For questions 1 – 11 select (A) Always, (S) Sometimes, or (N) Never.

For questions 12 – 15 select (T) True or (F) False.

  Scoring

How Did You Score?

26 to 30 points

A score of 26 to 30 points suggests that you are handling your finances very well. Keep up the good work!

21 – 25 points

A score of 21 to 25 points suggest that you are successful at managing some aspects of your financial life; however, you may want to investigate opportunities for increasing your savings or reducing your debts.

16 – 20

A score of 16 to 20 points suggests that while you typically manage your finances well, you are probably missing some items that can either improve your current situation or protect you from future hardship. You may benefit by talking to a credit counselor and developing a step-by-step approach for managing your money.

0 – 15

A score of 0 to 15 points suggests that you need to improve your money management skills to protect yourself and your finances. Think about taking a financial education course or talking to a credit counselor to help you learn ways to successfully and effectively manage your finances. 

Today, having a good credit report and score is a necessity. Below are some methods for establishing or reestablishing positive credit, so that when it comes time to apply for a job or establish a utility account, you can provide your credit information without fear or being denied or being asked to pay large fees. 

First a bit about credit reports and scores

A credit score is a number used to help lenders identify the credit risk associated with lending you money and there are a variety of scoring methods used to determine an individual’s score.  There is the FICO Score, the Vantage Score, Equifax’s ScorePower, and Experian’s Scorex PLUS.  Additionally, some large lenders have developed their own scoring models.

You can get a free copy of your credit reports one time per year at www.annualcreditreport.com however, to receive the credit score there is a nominal fee.  This is the only site where you can receive a truly free copy of your credit report.

No credit score

It is hard to believe that some people do not have a credit score, yet it’s true.   This occurs when there is no data or a lack of data for the credit scoring methods to calculate. 

Adults that have never used credit and young people just starting out may find that it is difficult to get credit or a loan.  This is because without that information, lenders do not know if you are a good credit risk or if you will make your payments on time.   Follow these tips to begin your positive credit history:

1. Apply for a secured credit card through your bank.  A secured card requires that you put money down to secure the credit card. This makes it less risky for the lender because they know if you do not pay, they will get their money. 
2. Ask someone with a good credit history to co-sign for you.  A co-signer becomes liable for the debt in the event you do not make the payment. 
3. Once you get credit, be certain to make your payments on time, every time. 
4. On credit cards, avoid charging more than thirty percent of the limit.  For example, if the limit is $300 avoid using more than $100.
5. Avoid opening multiple credit card accounts.  Build your credit slowly and methodically.
6. Remember that you are building your history, the longer you keep an account the better. 

Low credit score

Low credit scores may be caused by a number of factors such as a short period of time using credit, late payments, too much credit, collection accounts and bankruptcy.  If you find that you have a low credit score, you are not alone.  Turn your focus to improving your credit score by following these tips;

1. Dispute any invalid or incorrect information in your credit profile.
2. Pay all existing credit accounts on time, every time.
3. For bills you have fallen behind on, get current and stay current.
4. Focus on paying down debt and credit card balances.  Avoid using more than thirty percent of any revolving credit balances. 
5.  Avoid opening new accounts in order to transfer existing balances.
6. Keep accounts with a long, positive credit history open.

It takes about six months to begin establishing credit and two years to see significant changes in a negative credit report and score. On the other hand, it can take one late payment to undo the positive credit you have established. Keep track of what is on your credit by checking it annually at www.annual creditreport.com.  Your future job, home or auto insurance rate depends on it.

Report your dispute to the credit reporting agency (CRA) in writing. List what information you believe is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request deletion or correction. You may want to enclose a copy of your report with the items in question circled. See our Sample Dispute Letter.

Send your letter by certified mail, return receipt requested, so you can document that it was received by the CRA. Keep copies of your dispute letter and enclosures.

The credit reporting agency must re-investigate the items in question – usually within 30 days – unless they consider your dispute frivolous. They also must forward all relevant data you provide about the dispute to the information provider (creditor, lender, etc.). After the information provider receives notice of a dispute from the credit reporting agency, it must investigate, review all relevant information provided, and report the results to the credit reporting agency.

According to the Fair Credit Reporting Act disputed information that cannot be verified must be deleted from your file, erroneous information must be corrected, and incomplete items must be completed.

When the investigation is complete, the credit reporting agency must give you the written results and a free copy of your report if the dispute results in a change. Also, if you request, the credit reporting agency must send notices of corrections to anyone who received your report in the past six months. Job applicants can have a corrected copy of their report sent to anyone who received a copy during the past two years for employment purposes. If a reinvestigation does not resolve your dispute, ask the credit reporting agency to include your statement of the dispute in your file and in future reports.

Tell the creditor or other information provider in writing that you dispute an item. Again, include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider then reports the item to any credit reporting agency, it must include a notice of your dispute. In addition, if you are correct-that is, if the disputed information is not accurate-the information provider may not use it again.

Accurate Negative Information – when negative information in your report is accurate, only the passage of time can assure its removal.

Accurate negative information can generally stay on your report for 7 years. There are certain exceptions:

1. Information about criminal convictions may be reported without any time limitation.
2. Bankruptcy information may be reported for 10 years.
3. Credit information reported in response to an application for a job with a salary of more than $75,000 has no time limit.
4. Credit information reported because of an application for more than $150,000 worth of credit or life insurance has no time limit.
5. Information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.

Adding Accounts to Your File. Sometimes your file may not reflect all your credit accounts. Although most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors supply information to credit reporting agencies: Some travel, entertainment, gasoline card companies, local retailers, and credit unions are among those creditors that may not report your accounts to all three credit reporting agencies. If you’ve been told you were denied credit because of an “insufficient credit file” or “no credit file” and you have accounts with creditors that don’t appear in your credit file, ask the credit reporting agency to add this information to future reports.

Although they are not required to do so, many CRAs will add verifiable accounts for a fee. However, if these creditors do not report to the CRA on a regular basis, these added items will not be updated in your file.

A: All items, positive and negative, stay on your credit report for 7 years. The good news is that these debts should now be showing as “paid” on your report. This should have a positive effect on your credit score. It may take some time for the creditor to change the status on your credit report as not all creditors report to the credit bureaus each month.

When paying off debt, be sure to keep proof of the payment. This can be especially important if you are applying for additional credit before the new status is reflected on your report. By doing so, you can prove to the lender that the debt has been paid in full. You can also send this proof of payment to the credit bureaus to have your credit reports updated.

If you accepted any “settlement” offers from your creditors rather than paying the debt in full, the status on your credit report may reflect “settlement” rather than “paid” or “paid as agreed.” If this is the case, it can have a negative impact on future credit for up to 7 years from the date of the final payment. Lenders will view this as a weakness – the philosophy being, “why should we loan money to someone who does not have a history of paying their debt in full?”

By Steve Axtell

The main ingredients to the credit score include the Payment History, Amounts Owed, the Length of Credit History, New Credit and the Types of Credit Used.

This pie chart shows the percentage of each category that is attributed to the overall credit score.