What you need to know when it comes to your credit education:

Credit Scores

Your credit score is a number based on the information in your credit file that shows how likely you are to pay a loan back on time; the higher your score the less risk you represent.

While lenders take into account many factors when making a credit decision, including your income and the kind of credit your applying for, your credit score only reflects the information in your credit report. Your credit score does not consider your ethnic group, age, religion, marital status and nationality. These are, in fact, prohibited from use in scoring by US law.

When a lender receives your FAIR Isaac credit bureau risk score, up to four "score reason codes" are also delivered. These explain the top reasons why your score was not higher. These reason codes are more helpful than the score itself in helping you determine whether your credit report might contain errors and how you might improve your score over time.

The score from each credit reporting agency considers only the data in your credit report at that agency. One agency might be missing data based on a name change or an address change. This is why you may have a different score from each of the credit reporting agencies.

Credit Scores are calculated from a lot of different credit data in your credit report. This data can be grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining your score.

These percentages are based on the importance of the five categories for the general population. For particular groups (e.g. people who have not been using credit long) the importance of these categories may be somewhat different.

• Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.).
• Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items).
• Severity of delinquency (how long past due).
• Amount past due on delinquent accounts or collection items.
• Time since past due items (delinquency), adverse public records (if any), or collection items (if any).
• Number of past due items on file.
• Number of accounts paid as agreed.

• Amount owing on accounts.
• Amount owing on specific types of accounts.
• Lack of a specific type of balance, in some cases.
• Number of accounts with balances.
• Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts).
• Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans).

• Time since accounts opened.
• Time since accounts opened, by specific type of account.
• Time since account activity.

• Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account.
• Number of recent credit inquiries.
• Time since recent account opening(s), by type of account.
• Time since credit inquiry(s).
• Re-establishment of positive credit history following past payment problems.

• Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.).

• A score takes into consideration all these categories of information, not just one or two. No one piece of information or factor alone will determine your score.
• Your credit score only looks at information in your credit report. However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting.
• Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score.

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Credit Score Maximization

Payment History Tips

• Pay your bills on time. Delinquent payments and collections can have a major negative impact on your score.
• If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your score.
• Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years.
• If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor. This won't improve your score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time.

• Keep balances low on credit cards and other "revolving credit". High outstanding debt can affect a score.
• Pay off debt rather than moving it around. The most effective way to improve your score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.
• Don't close unused credit cards as a short-term strategy to raise your score.
• Don't open a number of new credit cards that you don't need, just to increase your available credit. This approach could backfire and actually lower score.

• If you have been managing credit for a short time, don't open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a larger effect on your score if you don't have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.

• Do your rate shopping for a given loan within a focused period of time.
• Re-establish your credit history if you have had problems. Opening new accounts responsibly and paying them off on time will raise your score in the long term.
• Note that it's OK to request and check your own credit report. This won't affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.

• Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix - it probably won't raise your score.
• Have credit cards - but manage them responsibly. In general, having credit cards and installment loans (and paying timely payments) will raise your score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.
• Note that closing an account doesn't make it go away. A closed account will still show up on your credit report, and may be considered by the score.

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Recovering From Bankruptcy

• Before you start to rebuild your credit you should check your credit report for errors. Check that your credit reports from TransUnion, Equifax and Experian have accurately recorded your pre-bankruptcy debts as "Included in BK". Under the Fair Credit Reporting Act, only accurate debts can be recorded so contact the credit bureaus if anything is inaccurate.
• After clearing out any errors in your credit reports it is best to slowly rebuild your credit history. Keep your employment stable, be cautious with spending and pay your bills on time.
• You may want to apply for a secured credit card that can be used in moderation and is paid off each month. Secured credit cards use your savings account as collateral for the credit limit and are easier to be approved for than a standard credit card.
• As early as 1-2 years after bankruptcy you may be able to receive a home loan. The Federal Housing Administration (FHA) and Department of Veteran Affairs (VA) have specific guidelines for accepting borrowers who have filed for bankruptcy. For example, the FHA will insure mortgages to individuals who have filed Chapter 7 liquidation bankruptcy two years after the discharge if "the borrower has reestablished good credit (or has chosen not to incur new credit obligations), and has demonstrated an ability to manage financial affairs."
• You may want to make contact with a U.S. Department of Housing and Urban Development (HUD) approved housing counselor, or local support program for advice and assistance with purchasing a home. Unfair lenders can sometimes target people recovering from bankruptcy so be sure to research your loan options, know your rights and read the small print.
• After 7 years, the accounts that were marked as "included in BK" should be removed from your credit report. The bankruptcy record itself will be removed after 7-10 years depending on the chapter that you filed. If your records are not removed by the credit reporting agencies automatically, you can send a letter of dispute to have the records taken off your record.

Credit Report Expiration Guide

Bankruptcy - Chapter 7, 11, and 12 bankruptcies remain on your credit report for 10 years after the filing date. When you file for bankruptcy, all the accounts included should be marked as "Included in BK" and will each stay on your report for 7 years.

Charge-off Accounts - If your delinquent account is charged-off, the record will stay on your credit report for 7 years.

Closed Accounts - If the account has delinquencies, those marks will stay on your credit report for 7 years from the date they were reported.

Collection Accounts - Accounts sent to collections will remain on your credit report for 7 years from the date of the original missed payment. The record will be marked as "paid collection" on your report when you pay the full balance. If you settle with the collections agency for a reduced amount, be aware your record will state the account as "paid for less than the total due."

Inquiries - When a creditor or lender checks your credit it causes a "hard inquiry" to be listed on your credit report. These hard inquiries stay on your report for up to two years, and they can cause a slight drop in your credit score if there are too many of them. When an employer checks your credit or when you check your own credit online, you may see a harmless "soft inquiry" on your credit report. Soft inquiries, which also remain on your report for up to 2 years, do not cause a drop in your credit score and do not appear when a business checks your credit.

Judgments - Most judgments, including small claims, civil and child support, will remain on your credit report for 7 years from the filing date.

Late Payments - If you are late with a payment, the 30-180 day delinquency can stay on your credit report for up to 7 years.

Tax Liens - City, county, state and federal tax liens are especially harmful and can remain on your credit report indefinitely.

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Federal Fair Credit Reporting Act

• The federal Fair Credit Reporting Act (FCRA) is designed to promote accuracy, fairness, and privacy of information in the files of every "consumer reporting agency" (CRA). Most CRAs are credit bureaus that gather and sell information about you-such as if you pay your bills on time or have filed bankruptcy-to creditors, employers, landlords, and other businesses. You can find the complete text of the FCRA, 15 U.S.C. 1681-1681u, at the Federal Trade Commission's web site. The FCRA gives you specific rights, as outlined below. You may have additional rights under state law. You may contact a state or local consumer protection agency or a state attorney general to learn those rights.

• If you tell a CRA that your file contains inaccurate information, the CRA must investigate the items (usually within 30 days) by presenting to its information source all relevant evidence you submit, unless your dispute is frivolous. The source must review your evidence and report it's finding to the CRA. (The source also must advise national CRAs-to which it has provided data-of any error.) The CRA must give you a written report of the investigation, and a copy of your report if the investigation results in any change. If the CRA's investigation does not resolve the dispute, you may add a brief statement to your file. The CRA must normally include a summary of your statement in future reports. If an item is deleted or a dispute statement is filed, you may ask that anyone who has recently received your report may be notified of the change.

• A CRA must remove or correct inaccurate or unverified information from its files, usually within 30 days after you dispute it. However, the CRA is not required to remove accurate data from your file unless it is outdated (as described below) or cannot be verified. If your dispute results in any change to your report, the CRA cannot reinsert into your file a disputed item unless the information source verifies its accuracy and completeness. In addition, the CRA must give you a written notice telling you it has reinserted the item. The notice must include the name, address and phone number of the information source.

• If you tell anyone, such as a creditor who reports to a CRA-that you dispute an item, they may not then report the information to a CRA without including a notice of your dispute. In addition, once you've notified the source of the error in writing, it may not continue to report the information if it is, in fact, an error.

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How Scoring Helps You

Credit scores have made big improvements in the credit process. Because of credit scores:

• People can get loans faster. Scores can be delivered almost instantaneously, helping lenders speed up loan approvals. Today many credit decisions can be made within minutes. Even a mortgage application can be approved in hours instead of weeks for borrowers who score above a lender's "score cutoff". Scoring also allows retail stores, Internet sites and other lenders to make "instant credit" decisions.
• Credit decisions are fairer. Using credit scoring, lenders can focus only on the facts related to credit risk, rather than their personal feelings. Factors like your gender, race, religion, nationality and marital status are not considered by credit scoring.
• Credit "mistakes" count for less. If you have had poor credit performance in the past, credit scoring doesn't let that haunt you forever. Past credit problems fade as time passes and as recent good payment patterns show up on your credit report. Unlike so-called "knock out rules" that turn down borrowers based solely on a past problem in their file, credit scoring weighs all of the credit-related information, both good and bad, in your credit report.
• More credit is available. Lenders who use credit scoring can approve more loans, because credit scoring gives them more precise information on which to base credit decisions. It allows lenders to identify individuals who are likely to perform well in the future, even though their credit report shows past problems. Even people whose scores are lower than a lender's cutoff for "automatic approval" benefit from scoring. Many lenders offer a choice of credit products geared to different risk levels. Most have their own separate guidelines, so if one lender turns you down, another may approve your loan. The use of credit scores gives lenders the confidence to offer credit to more people, since they have a better understanding of the risk they are taking on.

Credit Rates are Lower Overall

With more credit available, the cost of credit for borrowers is decreasing. Automated credit processes, including credit scoring, make the credit granting process more efficient and less costly for lenders, who in turn have passed these savings on to their customers. By controlling credit losses using scoring, lenders can make rates lower overall. Mortgage rates are lower in the United States than in Europe, for example, in part because of the information - including credit scores - available to lenders here. Knowing and improving your score can also lead to more favorable interest rates.

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How Errors Occur

When a credit report contains errors, it is often because the report is incomplete, or contains information about someone else. This typically happens because:

• The person applied for credit under a different name.
• Someone made a clerical error in reading or entering name or address information from an application.
• The person gave an inaccurate Social Security Number, or the number was misread by the creditor.
• Loan or credit card payments were inadvertently applied to the wrong account.

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Disputing

What to do:

You should begin the dispute process by contacting the creditor responsible for the inaccuracy. You can find the contact information for each of your creditors at the end of your credit report.

You can also contact an eCreditAdvisor Representative to discuss the inaccuracy. Because eCreditAdvisor is not a credit bureau, we cannot correct the inaccuracy for you; however, we are happy to discuss your credit report and answer any questions you may have.

To dispute inaccurate information directly with the credit reporting agencies, you must explain the inaccuracies in writing. Include copies of documents that support your position. You can also include a copy of your credit report, and mark the items in question.

• Your full name.
• Your complete mailing address.
• Your date of birth.
• Your Social Security number.
• The name and account number of the creditor and item in question.
• The reason for your disagreement with the disputed item-be specific.
• Your signature.

Send your letter via certified mail and save the receipt. Save copies of your dispute letter and all enclosures. This information should be filed away to document your communication with your creditors and the credit reporting agencies.

Please note:

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Getting Negative Comments Removed

1. Credit bureaus receive thousands of disputes each day. They additionally receive 30 to 40 million bits of new information daily. It is impossible to not make errors with such a vast amount of information being processed daily. Very often the technician is just plain to tired to be entirely accurate. And often times an item is deleted in absolute error. A deletion is your goal.
2. It is possible that the technician is too tired or lazy to research your one entry. Therefore, they simply delete it. This is simple human nature but the result is the same.
3. Your third hope is that the creditor they (3 bureaus) contact makes an error; has previously destroyed your record (many companies destroy information after 25 months to make room for new data) or is simply too tired to pay close attention and tells the bureau it cannot be verified. The item must now be deleted.

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Why can't eCreditAdvisor use the credit reports I have?

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ID Fraud and Identity Theft

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.

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.

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 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.

Identity theft is one of the nation's fastest-growing crimes, affecting more than 9 million people each year. The more you know about this prevalent crime, the better prepared you will be to protect yourself. Identity thieves can get hold of your personal information in a variety of sneaky and illegal ways:

• They go through your mail and take your bank and credit card statements, pre-approved credit offers, and tax information
• They complete a "change of address form" and reroute your mail to another location.

• They steal your wallet or purse containing your personal identification and credit cards.
• They "dumpster dive", rummaging through trash bins for your personal information such as unshredded credit card and loan applications.
• They "shoulder surf" at ATM machines and phone booths in order to capture PIN numbers.

• They buy your personal information from "inside" sources. For instance, an identity thief may pay a store employee for a copy of your credit application

• Call your credit card company and ask to change the mailing address on your credit card account. Then, they run up the charges on your credit card. Because your bills are being sent to the new address, it may take some time before you realize what's going on.
• Use your name, date of birth and SSN, to open a new credit card account. They use the credit card and don't pay the bills. Or, sometimes they make the minimum payment every month so that the activity can go on, unnoticed, for months.
• Establish phone or wireless service in your name.
• Open a checking account in your name and write bad checks.
• File for bankruptcy under your name to avoid paying the debts they've incurred as you.

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Credit Statistics and the Bureaus

• On average, today's consumer has a total of 11 credit obligations on record at the credit bureau.
• On average, today's consumers are paying their bills on time. Fewer than 4 out of 10 have ever been 30 days or more late on a payment.
• About 48% of credit card holders carry a balance of less than $1,000. About 54% carry a balance less than $5,000. About 10% of credit holders carry a balance of more than $10,000.
• The typical consumer has access to $12,190 on all credit cards combined. More than half the consumer population is using less than 30% of their total limit.
• The average consumer's oldest obligation is 13 years old. Only 1 in 20 consumers had a credit history of less than 2 years.

So why do Americans blindly trust three corporate entities with questionable histories and cutthroat profit-seeking motivations to play such a critical role in almost every aspect of their financial lives? And why do consumers sometimes even feel guilty going up against these larger than life conglomerates? Unfortunately, that's just the way it is.