Think of it as putting a great big padlock on your credit information, making it far less likely that criminals will gain access and turn your life upside down by stealing your identity. It is called both a credit lock and a security freeze but the service is the same.

Just recently all three of the major credit agencies provided the ability for individuals to lock their credit reports providing limited access to the information in their credit report. This proactive measure isn’t free. But then can you put a price on your protecting your identification. Anyone that has had their stolen can tell you the cost to restore things to normal can be substantial. Services like TrustedID and Lifelock offer credit lock as part of their services.

Although a credit freeze provides superior protection, nothing is fool proof and this is no different. It cannot halt duplications of ID that’s not related to your credit. So for example, if someone fraudulently creates a drivers license or social security card it can’t do anything to protect you from those fraudulent activities.

It also doesn’t stop all companies from accessing your credit information. Credit companies and lending institutes that you have or have had business with will still have access to your credit report, however new companies won’t be able to access it.

You will continue to get those pre-approved credit card notices in the mail because the credit bureaus can legally continue to sell your name and address to credit card companies. The only way to stop this is to visit http://optoutprescreen.com.

Collection agencies that are acting on behalf of the financial institutes you have existing contracts with, child support agencies, government, or law enforcement will continue to have access to your information.

One draw back to the credit lock is the amount of time it takes to fill out the paperwork plus it requires certified letters. You also have to remove the freeze to allow access and then put it back on. It doesn’t protect your identity to just freeze a couple of reports. It’s all or nothing. So if you put the freeze on and then want to apply for a new car loan you will need to lift the freeze to the credit bureaus and then put it back on. The cost varies but it’s about $10 each time. That compared to the cost of getting your identity back is really peanuts.

You might consider one of the services like Lifelock or TrustedID, which offer it as part of their package. It can save you a bundle and you get other services to increase your protection a little more. And in today’s world of white collar, educated criminals we need all the help we can get to keep our identity safe.

• Open a bank account. Here’s a basic step that’s sometimes overlooked by people seeking credit. Opening checking and savings accounts is also one of the few things you can do as a minor to start building a financial history.

  A savings or checking account may not affect your credit score directly, but the account activity will demonstrate your stability and ability to handle money responsibly. However, you need to remember that writing bad checks or overdrawing from your bank account are negative indicators to lenders and damage your credibility.

• Apply for a low credit limit or student credit card. Plan to pay your balance off each month and follow a budget. If you must carry a balance, never pay late and don’t exceed 30% of your available credit line. Make sure to include your student status on your application; full-time students often are given a lower initial credit limit to help build a healthy credit history.
• If you don’t qualify for a regular credit card, apply for a secured card that requires a deposit of money with a lender. Your credit limit is usually equal to the amount on deposit. But be careful of high rates and punitive fees that may be part of the terms with some of these offers.
• Get a store credit card. Department store and gasoline credit cards are generally easier to obtain than major credit cards such as a MasterCard®, Visa®, or Discover®. These cards don’t do as much for your credit score as a bank card (Visa, MasterCard, Discover, etc.), but they’re usually easier to get.
• Apply for a small loan and repay it promptly and on time. To increase your chances of being approved, plan to apply a large down payment on the loan. If your application is denied, consider getting someone with an established credit history to co-sign on your behalf.

If you make all payments on time and never go over the credit limit, over a period of years your credit history will be in good shape. Even better, the longer you keep it up, the better your credit score will be (up to roughly seven years).

Financial institutions must make credit equally available to all creditworthy applicants. Under the Equal Credit Opportunity Act, you have certain rights that protect you against unfair credit discrimination. Under this Act, you cannot be denied credit because of your age, sex, marital status, race, religion, national origin, income from public assistance, intent to have children or birth control practices.

If you suspect discrimination by a bank, savings and loan or credit union, ask for the name and address of the federal agency that enforces the Equal Credit Opportunity Act (depending on the institution, this will be either the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision or the National Credit Union Administration). The Equal Credit Opportunity Act mandates that the creditor must give you this information.

For additional articles and resources on everything you need to know to apply for a credit card, please visit WowCreditCards.com and check out the many instant credit card applications.

A credit freeze, which was first allowed back in January 2003 to victims of identity theft, allows you to have much more control over your credit and its history. Once you place a credit freeze on file, neither a company nor individual is allowed to access your credit report. Many businesses dislike this new law because it blocks employers, lenders and insurers from your credit files. In November 2007, bowing to consumer pressure and impeding federal law (still being discussed), the credit agencies allowed freezes in every state, regardless of whether you were an identity theft victim or not.

How Do They Work?

A credit freeze does not mean that you have to stop large parts of your life because you won’t allow anyone to check your credit history. However, if a company were to request for your file, they would be denied. Because of this, they will most likely deny your application for a new credit card or loan because they can’t find out more about you without seeing your prior credit history.

To counteract this problem, anyone who places a credit freeze on their credit will be issued a personal identification number (PIN) by the 3 major credit agencies. This PIN will allow you to unfreeze your accounts whenever you need to with little hassle. A company like TrustedID will give you the ability to do this with a simple web-based on/off switch.

A freeze on your credit means that an identity thief could have all of your private information, such as your social security number, your mother’s maiden name, your address and birthday. Regardless of how much information they have on you, they will not be able to ruin your credit because it will be locked to anyone who does not have that PIN. To start a freeze, all three of the credit reporting agencies will need to be contacted. The cost to freeze your credit report is $10 each (varies by state) and you will need to pay another $10 when you want to unfreeze it.

Credit Freezes and the Government

In some states like Delaware, if you are a victim of identity theft, all fees will be waived. Although most states require a $10 fee for the freeze, some states charge a lower fee and others ask consumers to pay more for the service.

Credit freezes are being embraced by consumer advocates, but when it was first being discussed and suggested, credit reporting agencies and retail companies such as auto dealerships did everything that they could to stop it from being conceived. They finally settled on an agreement to create the special PIN so that consumers could have their credit accounts unfrozen in a matter of minutes.

Opposition to Credit Freezes

Why would the credit reporting companies hate the concept of credit freezes? Though it helps protect consumers from identity theft, it costs the credit bureaus in lost revenue. They sell your information to others who need to find out your credit info before giving you a loan, rental property, vehicle or job. A credit freeze denies them from doing this. Therefore, their income can potentially drop, and as all of the credit reporting agencies are for-profit, public corporations, this could spell trouble.

Auto dealers and other companies who depend on consumers to spend money on a whim did not want the freeze to occur either. If someone has to go through a few steps before they can spend large amounts of money, they will have time to think over the purchase and may change their minds.

Depending on your point of view and your occupation, credit freezes are either a good or a bad thing!

Understanding your credit report

Your credit report illustrates your financial story, one that is of special interest to lenders, financial institutions, and potential employers. It is a look into how well you manage payments and your finances. Typically, different types of data are submitted to the reporting agency, ranging from your creditors to public records from court. Once a submission goes on your report, it stays on from seven to ten years. Positive marks will improve your buying power, but if an identity thief uses your name to open new accounts, credit cards, purchase cell phones, houses, etc, these all become negative marks that can destroy your financing ability – after all, the thief using your good name certainly won’t pay for their fraudulent purchases!

The credit score on a credit report reflects your risk factor, not the ability to pay. It is a number generated when analyzing your complete credit file. The higher that your score is, the less risky you look to a lender. Scores range from (low) 340 to (high) 850.

Ordering your credit report

All Americans can order one free credit report in each 12 month period. You are entitled to obtain a free credit report from each one of the three agencies. Users can order a free credit report, but usually without credit scores. Credit scores can be purchased as an added feature for a fee.

The three national credit reporting companies have set up a single website for you to order your free annual 3 credit reports. Visit their website at www.annualcreditreport.com. If you would like to order by phone or mail, use the following information: Phone – (877) 322-8228 or Mail – Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. When submitting a request by mail, you will need to print and complete the Annual Credit Report Request Form. You do not have to contact all three of the consumer reporting agencies individually because they provide your free annual reports through the website. The law permits you to obtain one free report every 12 months, from each of the big three credit bureaus.

You will need to provide the credit bureaus with specific information, including name, address, date of birth and social security number. In order to maintain security, each one of the credit reporting companies may ask security questions that only you know. Prepare to answer any question they ask so that your identity is clear.

Reviewing your credit report for signs of identity theft

When you obtain your credit report, review it very carefully to ensure all of the information is correct. The signs of an identity theft attack are apparent in several red flags:

• New accounts that you did not open
• New debts that you did not accrue
• Rental agreements or mortgages in your name you do not own
• Addresses, “other names,” and employers that are inaccurate

It is critical that you ensure that everything that is listed in your credit report is accurate. File a dispute to have any inaccurate information removed. The credit bureau has to bear the burden of proof, and they will conduct an investigation into your disputed accounts. If the credit reporting provider finds that the information in question is inaccurate, they must notify all of the three nationwide reporting companies in order to correct the information that they have in your file.

When they complete their investigation, the credit bureaus will respond within 30 days with results in writing, and they should send you an updated report so you may review that the fraudulent charges have been removed. You may also request that the reporting company send correction notices to any party that had received your credit report in the previous six months.

Use the following information to file your dispute with any of the three agencies; they will notify other related financial institutions of any possible changes or erroneous entries. You can also contact them directly if you have any questions about the dispute information.

• Equifax: (800) 525-6285, www.equifax.com, P.O Box 740241, Atlanta, GA 30374-0241
• Experian: (888) EXPERIAN, www.experian.com, P.O Box 9532, Allen, TX 75013
• TransUnion: (800) 680-7289, www.transunion.com, Fraud Victim Assistance Division, P.O Box 6790, Fullerton, CA 92834-6790

Improving your score can be achieved, but it may take some time. While you are waiting to hear about the items in dispute, you can focus on other actions that will significantly improve your credit score, such as pay your bills on time and staying clear of new debt.

But what if you have no credit history to begin with? Everybody starts with a clean slate, and when you turn eighteen, the law states you are old enough to be financially responsible to apply for credit. But how do you begin your financial life with a blank report? A great first step is a credit card.

Apply For a Credit Card to Begin Your Financial Journey

When you apply and are approved for your first credit card, your credit history is born! Time to spend, spend, spend, right? No, of course not. The worst thing to do is tell your future lenders that money flows through your hands like water. Acquiring a card is your chance to prove your sense of responsibility. The way you pay your bill every month is recorded on your report. If you skip a payment or ring up purchases you can’t pay back, you will be marked with a late payment, and your credit score will decline. This may haunt you years down the road in the form of higher interest rates for a car loan or mortgage, simply because you are seen as a higher risk. Even carrying a balance on your card affects you, though paying the minimum is certainly better than nothing.

Of course, without a credit history, it may be harder to be approved for a card. That’s why financial institutions have made it easier to begin your history, in the form of a student credit card. This card will have a lower limit and a higher interest rate than standard cards, because the issuing company has no clue about your financial track record. The lower limit is to reduce misuse, and the higher interest is to offset the loses due to the fact that a small percentage of students will never pay their bill. Another option is to have a parent or guardian co-sign the application form. They will then be responsible for the bill if the student can not pay, and they control the card’s credit limit.

A student card is a great way to begin building your credit history, and once you have a proven history of paying your bills, you can then upgrade to a standard card, with higher spending limits and lower interest. From there on, as your lifestyle changes, it will be a lot easier to apply for a car loan and a mortgage. Congratulations, you’re now a financially responsible adult. Now pay those bills!

What if I Have a Horrible Credit History? How do I Fix It?

If you dug yourself into an impossibly deep financial hole, due to bankruptcy or divorce, begin the process of digging yourself out now. A secure credit card is a great way to begin repairing your credit report. With this type of card, you have to deposit cash into your account before you are allowed to use it. That way, you have money saved to pay it off. After a few careful months of paying your bills on time, your score will be raised enough to be able to apply for a standard credit card. Keep digging yourself out by pacing your spending and paying on time, and soon there will be more positive indicators than negative.

Finally, ask for a loan when you know you’re ready, for each inquiry into your report from a potential lender will affect it. This is because inquiries indicate that you wish to carry more debt. Asking for a copy of your report does not affect it, though.

The Do’s of Repairing Your Credit

• Pay your bills on time, every month
• Be aware of your purchases, and resist impulse buys
• Don’t bring your credit card if you don’t think you’ll need it
• Never spend over your limit – sometimes, the issuing company will up your limit. However, this could turn into a viscous cycle, with larger and larger balances
• Pace your loan applications. Too many at once will affect your score, whether you are approved or not
• Keep up to date on any fee changes, and check your credit card statement every month
• Consider creating a budget to see the overall picture of your finances
• Check your credit reports regularly for errors, but more importantly, it gives you great support to see those negative warning marks shrinking

A good credit report helps you obtain more credit as well, so goes the saying, “wealth attracts wealth”. A person with a healthy credit history might not be synonymous with a person of plenty of wealth. As mentioned earlier, a credit report is the permit to receive credit; it is the token that shows how reliable you are when money is the matter.

If you cannot prove yourself to be reliable, creditors won’t be willing to lend you money. Hence, you should try hard to attain better credit and must adopt all precautionary measures to protect it from undue damages. Wise men say “an ounce of prevention is worth a pound of cure”.

What Factors Affect Your Credit Report?

But how can you do so, if you have no idea about the controlling factors of a credit report? What are the variables that influence it? Do you know how fragile your report is? Credit is very much prone to damages – wait, don’t get nervous. You need not be an expert to answer all these questions. Only some basic knowledge is required that can help you manage your credit on your own.

A credit report is a document that includes the individual’s financial history of the last 10 years with borrowing and repaying habits and bankruptcy details, if any. Generally, creditors report your account to the Credit Reporting Agencies. These agencies maintain files for each individual. Once they get the account information for a particular person, they enter the data into his or her file.

Based on your credit history, CRA assigns you a three digit score that is the yardstick of measuring your creditworthiness. Sometimes creditors introduce their own formula for calculating credit scores. But whatever may be the system, data used in the process of calculations are compiled only from your report. So, if you have a healthy report with no blemishes, you need not worry about your score, as it will definitely be in the upper range.

Maintaining Your Good Credit

Once you manage an appreciable credit score, there comes the question of maintaining it, because a credit report is prone to injury. It can be damaged if it reflects -

1. Negative information or;
2. Wrong information

As far as negative information is concerned, the consumer is responsible for it, directly or indirectly. If you fall behind with your payments for some reason or other, your creditors will report it to the bureaus, and your report will begin showing it thereafter. Needless to say, your future creditors will not like a delinquent account because it raises doubts about your consistency with payments.

Generally speaking, charged off accounts, accounts under collection, settled at a lower amount, bankruptcy – these statements are considered to be negative and it will hamper your score. One should be careful to remove these entries and may go for professional help if required. The process of credit repair requires you to be patient and disciplined.

As far as wrong information in your report is concerned, it can be of two types –

1. A CRA can make mistakes while processing your report;
2. Creditors can report wrong information about your account by mistake.

These mistakes are rectified by Credit Bureaus on a request from the consumer. The Bureau will carry out an investigation and make suitable corrections if any erroneous information is in your report.

Beware of Fraud in Your Name

There could be another source of erroneous entries, though! If you suddenly see lots of defaulted and unpaid accounts in your report, you may be a victim of identity theft. If you have lost your personal information in the near past, be alert. Exercise all preventive actions to protect your credit history. File a report with local police and contact Credit Bureaus to place a fraud alert. It will help you erase fraudulent entries from your report in the future.

I would like to conclude by saying everybody should check their credit report regularly. It will help to arrest the negative or wrong information at the earliest and can save a lot of time, money and energy in the future.