FICO 08′

With all the hubbub surrounding FICO 08, we thought we owed it to our readers to separate the truth from the myth. This is Fair Isaac’s “answer” to the problem of authorized users and other complications with the credit score world. It is a software program to be used by all three credit bureaus to weed out authorized users and prevent their scores from being accepted by lenders as “legitimate.” It also aims to do much more that could put millions of credit card users in financial jeopardy. Fair Isaac, who incidentally own Experian, said that Experian would begin implementing the new software in September with the other two agencies to follow sometime next year. Well, September has come and gone and no changes have been made. Apparently it has been easier for critics to confuse the public, than to actually implement the software.

Even amid all the controversy surrounding the purchase of trade lines, experts in the business have good reason to believe itwill never happen. Here are three legitimate reasons why FICO 08 won’t happen:

1. It is not in the interest of any of the three credit agencies to promote or support the use of FICO 08.

If it is implemented, the agencies would report the exact same credit score for each individual. Presently, each agency comes up with the score through different means; Experian uses ‘Fair Isaac Version2, TransUnion uses Emperica 95 and Equifax uses Beacon 5.0, providing three different scores from which lenders take the middle. If FICO 08 is used, all three agencies will come up with the same score. This would ultimately negate the need for three agencies, when one would be sufficient.

Craig Watts, a spokesman for Fair Isaac said regarding the proposed release of FICO 08, “Adopting the FICO blueprint to get the maximum benefit for each repository is difficult because each uses unique data. When we update the FICO score we need to do that individually with each credit reporting agency.” Implementing this new software is apparently much more complicated, which may explain why no one has yet begun using it.

2. It would be detrimental to the millions of families facing foreclosure.

With the real estate market taking a dive and countless people facing foreclosure (due mainly to lenders and their “creative loan option”), to prevent these same Americans from boosting their credit score through trade lines in order to refinance and get a loan they can afford, would send countless families into foreclosure and our economy spinning out of control. Experts know that lenders and Wall Street banks have attempted to push this program forward as they have the most to lose by people purchasing trade lines and refinancing into affordable loans that they can pay. A loan at a lower rate means hundreds of dollars in the borrowers pockets every month and not the banks’. Even Presidential candidates have remarked that Wall St. banks have stepped up lobbying over the issue of sub-prime lending as underwriting practices have come under scrutiny. They don’t want legislation that would ultimately protect the consumer despite recent moves to do so. This is why FICO 08 is their only hope, to continue to line their pockets at the expense of homeowners and to avoid greater speculation regarding their abusive lending practices.

3. FICO 08 could bring legal action against Fair Isaac.

Another aspect of FICO 08 is to redistribute credit users into 12 new categories effecting millions of people, many negatively. With the new categories, everyone will shift somewhat and even a slight change downward could mean the difference between a great and a poor credit score. This shift could ultimately cost a consumer hundreds of dollars a month on a mortgage. Experts say that women are more likely to be ill effected as they are often “authorized users” on their husband’s credit cards. The shift would bring down the average score of a couple seeking a loan, hurting their chances of qualifying for one they can afford. All that said, legal experts predict a civil action lawsuit on the horizon for Fair Isaac. Not ignorant of this possibility, it is unlikely that they would be willing to risk great financial risk and negative press over a software program, especially if it fails to benefit all three credit bureaus.

In addition to these reasons, the fact that none of the credit agencies have yet to implement the system, leads market experts to agree that it simply may not happen. Despite what the critics have to say about the acceptance of trade lines and Fair Isaac’s full-fledged marketing campaign to confuse and mislead the public to think the loophole has closed, the remains open. So where does that leave us as a business restoring hope to financially troubled families? Where does this leave you as a consumer trying to keep your home? Trade lines are still the best and fastest method to boost your credit score in 30-45 days, refinance, keep your home and experience financial stability.

Ted Stearns, owner of TradeLine Solutions, a San Diego based credit aide company, is not a newcomer to the world of finance. His experience began as an options and futures broker with Currency Trading International about 12 years ago. Since then he has been a financial advisor who hosted a live radio show on AM 1000 KCEO for four years, educating callers and listeners on stocks, bonds and various investments. Over the last five years he has delved into the nationwide mortgage business informing both clients and lenders alike in the arena of purchasing and refinancing. With all former experience as his guide, he has come into the world of trade lines to help clients better their financial situation. Able to glean from the perspective of both lender and client, he has the unique ability to see the need of the purchaser and meet it head on. Article Source: http://EzineArticles.com/?expert=Ted_J_Stearns

Credit Repair - Check Your Score

Four Reasons to Check Your Credit By Rick Sauder

Be honest: When was the last time you checked your credit report?
Almost half of all consumers never check to see what information the three major credit bureaus have compiled about them. And just one in five people know their credit score, according to a recent survey by TrueCredit.com, a subsidiary of the TransUnion credit bureau.1
Yet knowing what’s lurking on your credit report can help you avoid problems with everything from landing a job to buying a home.
“Too many people don’t fully appreciate the tremendous effect a credit report has on them,” says Steve Weisman, author of 50 Ways to Protect Your Identity and Your Credit. “Your credit score can affect whether you get the job you apply for, it can determine whether you’re approved for a car loan or a home loan and what mortgage rate you’re offered. It can even affect you when you apply for insurance. And then there’s the whole issue of identity theft.”
The good news is that checking your credit report has never been easier. You’re entitled by law to receive a free report from each credit reporting agency once a year, and the agencies are required to fix any errors in a timely fashion. All you need to do to obtain your free report is to contact the major credit bureaus:

• Equifax or 1-800-685-1111
• Experian or 1-888-397-3742
• TransUnion or 1-800-916-8800

Still need to be convinced that monitoring your credit report is a wise practice? Here are four compelling reasons to find out what’s on your report.
1. Avoid unpleasant surprises
Typically, companies will access your credit report before they lend you money or extend credit for a wide variety of reasons, such as buying a new car, obtaining a home mortgage or renting an apartment. Not only will a good credit score land you the loan or line of credit, but it also could reduce your interest rate.
The use of credit reports also is expanding beyond the traditional areas. Many employers now check the credit reports of prospective employees, and insurance companies use them to spot potential high-risk applicants.
Buying a home and seeking a job are major life events, and the last thing you need is to have them derailed by a surprise in your credit report. That’s why it’s important to know what’s in your report before you need it.
“The problem with waiting until something comes up is that fixing a credit report can take months,” Weisman says. “If you’re applying for a job, for example, that job might not still be around in six months.”
A credit report surprise also can turn buying a home into a nail-biting nightmare, adds Linda Leitz, a financial planner in Colorado Springs, Colo. She remembers a situation in which newlywed clients were buying their first home when the wife discovered that two former college roommates had skipped out on a house lease without paying their portion of the obligation.
Because Leitz’s client’s name was on the lease, the bad debt showed up on her credit report, and she was forced to negotiate a settlement with the former landlord before the mortgage was approved. “It turned out to be an expensive lesson, and it added a lot of stress to the home-buying process,” Leitz says.
2. Protect yourself from identity theft
Identity theft is one of the nation’s fast-growing crimes, according to the U.S. Department of Justice. A recent federal survey indicated that more than 27 million Americans were victims of identity theft during a five-year period ending in 2003.2

There are steps you can take to make it hard for would-be crooks to steal your personal information, but in today’s information-based society it has become impossible to totally eliminate your exposure. Being alert to unauthorized charges on your credit cards is one way to spot identity theft early, but what if the thief obtains a new card using your name? That’s where your credit report can be a big help.
Fraudulent credit accounts and loans in your name will show up on your credit report. Getting fraudulent credit accounts removed from your report can be difficult and time consuming, Weisman says, and that’s why it’s imperative to check your information frequently.
Although the law allows you to obtain only one free report per credit bureau per year, Weisman recommends asking for a report from each company at different times throughout the year. That way you can have a fresh look at your credit report every four months without any cost to you.
3. Correct mistakes
Credit bureaus maintain credit reports on about 19 million people. In addition to credit histories, they gather information ranging from your name and address to your Social Security number and employment history. Given the huge number of people in their files and the large amounts of information they compile, it’s not surprising, Weisman says, that mistakes occur frequently.
“I don’t know anybody who never found a mistake on their credit report,” he says. They’re usually small mistakes, but they should still be corrected to help you establish your identity in the event that a larger problem would arise.
Federal law requires credit bureaus to investigate notification of errors within 45 days, but as a practical matter it can take much longer to have a mistake resolved. In addition to mistakes, credit reports also may contain old information that’s no longer applicable. You can request that that information be removed, Weisman says.
4. Build your credit score
Your credit report is more than just a potential liability. It’s also a tool that helps you establish a history of good credit, which in turn enables you to establish yourself as a reliable and trustworthy individual. This is especially important for young people starting out on their own and for newly divorced or widowed individuals.
For creditors, the most import feature of your credit report is your credit score. The credit score is simply a number, usually somewhere between 300 and 850, that reflects your creditworthiness based on a variety of factors. A score below 620 is generally a red flag, while scores above 660 are usually regarded as positive.
You can move your score higher in three ways: by paying your bills on time, by lowering your debt, and by sticking with it. The scoring formula gives heavier weight to more-recent events, and negative incidents eventually drop off. Even a bankruptcy generally is removed 10 years after its successful resolution.
Financial planner Leitz cautions people to beware of “quick fixes” for boosting your credit score. For example, one popular myth is that taking out multiple credit cards and paying off the balance each month will improve your credit score. In reality, this could actually be a concern for a lender because of the large cumulative credit limit available to you on your multiple cards. It’s better to have just one or two cards and manage them well, Leitz says.
Also be alert to what’s not on your credit report. If you make regular payments to a company but they aren’t being reflected on your credit report, ask the company to begin reporting your activity to the three credit bureaus so you can build a positive track record.
The one point on which nearly all financial planners and advisors agree is that keeping abreast of your credit rating is an essential financial practice. “Checking your credit report is like getting screened for a disease,” Leitz says. “The earlier you find a problem, the easier it is to fix.”
This information is general in nature, is provided for educational purposes only, and should not be construed as financial or legal advice.

Credit Repair - Apex Credit Services

Four Reasons to Check Your Credit By Rick Sauder

Be honest: When was the last time you checked your credit report?
Almost half of all consumers never check to see what information the three major credit bureaus have compiled about them. And just one in five people know their credit score, according to a recent survey by TrueCredit.com, a subsidiary of the TransUnion credit bureau.1
Yet knowing what’s lurking on your credit report can help you avoid problems with everything from landing a job to buying a home.
“Too many people don’t fully appreciate the tremendous effect a credit report has on them,” says Steve Weisman, author of 50 Ways to Protect Your Identity and Your Credit. “Your credit score can affect whether you get the job you apply for, it can determine whether you’re approved for a car loan or a home loan and what mortgage rate you’re offered. It can even affect you when you apply for insurance. And then there’s the whole issue of identity theft.”
The good news is that checking your credit report has never been easier. You’re entitled by law to receive a free report from each credit reporting agency once a year, and the agencies are required to fix any errors in a timely fashion. All you need to do to obtain your free report is to contact the major credit bureaus:

• Equifax or 1-800-685-1111
• Experian or 1-888-397-3742
• TransUnion or 1-800-916-8800

Still need to be convinced that monitoring your credit report is a wise practice? Here are four compelling reasons to find out what’s on your report.
1. Avoid unpleasant surprises
Typically, companies will access your credit report before they lend you money or extend credit for a wide variety of reasons, such as buying a new car, obtaining a home mortgage or renting an apartment. Not only will a good credit score land you the loan or line of credit, but it also could reduce your interest rate.
The use of credit reports also is expanding beyond the traditional areas. Many employers now check the credit reports of prospective employees, and insurance companies use them to spot potential high-risk applicants.
Buying a home and seeking a job are major life events, and the last thing you need is to have them derailed by a surprise in your credit report. That’s why it’s important to know what’s in your report before you need it.
“The problem with waiting until something comes up is that fixing a credit report can take months,” Weisman says. “If you’re applying for a job, for example, that job might not still be around in six months.”
A credit report surprise also can turn buying a home into a nail-biting nightmare, adds Linda Leitz, a financial planner in Colorado Springs, Colo. She remembers a situation in which newlywed clients were buying their first home when the wife discovered that two former college roommates had skipped out on a house lease without paying their portion of the obligation.
Because Leitz’s client’s name was on the lease, the bad debt showed up on her credit report, and she was forced to negotiate a settlement with the former landlord before the mortgage was approved. “It turned out to be an expensive lesson, and it added a lot of stress to the home-buying process,” Leitz says.
2. Protect yourself from identity theft
Identity theft is one of the nation’s fast-growing crimes, according to the U.S. Department of Justice. A recent federal survey indicated that more than 27 million Americans were victims of identity theft during a five-year period ending in 2003.2

There are steps you can take to make it hard for would-be crooks to steal your personal information, but in today’s information-based society it has become impossible to totally eliminate your exposure. Being alert to unauthorized charges on your credit cards is one way to spot identity theft early, but what if the thief obtains a new card using your name? That’s where your credit report can be a big help.
Fraudulent credit accounts and loans in your name will show up on your credit report. Getting fraudulent credit accounts removed from your report can be difficult and time consuming, Weisman says, and that’s why it’s imperative to check your information frequently.
Although the law allows you to obtain only one free report per credit bureau per year, Weisman recommends asking for a report from each company at different times throughout the year. That way you can have a fresh look at your credit report every four months without any cost to you.
3. Correct mistakes
Credit bureaus maintain credit reports on about 19 million people. In addition to credit histories, they gather information ranging from your name and address to your Social Security number and employment history. Given the huge number of people in their files and the large amounts of information they compile, it’s not surprising, Weisman says, that mistakes occur frequently.
“I don’t know anybody who never found a mistake on their credit report,” he says. They’re usually small mistakes, but they should still be corrected to help you establish your identity in the event that a larger problem would arise.
Federal law requires credit bureaus to investigate notification of errors within 45 days, but as a practical matter it can take much longer to have a mistake resolved. In addition to mistakes, credit reports also may contain old information that’s no longer applicable. You can request that that information be removed, Weisman says.
4. Build your credit score
Your credit report is more than just a potential liability. It’s also a tool that helps you establish a history of good credit, which in turn enables you to establish yourself as a reliable and trustworthy individual. This is especially important for young people starting out on their own and for newly divorced or widowed individuals.
For creditors, the most import feature of your credit report is your credit score. The credit score is simply a number, usually somewhere between 300 and 850, that reflects your creditworthiness based on a variety of factors. A score below 620 is generally a red flag, while scores above 660 are usually regarded as positive.
You can move your score higher in three ways: by paying your bills on time, by lowering your debt, and by sticking with it. The scoring formula gives heavier weight to more-recent events, and negative incidents eventually drop off. Even a bankruptcy generally is removed 10 years after its successful resolution.
Financial planner Leitz cautions people to beware of “quick fixes” for boosting your credit score. For example, one popular myth is that taking out multiple credit cards and paying off the balance each month will improve your credit score. In reality, this could actually be a concern for a lender because of the large cumulative credit limit available to you on your multiple cards. It’s better to have just one or two cards and manage them well, Leitz says.
Also be alert to what’s not on your credit report. If you make regular payments to a company but they aren’t being reflected on your credit report, ask the company to begin reporting your activity to the three credit bureaus so you can build a positive track record.
The one point on which nearly all financial planners and advisors agree is that keeping abreast of your credit rating is an essential financial practice. “Checking your credit report is like getting screened for a disease,” Leitz says. “The earlier you find a problem, the easier it is to fix.”
This information is general in nature, is provided for educational purposes only, and should not be construed as financial or legal advice.

Credit Repair - Knowing Your Score

There are the three major credit bureaus (aka credit reporting agencies): Equifax (EQ), Experian (EX), and TransUnion (TU). You’ll need to find out all three of your FICO scores to properly grasp your overall credit picture.

What is the range of FICO scores?

FICO (aka Classic or BEACON) scores can range from 300 to 850, but the majority of scores usually fall within the above.

FICO, FAKO, HUH?

FICO, FAKO, Credit Score, PlusScore, ScoreX, Vantage are all the same right? WRONG!

FICO = The score lenders use and the only score you care about.

FAKO = Any score that isn’t a FICO. Most people like to buy the ScoreWatch product because you can quite often get updates as to your current EQ FICO score. myFICO Identity Theft Security Deluxe is similar to Score Watch except that is monitors TU. There is no FICO monitoring service for all three credit reporting agencies.

ScoreWatch: myFICO - Score Watch

myFICO Identity Theft Security Deluxe: myFICO - myFICO® Identity Theft Security Deluxe

myFICO - FICO Credit Scores; Get a Free Credit Report Online with our Score Watch Trial sells FICO scores for EQ, TU, and EX.

Online Personal Credit Reports & Credit Scores - TrueCredit or TransUnion sells FAKO scores only.

Yet www.transunioncs.com sells FICO (TU score only). I have no idea why transunion.com doesn’t sell FICO but transunioncs.com does.

Providian - Welcome or WaMu.com: Home of WaMu Free Checking offers a PFICO TU score to their credit card customers (PFICO is a real FICO score). These are called bankcard enhanced scores.

There are generally two reasons why you might not be able to get a score from MyFICO. Your score does not contain enough positive data to calculate a score, or there is a fraud alert on your file.

Classic or BEACON FICO scores are generally the best indicator of credit-worthiness and a good overall indicator of where your credit (mortgage, credit card, auto,etc.) stands.

Credit card enhanced (or bankcard enhanced scores) are specific indicators of credit worthiness with regards to credit cards only (not mortgages, auto, loans, etc.).

Auto-enhanced scores are specific indicators of credit worthiness with regards to an auto loan. Consumers cannot purchase auto-enhanced scores.

Your actual FICO score ranges from 300-850, remember you have three separate FICO scores for each credit reporting agency EQ, EX, and TU.

Scores higher than 720-750+ are ideal. Any higher really doesn’t matter. Once you get this high, you have excellent scores regardless.

Also, just because you have your score today doesn’t mean you can walk into the car dealership tomorrow and say “I have an 800+ FICO please give me the APR I want on my loan”, the lender may calculate a completely different FICO score and if you were to pull your FICO score again that day it may be different for you.

Remember, a FICO score is a quick look at the overall status of your credit. It may mean getting a better APR on the credit card you want, but it likely won’t determine whether you get the card or not (your credit report(s) will!).

How is my score calculated?

-35% affects Payment History. Meaning any lates; collections; charge offs; bankruptcies; judgments; liens or the such will hurt the score. All is time based, the older the information the less it is contributing to the scores.

-30% affects Utilization. It is best to have several accounts with low balances distributed then it is to have fewer accounts maxed out. To figure utilization: Balance (divided) by Credit Limit = percentage. Lower than 10% recommended per account, this is one of the fastest means for increasing the over all credit score.

-15% affects Established History. The longer you maintain open accounts with creditors the better. When first starting out of course this is not easy; but this is where getting added as an Authorized User to another persons established credit comes in best. Remember that the contributor must have an account that has long history; clean payment record; high credit limit; and low balance. Also need to check with the creditor to insure that they have a policy to report authorized user accounts to all three major credit reporting agencies.

Note: Authorized user accounts are the best way to go; since you are not legally responsible for the debt rather than Joint or Co-Signer accounts. Also, if this account starts to report negatively; these accounts are usually easier to remove from the credit reports by either contacting the creditor and requesting termination of the relationship; or disputing through the CRAs.

*NOTE* FICO MODELS STILL CALCULATE AUTHORIZED USERS AND WILL CONTINUE TO DO SO IN LIGHT OF THE EQUAL CREDIT OPPORTUNITY ACT. More info:

http://www,apexcreditservices.com/FairIsaac.cfm

-10% affects Inquiries. Don’t apply for credit unless you know you can get it or that you need to get it; unnecessary credit inquiries are going to hurt the scores - especially if your over all credit file is small to begin with.

Tip: When applying for credit pull your own credit report first (this is a soft hit and won’t drop your scores). With credit report in hand go visit your local banks or credit unions. Show them the reports; and don’t allow them to pull a credit report of their own unless they can say for sure that you will be approved, this way you save your self unnecessary pulls on your credit report if they decline you. If they say yes, you are approved, then they will need to pull credit report to seal the deal.

Mortgage & Auto industry has special rules for inquiries: all applications for credit resulting in pulled credit reports within a 14 day period of time will only count as one inquiry & will be suppressed from affecting credit scores for 30 days. So if you plan to go shopping for a mortgage or a car, do your research first picking what companies you want to apply with and do this all within a 2 week period of time so that the scores are not affected too much.

-10% affects Mix of Credit. Use different types of credit (revolving; installment; auto; mortgage…) evenly.

Also remember the advice which a lender gives you is productive for getting a loan; but not always good for the credit scores. If they tell you to consolidate and close accounts be careful how you go about this, most people’s compliance usually results in dropped credit scores. You are shrinking your overall available credit limit verses your balances… so remember you don’t want to hurt the utilization by consolidating and closing accounts behind you.

What types of information are NOT used in calculating my FICO score?

1. Your race, color, religion, national origin, sex or marital status

2. Your age

3. Your salary, occupation, title, employer, date employed or employment history

4. Where you live

5. Certain types of inquiries such as promotional, account review, insurance or employment related inquiries

6. Any information not found in your credit file

7. Any information that is not proven to be a predictive of future credit performance

How often does my score change?

Your credit file is continually updated with new information from your creditors. The FICO score is calculated based on the latest “snapshot” of information contained in your file at the time the score is requested. Therefore, your FICO score from a month ago is probably not the same score a lender would get from the credit reporting agency today. Fluctuations are quite common.

Why are my scores different?

Your scores may be different at each of the three main credit reporting agencies as the FICO score only considers the data in your credit file from that agency. If your score from the three credit reporting agencies is different, it is probably because the information those agencies have on you differs. Also keep in mind that there is a different FICO formula for each credit reporting agency.

How can I improve my score?

Use Apex Credit Services, LLC.  Both our credit restoration package and seasoned tradelines rapidly increase credit scores.

Credit Repair - New Complaint Processing

FTC Announces New Complaint-referral Program

http://www.ftc.gov/opa/2004/04/cra.htm

FTC Will Refer Consumer Complaints to Credit Bureaus

The Federal Trade Commission will refer consumer complaints to the three major national consumer reporting agencies (CRAs) under a new program announced today. The FTC will send the CRAs – Equifax, Experian, and TransUnion – certain complaints from consumers about disputed inaccuracies or incomplete information in the companies’ files. The CRAs will review the complaints, correct the files if necessary, and report the results to the FTC. The program implements a new provision in the federal Fair Credit Reporting Act (FCRA).

The CRAs collect information about consumers, including payment histories on their debts, and compile the information into “credit reports.” The CRAs provide these reports to lenders, other creditors, insurers, employers and others with a legitimate business need for the information.

Under amendments to the FCRA in the Fair and Accurate Credit Transactions Act of 2003 (FACT Act), consumers will have a right to receive a free copy of their credit report every year from each of the three national CRAs. Consumers also have a right to dispute the accuracy or completeness of any information in their reports. A dispute by a consumer triggers a reinvestigation by the CRAs and the original source of the information, as well as a correction, if necessary.

Under the program announced today, the FTC will refer to the CRAs complaints it receives from consumers who maintain that their disputes about accuracy or completeness have not been resolved to their satisfaction. The FTC will not make any determination about the merits of the complaints. The CRAs will review the complaints to make sure they have complied with the applicable provisions of the FCRA, and periodically provide reports to the FTC on the disposition of a sample of the complaints. The program does not limit the FTC’s ability to pursue law enforcement under the FCRA.

“Accurate and complete information is not only essential to our credit-based economy,” said Howard Beales, Director of the FTC’s Bureau of Consumer Protection, “but also to the fair treatment of consumers. We look forward to working with the CRAs on this complaint-sharing program.”

For a complete description of the process for disputing information in a credit report that may contain inaccurate or incomplete information, see www.ftc.gov/bcp/conline/pubs/credit/fcra.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online

Credit Repair - Over the Limit?

Over the limit reporting how to fix

If you are over on your credit limit, meaning that the High Balance is showing greater amount then what your Credit Limit is showing.

This can hurt your credit score just as much as if you had been late, or had collection / charge off rating. And I mean hurt, like 20 to 50 points against the score for each offense!

You can fix this! Provided the account is still open!

1) Immediately pay back down below the credit limit - this is so so important, because as long as you are over, they can hit your account for over the limit fees, and this is one trap that can put a person easily on the road to charge off, it can break you.

2) Age the account, you have to prove to the lender that you can get back down below that credit limit and stay there. You will want 6 months to 1 year clean payment history with no other problems like lates and such.

3) Request increase in the credit limit - At the very least ask for your credit limit to be increased for a bit over what you had exceeded the credit limit by.

4) Utilization is very important as well for the creditor, usually a good idea not to be over 50% utilization when you request credit limit increases. The higher the balance at the time, the more likely you may be to get declined for the increase.

5) Request that they update the credit reporting agencies to the new increase! This way you have fixed the reporting babble that hurt the score, it might not gain back what you had lost being that time will have passed, but it will make your report look better to other prospective lenders!

This article supplied by Infinitecredit.com

Apex Credit Services, LLC - Credit Repair

Anatomy of a Credit Score
By Toddy Gutner, BusinessWeek

During a shopping spree a few months ago, I opened several retail credit-card accounts to take advantage of an immediate 10% discount on that day’s purchases. Surely this familiar offer was risk-free as long as I paid my bills on time, right?

It wasn’t until I reported this story that I found out my credit score could have been negatively affected by the spate of new accounts I opened in such a short time. I had no idea.

Many people are ignorant of what their credit score is, how they can hurt or help that score and how it can be used against them. Some 49% of 1,013 consumers polled in a 2005 survey by the Consumer Federation of America and Fair Isaac did not understand that credit scores measure credit risk. Fair Isaac created FICO, the most widely used credit-score formula.

Lenders have used these scores for years to determine whether to grant you a loan and at what interest rate. “Credit scores are very powerful predictors of consumers’ future (bill-paying) performance,” says Mike Fratantoni, a senior research director at the Mortgage Bankers Association. But with the rise of technology that can automatically assess consumer creditworthiness while you wait, FICO scores now are requested by insurance companies, cell-phone providers, utilities, landlords and even prospective employers. That’s a reason to make managing your FICO score a priority.

Recipe for a credit score

But first, just what is a credit score? To calculate a score, Fair Isaac uses 22 pieces of data collected from the three major credit bureaus, Equifax, Experian and TransUnion). The lowest possible score is 300, while the highest is 850.

The final number is a composite of individual ratings in five categories:
- Payment history (35% of the rating)
- Length of credit history (15%)
- New credit (10%)
- Types of credit used (10%)
- Debt (30%)

Income is not a factor. “A person can have a very high income and never pay their bills,” explained Craig Watts, public affairs manager for Fair Isaac.

Fair Isaac calculates a FICO score based on the data provided by each credit bureau. It’s not uncommon to see up to a 50-point differential between ratings. The reason: Bureaus collect data at different times of the month, and one bureau may have inaccurate information.

The higher the score, the lower the risk you are to a creditor — and the less interest you’ll pay. Only 13% of the population has FICO scores of 800 or above; the median is 723. There is no single cut-off for loans, however, and cut-offs employed vary from industry to industry. Generally, borrowers with scores above 740 receive the best rates.

To see how a change in your FICO score affects how much you’ll pay, consider this example. On a $350,000, 30-year fixed mortgage, you’ll pay 6.24% in interest and $2,153 a month if you score between 720 and 850. If your score drops to between 620 and 674, your interest rate jumps to 8.05%, and your monthly cost rises to $2,581. You will pay an additional $154,131 over the life of the loan, according to a calculator on myfico.com.

Keep an eye on your score

Want a peek at your FICO scores? Many people think they can get their FICO scores from their credit reports. They can’t — but it’s still a good place to start. The Fair and Accurate Credit Transactions Act of 2003 entitles you to a free credit report from each major credit bureau once a year. I ordered my reports by telephone from annualcreditreport.com and received them all within 10 days. It’s smart to request a report from a different agency every four months so you stagger the reports over a year. That way, if there’s bad information in one, you’ll spot it sooner.

When you request a free credit report, each bureau will offer to calculate a credit score for $6.95. Experian and TransUnion use proprietary formulas; Equifax uses FICO scores. Pass up these offers, because the information is not as comprehensive as you’ll get elsewhere and lenders are less likely to look at these scores.

For the most detailed explanations on your FICO scores, go to the credit education area at myfico.com. A score from one credit bureau costs $14.95, all three are $44.85. It’s useful to buy all three because large lenders either average the scores or take the middle one. You’ll want to check your FICO scores once a year or several months before you apply for a loan.

The negative factors that bring your score down remain on your credit report for seven years and can adversely affect your FICO score. But lenders typically look back only in the past two years when they make credit decisions. One 30-day late payment shouldn’t make a difference. Lenders look for trends.

I paid for three scores and anxiously waited while the computer calculated them on the spot. Within seconds, I was relieved (not to mention a bit proud) when 771, 751, and 738 popped up on my screen. Still, I wondered why I wasn’t in the 800-plus range. To find out, I reviewed the various strategies credit experts recommend to raise FICO scores:

- Pay all bills on time. This is probably the most important factor in the FICO calculation. If you’re consistently 30 days overdue, your score can drop by as much as 100 points, depending on how long the account has been open and how long ago the late payment took place. To avoid late payments, consider automating your bill-paying process. I got high marks in this arena.

- Think twice before closing accounts. Lenders are looking for consumers with long credit histories that have been managed well. But because of the increase in identity theft, you don’t want too many open accounts that you don’t use. “Be judicious about the accounts you have,” says Norm Magnuson, public affairs officer for the Consumer Data Industry Association. In my effort to consolidate our finances, I had canceled an American Express account that I’d had for 20 years to become an authorized user on my husband’s account. While I benefit from his 20-year credit history on that account, it was a mistake to eliminate my own. I have a few cards in my name only, but the history isn’t as long.

- Minimize credit-card applications. Bingo. That was cited as a problem on all three of my FICO scores. On average, a consumer has a total of 11 credit obligations, of which seven are credit cards and four are loans. I had 21, of which six had balances. Each time you apply for credit, a lender requests to view your report. This inquiry is noted and can reduce your overall score. Don’t apply for unnecessary credit. If you’re in the market for a big-ticket item that requires a loan, avoid credit applications for 18 months prior to your purchase.

- Keep balances low. The FICO score evaluates your total balances in relation to your available credit. This is known as credit utilization. Credit cards that are “maxed out” can lower your score. Try to spend only 30% of your credit limit. If you have a $10,000 limit on one card, keep the balance near $3,000. My credit utilization was too high. It helps that I pay off my balances every month, but it is better to spread the spending.

While my FICO reports said that “most lenders would consider consumers in this score range as extremely low risk,” the competitive spirit in me wants to get over the 800 mark. To that end, I recently refrained from signing up for a Target Stores credit card to get $10 off $100 purchase.

__________________

Apex Credit Services - Credit Repair

Anatomy of a Credit Score
By Toddy Gutner, BusinessWeek

During a shopping spree a few months ago, I opened several retail credit-card accounts to take advantage of an immediate 10% discount on that day’s purchases. Surely this familiar offer was risk-free as long as I paid my bills on time, right?

It wasn’t until I reported this story that I found out my credit score could have been negatively affected by the spate of new accounts I opened in such a short time. I had no idea.

Many people are ignorant of what their credit score is, how they can hurt or help that score and how it can be used against them. Some 49% of 1,013 consumers polled in a 2005 survey by the Consumer Federation of America and Fair Isaac did not understand that credit scores measure credit risk. Fair Isaac created FICO, the most widely used credit-score formula.

Lenders have used these scores for years to determine whether to grant you a loan and at what interest rate. “Credit scores are very powerful predictors of consumers’ future (bill-paying) performance,” says Mike Fratantoni, a senior research director at the Mortgage Bankers Association. But with the rise of technology that can automatically assess consumer creditworthiness while you wait, FICO scores now are requested by insurance companies, cell-phone providers, utilities, landlords and even prospective employers. That’s a reason to make managing your FICO score a priority.

Recipe for a credit score

But first, just what is a credit score? To calculate a score, Fair Isaac uses 22 pieces of data collected from the three major credit bureaus, Equifax, Experian and TransUnion). The lowest possible score is 300, while the highest is 850.

The final number is a composite of individual ratings in five categories:
- Payment history (35% of the rating)
- Length of credit history (15%)
- New credit (10%)
- Types of credit used (10%)
- Debt (30%)

Income is not a factor. “A person can have a very high income and never pay their bills,” explained Craig Watts, public affairs manager for Fair Isaac.

Fair Isaac calculates a FICO score based on the data provided by each credit bureau. It’s not uncommon to see up to a 50-point differential between ratings. The reason: Bureaus collect data at different times of the month, and one bureau may have inaccurate information.

The higher the score, the lower the risk you are to a creditor — and the less interest you’ll pay. Only 13% of the population has FICO scores of 800 or above; the median is 723. There is no single cut-off for loans, however, and cut-offs employed vary from industry to industry. Generally, borrowers with scores above 740 receive the best rates.

To see how a change in your FICO score affects how much you’ll pay, consider this example. On a $350,000, 30-year fixed mortgage, you’ll pay 6.24% in interest and $2,153 a month if you score between 720 and 850. If your score drops to between 620 and 674, your interest rate jumps to 8.05%, and your monthly cost rises to $2,581. You will pay an additional $154,131 over the life of the loan, according to a calculator on myfico.com.

Keep an eye on your score

Want a peek at your FICO scores? Many people think they can get their FICO scores from their credit reports. They can’t — but it’s still a good place to start. The Fair and Accurate Credit Transactions Act of 2003 entitles you to a free credit report from each major credit bureau once a year. I ordered my reports by telephone from annualcreditreport.com and received them all within 10 days. It’s smart to request a report from a different agency every four months so you stagger the reports over a year. That way, if there’s bad information in one, you’ll spot it sooner.

When you request a free credit report, each bureau will offer to calculate a credit score for $6.95. Experian and TransUnion use proprietary formulas; Equifax uses FICO scores. Pass up these offers, because the information is not as comprehensive as you’ll get elsewhere and lenders are less likely to look at these scores.

For the most detailed explanations on your FICO scores, go to the credit education area at myfico.com. A score from one credit bureau costs $14.95, all three are $44.85. It’s useful to buy all three because large lenders either average the scores or take the middle one. You’ll want to check your FICO scores once a year or several months before you apply for a loan.

The negative factors that bring your score down remain on your credit report for seven years and can adversely affect your FICO score. But lenders typically look back only in the past two years when they make credit decisions. One 30-day late payment shouldn’t make a difference. Lenders look for trends.

I paid for three scores and anxiously waited while the computer calculated them on the spot. Within seconds, I was relieved (not to mention a bit proud) when 771, 751, and 738 popped up on my screen. Still, I wondered why I wasn’t in the 800-plus range. To find out, I reviewed the various strategies credit experts recommend to raise FICO scores:

- Pay all bills on time. This is probably the most important factor in the FICO calculation. If you’re consistently 30 days overdue, your score can drop by as much as 100 points, depending on how long the account has been open and how long ago the late payment took place. To avoid late payments, consider automating your bill-paying process. I got high marks in this arena.

- Think twice before closing accounts. Lenders are looking for consumers with long credit histories that have been managed well. But because of the increase in identity theft, you don’t want too many open accounts that you don’t use. “Be judicious about the accounts you have,” says Norm Magnuson, public affairs officer for the Consumer Data Industry Association. In my effort to consolidate our finances, I had canceled an American Express account that I’d had for 20 years to become an authorized user on my husband’s account. While I benefit from his 20-year credit history on that account, it was a mistake to eliminate my own. I have a few cards in my name only, but the history isn’t as long.

- Minimize credit-card applications. Bingo. That was cited as a problem on all three of my FICO scores. On average, a consumer has a total of 11 credit obligations, of which seven are credit cards and four are loans. I had 21, of which six had balances. Each time you apply for credit, a lender requests to view your report. This inquiry is noted and can reduce your overall score. Don’t apply for unnecessary credit. If you’re in the market for a big-ticket item that requires a loan, avoid credit applications for 18 months prior to your purchase.

- Keep balances low. The FICO score evaluates your total balances in relation to your available credit. This is known as credit utilization. Credit cards that are “maxed out” can lower your score. Try to spend only 30% of your credit limit. If you have a $10,000 limit on one card, keep the balance near $3,000. My credit utilization was too high. It helps that I pay off my balances every month, but it is better to spread the spending.

While my FICO reports said that “most lenders would consider consumers in this score range as extremely low risk,” the competitive spirit in me wants to get over the 800 mark. To that end, I recently refrained from signing up for a Target Stores credit card to get $10 off $100 purchase.

__________________

Credit Repair - When Not to Pay Debts

When paying bills can hurt your credit

Settling some old debts can actually harm your credit score. Here’s how to do the right thing the right way.
Cynthia worked hard to improve her credit scores. She was careful to pay her bills, including an auto loan and a credit card, on time every month. Finally, in December 2004, she decided to pay off the one old debt on her credit reports.

Her scores promptly plunged by as much as 95 points.

“I spent over $1,200 in paying off hospital bills from six years ago, thinking this would help,” she wrote in an e-mail. “Did this hurt me instead?”

Borrowers who try to pay off old delinquencies, charge-offs and collection accounts often learn the hard way: Sometimes, doing the right thing does the wrong thing to your credit.
Quirky credit scoring system
Thanks to the sometimes bizarre quirks of credit scoring, state statutes of limitations and the federal Fair Credit Reporting Act, consumers can’t always assume that paying off old debts will improve their financial situation or make them a better risk in lenders’ eyes. Add in the tactics of some unethical collection agencies, and you have a real quagmire.

The one bit of good news, though, is that what happened to Cynthia — a score plunge because of a new payment on an old debt — is much less likely to happen today. That’s because the company that creates the leading credit score, the FICO, worked with credit bureaus to iron out that particular wrinkle in the formula.

But there are still other problems that can arise:

* Settling accounts for less than you owe can often hurt your credit scores.

* Arranging a payment plan or even inquiring about an old debt can restart the statute of limitations in some states, allowing creditors to sue you.

* Simply contacting a creditor about a past-due account can revive its interest in trying to collect, leading to harassment and hardball tactics.

* Unethical collection agencies may promise to upgrade how your debt appears on your credit report in exchange for payment — then not follow through or make matters worse by making the debt seem more recent than it is.

To understand how these things happen, you need to understand some of the practices of the credit industry, such as:
How delinquencies and charge-offs are handled
A lender will generally write off an account as a bad debt within six months after it becomes delinquent — in other words, six months after the borrower stops paying. The write-off is reported to the credit bureaus as a “charge-off.”

Some people incorrectly believe that a charge-off means they no longer have to pay their debt. But “charge-off” is basically just an accounting term, notes debt expert Gerri Detweiler, author of “The Ultimate Credit Handbook.” It doesn’t relieve you of the legal or ethical obligation to pay the loan, and the lender or a collector can still come after you.

Usually, a lender will turn the charged-off account over to its collections department or a collection agency, and you’ll have two entries for the same account on your credit report: one from the original creditor showing the account’s status as “charged-off” and another from the collection agency showing the account’s status as “in collections.”

(If you have more than two entries for the same debt, which sometimes happens when an account is passed from one collection agency to another, you can demand the credit bureaus remove the extra entries.)
How your credit score views old debts
Not paying your bills is a big bad when it comes to your credit. Delinquencies, charge-offs and collections all seriously hurt your score.

But here’s something that’s really important to know:

When it comes to your FICO credit score, the one most used by lenders, what matters most is what the original creditor says on your credit report. The status and amounts owed shown on that entry will figure more heavily in your credit score than what a collection agency reports.

If the original creditor shows a charge-off with a balance still owed, you might be able to boost your score by paying off the bill and getting the original creditor to reset the balance to zero.

If the balance is already zero — which credit bureaus say is typical when a collection agency takes over an account — you can’t improve your score by paying up.

“If the trade line balance is showing zero, you’re not going to help your FICO score by paying off a collections account,” said Craig Watts, spokesman for Fair Isaac Corp., creators of the FICO credit scoring methodology.
‘Settling’ an old debt can hurt your score
In the past, making any payment on an old, past-due debt could actually make matters worse because the action “updated” the negative mark in the eyes of the credit-scoring formula, making it look more recent than it actually was.

“Recency,” or how long it’s been since you’ve had a negative mark, matters a lot to your credit score. The more recent the problem, the more heavily it weighs against you.

In the last couple of years, however, Fair Isaac worked with the credit bureaus to change how new payments on old debts were reported, said Tom Quinn, the company’s vice president for scoring. Now, the scoring formula can distinguish between the new payments and actual new delinquencies.

“If you’re making a payment (on a past-due account),” Quinn said, “that will not negatively affect your score, in and of itself.”

You still can hurt your score, however, by “settling” an account for less than what you owe. Such settlements may get the creditor off your back, but the notation of “settled” on your credit report can sometimes be worse for your FICO score than just leaving the account open and unpaid, said Barry Paperno, a Fair Isaac manager.

“Settling the account can add a new element to its record at the bureau,” Watts said. “Since that element’s date would be more recent than the original item, it can end up lowering the score.”

Now, this assumes you’re still dealing with the original creditor. If you’re dealing with a collection agency, a settlement can be more of a wild card: It could help your score, it could hurt your score or it may have no affect.
Lenders may require you to pay old debts
Of course, just leaving the account unpaid might not be an option if you want to buy a house. A mortgage lender may require that you pay off or settle any open collections that show up on your credit report as a condition of getting the loan.

If you’re interested in a settlement, credit repair experts suggest that, as part of your negotiations, push to have the creditor or collection agency either stop reporting the account altogether or demand that the account be reported as “paid in full” rather than “settled.” Such treatment might not help your score, but it’s less likely to hurt it. You’ll have more clout if you’re able to pay a lump sum than if you have to set up a payment plan.

Credit bureaus really hate it when collection agencies agree to these demands and have even banned companies for failing to properly report transactions. But that doesn’t mean you can’t try.
How long credit bureaus can report your accounts
Your credit score is based on information in your credit report, and there are limits on how long your bad marks can be used against you. Once a negative item is on your file, it generally can be reported for 7½ years from the time you stopped paying on the account. (Bankruptcies can be reported for up to 10 years.)

So, if you stopped making payments on your Visa bill in January 2004, the lender can report a charge-off the following June. The account can be reported to the credit bureaus until June 2011, when it must be deleted from the bureaus’ records.
How letting sleeping dogs lie can affect your credit
You can see why some borrowers choose to just let their old debts “fall off” their credit report rather than try to repay. Once the bad marks are gone, your credit score probably will improve, and you’ll still have the money you would otherwise have sent to your old creditors.

Note the word “probably.” In credit scoring, little is certain. Thanks to the way the FICO is designed, sometimes a score actually drops after old, bad accounts disappear.

That’s because the FICO formula groups borrowers based on certain characteristics, such as whether they’ve had a bankruptcy or other credit problem. You could rise to the top of the “had-a-bankruptcy” group but, once your bankruptcy drops off your report, be “transferred” to another group, where you’d rank near the bottom.

“That move (from one group to the next) can sometimes be pretty graceless,” Watts concedes. “It’s as though you fell off a chair. Your score can change a couple dozen points for no apparent reason.”

Fair Isaac attempted to ease this transition with its “next generation” credit-scoring model, known not surprisingly as NextGen. But most lenders still use the classic FICO scoring formula, so a sudden score drop when a negative item disappears is still a possibility.
Know your state’s statute of limitations
That’s not the end of the complications. Each state limits the amount of time in which a creditor can sue you after an account becomes delinquent. Sometimes the statute is longer than the credit reporting limits, sometimes shorter.

The statutes of limitations for written contracts, for example, range from three years in Delaware to 15 years in Ohio, although the typical limit in most states is five or six years. The rules vary widely, but, in some states you can inadvertently extend the statute of limitations by entering into a repayment plan with a creditor or even by acknowledging that a debt is yours. Getting dragged into court and having a judgment entered against you could further hurt your credit score and your efforts to rehabilitate your credit.

Before you contact your creditors, you should know the details of the statute of limitations in your state. (If you’ve moved, it may be the state you live in now whose law will apply, even if you entered into the credit agreement in another state.) Your best bet may be contacting a consumer law attorney for help; you can get referrals from the National Association of Consumer Advocates.

Several Internet sites, including CreditBoards.com, have message boards whose members share advice and tactics.

In the end, you may decide that trying to pay off your old accounts isn’t worth the hassle — or you may decide just the opposite. You may decide the ethical obligation to pay what you owe outweighs any short-term concerns you have about your credit.

“If you can afford to pay, pay,” said Steve Rhode, chairman of the credit-crisis counseling firm MyVesta.org. “Too many people live and die by what their credit r

Credit Repair - When Not to Pay Debts

When paying bills can hurt your credit

Settling some old debts can actually harm your credit score. Here’s how to do the right thing the right way.
Cynthia worked hard to improve her credit scores. She was careful to pay her bills, including an auto loan and a credit card, on time every month. Finally, in December 2004, she decided to pay off the one old debt on her credit reports.

Her scores promptly plunged by as much as 95 points.

“I spent over $1,200 in paying off hospital bills from six years ago, thinking this would help,” she wrote in an e-mail. “Did this hurt me instead?”

Borrowers who try to pay off old delinquencies, charge-offs and collection accounts often learn the hard way: Sometimes, doing the right thing does the wrong thing to your credit.
Quirky credit scoring system
Thanks to the sometimes bizarre quirks of credit scoring, state statutes of limitations and the federal Fair Credit Reporting Act, consumers can’t always assume that paying off old debts will improve their financial situation or make them a better risk in lenders’ eyes. Add in the tactics of some unethical collection agencies, and you have a real quagmire.

The one bit of good news, though, is that what happened to Cynthia — a score plunge because of a new payment on an old debt — is much less likely to happen today. That’s because the company that creates the leading credit score, the FICO, worked with credit bureaus to iron out that particular wrinkle in the formula.

But there are still other problems that can arise:

* Settling accounts for less than you owe can often hurt your credit scores.

* Arranging a payment plan or even inquiring about an old debt can restart the statute of limitations in some states, allowing creditors to sue you.

* Simply contacting a creditor about a past-due account can revive its interest in trying to collect, leading to harassment and hardball tactics.

* Unethical collection agencies may promise to upgrade how your debt appears on your credit report in exchange for payment — then not follow through or make matters worse by making the debt seem more recent than it is.

To understand how these things happen, you need to understand some of the practices of the credit industry, such as:
How delinquencies and charge-offs are handled
A lender will generally write off an account as a bad debt within six months after it becomes delinquent — in other words, six months after the borrower stops paying. The write-off is reported to the credit bureaus as a “charge-off.”

Some people incorrectly believe that a charge-off means they no longer have to pay their debt. But “charge-off” is basically just an accounting term, notes debt expert Gerri Detweiler, author of “The Ultimate Credit Handbook.” It doesn’t relieve you of the legal or ethical obligation to pay the loan, and the lender or a collector can still come after you.

Usually, a lender will turn the charged-off account over to its collections department or a collection agency, and you’ll have two entries for the same account on your credit report: one from the original creditor showing the account’s status as “charged-off” and another from the collection agency showing the account’s status as “in collections.”

(If you have more than two entries for the same debt, which sometimes happens when an account is passed from one collection agency to another, you can demand the credit bureaus remove the extra entries.)
How your credit score views old debts
Not paying your bills is a big bad when it comes to your credit. Delinquencies, charge-offs and collections all seriously hurt your score.

But here’s something that’s really important to know:

When it comes to your FICO credit score, the one most used by lenders, what matters most is what the original creditor says on your credit report. The status and amounts owed shown on that entry will figure more heavily in your credit score than what a collection agency reports.

If the original creditor shows a charge-off with a balance still owed, you might be able to boost your score by paying off the bill and getting the original creditor to reset the balance to zero.

If the balance is already zero — which credit bureaus say is typical when a collection agency takes over an account — you can’t improve your score by paying up.

“If the trade line balance is showing zero, you’re not going to help your FICO score by paying off a collections account,” said Craig Watts, spokesman for Fair Isaac Corp., creators of the FICO credit scoring methodology.
‘Settling’ an old debt can hurt your score
In the past, making any payment on an old, past-due debt could actually make matters worse because the action “updated” the negative mark in the eyes of the credit-scoring formula, making it look more recent than it actually was.

“Recency,” or how long it’s been since you’ve had a negative mark, matters a lot to your credit score. The more recent the problem, the more heavily it weighs against you.

In the last couple of years, however, Fair Isaac worked with the credit bureaus to change how new payments on old debts were reported, said Tom Quinn, the company’s vice president for scoring. Now, the scoring formula can distinguish between the new payments and actual new delinquencies.

“If you’re making a payment (on a past-due account),” Quinn said, “that will not negatively affect your score, in and of itself.”

You still can hurt your score, however, by “settling” an account for less than what you owe. Such settlements may get the creditor off your back, but the notation of “settled” on your credit report can sometimes be worse for your FICO score than just leaving the account open and unpaid, said Barry Paperno, a Fair Isaac manager.

“Settling the account can add a new element to its record at the bureau,” Watts said. “Since that element’s date would be more recent than the original item, it can end up lowering the score.”

Now, this assumes you’re still dealing with the original creditor. If you’re dealing with a collection agency, a settlement can be more of a wild card: It could help your score, it could hurt your score or it may have no affect.
Lenders may require you to pay old debts
Of course, just leaving the account unpaid might not be an option if you want to buy a house. A mortgage lender may require that you pay off or settle any open collections that show up on your credit report as a condition of getting the loan.

If you’re interested in a settlement, credit repair experts suggest that, as part of your negotiations, push to have the creditor or collection agency either stop reporting the account altogether or demand that the account be reported as “paid in full” rather than “settled.” Such treatment might not help your score, but it’s less likely to hurt it. You’ll have more clout if you’re able to pay a lump sum than if you have to set up a payment plan.

Credit bureaus really hate it when collection agencies agree to these demands and have even banned companies for failing to properly report transactions. But that doesn’t mean you can’t try.
How long credit bureaus can report your accounts
Your credit score is based on information in your credit report, and there are limits on how long your bad marks can be used against you. Once a negative item is on your file, it generally can be reported for 7½ years from the time you stopped paying on the account. (Bankruptcies can be reported for up to 10 years.)

So, if you stopped making payments on your Visa bill in January 2004, the lender can report a charge-off the following June. The account can be reported to the credit bureaus until June 2011, when it must be deleted from the bureaus’ records.
How letting sleeping dogs lie can affect your credit
You can see why some borrowers choose to just let their old debts “fall off” their credit report rather than try to repay. Once the bad marks are gone, your credit score probably will improve, and you’ll still have the money you would otherwise have sent to your old creditors.

Note the word “probably.” In credit scoring, little is certain. Thanks to the way the FICO is designed, sometimes a score actually drops after old, bad accounts disappear.

That’s because the FICO formula groups borrowers based on certain characteristics, such as whether they’ve had a bankruptcy or other credit problem. You could rise to the top of the “had-a-bankruptcy” group but, once your bankruptcy drops off your report, be “transferred” to another group, where you’d rank near the bottom.

“That move (from one group to the next) can sometimes be pretty graceless,” Watts concedes. “It’s as though you fell off a chair. Your score can change a couple dozen points for no apparent reason.”

Fair Isaac attempted to ease this transition with its “next generation” credit-scoring model, known not surprisingly as NextGen. But most lenders still use the classic FICO scoring formula, so a sudden score drop when a negative item disappears is still a possibility.
Know your state’s statute of limitations
That’s not the end of the complications. Each state limits the amount of time in which a creditor can sue you after an account becomes delinquent. Sometimes the statute is longer than the credit reporting limits, sometimes shorter.

The statutes of limitations for written contracts, for example, range from three years in Delaware to 15 years in Ohio, although the typical limit in most states is five or six years. The rules vary widely, but, in some states you can inadvertently extend the statute of limitations by entering into a repayment plan with a creditor or even by acknowledging that a debt is yours. Getting dragged into court and having a judgment entered against you could further hurt your credit score and your efforts to rehabilitate your credit.

Before you contact your creditors, you should know the details of the statute of limitations in your state. (If you’ve moved, it may be the state you live in now whose law will apply, even if you entered into the credit agreement in another state.) Your best bet may be contacting a consumer law attorney for help; you can get referrals from the National Association of Consumer Advocates.

Several Internet sites, including CreditBoards.com, have message boards whose members share advice and tactics.

In the end, you may decide that trying to pay off your old accounts isn’t worth the hassle — or you may decide just the opposite. You may decide the ethical obligation to pay what you owe outweighs any short-term concerns you have about your credit.

“If you can afford to pay, pay,” said Steve Rhode, chairman of the credit-crisis counseling firm MyVesta.org. “Too many people live and die by what their credit r