The balancing act of credit card bills, mortgage payments, student loan payments, and car payments is something we’re all familiar with. Sometimes, it’s all too easy to get caught up in making only the minimum payments.

There’s good and bad news here. The good news: Your credit report does not indicate whether you’re making your credit card payments in full or only the minimum payments.

The bad news: If you make only the minimum payments, you’ll end up paying more in interest over time. You can see exactly how much more you’ll end up paying by taking a look at your monthly credit card statements. Since the enactment of the Credit Card Act of 2009, credit card companies are required to show you how long it will take you to pay off your balance and what you will pay in interest over time.

How Payments Appear on Your Credit Report

Let’s take another look at how payments appear on your credit report.

Different creditors have different policies for how they report your information, but revolving accounts, like your credit cards, will usually show the same information:

• When you opened the card
• Your high balance limit
• Your available balance
• Your history of on-time or late payments

As long as you make the minimum payment and you make it on time, then it will be reflected on your credit report as an on-time payment for that month.

Now, if you’re making only the minimum payments every month, you likely don’t have a lot of available credit. And, if you have several credit accounts that are charged to the limit, on-time payments aren’t the only cure. You’ll still need to tackle how much debt you have and lower your ratio of debt to available credit. (If you want to understand better how your credit score is calculated, take a look at some of our past blogs.)

A Strategy for Paying Off Credit Card Debt

When it comes to paying off your debt, you have to decide on a strategy that works best for you. Paying off small debts first or tackling larger debts with higher interest rates, using online budgeting sites and software, seeking the help of a reputable consumer credit counseling agency, or using do-it-yourself products like Equifax’s Debt Wise™ to help you tackle your debt more efficiently and effectively. Unlike similar products, Debt Wise is powered by the information in your Equifax Credit Report and allows users to create a personalized debt payment plan that shows you how to pay off your debt faster—the average subscriber can save over $30,000 in interest and get out of debt 15 years quicker by following their personalized plan.

Making only the minimum payments can make you feel like you’re buried under interest payments and rising fees. But remember, paying down your debt is a process—it took you a while to get in debt, so it’ll take some time to get out of debt too. If you have a couple of small balances that you can tackle right away, go ahead and pay them off—the satisfaction of being done with those accounts will help fuel your journey to becoming debt free.

What’s your plan for tackling your credit card debt?

We get tons of questions from consumers about how their credit score has changed. People also want to know how to improve their credit score, and how their financial activity will affect it. We’ve talked here before about what’s in a credit report, but I want to take a close look at how credit scores are calculated. One of the most common questions I see from people on Facebook and on this blog is “How will closing an account affect my credit score?”

Unfortunately, I can’t say that closing a certain account will decrease your score by X points, or that paying off your balance on another account will raise your score by Y points. The reason I can’t tell you exactly what will happen to your credit score is that everyone’s credit is different, and everyone’s financial situation is different. (And no one else can tell you this, either, so watch out for scammers!)

For example, take someone who has no debt, an excellent credit history, and a good mix of types of accounts. Closing one account is probably not going to affect that person too much.

When you’re thinking about closing an account, you want to evaluate your credit situation and the types of accounts you have open to make the least, or most positive, impact on your credit score.

• What kind of accounts do you have? You want to maintain a healthy mix of accounts. How many open, revolving, or installment accounts do you have? If you have five revolving loans (most often credit cards), these are considered to be part of the same family. You can probably close one or two accounts within the same family without too much impact.
• How long have your accounts been open? Credit accounts that have been open for a long period of time are scored more favorably than recently opened accounts. Showing a history of paying your debts on time reflects more positively than having lots of credit accounts. If you want to streamline your accounts and close one or two of your credit cards, make sure you hold on to the cards you’ve held the longest.

People open credit accounts for many reasons and decide to close them for lots of different reasons. There isn’t a magic formula to opening or closing accounts and improving your credit score, because each situation is different. But if you evaluate your credit needs thoughtfully, you can make better decisions about your credit accounts.

For example, when I moved from California to Atlanta, it was the perfect time for me to examine my credit and personal finances. I decided to close the retail cards, because I wouldn’t be shopping at those stores anymore, but I kept my mortgages open. I have a long history of paying my mortgages on time, and it would be foolish to remove that positively contributing account from my credit report.

Curious about how your credit score might change if you open or close an account? Check out the FICO Score Simulator.

Security freezes, credit monitoring, fraud alerts–all are ways to keep track of your credit and watch out for identity theft.

For information on credit monitoring and fraud alerts, take a look at our previous blog posts. In this post, we’ll cover the information you need to know about security freezes.

FAQ: What is a security freeze?

A security freeze prevents your credit report from being shared with most third parties. It can be a helpful tool to fight identity theft and fraud, because it prevents access to your credit.

You have the right to place a security freeze on your Equifax credit file under state law or the Equifax voluntary security freeze program. Only you can request that a security freeze be placed on your Equifax credit file, and only you can request that it be removed or temporarily lifted. A security freeze will remain on your Equifax credit file until you request permanent removal or a temporary lift of the security freeze for a specific credit grantor/credit file user or date range.

FAQ: Who needs a security freeze?

A security freeze is more important for a person who is no longer credit active. This is probably going to be an older person-someone who has already purchased a home and doesn’t need more credit cards. A security freeze will be more of an inconvenience for someone who is still credit active and needs lenders and creditors to have frequent access to his or her credit report.

However, a security freeze can be helpful for people who have been a victim of identity theft or are concerned about the potential for identity theft. A security freeze takes you “off the grid,” so to speak. It’s the securest way to protect your credit outside of a credit-monitoring product, but a fraud alert is probably a better first step for a victim of identity theft.

FAQ: How do I place a security freeze on my Equifax credit file?

The easiest and fastest way to place a security freeze on your Equifax credit file is online at Equifax.com. You may also request a freeze by phone or mail.

A security freeze requested with Equifax will freeze only your Equifax credit file. You’ll need to contact TransUnion or Experian directly to freeze those files.

FAQ: I need to apply for new credit. How do I remove a security freeze?

The easiest and fastest way to remove a security freeze on your Equifax credit file is online at Equifax.com.

You will need to contact the other credit-reporting agencies separately to remove a security freeze with them.

Remember, the point of a security freeze is to prevent unauthorized users from accessing your credit report. A security freeze may hinder your ability to immediately obtain credit to make major purchases.

If you are credit active and apply for credit on a regular basis, you need to be especially mindful of planning ahead when you have a security freeze on your Equifax file. Be sure to contact us in advance to request a temporary lift of the security freeze.

Depending on the law in your state, it may take up to three business days to process your request to temporarily lift the security freeze. We want to protect your credit report and make sure it’s really you requesting the removal of the security freeze. Equifax provides a confirmation number to its security freeze customers, and the other credit-reporting agencies offer similar security. If you’ve lost the confirmation number, it may take longer to verify your identity and remove the security freeze.

FAQ: Who is exempt from the security freeze?

• You
• Equifax Security Freeze Teams
• Authorized users you have informed us about and for whom you requested a temporarily lift of the security freeze-for example, if you are looking for a car loan and want your lender to have access to your credit report
• Companies that have a current account or relationship with you, and collection agencies acting on behalf of these companies
• State or local agencies, including law enforcement, child support agencies, trial courts pursuant to a warrant or subpoena
• Credit-monitoring companies
• Companies that sell credit reports to consumers
• Federal government agencies as permitted under the Fair Credit Reporting Act (FCRA)

FAQ: What are the security freeze fees in my state?

You may be charged a fee for different actions involving security freezes. These fees can vary by action, and whether or not you are a documented identity theft victim. Activities include

• Security freeze placement
• Date range lift
• Specific party lift
• Permanent removal
• Replacement PIN

Security freeze fees can also differ by state. Visit Equifax.com for a list of the various fees for each state.

Read More

Interest Rate Shopping and Its Effect on Your Credit Score
Credit Report FAQs: What Do I Do When a Family Member Dies?
Can Equifax Decline My Credit Application?
Credit Trends: Super-Prime Consumers Tap Home Equity Lines of Credit and Credit Cards Not Available To Most

Why did the credit-reporting agency deny my credit application?
Why did the credit-reporting agency change my score?
Why did the credit-reporting agency put false information on my credit report?

And then there are questions about supposed myths of the credit-reporting process. I recently received this comment, from Marcy, on a previous blog post:

I’ve been in the process of a refi. I have worked with 3 companies in the same 30 day period (I always get 3 quotes for any job). I always heard that if you have multiple inquires within a 30 [day] period for the same thing (refi) that the inquires would NOT affect your score. The last credit score I received a copy of, my score (Equifax) had dropped 10 pts, with Experian it went from 818 to 792-the reason “too many inquires…” Is the 30 day period a MYTH?

The 30-day grace period is not a credit myth. It’s probably a smart idea to compare rates and check out loan offers from several lenders before making a purchase of a car or a house.

Under normal circumstances, if you apply for a mortgage or an auto loan, any inquiries related to that application made within 30 days count as ONE inquiry. Even if you visit twenty lenders and all of them pull a copy of your credit report, those twenty inquiries should count as only one inquiry.

I don’t know what other activity Marcy has on her credit file, but some inquiries will affect your credit report differently:

Personal Credit Inquiry: If you pull your own credit report, it will not affect your score. You can check your credit report every single day, and it will not make a difference in your credit report or credit score.

Soft Inquiry: When someone other than you accesses your credit report, but you did not initiate the transaction, the inquiry doesn’t count against your score. One example is a promotional inquiry, in which a creditor or lender looks at your credit report in order to give you a new credit offer or a different rate. This promotional inquiry should show up on your credit report as a promotional offer, which makes it clear that you did not initiate the request. Soft inquiries don’t affect your credit score during a hard inquiry, which is when you give permission to a credit grantor to pull a copy of your credit report (see below). If you want to prevent creditors from accessing your credit report, you can opt out of these promotional offers.

Hard Inquiry: Any request for a copy of your credit file is an inquiry, but a hard inquiry is the only one that can affect your credit score. A hard inquiry is one in which a bank, a landlord, an a mortgage broker, or another creditor or lender accesses your credit file because of a transaction you have initiated.

Read More:

How To Dispute Credit Report Errors
Four Things College Kids Need To Know About Credit
Four Myths About Your Credit History
Debt Reduction: Why Paying Down Your Credit Card Debt Helps Your Credit Score

Sometimes we talk to consumers who think that Equifax has declined their credit. No matter how many times we hear people say it, the answer is No!

The idea that Equifax and the other credit-reporting agencies can decline your credit is a big MYTH!. The credit-reporting agencies are a part of the credit application process, but a credit-reporting agency cannot grant or deny you credit.

But because so many people call to ask this question, I thought it might help if we talk about the process that occurs every time you apply for credit:

Step 1: You, the consumer, apply for credit with a store, a credit card company, or another lender.

Step 2: The credit grantor—the mortgage lender, credit card company, or other lender you are working with—requests your credit report from a credit-reporting agency. The credit grantor decides which credit-reporting agency to use, so it’s important to make sure that all your credit reports are up-to-date and accurate with each CRA.

Step 3: The credit grantor compares your credit report and other information on your application against its criteria for extending credit, and then it decides, based on all the information, whether or not to grant you credit. Lenders can have different standards and requirements for granting credit, so you might receive a higher credit limit from one creditor than another, or get turned down for one car loan but get a different one from another lender.

Step 4: The credit grantor informs you of its decision to grant or deny you credit.

Take a look at this graphic illustrating the credit process.

Since Equifax and the other credit-reporting agencies don’t grant or deny credit, we don’t even know what it is in your credit report that may be preventing you from obtaining credit. Each creditor has its own criteria for making credit decisions.

Sometimes the decision to deny you credit isn’t even based directly on the credit report. For instance, you may not have been at your current residence or in your present job long enough. If you have questions about why you were not approved for credit, you should contact the credit grantor who declined you and ask for an explanation.

Under the law, if your request for credit is declined, or if you don’t receive the best possible rate, you’re “declined a benefit,” and the creditor must tell you which information contributed to its decision and which credit agency supplied the report. You should receive a letter or some form of correspondence from the creditor in which it explains its decision.

After you’re “declined a benefit,” you have sixty days to look at a free copy of your credit report from the credit-reporting agency that supplied the report to the creditor.

So while the credit-reporting agencies are not responsible for the terms of your credit, the credit-reporting system makes it easier for you to acquire credit while allowing lenders to offer fair terms that match their risk. This helps you obtain credit cards, instant in-store financing, auto financing, and home loans in only minutes, hours, days, or weeks, not months or years.

Read More:

How To Dispute Credit Report Errors
Four Things College Kids Need To Know About Credit
Four Myths About Your Credit History
Debt Reduction: Why Paying Down Your Credit Card Debt Helps Your Credit Score

Ever wonder how the information about your identity and financial history ends up on your credit report? It can be an incredibly detailed report-where does all that information come from?

The credit-reporting agencies aren’t watching over your shoulder, having a private eye get the dirt on you, or paying anyone for your records.

Your credit report contains information from the companies that have granted you credit in the past and those with whom you have open accounts. Credit-reporting agencies get their information from retailers, credit card companies, lenders, banks, collection agencies, and public records.

When you enter into an agreement with a creditor, the information you provide them is included on your credit report as a reflection of that agreement.

Your contract with your creditors, whether it’s a mortgage or a credit card agreement that kicks in after your first purchase contains all of the requirements of your relationship or the terms of use with them, but a lot of people forget to read the fine print.

Most contracts are going to include the basic requirements of your payment terms. If you fulfill the terms of your payment agreement, that will be reflected on your credit report. If you don’t live up to your end of the deal and you make late payments or no payments at all, your creditors are going to voluntarily report this information to the CRA’s, and this information will show up on your credit report.

The credit reporting system works because it streamlines the interaction between consumers and creditors, because by and large everyone works together. The creditors want to provide accurate information to the credit-reporting agencies because it makes their decision-making process easier (e.g. instant credit offers).

One of the complaints we hear from consumers is that different information appears on credit reports from each of the three credit-reporting agencies. This can happen because not all creditors report to all three credit reporting agencies. While the majority do report to all three, some creditors report to only one of the three agencies, while others may not report to any at all.

What if the missing information is a positive account that you want to show up on all of the reports and you personally want to report it to the CRA’s? Unfortunately, data is carefully regulated, and there are industry reporting standards, so self-reporting isn’t allowed.

If you check your credit report and find a mistake, you can file a dispute with the credit reporting agency that lists the error.

Read more here on how to file a dispute and other credit topics.

Read More:

How To Dispute Credit Report Errors
Four Things College Kids Need To Know About Credit
Four Myths About Your Credit History
Debt Reduction: Why Paying Down Your Credit Card Debt Helps Your Credit Score

Creditors don’t get to know you by inviting you over for a barbecue or “friending” you on Facebook. They look to your credit report to get an idea of who you are, your history of payments with loans and credit cards, and what kind of client you may potentially be. Creditors can tell a lot about you from your credit report. They have a ton of experience in evaluating consumers’ creditworthiness and their potential to be a credit risk based on the information revealed in it.

Let’s take a look at the different kinds of information on your credit report.

Your Equifax credit report contains four categories of information.

Credit Report: Identifying information

This nuts-and-bolts section of your credit report isn’t used for scoring purposes–it establishes who you are.. The information usually comes from lenders who report to Equifax that you applied for or have credit with them.

This section establishes who you are and should list your name, address, Social Security number, and date of birth, and it may include employment information. It’s all there so that credit grantors and lenders know that the accounts belong to you, and not to the guy across town who may share your name.

Credit Report: Trade lines

These are your credit accounts. Lenders report on accounts you have established with them. The information includes the type of account (bank card, auto loan, mortgage, etc.), the date you opened the account, your credit limit or loan amount, the account balance, and your payment history including any late payments

Credit Report: Inquiry information

This section contains information about companies that have requested and/or viewed your credit report information, typically within the last two years. This could be a “soft inquiry” from a credit card company looking to extend a preapproval offer of credit to you, or a “hard inquiry” from credit grantors with whom you have applied for credit. (Check out next week’s post on opting out of credit preapproval offers.)

Credit Report: Public record and/or collection information

Your credit report may contain public record information, such as judgments, tax liens, and bankruptcies. It may also contain account information from professional service providers, such as doctors, hospitals, and cable companies, that has been turned over to an outside collection agency. Not all credit reports contain public record and/or collection information. Generally speaking, negative information drops off your credit file after seven years.

Read More:

How To Dispute Credit Report Errors
Four Things College Kids Need To Know About Credit
Four Myths About Your Credit History
Debt Reduction: Why Paying Down Your Credit Card Debt Helps Your Credit Score

We get lots of questions from consumers on Equifax.com, our Facebook page, Twitter and now the Equifax Personal Finance Blog about what factors impact credit scores.

The truth is, you have control over your credit. Only you determine what accounts you open, how much debt you carry, how you make your payments, and how responsible you are with your credit and how that behavior translates to your credit report. Your credit score is comprised using the information from your credit report, so understanding how your credit behavior, especially paying down debt, may impact your credit score over time is important.

How Is My Credit Score Calculated?

Your credit score is a number based on different factors in your credit history, including:

1. Payment History. Do you make your payments on time or are you late? If you’re late, how late are those payments? Are you paying in full or only making minimum payments?
2. Amounts Owed and Available Credit Balances. Creditors look at how much installment and revolving debt you owe. But they also want to know what percentage of your available credit balance you are using.
3. Length of Credit History. How long have your credit accounts been open? Which accounts have been closed and why?
4. New Credit Accounts. Opening several new accounts can affect your length of credit history, your available balances and could negatively impact your credit score.
5. Types of Credit. Creditors like to see a variety of types of credit, including installment loans (such as auto loans), revolving loans (such as a mortgage or home equity loan), and open credit accounts (such as credit cards).

Paying your bills on time and your available balance are the two biggest factors in calculating your credit score, accounting for over 65 percent of your credit score computation. It’s basic math – handle these two things well and you’re more likely to have a higher credit score, generally speaking.

While the last three factors only account for 35 percent of your credit score calculation, if you keep applying for new lines of credit, it will affect your score.

Learning how to think differently about the components of your credit history and credit score is the first step toward being more in control of your financial life. Read more about what factors impact your credit score at Equifax.com.

It can happen to anybody, but you never really think it will happen to you.

A few weeks ago, I was on a business trip in Washington D.C. when my luggage was stolen out of the back of a cab. I had to deal with the massive headache of getting new clothes and toiletries, but I also had to worry about possible identity theft and fraud.

My wallet and credit cards were with me in my purse, but I had stuck a bank statement and a credit card bill in my suitcase at the last minute, planning to pay my bills on the road. My bank account information and credit card numbers were now in the hands of whoever stole my luggage. I’m sure the thief loved my three changes of business-casual wear and one-quart plastic baggie with mini bottles of soap and shampoo, but my financial information was no doubt a whole lot more valuable to him.

I immediately got online and went to Equifax to put a free, temporary ninety-day fraud alert on my account.

What Is a Temporary Fraud Alert?

An initial ninety-day fraud alert indicates to anyone requesting your credit file that you suspect you are a victim of fraud. When you or someone else attempts to open a credit account in your name, increase the credit limit on an existing account, or obtain a new card on an existing account, the creditor should take steps to verify that you have authorized the request. If the creditor cannot verify this, the request should not be satisfied.

When you file a fraud alert, you may also request one additional free credit report.

A fraud alert is a helpful tool anytime you feel your credit has been compromised or has the potential to be compromised. You don’t have to wait to be pick pocketed. Set up a temporary fraud alert if you think your accounts have been compromised in any way-for example, if you get a copy of your credit report and see accounts on it that you didn’t open, or if you see charges on your credit card statement that you didn’t make.

When you place a fraud alert, you don’t have to worry about contacting all of the credit reporting agencies and all of your creditors.

Once you place a fraud alert with one credit-reporting agency, the alert is automatically forwarded to the other agencies. This automatic reporting is helpful to you, because you don’t know which credit-reporting agency a creditor is using. It’s the same with fraud: you never know where the perpetrator is applying for credit and which credit-reporting agency is being used.

What Is an Extended Fraud Alert?

The temporary alert can be used by anyone who suspects fraud, but once you’ve established that your identity or your credit has been compromised, you can set up an extended alert to protect yourself.

An extended fraud alert is similar to an initial ninety-day alert, except that it lasts for seven years, and to verify your request a creditor must contact you at the telephone number(s) you provide to Equifax when you request the extended fraud alert. A valid police report showing that you have been a victim of identity theft is required to place an extended fraud alert. You can file a complaint with the FTC and fill out their ID Theft Complaint form to take to the police. Also, you may request two additional free credit file disclosures, and your name is removed from prescreened offers of credit or insurance for five years. Download an extended fraud alert request form.

Extended Alert vs. Automatic Alerts

The extended alert is available only if you are a confirmed victim of identity theft, but what if you want to restrict access to your credit to prevent identity theft? Using a product like Equifax ID Patrol, which includes the Automatic Fraud Alert feature, can help you do this.

Equifax is the only credit reporting agency that offers the Automatic Fraud Alert feature. The feature enables Equifax to place your free initial ninety-day fraud alert on your credit file. Then every ninety days the fraud alert will automatically be renewed for you. This tool can come in handy if you know you won’t have a lot of activity on your credit file and don’t want to worry about identity theft.

Let’s say you know you won’t be applying for a loan or any credit cards in the next year or so. With the Automatic Fraud Alert feature, you can rest assured, as I do, that no one will access your credit file illegally or steal your identity.

Leaving home and moving into the dorms can be the first step into adulthood for a lot of college freshmen.

Along with juggling a full class load, maintaining a busy social life, and remembering to do laundry every once in a while, new college students might find themselves responsible for managing their own finances for the first time in their lives.

New college students (really anyone) can quickly find themselves in trouble if they don’t understand how to manage their money and use credit cards wisely.

In the financial literacy workshops I teach, so many people just don’t understand the basics of how to use credit cards. Getting ready to go off to college is the perfect time to learn some lessons about developing credit card and financial savvy.

Lesson #1: Credit cards are a convenience, not a form of income.

I’ve met college students who think that because a credit card company gave them a $1,000 limit, they have $1,000 to spend every month.

Sorry, guys, that’s not how it works. Before using a credit card, you need to determine your monthly income. That’s all you’re allowed to spend. Credit cards are not a means of income to survive (or pay for nightly pizza fixes).

Adjust your spending to match your financial situation. Do you have a budget? Do you know how much you spend on books and food and clothes? Maybe you’ve been working fifteen hours a week the entire semester and your paycheck has been enough to pay off your credit card bill every month. But then exam time comes around, and you have to drop down to just five hours a week. You don’t have the same amount of income, so you may need to adjust your discretionary spending.

Lesson #2: Just because you can afford the minimum payment every month doesn’t mean you’re not in debt.

The new credit card laws might help with this problem, but it’s still a good lesson to learn. Under the new law, the creditor is required to tell you on your statement how long it will take to pay off your debt by making only the minimum payment.

For example, let’s say you go on a shopping spree at the campus bookstore at the beginning of the semester. You put $500 worth of books on your credit card, and you charge another $200 in school logo merchandise.

It will be great to wear that sweatshirt to class in the morning, and you know your mom and grandma will love their new mugs. It doesn’t seem like such a big deal until you get your statement and see that by making the $15 minimum payment every month, you’ll still be paying off that one semester’s worth of books when you graduate.

Lesson #3: You should shop around for the best terms for your financial situation.

As a college student just starting out, you might face a pretty high interest rate. When you’re looking for a credit card, start with your bank. It might have a special credit card for college students. You can also shop around on sites like Bankrate.com for the lowest interest rate.

When shopping for a credit card, keep in mind that lots of inquiries (or when a potential creditor verifies details of your credit history by pulling a copy of your report) within a short period of time can ding your credit score.

You’re just beginning to establish your credit—there’s no need to start out in the hole. Do your research first and find the top three cards that might be a good fit for your financial needs. Apply for those three, and then take the one that works the best.

Above all, do NOT get a credit card just because someone is offering you a pretty towel or concert tickets. How you start to manage your finances at the age of eighteen will affect you for years to come.

Lesson #4: You should limit the amount of plastic in your wallet.

As a college student, or really any young person, you should limit the number of credit cards you own. Almost all retailers take the three major credit cards—Visa, MasterCard, and Discover. You don’t need multiple store cards. You’re a student, not a supermodel or VIP who eats at four-star restaurants every night.

If you find that you’re having difficulty paying off your credit card bill every month, you should think of it as an emergency-only fallback. Most college students are going to graduate with student loans. Why would you want to graduate saddled with credit card debt as well?