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Inquiries can be classified into two categories; soft and hard inquiry. A hard inquiry shows up on credit report due to transactions you have initiated such as applying for a credit card, car loan, asking for a credit limit increase, set-up utility bills and applying for a new job. These inquiries typically stay for two years. Although, many will disappear within one year.

Soft inquiries happen when existing creditor does a maintenance review of your file, when you pull your own credit report and a promotional credit is extended to you. Soft inquiries do not affect your credit rating.  

After a bankcruptcy discharge, debts that were discharged should be reported in the same category along with "good items" as accounts that are current. They should not be reported under derogatory category.

Obtain a free credit report annually from www.annualcreditreport.com. Upon bankcruptcy discharged, establish new trade lines by secured credit card and get an auto loan.

GET RID OF YOUR COLLECTION ACCOUNTS.

Did you know that paying a collection account can actually reduce your score? Here’s why: credit scoring software reviews credit reports for each account’s date of last activity to determine the impact it will have on the overall credit score. When payment is made on a collection account, collection agencies update credit bureaus to reflect the account status as “Paid Collection”. When this happens, the date of last activity becomes more recent. Since the guideline for credit scoring software is the date of last activity, recent payment on a collection account damages the credit score more severely. This method of credit scoring may seem unfair, but it is possible to pay a collection and maximize your score?

The best way to handle this credit scoring dilemma is to contact the collection agency and explain that you are willing to pay off the collection account under the condition that all reporting is withdrawn from credit bureaus. Request a letter from the collector that explicitly states their agreement to delete the account upon receipt/clearance of your payment. Although not all collection agencies will delete reporting, removing all references to a collection account completely will increase your score and is certainly worth the involved effort.

GET RID OF YOUR PAST DUE ACCOUNTS.

Within the delinquent accounts on your credit report, there is a column called “Past Due”. Credit score software penalizes you for keeping accounts past due, so Past Dues destroy a credit score. If you see an amount in this column, pay the creditor the past due amount reported.

GET RID OF YOUR CHARGE-OFFS AND LIENS.

Charge-offs and liens do not affect your credit score when older than 24 months. Therefore, paying an older charge-off or a lien will neither help nor damage your credit score. Charge-offs and liens within the past 24 months severely damage your credit score. Paying the past due balance, in this case, is very important. In fact, if you have both charged-off accounts and collection accounts, but limited funds available, pay the past due balances first, then pay collection agencies that agree to remove all references to credit bureaus second.

GET RID OF YOUR LATE PAYMENTS.

Contact all creditors that report late payments on your credit and request a good faith adjustment that removes the late payments reported on your account. Be persistent if they refuse to remove the late payments at first, and remind them that you have been a good customer that would deeply appreciate their help. Since most creditors receive calls within a call center, if the representative refuses to make a courtesy adjustment on your account, call back and try again with someone else. Persistence and politeness pays off in this scenario. If you are frustrated, rude and unclear with your request, you are making it very difficult for them to help you.

DO NOT CLOSE OLD CREDIT CARDS.

Strive for owning 3 to 6 credit cards. You may close credit cards if they are less than 2 years old and you have over six credit cards. 15% of the score is determined by the age of the credit file. Use old credit cards once every six months to avoid it from becoming inactive and unused in credit scoring.

For everyone else, there are standard FICO scores, which range from 300 to 850. The median is 723, meaning half of consumers score better and half score worse. The higher the number, the stronger the rating.

Credit Bureaus

Here's how you can contact each credit bureau:

Equifax: 800-685-1111, www.equifax.com

Experian: 888-397-3742, www.experian.com

TransUnion: 800-888-4213, www.transunion.com

Here's where you can request your free credit report: www.annualcreditreport.com

Credit myths

Myth: Once you have credit problems, your credit score will not improve for seven years.

Fact: You can improve your credit score over a shorter time period. Most recent entries to your report carry more weight than old ones.

Myth: When paid, the bad debt will go away.

Fact: Bad debts, charge-offs and late payments can stay on your credit report for at least seven years. But you can provide an explanation of your situation in a limited space on future credit reports.

Myth: If you catch up on your late payments, it won't show up on your credit report.

Fact: Your credit report must show that you are caught up, but will also show that you were late.

Myth: If you have a good FICO score, one late payment won't hurt it.

Fact: A first-time delinquency can drag down your score by at least 100 points. The later the payment, the more the damage.

Myth: You have to pay to fix errors on your credit report.

Fact: Nobody needs to pay to fix errors. Contact the credit bureau that created the report and work with the bureau to erase mistakes. But mortgage lenders can pay for a service that could help expedite the process.

Myth: You will be penalized for checking your credit report.

Fact: People can check their credit report or score as many times as they want without hurting their credit rating. When shopping for a mortgage, your credit can be checked multiple times in a 30-day period without penalty.

Myth: You should close as many credit cards as possible before applying for a mortgage.

Fact: Having credit cards open does not harm your credit score and can even help if they are in good standing. Having them maxed out hurts.