Experian notes that in order for your positive rental history to be included in your file, your property management company has to provide its rental history database to Experian RentBureau, a division of Experian that collects and reports rent payment history. If your property management company does not currently provide this information to Experian, you can contact the company and ask them to begin providing this information.

Sheiresa Ngo is the multimedia content producer for consumer affairs at Black Enterprise.

For more credit and debt management tips, be sure to read:

• 10 power moves to help you better manage your money
• What to do if you’re contacted about expired debt
• 4 things you might not know about your credit

Experian notes that in order for your positive rental history to be included in your file, your property management company has to provide its rental history database to Experian RentBureau, a division of Experian that collects and reports rent payment history. If your property management company does not currently provide this information to Experian, you can contact the company and ask them to begin providing this information.

Sheiresa Ngo is the multimedia content producer for consumer affairs at Black Enterprise.

For more credit and debt management tips, be sure to read:

• 10 power moves to help you better manage your money
• What to do if you’re contacted about expired debt
• 4 things you might not know about your credit

A credit report contains detailed information about your credit history including any late payments, bankruptcies, credit accounts, recent inquiries, etc. This week’s presenter, Deborah Johnson, vice president and relationship manager, for J.P. Morgan Chase informed us that payment history, outstanding debt, length of your credit history, types of credit accounts, and new accounts opened are all factored into your FICO Scores. They are calculated from a lot of different credit data in your credit report and are used to determine you credit worthiness or the likeliness that you will pay back the loan. Johnson explained how the three credit repositories, Equifax, Experian, and TransUnion, calculate your score:

Payment History: Accounts for 35% of your score. This includes payment on your credit cards, retail accounts, installment loans, mortgage, etc. “Pay your bills on time,” advises Johnson.  “Payments more than 90 days late are weighed just as heavily as a bankruptcy or foreclosure,” she added. A solid record of on time payment helps your score.

Amount of Outstanding Debt: This looks at the number of accounts you have balances on, the amount you still owe on an installment loan, and the proportion of credit lines used-the amount owed and what is available on your credit line. Outstanding debt accounts for 30% of your score. Johnson advises that when you’re creating a wealth plan, your monthly debt should not be more than 20% of your monthly net income. For example, if you make $8,000 per month you should not have more than $1,600 in debt for that month. The more you owe compared to your credit limit, the lower your score will be.

Length of Credit History: Account activity, time since accounts were opened, and the types of accounts opened makes up 15% of your score. If you’re thinking about closing out some of your accounts, it is best to close the most recently opened accounts Johnson recommended. Your oldest cards reflect a longer credit history. But you can still have a high credit score if you have a short credit history. Johnson says that non-traditional credit can be presented. This includes rent payments, household bills, personal loans, etc.

Types of credit accounts: This include the various types of accounts such as credit cards, retail accounts, installments (car loans, student loans), mortgages, etc.  It accounts for 10% of your score.

New Credit Accounts: Make up 10% of your credit score. This category looks at the number of recently opened accounts, the number of recent credit inquires, re-establishment of positive credit following past payment problems, and the time since recent account openings by account type.

Visit www.annualcreditreport.com to get your free credit report and one of the three credit repositories to get your credit score. Follow me at www.twitter.com/LaToyaReports.

Other posts in The Homebuyers Toolkit series:

Getting Started

Qualifying For A Mortgage

Key Players

Let’s Talk Money

Money Attitudes and Budgeting

Building Financial Security

Renting vs. Buying

LaToya M. Smith is an editorial assistant at Black Enterprise

Over the next two weeks, we’ll have money management tips and strategies from Harrine Freeman, CEO and owner of H.E. Freeman Enterprises, a credit counseling service.

BlackEnterprise.com: How can you rebound, in terms of credit, after a divorce? Is it true that what your husband did financially also affects your score even after divorce?
Harrine Freeman: January is the month when most divorces are filed.  For every 1,000 marriages, 3.6 divorces occurred in the U.S. in 2008. Divorcing a spouse can be a traumatic, stressful and painful experience.  Create a support network of family and friends or join a support group for divorcees to help work through any issues.

What your husband did financially only affects your credit after divorce if you had or have joint accounts. Here are six tips to help you get back on track with your credit after a divorce.

1.    Remove your name and close all joint accounts and cancel the cards.  Canceling the credit cards ensures that your spouse or another person cannot use the credit card in the future.

2.    If you are an authorized user on any of your ex-spouse’s accounts, remove your name as an authorized user.  Ensure that it is also reflected on your Equifax, Experian and TransUnion credit reports. Try to work with your ex-spouse to setup a plan to pay off joint debt. You may have to get a mediator to help negotiate payment of the outstanding debt.

3.    If you had joint accounts and your spouse got into debt during the marriage that you were unaware you will still be held liable to pay the debt because you name is on the account.

4.    Contact all of your creditors in writing and notify them that you are now divorced if you previously had joint accounts with your ex-spouse.  If you are unable to make a payment on a joint account notify your creditor immediately to setup a payment plan to keep your credit in tact.

5.    Order a copy of your credit report and review it once every six months forthe first year after the divorce to be sure your credit is not damaged and to ensure no new accounts appear on your credit report.

6.    Open individual accounts in your name only such as: insurance polices, bank accounts, retirement accounts, etc. Transfer your share of the money from joint accounts to your individual accounts.

7.    Get a land line in your name only.  This can be helpful if you are trying to establish credit.

8.    If you don’t have any credit in your name, open a personal line of credit with your local bank or credit union, or open a secured credit card account.

Ever since subprime mortgages became more “sub” than “prime,” lenders have been tightening up on credit. The days of the nothing-down, no-documentation mortgage are gone.

Now homebuyers need a down payment and proof of income. What’s more, mortgage applicants need a winning credit score.

Credit scores are also weighed when you want to refinance a home loan or buy something on time. Some auto and home insurance companies will accept or reject you based on your credit score. Even if you’re accepted, the price you pay for insurance may vary according to your credit score.

Fair Isaac is the company that developed the FICO scores used by most lenders. On Myfico.com, the company illustrates how a higher score can lead to better deals on a 30-year, $300,000, fixed-rate mortgage:

The median FICO score in the U.S. is 723. Even if you’re a cut below that level, with a 660 score, you won’t pay that much more than someone with a superlative 800 score.

However, once your score dips below 660 (about 30% the U.S. population falls into this group), you’re considered more of a credit risk so you’ll pay much higher interest rates. Those with scores under 620 are likely to be quoted rates far above the norm, if they can get credit at all.
The bottom line is that your credit score has become vital to your financial well-being, so bringing up your score pays off. To do so, you should know how your score is compiled. Here’s what goes into a FICO score:

Payment history: 35% of your score. Pay your bills on time, even if you send in only the minimum amount due. Late payments will knock points off your score. Generally, a 90-day delinquency is more serious than a 60-day delinquency, but recency also counts. For example, a 60-day lateness a few months ago will hurt your score more than a 90-day late payment five years ago. This part of your score also takes into account factors such as bankruptcies, foreclosures, and wage attachments. Filing for bankruptcy, for example, can affect your score for seven to 10 years.

Amounts owed: 30%. The key here is your debt-to-credit ratio. Once you go over 35%, your score might drop, according to Steven Katz, director of consumer education for TransUnion’s TrueCredit.com. Suppose, for example, you have $20,000 worth of available credit on your credit cards. If your balance goes over $7,000 (35% of $20,000) your score might drop, even if you pay down the amount you owe by the due date.

That 35% rule may be card-by-card. For example, if you have a $12,000 limit on one credit card and an $8,000 limit on another, charging $4,000 on the $8,000 card can lower your score, even if you owe nothing on the $12,000 card. Generally, says Katz, it’s better for your score to spread your credit card usage among two or more cards, rather than load up on one card.

Length of credit history: 15%. When it comes to credit scoring, older is better. You shouldn’t close down old cards where you have a good record. Moreover, closing old cards reduces your total credit availability, which can raise your debt-to-credit ratio. Say you have $30,000 in credit lines from three cards. You close one card with a $10,000 limit, bringing your total credit down to $20,000. If you have balances adding up to $9,000, you’ll go from a 30% debt-to-credit ratio ($9,000 over $30,000) to a ratio of 45%, which probably will raise red flags.

New credit: 10%. Try to avoid opening many accounts within a few weeks. “Some people fall into a trap during the year-end holiday season,” Katz says. Shoppers are told they can get, say, 15% off on all purchases that day by getting a store card. That opens a new line of credit, and opening several new lines in a short time can lower your credit score.

Types of credit: 10%. Your history will look better if you have a record of making payments on installment debt (such as an auto loan) as well as revolving debt (credit cards). If you want to see your credit scores from all three credit bureaus (Equifax, Experian, and TransUnion) go to www.myfico.com.