Table of Contents Title Page Acknowledgments Preface Introduction CHAPTER - Determining Your Current Financial and Credit Situation What Is Debt? Determining Your Current Financial Situation So, Where Do You Stand Financially? Identifying Credit Mistakes You’ve Made in the Past Setting Your Financial Goals and Objectives in Today’s Economy Your Financial Goals What’s Next? CHAPTER - The Credit Reporting Agencies What Is a Credit Reporting Agency, Anyway? In Their Own Words What’s Next? CHAPTER - Credit Reports 101 A Preview of How Credit Scores Work What Is a Credit Report? The Anatomy of Your Credit Report How the Information on Your Credit Report Is Compiled Who Can View My Credit Report? Why Your Credit Reports Are So Important What’s Next? CHAPTER - Solving Credit Score Mysteries Prepare to Get a Bit Confused by Credit Scores Understanding Credit Score Ranges E = MC Is a Complex Formula Your Credit Score May Seem Just as Complex Credit Score vs FICO Score: What’s the Difference? What’s a VantageScore 2.0? The Inside Scoop on FICO Scores from the Company that Calculates Them What’s Next? CHAPTER - Obtaining Your Credit Reports and Credit Scores How to Request Free Copies of Your Credit Report Annually Obtaining Your Credit Report Online Submitting Your Request by U.S Mail Requesting Your Free Credit Report by Telephone The Cost of Obtaining Additional or More Frequent Credit Reports What About Your Credit Score? The Benefits of a Three-in-One Credit Report You Have Your Credit Report, Now What? What Your Creditors Have to Say About Your Credit Report Figuring Out What Needs to Happen Next Misconceptions and Bad Information Can Lead to Costly Mistakes What’s Next? CHAPTER - How to Update or Fix Your Credit Report Reviewing Your Credit Reports The Types of Information That Can Be Removed from Your Credit Reports How to Correct Errors Listed in Your Credit Reports Initiating Disputes with the Credit Reporting Agencies Negotiating with Your Creditors Know Your Legal Rights as a Consumer Working with a Credit Counseling Company Meet Collections Expert Michelle Dunn What’s Next? CHAPTER - Ten Strategies for Improving Your Credit Rating Your Actions Always Impact Your Credit Worthiness Strategies for Improving Your Credit Rating Strategy 1: Pay Your Bills on Time, Every Time Strategy 2: Keep Your Credit Card Balances Low Strategy 3: Having a Long History Counts, So Don’t Close Unused Accounts Strategy 4: Only Apply for Credit When Needed, Then Shop for the Best Rates on Strategy 5: Separate Your Accounts After a Divorce Strategy 6: Correct Inaccuracies within Your Credit Reports and Make Sure Old Strategy 7: Avoid Too Many Hard Inquiries Strategy 8: Avoid Bankruptcy, If Possible Strategy 9: Avoid Consolidating Balances onto One Credit Card Strategy 10: Negotiate with Your Creditors or Collection Agencies Avoiding Credit Repair Scams Learn How to Better Manage Your Finances and Expenses Advice from a Credit and Debt Counseling Expert What’s Next? CHAPTER - Credit Card Management Strategies Credit Cards Can Be Your Best Friend or Biggest Credit Foe What Are Credit Cards? The Potential Benefits of Credit Cards The Potential Drawbacks of Credit Cards What to Consider Before Using a Credit Card Types of Credit Cards Using Credit Cards Intelligently Credit Card Lingo You Should Understand Shop Around for the Best Credit Card Deals Managing Your Existing Credit Card Accounts Take Advantage of Special Balance Transfer Offers Should You Consider Debt Consolidation? What to Do if Your Credit Card(s) Get Lost or Stolen Advice from Experts Representing Three Credit Card Comparison Websites What’s Next? CHAPTER - Finding and Obtaining the Best Rate on an Auto Loan What Happens If You Don’t Pay? Understanding Your Credit History Your Credit Reports and Credit Score Directly Impact Vehicle Financing Shop Around for the Best Vehicle Financing Options Vehicle Financing Options for People with Bad Credit What’s Next? CHAPTER 10 - Finding and Obtaining a Mortgage Pre-Qualifying for a Mortgage Makes Sense There Are Many Reasons to Pre-Qualify for a Mortgage Finding a Mortgage Broker or Lender What Is a Mortgage Broker? Fewer Mortgage Options Are Available These Days Money-Saving Strategies for Mortgage Shoppers Pre-Qualification vs Pre-Approval You’re Pre-Qualified or Pre-Approved, Now What? What If Your Application Gets Rejected? What’s Next? CHAPTER 11 - All About Refinancing in a Tough Economy How Recent Changes in the Mortgage Industry Will Impact You Refinancing 101 Popular Reasons Why People Choose to Refinance The Paperwork You’ll Need to Refinance Meet Greg McBride, Bankrate.com’s Senior Financial Analyst What’s Next? CHAPTER 12 - Getting the Help You Need to Fix Your Credit Problems Being too Proud to Ask for Help Can Lead to Worse Problems Solutions for People with Credit and Financial Problems Strategies for Finding a Qualified Financial Planner Credit Counselors Are Available to Help You Beware of Scams Debt Consolidation May Be a Viable Option Don’t Be Afraid to Seek Help Advice from a Certified Financial Planner What’s Next? CHAPTER 13 - Identity Theft and Bankruptcy Two Credit Rating Killers to Avoid How Many People Out There Are Posing As You? Watch Out! Identity Theft Is the Fastest Growing Crime in America How Criminals Obtain Your Private Information You May Already Be a Victim of Identity Theft and Not Even Know It What to Do if You Become an Identity Theft Victim Consider Using An Identity Theft Prevention Service Meet Todd David, CEO and Founder of LifeLock Thoughts About Bankruptcy from an Attorney What’s Next? CHAPTER 14 - Managing Your Finances There’s an App For That Mint.com Is an Online and App Tool Manage Your Credit Cards with a Smartphone App Now It’s Your Turn Glossary Index Subscribe to Entrepreneur Magazine Copyright Page Credit Card Expense Manager app credit cards about annual fees annual percentage rate (APR) applying for approvals apps for managing automatic payments of average daily balance balance consolidation balance transfers benefits of calculators for cardholder agreements cash advance fees charge cards vs charge-offs credit limits credit scores and debt consolidation of default rates drawbacks of fees/offers, evaluating FICO credit scores and financial problems with finding best deals grace periods impact on credit reports/scores introductory rates late fees laws governing long-term cost of lost/stolen maintaining low balances managing minimizing fees minimum payments misleading offers mismanagement of online comparison services online management of online payments, fees for over-the-limit fee rewards cards store credit cards telephone payments, fees for terms of transaction fees types of credit counseling benefits of consumer expectations of cost of counseling process defined disputes and finding reputable impact on credit ratings/scores information required for negotiating with creditors pitfalls in scams in services provided timing of credit histories See credit reports credit monitoring services credit problems See also financial problems asking for help avoiding bankruptcy as solution to causes credit counseling for See credit counseling debt consolidation as solution to debt management as solution to repairing seeking expert advice credit ratings See also credit scores; FICO credit scores about applying for credit and bankruptcy and See bankruptcy credit scores and credit worthiness and divorce and impact of credit counseling on strategies for improving timely bill paying unused credit card accounts and credit reporting agencies credit reports about auto loans and collection agencies and components of correcting/disputing errors in credit scores in defined identity theft, detecting in See also identity theft impact of inquiries negative information in negotiating with creditors obtaining personal statements in purchasing removing information from requesting free copies requests by others to review reviewing for accuracy source of information for three-in-one reports who can view your credit scores See also credit ratings; FICO credit scores about auto loans and basis for calculation of collection agencies and credit cards and credit ratings and discrepancies in impact of credit counseling on as indicator of credit worthiness obtaining ranges in weighting of credit utilization credit worthiness CreditCards.Com CreditDonkey.com D David, Todd debit cards debt See also specific type of loan by name debt collectors See also collection agencies debt consolidation debt counseling See credit counseling debt management plans (DMP) Debt Manager app default rates disputes divorce Dunn, Michelle E email scams Equifax equity expenses, managing See also managing personal finances Experian F Fair Debt Collection Practices Act Fair Isaac Corporation Scores See FICO credit scores FICO credit scores See also credit ratings; credit scores about authenticity of calculation of closing unused accounts and collection actions and credit cards and credit scores vs differences in evaluating geographic averages in improving inquiries and misconceptions about obtaining rebuilding reporting requirements finances, evaluating See managing personal finances financial goals See also managing personal finances financial management, personal See managing personal finances financial planners financial problems See also credit problems asking for help bankruptcy as solution to See also bankruptcy credit cards and indicators of solutions to fixed rate loans Foss, Kimberly fraud alerts G general use credit cards grace periods H hard inquiries helpwithbills.org home equity lines of credit (HELOC) home equity loans I identity theft about avoiding how it’s done indicators of misconceptions about prevention services protecting your identity types of activities what victims should inquiries interest rates about on long-term loans lowering L late fees, credit card LifeLock loan savings calculator loans See also specific type of loan by name lost/stolen credit cards M managing personal finances about advice for improving auto loans credit mistakes credit/charge card balances current debt debt summary income living expenses miscellaneous debt savings/investments student loans tools for McBride, Greg minimum payments on credit cards Mint.com mortgage refinance calculators mortgages See also refinancing evaluating loan offers industry changes in information resources loan modifications lowering interest rates in money-saving strategies monthly payment calculations mortgage brokers/lenders pre-approval pre-payment penalties pre-qualification rejected applications terms MyFICO.com N National Foundation for Credit Counseling (NFCC) negative credit report information negotiating with creditors See also credit counseling O online account security online banking online calculators online credit report requests online loan/debt calculators See also Bankrate.com over spending over-the-limit fee P payday loans payments, timely Pelkey Sdeo, Kimberly phone credit report requests positive credit report information See also negative credit report information pre-approvals for mortgages premium credit cards pre-paid credit cards pre-payment penalties pre-qualifying for mortgages public record information Q Quicken R ratings See credit ratings refinancing See also mortgages auto loans closing costs considerations before defined documentation for grace periods pre-payment penalties and qualifying for reasons for requirements for repairing/rebuilding credit repossession S scams secured credit secured credit cards Social Security numbers soft inquiries software, personal finance stolen/lost credit cards sub-prime credit cards T telephone credit report requests three-in-one credit reports trade lines traditional credit cards Tran, Charles transaction fees TransUnion U unsecured credit unused credit card accounts upside down on loans V VantageScore 2.0 system variable rate loans vehicle repossession W Watts, Craig Wood, Bradley M Woolsey, Ben Publisher: Entrepreneur Press Cover Design: Beth Hansen-Winter Production and Composition: Eliot House Productions © 2013 by Entrepreneur Press All rights reserved Reproduction or translation of any part of this work beyond that permitted by Section 107 or 108 of the 1976 United States Copyright Act without permission of the copyright owner is unlawful Requests for permission or further information should be addressed to the Business Products Division, Entrepreneur Media Inc This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services If legal advice or other expert assistance is required, the services of a competent professional person should be sought Library of Congress Cataloging-in-Publication Data Rich, Jason p cm eISBN : 978-1-613-08229-4 Credit bureaus—United States Consumer credit—United States I Title HG3751.7.R53 2013 332.7—dc23 2012034552 Get Entrepreneur Magazine to help grow your business Don’t miss out on must-have tips, techniques, trends and strategies that business owners need to help build and grow their businesses Learn what other smart business owners know Subscribe to Entrepreneur! 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Knowing what the credit reporting agencies do, how they work, and what goes into calculating your credit scores, for example, is the first... to the credit reporting agencies (formally known as credit bureaus) Negative information in turn gets added to your credit reports The information within your credit reports is then used by the. .. with creditors and lenders; the purpose of the three credit reporting agencies (formally known as credit bureaus); what credit reports are all about and what s contained within them; and the impact