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Credit FAQ

Credit Q & A

  • Q. Do I need to review my credit reports? ...
  • A. Yes. You should review at least one of the three major credit bureaus reports quarterly. Otherwise, you do not know if inaccurate or incomplete information is impacting your credit score.
  • Q. Who reviews my credit reports? ...
  • A. Employers, creditors, merchants, landlords, real estate agents, and virtually anyone you want to do business with has a permissible purpose to review your credit reports.
  • Q. Do each of the three major credit bureaus report the same information on me? ...
  • A. No. Reporting is voluntary. They may report to none, one, two, or all three of the bureaus.
  • Q. What is a good credit score?
  • A. On average, Americans have a 695 FICO score. The best interest rates are available for those with a 720 or higher credit score. The very best rates are available for those with a 760+ credit score.
  • Q. What can I do to improve my credit score?
  • A. The very first step is to review your credit reports. Almost every consumer has inaccurate or incomplete information on their reports. In such cases, they must engage in credit repair through the dispute process to have it removed, or they need to learn and practice the basic precepts and fundamentals of the credit score game.
  • Q. How do I build positive credit?
  • A. Practice the Disciplined Credit Philosophy. The key factor in this is establishing and following a budget.
  • Q. Do negative items on my credit report impact my credit score?
  • A. It depends on how old the item is. A negative item will cause an immediate drop in your credit score. As it becomes older and positive items appear on your report, the negatives have an increasingly less affect upon your score.
  • Q. How long do negative items stay on my credit report?
  • A. The Fair Credit Reporting Act provides for a bankruptcy to remain for 10 years; collection accounts and charged-off debt remain for 7 1/2 years; all other adverse items must be removed after 7 years.
  • Q. Can I remove inaccurate or incomplete negative items from my credit report myself?
  • A. Yes. There are 'credit repair specialists' who make a living off of providing credit-repair services.They, however, perform a service that you should complete yourself. Only you, by law, can send a dispute to a lender, and you know your situation best. Plus, doing it yourself is cheaper when you consider the minimal time you spend in DIY credit repair against how many hours you must work to pay someone a fee for that service.
  • Q. How do I build a credit score?
  • A. Anytime you do business with a company that reports to the credit bureaus, you are building a credit score.
  • Q. Is credit good or bad?
  • A. The answer to this question lies in whether it is used according to the Disciplined Credit Philosophy or whether it is used without a plan. Those who use credit in an undisciplined manner eventually find themselves in a financial squeeze and heading to collections or bankruptcy. On the other hand, disciplined players have the buying power to get themselves out of squeezes, and they enjoy the lowest interest rates.
  • Q. How much credit do I need?
  • A. This depends upon how you use credit. To achieve a top tier credit score, you need enough to assure you owe less than 10% of the credit limit on every credit card when your credit score is pulled.
  • Q. As a parent, can I help my children build credit?
  • A. Yes. You can make them authorized users on your credit cards.
  • Q. If a debt I owe is not reported on my credit report, do I still owe the debt?
  • A. Yes. However, statutes of limitations apply that limit how long a lender can take you to court to force payment.
  • Q. How long do positive items remain on my credit report?
  • A. No law regulates this, but as long as an account is active, it will stay on your report. Inactive accounts are removed under the credit bureaus' 10 year rule from the last activity.
  • Q. How do I remove an inaccurate, incomplete, or negative item from my credit report?
  • A. There are two ways. You can wait for the Fair Credit Reporting Act statute of limitations to expire, or you can engage in credit repair and file a dispute letter with the credit bureau and/or creditor.
  • Q. What are pre-paid credit cards?
  • A. There is no such thing as a pre-paid credit card. A credit card is ether secured or unsecured; both extend credit and report payments or non-payments to the credit bureaus. These so-called pre-paid credit cards are not credit cards at all; they are debit cards. Credit card companies use the money you pre-pay on the card to pay for your purchases. There is no credit extended. Staying away from so-called pre-paid credit cards, as they do nothing to build your credit.
  • Q. If I make extra payments, will it show up on my credit report?
  • A. No. It will reduce your balance, which will lower the utilization rate on the account. This will help increase your credit score.
  • Q. What is a pre-paid credit card?
  • A. There is no such thing. Credit cards fall into two classes: secured and unsecured. A pre-paid card is actually a debit card that is not reported to the credit bureaus.
  • Q. Is buying or leasing a vehicle best for my credit?
  • A. There is no difference on your credit for a purchase or a lease; either option impacts your credit based upon your payment history.
  • Q. What is the most important factor in building my credit score?
  • A. There are five key factors that FICO uses to determine a credit score. Payment history is the most important. The amount of debt is the second biggest factor.