Ask the Experts

1. I have a question about improving my credit. I have bad credit and I have been trying to improve it for about two years now, and my question is about the credit information on my report. I have items on my credit report that have been there for over ten years. Will these things affect me if they are noted to come off of my report this year. Also, if I have unpaid bills on my report. How will these affect me if they are about to come off?

First, only bankruptcies stay on your credit report for 10 years. If you have items that are on longer than seven years from the date of last activity, you need to report that to the credit bureaus right away. They are required to remove them. If you have items that are due to come off but are derogatory, they will affect your score negatively. However, the age of the delinquency is a factor. So, a past due item from last month is much more of a problem than a past due from six years ago.

2. What information do I need to know that could help me improve my credit rating? I do not have credit cards and I paid off my car, but I do have small bills and medical bills.

It starts with a copy of your credit report. On our site, follow the instructions to request a copy from each of the three credit bureaus. Under the Fair Credit Reporting Act, you are entitled to one report from each of the bureaus once a year. Look for mistakes and report them. Once the reports are correct, order a copy of your credit report with a score. This will cost you a small amount but is important to establish your starting point. The biggest issues and most impact occur because you pay your bills late and are overextended in your credit. Pay every bill on time and do not carry a balance that exceeds 25% of the credit limits on your cards. These two categories alone account for 65% of your credit score.

3. How will one late payment on a credit card affect my credit score?

The difference between someone with good credit and someone with bad credit can be as few as five late payments in one year. One late payment may not hurt someone with good credit but it could make a huge difference to someone with less than perfect credit. Payment history accounts for 35% of your credit score and this is the most heavily weighted item on your score.

4. Recently, I was offered the opportunity to get a free credit report, but the website said I needed a credit card to get the report. How do I go about getting a credit report without entering a credit card?

Under the Fair Credit Reporting Act, you are entitled to one free credit report from each of the three credit bureaus once a year. Simply go to annualcreditreport.com and complete the information requested. This site will not ask you for a credit card number. Keep in mind, however, that this is just the first step. You will have to, at some point, pay for a credit report with a credit score. The free reports do not contain a score.

5. Is it advisable to close an old credit card with a high interest rate and only use a new credit card with a lower interest rate?

The answer to this question is, it depends. Do you pay off each credit card every month? If you do, it does not matter how long you have had each card. If you have had the high interest credit card for 10 years and the low interest card for 10 months, you are better off keeping the high interest credit card because length of credit history accounts for 15% of your score.

6. I have a few questions. I was told that if there are negative items on my credit report that are 2+ yrs old, that they automatically fall off. I was also told that by paying on an old account, it then brings that account current and makes the history look even worse, so don't pay it and let it fall off. Do those accounts fall off even though they are not paid in full? Do I have to contact the bureaus and ask them to take those accounts off? Once they fall off, will my score go up?

Credit reports contain all credit information, good and bad. Information on your report stays in your history for a period of seven years from date of last activity.

Paying off old debt becomes a choice. It does not make your credit worse. However, if you have a collection account that is six years old, it will fall off the report within the year. In this case, it is better to not pay it and have it fall off than it would to pay it and have it report as a paid account for another seven years.

All accounts must come off your report after seven years from date of last activity. If any inactive account continues to report after seven years, you need to dispute this with each of the credit bureaus reporting the information. As bad items on your account fall off your report, your credit score will go up.

7. Is it a good idea to boost your credit score by being added as an authorized user on a good credit account?

While it is not illegal to be added as an authorized user on someone else's account, this loophole in the law is coming to an end. As scoring models adjust to not include authorized users on credit reports, the credit boost that many have received will disappear. Also, this will not do anything to help your credit long term since the good credit history belongs to someone else. Most people with credit problems have them because of bad habits. If you ignore these issues, the bad habits will continue, as will your credit problems.

8. I have an old credit card that I don't use anymore. I have some late payments on the file. Will closing the card remove all of the negative information from my credit report?

If your history with this credit card is bad and somewhat recent, it is best to close this account. This account will keep reporting for seven years from the date of last activity and keeping it open is an activity. So, keeping the account open will never allow the negative information to disappear.

9. I went to a credit repair agency to fix my credit and they want to charge me a lot of money. What are they doing to fix my credit? Can I do it myself?

A credit repair agency cannot do anything that you cannot do yourself. More importantly, if someone else does your work, you will never learn. Educate yourself about credit, break your bad habits, and you will fix your own credit for life without having to pay for a short-term fix.

10. I want to buy a new car and I have heard about an auto-enhanced score. What is it and will it help or hurt my credit when I apply for a loan?

If you know you will be buying a new car within 6 months, it makes good sense to make sure you make your car payment on time. An auto-enhanced score pays special attention to how you handled your previous automotive payments.