Q. I didn't pay my parking tickets when I was in college. Is this going to show up in my credit report?

A. It's possible the sins of young adulthood will show up on your credit report, but there's only one way to find out. You can get a free copy of your report once a year. Unless there was a parking ticket amnesty program in your college city, the fines might have been turned over to a collection agency. If so, you might see those ghosts of an indigent past in black and white. Pay them, and then inform the credit company that you have done so.

Q. Okay, so I got into some financial trouble and now my credit score has tanked. What should I do?

A. Unfortunately, you aren't alone. That's why there are lenders out there who get creative with mortgages, and can find you one even with your bad credit. Of course, they aren't handing these mortgages out for free — they will cost you more than if you had good credit. The first thing to do is to clean up your debts. And be honest with your lender; don't lie about your credit because he will find out anyway and you'll waste both your time.

Q. I'm so upset I can hardly talk. I got my credit report and it says I have an account at a bank I stopped using long ago. I closed that account but here it is showing up again, and I think it's hurting my credit score. What should I do?

A. Call the bank and make sure they have closed the account. Banks are sometimes reluctant to do that and the account can hang around unbeknownst to you. Then dispute your credit report with the reporting agency so they can track down the creditor to see what's up. You should see the item disappear from your report in about 30 days. If not, contact the credit agency.

Before you start house hunting and getting pre-approved for a home loan, check your credit report and get your FICO scores. Why? Your credit rating may be the single most important piece of financial information you have to obtain a mortgage at the best interest rate.

Checking your credit rating before you purchase will give you time to correct reporting errors and to clean up your ratings if they are in the dumps. One lender tells us that it can take up to 90 days to get erroneous — and costly — information off your report, although some prospective borrowers say they have a much quicker outcome.

Credit reports are a history of your track record of borrowing and repaying banks, credit card companies, and any other lenders. When you apply to borrow money, the lender uses the credit report to decide if you are a safe bet, or a risk. They also base whatever interest rate they offer on that report and the resulting credit score.

A credit report includes:

• Credit history. This includes account information detail, such as your payment history, and specifically information about accounts that may have been sent to debt collection agencies. It also includes the number of accounts you have and the type of each, and if you are in good standing with each.
• Who is examining your credit. Any inquiries by lenders or others about your credit is recorded as well.
• Any judgments against you, such as bankruptcy.
• Personal information about you, such as your addresses (current and past), Social Security number and your previous employers.
• A section for comments by you, in the event you have disputed the report specifics in the past.

There are three major credit-reporting agencies: Equifax, TransUnion, and Experian. You can receive a free copy of your credit report once a year from AnnualCreditReport.com, which gets the reports from each of the three companies.

It is a good idea to get a copy annually so that you can check it for errors. Errors range anywhere from name misspellings and incorrect Social Security numbers to accounts being listed as still open when in fact they have been closed — an error that can hurt you when you need to get a mortgage.

Your credit report also will show whether you have been the victim of identity theft. If your personal information, such as your Social Security number, has been changed, the report will reveal it.

So, what do you do if your credit reports make you want to hide under the covers and never use your credit cards again? Relax, you can turn your ratings around.

Mortgage lenders look at the "age," dollar amount, and payment history of your different credit lines. That means opening accounts frequently, running up your balances, and paying on time or not at all can impact your credit score negatively. Just changing one of these components of your spending behavior can positively affect your credit score. Also, bad credit does not necessarily mean you can't get a mortgage, it will just come at a higher cost.

If you are having trouble getting a loan, ask your lender why. Chances are it will be one of these reasons for rejection:

• Overextended credit cards: If you miss payments or exceed your limit, that's a red flag to lenders.
• Failure to pay a previous or existing loan: If you have defaulted on other loans, a lender will think twice.
• Bankruptcy: Filed for bankruptcy in the past seven years? You might have trouble getting a loan.
• Overdue taxes: Lenders check your tax payment record.
• Legal judgments: If you have a judgment against you for such things as delinquent child support payments, it could harm your credit.
• Collection agencies: Lenders will know if collection agencies are after you.
• Overreaching: You might be seeking a loan outside what you can reasonably afford.

Many financial experts suggest common sense strategies to turn your credit report around:

• Always pay your minimum balance on time. Let's face it, credit card companies make profits on you when you maintain a balance. Just make sure you send them their due each month. Better yet, only spend what you can expect to pay back at bill time.
• Try to reduce balances. Even throwing in an extra $20 to $50 each month will help reduce the overall debt, and paying extra looks good on your credit report.
• Don't run up the entire balance: Having $100 left on a $10,000 line of credit doesn't look so hot. Lenders look at the dollar amount of credit available to you and, from there, what percentage of that credit you have used. In other words, if you have a card with a $1,000 limit and you've spent $900 on that card, you've used 90% of your available credit; this looks a lot worse than having a balance of, say, $200 on the card.
• Throw away new credit card offers. Don't apply for new cards and lines of credit right before you go home shopping. And when those clerks in the stores offer you a discount if you just open an account, say no. Banks will not turn a blind eye to numerous inquiries for new credit.

If bad credit continues to dog you, the FHA loan programs may be your ideal option. With down payments as low as 2%, Americans with good and bad credit have been getting into their first homes with these federally insured loans since 1934.

Having bad credit is not the end of the world. It still may be possible for lenders to give you a loan, provided your credit score is not too low. But be aware that you may pay a higher interest rate and more fees since you are more likely to default (fail to pay the loan back).

There are ways you can improve your credit score, such as paying down your debts, paying your bills on time, and disputing possible errors on your credit report. But on the flip side, there are ways you can also hurt your score, so remember:

• DON'T close an account to remove it from your report (it doesn't work).
• DON'T open too many credit accounts in a short period of time.
• DON'T take too long to shop around for interest rates. Lenders must pull your credit report every time you apply for credit. If you are shopping around with different lenders for a lower interest rate, there is generally a grace period of about 30 days before your score is affected.

In addition to cleaning up your debts, you also need to check your credit report to make sure it is accurate. This is important: Items that are just plain erroneous can stay on your report for up to 10 years if they are not disputed. By disputing it, you put the wheels in motion to clean up the report and get a better mortgage. Your credit bureau will attempt to get the disputed items deleted from your report by contacting the creditors involved. After 30 days, if the creditors do not respond, the item is deleted from the report. (You can also contact the creditors yourself.)

Even after you reverse the downward spiral of your credit history, you might need to tell a prospective lender that there may be some signs of bad credit in your report. This will save you time, since he will look at different loans than he might otherwise.

Depending on the lender or mortgage broker, it may be possible to pursue a loan before negative items on your credit report are removed. Talk to your lender about outstanding things (like unpaid parking tickets that you've paid) and they might be understanding.

Beware of companies that promise free credit reports, but really want to sell you services to fix your credit. Remember, three credit bureaus are required to give you the report free. To then figure out your estimated credit score, use the Credit Score Estimator on Zillow.

Check government loans if you have bad credit. They are more forgiving.

No credit at all? Everyone has to start somewhere. FHA loans are subsidized by the government and require a lower down payment than many conventional loans. They target first-time homebuyers.

Your credit report is separate from your credit score, though the score is developed from the report. In addition to viewing credit reports from the three major reporting bureaus, you also should obtain your FICO score. Your score is like a report card. Fair Isaac & Co. (the FICO score keeper) assigns you a number based on the information in your credit report. Since there are three credit-reporting bureaus, you have three FICO scores. Here are the scoring factors:

• Payment history — Have you paid your bills on time?
• Amounts owed — What is your overall debt?
• Length of credit history — How long have you been borrowing money? Lenders like to see a long credit history.
• New credit — Have you applied for new credit?
• Types of credit used — Lenders like to see all kinds of credit types: bank cards, car loans, student loans, and more.

The FICO scores range from 350 to 850; an 850 is the Holy Grail of credit scores and 723 is the median score in the U.S., but you can expect good mortgage interest rates at the 720 to 760 level and up.

For anecdotal evidence of your good credit standing, if you notice you are receiving a lot of zero percent credit card or lines of credit offers, you are probably in pretty good shape.

Homebuyers who pursue an FHA loan, one of the most common loan types for first-time purchasers, can usually secure a loan if their credit is 630 or over.

If you are applying for a "stated income" loan, whereby you forego providing income verification to the lender, the lender will be looking for a minimum FICO score of 680 or higher. Banks don't like to assume all the risk, so your good credit history is key.

Seventy to 80 percent of mortgage lenders use FICO as their means of determining your interest rate and the types of loan you qualify for; as interest rates creep up, this difference can be significant.

The good news is that your credit report is easy to get. A federal regulation that went into effect in September 2005 gives consumers access to one free credit report per year from each of the three reporting bureaus: Equifax, Experian, and TransUnion. The online report is generated after you answer a series of security questions and only takes about 10 minutes to complete.

Your FICO score is in easy reach as well at www.myfico.com. Each FICO score costs approximately $15, but this expense may save you thousands over the life of your mortgage if you end up with a lower interest rate.

How do you know what a good score is and what a bad score is? Well, that's sort of a gray area since different scores are calculated in different ways; different creditors use different scores, and no one knows exactly how they are calculated since those formulas are proprietary to the companies using them. Scores may range from around 300 to 900 with the average credit score in America being at about 740. Here is an approximate range of how credit scores are judged:

Excellent credit = 720 and above

Good credit = 660 to 719

Fair credit = 620 to 659

Poor/bad credit = 619 and below

 © Zillow, Inc. 2009. Originally posted