Education

1Building a poor credit history: Unemployment
If you want to transform an excellent personal credit history into a credit nightmare- losing your job is a good place to start. Periods of unemployment can send your credit score into a nose dive as you struggle to meet the bills.
2Building a poor credit history: No credit history
One way to give yourself a poor credit history is to never establish a personal credit history at all. Don't put utilities in your name, don't open charge accounts at stores, don't get a gas card, and never apply for loans, lines of credit, or credit cards. Having no credit history will hamper your ability to finance major purchases such as a car or a home almost as much as a personal credit history full of mistakes.
3Building a poor credit history: Late payments
Late payments can wreak havoc on your personal credit history. The occasional late payment is usually nothing to worry about. However, racking up several consecutive late payments will be a red flag to the credit reporting agencies. Recent episodes of late payments are also troubling to the credit bureaus because they can indicate financial difficulty.
4Building a poor credit history: Excessive credit report inquiries
To damage your credit history, apply for a bunch of credit cards simultaneously. Every time you apply for a loan, line of credit, credit card, or store credit card, those lenders will request your personal credit history from the major credit bureaus. Multiple inquiries in a short time frame send the message that you're desperate or impulsive, and the effect on your credit score is immediate and negative.
5Building a poor credit history: High credit card balances
If you want to establish a bad credit history, charge your cards up to their limits, and keep them there. Your credit score is based on your ratio of total debt to total available credit. As your credit card balances go up, your credit score goes down.
6Building a poor credit history: Bankruptcy
Bankruptcy is the undisputed champion at destroying an excellent credit rating. By law, bankruptcy filings can remain on your personal credit history for up to 10 years. During that time, you'll find it much harder to obtain loans at decent rates, get a mortgage, or even get affordable car insurance. Fortunately, there are steps you can take to build a strong credit history. A good way to start is by monitoring your credit, making sound financial decisions, and paying your bills on time.

1Credit Score Breakdown
Most lenders use your FICO (Fair Isaac Corporation) score when determining whether they will extend an offer of credit to you. FICO scores (also referred to as credit scores) range from 350 to 850. As indicated by the list below, the higher your FCIO credit score, the better your credit rating: - Credit score between 750 and 850 is considered an excellent credit rating. - Credit score between 660 and 749 is considered a good credit rating. - Credit score between 620 and 659 is considered a fair credit rating. - Credit score between 350 and 619 is considered a poor credit rating. However, it is possible that you can have a credit score of 0, which means that there is not enough information in your credit file to generate a credit score.
2Your Credit History's Role
Some people wrongly assume that no credit history is a good thing because there can be no negative marks on your credit report. However, if you have little or no credit history, getting financing approval can be difficult. Because your FICO credit score is based primarily on how you have used credit in the past, having no credit history leaves you with no credit score. Without a credit score, lenders do not have an easy formula to determine if you are a credit risk. Many lenders do not want to take a chance on an unproven applicant.
3Other Possible Factors for a Credit Review
A lack of credit history and no credit score does not mean you will automatically be denied financing. In addition to the four main factors of a credit report - identification, account history, public records of bankruptcies, liens, etc., and inquiries from other lenders - many lenders will also look at your residency, employment, and banking history. Residence History Your residence history can play an important role in the lender decision-making process. Lenders may view not staying in one location for any extended period of time or breaking a lease at an apartment as negative factors. Conversely, a solid residence history may be seen as a positive element for a potential lender. Employment History Your employment history is another factor many lenders review, especially if you have little or no credit history. Stable and consistent employment may be seen by lenders as a good indicator of a candidate's level of responsibility. Banking History When you have no credit score, your banking history may come into play. Lenders tend to look more favorably on applicants who have checking and savings accounts.
4Building Your Credit History Can Help
When you are approved for financing, you will begin to build your credit history, which will increase the chances that you will break free from the "no credit score" category. However, as you begin to establish your credit, you will not immediately achieve a perfect score of 850. According to a Bankrate.com article, credit applicants are evaluated as compared to their peers. This means that if you have a shorter credit history, you will be compared to others in a related scoring model. It is important to note that not all scoring models allow for a perfect score. However, this does not mean you cannot achieve a score in the excellent category range.
5Having No Credit Score Isn't a Hopeless Situation
Obtaining credit when you have no credit score can be frustrating since some lenders do not want to extend financing offers to applicants with no credit history. However, as noted above, some lenders will consider additional factors to applicants with limited credit histories. This means no credit score does not necessarily mean no credit offers.

Learn About Credit Scores
What are credit scores, and how are they different from credit reports? Credit scores are three-digit "scores" that show how responsible you've been in paying off credit cards, mortgages, car loans, and other lines of credit. The three credit bureaus — TransUnion, Equifax, and Experian — use the information in your credit report to calculate your credit scores. Credit reports provide the information the bureaus use to calculate your credit score. They list, among other things, your reported on-time, delinquent, and missed payments. (To see what else they contain, check out the "Learn More About Credit Reports" section below.) For more information, check out "How Credit Scores Are Calculated." How do you know if your credit scores are good? Along with your free credit scores, FreeScore offers you an analysis of where your scores are relative to others. FreeScore's credit score estimator measures your scores against those of the general population and assigns you a grade — A, B, C, etc. — according to where you stand in comparison to others. What is a good credit score? Generally speaking, a credit score of 750 or higher is considered good — that is, lenders will consider you a lower risk of defaulting on a line of credit. While the cut-off line for "good" scores is subject to change, the higher your score is, the better your chances are to secure a loan or other line of credit at a desirable interest rate. To learn more, check out "What Is a Good Credit Score?" What are credit score ranges? The range of credit scores differs from bureau to bureau but in general, they range from a low in the 300s to a high in the mid-800s. Your scores can also differ from bureau to bureau because credit issuers aren't required to report your credit transactions to all three bureaus; some of them may report your credit activity to only one or two of them. Regardless of the bureau, though, most people have credit scores somewhere between 500 and 800. For more information, check out "Credit Score Ranges."  
Learn More About Credit Reports
What's included in your credit report? Your credit report contains a variety of information about you, including:
  • Your personal information — name, current and previous addresses, Social Security number, past and current employers, and more
  • Your credit history — mortgages, auto loans, student loans, credit cards, and other lines of credit opened in your name, along with your history of payments (on-time, late, or missed)
  • Public records about you — bankruptcies, liens, court judgments, unpaid taxes, and more
  • Inquiries — organizations or individuals who have requested your credit report
  • Disputes — any information that you've added to your credit report disputing items on it
Should you expect to find errors in your credit reports? Errors are commonly found in credit reports, due to input errors, incorrect reporting from credit issuers or merchants to the bureaus, or even identity theft events. The only way to determine whether your credit reports are accurate is to carefully review your reports from all three bureaus — TransUnion, Equifax and Experian. What is AnnualCreditReport.com? AnnualCreditReport.com is the government-mandated website through which you can order a free credit report from each of the three credit bureaus once every 12 months. Through AnnualCreditReport.com, you can order a credit report from each bureau at the same time, or you can stagger your requests throughout the year.  
Learn More About Credit Monitoring
What is credit monitoring? Credit monitoring is a service that alerts you whenever a change is made to the information in your credit files at one or more of the three credit bureaus. Triple-bureau monitoring obviously provides a more comprehensive overview of the changes being made in your credit files. Changes that can trigger an alert include new addresses; new users being added to credit card accounts in your name; on-time, delinquent, or missed payments on accounts in your name; inquiries into your credit files made by third parties; and more. For more information about credit monitoring, check out "How to Choose a Credit Monitoring Service." What can credit monitoring do for you? Monitoring your credit can help you keep track of your credit activity, which is particularly useful if you're planning to apply for a loan or line of credit in the foreseeable future. The sooner you're alerted to errors that might harm your credit score, the quicker you can dispute them to protect your credit history — and with it, your credit score. Credit monitoring is also a good way to quickly detect suspicious or unauthorized activity within your credit records. Such activity is often a sign of identity theft, and the sooner you detect and react to identity theft, the more chance you have of limiting the damage it can inflict. To learn more about the benefits of credit monitoring, check out "10 Reasons You Need a Credit Monitoring Service." Can you monitor your credit without using a service? You can monitor your credit through AnnualCreditReport.com if you'd like. However, because creditors aren't required to report your credit behavior to every credit reporting bureau, if a change occurs at one bureau after you've ordered your credit report from them, you won't be aware of it for 12 months. To learn more about monitoring your credit on your own, check out "What You Miss With Do-It-Yourself Credit Monitoring."

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