Let me start off by saying that understanding how the three major credit bureaus arrive at your credit score is one of the most powerful pieces of knowledge you can have. Most likely this is not something that you have ever been taught. In fact, when it comes to your credit scores, the three major credit bureaus, Equifax, Experian, and Transunion, run sort of a “black box” operation.

Here’s a brief explanation of the system -

Payment History: 35%
Payment history makes up the largest piece of your credit scoring model. It reflects how timely you make payments to your creditors.

Credit Utilization 30%:
The percentage of available credit used. Keeping your account balances below 50% of the available credit limit will maximize your scores. For the purpose of this article, this is where we will find the most room to quickly increase your scores.

Credit History - 15%
Your credit history reflects how long your credit has been open. Older accounts receive more positive weight than newer accounts.

Recent Inquiries 10%:
Whenever you apply for any kind of credit, a credit inquiry is reported. Too many of these, and they can negatively effect your scores.

Types of Credit In Use: 10%
Types of credit in use lists both the amount and type of accounts that you have.

If you’re looking for a few ways to boost your credit scores, here are some ideas!

Raising Your Limits -
It’s often easier to raise your limits than you think it might be. You might not realize that most times, all you have to do is ask that your limit be increased and your wish will be granted. Call the customer service department of your credit card company and let them know you’re looking into transfering your balance to another card with a lower interest rate and a higher credit limit and that you’d like to keep your account with them, but only if they are willing to make the concessions you are asking for. A lower interest rate might just come with your new, high credit limit! A lower interest rate won’t help your credit scores, but it will definitely help your financial situation.

For example … Let’s say you have a credit card with $5,000 as your limit and your balance is $4,000. Your card would be 80% utilized, well over the recommended percentage of 50%-or-lower. One phone call to the customer service department of your credit card company could raise your limit to $6,500. You would now be looking at a 62% credit utilization instead, which would definitely be a positive way to impact your scores.

Lower Your Balances!
Continuing from the example above, you are now 62% utilized on your credit card. This means you still have some room to further maximize your scores. If you pay $750 on this credit card, you will bring the balance down to 50% of the new credit limit ($3,250 balance on $6,500 credit limit). Now, you might be saying that you don’t have $750 to pay down your credit card. That’s ok, you could stop here, you have already increased your scores, and you can get the limit raised for all your credit card accounts. However, if you are trying to buy a home, or even a car, you can potentially save thousands in interest on your new loan and get a lower monthly payment, just by paying a little down on your current accounts. When that results in higher credit scores, you may qualify for much better loan terms.

These are very powerful techniques. I have seen this work for clients time and time again. One client recently was able to raise the credit limits on 3 credit card accounts and raise their scores by 105 points immediately.

The tips given here are best suited to work for people with a good credit history and for those with at least 3 open and established credit accounts. A more aggressive approach may be more appropriate for those with less than perfect credit, or with a negative credit history.

In this article, I will expose some of the most common myths about credit and credit reports. I love watching the expression on my client’s faces when they realize the truth about some of these common myths.

I caution you before we get started In this article, you are going to hear some things that will contradict what you have been told in the past. This is because credit is one of the most misunderstood topics, and most people, even many of those in the financial field, do not really understand credit.

Myth 1: Paying off collection accounts, tax liens, judgments, or late payments will remove the negative item from my credit reports.

This is simply not true. In fact, by paying off an old collection account, you can actually lower your credit scores. The reason for this is because more recent negative items will hurt your score more than older negative items. If you pay off an old collection account, not only will the collection account remain on your reports as a paid collection, but it will now show a current date, and cost your more points. I am not suggesting that you should not pay off your delinquent accounts, only that you need to understand the consequences so that you can factor that into your decision.

Myth 2: Paying my full credit card balance every month will improve my credit scores.

Not true! In fact, this is absolutely not what the credit card companies want you to do. In the eyes of the credit card companies, the best client is one who only pays a little more than the minimum payment each month, but makes all their payments on time. Keep in mind that the credit card companies do not maximize their profits unless you are paying interest every month, and they are the ones who designed the credit system. If you want to maximize your credit scores, you need to give them what they want.

Myth 3: Credit repair is illegal.

Not only is this false, but your right to repair your credit is protected by federal law. The Fair Credit Reporting Act (FCRA) protects consumers from inaccurate reporting, as well as issues surrounding identity theft. As a consumer, you have the right to repair your own credit, as well as hire anyone you choose to do it for you.

Myth 4: Consumer Credit Counseling will improve my credit.

Credit counseling programs will only harm your credit. The first thing that will happen as a result of enrolling in a CCCS or credit counseling program, is that your creditors will add the line “Account in CCCS” or “Account paid through credit counseling” to each of their trade lines. This will not affect your score, but does look very negative to lenders. The next thing that seems to always happen is that the credit counseling program will make the payments to your creditors late. Sometimes this is not their fault since they just setup the payment to be on your original due date. However, the credit card companies often adjust your due date, and since nobody, like yourself, is monitoring this, they began making your payments late. This will result in late pays on your credit, in addition to late fees.

Myth 5: By law, negative items on my credit have to remain for 7 years.

This is also false. There is no law that dictates the duration that an item must remain on your credit reports. The only thing that dictates that an item must remain on your credit report is that it can be proven to be 100% true and accurate.

Myth 6: I make a lot of money so I must have excellent credit.

Actually, your credit scores are made up of several factors such as payment history, account balances, types of credit in use, etc. Your income is not one of those factors that determine your credit scores.

Myth 7: I have never been late on my payments, I must have great credit.

It is important to your credit scores that you have never been late on your payments; however, this is only one piece of the credit score pie. It is possible to have never been late on a payment and have sub prime credit, or no credit at all. Your history of payments only makes up 35% of your credit scores.

Myth 8: Your credit report from each credit bureau will be the same.

This is not true. In fact, most of the time, all 3 of your credit reports will differ from one another. The reason for this is that each of the credit bureaus is a separate independent company, and the processes at each are different. Also, some creditors may only report to 1 or 2 bureaus, but not all 3. In my experience, your reports will very rarely be exactly the same.

Myth 9: Once you are married, you and your spouse share the same credit.

False! This is something that many believe, but it is absolutely not true. Every individual has their own unique credit reports. You may share some credit items with your spouse if you have joint accounts.

Myth 10: Closing credit card accounts will increase your credit scores.

This is one of the biggest surprises that I see happen to people all the time. You go to your mortgage lender and they instruct you to close some accounts in order to qualify for a loan. You do as you are told, but only to see your scores plummet almost immediately; sometimes by more than 100 points. What happened? The reason for the drop was because you just closed some of your oldest and most valuable accounts as far as your credit scores were concerned. Remember, the longer you have had an account in good standing, the more positive points it will provide. It is not advised to close a long-standing account unless you have good reason.

You are now armed with some very powerful information that will surely be able to use to your advantage.

Making a decision purely on price when it comes to choosing a credit repair company can be a serious mistake that could cost you your money and time. If you are serious about repairing your credit and trying to find the right company, read on…

It is easy not to realize that all those credit repair companies that charge on a monthly service fee basis are only going to do a very small amount of work each month. This method of billing allows virtually anyone to start and represent themselves as a credit repair expert, and not have any responsibility to produce results. If you are like the average person, you most likely have an average of 4-12 negative items on each of your credit reports. If you are only paying $39 - $79 for a monthly service fee, the credit repair company is only going to work on a couple items at a time. Keep in mind also that with the monthly service fee model, the credit repair company is actually incentivized to take as long as possible to clean up your credit. You may easily end up paying far more, with fewer deletions, than you would have with a simple flat-rate credit repair program.

With a flat-rate credit repair payment model, the motivation is to get your credit cleaned up as quickly as possible, and isn’t that exactly what most people want? In years in the industry, I have never come across a client who wanted to clean up their credit slowly. Excercise caution when choosing a credit repair company, as they are absolutely not all created equally? The first thing you should do is call and see what kind of service you receive before you pay them anything. Are they willing to talk to you about your credit and their program, or do that simply push you into enrollment? You should also check out their record of complaints. If the company has been in business for more than a few years and has not been providing a acceptable service, you will read about it on the Internet. Just go to Google and type in “[company name] complaints”.

Consumers have been warned by The Federal Trade Commission to stay away from credit repair companies, and not to work with any company who charges an up-front fee. The reason for this is that they are tired of getting complaints about credit repair companies that take money and not perform any work. Since the FTC cannot recommend any particular company, their policy is to simply tell everyone to stay away. Many companies have since adopted the model of charging a monthly service fee instead of charging for the credit repair itself. They have found it to be easy money, as most clients will sign up for this type of service and forget about it; leaving the credit repair company to continue receiving payments for a long period of time with no obligation of work.

I cannot tell you how many times a week we get calls from people who have been a client of a monthly service fee credit repair program for more than one year, and have only seen a couple of improvements on their credit reports. I personally find this appalling, and so should you.

Hopefully this will give you some useful information that will help you in your quest for the right credit repair company.