• 740+ = Perfect credit
• 700+ = Excellent credit
• 660+ = Good credit
• 620+ = Fair credit
• 560+ = Poor credit

Your credit score depends on many factors, such as: number of credit accounts, dollar amounts of debts, total amount of debt, record of on-time payments, public records such as bankruptcy, account chargoffs, and credit inquiries.  The FICO score is comprised of: Payment history (35%), Amounts owed (30%), Length of credit history (15%), New credit (10%), Type of credit in use (10%).

There are 3 major credit bureaus: Equifax,TransUnion, and Experian.  Consumers should review their credit reports periodically, and especially before applying for a loan, to verify that all information recorded is correct.  Consumers can "repair" their credit reports by challenging incorrect information, and adding statements to their reports.  Credit scores can be raised by paying bills on time and other factors.  It is Important to maintain excellent credit because poor credit costs a lot more in interest and fees.

All of your financial habits are tracked by your creditors including your bank, the local stores, and your credit card company. Whether you know it or not, credit bureaus compile purchasing information about you, information they gather based on how quickly or slowly you pay your bills, how long you have lived in your home and how many years you have been working for your employer. When you apply for a loan, the lender checks with the credit bureau to learn other lenders' experience with you.

Before you apply for credit, you should review a copy of your credit report from each of the three major bureaus to avoid any surprises. A copy of your credit report from each bureau generally costs $8.00.

The two types of inquiries to your credit report are hard inquiries and soft inquiries. Hard inquiries are those made by creditors to obtain a copy of your credit report. Soft inquiries are those made by you, or by firms looking to gather a mailing list of potential card applicants. Only the hard inquiries register on your credit report. Excessive hard inquiries from credit card companies may raise a red flag with prospective creditors. It suggests you're intending to get access to multiple sources of credit. Creditors are always on the lookout to avoid the greater risk that is associated with having too much revolving debt. As a result, it pays to exercise prudence and discretion in applying for credit.

Each bureau uses its own form to report your credit status.  The categories of data listed on the credit report include:

Basic identifying information - Name, address, date of birth, Social Security number and spouse's name.

Credit history - Companies that have loaned you money in the past, along with the account numbers, size of your credit lines, dates the lines were opened, dates you last used the credit lines, lines' repayment terms, amounts you presently owe, status of your payments (current or in arrears) and number of months your payments are past due, if applicable.

Collection agencies - Those assigned to collect overdue debts, including original creditor's name, which collection agency oversaw which account, the amount it tried to collect and whether you paid.

Courthouse records - Federal, state or local courts showing liens, bankruptcy filings or other judgments.

Additional history information - Former employers, addresses, etc.

Inquiries - Listing of inquiries made by potential credit grantors.

At the end of a credit report, the credit bureau normally offers a dispute form to complete if you find anything in the report inaccurate. (You have the right to correct mistakes under the Fair Credit Reporting Act, and the bureau must finish their investigation of your claim within 30 days of receiving it.)

On the form, you must explain why you think the information is incorrect. For example, you may contend that some credit activities do not belong to your account. Or you may have paid a debt that the lender contends you have not. The more evidence you can show to back up your claims, the better the chance your credit report will be altered. (Only send the credit bureaus copies of your documents.)

If the credit bureau finds your credit report accurate after you've disputed parts of it, do not give up. Instead, write a letter (maximum of 100 words) presenting your case, which will become part of your record. Subsequent lenders that ask to see your credit record will then get your side of the story and have evidence that you are protective of your credit record.

If your credit report contains negative financial information, take solace in the fact that making regular debt payments today will eventually improve your credit score. Your credit report retains information for up to seven years. Personal bankruptcies remain on your report for as many as 10 years. Yet, making regular payments on your debts will help you establish your credit over time.

Some practical steps to help you repair your credit include:

Make a list of what you owe. An updated list of creditors, how much you owe them, and the interest rate you pay helps you to manage your debts. A list that is airtight will match the debts and amounts that appear on your credit reports.

Review your personal cash flow. A statement of your cash flow gives you an idea of how much you can presently set aside to make regular debt payments.

Prepare a personal budget. A personal budget helps you to find ways to improve your personal cash flow. Unfortunately, this may require some hard decisions about spending.

Set up a debt workout plan with each creditor. Lenders want to get repaid, even for small debts. If you're unsure, visit a loan representative or workout specialist at the financial institution to help you set up a repayment plan.

If you need help eliminating your credit card debt, you might want to consult with the local chapter of the nonprofit Consumer Credit Counseling Service (800-388-2227). CCCS will send you an information packet explaining its services. It also includes a form where you explain your financial situation. CCCS will refer you to the counseling center nearest you.

Under the guidance of the CCCS, one of your first acts will be to cut up most or all of your credit cards in front of your credit counselor. After that, your counselor will help you work out a realistic budget and debt repayment plan. Your credit counselor's job is to ensure that you pay back your debts over time. When the CCCS informs your lenders that you are working out a repayment plan, they will probably leave you alone. Your credit counselor will keep your creditors up to date on your progress.

If you've fallen behind in paying your bills, repairing your credit becomes a necessary part of managing your credit. If you diligently avoid further debt and compulsive spending, you will be taking control of your credit problems. Sometimes you can negotiate more favorable loan terms with lenders. You may decide to destroy your credit cards to avoid further temptation. But the cornerstone of repairing your debt is having a budget and sticking to the plan.

Disclaimer: The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a mortage lender or financial adviser.