First you want to get proof of the error.  This can include items such as your canceled checks, previous billing statements, any relevant court judgment papers, and a letter from your creditor acknowledging the status of the account in question.  Start contacting the credit bureau that listed the error and keep a log of all the calls you make, emails you send, names of people you talk to, etc.  Make sure that when you send anyone your documentation that you send photocopies and keep the originals for yourself—you may not get them back, or they may get lost in the mail, and then you’re out of luck.

Inform the creditor of the mistake.  If they reported something incorrectly (for example, that the account is still open but you have proof that you paid it off), they must correct the error and contact the bureau to have it updated or removed.  In fact, once you report an error to the credit bureau, they are required to contact your creditor.  The creditor has 30 days to send proof that the account is open and valid and belongs to you.  If they don’t, the error must be removed from your report, and you will receive another free copy of it.

If your inquiry turns into a larger dispute, you can take legal action.  You’ll be spending more time and money to get the error removed, but if it’s hurting your score and you know it should not be on your report, it’s well worth it.

At the end of all these steps, if the error cannot be removed, you are entitled to add a small explanation to it on your report.  For example, if you missed payments to your credit card because you lost your job or had medical problems, this can be listed alongside the account.  The creditor is also required to include your explanation every time they report to the bureaus.  This will not improve your score, but the next time you apply for credit, the lender may be more inclined to approve you if they understand the circumstances behind your negative history.

In effect, yes, a 700 is good, but it’s not great.  You are not considered much of a risk to lenders, so your chances of being approved for a loan are high, perhaps just as good as someone with an even higher score.  The only difference for you would be the terms of the loan; you will most likely have to pay a higher interest rate than the person with the better score.

The interest rate is a way for the creditor to safeguard their investment as much as possible, making sure they’ll get it back.  The lower your score, the riskier of an investment you present, and the higher your interest rate goes.  And that goes for all loans: mortgages, auto loans, equity loans, personal loans, etc.

To guarantee yourself the best rates possible, you should consider working to raise your score.  Even a 720 will be better than a 700, as you’re officially part of the “excellent” category then.  A higher score is also a better way to ensure that there is less discrepancy between your scores from each of the three credit bureaus.  Each one will rank you differently according to their scoring formula; so you could have a 720 from Experian and a 726 from Equifax but a 710 from Trans Union, leaving one in the “good” category instead of “excellent”.

A discrepancy like the example isn’t really enough to ruin your chances of getting a good loan, but even that tiny jump into the next category could be the difference between an okay interest rate and a great interest rate.  You can raise your score by paying your bills on time and in full, keeping your balances low, and using your credit responsibly.  After that, let time do its work—the longer your positive history, the higher your score can go.

Without question, you should sign your credit card.  If there is no signature on the back, it simply poses a problem for you and any merchant you try to purchase items from.  I can speak from experience; merchants are not allowed to accept your credit card payment if there is no signature on the back.  You could argue that writing “See ID” demands that the merchant must verify that you are the actual cardholder, but even that can get tricky.

Visa and Mastercard both clearly state that merchants may not accept cards with “See ID” written on them, and that writing that makes your card invalid.  The merchant also cannot insist that you provide an ID as a term of accepting your card.  What your signature really does, supposedly, is verify your contract with the credit card company—but you’re still held to it even if you don’t sign.

“See ID” also poses some other issues.  If the merchant does accept your card, you’re slowing down the transaction, which can be particularly annoying for any customers waiting behind you.  If for any reason you don’t have your ID with you, you’re officially out of luck.  If a thief gains possession of your card, they could easily sign the card themselves in the merchant’s presence and provide their own, easily-created fake ID with their picture and your information.

Signing your card simply makes things easier.  And credit card companies are constantly combating credit card and identity theft; they generally have regulations in place to protect you, easily verify any fraudulent activity, and refund the charges made by the thief.

You can protect yourself in other ways, too.  Check your statement regularly, especially if you have access to online statements where new activity is reported rather quickly.  Don’t give your credit card number out over the phone or email, especially without verifying that the caller is legit.  Another good bet is to designate one card solely for online purchases, thereby protecting the card you use for emergencies.  So go ahead and just sign your card—you’re protected.

Your first, and probably best, option is to try to reach an agreement with the creditor, preferably before the court proceeding.  The creditor cannot garnish your wages themselves without a ruling, but you will have to commit to the terms of the agreement; court can still be an option at any point.

You can file bankruptcy.  This will severely damage your credit score, but it will immediately prevent your creditor from collecting the debt that you owe.  With this option, you’re really weighing the costs and choosing the lesser of two evils.  While your creditor might be stopped in their tracks, you’ll have a tough time being approved for loans and other lines of credit in the future.

If the wage garnishment has already taken effect, and it’s too late to stop it, your last option is to file a “Claim of Exemption.”  This means that the amount being garnished will be adjusted and lessened.  You only qualify for this, though, if you can prove that the amount of money you’re left with is not sufficient enough to cover basic life necessities.  When you fill out the form to submit to the court, you’ll need thorough proof of your income and a detailed list of your necessary expenses.

One important thing to note is that you’ll want solid documentation from your creditor when your debt is finally paid off.  This can help you ensure that the account is removed from your credit report when it should be.  You can also use it to supplement any future loan or credit applications to help explain the status of your credit score and why it’s so low, as well as show that you’ve worked on turning it around.

A credit judgment means you’re being taken to court for failure to make good on an old debt.  Perhaps you were even sent to collections over this delinquent account but you ignored the warnings or were unfortunately unable to pay.  If the creditor believes they have a decent chance of receiving their money from you, the next step is to request a judgment from the court.

Unless the debt in question isn’t yours, chances are very high that the court will rule in the creditor’s favor.  You don’t even have to be present for any actual proceedings.  (If the debt really isn’t yours, then definitely attend and fight it all the way!)  Once the judgment is ruled, your credit score will drop dramatically, and it can be extremely difficult to recover until you’ve paid off the debt.

But your credit score is the least of your worries right now; it gets worse.  The common way for the court to ensure that the creditor will actually be repaid is garnish your wages.  This means a certain amount of your paycheck will be withheld from you and sent to the creditor until the debt is paid in full.  It can be embarrassing because now your employer will know your personal financial and credit information.  Worse still, it’s obviously going to become harder to pay your bills and afford even simple life necessities, especially if you’re already living paycheck to paycheck.

Once you’ve been notified of a potential judgment proceeding (or even if you think you’re at risk for that), you only have a couple options left, but it’s best to consider at least one of them.  First, you can file bankruptcy.  This will also shoot your credit score down and you’ll still have a big hole to crawl out of, but it will protect your paycheck.  Your other option is to contact a lawyer or a credit agency that can help you negotiate a payment arrangement with the creditor.  The payment plan reached with the creditor may still be a bit damaging to your paycheck, but that may be your better option if it helps you avoid a judgment.

A Few Notes

Before you get started, there’s one thing you need to drill into your head: A credit card is NOT FREE MONEY!  You still have to pay for every purchase you make—just not right now.  Once the end of the month rolls along, you’ll get your statement, and you’re expected to pay in full.  If you start the habit of doing so, you’ll be less likely to live beyond your means or get a nasty surprise when you open your bill and remember that you bought pizza for your entire sorority with your credit card that one night and no one chipped in.  If you start off only making minimum payments, your credit card debt could soon rival your student loan debt.

That said, there are a couple of cards directed toward college students that can help you along.  You’ll need your credit score for a lot in the future, including securing a job and applying for your first home.  Time is your best friend in establishing a high score, so you want to get started early and maintain good habits from the start.

CitiForward Card for College Students

The CitiForward Card for College Students is recommended because it rewards you for good behavior.    If you stay under your credit limit and pay your bill on time for three consecutive billing cycles, your APR could be lowered by up to 2%.  That could mean a lot to you down the road if an emergency arises or your credit somehow gets out of hand.  You’ll start off with 0% APR for the first six months (but check the fine print to see what could jumpstart the APR ahead of time), and you’ll get 5000 bonus reward points for choosing paperless statements within your first three months.

Citi mtvU Platinum Select Visa for College Students

The Citi mtvU Platinum Select Visa for College Students is my personal choice.  Here, you also get 0% APR for the first six months, and there’s no annual fee.  You get 25 Thank You rewards points for each month that you pay on time and stay under your limit, and you get up to 2000 Thank You points twice a year for having a good GPA.  You’ll get 250 points for a GPA of 2.5-2.99, 500 points for 3.0-3.49, 750 points for 3.5-3.99, and 2000 points for a 4.0.  Sounds like great incentive to be studying rather than spending!  You’ll get closer to rewards for free.

AccountNow Prepaid Visa

If spending too much would be a temptation for you, consider a prepaid card, like AccountNow Prepaid Visa.  There is a $9.95 monthly fee, but you have a $10,000 balance limit (meaning you can prepay up to that amount), and since it’s prepaid, you can’t go over your limit or get stuck paying finance charges.  You also get free bill pay and free Credit Builder—while it’s not technically a credit card, your payment history will be reported and will affect your credit score (hopefully boosting it).

Your best bet is to save your credit card for emergencies only, but it happens to all of us—that dress is just too cute or you have no cash but your friend flew in to hang out for the weekend.  The key is to choose the right card and be responsible about your spending.  Use your credit card as a means to build credit itself, and try not to spend more than you can pay off when your bill arrives.

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Some people insist that creditors are required to report to the credit bureaus once a month.  But it’s also possible that if you have no significant activity, positive or negative, the information on your credit report may not change during that time.  So in some cases, the frequency depends upon your creditor and your level of activity.

Other creditors may update the bureaus daily, regardless of activity.  For this reason, it’s possible for your credit report and even your score to alter slightly during a loan application process.  You should constantly monitor and be in control of your activity at all times.  If a lender, particularly a mortgage lender, rechecks your credit right before final approval or closing (which is highly likely in the current economy) and your score has changed due to newly-reported information, you could suddenly be denied.

Some creditors may wait until the last possible minute to report positive information, such as resolving a debt, but they’ll be quick to report anything negative.  The lower your score is pushed, the more they’ll be justified in charging you for interest.

There is some information you can’t prevent from hitting your credit report, like a bankruptcy or being sent to collections.  But if it’s a simple item like a late payment, some lenders will grant you leeway your first time.  If it’s good information you want reported, simply call and ask.  Your creditor is not required to report to all of the bureaus or even agree to your request, but sometimes they can be persuaded.  There may be a fee involved, but if adding the information could significantly raise your score, it might be worth it.  It’s your credit report; you just need to take control.

If you hold a position that deals with money, valuables, sensitive information, and the like, your boss may periodically check your credit report.  If your score is low or you continue to add negative history like late payments or defaulting on a loan, it may represent to your boss that you are not dependable.  Right or not, you may appear more likely to steal cash or valuables in an attempt to catch up on debt, and if you are in a security or government position, your boss may not want to trust you with sensitive information.

No matter the reason, your boss does need your permission to run a credit check.  If you are fired as a result of what is on your report, your boss is required to tell you so and provide you with a copy, an explanation, and the name of the bureau the supplied the report.  You then have the right to file a dispute, particularly if the information used to justify letting you go was an error or otherwise incorrect.

The unfortunate fact is that by time the dispute is resolved, your old position may be filled.  You might not find it to be a completely fair practice; hopefully your boss would consider outside forces and/or give you time to improve your score.  Let this stand as one more reason to maintain a high credit score and check your credit report often: don’t let your boss blindside you.

Bankruptcy Can Be Reported for 10 Years

You should know that most negative activity can remain on your report for 7 years, but bankruptcy can be reported for 10 years.  Don’t fall for potential scams that insist they can have it removed earlier.  These credit agencies are likely going the route of disputing the bankruptcy, claiming that the credit bureau needs to prove it.  Well, if you really did file bankruptcy, that’s all the proof that is needed.  It’s true that you can dispute information on your credit report, and that if the dispute is not responded to within 30 days, the bureau must remove it.  But if the information is true, no matter how negative, it will not be removed until the necessary time has passed.

Bankruptcy is Removed Automatically

There’s nothing you need to do in order to remove bankruptcy from your credit report.  It is automatically programmed to disappear after 10 years.  However, if you reach that point and notice that it is still being reported, then you can contact the bureau and file a dispute to have it removed, and you’ll be likely to win at this point.

Close Accounts Related to Your Bankruptcy

Some of the accounts that were related to your bankruptcy may still be reported, and you can (and should) file a dispute to remove them if you know they have been closed or otherwise resolved.  Especially once the bankruptcy has run its course, you want to remove any and all other evidence of it.  Your credit score depends upon a positive history, and as long as you’ve improved your financial habits since filing bankruptcy, your score can go back up again.  But letting those old accounts remain on your credit report is only pulling you down, so be sure to get rid of them.

Bankruptcy is an extremely negative option for resolving debt, but unfortunately, sometimes it becomes the only way out.  It will take time, but remember that it is possible to come out of this event on the positive side.  Make sure you pay your bills on time and, when possible, in full.  Don’t push the edge of your credit limits (especially since you’re probably paying very high interest rates for the time being).  Make a conscious effort to fix your habits, and you’ll fix your credit score, slowly but surely.

You already know that your credit score will determine whether or not lenders will approve you for loans, as well as what interest rate you’ll have to pay. But that score is also being used in other ways today–potential employers, your landlord, and yes, your insurance agent, may all check your credit history today. Just as you’ll pay lower interest rates on loans if you have a high score, you’ll pay less on your car insurance, too.

The two ideas may seem unrelated, but to your insurance agent, a better credit score indicates that you are a good driver. Of course, if your score is low, it may seem unfair to tie those things together, especially if you know you’re a good driver. Your defense against that is to maintain a clean driving record. In many cases, that can be enough for your agent to lower your payments, but if you can maintain a higher credit score, too, that simply gives you more opportunity to pay even less.

What would the reasoning be for increasing your rates due to a low credit score? Employers may choose not to hire you due to a low score because your history of poor financial management skills could mean you are more liable to steal or lie or even search for a different job right away because you wouldn’t be able to pay off your debt with the salary they can afford to give you. Your insurance agent may follow similar logic. If you have been struggling with money, you might be liable to purposely cause a car accident in order to collect the insurance payout.

Your driving record, where you live, and the length of your drive to work can all have an effect on what you pay for your car insurance. If you know your credit score is low, do your best to improve it. Once it’s high, you might want to make sure that your agent DOES consider it when determining your rates so that your credit score can be used for your advantage.