Understanding credit report scores is important when you see your credit report because you need to be able to make some sense of it.

Your credit score is used by anyone loaning you money such as credit card companies, home loan lenders, auto loan lenders and finance companies. They all use your credit score to determine your credit risk. The interest the lender charges you is based on your credit risk. So you can see how understanding credit report scores is information that can save or cost you money.

You need to find out what your credit score is before you talk to any lender in case there is something on your report that you may question. You don't want the lender to find a mistake that you aren't aware of. If you find a mistake, it takes at least 30-60 days before you see corrections in your credit reports and scores.

You have probably heard that checking your credit will bring down your score. But checking your own credit report and score is counted as a "soft inquiry" and doesn't harm your credit score at all. Only "hard inquiries" from a lender or creditor, made when you apply for credit, will bring your credit score down a few points.

Your credit report should have the three main credit services Experian, Trans Union and Equifax and each service will give you a different credit score.

The credit scores will range between 300 and 870 with each credit service giving a different score. The higher the score the better, because as your credit score increases, your credit risk to a lender decreases.

The average high approval score where the best interest rates are offered is 680 or above. The credit score the lender uses comes from the middle score or an average of all three scores is sometimes used.

Don't be surprised if you find an error once you get your credit report. Statistics show that 70 percent of credit reports contain serious errors. Those errors are what you want to clear up because they will affect your credit score.

If you find a mistake, you have the right to dispute the information free of charge. Contact the credit bureau that provided the information and dispute the inaccurate information.

Below are the names, addresses, phone numbers and web sites of the three credit bureaus
TransUnion, Experian and Equifax.

Equifax Credit
P.O. Box 740241
Atlanta, GA 30374
Equifax 800-685-1111
http://www.equifax.com

TransUnion
P.O. Box 1000
Chester, PA 19022
Trans Union 800-888-4213
http://www.transunion.com

Experian
P.O. Box 2002
Allen, TX 75013
Experian 800-682-7654
http://www.experian.com

You can also contact the creditor direct and ask that the corrected information be provided to the credit bureaus.

If you suspect any fraud, contact all three credit bureaus immediately and place a fraud alert on your report. Then, contact your credit card companies and bank to protect your accounts.

Understanding credit report scores and checking your credit report at least once a year will keep fraud in check and keep your credit score safer.

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QUESTION:

I am trying to negotiate hardship arrangements with 12 credit card companies regarding the payment of credit card bills. One company has sued me and has served a complaint. If it gets a judgment, is it true that it can only get 25% of takehome pay? And if it gets this amount, where would that leave the other credit card companies? Even if they sued me, too, would they still be able to each get 25% of take-home pay? I would prefer to pay them each a share of that 25%, presuming I still have a job -- but that's another story. Is there any way I can handle this to get the results I want?

ANSWER:

The maximum total your creditors can take from you is 25% of your takehome pay. Remember, however, that each creditor must have a judgment against you to be able to garnish your wages. If more than one creditor has a judgment, the first one would garnish your wages, get the 25% until the judgment is paid and then cancel the garnishment. Then the second creditor would garnish 25% of your wages until that judgment was paid. And so on.

If this sounds like you you need some help dealing with your creditors. We suggest the services of a Certified Debt Arbitrator.

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1. Choose a card with a fee, high interest rate and poor customer service. Everyone uses credit differently. Those who pay off their balances at the end of each month may benefit from a rewards card with a reasonable annual fee. For those who plan to carry a balance from month to month, a low annual-percentage rate and no annual fee would probably work best. Shop around for the right credit card for you.

2. Make your payments a day late. The fastest way to lower your credit score is to make late payments on your credit accounts. It is important to come up with a system of paying your bills so that all payments are received on or ahead of time. Remember that your payment must reach your creditor before the due date and many do not post credits after 1 p.m. Late payment fees for credit card accounts are as high as $39 and add up very quickly.

3. Pay only the minimum payment. A mistake often made by consumers is that they believe they are doing OK with their credit cards as long as they can make the minimum payment. For anyone who has not done the math, paying the minimum is not OK. As an example, a credit card balance of $5,000 at 15 percent APR with a minimum payment of 2.5 percent would take more than 21 years to pay off and the amount paid would be $9,757.98. That is almost double the original balance!

4. Accumulate all the cards you can. The more cards you have, the more difficult it is to keep up with timely payments and how much you owe. Department and gas cards are convenient and often offer incentives for signing up such as an immediate discount or discounts on future purchases. However, one or two bank cards such as MasterCard or American Express are all that most people need. They can be used most places, offer better APRs and don't use up your credit availability.

5. Spend today; worry about how to pay it off tomorrow. The convenience of buying now and paying later sometimes gets the better of us. It may not seem like a $500 purchase when you hand the sales clerk a credit card as much as it does when you place $500 in cash on the counter. Be aware of the temptations of credit and ask yourself how you will pay off that $500 purchase. Have a plan in place to pay off purchases in no more than 90 days. To avoid impulse purchases, tell yourself that you will have to work for X number of days to pay for the item.

6. Use credit as additional income. Most of us get in trouble when we try to keep up with the Joneses. Do not purchase $200 tennis shoes for your child because they want them if you can only afford $50 tennis shoes. Having credit is not the same thing as having more income. Credit is only another way to spend the same income you already have! Live within or even below your means.

7. Share it with a friend who has none. This is not kindergarten lunchtime. If someone you know has no credit, don't share your cards with him or her for any reason. There is probably a real good reason why the person has no credit, like they don't pay their bills or they are chargeaholics! You share, you pay, don't do it!

8. Use cash advances from one card to pay another. It's hard to believe that people still do this, but it remains a big problem. This should be a wake up call that you are in serious debt trouble and need to seek help.

9. Hide debt from your spouse. After all, if your spouse doesn't know about it, it really doesn't exist! The very act of hiding something says you have made a mistake and are trying to cover it up. Money is in the top five list of things about which couples fight. If you are concealing a credit card balance from a spouse for whatever reason, come clean and discuss the debt and how you plan to pay it.

10. Ignore the problem. If you really want to foul up your credit, whistle in the wind and pretend the problem isn't there. It will only get worse the longer it is ignored. Certified Debt Arbitrators are available to help you set a budget, manage your debt and educate you on money management skills. Remember it's not the person calling you to collect a balance who has a problem ... you do! Don't put it off, call today!

This list of 10 is not all the ways to get into trouble with credit cards. There are as many ways to get into trouble as there are credit cards and new ways are created every day.

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