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by Liz Weston
Your Credit Score: How to Improve the 3-Digit Number That Shapes Your Financial Future, Fifth Edition
About This eBook
Title Page
Copyright Page
Praise for the Previous Edition of Your Credit Score
Contents
Acknowledgments
About the Author
Introduction
1. Why Your Credit Score Matters
How Your Credit Scores Affect You
What It Costs Long Term to Have Poor or Mediocre Credit Scores
How Credit Scoring Came into Being
How Credit Use Has Changed over the Years
Consumer’s Fight for Truth About Credit Scores
Credit Controversies
Credit Scoring’s Vulnerability to Errors
Credit Scoring’s Complexity
Credit Scoring’s Use for Noncredit Decisions
Credit Scoring’s Potential Unfairness
2. How Credit Scoring Works
What Is a Good Score?
Your Credit Report: The Building Blocks for Your Score
How Your Score Is Calculated
The Five Most Important Factors
Your Payment History
How Much You Owe
How Long You’ve Had Credit
Your Last Application for Credit
The Types of Credit You Use
Your Credit Scorecard
Your Results Might Differ
How Do I Get My Score?
What Hurts and for How Long
New Versions of the FICO Score
3. VantageScore—A FICO Rival Emerges
The VantageScore Scale
How VantageScores Are Calculated
So Which Is Better?
VantageScore’s Future
Other Scores Lenders Use
4. Improving Your Score—The Right Way
Step 1: Start with Your Credit Report
Check the Identifying Information
Carefully Review the Credit Accounts
Parse Through Your Inquiries
Examine Your Collections and Public Records
Dispute the Errors
Step 2: Pay Your Bills on Time
How to Make Sure Your Bills Get Paid on Time, All the Time
Step 3: Pay Down Your Debt
You Need to Reduce What You Owe Rather Than Just Moving Your Balances Around
You Might Need to Change Your Approach to Paying Off Debt
You Need to Pay Attention to How Much You Charge—Even if You Pay Off Your Balances in Full Every Month
How to Find Money to Pay Down Your Debt
Step 4: Don’t Close Credit Cards or Other Revolving Accounts
Step 5: Apply for Credit Sparingly
How to Get a Credit Score if You Don’t Have Credit
Credit Scores Without Credit
5. Credit-Scoring Myths
Myth 1: Closing Credit Accounts Will Help Your Score
Myth 2: You Can Boost Your Score by Asking Your Credit Card Company to Lower Your Limits
Myth 3: You Can Hurt Your Score by Checking Your Own Credit Report
Myth 4: You Can Hurt Your Score by Shopping Around for the Best Rates
Myth 5: You Don’t Have to Use Credit to Get a Good Credit Score
Myth 6: You Have to Pay Interest to Have a Good Credit Score
Myth 7: Adding a 100-Word Statement to Your File Can Help Your Score if You Have an Unresolved Dispute with a Lender
Myth 8: Your Closed Accounts Should Read “Closed by Consumer,” or They Will Hurt Your Score
Myth 9: Credit Counseling Is Worse Than Bankruptcy
Myth 10: Bankruptcy Hurts Your Score So Much That It’s Impossible to Get Credit
6. Coping with a Credit Crisis
Step 1: Figure Out How to Free Up Some Cash
Step 2: Evaluating Your Options
Task 1: Prioritize Your Bills
Task 2: Match Your Resources to Your Bills and Debts
Task 3: Figuring Out a Repayment Plan
The Real Scoop on Credit Counseling
Debt Settlement: A Risky Option
Should You File for Bankruptcy?
The Effects of Bankruptcy Reform
The Type of Bankruptcy That You File Matters
Should You Walk Away from Your Home?
Step 3: Choose Your Path and Take Action
Option 1: The Pay-Off Plan
Option 2: Credit Counseling
Option 3: Debt Settlement
Option 4: Bankruptcy
7. Rebuilding Your Score After a Credit Disaster
Part I: Credit Report Repair
Scrutinize Your Report for Serious Errors
Know Your Rights
Organize Your Attack
What You Need to Know About Unpaid Debts and Collections
What You Need to Know About Statutes of Limitations
Should You Pay Old Debts?
“But You’ve Got the Wrong Guy!”
Part II: Adding Positive Information to Your File
Try to Get Positive Accounts Reported
Borrow Someone Else’s History
Get Some Credit or Charge Cards if You Don’t Have Any
Part III: Use Your Credit Well
Pay Bills on Time
Use the Credit You Have
Keep Your Balances Low
Pace Yourself
Don’t Commit the Biggest Credit-Repair Mistakes
8. Identity Theft and Your Credit
Options That Might Help
Credit Freezes
FACTA Rights
Chip-and-PIN Cards
How to Reduce Your Exposure to Identity Theft
Buy a Shredder
Get a Locking Mailbox
Protect Your Outgoing Mail
Be Careful with Your Tax Returns
Keep Your Financial Documents Under Lock and Key
Get Stingy with Your Social Security Number
Know What’s in Your Wallet
Ask About Shredding Policies
Don’t Let Your Debit Card out of Your Sight
Monitor Your Accounts
Opt Out of Credit Card Solicitations, Junk Mail, and Telemarketing
Be Cautious About Using Your Smartphone for Financial Matters
Be Wary of Telephone Solicitors and Emails Purporting to Be from Financial Institutions
Be Smarter About Social Media
Safeguard Your Social Security Number
Monitor Your Credit Reports
Consider a Credit Freeze
What to Do if You’re Already a Victim
Keep Good Notes of Every Conversation You Have Regarding the ID Theft
Contact the Credit Bureaus by Phone and Then with a Follow-Up in Writing
Contact the Creditors by Phone and Then Follow Up in Writing
Contact the Police or Local Sheriff
Contact Bank and Checking Verification Companies
Contact the Collection Agencies
Get Legal Help
Don’t Give Up
What to Do if the Credit Bureau Won’t Budge
9. Emergency! Fixing Your Credit Score Fast
Repairing Your Credit in a Matter of Hours: Rapid Rescoring
Boosting Your Score in 30 to 60 Days
Pay Off Your Credit Cards and Lines of Credit
Use Your Credit Cards Extremely Lightly
Focus on Correcting the Big Mistakes on Your Credit Reports
Use the Bureaus’ Online Dispute Process
See if You Can Get Your Creditors to Report or Update Positive Accounts
What Typically Doesn’t Work
Disputing Everything in Sight
Creating a “New” Credit Identity
Closing Troublesome Accounts
10. Insurance and Your Credit Score
History of Using Credit Scores to Price Insurance Premiums
But What’s the Connection?
What Goes into an Insurance Score
Keeping a Lid on Your Insurance Costs
Start Thinking Differently About Insurance
Raise Your Deductibles
Don’t Make Certain Kinds of Claims
Be a Defensive Driver
Use the Right Liability Limits
Drop Collision and Comprehensive on Older Cars
Shop Around
Protect Your Score
11. Can Bad Credit Cost You a Job?
12. Keeping Your Score Healthy
The Do’s of Credit Health
Pay Off Your Credit Card Balances
Have an Emergency Fund
Have Adequate Insurance
The Don’ts of Credit Health
Don’t Buy More House Than You Can Afford
Don’t Overdose on Student Loan Debt
Don’t Let Your Fixed Expenses Eat Up Your Income
Don’t Raid Your Retirement or Your Home Equity to Pay Off Credit Cards
Credit and Divorce: How Your Ex Can Kill Your Score
Get Your Credit Reports
Take Action
Don’t Be Late
Dealing with Mortgages, Car Loans, and Other Secured Debt
Consider a Fraud Alert or Credit Freeze
In Conclusion: The Three-Year Solution
Index
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