Before you begin to fix credit score ratings, first you need to understand; and fully appreciate, the impact your credit report can have on you.

When it comes to lending money and extending other lines of credit such as credit cards, there is most certainly bias in favor of those with good credit scores. And now even landlords, insurance companies and employers; to name a few, are also favoring people with better credit scores than the average and below-average person.

Not only does your score affect whether or not you even get approved for credit, but also how much you'll pay for it. The better your score, the more credit you can get and you'll pay less interest and fees. If your credit is good enough and you use your credit lines wisely, you can actually get paid for using credit such as cash back credit cards.

Here are some ways credit can affect you:

• Banks and credit card issuers review your score when deciding to approve or reject your application and; if approved, how much interest to charge.
• A high score can lead to lower car and home insurance premiums, and whether or not you'll need to cough up a deposit for things such as utilities.
• Many landlords check credit scores before allowing you to sign a lease.
• Many employers use credit checks when trust is of vital importance.

About scores:

• If your credit score is 760 or higher, you're doing good.
• If your credit score is below 620, take steps to improve it. Scores below 620 indicate a high risk and subject the person to credit denial and the high interest rates charged to subprime, bad credit people.

The three major credit report agencies (Equifax, Experian and TransUnion) use software developed by Fair Isaac Corp. to rate credit risks for assuming debt based on credit history. The result is what is called the FICO score. The FICO score is based on five factors which include payment history, the amounts owed and the types of credit obtained. The resulting FICO score can range from 300 to 850, although very few people achieve 850. Also, the score awarded by one credit bureau may not the same score another bureau gives. This is because one agency may recieve different information from creditors.

You generally have to pay to get your credit score. You are legally entitled to one free credit report each year from each of the three credit reporting agencies. You need a credit report to effectively watch for errors and identity theft. We recommend that you stagger your requests for a free credit report by selecting a different bureau every four months.

Improve credit score ratings:

• Don't apply for lots of credit cards. A credit inquiry can deduct five points from your credit score. However, multiple checks made when you're shopping for a mortgage will count as only one. (Asking for your personal report won't hurt your score, nor will requests made by credit card companies that offer preapproved cards, or requests by prospective employers.)
• Avoid applying for credit cards from companies that don't set a spending limit or won't report your limit to the credit bureaus.
• Don't cancel multiple credit cards. That can suddenly lower your available credit and can hurt your credit score. Keep old accounts open to ensure a long credit history.
• Limit the percentage of available credit you use to no more than 30%, even if you pay off your balance each month. Your credit report will show the amount you owed, even if you subsequently paid in full, and excessive spending will harm your score.
• If you don't have a credit history, start one by obtaining a secured credit card and managing it responsibly.

The top way to improve credit scores is to pay all of obligations on time. Payment history constitutes 35% of credit scores. That includes library fines and other delinquent accounts turned over to collection agencies, which will lower your score. One late payment reported to a credit bureau can drop your score by 100 points, particularly if you had a high score. Consulting a credit counseling service to manage excessive debt will not damage your credit score. Late payments can remain on your credit report for seven years. Bankruptcies appear for 10 years.

If you find an error in your credit report, ask the creditor to correct it, then notify the credit bureau by sending a certified letter and copies of documents that support your claim.

• If the error isn't fixed, the bureau must identify the person who investigated your claim, and you can request a second report.
• If the error is corrected, the bureau must send you a copy of your new report and, at your request, a copy to everyone who obtained your credit report within the previous six months.
• If it's not corrected, you can include a statement in your credit report.
• Faced with a faulty credit report when you're about to obtain a mortgage? Mortgage companies can engage a rapid rescoring service to correct errors within days.
• Paying a service to monitor your credit is not worth the fee, unless you've been the victim of identity theft and have reason to believe you're still at risk.

Credit Report Problems:

• There are two kinds of credit report problems: (1) errors made by creditors and bureaus and (2) financial errors made by you.
• Regardless of what type of problem you have, the best way to fix the problem is to start with the source (creditor) who had the offending problem listed on your report.
• Negative information (items that are true but reflect badly upon your score):
• Information about criminal convictions may be reported without any time limitation.
• Bankruptcy information can follow you around for 10 years.
• Credit information reported in response to an application for a job with a salary of more than $75,000 has no time limit.
• When you apply for credit or life insurance in the amount of $150,000 or more, any credit information reported at that time has no time limit.
• 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.

Repair Credit Report:
To repair past credit abuses, simply pay your bills on time and demonstrate responsible credit management. The good news is that you have as much leverage with the credit bureaus as anyone else does. And there's no safer and more effective option than helping yourself get on the road to good credit.

• 1. Start with the source. Since the three major credit bureaus (Equifax, Experian, and TransUnion) all have slightly different information about you, you need to order your credit report from all three bureaus. Each individual report will cost you about $9 (that fee does not include your credit score).
• 2. Determine what you owe and to whom. This is easy to do once you have your credit reports in front of you. Most of your creditors should be listed on your report. But remember, not all of them will be. Store credit cards, gas cards, and other small loans aren't always reported to the credit bureaus.
• 3. Catch up on payments. If there are any past due accounts, contact the creditor directly and let them know that you're ready to make amends. If you are unable to pay even the minimum amount on all of your accounts, you will need to look for ways to cut back in other areas of your spending. Lenders want to get re-paid -- no matter how little you owe. We offer an entire Get Out of Debt online seminar (for free!) that will walk you through this trying time step-by-step.
• 4. Set a good example for your lenders. If lack of credit is one of the reasons your score is low, apply for a small loan from your bank, and make regular, on-time payments until the loan is paid off in full. You'll be exhibiting responsible credit behavior, which can go a long way in helping you build a better credit history. If you can't get a loan, consider applying for a secured credit card. With a secured credit card, you deposit some money with a lender and use that as collateral for your purchases. Again, make sure to pay the bill on time (and in full) every month.

Nothing in this credit rebuilding plan is rocket science. And it's certainly a plan you can implement yourself without the help of an expensive credit repair program. Again, diligent and disciplined saving and bill-paying will, in time, turn your credit history around.

Fix Credit Report Errors:

• If you wish to dispute an error on your credit report, you can do so for free. When you contact the credit reporting company, they will investigate the dispute and, if applicable, issue you a revised credit report for free.
• 1. Start a record. Every step of the way, be sure to keep good records of all of your phone conversations and copies of each letter/e-mail/carrier-pigeon missive you send. Send all letters via certified mail (return receipt requested), and be sure to include copies of any documentation (such as an account statement that shows an account paid in full) that supports your claim. Also be sure to tell the credit bureau exactly what you want them to do -- whether it is to delete a false item completely or update an old entry.
• 2. Inform the credit reporting agency (Equifax, Experian, or TransUnion), and tell them what information you believe is inaccurate. Check out the Federal Consumer Information Center sample dispute letter. The FCIC suggests that you enclose a copy of your report with the items in question circled.
• Within 30 days, the credit reporting agency will reinvestigate the items in question. They will forward all relevant data you provide about the dispute to the "information provider" (a lender, creditor, or other business that reported the inaccurate information). The creditor is then required by law to investigate your complaint and report its findings. Here are a few possible scenarios:
•   Disputed information that cannot be verified must be deleted from your file.
•   If your report contains erroneous information, the credit reporting agency must correct it.
•   If an item is incomplete, the credit reporting agency must complete it. For example, if your file showed that you were late making payments, but failed to show that you were no longer delinquent, the credit reporting agency must show that you're current.
•   If your file shows an account that belongs only to another person, the credit reporting agency must delete it.
• If the disputed information turns out to be inaccurate, the creditor must notify all nationwide credit reporting agencies, so they all can correct the information in your file.
• 3. Inform the business that sent the erroneous information of your dispute. Now that you've honed your letter-writing skills, let the creditor (or other information provider) know in writing that you are disputing an item it put on your report. You want to include communications with the credit bureau as part of the documentation trail, but the source of the problem is your best bet for successful resolution. Use any leverage you might have as an ongoing customer of the offending business.
• 4. Get the good stuff put into your file. If you've been told you were denied credit because of an "insufficient credit file" or "no credit file," take your pulse. If you're alive, and have accounts with creditors that don't appear in your credit file, you can ask the credit agencies to add this information to future reports. They are not required to do so, but if you ask nicely and they can verify the accounts, most will add them to your report for a fee.
• 5. Celebrate victory! If your dispute results in a change to your credit report, the credit bureau will give you the written results and a free copy of your report. While this marks the end of most disputes, be aware that the information can show up again. That will only occur if the creditor verifies the disputed item's accuracy and completeness. If that happens, you'll receive notice from the credit bureau and you can take it from there. Again.
• 6. Accept defeat -- but make sure you get in the last word. If you are unsuccessful in removing information from your credit file and reach an impasse, you always have the legal right to attach a letter of explanation to your credit file. Be sure to cover all three of the major credit bureaus as well as the offending business. The business is obligated to include your letter in any future input to the credit bureaus. Verify that they do.