With so many rewards credit cards to choose from, it can be hard to pick just one. The good thing is, you don’t have to. So, how many credit cards should you have? Although Experian found that the average American owns just under 4 credit cards, the answer isn’t as straightforward as you might think — it all depends on your financial situation. However, opting for multiple credit cards can have many benefits, as long as you use each card responsibly. 

Here's what you need to know when deciding how many credit cards you should carry. Also, use our tool below — in partnership with Bankrate — to compare cards today.

Impact on credit score

Three credit card bureaus — Experian, TransUnion, and Equifax — evaluate several factors to determine if you have a good credit score. These bureaus look for at least two open “lines of credit,” including credit cards, mortgages, student loans, car loans, and other types of loans, to ensure that you can handle multiple budgeting and payment schedules. 

Your credit score won’t be negatively affected by having too many lines of credit, but having too few lines of credit might be what’s keeping your credit score low. Equifax, for instance, recommends having at least two or three credit cards in addition to other types of credit, like a mortgage. 

When you have a “thin” credit file, with few lines of credit and a short credit history, it makes it difficult for lenders to trust you as a borrower. Therefore, if you’re looking to bolster your credit file and increase the number of open credit accounts you have, opening a new card could help - especially if you use the card frugally.  If you’re a responsible cardholder, adding a new addition to your wallet could prove beneficial to your overall credit score.  

30% credit rule

Another way owning multiple credit cards can also boost your credit score is by lowering your credit utilization ratio. Credit utilization is the total amount you owe across accounts compared to your overall credit limit, and it affects 30% of your credit score. As a general rule of thumb, it’s recommended that your credit utilization remain below 30%. If you have few lines of credit, you may find it difficult to keep your utilization low. 

By opening a new credit card, you’ll be able to increase your overall credit limit — the amount you’ve spent in proportion to this amount will be lowered, as long as you don’t rack up a balance right away.

Spend wisely

While owning multiple credit cards can be beneficial to your credit score, it can also negatively affect your score if you don’t use those cards responsibly. Having too many open lines of credit can prove difficult for some cardholders — you may find it hard to juggle multiple payment due dates and rewards structures or be tempted to overspend, all of which are bad for your overall credit score. 

Opening an additional credit card means more available credit, so if you think you may be tempted to spend too much with a higher credit limit, be wary of opening up another card. Payment history is the number one factor affecting your credit score, so if you fail to make even one payment on time, you’ll be hurting your score more than opening that extra card will help. 

Timing and preparation pay off 

If you do decide to take out a credit card, make sure you don’t take out too many within a short period of time, or you’ll negatively affect your credit score, especially in the short term. Instead, space out your applications by three to six months. And before you apply, make sure you know how to get approved for a credit card. Getting rejected will lower your credit score and you will need to wait several months before applying again. 

Is it bad to have a lot of credit cards with zero balance?

Having a credit card you use infrequently can be an easy way of increasing your total credit availability, as long as you avoid opening too many at once. However, make sure you remember to spend just enough on the card for it to remain active. Your credit card can be closed due to “inactivity,” lowering your available credit.  

Benefits of multiple credit cards

By having multiple credit cards, like one of the best travel rewards credit cards or cash back credit cards, you can maximize your earnings where you spend the most. You’ll have access to a greater variety of rewards, including any welcome bonuses associated with a card, which can save you hundreds of dollars. Just be sure you’re able to afford any annual fees associated with each card and that you can keep up with multiple payment due dates and redemption programs. 

Furthermore, if you have existing credit card debt, you may want to consider adding a balance transfer credit card to your credit card lineup. This will allow you to avoid expensive interest rates while paying off credit card debt.

The verdict

How many credit cards should you have? There’s actually no set number. In fact, there are both positives and negatives to owning multiple cards, depending on how you use them. 

Having several credit cards can be a good way to help you tackle various financial goals, whether it’s earning as much cash back as possible or avoiding interest rates on existing balances. Just make sure you don't overspend or miss any payments, or you could wind up in debt and damage your credit score. 

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• Credit Cards vs. Debit Cards: Which is Better for You?
• How to Pay off Credit Card Debt
• Best Credit Cards for Bad Credit

A credit score is a number, usually from 300 to 850, that provides a snapshot of a consumer’s creditworthiness. Lenders use these scores to decide whether a potential borrower is qualified for a loan and, in many cases, to set the interest rate and other terms.

By tracking and keeping a score in the good range or better, consumers might qualify for one of the best rewards credit cards or for other types of loans.

One of the best ways to track your credit score is by using a monitoring service such as myFico. It'll alert you if there are any changes to your credit report so you can address them promptly.

What is a good credit score?

Two companies control the market for credit scores: FICO and VantageScore. FICO considers a score of 670 to 739 as good, while VantageScore rates a score of 661 to 780 as good.

FICO boasts that 90% of top lenders rely on their scores, and consumers generally need to focus on their FICO score first. Credit card companies, however, often consider both FICO and VantageScores.

How do you measure up to other borrowers?

The average FICO score in the U.S. was 705 as of January 2026. Want to see how you measure up? Here's a table of average credit scores by age:

The latest versions of the VantageScore also use a 300 to 850 scale, with about 61% of Americans having a Good VantageScore or better.

How to check your credit score?

There are three ways to see your FICO credit score for free.

• Many banks and credit card issuers offer customers free FICO scores every month, so look at your account online or your credit card statement.
• Equifax, one of the three credit bureaus, offers free scores at myFICO.com/free.
• Experian also provides a free score and credit report at www.freecreditscore.com.
• To check your VantageScore, sign up for Chase Bank’s free credit-monitoring service, Credit Journey, or see other programs offered by VantageScore partners.

Checking your credit score using FICO or Vantage, called a “soft pull,” won't harm your credit score. But when you apply for a credit card or loan, the lender will conduct a “hard pull,” running a report that will temporarily lower your credit score.

That is why knowing your credit score is so important before applying for a loan or card. If you've applied for a few credit cards and been rejected, your credit score will be lower, and it will be even harder to qualify for a new card until some time has passed, and your credit score has recovered.

Why do I have more than one credit score?

There are myriad factors that determine your credit score. FICO and VantageScore base their algorithms on the same underlying data but assign a different weight to the same criteria.

FICO and VantageScore get these data, in turn, from three credit bureaus that track your credit activity: Equifax, Experian and TransUnion. As a result, you might see slightly different scores based on whether data was pulled from all three bureaus or just one.

Credit bureau and scoring algorithms also have different versions; sometimes a lender will use a score drawn from the latest version or rely on an older, even years-old version of the algorithm.

What affects my credit score?

Across all the credit reporting and scoring services, these are the most important factors that go into your credit score.

Payment history is based on your record of paying bills on time and is the most important criterion for determining your score. Late or missed payments can significantly lower your credit score, which is why it's important to add credit card payments to your budget. Use a budgeting app such as Quicken's Simplifi, which can project future cash flow to ensure you have money on hand for payments.

Credit utilization reflects the amount of credit you're using relative to your credit limit. Using more than about 30% of your available credit will likely lower your score.

Length of credit history refers to the amount of time you've had your accounts. A long credit history demonstrates that you've had plenty of practice managing debt payments.

Credit mix refers to the types of credit you rely on. Having both installment (mortgages and car loans) and revolving (credit cards) loans will increase your score since it shows you can handle different types of payments and terms. If you're thinking of taking on a Buy Now Pay Later loan, see below for details on how they might affect your score.

New credit accounts or applications can lower your credit score by generating a “hard pull” and by lowering your average length of credit history.

Retiring might reduce your income and use of credit cards and loans that bolster your score. Be sure you understand how retirement could hurt your credit score (but can be avoided).

Tips for increasing/protecting your credit score

Here are tried-and-true strategies to boost your credit score.

Pay your bills on time and if you can, pay the total amount due each month.

Keep your credit utilization low, ideally below 30% of your credit limit. Paying off your statement balance is ideal because it allows you to maximize credit card rewards without incurring interest.

Don’t close old credit card accounts. If you're thinking of closing a credit card that you’ve had for many years to avoid an annual fee, consider asking the card issuer to roll the account onto a similar card with no fee. You'll maintain your long credit history even if you never use the card.

Check your credit report and credit score periodically. You can now get free credit reports for free from all three credit bureaus at annualcreditreport.com, every week. Look for incorrect information or fraudulent activity, and know how to fix your credit report if you find errors.

Not sure what a credit report is? Check out our article showing the difference between credit scores and credit reports.

Once you get a good or even excellent credit score, don’t rest on your laurels. Good credit hygiene, such as keeping up with all of your credit card or loan payments, can help you qualify for choice loans in the future.

What credit score do I need to buy a house?

Conventional loans. When you buy a home, you will most likely take out a conventional loan. The minimum credit score you'll need is 620 to 660, depending on the lender. A higher score usually means you will get a better deal on your mortgage interest rate.

Jumbo loans are generally defined as loans over $832,750. You will typically need at least a 700 credit score, though the average score is 740, according to Bankrate.

Other types of loans. Lenders typically require a credit score of 620 for VA loans, 500 for FHA loans and 580 for USDA loans.

What credit score do I need to buy a car?

If you're shopping for a car, you should ensure your credit score is 661 or higher. According to the Experian State of the Automotive Finance Market report (PDF), as of the fourth quarter of 2024, more than 68% of borrowers met or exceeded that threshold.

Less than one-fifth of borrowers had scores of 600 or less.

Credit score myths

No, not everyone 18 or older in the U.S. has a credit score, even though 42% of Americans think it is true. That's one of the many misconceptions consumers have about how to monitor and build good credit. According to a study by Capital One Insights Center, there are a host of myths surrounding credit scores; here are some of the biggest doozies.

My spouse's credit will affect my credit score - False. If your spouse has a low credit score and you apply for a joint loan, that low score might impact your ability to get a loan with good terms, but the score itself will not drag down your own score.

A hard credit check (or credit "pull") will not affect my score - False. There are two kinds of credit card inquiries: hard and soft. Hard inquiries will lower your score temporarily, and too many hard pulls in quick succession could really damage your score. Lenders perform a hard pull when you apply for new credit, like a credit card, a car loan or a mortgage. Hard inquiries stay on your credit report for two years, so it's important to think strategically when you want to trigger one. Soft credit checks that will not affect your score include instances when your bank updates your free FICO score, or your employer checks your credit after you're offered a job.

Carrying a balance (not paying the total amount due) on your credit card each month is a good way to increase your credit score - False. Most older consumers knew this statement was false on the Capital One survey, but almost half of millennials polled, and 53% of Gen-Z respondents, thought this statement was true. By not paying your balance in full each month, you risk paying high interest rates and increasing your credit utilization rate, which can lower your credit score.

Buy Now Pay Later (BNPL) and your credit score

Some consumers are turning to Buy Now Pay Later (BNPL) to make large purchases over time, usually in four payments with no interest due. These loans, sometimes called "point-of-sale installment loans" or "pay-in-4" have grown rapidly.

There is no cookie-cutter version of BNPL. The lending agency might be your own credit company, a bank or an app-based service such as Affirm or Afterpay. This lender diversity means that terms might vary, so it's crucial to do your research before signing up for BNPL.

Anyone considering a BNPL should be wary. Hidden fees and weak regulation have led BNPL plans to come under scrutiny and criticism from a host of government agencies and consumer watchdog organizations such as Consumer Reports.

Ways BNPL services can improve your credit score.

• For consumers who have poor or even no credit history, a small BNPL loan might help make ends meet for an important purchase. Since most BNPL services don't conduct a hard credit pull, consumers can get access to credit without lowering their credit score.
• Some BNPL lenders provide services to help you improve your credit score. For example, customers of Sezzle can elect to have their payments reported to all three credit bureaus in a program called Sezzle Up. If you can make on-time payments, your credit score might improve. However, if you miss a payment or are late, that will also be reported, so only use this service if you have enough cash flow to pay fully and on time.

How BNPL services may harm your credit score

• If you don't understand the terms of a BNPL loan, you might pay expensive fees that could unnecessarily stress your financial health. For example, some BNPL lenders charge an installment fee, essentially acting as interest on the loan. Late fees might also make paying back your loan more difficult.
• A high number of BNPL customers rack up overdraft fees from their banks. A recent survey from the Consumer Federation of America and the Center for Responsible Lending found that 37% of these borrowers were charged an overdraft fee in the last six months.
• If you fail to make a payment, some BNPL lenders (such as Zip, might turn over your account to a collections agency, harming your credit score.
• If you return an item or an item is damaged, the BNPL lender might not be able to credit your account quickly. In that case, you might still have to make payments to avoid late fees. If you've already paid the full BNPL loan but the item is unusable, you might not get a refund. If you can't make those payments, your credit score could be harmed.
• If you elect to pay BNPL installments with a credit card, you might be charged interest by that card if you're unable to make your monthly payment. Late or incomplete credit card payments will damage your credit score.

On-time rent payments can boost your score

Your landlord doesn't typically report on-time rent payments to the three credit bureaus that generate your credit reports. This is a disadvantage for renters; they can't demonstrate responsible financial practices with one of their biggest monthly expenditures — rent.

You might think that charging rent payments to a rewards credit card would help solve this problem and maybe earn you some cash back or miles.

But credit cards charge a fee to pay your rent that might cancel out or even exceed the rewards you earn. There is one exception to this: The BILT credit card allows you to pay rent on the card without those fees, and you earn travel rewards. BILT reports your on-time payments to credit bureaus, helping you increase your credit score.

The real estate technology firm Zillow launched a similar program. Tenants renting through Zillow can ask the company to report their rental payments to credit bureaus. Zillow won't report late payments.

Hiow a good credit score affects your personal finances

Your credit score touches many areas of your financial life: From the interest rates you'll pay on loans to insurance premiums, your credit score can determine whether you pay more or less for the things you need.

Knowing the factors that influence credit scores can help adjust behaviors to ensure you're earning the highest score possible. That way, you don't pay more than you have to on loans, insurance and credit cards.

Related Content

• Credit Score vs. Credit Report: What's the Difference?
• Credit Reports Are Now Permanently Free Weekly
• What Does Your Credit Score Really Mean?
• How Does Marriage Affect Your Credit Score?
• 6 Ways to Boost Your Credit Score

Rates checked as of October 31, 2023.

This article covers our picks for the best credit cards for bad credit. We may get compensation if you visit partner links on our site. We may not cover every available offer. Our relationship with advertisers may impact how an offer is presented on our website. However, our selection of products is made independently of our relationship to advertisers.

If your credit score is in the doldrums, you won’t qualify for many standard credit cards–especially the best rewards credit cards. But some cards are targeted toward those who have bad credit. Many of the strongest options are among secured credit cards, which require the cardholder to make a security deposit as collateral. If you deposit $200, for example, you may have a $200 spending limit on a secured card. Some unsecured credit cards are available to those with bad credit, but they often come with high interest rates and fees, and you won’t be able to fall back on a security deposit if you miss payments.

To help you choose a card that you may qualify for even with bad credit, we’ve rounded up the top options here. All of our selections are secured credit cards with reasonable deposit requirements. They report to the three major credit bureaus–Equifax, Experian and TransUnion–giving cardholders the opportunity to build a positive credit history by making on-time payments. One of them even offers cash back rewards.

Our best credit cards for bad credit are selected based on securitization, credit bureau reporting terms, and deposit requirements. Interest rates, fees, rewards and other terms listed in this article are subject to change. Before you apply for a credit card, check its current terms and conditions with the issuer.

Discover It Secured Credit Card

• Interest rate: 28.24% variable APR for purchases.
• Annual Fee: None.
• Deposit and credit-line information: Your deposit matches your credit limit, and you must deposit a minimum $200; your deposit and credit line may go as high as $2,500, depending on your income and ability to pay; once you’ve made six consecutive months of on-time payments and are in good status on your other credit accounts (including those that are not Discover accounts), you qualify to get your deposit back and convert to an unsecured card.
• Late-payment fee: None the first time you pay late; up to $41 for subsequent late payments.
• Perks: 2% cash back on up to $1,000 in combined quarterly spending at gas stations and restaurants and 1% on all other spending; you also get a match of cash back earned after one year, doubling your rewards.

Capital One Platinum Secured Credit Card - Low Deposit

• Interest rate: 30.75% Variable APR.
• Balance transfer fees: $0 at the Transfer APR, 4% of the amount of each transferred balance that posts to your account at a promotional APR that Capital One may offer to you.
• Annual fee: None.
• Deposit and credit-line information: With a refundable deposit of $49, $99 or $200, you get a $200 credit line; pay it all at once or in installments over 35 days; plus you can increase your initial credit line by making a larger deposit, with a maximum credit limit of $1,000.
• Late-payment fee: Up to $40.
• Preapproval available: You can ask for preapproval, with no "hard pull" on your credit score. That means you won't risk getting denied for the card, hurting your credit score.

Chime Credit Builder Secured Credit Card

• *Interest rate: 0%
• Annual fee: None.
• Deposit and credit-line information: You choose how much money to transfer from your Chime checking account to your Credit Builder secured account and how often to make transfers (one option is to have money automatically transferred into Credit Builder after each paycheck); the "available to spend" in your credit builder account is the amount you can spend with the credit card, and members can use the money in the Credit Builder secured account to pay their bill at the end of every month.
• Late-payment fee: None.
• Disclosures: The Secured Chime Credit Builder Visa® Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted. Chime Checking Account and $200 qualifying direct deposit required to apply for the Secured Chime Credit Builder Visa® Credit Card. See chime.com to learn more.
  • Out of network ATM fees may apply.
  • Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.

How to Get a Credit Card With Bad Credit

Before you apply for one of these credit cards, take a few minutes to go over your application information and strategy. Doing so can save you time and protect your credit score from falling even further.

Follow these steps when you apply.

• Be honest with yourself. Are you ready for a credit card? If you have trouble paying your bills, or often pay them late, a credit card may exacerbate your financial situation.
• Check your credit score, which may be a FICO score or VantageScore and is measured on a scale from 300 to 850. A score below 580 is considered “bad.” If your score is 580 or higher, you may have more cards to choose from.
• Review the card’s terms and conditions, including fees and interest rates. The cards we recommend here are all secured. Ensure you understand how secured credit cards work and that you can afford the upfront deposit.
• Fill out the credit card application. The easiest way to apply is usually online.

How to rebuild your credit score

A credit card can be a great way to rebuild credit because it's possible to achieve your goal without paying interest — as long as you pay off your balance in full every month. Here are the two primary ways you can use your credit card to your advantage.

Pay your bill on time

Your payment history is the most important factor in your FICO credit score. As a result, it's critical that you pay your credit card bill on time every month. In most cases, your due date will be 21 days or more after your monthly statement closes.

If you pay your bill on time and in full each month, you can establish a positive payment history and avoid interest charges. If you accidentally miss a payment, then pay your bill as soon as possible — late payments don't get reported to the credit bureaus until they're 30 days past due.

Minimize your balance

Your credit utilization ratio is another influential factor in your FICO score. This ratio is calculated by dividing your card's balance (the amount you owe) by its credit limit (the total amount you can borrow). For example, with a $200 balance on a card with a $500 limit, your utilization ratio is 40%. If you have several credit cards, your utilization ratio will be based on the sum of your cards’ balances divided by the sum of your cards’ credit limits.

There's no hard-and-fast rule for what your utilization ratio should be, but most lenders will look for a ratio below 30%. Still, the lower it is, the better. Because credit cards for bad credit typically come with lower credit limits, try to keep your balance low by using the card only occasionally or by making multiple payments throughout the month.

Once you have a good handle on paying your monthly bill on time and in full, you can request a credit limit increase to help reduce your utilization ratio even further. In some cases, credit card issuers may offer automatic credit limit increases as a card benefit.

Credit cards to avoid

Not all credit cards are created equal, and some cards designed for consumers with bad credit come with a lot of limitations and costs. Fortunately, you can avoid the worst offenders by watching out for a few red flags:

• Limitations on where you can use the card: Many retail credit cards are accessible to people with bad credit, but you may only be able to use the card with the co-branded retailer. To avoid these "closed-loop" credit cards, make sure the card you're considering has a Visa, Mastercard, American Express or Discover logo.
• Sky-high APR: It's common for bad-credit cards to charge interest rates upwards of 20%, but if a card's APR is upwards of 35%, it may be best to stay away.
• Fees: Unlike the cards profiled in this article, many credit cards for bad credit charge annual fees. Some cards may also charge a processing fee when you open your account, a monthly fee and even a fee to increase your credit limit.
• Incomplete reporting: For your credit-building habits to be effective, your credit card company should report your account activity to all three credit bureaus: Experian, Equifax and TransUnion. If it only reports to one or two of the bureaus, it could limit your potential to improve your credit score.
• Requires closure to get your deposit back: Secured credit cards require an upfront cash deposit as collateral to get approved. Unfortunately, many secured credit card issuers won't return that deposit unless you close your account, which may not be beneficial for your credit score. If you're considering a secured card, pick one that offers to return your deposit and convert your account to an unsecured card with responsible use.

How to pick the right card

With fewer options available, you may be tempted to take the first offer you see. However, it's a good idea to consider a few factors before you start the process:

• Your credit score: Check your credit score before you apply for a credit card. If it's above 580, you may have more options in the fair-credit range.
• Deposit affordability: If you're looking at a secured credit card, check the minimum security deposit requirement and consider whether you can lock up that amount of money for several months with no access.
• Costs: Look at each card's APR and fees to get an idea of what costs you may incur while using the card. Keep in mind, though, that you can easily avoid some credit card costs by using your account responsibly and always paying your bill on time and in full.
• Rewards: Most credit cards for bad credit don't offer rewards, but some of them may give you cash back or points on your purchases. If so, look for cards with rewards rates that align with your spending habits.
• Incentives for good credit behavior: Look for features like automatic credit limit increases and the ability to convert your account to an unsecured credit card when you use your card responsibly.

Other Ways to Build Credit

If you can't afford a security deposit or you aren't sure about getting a credit card, here are some potential ways you can build credit boost your credit score without one.

Pay existing loans on time

If you already have some loans, make it a priority to pay your bills on time every month. If you're behind on a loan or credit card, get caught up as quickly as possible.

Apply for a credit-builder loan

A credit-builder loan is an installment loan designed specifically to help you build or rebuild your credit history. Instead of disbursing the loan funds upon approval, credit-builder loan companies set the funds aside in an account while you make payments.

Once you've finished your repayment term, you'll receive the loan proceeds. Because credit-builder loans are effectively secured by the loan funds, they can offer relatively low interest rates.

Become an authorized user

If you have a family member or friend with good credit, consider asking them to add you as an authorized user on their credit card account. Once you're added to the account, the entire history of the card will show up on your credit report.

On-time payments and a low credit utilization ratio can improve your credit. But if the primary cardholder misses a payment or racks up a large balance, it could damage your credit instead.

You can also receive a credit card linked to the account and use it for purchases. That said, only the primary cardholder is responsible for making payments, so you'll need to arrange payment for your charges.

Make rent and utility payments count

Experian Boost allows consumers to add their rent payments, utility payments and even streaming subscriptions to their Experian credit report. Simply link your financial accounts and identify the payment history you want to add to your credit file.

Depending on your situation, this could result in an instant boost to your FICO credit score. Keep in mind, though, that Experian doesn't add the payments to your credit reports with Equifax or TransUnion, so it's not as effective as other means.

Dispute inaccurate credit report information

Review your credit report regularly — you can get free copies from AnnualCreditReport.com — to ensure the information is accurate and fair. If you find details that are incorrect, you have the right to dispute them with the credit bureaus.

The credit bureaus will investigate your dispute, and if your claim is substantiated, they may correct or remove the information, which can help improve your credit.

Be wary of credit repair companies

If you feel overwhelmed by the prospect of repairing your credit on your own, you may want to talk to a credit counselor. But keep in mind that some credit repair companies prey on consumers with poor credit scores. Avoid credit counselors that ask you to pay money up front or make shady claims about their ability to fix your credit.

As an independent publication dedicated to helping you make the most of your money, the article above is our view of the best deals and is not the opinion of any entity mentioned such as a card issuer, hotel, airline etc. Similarly, the content has not been reviewed or endorsed by any of those entities.

It used to be that you'd freeze your credit if you'd suffered identity theft or some other compromise of your personal information. But as data breaches have piled up, a pre-emptive credit freeze has become a popular way to protect your credit, even if a thief hasn't yet made fraudulent use of your info.

Being proactive is only one way to protect your identity. There are many other ways to keep your credit secret, which we'll cover in the article.

We'll also explain how a credit freeze works and how to set one up to protect your most important data from digital thieves.

What does a credit freeze do?

When you put a credit freeze (sometimes called a security freeze) in place, new creditors can't review your credit reports to judge whether you're eligible for a credit card or loan — and in turn, lenders are unlikely to grant credit to fraudsters posing as you. When you need to shop for credit for yourself, you can temporarily lift the freeze.

How much does a credit freeze cost?

Do I have to pay to freeze my credit? Nope. Placing and lifting a freeze is free at each of the major credit agencies, thanks to federal law.

How do I freeze my credit?

To set up a credit freeze, take these three steps.

1. Gather your information. In the past, all three of the credit agencies had consumers use a PIN to confirm their identities when they wanted to temporarily lift or permanently remove a freeze. But TransUnion, Equifax and Experian no longer require a PIN.

Instead, you can set up a password-protected online account or provide identity-verification information by phone or mail. But if you go online, you can manage your freeze with a password-protected account instead.

2. Contact each credit agency. The web pages or phone numbers below are the quickest avenues to imposing a freeze. To submit your request by mail, use these addresses.

Freeze your credit with Equifax
Equifax Information Services LLC,
P.O. Box 105788,
Atlanta, GA 30348
(Fill out and submit this form to request a freeze by mail.)
888-298-0045

Freeze your credit with Experian
Experian Security Freeze,
P.O. Box 9554
Allen, TX 75013
888-397-3742

Freeze your credit with TransUnion
TransUnion
P.O. Box 160
Woodlyn, PA 19094
888-909-8872

3. Save your passwords. We're all guilty of using the same passwords for everything. However, that also means if hackers can crack your password, it won't take them long to access all of your information.

For this reason, having a password manager is essential. Some of the top options include Dashlane and NordPass. They can create unique passwords for each of your online accounts to keep you safe and store them securely for when you need to use them.

Other steps to protect your credit

• Monitor your credit reports regularly. While you can receive a free credit report from each bureau annually, a service like MyFico helps you stay on top of any credit changes, like new accounts opening or inquiries. And if you don't recognize any changes, you can place freezes on your credit history right away before more damage happens.
• Store documents securely. If you can, sign up for electronic statements with your lenders. They'll arrive in your email, reducing the likelihood of anyone intercepting information through the mail. You can also use a service like Quicken's LifeHub for cloud storage. That way, you can shred paper files and gain access to them on the go, anytime you need them.
• Use a password manager. A password manager creates difficult passwords to crack and stores them securely for you. Services like 1Password protect every aspect of your digital life, tying in all your online accounts with all of your devices in one hub to secure all data points.
• Secure your internet: If you use home Wi-Fi, ensure your phone, computer and router have updated software. This can minimize security vulnerabilities thieves use to hack into Wi-Fi.
• Use credit repair services to fix errors. If you notice errors in your credit report, you might be wondering how to fix them. Credit Saint specializes in helping customers improve their credit scores by working on their behalf to remove incorrect information on their credit reports.

Being proactive pays off

Data breaches happen all the time. As such, knowing all the credit monitoring tools at your disposal can help you keep up to date with any changes. In turn, you can take action promptly if someone tries to open an account in your name.

Just remember to freeze your credit with each credit agency. That way, if your information is compromised, you can stop them from harming your credit. And if you don't plan to use your credit anytime soon, freezing it doesn't do any harm, yet it protects your information from being used.

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Credit reports are getting a couple of significant tweaks. Information from buy now, pay later (BNPL) firms will now be added to consumer credit reports from the three major credit bureaus—Equifax, Experian and TransUnion—and some medical debt information will be removed.

Consumers with medical debt should see their scores increase. Starting in July, medical debt that was sent to collection but eventually paid off will be removed from all three reports. Plus, any new medical debt you incur won’t show up on your credit reports until a year after it is sent to collection. Currently, credit reports start to show an unpaid medical account 180 days after it is sent to collection, and it can stay on your credit reports for up to seven years after you’ve paid off the debt.

BNPL firms, including Affirm, Klarna and Afterpay, offer you a loan at the checkout counter to cover your purchase. Until now, credit bureaus didn’t track such loans, and it’s not clear exactly how the BNPL information will factor into credit scoring formulas, says Matt Schulz, chief credit analyst at LendingTree, an online loan marketplace. People who pay their installment loans on time could see their scores go up, and tracking the loans may give some people a score who didn’t have one before.

However, if you miss payments or take out a lot of these short-term loans, the hit to both the payment history and credit history sides of the credit scoring algorithm could cause your score to drop, Schulz says. Payment history counts for 35% of your FICO score, with length of credit history counting for 15%. And if your BNPL loans boost your utilization ratio—how much of your available credit you are using—that could affect your score as well. If you plan on using a BNPL loan, it’s a good idea to set up automatic payments from your checking account or debit card to pay it off as soon as possible.

For more information on how to troubleshoot your credit reports, see How to Build Wealth (or Rebuild it.)

In 2017, credit bureau Equifax announced that the sensitive personal information of 147 million people had been exposed in a data breach. As part of Equifax’s settlement with regulators, affected consumers were able to sign up for free monitoring of their credit reports from Equifax as well as the other two major credit bureaus, Experian and TransUnion.

Early this year, the settlement became final, and if you were among those who filed a claim for credit monitoring (the deadline was in January 2020), you should have received a letter or an e-mail from info@equifaxbreachsettlement.com with instructions to sign up for daily three-bureau monitoring with Experian IdentityWorks. You must enroll by June 27, 2022. For more details, you can check this page on the Federal Trade Commission website.

Names, birth dates and Social Security numbers are among the data involved in the breach. Those are key pieces of information that a criminal can use to open credit accounts in your name, among other forms of identity theft. If a new inquiry (a request by a lender to view your credit report), credit card, loan or collection account pops up on your credit reports, IdentityWorks should notify you.

The service also provides monitoring of internet black markets for your personal data, and up to $1 million in identity theft insurance, which reimburses you for certain expenses related to recovery from identity theft, such as lost wages or income, attorney and legal fees, and costs of child or elder care. You also get monthly access to your Experian credit report—although you can get a free credit report each week from each of the three major credit bureaus for the remainder of 2022 at www.annualcreditreport.com, and through 2026 all U.S. consumers get seven free Equifax credit reports per year. Your IdentityWorks membership lasts for four years, and you don’t need to cancel the service when it expires.

Even if you didn’t file a claim, if you become an identity-theft victim, you can get free identity-restoration services—such as help contacting your banks and lenders and notifying law enforcement—if you are among those whose data was exposed in the Equifax breach. To check your eligibility, visit the Equifax Data Breach Settlement website.

It’s easy to get your credit score for free these days. Your bank or credit card issuer may offer it, and there are other options as well. Experian, one of the three major credit bureaus, supplies a free score and credit report at www.freecreditscore.com. Credit Karma (www.creditkarma.com) also offers a free score, as well as credit reports from the other two major credit bureaus, Equifax and TransUnion (you must create an account to get your score).

FICO, which invented the credit score, and the three credit bureaus offer monthly plans that provide your credit score and other features, such as credit monitoring, for prices ranging from $10 to $40 a month, depending on the level of service. But you probably don’t need to sign up for a subscription service or pay for a credit score.

Know your score. Your credit score is designed to provide lenders with a way to assess the likelihood you’ll repay a loan; your score also measures your financial well-being. But not all credit scores are created equal. The two big consumer credit scoring companies are FICO, whose scores are most commonly used in lending decisions, and VantageScore, a company created by the three major credit bureaus. The latest models of both scores operate on a scale of 300 to 850, but the formulas differ, and your scores could vary. Generally, a score of 750 or higher is considered excellent, and a score of about 700 or higher means you’re managing your credit well.

Keep in mind that when you obtain a credit score, the number you’ll see is not necessarily the score your lenders will use. Some large lenders have proprietary credit scores they’ve created for their own purposes, says Matt Schulz, chief credit analyst for LendingTree. Still, the free scores you find online or elsewhere provide a way to gauge your credit standing. In addition, a significant drop in your score could be a sign that you’ve been a victim of identity theft or that an error has popped up on your credit reports—say, because a lender has mistakenly flagged an account payment as past due. Don’t rely completely on your score—you should periodically review your credit reports to monitor them for signs of fraud and to make sure the information used to compile your credit scores is accurate. Until April, you can check your credit report from all three credit bureaus weekly at no cost through www.annualcreditreport.com. After that, you can do it for free once every 12 months.

Getting granular. Most people are aware that paying bills late can hurt their score, but that’s just one of the factors affecting your credit score. The five categories that make up your FICO score are payment history (35% of the total), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).

The amounts-owed category refers not only to how much you’ve borrowed but also to your credit-utilization ratio, which is the amount you owe on your credit cards as a proportion of your card limits (the ratio is calculated for individual cards as well as in the aggregate for all your accounts). Try to keep the ratio below 30%, and keeping it below 10% is even better, says Ted Rossman, an analyst at CreditCards.com.

The length of credit history would come into play when you, say, apply for multiple new lines of credit—for example, opening a bunch of retail cards to get discounts on your purchases. That can hurt your score, particularly if you have a short credit history. Finally, your credit mix is an assessment of your ability to successfully manage different types of credit, such as credit cards, installment loans and mortgage loans.

Inaccurate information on your credit reports could hurt your credit score, and errors are not uncommon. Complaints to the Consumer Financial Protection Bureau about the major credit reporting agencies—Equifax, Experian and TransUnion—skyrocketed in 2020, and the majority concerned incorrect information, according to a report from the U.S. Public Interest Research Group.

Under the Fair Credit Reporting Act, you have a right to dispute information in your credit reports that you believe is inaccurate. Unfortunately, however, you can’t just send a complaint to the CFPB and watch the mistakes magically disappear. You need to take specific steps to get the credit agencies to scrub errors.

You can download or print your credit reports from each of the three bureaus for free at www.annualcreditreport.com on a weekly basis until April 2022. In general, the credit reporting agencies receive information about you from your creditors on a monthly basis. And while your credit reports should look similar, there will be some differences, because some lenders don’t report to all three agencies. For example, if you have a credit line with Affirm, which offers payment plans for online purchases, it may show up on your Experian report and not your Equifax or Trans­Union report. When you’re checking each report, make sure your address is correct and that information about lenders and your payment history is accurate for all of your accounts. For example, each entry should show when you’ve paid your bills and whether the payments were on time.

Disputing an error. If you find an error, you have three options: Call the toll-free number provided on the report, fill out the bureau’s online dispute form or write to the bureau. (If an error appears on two or three reports, you’ll have to contact all of the bureaus that are reporting the error.) Experts suggest starting with the online form. It’s typically the easiest to do, and you can attach documents, such as bank or credit card statements or letters from your lender, to support your contention that the information on your report is wrong.

Once a credit bureau receives your dispute, the bureau is required to conduct an investigation and contact the lender. The lender will then instruct the credit bureau either to update the information you’re contesting or to leave the info alone because the lender believes it’s accurate. After the lender responds to the credit bureau, the credit bureau is required to tell you the results of its investigation. Ideally, the credit reporting agency will get back to you within 10 to 14 days after you’ve filed your dispute, but it can take up to 30 days.

If a lender corrects an error, that should resolve your dispute. But things can get complicated if a lender contends that the information on your credit report is correct. If you’re convinced that the information is incorrect, you can file a new dispute. Credit expert John Ulzheimer suggests filing this dispute by mail because that will allow you to provide more detail than the credit bureaus’ online forms can handle.

Alternatively, you can go directly to the lender and state your case. Gerri Detweiler, credit expert and coauthor of Debt Collection Answers, did that when she applied for a car loan and discovered that her mortgage lender had reported that she had made six late payments. After she was transferred several times, she finally reached a representative with the mortgage lender who confirmed that the information was incorrect. From there, the mortgage company instructed each of the credit bureaus to fix the information on her reports. Detweiler’s mortgage company also sent her a letter through the mail confirming that her situation was resolved.

If you come to an agreement or resolution with a lender, make sure you get it in writing and save it for your records. That’s important because although you may get your error resolved more quickly by going directly to the lender, you could lose the right to get legal help if the lender mishandles your dispute.

If your credit reports contain errors stemming from identity theft, the bureaus must block the fraudulent items from appearing, as long as you follow certain procedures. According to the Federal Trade Commission, you must provide the following documents to the credit bureau (or bureaus, if the issue involves more than one report): A copy of a police report, a letter detailing the information that is fraudulent, and proof of identity, such as your Social Security number. If the credit bureaus determine that you were a victim of identity theft, they’ll notify the lender. For more information on what to do if you’re a victim, go to www.identitytheft.gov.

Caveats. Fixing an error on your credit report doesn’t necessarily mean your credit score will improve (correcting your address, for example, likely won’t have an effect). However, successfully disputing a late payment should help because payment history counts for 35% of your FICO score. If you have a debt in collection—an old medical debt, say—that’s reported twice, you should file a dispute, Detweiler says. Debts that have gone into collection are sometimes sold to other debt collection agencies, and that can lead to duplicate accounts on your report.

When reviewing your reports for errors, keep in mind that credit cards you have with retailers, such as Home Depot and Target, may show up under different names on your credit report. Retail credit cards are issued through financial institutions, such as Citibank and Synchrony Financial, so an account you don’t recognize could be legitimate.

Finally, keep in mind that the Coronavirus Aid, Relief and Economic Security (CARES) Act enacted last year requires lenders to report your account as current if you were adversely affected by the pandemic and were current on your account when you entered into an agreement to defer or make partial payments.

“Some lenders have been better than others at following the CARES Act rules,” says Matt Liistro, founder of National Credit Fixers, a credit repair company. If your account was incorrectly reported as delinquent, your best bet is to call the lender with your payment agreement in hand so it can contact the credit bureaus about the error.

If disputing an error (or errors) becomes overwhelming, you can outsource the work to a credit repair agency. Note, however, that credit repair companies can’t get accurate information removed from your report. Also, be sure to check with the Better Business Bureau (www.bbb.org) to see if there have been complaints filed against a credit repair agency before you enlist its help.

Update: The deadline to check your credit reports with the three major bureaus has been extended to April 2022. You can access them weekly for free.

Last spring, in response to the coronavirus crisis, the three major credit bureaus—Equifax, Experian and TransUnion—began offering consumers a free credit report every week at AnnualCreditReport, the federally authorized source of free credit reports. But unless the bureaus provide a last-minute extension, the free weekly reports will last only through April.

You’ll still be able to get a free report from each bureau through AnnualCreditReport once every 12 months, but you can see your reports for free more frequently through other websites that pull report data with your permission. If you create an account at CreditKarma.com, for example, you can see updated information from your Equifax and TransUnion reports once a week. You can also have the site monitor your reports for significant changes, such as the presence of a new loan or credit card, and send you alerts through e-mail or the site’s mobile app. And Credit Karma offers free updates of your VantageScore credit scores based on data from each of the two bureaus.

If you would rather get free Equifax and TransUnion reports directly from those bureaus, each offers services through its website. At Equifax, you can register for free monthly updates of your Equifax credit report and VantageScore credit score. And by signing up for Trans­Union’s TrueIdentity at Transunion.com, you get unlimited access to your TransUnion report and credit monitoring alerts.

To check your report from the third major bureau, Experian, you can enroll at FreeCreditScore.com, which Experian sponsors. The site provides a new free credit report and FICO credit score based on Experian data every 30 days, as well as credit-monitoring alerts.

To ensure that your reports remain free at any of these sites, skip pitches to upgrade to three-bureau report access or other services, and don’t enter your credit card number or other payment information.

In addition to the yearly credit reports at AnnualCreditReport.com, you’re entitled to a free report from the bureaus in certain other situations, including if you place a fraud alert on your report (a move you may make if you suspect identity theft); your report contains inaccurate information because of fraud; an adverse action has been taken against you (such as your application for credit being denied) because of information in the report; you’re unemployed and expect to apply for employment in the next 60 days; or you receive public assistance.

Reviewing Your Reports

Regularly checking your credit reports is im­portant in case a lender or other provider furnishes erroneous information to the bureaus, the bureaus mix up your file with that of someone else, or an identity thief opens fraudulent accounts in your name.

On your reports, make sure that all the accounts listed are yours and that the details on each —such as history of on-time payments, balances, credit limits and dates the accounts were opened — are accurate. Check that your address is listed correctly, too.

If you find a problem, contact the lender or company that provided the faulty data and file a dispute with each credit bureau that is reporting it. (You can get more information at Equifax.com, at Experian. and at Transunion.com.) Include an explanation of your dispute, the resolution you expect, details such as the account number and name of the lender or other furnisher, and any supporting documents, such as a bank statement showing that you paid a bill on time despite a lender reporting that you didn’t.

As college costs continue to rise, the need for students and their parents to borrow money to get a college education has also increased. Americans now owe about $1.6 trillion in student debt, according to the Federal Reserve.

In general, there are two types of student loans: federal and private. Federal student loans are issued by the government, whereas private student loans may come from different nonfederal lenders, such as banks, schools or credit unions.

First: Are your student loans federal or private?

Over the course of your studies, you may have taken out many loans. Since your repayment strategy may depend on the type of loans you have, it is important to take an inventory of all of your loans. If you have federal loans, you can create an account on studentaid.gov and log in to see your federal loans. To identify your private loans, you can get a free annual credit report from Equifax, TransUnion or Experian. Since both federal and private education loans appear on your credit report, any education loans you see on the credit report that are not listed on studentaid.gov are private student loans.

What are some examples of the terms you may see in private student loans?

The terms of private student loans are set by the lender and, therefore, may vary greatly. The interest rate can be fixed or variable. Also, although most lenders realize that students do not have the means to make payments, some may require repayment anyway while you are still in school.

Generally, private loans are more expensive than federal loans and may require the borrower to have a good credit record or a cosigner. Having a cosigner may help reduce your interest rate, but you should watch out for the risks involved. For example, the promissory note may contain a provision that requires you to pay the entire balance in case of the cosigner’s death.

Private loans are like any other type of traditional loans, such as a car loan or a mortgage. You need to be able to afford the monthly payments. If you recently graduated from school, you may not have the financial means to make the payments. Federal loans, on the other hand, may come with options for postponing or lowering your monthly payments.

Therefore, if you are thinking about taking out student loans, it is generally better to apply for and exhaust all the federal student loan options before taking out private loans.

When could it be better to have a private student loan?

If you think you will have a stable job and are confident about your ability to make the required monthly payments, having a private loan with a lower interest rate could be beneficial. If you originally took out federal loans, you can refinance the loans with a private lender and, if you can refinance at a lower interest rate, you may save a lot of money. However, it is important to know that you cannot refinance your private loans into federal loans, which means that once you refinance your federal loans, you will permanently lose the benefits and options under the federal system that I will discuss in my next article.

Refinancing example: Sarah, a physician

Let’s look at Sarah as an example. She is a physician making $250,000 a year and has a federal student loan balance of $250,000 with a 6% average interest rate.* Sarah has an excellent credit history and could take advantage of the historically low interest rates right now. She finds a private lender to refinance at 2.99%. After refinancing, she would pay $2,413 a month for 10 years, compared with $2,776 for the federal standard 10-year repayment plan and save about $43,000 in total over the 10 years.

Sarah likes the idea of saving $43,000. She feels comfortable about her ability to make the monthly payments of $2,413. That makes her a good candidate for private refinancing.

However, is it possible that someone like Sarah could benefit from keeping her loans in the federal system? In my next article, I will explain when and how Sarah and a medical resident, Jimmy, could benefit from keeping their federal loans. Spoiler: There are special protections and programs for federal borrowers!

*Note that the interest rate for some federal loans is 0% until Dec. 31, 2020, so Sarah may want to take advantage of that and wait to refinance.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In addition to all of the other damage it has caused, the coronavirus pandemic has taken a toll on many individuals’ credit scores. If you lost your job because of the crisis, for example, and fell behind on your bills, your score is in danger of a precipitous fall. Need some extra cash until you’re back on your feet? Maxing out your credit cards or applying for several new cards at once could hurt your score, too.

The Coronavirus Aid, Relief and Economic Security (CARES) Act, which Congress passed last spring, includes some important provisions for borrowers. Even if you’re not facing difficulties now, it’s not a bad idea to brush up on steps you can take to keep your credit in good shape. You’ll be armed with knowledge in case you need access to credit later—and you’ll keep your credit reports in top condition by monitoring them for mistakes or fraud.

Check your credit reports

Through April 2021, you can get a free credit report online every week from each of the major bureaus—Equifax, Experian and TransUnion—at www.annualcreditreport.com. Typically, the free reports are available only once per year, but the bureaus have temporarily increased access in response to the coronavirus crisis.

Checking your credit reports closely and regularly is especially important if you have an “accommodation” on a loan—that is, forbearance or other relief, such as that available under the CARES Act. But regardless of whether you have an account in forbearance or in another program, make sure your credit reports are free of problems. Check that your name, current residence and previous addresses are listed correctly and that you recognize each account and inquiry on your report. If you see a credit card or loan that you never opened, a collection account that doesn’t belong to you, or a “hard” inquiry (more on hard inquiries below) from a lender or some other entity with which you’ve never done business, that may be a sign that an identity thief is at work. Review all legitimate accounts for accurate reporting of their payment history and balances.

If you find an error or an indication of fraud on your report, contact the lender (or other company that furnished the information) and ask it to fix the problem. You should also file a dispute with each credit bureau reporting incorrect information—that preserves your right to take legal action if the issue isn’t resolved. You can get more details and submit your disputes at the website of each credit bureau For more on how to successfully combat errors and fraud, see Battle the Credit Bureaus…and Win.

To help you keep tabs on your credit reports, sign up for a free service that sends you an alert via e-mail, text message or a mobile app if a significant change pops up, such as a new inquiry or account. A couple of the bureaus have their own programs that offer free monitoring of the reports they issue: TransUnion, with its TrueIdentity service, and Experian with its FreeCreditScore.com site. Or you can use a third-party service, such as CreditKarma.com, which provides free monitoring of your Equifax and TransUnion reports. When you sign up for any service, check that you won’t have to pay for it after a free trial period. If you must enter credit card or bank account information when you enroll, that’s a sign that you may be charged later.

Mend your credit score

Credit scores, which are calculated based on information in credit reports, are an important measure of a borrower’s credit health. FICO and VantageScore are two large scoring companies, and the standard scale for both is 300 to 850 (specialized scores designed for certain types of lenders or other companies often run on different scales). You may qualify for a loan with a credit score in the 600s, but an excellent score of about 750 or higher positions you to get the best terms, such as a low interest rate. A healthy credit history may also help you get an apartment, a wireless plan or a low rate on homeowners or auto insurance.

Payment history is the most influential factor in your credit score. If you’re late by 30 days or more on a debt payment and have no accommodation from the lender, your credit score will take a blow from the resulting delinquency on your credit report. Or if you miss several payments for bills with another company that doesn’t typically report payment history directly to the credit bureaus, such as a cell-phone or utility service, the account may be sent to collection—and that likely will show on your credit report and harm your score significantly.

The total impact of delinquencies depends on three main factors, says Tom Quinn, vice president of scores for FICO, which provides the credit scores that lenders most commonly check. One is the severity of the delinquency—missing a payment by 90 days is more damaging than being 30 days overdue, for example. How often you have paid late is a factor, too; a pattern of missed payments on multiple accounts is detrimental to your score. And the more recently you skipped a payment, the more it hurts your score. As time passes, the delinquency becomes less harmful.

Generally, the better your credit health before you pay late, the harder the hit to your score. In a simulation from FICO, someone with a 793 score, no record of delinquencies and an otherwise strong credit profile who pays a bill 30 days late would see a score drop of 63 to 83 points. That compares with a decrease of 17 to 37 points for someone who starts with a 607 score and has a previous 30-day missed payment and other less-favorable factors on his or her credit record.

“The good news is that there are things you can do,” says Christina Lucey, director of product management and financial advocate for Credit Karma. To start rehabilitating your score, catch up on missed payments as soon as possible, and make on-time payments going forward. On a credit card, paying the minimum amount due avoids a delinquency, although you’ll pay interest on the balance you carry from month to month (unless you have a 0% rate for some period). If the minimum isn’t manageable, ask your issuer whether it will lower the amount, allow you to defer a few payments or otherwise modify the terms until you’re in a better financial position. Signing up for automatic payments helps ensure that you’ll be on time, too.

You can also explore other ways to add positive payment information to your credit reports. For example, you can connect Experian Boost to your bank account and allow it to add positive information about your payment history for utility and cell-phone bills—and even for your Netflix subscription—to your Experian credit report. Experian says that on average, Boost users increase their FICO score (as calculated with Experian report data) by 13 points. Keep in mind that Boost information won’t appear on your reports from Equifax or Trans­Union or affect your scores based on those reports.

Free credit scores are easy to come by these days, so you shouldn’t have any trouble tracking yours. Your bank or credit card issuer may provide you with regular score updates. Or you can use a service such as Credit Karma, which offers VantageScore credit scores from your Equifax and TransUnion reports, or Experian’s FreeCreditScore.com, which provides a FICO score based on Experian report data.

Other ways to improve your score

Another big factor in your credit score is the amount you owe on your credit cards expressed as a percentage of your card limits—known as your credit utilization ratio. Your credit score considers the ratio both for each card as well as in the aggregate across all your cards. The lower the percentage, the better for your score. As a general rule, keeping your card balances to about 20% or less of your card limits should be beneficial for your score. But if you’re focused on improving your score, you may want to hold the ratio to less than 10%. FICO has found that those who have credit scores higher than 795 use an average of 7% of the credit available to them.

Although a missed payment weighs on your score for a while, your score typically recovers quickly from high credit utilization after you pay down card balances. The bottom line: If your card balances are near their limits for a bit—say, because you’re in a deferred-payment program, you’re making only the minimum payment or you’re using your cards more heavily to cover expenses while your income is down—don’t stress about the effect on your score.

As you practice good credit habits, letting time pass helps your score, too. Most negative information, such as missed payments, collection accounts, foreclosures and Chapter 13 bankruptcies, will slide off of your credit report after seven years. (Chapter 7 bankruptcies may remain for 10 years.) And a lengthening credit history is good for your score, too. The credit accounts of those who have FICO scores higher than 795 have an average age of 12 years, and the oldest account of a high scorer was opened 27 years ago, on average.

Take caution with new credit

If you need a lifeline while money is tight, you may be considering a new credit card or personal loan to get by. Or, if your finances are in good shape, you may want to take advantage of low interest rates to, say, refinance your mortgage. The first hurdle is qualifying—the recession has caused many lenders to tighten their standards. But you should consider the impact on your credit, too.

When a financial institution pulls your credit report for a credit card or loan approval, it results in a “hard” inquiry on your report. Usually, a single hard inquiry shaves only a few points from your score. But if you apply for several credit cards in a short time, the presence of multiple inquiries inflicts more damage. Hard inquiries affect your FICO score for one year and disappear from your credit reports after two years. “Soft” inquiries—which occur when you check your own credit report, for example, or when a credit card or insurance company peeks at your report to preapprove you for an offer—do not affect your credit score.

If you’re looking for a private student loan, auto loan or mortgage, credit scoring systems don’t penalize you if you shop around for the best rate within a few weeks’ time. FICO scores ignore inquiries for such loans made within the 30 days prior to scoring. And with newer versions of the score, any inquiries that appear within 45 days of each other are counted as a single inquiry.

Easing pain for borrowers

Under provisions of the CARES Act, if you are undergoing a financial hardship related to the pandemic and have a federally backed mortgage (such as through Fannie Mae or Freddie Mac), you’re entitled to up to 360 days of forbearance—which allows for paused or reduced payments—upon request. The law automatically suspended payments on federal student loans through September, too. And although they’re not legally required to, many auto lenders, credit card issuers and other creditors have been cutting breaks. About 23% of all consumers have received assistance of some kind, according to TransUnion.

The CARES Act also shields borrowers who enter a forbearance, deferred payment or other relief program (referred to as an “accom­modation” in the law) from damage to their credit reports. If you are current on payments when you start an accommodation with your lender and hold up your end of the deal, the lender must continue to report your account as current. If your account is delinquent when you start the accommodation, its status will remain delinquent until you return it to good standing; then the lender must report it as current.

If you do not bring the account to current status, the lender cannot increase the severity of the delinquency during the accommodation period. An account that was being reported as 30 days late when you started an agreement, for example, may not be reported as 60 days past due during the accommodation. Creditors must follow these rules until 120 days after the end of the COVID-19 national emergency (as of mid August, the emergency was still in effect).

When you enter an agreement with your lender, make sure you understand the terms, and get them in writing. Documentation may help you later if the account’s status is reported incorrectly. It’s also a good idea to ask the lender how it will report your account to the credit bureaus, says Amy Thomann, head of consumer credit education at TransUnion.

If you are nearing the end of an accommodation period and are concerned that you still won’t be able to keep up with payments, contact your lender as soon as possible. It may be willing to extend the agreement, helping to protect your credit profile. But keep in mind that depending on the terms, interest may continue to accrue, and eventually, you’ll likely have to make up for missed payments.

As lenders and credit bureaus adjust to the new rules, mistakes on your credit records are more likely to happen. If an account was current going into the accommodation, you should see its recent status listed as “current” or “OK” or with a check mark, depending on which bureau’s report you’re viewing, says Geoff Smith, vice president of consumer scores for FICO. In addition, you may see comment codes that provide more information. For accounts that are in an accommodation related to the coronavirus crisis, some lenders are using the code AW to indicate they are affected by a natural or declared disaster, says Smith. If you see the code AC, which means “paying under a partial payment agreement,” contact your lender and file a dispute with the credit bureaus. “This comment code is considered negative by FICO scores and should not be used for forbearance and deferment programs due to corona­virus,” says Smith.

Don’t let the credit bureaus freeze you out

As data breaches have piled up—including a major hack of consumer data from credit bureau Equifax in 2017—more consumers are taking advantage of the credit freeze (also known as a security freeze) as one of the best ways to prevent identity theft. When you freeze your credit reports, lenders cannot check them in response to an application for a new credit card or loan, blocking criminals from opening credit accounts in your name. You can place and lift a freeze for free with each major credit bureau—Equifax, Experian and TransUnion.

Like most any other interaction with the credit bureaus, however, freezing and thawing your credit reports may come with complications. Use these tips to smooth the process—or to overcome any obstacles in your path.

Beware identification problems. When you attempt to place or lift a freeze, the bureaus will match the identifying information that you provide with data in your credit report. If anything is amiss, the freeze request may not go through. A recent change in your address or surname, for example, could cause verification issues.

If you run into difficulties when you request a freeze online or through an automated phone system, try to reach a live human on the phone—he or she may be able to work out the problem on the spot. Otherwise, you may have to mail in copies of identifying documents, such as a driver’s license and utility bill, before the bureau will proceed with a freeze request.

Hang on to your PINs and passwords. Depending on the bureau, you may have to provide a PIN or password to unfreeze your report. Equifax and TransUnion allow consumers to create password-protected online accounts through which they can manage freezes. With Experian, you’ll have to provide a PIN that you receive when you first freeze your report; the same is true if you unfreeze your TransUnion report over the phone. Equifax allows you to unfreeze your report over the phone by providing certain identifying information and submitting a one-time PIN that you receive by text message or by answering security questions.

Keep your PINs and passwords in a safe place at home. If you lose your Equifax or TransUnion online account password, you can enter some personal information to verify your identity and go through steps to reset the password. Through your TransUnion online account, you can reset your PIN to use on the phone, too. If you forget your Experian PIN, you can obtain it by going to www.experian.com/freeze and providing identifying information.

Leave some extra time. If you ask for a freeze online or over the phone, the credit bureau must place it within one business day. For online or phone requests to temporarily lift or permanently remove a freeze, the bureaus must act within one hour. But if you run into any identity or security problems, you may need extra time to contact the bureaus or mail documents to them before the freeze is placed or lifted. If you want to lift a freeze to get a credit card or loan, consider requesting it a couple of weeks before you apply.

As obvious as it may sound, try not to forget that the freeze is there in the first place—which may be easy to do if you haven’t had any reason to lift the freeze in a long time. Ted Rossman, industry analyst for CreditCards.com, says that when he applied for a credit card without first removing the freeze on his reports, he had to wait several months before the issuer would let him reapply.

What’s worse than living through two recessions? Getting hit with the second recession just as you’re recovering from the first. Although millennials aren’t the only generation facing financial challenges, the severe economic downturn triggered by the COVID-19 pandemic is hitting us particularly hard.

According to a survey in early April by Kantar, a consulting firm, 78% of millennials say their household income has been or will be impacted by COVID-19, compared with 71% overall. And while I’m grateful I’m still earning a paycheck and my finances have been stable, I can’t say the same for my sister or my friends. Making matters worse, a lot of us are paying off student loans and other debts.

The average non-mortgage debt for millennials in the second quarter of 2019 was about $25,600, according to Experian’s annual State of Credit report. A separate Experian report found that roughly 11% of millennials were 30 days past due on payments. Now, 40% of millennials say the pandemic will likely cause them to delay payments on their debts, according to a survey by MassMutual. If you fall into that group, you need a plan.

What to do. The first thing on your to-do list: Call your creditors, explain your income situation, and ask about options for repayment (see Get Help With Your Bills). After my sister told her credit card issuers that she had been furloughed, she was able to defer payments for April and May with no penalty or late fees. However, the balances are still accruing interest.

Other options include asking for a reduction in your interest rate or your minimum payment, says Samantha Gorelick, a certified financial planner at Brunch & Budget. For example, American Express will lower cardholders’ minimum monthly payments, waive late-payment fees or temporarily lower their interest rate. If you can afford it, reducing your interest rate or minimum payment may cost you less in the long run than deferring payments altogether.

Check your credit reports to make sure your information is being reported correctly. Under the CARES Act signed into law in early spring, lenders are required to report that consumers are current on their loans if they’ve requested coronavirus-related relief. Ordinarily, you can get a free report from each of the credit bureaus—Equifax, Experian and TransUnion—only once every 12 months at www.annualcreditreport.com, but through April 2021, you can get a report once a week.

After you’ve deferred or reduced loan payments, Gorelick recommends you stash the money that you don’t need for essentials in an emergency fund. Because I can cover my necessities, that’s what I did with my stimulus check.

If you’re feeling overwhelmed, consider reaching out to a financial planner. The Association for Financial Counseling and Planning Education is offering free virtual financial coaching sessions as part of their COVID-19 response. To sign up, go to https://yellowribbonnetwork.org/afcpecovid19.

Once you’ve got your finances in order, bolster your cash reserves so you’re prepared for the next recession (or other setback). Set up an automatic transfer from your checking to your savings account so you’re saving at a regular pace. After you’ve replenished your emergency fund, increase contributions to your retirement plan.

Finally, if your credit score has taken a hit, work on rebuilding your credit. Pay your bills on time, and try to keep the amount you owe on your credit cards as a proportion of your total credit limit—known as your credit utilization ratio—under 30%.

Have you ever found yourself fuming at the credit bureaus? You have plenty of company. Among companies in the Consumer Financial Protection Bureau’s database, the three major credit-reporting bureaus—Equifax, Experian and Trans­Union—have logged the most complaints for four years running, according to a report from the U.S. Public Interest Research Group.

Most of the complaints involve hassles remedying inaccurate information on credit reports. But some are from consumers who find themselves caught in a tangle of red tape or facing an impenetrable wall of indifference. Each year, Margaret Finelt, of Richmond, Texas, gets her free credit reports at AnnualCreditReport.com.

At the site, you are directed to each of the three bureaus. But for the past couple of years, although she’s had no problem claiming her reports from TransUnion and Experian, she’s been unable to obtain her Equifax report.

On the phone, Equifax representatives have given her a number of pos­sible reasons: that her credit report is frozen (a freeze prevents lenders from seeing the report in response to a request for new credit in her name), that she failed to correctly answer a security question, or that AnnualCreditReport.com was having a technical issue. Margaret’s husband, Daniel, has since frozen his credit reports—and now he can’t obtain his Equifax report online. By law, a freeze doesn’t prevent you from getting your free annual credit report. In a statement to Kiplinger’s, Equifax confirmed that a credit report is available via the “online, phone or mail channel even if you have a security freeze.” The Finelts finally managed to get their Equifax reports by calling customer service and verbally answering security questions.

It’s hard to say why the Finelts can’t get their Equifax reports online, but their experience illustrates the everyday difficulties that consumers have with the credit bureaus: receiving scattered or faulty information from agents and encountering roadblocks in processes they expect to be simple. “With Equifax, I dread trying to get anything,” says Margaret.

In a battle of you versus the credit bureaus, the bureaus have most of the power—and Congress has been reluctant to regulate them. It took Equifax’s massive data breach two years ago to get the attention of lawmakers. That led to the legislation that allows you to freeze your reports for free but provides few other new protections involving the credit bureaus.

Over the past decade, regulators and the attorneys general of several states have managed to enact a few reforms in an effort to improve credit-report accuracy and secure better treatment for consumers. For example, when a bureau confirms that a consumer’s credit-report data is mixed with that of another person, it must inform the other bureaus. Your credit reports may no longer include debt that did not arise from a contract or agreement (such as a parking ticket or library fine) or medical debts that are less than 180 days old. Plus, the bureaus must remove medical debts from credit reports after they’ve been paid by an insurer. The CFPB has directed the bureaus to conduct their own reviews of consumer disputes and documentation—rather than simply passing the buck to the data provider and “parroting” its response back to the consumer—and data providers should have systems capable of receiving consumer-dispute information.

But problems persist, according to a National Consumer Law Center report, “and we fear the needle on the speedometer for reform is stuck on slow.” Plus, some of the permitted practices do consumers no favors. For example, the bureaus convert disputes into two- or three-digit codes to summarize complaints for data furnishers. The process mostly involves “computers talking to computers,” says Gerri Detweiler, credit expert and education director for Nav.com, a website offering credit scores and data for businesses. That doesn’t allow for much nuance in what may be a complex dispute.

Although you can go to court when a dispute fails and may win compen­sation and a cleaned-up credit record, such cases aren’t much of a threat to the bureaus. “Rather than changing their business practices to be fairer to consumers, they pay go-away money in very small lawsuits. They can afford it as a cost of doing business,” says Ed Mierzwinski, consumer advocate for U.S. PIRG. Even Equifax’s recent settlement of up to $700 million for its 2017 data breach is “a mere parking ticket,” he says. (For more on the settlement, see The Disappointing Equifax Settlement.) “More needs to be done to rein in the bureaus.”

Clear errors from your credit report

You may have discovered that something was amiss when you were un­expectedly rejected for credit or received notice of a change from a credit-monitoring service. Rather than wait for a surprise, make it a habit to regularly visit annualcreditreport.com, where you can collect one free report from each bureau every 12 months. Review your reports to ensure that all of the accounts are yours. Check that any accounts you’ve closed are marked as such (accounts in good standing continue to appear on your reports for about 10 years after they’re shut down) and that details such as balances, credit limits and dates that accounts were opened are correct. Make sure your personal information is accurate, too. An incorrect address, for example, could be a sign of a mixed file or identity theft.

If your credit report shows information that is inaccurate or incomplete, you have the right to dispute it and have it corrected or deleted. Fixing an error is especially important if it could prevent you from getting credit (or result in a higher interest rate on a loan), renting a home or getting a job. A new collection account that mistakenly appears in your name, for example, will likely cause your credit score to drop significantly.

Errors crop up for a variety of reasons. A lender or other furnisher of information may tell the credit bureaus that you’ve missed payments when you haven’t or provide an incorrect balance for your account. Or a bureau may continue to report a delinquency after it should have been removed from your credit file (by law, negative information must disappear after seven years—except for bankruptcies, which may remain for 10 years).

Another possible problem—one that can be vexing to resolve—is that your credit file is mixed with that of someone else who has the same name or other similarities to your identifying information. It’s especially likely to happen if you have a common first and last name or if you have a family member with the same name. Plus, when matching information from furnishers to consumers’ credit reports, the credit bureaus may consider only seven of a Social Security number’s nine digits.

Make your case. If you spot an error, attack it from both sides: Contact the furnisher that provided the data to the credit bureaus as well as each bureau reporting the error. The furnisher’s contact information may appear on your credit report. Be persistent—you may have to ask for a supervisor or talk to representatives from a few different departments before you find someone who can help. If the furnisher agrees to fix a mistake, confirm that it will update all the credit bureaus (which it must do) and ask for written acknowledgment.

Because the credit bureaus still often shift a complaint to the data furnisher and regurgitate its response, convincing the furnisher that it made a mistake may be your best bet to get an error off of your report. A couple of years ago, Mike Gnitecki of Longview, Texas, noticed that his credit score, which typically tops an excellent 800, had dropped. After checking his credit reports, he found that payment on a line of credit was being reported as 30 days overdue. A bank representative told him that its records showed no late payments, so he filed a dispute online with each credit bureau.

A month passed with no word from the bureaus, says Gnitecki. He then showed his credit report to bank representatives, who concluded that there had been a glitch. The bank fixed it, and the delinquency stopped showing up on his reports. But the process left him less than impressed with the credit bureaus. “It was a frustrating experience. They make it sound like the process is easy. It’s not,” says Gnitecki. “You get the impression that nobody cares.”

Still, it’s wise to file a dispute with the credit bureaus even as you communicate with the furnisher. That preserves your right to make a legal claim against the data furnisher or bureau if the error isn’t corrected. And the bureaus must investigate a dispute, generally within 30 days, unless they consider it frivolous. A dispute may be deemed frivolous if it comes from a credit-repair company or if it’s a repeat dispute, says Chi Chi Wu, staff attorney for the NCLC.

Submitting a dispute online is usually the quickest method, but legal experts recommend sending it via certified mail, return receipt requested, to leave a paper trail. You can find more information on how to file a dispute for each bureau, including mailing addresses and online dispute portals, at equifax.com/disputes, experian.com/disputes and transunion.com/disputes.

Keep the description of your dispute clear and concise. Issues involving a mixed file, fraud or identity theft are prioritized, so be sure to cite the type of problem you have. Describe the resolution you expect—say, the removal of a credit account that isn’t yours from your credit report—and include details about the account in question, such as the account number and the name of the lender or other furnisher. Put in your personal information, including name, Social Security number, mailing address and birth date.

Include any supporting documents that may back up your case. Sending a copy of your credit report with the area in question marked may help. If a creditor is falsely reporting that you didn’t pay a bill, try to pull up a bank statement showing that you did. Keep copies of everything you send to the bureaus and furnishers. If you talk to representatives on the phone, note the names of people who spoke with you and the date, time and content of your conversations.

Round two. After the bureaus complete their investigations, they should send you written results, plus a free copy of your credit report if something has changed. If your dispute succeeds, give yourself a pat on the back—but stay vigilant in case the error creeps back onto your reports. Legally, that’s prohibited unless the furnisher certifies the item’s accuracy to the bureau, says Wu.

If the dispute fails, you have a few options. You can contest the error again, but you likely won’t get anywhere unless you have new information to bring to the table. You may write a 100-word statement to be included in your credit file that tells your side of the story, but it probably won’t be effective. Many lenders view credit reports in a format that doesn’t show the statement, and credit scores don’t consider it, says credit expert John Ulzheimer. Or you can choose to live with the error. That may be acceptable to you if it isn’t causing real harm to your creditworthiness (say, a misspelling of your name). If none of those options are suitable, turn to the government or an attorney for help.

Fight fraud

If your credit reports contain inac­curacies because an identity thief is at work, the bureaus must block the fraudulent items from appearing as long as you follow certain procedures. Because the Fair Credit Reporting Act contains these special stipulations for fraud, you may see quicker or more streamlined relief than you would when disputing an error. Indicators of identity theft include a hard inquiry from a lender or other business (say, a wireless carrier) that you haven’t dealt with recently or a new credit card, loan or collection account that you don’t recognize.

As when disputing an error, you should contact both the entity reporting the fraudulent data as well as the credit bureaus. With the bureaus, start with an online chat or a phone call to clarify what documentation each wants you to send and where it should go, suggests Eva Velasquez, president and CEO of the Identity Theft Resource Center. Fill out an Identity Theft Affidavit at the Federal Trade Commission’s identitytheft.gov. If you supply it to the bureaus—along with proof of identity, a description of which information on your credit report is fraudulent and a statement that the information resulted from transactions that weren’t yours—the bureaus must block the fraudulent information from your credit reports within four days of receiving your request.

Usually, the process works as it should; if it doesn’t, the reason may be that the victim is dealing with a complex case, says Velasquez. If you’re having trouble getting fraudulent information removed from your credit reports—or otherwise need assistance cleaning up after identity theft—call the Identity Theft Resource Center’s free hotline at 888-400-5530. Agents can guide you through the steps to take and language to use in contending with credit bureaus or other businesses based on the details of your case. If you subscribe to an identity-protection service, its representatives may help you. Check whether your bank, credit card issuer, insurance company or employer offers free or discounted assistance for identity-theft victims, too.

Claim your credit reports

People are commonly barred from acquiring their credit reports online because they fail the authentication quiz, which poses questions regarding their personal information and accounts. Passing isn’t as easy as it may sound; if you don’t know the exact amount of your mortgage payment or the year you opened a credit card, for example, it’s smart to look it up. Plus, you may be given only a few minutes to complete the questionnaire. Rod Griffin, director of public education for Experian, says he once missed an authentication question when his mortgage had been resold and he couldn’t remember the current lender. “We’re trying to achieve a balance. We don’t want the questions to be too easy, so that anybody could get through, but we try not to make them too hard, either,” says Griffin.

Other possibilities: The bureau can’t match the information you provide with what it has on file, you have an open dispute with the bureau or you have no credit record. If identity verification is the problem, you may be asked to mail in proof of ID. That’s what Equifax requests when Margaret Finelt attempts to get her report online, but she’s reluctant to send sensitive information through the mail.

If you do mail the bureaus copies of your Social Security card, driver’s license, birth certificate or other proof of identity, don’t leave it in your mailbox, where a thief could easily grab it. Take the envelope to the post office and send it via certified mail.

Your right to a free report

It pays to know when you’re entitled to a free credit report besides those available yearly at AnnualCreditReport.com. After Daniel Finelt of Richmond, Texas, experienced identity theft, an Equifax agent told his wife, Margaret, that he couldn’t get a free report because he had claimed his annual report a month earlier. But because Daniel had placed on his reports an initial fraud alert—which signals to lenders that they should verify a consumer’s identity before granting credit—the law allows him an extra free report. You also get a free report if your file contains inaccurate information because of fraud, if an adverse action has been taken against you because of information in the report, if you’re unemployed and expect to apply for employment in the next 60 days, or if you receive public assistance. For seven years starting in 2020, Equifax will provide all U.S. consumers six free additional copies of their credit report per year, too.

Take it to the next level

If the bureaus won’t rectify your credit reports despite your due diligence, bring in a third party.

Contact consumer protection agencies. Try submitting a complaint to the Consumer Financial Protection Bureau at consumerfinance.gov/complaint. The CFPB will forward your complaint to any bureaus mentioned and let you know their responses. Your state’s department of consumer affairs or attorney general’s office are other avenues for lodging a complaint, says Dana Marineau, vice president and financial advocate for Credit Karma.

Write to Congress. Another idea: Write a letter to your U.S. senators and representative. “If a credit bureau gets a complaint from a senator about her constituent, it will bump the complaint higher in the system,” says Ed Mierzwinski, consumer advocate for the U.S. Public Interest Research Group.

Take legal action. When you’ve exhausted your other options, taking legal action is the final step. “People who jump through the hoops and do everything right but still can’t get relief are the ones who have cases that should be brought in court,” says Justin Baxter, a consumer protection attorney in Portland, Ore. If you’ve kept solid records of your interactions with the bureaus and other parties involved, that will improve your case. At consumeradvocates.org, search for an attorney in your area who specializes in credit reporting. Many such attorneys work on contingency, meaning that if your case wins compensation, the lawyers take a cut of it; otherwise, you don’t pay a fee.

Skip the credit-repair companies. These companies promise to clean up your credit reports for a fee. Some of these companies barrage the credit bureaus with disputes of legitimate credit-report blemishes—say, collection accounts that their clients truly owe. The bureaus may rightly reject such disputes as frivolous. Plus, armed with knowledge of the system, you can do a better job disputing real errors on your own—free.

Question: Years ago, my parents made me an authorized user on one of their credit cards. I have my own cards now, and they are removing me from their account. Will this affect my credit score?

Answer: It can, but maybe not much if you’re smartly managing your own cards. “You might see a bit of a dip in your score because there’s been a significant change. But if you’ve established a strong credit history otherwise, that score will rebound,” says Rod Griffin, director of public education for credit bureau Experian. If your parents’ card has a high balance relative to its limit or a record of late payments, then being removed as an authorized user could even give your credit score a lift.

One important consideration: The credit line on your parents’ card should no longer factor into your utilization ratio, which is the amount you owe on your cards as a percentage of available credit. FICO includes utilization in its “amounts owed” category, and it makes up 30% of your credit score. The lower the utilization ratio, the better for your score. For example, if your credit limits total $25,000 while you’re an authorized user, your parents’ card has a $500 balance and your own cards have $4,500 in total balances, your overall utilization ratio would be 20%. But if your available credit falls to $10,000 after you’re dropped from your parent’s account, your utilization ratio rises to 45%.

Utilization is calculated for individual cards as well as in the aggregate for all your accounts. Aim to use no more than 20% to 30% of your limit on each card to maintain a healthy score. Those with excellent FICO scores of 800 or higher use an average 7% of their available credit, according to FICO.

After an authorized user is removed from a credit card, the account usually disappears from the user’s credit report, says credit expert John Ulzheimer, formerly of FICO and credit bureau Equifax. If that’s the case, the age of your parents’ account will no longer be a factor in your credit score. Length of credit history counts for 15% of a FICO score, so if your other credit accounts are newer than your parents’ account, your score may drop a bit.

It’s possible that your parents’ card account will remain on your credit report but no longer be updated by the issuer. In that case, the account’s age will still be considered in your credit score (but utilization won’t). If you want to see whether an account still shows up on your report, go to www.annualcreditreport.com, where you can get a free report from each of the major bureaus—Equifax, Experian and TransUnion—every 12 months.

Question: My FICO credit score hovers between 825 and 830, but when I recently switched cellular companies, my new provider reported that my score was 703. Is this inaccurate, or will the phone company’s report negatively affect my score going forward?

Answer: A likely scenario is that the cellular company is using a specialized score designed for the telecommunications industry.

Telecom scores are entirely different from credit scores and “703 might be a really good score,” says credit expert John Ulzheimer, formerly of FICO and credit agency Equifax. Telecom scores emphasize the customer’s behavior on accounts from companies within the industry. “A telecom score would consider how you've managed telecom accounts more than how you've managed credit cards or auto loans. And a lack of any telecom experience is also relevant,” Ulzheimer says.

Credit agency Experian offers a score to companies involved in telecommunications, energy and cable, and it operates on a scale of 400 to 900. A standard FICO credit score ranges from 300 to 850.

Keep in mind that credit scores come in many flavors, too. The FICO score that a credit card issuer may include with a customer’s monthly statement, for example, is from a different source than the free VantageScore credit scores that CreditKarma.com provides. And both FICO and VantageScore create a variety of scores, including separate ones derived from your credit reports with each of the three major credit agencies (Equifax, Experian and TransUnion). Most lenders report to all three agencies, although the information on your credit reports may vary. Any differences among reports are not usually drastic, says Gerri Detweiler, credit expert and education director with Nav.com, a site offering credit scores and information for businesses. If one agency’s report includes a mistake, however, such as a collection account that you don’t owe or some other black mark, it could have a negative effect on a credit score derived from that agency’s data.

You can check your credit report from each of the three agencies free every 12 months at www.annualcreditreport.com. Review your reports to ensure that they include only legitimate accounts in your name. You can also stay on top of your credit scores and reports from each agency free with CreditKarma.com (providing credit-report information and VantageScore credit scores from TransUnion and Equifax) and FreeCreditScore.com (offering your Experian credit report and a FICO score based on Experian data).

If a wireless carrier checks your credit report as part of its vetting process, that will result in a “hard” inquiry on the report, which may pull down your credit score a bit. But it shouldn’t drop more than about three to seven points, says Detweiler.

Question: I remember reading a while back that everyone starting this fall will be able to freeze their credit report for free. Is this change effective now, and what do I need to do to get my free freeze?

Answer: The law providing free credit freezes took effect on September 21. The three big credit bureaus—Equifax, Experian and TransUnion—can no longer charge a fee to place or lift a credit freeze. In the past, the cost to freeze your credit report varied by state. Some states required free credit freezes for their residents, but others let the credit bureaus charge $5 to $10 every time someone wanted to freeze their credit record or lift the freeze (when applying for a loan, for instance).

A credit freeze prevents new creditors from reviewing your credit report, making it harder for identity thieves to take out credit in your name. For it to be effective, you’ll need to contact each of the credit bureaus separately to initiate a freeze. To see what steps you need to take, go to the Equifax freeze page, the Experian freeze page and the TransUnion freeze page.

Once you request a freeze either online or by phone, the new law requires the credit bureaus to implement it within one day. And if you ask for the freeze to be lifted, the credit bureaus have one hour to do it. “That is the law’s maximum time, but for most people setting the freeze online or by phone, it will be pretty close to instantaneous,” says Francis Creighton, the president of the Consumer Data Industry Association, a trade organization for credit bureaus and other consumer reporting agencies.

Some states have additional consumer protections. In Utah, for example, the credit bureaus must initiate or lift the freeze within 15 minutes of the request for a freeze on a mobile app, says Rep. Jim Dunnigan, who sponsored the credit freeze legislation in the Utah House of Representatives (Utah’s law took effect in May). You can find out about additional consumer protections in your state from its division of consumer protection or the state attorney general’s office.

The freeze remains in effect until you take steps to remove it—either temporarily or permanently. “Understanding the correct terminology is important,” says Eva Velasquez, CEO and president of the Identity Theft Resource Center. “A thaw (or unfreezing) of one’s credit allows them to temporarily remove the freeze for a specified period of time. For example, if a consumer knows they will be applying for credit, they can request a thaw for a day, or a week or another specified time period. And after that time period has elapsed, the credit will freeze again—no additional action is necessary on the part of the consumer.” Lifting a credit freeze, on the other hand, removes the freeze until the consumer actively requests the freeze from the credit bureau again. It’s free whether you lift or thaw a freeze.

The new law also lengthens the duration of a fraud alert that you can place on your credit file from 90 days to one year. A fraud alert signals to businesses that you may have been a victim of identity theft and that they should verify your identity before opening any new accounts. You need only place a fraud alert with one credit bureau, which will notify the others.

For more information about protecting yourself against identity theft, see The Equifax Data Breach: What You Should Do. Also see the Identity Theft Resource Center’s How to Place a Credit Freeze guide.

Question: I'd like to freeze my credit record to protect against identity theft. I heard that Congress recently passed a law making credit freezes free. When can I get my free freeze?

Answer: Congress just passed a law that will prohibit the three big credit bureaus—Equifax, Experian and TransUnion—from charging a fee to place or lift a credit freeze. The free freezes will be available throughout the country this fall; the credit bureaus have until September 21, 2018, to implement the new law. A credit freeze prevents new creditors from reviewing your credit report, making it harder for identity thieves to take out credit in your name.

Until the new law goes into effect, the cost to freeze your credit record varies by state. In many states, each credit bureau charges $5 to $10 to freeze your credit record and may charge a similar fee to lift the freeze if you're applying for a loan. (To hinder ID thieves, you need to freeze your record at all three credit bureaus.)

But several states recently passed laws to eliminate credit-freeze fees. You can place a free credit freeze in Colorado, Indiana, Maine, Maryland, New Jersey, New York, North Carolina, South Carolina, Utah and Washington, D.C. (You may need to pay a fee to lift the freeze in some of these states.) By the end of June, Michigan, Nebraska, Oregon and Washington state will also be offering free credit freezes.

Go to www.equifax.com, www.experian.com and www.transunion.com to initiate the freeze and find out more about the cost and procedures. Equifax, which experienced a massive data breach last year, is offering free freezes for all consumers until June 30.

Also check with your state attorney general's office or consumer protection bureau to find out whether your state offers additional consumer protections on security freezes beyond what the federal law provides.

After a data breach at credit agency Equifax exposed the personal data of nearly 146 million Americans last year, you may have hurried to freeze your credit reports to help prevent identity theft. A credit or security freeze prohibits new lenders from viewing your credit report. In turn, a thief who attempts to use your Social Security number and other personal information to apply for a credit card or loan is unlikely to succeed (see Freeze Your Credit in 3 Steps).

But a freeze can also cause headaches for you. You probably know that you must temporarily lift a freeze when you shop for credit. Several other entities, however, ranging from insurers to employers to the IRS, may rely on data from your credit report (see The Equifax Data Breach: What You Should Do).

If you must lift your freeze, ask the institution which credit agency's report it checks. You may get away with removing the freeze at only one of the major agencies rather than all three (Equifax, Experian and Trans­Union)—and that could save you money if you must pay a fee each time you lift the freeze. Be prepared for these potential sticking points.

Opening a bank account. When you apply for a checking or savings account, the bank or credit union may use your credit report to verify your identity. Depending on the institution, you don't necessarily have to remove your freeze. With PNC, for example, a freeze may only prevent you from opening an account online. If you'd rather not thaw your report, you can visit a branch office to confirm your identity, says Amy Vargo, a PNC spokeswoman. But at U.S. Bank, new customers have to lift the freeze to sign up for a checking account, even at a branch. Bank of Internet USA, an online bank, also requires customers to remove a freeze before opening an account. "There is no other way around it," says Elise Yung, senior vice president of consumer banking. "We are encountering this issue more and more frequently."

Signing up for insurance. Except in a few states where the practice is prohibited, auto and home insurers may check an insurance score based on your credit when determining premiums. In some states, you may need to thaw one or more of your credit reports to help ensure that you get the lowest possible rate; in most states, however, insurers can review your credit even when a freeze is in place (see Will a Credit Freeze Boost Car Insurance Premiums?).

In other cases, your credit report may be tapped for identity verification. HealthCare.gov, which offers health insurance through the provisions of the Affordable Care Act, relies on Experian credit report data to generate questions that online applicants answer to prove their identities. So those who have frozen their credit reports can’t go through the standard security process. Rather than unfreeze their Experian report, enrollees can upload or mail in documents, such as a copy of their driver’s license, passport or voter registration card, as proof of identity.

Checking your credit score. Some services that periodically generate a credit score based on the data in your credit report will continue to operate after you set up a freeze (although you usually must remove the freeze when you enroll). But others won't function. Discover’s Credit Scorecard offers a free FICO score and data from your Experian credit report, updated monthly, to all consumers. If you do not have a Discover credit card or bank account, however, the service will not refresh your scorecard after you freeze your credit report, even if you signed up for the service before placing the freeze. (Customers who do have a Discover card or bank account should see no disruption.) Similarly, at Credit.com, you can't get updated Experian credit scores or report information if your report is frozen. Purchasing credit scores directly from FICO at www.myfico.com doesn't require you to unfreeze your reports, but you may have to contact FICO to confirm your identity. A freeze does not block you from getting your free credit reports yearly at www.annualcreditreport.com.

Registering to use IRS services online. To verify your identity, the IRS needs access to your Experian credit report when you sign up for certain online tools, including those through which you can get a transcript of your tax return or other records, view tax account information (such as balances owed and payment history), and obtain an IP PIN, a six-digit code that victims of tax-related identity theft submit with their tax returns for extra security. You must remove a freeze on your Experian report to get through registration.

Applying for a job. With your written consent, a prospective (or current) employer may check a version of your credit report that omits account numbers, your year of birth and information about your spouse. "Many employers in the defense, chemical, pharmaceutical and financial services industries check employees' credit reports because of the sensitive positions they hold," according to Experian. Several states limit the use of credit information in employment decisions.

Some 41 million Americans have been victims of identity theft, says a recent survey from Bankrate.com, but I (irrationally) always thought I’d be immune. Then, last September, I got the call.

My wife and I were in the Lake District of England, in a well-worn 18th-century hotel not far from the bucolic estate where Words­worth lived and composed his poetry. The caller was a woman from the fraud department of Capital One, asking if I’d applied for a second Capital One credit card. I had not. Capital One turned down the application, she told me in a soothing voice. “But whoever tried to open this account has your Social Security number and date of birth,” she said. The credit application raised a red flag because the imposter listed his (actually, my) address as Springfield, Ill. I live in Washington, D.C., and have for most of my life.

She told me to contact the three major credit bureaus, review my reports and consider putting a fraud alert on my accounts. I already knew the drill, because Kiplinger’s gives the same advice to all victims of ID theft.

Maybe I shouldn’t have been surprised. Just before we left on vacation, I had spotted two small deposits to my checking account from PayPal—an indication that someone was trying to connect a PayPal account with my bank account. I had spent precious pre-vacation hours closing my checking account, opening a new one, ordering new checks, and changing direct deposits and automatic payments.

Now, from my hotel in rural England, with sketchy Wi-Fi, I logged on to the TransUnion website and placed an initial fraud alert on my file, which told creditors to verify my identity prior to issuing credit. The site assured me that the other two major credit bureaus, Equifax and Experian, would be notified and would automatically place fraud alerts on my accounts, too. I tried to relax and enjoy the rest of my vacation. I would have to wait until I was back at work to check my credit reports to see if any damage had been done. All the while, I couldn’t shake the discomfiting feeling that someone was stealing my name—and the sterling credit history I had built over several decades.

A tangled web. Ten days later, back at my desk, I went to www.annualcreditreport.com to get my free credit reports and make sure that no one had opened any accounts in my name. Damn. Someone had beaten me to the site, because each credit bureau in turn said that I had already claimed my free report for the year. (I had not.)

As a victim of ID theft, I had the right to free credit reports if I mailed in verification of my identity and my address, plus a police report, but I figured all that would take too long. I decided to pay for my reports. Despite the fraud alerts on my account, Experian and Equifax were more than happy to take my $10 (the cost varies by state). But TransUnion, to its credit, refused to acknowledge me without more verification.

I downloaded and scanned the two reports. Each had the Capital One inquiry, as well as one from Discover, but no fraudulent accounts or new addresses—yet. I called Discover, was connected to the fraud department, and learned that someone had filed an application for a credit card in my name. (This time the address was in Metcalfe, a tiny town in Mississippi.) I was assured that the application would be denied. I had to get creative to get my credit report from TransUnion. One of my Kiplinger colleagues contacted someone in public relations, who put me in touch with a Trans­Union rep, who gave me a link to download my report.

I was beginning to understand the tangled web that ID thieves weave (to paraphrase another Brit, Sir Walter Scott). Scammers like the one who targeted me try to steal your personal information and apply for credit in your name, but at a different address. If that application slips through the cracks and is approved, it gets easier and easier to open more accounts in your name, and soon your credit is a bloody mess.

The credit bureaus seemed more interested in selling stuff than protecting my credit. I was never able to speak to a live human, except for the TransUnion rep I reached through my Kiplinger connections. The websites were an obstacle course of dead ends, confusing information and pitches for products—credit scores at $8 a pop, credit monitoring at $20 a month, the ability to lock and unlock your report for another $20 a month. I wasn’t planning to apply for any loans or new credit cards, so I decided the best way to protect myself was to freeze my accounts.

How it happened. I called Eva Velasquez of the Identity Theft Resource Center to double-check my strategy. The center is a nonprofit organization dedicated to helping victims of ID theft. Call 888-400-5530 and you’ll be able to talk with an adviser, who will send you a remediation plan. You’ll find tons of information online (www.idtheftcenter.org), including an explanation of the options available to ID theft victims and templates for letters you can use to communicate with the credit bureaus.

Data breaches are incredibly common, and fraud rings have flow charts that help them determine when to sell stolen information, says Velasquez. My batch had probably just been sold.

I recalled that in 2015 I had received a notice from Anthem that my personal information may have been breached, but I stuck the letter in a folder and forgot about it. Maybe that was it? Maybe, she says, but “we tell people not to waste emotional energy trying to figure it out.”

I retrieved the letter from Anthem and signed up for the free credit monitoring I’d been offered from a service called AllClear ID. I still had six months of monitoring left. But Anthem had paid for AllClear ID to access only one of the three bureaus, TransUnion. “Free monitoring of one report is like locking one of three doors to the house,” says credit expert John Ulz­heimer. (Free credit monitoring from Credit Karma also checks only Trans­Union.) Services that monitor all three bureaus typically charge $20 a month.

By the end of October, I had managed to freeze my TransUnion and Equifax accounts. Experian said it couldn’t identify me to impose a freeze. To be absolutely sure no one had opened accounts in my name, I needed to recheck my Experian report and freeze it. But after a flurry of fraud-fighting, I had hit a wall of weariness.

Finally, in late April, I called the police and an officer stopped by our house, took notes and filed a report. I sent it, along with copies of my driver’s license and other documents, to Experian, asking for a freeze and a copy of my credit report (at no charge, because I now had proof that I had been a victim of fraud). Within two weeks I got a fat envelope from Experian.

An unsigned letter acknowledged that the freeze was in place, and my credit report was included. Under “Inquiries” was the Capital One listing that had started the whole Kafkaesque experience. And on the list of my addresses, there it was: Springfield, Ill., had become part of my official history. That’s why Experian couldn’t verify my current, real address. I just wish they had told me why. I also sent the police report to Trans­Union asking for an extended fraud alert, which lasts for seven years. Trans­Union shared that request with the other two bureaus, and now all my accounts are frozen and have an extended fraud alert.

I was lucky. No one actually managed to open an account in my name. And now that my accounts are locked down, I can finish cleaning things up and put the nightmare behind me. I hope.

Put your accounts on ice

A freeze prevents new creditors from viewing your credit report or score. The Identity Theft Resource Center says that ID-theft victims should strongly consider placing a credit freeze after they’ve cleared up their credit report—and it’s the best way to prevent ID theft in the first place, even if you don’t suspect any funny business. You can freeze your reports free if you provide a police report showing you were a victim of ID theft. Otherwise, it costs about $10 per bureau, depending on your state. You also have to pay to lift a freeze when you apply for credit.

Want to improve your credit score? Take a page from the best. People with excellent scores know that following a few basic rules is the key to success. Adopting their habits could boost your score into the stratosphere, opening the door to the best interest rates and terms on loans. And capturing the lowest loan rates can save you a bundle of money in the long run.

The two big consumer credit scoring companies are FICO, whose scores are most commonly used in lending decisions, and VantageScore, a company created by the three major credit bureaus (Equifax, Experian and TransUnion) whose scores have been gaining ground among lenders. The latest models of both scores operate on a scale of 300 to 850. Generally, a score of 750 or higher is considered excellent.

Once you know your score, you can start taking steps to raise it by following these seven habits of people with excellent credit scores.

• The most influential factor in your credit score is your payment history, so staying on top of bills is crucial. Just one late payment (overdue by 30 days or more) can damage your score. FICO recently reviewed the profiles of consumers it calls high achievers (those with scores higher than 795) and found that 96% of them had no late payments on their credit reports.

To ensure that you pay bills on time, consider signing up for automatic payments from your bank account or credit card. Or set up reminders of upcoming due dates on your smartphone (or mark your paper calendar), suggests Heather Battison, vice president of TransUnion. Budgeting site Mint.com can also alert you when bills are coming due for accounts you link to its tool.

TAKE OUR QUIZ: Will It Sink Your Credit Score?

The amount you owe on your credit cards as a proportion of your card limits—known as your credit utilization ratio—is another important score component. FICO high achievers with scores higher than 795 use an average 7% of the credit available to them. There are no hard-and-fast rules to pinpoint the optimum ratio, says Can Arkali, principal scientist at FICO. But in general, the lower your utilization, the better. As a guideline, experts often recommend using no more than 30% of the credit available to you to show lenders that you can manage credit responsibly. But if raising your credit score is a priority, keep utilization under 10% on each credit card you have, says Beverly Harzog, consumer credit expert and author of The Debt Escape Plan.

• Paying down your credit card balances multiple times per month can help keep your utilization down, says Jeanine Skowronski, managing editor at Credit.com. Your card issuer may allow you to set up e-mail or text message notifications when your balance reaches a level that you specify. Another tactic: Ask your card issuer to raise your credit limit. If you've been using the card for several months and paying your bills on time, the issuer may grant your request. But be sure that you have the discipline not to increase your spending, too, cautions Harzog.

Even if you stop using a credit card, it's often smart to keep it open so your score benefits from the available credit. However, if the card tempts you to overspend or carries an annual fee, closing it may be better.

People with FICO scores higher than 795 owe less than $4,000 on their credit cards, compared with average balances higher than $6,000 for those with scores lower than 635.

The takeaway? Maintain firm control over your spending, charging only what you can afford to pay in full each month on your credit cards. That way, you'll also avoid incurring interest, which can quickly pile up.

Having several years of credit usage under your belt also elevates your score. The average age of revolving credit accounts among FICO high achievers is about 12 years, and the average high achiever's oldest account was opened 27 years ago. That may give older folks a leg up, but "it's important to note that you can still have a good score even if you're not a longtime user of credit," says Skowronski. Length of credit history accounts for 15% of your FICO score, compared with 35% for payment history and 30% for amounts owed (including credit utilization). If you are just starting to establish a credit history, set yourself up for success by using a credit card to make small, manageable purchases, such as gas and groceries, says Battison. She also suggests that renters ask their landlords to report rent payments to the credit bureaus to help start a credit history.

Opening new credit accounts may shorten the average age of your credit history, but closing accounts won't affect account age right away. Accounts that were closed in good standing may remain on your credit report for up to 10 years. Still, it's not a bad idea to keep your oldest credit cards open to help maintain your credit history.

Applying for several credit cards in a short period sends a signal that you may be a risky credit prospect. Each time a potential lender checks your credit, the action shows up on your report as an "inquiry" -- and the appearance of several inquiries at once can ding your credit score. (If you're shopping for a mortgage, auto loan or student loan, however, FICO ignores all inquiries that such lenders have made within the past 30 days. VantageScore counts auto loan and mortgage inquiries made within two weeks of one another as a single inquiry.)

Having a mix of account types helps increase your score. If you do open new credit cards regularly, Harzog recommends waiting at least six months between applications.

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• Look for cards that reward your spending patterns. If you buy a lot of gas, for example, a card that pays 5% cash back on fuel purchases will serve you well. Cash-back cards often let you use the rewards you've accumulated as a statement credit toward purchases, lowering your bill. A card that carries an annual fee may be worthwhile, but first do the math to decide whether the rewards you earn will outweigh the fee. Some cards waive the annual fee for the first year, giving you time to determine whether the card works for you.

If you are just getting started with credit (or bouncing back from a bankruptcy or other serious delinquency), a secured card, which requires you to make a deposit as collateral, can help you build a credit history and score. Retailers may offer you enticing discounts if you sign up for their store credit cards, and retail cards are often easier to obtain than other cards. But keep in mind that both cards often come with low credit limits—meaning that your credit utilization could easily push past the recommended 30% mark when you use the card to make purchases.

• By keeping an eye on your credit report and score, you will be aware of any negative changes that pop up and can act quickly to correct them. According to a survey from credit card issuer Discover, 76% of those who had checked their credit score at least seven times in the past year saw their score improve, compared with 38% of those who had checked their score once in the previous year.

At AnnualCreditReport.com, you're entitled to a free yearly credit report from each of the three major credit agencies: Equifax, Experian and TransUnion. Scan each report, looking for possible errors or signs of fraudulent activity, such as an incorrect credit limit on a card or an account that you never opened. (If you spot a problem, you can take steps to dispute and correct it. If you suspect fraud, you should also take measures, such as enacting a fraud alert.)

A host of other websites also offer free credit scores to help you gauge where you stand. One of our favorites: CreditKarma.com, where you can view information from both your Equifax and TransUnion credit reports as well as your VantageScore from each bureau. Credit Karma also lets you sign up for alerts of changes in your TransUnion credit report. Discover Credit Scorecard offers a free FICO score (based on data from your Experian credit report) to everyone, not just Discover card customers. Your bank or credit card issuer may provide customers with free credit score updates, too.

TAKE OUR QUIZ: How to Get Out of Debt

Whatever the elusive "proper" level of debt may be, a lot of people are exceeding it. Despite generally widespread prosperity for the past decade or so, Americans have been going broke in record numbers, filing for personal bankruptcy as never before.

If you see such drastic action looming in your future, better to take some steps now before your credit rating is ruined.

Roll your debts into a lower-rate loan. Perhaps you can reduce your monthly payments by combining your major debts into a longer-term loan at a lower interest rate. This can be an especially rewarding strategy for credit card debt, which clobbers you with the highest interest around. A home-equity loan may make sense. The rate will be lower, and you'll reduce the number of checks you have to write each month. But before you take this step, learn about home-equity loans.

Switch to a lower-rate credit card. Credit card offers are everywhere, and card issuers will gladly arrange for you to roll balances on existing cards into a new account with them, provided your credit rating is still good. Just make sure that you don't sign up for a low introductory rate that converts to a high rate after only a few months.

Check your credit record. You can get a free copy of your credit report from each of the bureaus every 12 months at AnnualCreditReport.com. And you can get a free credit report if you've been denied credit in the past 60 days. Also, federal law requires the credit-reporting firms to provide free reports to people who are out of work and looking, who are on welfare, or who believe that their credit record is inaccurate because of fraud.

The credit-reporting agencies are Equifax (800-685-5000; www.equifax.com), Experian (888-397-3742; www.experian.com), and Trans Union (877-322-8228; www.transunion.com).

Confess to your creditors. If you know things are going to get worse before they get better, call your creditors and spill the beans. Tell them you that can't pay on time but are determined to pay them back. Could they possibly stretch out the payments for you? Some will do it, and some will even waive interest and late fees for a while. If you get such an agreement, follow up with a letter to the company describing the terms you discussed. This protects you later if the company decides to change its mind.

Know your rights. See our section on credit rights.

Get help. If things are looking bleak and you can't handle it alone, consider calling the nonprofit National Foundation for Credit Counseling (800-388-2227), which operates more than 2,000 local offices. The national number will put you in touch with the local office of the Consumer Credit Counseling Service, where counselors can help you set up a repayment program and negotiate with your creditors for reduced monthly payments and lower-or even waived-finance charges. The CCCS then helps you set up a budget that calls for you to make one monthly payment to the service, which parcels it out to your creditors. There may be a small fee involved.

Wells Fargo has given its customers one more reason to take a hard look at their accounts. The bank recently disclosed that about 1.5 million deposit accounts and 565,000 credit card applications may have been opened by employees without customer permission, according to the Consumer Financial Protection Bureau. The bank is paying $185 million in fines to the CFPB, the Office of the Comptroller of the Currency and the Office of the Los Angeles City Attorney.

If Wells Fargo identified you as a victim in its review of accounts dating back to 2011, you should have already received a letter of notification and a check in the mail, or a message on your bank statement and an account credit, says Wells Fargo spokesperson Richele Messick. The bank has refunded $2.6 million so far, with an average credit of $25.

It’s still a good idea to check for any unfamiliar accounts in your name, however. Wells Fargo is now reviewing accounts opened in 2009 and 2010, and more could turn up.

If you have a mortgage, auto, student or other loan but no deposit or credit card accounts with Wells Fargo, you should be in the clear, says Messick, because such lending and mortgages fall under a separate division of the bank.

You can see all of your Wells Fargo bank and credit card accounts by logging in at www.wellsfargo.com. Or to talk to a bank representative, visit a branch or call the customer service phone number listed on your bank statement or on the back of your credit card.

Here are two other steps to take to keep your finances safe:

Check your credit reports. Go to www.annualcreditreport.com to get free copies of your credit reports from each of the major credit reporting agencies: Equifax, Experian and TransUnion.

A handful of states—Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey and Vermont—require that the bureaus provide an additional free copy to residents each year, which could be useful if you’ve already claimed your free reports at AnnualCreditReport.com in the past 12 months.

Some online credit tools offer credit report information at no charge. At CreditKarma.com, for example, you can sign up to see information from your Equifax and TransUnion reports.

Search your credit reports for credit card accounts that you don’t recognize. Banks don't report deposit accounts or debit cards to the three big credit agencies, although overdraft protection on a checking account may show up on credit reports, says credit expert John Ulzheimer, formerly of Equifax and credit-scoring company FICO.

If Wells Fargo checked your credit report in the past two years, that activity would show up as an inquiry on at least one of your credit reports (after two years, inquiries disappear from the reports).

Any inquiries that appeared on your report within the past year could be pulling down your credit score. If you believe that any Wells Fargo inquiries from the past year are tied to an account application that you didn’t request, you can ask the bank to have them removed, Ulzheimer says.

You may not necessarily want to close a credit card account opened by Wells Fargo without your knowledge. Shutting it down may seem like a no-brainer. But by doing so, you could lower the amount of credit available to you. That could increase the ratio of your credit card balances to your overall credit limits—which may cause your credit score to drop. "If you have a credit card on your credit report that has no balance and a large, unused credit limit, that’s very likely going to help your score," says Ulzheimer.

To keep your credit score in healthy territory, always try to hold your credit card balances to no more than 20% to 30% of your credit limits. Leaving an unused credit card account open may be your best bet as long as it’s not racking up annual fees or other charges.

In some instances, the Wells Fargo employees—given incentives in the form of bonuses that they could earn for meeting sales targets—moved money from customers’ original bank accounts to the new, unauthorized accounts. If the balances of the original accounts weren’t high enough to cover the transfers, they triggered overdraft or insufficient-funds fees.

In other cases, unauthorized credit card applications that the bank approved left customers with cards that incurred annual fees, interest charges or other fees. Some customers also had debit cards and PINs activated in their names or were enrolled in online banking without their knowledge. That's what you need to look for—and act upon.

Few things have haunted me as much as the fear of having my identity stolen. What a nightmare it would be, my credit in shambles and the prospect of spending countless hours to restore my good name. To quell the anxiety, I’ve paid for various credit-monitoring services over the years.

And then this spring it happened: I received an alert about a suspicious credit inquiry. My Social Security number had been used to open a new PayPal credit account in my name. Cue the panic attack...

However, as with most things in life, the anxiety turned out to be worse than the reality. Because I caught the fraud so quickly – within hours of the PayPal account being opened – I was able to minimize the damage. No charges were made to the fake account, and no other accounts were opened with my information.

Here’s what I did to successfully shut down the identity thieves -- including a few new tactics I learned along the way:

It all started with Equifax credit monitoring (cost: about $12 per month through my bank), which alerted me to the bogus credit inquiry from PayPal. As I hadn’t applied for any lines of credit, I knew I needed to take action.

I called PayPal right away and explained to a representative that I did not open the new account. She froze it and launched an internal investigation.

I then contacted Equifax to place a 90-day initial fraud alert on my record. This alert is free on request, and once you’ve placed it with one credit bureau, the alert is automatically placed with the other two credit agencies. For at least 90 days, my credit was safe.

[Insert a sigh of relief here.]

As I awaited PayPal’s internal investigation, I also took the time to create an account with the FTC so that I would have a record of the incident. Documentation is necessary if you want to take advantage of a free credit freeze for fraud victims (more on this in a moment). I give big props to the FTC for a helpful website and charming phone service agents. I also submitted a police report online for further documentation.

What the Experts Say

I reached out to a couple of experts to see if I had responded appropriately: Michael Bruemmer, vice-president for consumer protection at Experian, and credit expert John Ulzheimer, formerly of FICO and Equifax. Both agreed that I get an A, because most consumers would have disputed the issue with PayPal and stopped there. Bruemmer also gave me points for monitoring my accounts so proactively, which is one of his key steps to identity protection, along with shredding prescreened offers and personal documents you no longer need.

After a few weeks, I received written confirmation from PayPal that the fraudulent account would be closed.

To prevent future credit breaches, I next had to choose between establishing an extended fraud alert or freezing my credit completely. With an extended fraud alert, which lasts seven years, creditors can still access your report as long as they first take steps to verify your identity. A credit freeze means your credit report can’t be accessed unless you specifically grant permission.

“The credit freeze is the Fort Knox of credit protection,” says Ulzheimer. Although you need to unfreeze your account each time you apply to open a new account—say, with a home utility or cell-phone provider--or anytime you apply for credit, “the ability to decide when someone can access your credit report is a really empowering thing for a consumer.” And you don’t have to have your identity stolen to do it. Just be aware of your state’s laws regarding credit-freeze costs and requirements.

I opted for the credit freeze. Because I was the victim of fraud and had a police report, I was entitled to place the freeze free if I sent my documentation via certified mail. Unlike the initial fraud alert, which carried over automatically to all three credit bureaus, I had to request a separate freeze at each bureau. (Note: In my state, anybody can freeze their credit online for a $10 fee. And because the cost to send my documentation by certified mail would have exceeded $10, I, too, chose to pay the fee to freeze my credit online.)

Sure, the credit freeze will ultimately require more judiciousness on my part whenever I apply for credit in the future. (Note to self: Do not forget your PIN numbers.) But it’s completely worth it for the peace of mind. There are plenty of things to be anxious about. I don’t want identity theft to be one of them.

I’m going through my late mother-in-law’s belongings, and I see that her bank statements from the 1980s and 1990s often included her Social Security number. Do I need to shred them? --D.D., Washington, D.C.

You should shred any documents with information that thieves could use to steal someone’s identity, even after they pass away. “Recently deceased individuals are a prime target for fraudsters,” says Rod Griffin, director of public education for the credit bureau Experian. ID thieves can do the most damage during the period after the person dies but before the credit bureaus, financial institutions and government agencies are notified.

Financial institutions are usually notified about a death from the Social Security Administration’s Death Master File, but that can take a while. It’s better to send copies of the death certificate to creditors, financial institutions, insurers, government agencies and even the credit bureaus as soon as possible, says Adam Levin, chairman of IDT911, which provides ID-theft protection programs for consumers through employers and banks. The fact sheet at www.idtheftcenter.org has a checklist of companies to contact and sample letters to send.

To qualify you for the best rate, lenders will see if you pass muster in three main areas. Note that you may be able to offset weakness in one category with strength in another.

Are you a good credit risk? One of the first things lenders do is pull your credit score. The most common is the FICO score, which will be based on data from one of the three major credit bureaus (Equifax, Experian and TransUnion). Lenders use the lower of two scores, the middle of three or the average of all scores. If you have a co-borrower, they compare your scores and use the lower of the two or average them. Your debt-to-income ratio and your down payment determine the minimum required credit score for a mortgage.

Can you handle the payments? To measure “capacity,” lenders scrutinize your (and your spouse’s) job and income history and prospects, debt-to-income ratios, and savings and assets. Lenders will also look at your proposed ratio of monthly housing expenses to income. Housing expenses include loan principal and interest, real estate taxes, and hazard insurance (PITI), plus mortgage insurance and homeowners-association dues. Housing expenses generally shouldn’t exceed 25% to 28% of your gross monthly income.

Lenders also figure your maximum debt-to-income ratio (total monthly debt payments divided by gross monthly income). That number and your down payment determine the minimum required credit score; if it’s 36% or less, Fannie Mae sets a minimum credit score of 620 with a down payment of 25% or more, and 680 with less than 25% down. To push the debt-to-income ratio to 45%, you’ll need a credit score of at least 640 with a down payment of 25% or more, and 700 with less than 25% down. Standards get tougher as you layer on more risk—say, with an adjustable-rate mortgage or investment property.

Does the value of the home justify the loan you want? “Collateral” is typically measured as loan-to-value ratio: the amount of the loan divided by the appraised value of the home you want to finance. If you could borrow all of the money, the LTV ratio would be 100%. But lenders will demand a down payment of at least 3%. That way, you have a stake that you stand to lose if you default on your loan.

If you shopped at Home Depot or Neiman Marcus, ate at P.F. Chang’s or Jimmy John’s, banked at JPMorgan Chase, or used an American Express card in 2014, then chances are good that some of your personal information was exposed in a data breach. You probably knew that. The question is, how much should you care?

It’s easy to understand why consumers are starting to yawn in the face of a steady stream of data-breach notifications. Through early December, the Identity Theft Resource Center had counted more than 700 data breaches in 2014 -- representing a 26% increase over 2013 and surpassing the high set in 2010.

A 2014 survey conducted by the Ponemon Institute found that nearly one-third of consumers had received at least two notifications of a breach in the previous two years; 10% had received more than five. And although 76% of victims felt stress about the breach, more than half did not take any steps to protect against identity theft afterward.

Such inaction may not lead to disaster. Remember, a data breach does not mean you’re a victim -- or will be a victim -- of identity theft. Nor is all ID theft harmful to the same degree. The key is to distinguish the truly dangerous breaches from the merely annoying ones.

Take it seriously if your Social Security number is compromised. “That’s the golden ticket for an identity thief,” says Becky Frost, senior manager of consumer education at Experian’s ProtectMyID, an identity-monitoring service.

You’re actually more likely to become the victim of ID theft if your credit or debit card info is exposed than if your Social Security number is divulged. That’s because thieves can start racking up charges immediately; making money from a stolen Social Security number is a multistep process.

But the consequences of a stolen Social Security number can be enormous. Your liability is limited for unauthorized charges on your debit or credit card. But with a Social Security number, a thief can get into existing accounts, open new ones, take out a loan, get a job, file a fake tax return or gain access to health care. Getting a new Social Security number is cumbersome and impractical. “I don’t even recommend you try,” says Al Pascual, director of fraud and security for Javelin Strategy & Research.

Passwords, usernames and e-mail addresses are frequently compromised. But unless the exposure includes personally identifying information in com­bination with other info (think name and account number, or log-in plus password), you may not even be notified. Still, theft of such data puts you at risk for so-called phishing scams, in which ID thieves try to gain additional info via e-mail or phone. You also might be in trouble if you’ve used the same usernames and passwords on multiple sites.

Resist the tendency to ignore a data-breach notification. If you are offered free credit monitoring, take it. And, especially if your Social Security number was exposed, consider stepping up the protection to include alerts when new accounts are established using your info. Place a 90-day fraud alert on your credit report by notifying one of the three major credit bureaus: Experian, Equifax or Trans-Union. Change account numbers on affected financial accounts, monitor statements closely and report any fraudulent activity immediately. Limit damage from stolen e-mail or log-in information by using unique passwords and changing them regularly. You can keep on top of data breaches at www.idtheftcenter.org.

What is the difference between a credit freeze and a fraud alert? Who should take these steps?

You can place an initial fraud alert on your credit report if you worry that you have been -- or could be -- the victim of identity theft. This is a good idea if you see any suspicious activity on your report or bills, if your wallet or other information has been stolen, if you've been a victim of a security breach, or even if you're concerned that you've revealed too much personal information online or over the phone.

A fraud alert means that lenders must take extra precautions to verify your identity before granting credit in your name. It also entitles you to a free credit report from each of the bureaus.

Anyone can place a 90-day initial fraud alert in their credit report, which can be renewed in 90-day intervals indefinitely. Contact one of the three credit bureaus ( Experian, Equifax or TransUnion), which will notify the others.

You can get an extended fraud alert, which stays on your credit report for seven years, if you can provide a police report or other official record showing that you've been the victim of identity theft. You'll get two free credit reports from each of the credit bureaus every 12 months, in addition to the free copies everyone can get every 12 months.

Fraud alerts, however, aren't foolproof. If you'd like extra protection, you can get a credit freeze.

When you freeze your credit record, you prevent lenders from seeing your credit report unless you specifically grant them access. This can prevent identity thieves from taking out new credit in your name, even if they have your Social Security number and other personal information.

Your current creditors are exempt from the freeze, and you can use a PIN or password to open your file for certain lenders or for a certain time period if you plan to apply for credit.

A credit freeze may be a new option for you. In the past, only certain states allowed residents to freeze their reports. But the freeze became available nationwide on November 1, 2007.

To be effective, you need to freeze your record at all three credit bureaus. The costs vary by state, but you generally have to pay $10 to freeze your account at each bureau and another $10 to lift it -– even temporarily. The charge may be waived if you've been a victim of identity theft. Some states offer free freezes to residents over age 65.

It can take as little as 15 minutes or as long as three days to lift the freeze, depending on the state. Because of the time and money, a freeze may not be worth it if you're about to take out new credit. But it can offer strong protection for someone who worries a lot about identity theft, especially for seniors who can't check their records regularly and people whose information has been stolen in a security breach.

For more information about credit freezes and each state's rules, see Consumer Union's guide to security freezes. For more information about identity theft, see the Federal Trade Commission's ID theft page, the Identity Theft Resource Center and the Privacy Rights Clearinghouse.