begin releasing themselves by creating a debt attack plan. Start by making a list of all of your credit debts, then pick out which is harming you the most. If you have a card where you owe more than 30 percent of your credit limit,  pay that one down first to keep your credit score intact. Tackle your smallest bill first while making minimum payments on everything else, and once you’ve paid it and have that sense of accomplishment, move on to the next one. By focusing your financial resources on eliminating one problem debt at a time helps improve your chances of sticking with your debt attack plan.

Remain Positive

Consumers in dire credit straits may be able to boost their score simply by showing credit bureaus what they’re doing right. If you have positive histories in things like rent and utilities, adding those histories can greatly help the credit score. There are companies designed to get positive information on your credit score and that can have a significant impact.

Bargain Hunt

Credit inquiries can be a major obstacle that prevents consumers from getting the lowest interest rate on a new loan. While inquiries on your credit report can lower your score as much as five points,  consumers have a 30-day window before choosing their loan when all mortgage and auto loan inquiries only count once. An easy way to avoid racking up inquiries on your account, is to comparison shop as much as possible before filling out a formal application. Don’t just apply to multiple  lenders; talk to lenders, talk to customer service people, get as much information as possible. It pays to do your DUE DILIGENCE.

Checking your credit score and report on a regular basis allows you to track your progress.  SO DO IT

Did you know that not all secured credit cards report to all three major credit agencies?

Whether you are looking to rebuild credit after bankruptcy or recover from past credit problems taking the time to understand the process is just as important as the process itself.

If you truly want to make the most positive impact to your credit reports then you should avoid high risk lenders at all costs no matter how enticing their secured credit card offers are.

In the long run using high risk lenders like First Premier Bank for example can ultimately hurt your credit scores rather than improve it simply because the issuer is known for extending credit to high risk individuals.

In addition you should only select secured credit cards that report your payment history to all three major credit agencies.

If you end up using a secured credit card that reports to only one credit agency then you hardly leverage the positive payments you’re establishing with that account.

It’s simple common sense that one positive trade line reporting to all three major credit agencies will make a much greater impact on your credit scores then just one trade line on one credit file.

So to save you time and make life easier here’s three excellent secured credit cards that rebuild credit and meet the standards that I outlined above.

# 1 Public Savings Bank Open Sky Secured Visa Credit Card

With this card you can choose your credit limit from $200 to $3,000 and best of all there’s no credit check for approval.

They do charge a flat $50 per year fee but there’s no other upfront or monthly charges like you’ll see from a lot of other card issuers.

Here are some other benefits:

No credit history and no checking account required
Prime plus 6.5% variable APR- Not an introductory rate
They report to all three credit bureaus, so you’ll start building your credit fast
Four options for funding your card

# 2 Orchard Bank Classic Master Card

Now with Orchard bank they do pull a credit check and based on your profile they will either offer you an unsecured or secured credit card.

Here are some other benefits:

An excellent credit card for help rebuilding credit scores; reports to all 3 major credit bureaus monthly!
Acceptance at millions of locations worldwide, including website purchases and reservations
Your account information is updated and at your fingertips 24/7 so you can manage it your way
Email and text messages are available to remind you of your upcoming payment due date

# 3 Orchard Bank Visa Classic

Reports to 3 major credit bureaus monthly providing you the opportunity to rebuild your credit score!

Acceptance at millions of locations including website purchases and reservations
Your account information is updated and at your fingertips 24/7 so you can manage it your way
Email and text messages are available to remind you of your upcoming payment due date

On a final note when you decide to apply for a secured credit card remember there are three main factors that you control which is the credit limit you set, your balance owing, and credit usage.

Now if your funds are limited you may have to start out with a low deposit but remember to keep your debt to credit limit ratios at no more than 30% and use your card on a regular basis to establish a consistent payment history.

Here’s a problem that I’ve seen pop up on a multitude of consumers’ credit reports that we feel needs to be addressed in a MAJOR way. It has to do with medical debts and the frequency of medical collections that seem to show up on your credit report after a visit to the physician’s office.

So, you’ve just come back from a visit to the physician’s office for whatever ailment you’re having – nothing too serious. You hand them your insurance card at the front desk after your visit, and assume all will be taken care of. A couple of months later, you check your credit report and notice a medical collection account has appeared on your credit report.

How Does This Happen

Okay, here’s how the system works: You leave your insurance information with the physicians. They want to get paid for looking your ailment, so they immediately file a claim with your insurance company.

Unfortunately, the insurance companies take their sweet time when it comes to paying claims that come in and the physicians don’t want to wait that long for payment, so they send your account to a collection agency instead of waiting for your insurance to get around to paying. Of course, the collection agency turns around and reports the account to the credit bureaus and SHAZAM – you’ve got a brand-new collection account dragging your credit score and history down.

How To Avoid It

I’m guessing you can see how fair this system is to consumers. Fortunately, there’s a pretty quick fix for this type of problem: it can usually be resolved by validating the account as soon as the doctor has been paid. When you validate it after the insurance has covered the account, the problem will usually be corrected.

Still, the idea of having a medical bill sent to collections by default is a terrible practice, in my opinion. If you’re worried about a visit to the physician showing up as a collection on your credit report, I recommend staying in constant contact with your insurance provider to make sure the claim is processed in a more timely manner.

You could also consider paying the bill yourself and take the claim to your provider directly for reimbursement. That way, you won’t have to worry at all about the account popping up as a blemish on your credit report at all. After all, anything’s better than having a collection for a medical bill follow you around for up to 7 years on your credit report.

You’ve gotten your annual free credit report from http://www.annualcreditreport.com and it’s been less than a year and you want another one stat! Not only stat, but FREE!

There are ways to get another look at your credit report without having to wait another 12 months, but they usually involve signing up for a trial period and canceling before your card is charged.

There are a couple ways to get another look at your credit report without having to pay for the privilege or worry about signing up for a service you’ll have to cancel before your trial period ends. The trick is knowing when, where, and how to request them. Here are a few tips on more ways to get your credit report for FREE:

Through adverse action

Adverse action is pretty much exactly what it sounds like – an action that’s been taken that doesn’t really do you any favors. This can include anything from being turned down for a loan or a job to not getting the best insurance rates or having to pay a larger deposit for a cell phone.

Basically, if your credit report had any part to play in a decision that resulted in you not getting what you need, then you’re automatically entitled to a free report so you can determine what happened.

If you receive a notice from the lender denying your request, you’re entitled to a free copy of whichever report they pulled (their notice will state which one). You then have 60 days to request your free report. You’re allowed one report for each lender who turns your credit application down.

If you do decide to place a fraud alert on your file, you’re entitled to one report from each bureau that received the alert for up to 12 months. Simply follow the instructions that are given when you place the fraud alert for your free report.

Through your state

Depending on what state you’re living in, you could be entitled to a free copy of your report in addition to the requisite one from annualcreditreport.com.

Residents of Maine, Maryland, Massachusetts, Colorado, and Vermont get an extra copy of their credit reports each year thanks to state laws, while residents of Georgia and Puerto Rico can get up to 3 copies each year (so those of you that live in George really have no excuse for not knowing what’s on your reports now).

Through a job loss

If you’ve recently become unemployed, you can receive a free copy of your report if you let the credit bureaus know you’ll be applying for a job within 60 days of your last day on the job. You’re entitled to one report from each of the 3 bureaus this way.

Resources

Here’s who you’ll want to contact to receive your free report:

TransUnion

Online: http://annualcreditreport.transunion.com/pdf/DisclosureRequest.pdf
Mail: PO Box 1000
Chester, PA 19022
Phone: 1-800-888-4213

Experian

Online: https://www.experian.com/consumer/cac/InvalidateSession.do?code=CDIFREE
Mail: PO Box 2002
Allen, TX 75013
Phone: 1-866-200-6020

Equifax
Online: https://aa.econsumer.equifax.com/aad/landing.ehtml
Mail: PO Box 740241
Atlanta, GA 30374
Phone: 1-800-685-1111

Remember to include copies of your driver’s license or state-issued ID, social security cards, and documentation with your current address as well, if you’re requesting a copy of your report via regular mail.

Pay Past Due Balances

Around the same time tax refunds are pouring in, everyone is  also dealing with credit card debt from the holidays of last year. If a few payments were  missed at the end of last year or beginning of this year, use the tax refund to get caught up. Each month a credit card payment is missed, the amount required to catch up gets higher. Late payments are also added to the credit report, hurt the credit score, and lead to an interest rate increase.

Pay Off Entire Balances

A large part of a credit score – 30% – considers the total amount of debt. If debt is high, the  credit score is affected. Use the  tax refund to bring down high balances and help improve the credit score.  Pay off the balance of one credit card instead of dividing payment among all the debts owed.

If it is not feasible  to pay off an entire balance, look at the credit cards to see which ones have balances that are greater than 30% of the credit limit. Focus on bringing those balances below the 30% threshold. It will help the credit score even more if the balance can be brought below 10% of the credit limit.

Get a Secured Credit Card

Having trouble getting approved for a credit card because of bad credit, consider getting a secured credit card. The secured credit card requires a security deposit against the credit limit. Usually,  a security deposit may not have been affordable, but can use the tax refund to get a good credit limit. As long payments are made on time,  the deposit is refunded when the credit card is closed or if it’s converted to an unsecured card.

Future financial trouble can be prevented by putting your tax refund in a savings account and starting an emergency fund. It can be used instead of a credit card. It keeps from creating credit card debt that can’t be afforded to repay and that may hurt the credit score in the future.

Make no mistake. Short sale can also effect your credit and ability to obtain a new mortgage. You are selecting the lesser of 2 evils.

Here is how it can effect you in VA and Conventional Financing your future home.

FNMA and FHLMC:

Deed-in-Lieu of Foreclosure and Preforeclosure Sale (for Desktop Underwriter): These transaction types are completed as alternatives to foreclosure. A deed-in-lieu of foreclosure is a transaction in which the deed to the real property is transferred back to the servicer. A preforeclosure sale or short sale* (see below) is the sale of a property in lieu of a foreclosure resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer.
The following waiting period requirements apply:

• 2 years for transactions with a maximum LTV of 80%
• 4 year for transactions with a maximum LTV of 90%
• 7 Years for transactions for transactions with an LTV greater than 90%

*Short Sale: A short sale is the sale of a property in lieu of a foreclosure resulting in a payoff of less than the total amount owed. This applies regardless of the payment history of the mortgage. If any mortgage trade lines reflect they have been settled for less than the full balance, the above wait periods will apply. If the sale of any current properties is occurring during the subject transaction and it appears a short sale may result, a current pay off letter will be requested to confirm a short sale is not occurring.

VA SHORT SALES AND SHORT REFIS

The following is required for all VA borrowers having short sales in their credit histories:

• The borrower must have made all mortgage and installment payments within the month due for the 12 months prior to the short sale.
• The short sale must serve as payment in full on the existing lien(s) and the existing mortgage servicer may not require repayment of the difference between the mortgage balance and the short payoff.
• Borrowers may not execute a short sale to take advantage of declining market conditions and purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.
• If a borrower was delinquent on the mortgage at the time of short sale, lenders will not typically approve the borrower for VA financing for at least three years after the date of the short sale unless the borrower experienced significant extenuating circumstances and the loan receives an automated underwriting “approve” or “accept” response.
• Borrowers having short sales will not be approved if they also have a previous bankruptcy and/or foreclosure.
• All other VA requirements apply.

FHA SHORT SALES

FHA permits loans to borrowers whose credit history indicates a short sale, provided all of the following conditions are met:

• The borrower must have made all mortgage payments within the month due for the 12 months prior to the short sale
• Borrowers who executed a short sale after completing a permanent modification are eligible for FHA financing, provided the borrower made at least 12 payments on the permanent modification and all payments on the permanent modification were made within the month due for the 12 months prior to the short sale
• Borrowers who completed a short sale on a loan that was under a temporary modification plan at the time of the short sale are ineligible for FHA financing for three years after the short sale
• The borrower must have made all installment debt payments within the month due for the 12 months prior to the short sale
• The short sale must serve as payment in full on the existing liens, and the existing mortgage servicer may not require repayment of the difference between the mortgage balance and the short payoff
• Borrowers may not execute a short sale to “take advantage of declining market conditions and purchase, at a reduced price, a similar or superior property within a reasonable commuting distance”
• Borrowers in default on their mortgages at the time of a short sale are ineligible for FHA financing for three years after the date of the short sale unless the borrower experienced significant extenuating circumstances. ” Typically illness and not simply loss of job”

For additional information, refer to FHA Mortgagee Letter 2009-52 – Short Sales and Short Pay Offs

A recent report stated that over 11 million homes (which accounts for 23% of all mortgaged households in the US) went under from October to December of last year.

When you see stats like that, it’s easy to see why so many homeowners are concerned about the difference between a foreclosure and a short sale, and what it means for your credit history.  Before we cover which looks worse on your file, let’s cover the actual difference between the two.

It’s a little complicated more than “potato/pototo”

To put it simply, a short sale means the home was sold for less than the total amount owed on the mortgage, while a foreclosure means the lender has essentially repossessed the home.

That said, having either show up on your credit report looks bad, so you’ll want to avoid it if you can.  As for which one looks worse, that depends on a lot of the other information in your report.

What proceeded

A foreclosure or short sale will look worse if you have a lot of late payments associated with your mortgage that are still on the report.  Creditors and lenders will now start to pour over every other account in your credit report much more closely when trying to determine your credit worthiness.

If your report shows that you’re already having trouble managing other accounts (for example: multiple late payments, high credit card balances, etc.), a foreclosure or short sale likely won’t do as much damage as they would if your report was relatively unblemished.

On the other hand, if your credit report doesn’t feature that many credit accounts aside from the mortgage, or if the rest of your report still looks good, the short sale or foreclosure is going to affect you in a more meaningful way.

If you’ve got a fairly good credit score – meaning little-to-no late payments or other bad accounts – and this is your first negative item (and it’d be a pretty bad one to have show up for a first time offense), you could be looking at a huge loss.

So there you have it, the difference between the two is negligible at best when looking at what it’ll mean for your credit; how much of a negative impact it’ll have on your reports and scores will depend entirely on how your report is looking now.

Originally founded in 1999 under another name, Recla!m Credit Consultants is owned and managed by Lee Anderson, a business banker in Federal Way, Washington. He started the company to help consumers repair and restore their credit when buying homes or applying for other loans or types of credit. With stricter requirements for mortgage loans now, loan approvals have declined, so Anderson relaunched Recla!m Credit Consultants to help consumers improve their credit scores safely and effectively.

“My clients’ credit scores are impacted by many things, including duplicate and outdated reporting, inaccurate information and more,” Anderson said. “By removing and correcting credit errors, Recla!m Credit Consultants can help consumers improve their credit scores.”

With higher credit scores, consumers can reclaim control of their credit allowing them to achieve their financial goals, finance homes and vehicles, and get preferred interest rates on loans and credit cards. According to Anderson, Recla!m Credit Consultants is one of the best credit repair services available because the company gets results quickly by using a powerful, comprehensive set of credit fix services and tools.

For more information about Recla!m Credit Consultants or credit repair tips and services, visit Recla!m Credit Consultants online at
http://reclaimcreditconsultants.com
or contact Lee Anderson at 253-370-9432. Recla!m Credit Consultants can also be found on Facebook.

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Founded by business banker Lee Anderson in 1999, Recla!m Credit Consultants of Federal Way specializes in credit repair and restoration services quickly and effectively. Using powerful, comprehensive credit repair services and tools, consumers who have used the service are able to raise their credit scores, finance homes and vehicles, and get preferred interest rates on loans and credit cards. The firm serves consumers in the Puget Sound area.
For more information, contact:

Lee Anderson, president
Recla!m Credit Consultants
253-370-9432

http://reclaimcreditconsultants.com

Email Recla!m Credit Consultants