Credit scores affect many of today's lending decisions. Apartment rentals, insurance rates and even employment can hinge on your credit rating. Creditworthiness determines whether you'll qualify for competitive interest rates or get stuck with high rates.

As credit scores become more important, consumers are taking more notice of their three-digit numbers and want to know how they can improve their frequently asked questions regarding problem credit.

Does consumer credit counseling help people get out of credit card debt by paying off the balances?

A consumer credit counseling service will help you get out from under credit card debt, but it's your money, not their money, that gets the job done.

A credit counseling service will negotiate with your creditors to arrange a repayment schedule and may be able to lower the interest rate on your credit cards. Using a credit counseling service can affect your credit rating because your creditors will note that your bills are not being paid according to the original credit terms.

That said, there is less stigma attached to credit counseling than there would be to a bankruptcy showing up on your credit report. Consider credit counseling if you can't figure a way out from under your current debt load.

Remember that even though most credit counseling services are nonprofit organizations, that doesn't mean that they won't charge a fee for their services. Most agencies get at least part of their compensation in payments from your creditors.

If you're considering using a credit-counseling firm, you should interview at least two different firms, and review their written contracts before signing any agreements to enroll with a service.

The National Foundation for Credit Counseling can help you find agencies in your area, or even counsel you online. There is also a professional certification process that turns out Certified Consumer Credit Counselors.

Ask the firms that you interview about whether their counselors have this certification, and if you can be assigned to a certified counselor.

Can I raise my credit score by closing out inactive credit accounts?

Lenders look at your credit report to see if you are able to manage credit responsibly, but they also get a credit score from one of the credit reporting agencies. These scores are known generically as FICO scores. That's because the credit reporting agencies use Fair, Isaac & Company to create their proprietary credit scoring models.

A credit scoring model estimates your creditworthiness based on the information in your credit report. Outstanding credit lines aren't bad, but they can reduce the amount of money that a mortgage lender is willing to loan you. That's because the lender can't stop you from using those lines, and if you overextend yourself you're less likely to be able to make the mortgage payment.

According to the Fair Isaac Web site, closing accounts as a short-term strategy to raise your credit score is not recommended. Here are some suggestions from that site for improving your credit score:

• Pay your bills on time. Delinquent payments and collections can have a major negative impact on a score.
• Keep balances low on credit cards and other "revolving credit". High outstanding debt can affect a score.
• Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix -- it probably won't raise your score.
• Pay off debt rather than moving it around. Also don't close unused cards as a short-term strategy to raise your score. Owing the same amount but having fewer open accounts may lower your score.
• Make sure the information in your credit report is correct. It won't affect your score to request and check your own credit report. If you find errors, contact the credit reporting agency and your lender.

They're looking at the total picture and you should too. One account isn't going to make or break your credit score and limit your ability to get a mortgage. Look at all your outstanding credit relationships.

One way to see where you stand currently is by ordering a copy of your FICO score from Fair Isaac in partnership with Equifax -- a credit reporting agency. The introductory price of $12.95 is reasonable when you consider that in most states you're charged $9 for a copy of your credit report and for $12.95 you get both a copy of your Equifax credit report and your FICO score.

I often get solicitations about having my credit report sent to me for an annual fee of $99. Should I subscribe to one of these services or can I get these reports elsewhere?

Credit reports are notorious for their errors; it's a good idea to review them at least once a year so you can nip any problems in the bud. The three credit reports that matter are:

Equifax: (800) 685-1111
Experian: (888) 397-3742
Trans Union: (800) 916-8800

You shouldn't pay more than $9 for a single credit report, and depending on your location and your credit history, you may be able to get your credit reports for free.

The credit reporting agencies sell various services to folks who want to keep their fingers on the pulse of their credit ratings, or are nervous about identity theft. Visit their Web sites to see what they have to offer -- and expect to pay less than a C-note.

What's my FICO score?

Your FICO score is a credit rating produced by Fair, Isaac and Company It's used by most lenders to help them decide whether or not you're a good credit risk. Fair, Isaac crunches the numbers from your credit report, and spits out a score somewhere between 300 and 850. A low score says you're a bad credit risk, a score of 750 or higher puts you in the catbird seat.

Here are the factors considered when calculating your FICO score and an estimate of how heavily each factor might be weighted.

• Past payment history (35 percent): bankruptcies, late payments, past due accounts and wage attachments
• Amount of credit owing (30 percent): amount owed on accounts, proportion of balances to total credit limits
• Length of time credit established (15 percent): time since accounts opened, time since account activity
• Search for and acquisition of new credit (10 percent): number of recent credit inquiries, number of recently opened accounts
• Types of credit established (10 percent): number of various types of accounts (credit cards, retail accounts, mortgage)

How can I work with my creditors to get the bills paid off?

I don't know what kind of creditors you are dealing with, but the steps to dig yourself out of debt should apply to most of them:

• Make getting your financial house in order a high priority, and understand it's going to take time, energy and organization.
• Make a file folder for each creditor containing the following:
  -- The bills.
  -- A record of the dates and amounts paid on the bills.
  -- A log of every contact you make or attempt to make regarding the debt, including date and time; name and title of person contacted; nature of contact (whether you talked on the phone or left a message on a machine); summary of conversation.
• Set up a master list of everyone you owe money to. Include the name of the lender, the amount, the interest rate and the minimum monthly payment.
• Determine how much after-tax income you will have from your job and what your bare-bones living expenses are, not counting the debt. Include amounts you need to put aside each month to make quarterly or annual payments, such as insurance and taxes, and a little cushion for any expense you may have forgotten to write down. The difference between what's coming in and what's going out is what you have to pay your debts.
• Estimate what you can pay to each lender.
• Contact each lender, explain your situation, apologize for the late payments and state how much you can afford to pay each month. Put all agreements, negotiations and offers in writing.

If most of your debt is with credit cards and departments stores and so is unsecured, and you're batting zero in your attempts to deal with those lenders, a visit to your local Consumer Credit Counseling Services might help. There's no charge for an initial consultation, so it doesn't hurt to talk to them.

CCCS is funded by credit card companies. In spite of that, a counselor can help by getting the collection agencies off your back, and negotiating repayment schedules that you can afford. It will show up on your credit report if you enroll in a CCCS debt consolidation program. However, if your credit rating has taken a beating then it wouldn't really matter.

If you find yourself in a position where CCCS can't help and you will never be able to clean up your bills, the last resort is bankruptcy. Anyone without an emergency fund should set one up now. Without a fund, the financial chaos can be devastating.

Can I get lenders to remove charge-offs from my credit report?

When a lender gives up on collecting a debt, calling it a charge-off, it stays on your credit report for seven years from the date of last activity. Normally you can't get the lender to remove the charge-off, however, there's no harm in asking.

What you really want to concentrate on is having the charge-off reported as being paid in full, even if you negotiate a settlement, says Ed Maietta, director of Counseling at Consumer Credit Counseling Service in West Palm Beach, Fla.

If the account is with a collection agency should I negotiate with them or the lender?

Negotiating with the collection agency is probably better since the torch has been passed to it. If the collectors have stopped calling you, it means they're not optimistic about getting paid, and you're in a better position to negotiate a win-win deal.

Here are some negotiating hints:

• Negotiate face-to-face rather than over the phone, if possible.
• Make the appointment early in the morning.
• Set a goal -- closure before lunchtime.
• Talk to the person who can make the settlement decision.
• Be polite and accommodating, but don't offer any information on where you work or bank.
• Know what you can afford to pay, and don't agree to more.
• Offer whatever you can, 40 cents or 50 cents on the dollar. When the collector turns it down, ask what it's going to take. Don't agree to an amount that is more than you can afford.
• Be prepared to hand deliver -- or send by overnight mail -- a money order or a cashier's check as soon as the settlement is reached.
• Get everything you've agreed upon in writing before you pay. If you're doing this via phone, have a fax number ready, so they can send you a statement of what you've agreed upon before you deliver the cashier's check or money order.

You might want to read up on negotiating before you start this process. Try Deborah McNaughton's book, Insider's Guide to Managing Your Credit. It has some tips on negotiating with collection agencies.

What is a credit score and what is it designed to do?

• "The FICO score is the single best summary score of one's credit worthiness," says E-Loan President and Chief Operating Officer Joe Kennedy.
• A credit score number is often called a FICO score, for Fair, Isaac and Company, the California company that developed the system upon which it is based.
• The score is supposed to distill all the information in your credit report, using a formula to calculate a single number that indicates your credit worthiness.
• It's designed to give lenders a fast, accurate prediction of the risk involved in giving you a loan. Lenders have attested to the score's value in streamlining the underwriting process and creating more opportunities for consumers to get mortgages.
• Scores range from the 300s to the 800s, with the vast majority of folks falling in the 600s and 700s. The higher the score, the better.

What factors determine my credit score?

When determining how high a score will be, five characteristics separate the cream of the crop from everyone else. In order of score significance:

• Past delinquency: People who have failed to make payments in the past tend to do the same in the future.
• The way credit has been used: Someone who is maxed out or close to the limit on a credit card is considered a greater risk than someone who doesn't look at the high credit line as a license to print money.
• The age of the credit file: Fair, Isaac's model assumes people who have had credit for a long time are less risky.
• The number of times a person asks for credit: The system frowns upon those who have initiated several requests for credit cards, loans or other debt instruments over a short period.
• A customer's mix of credit: Someone with only a secured credit card is generally riskier than someone who has a combination of installment and revolving loans. (On installment loans, a person borrows money once and makes fixed payments until the balance is gone, while revolving borrowers make regular payments, each of which frees up more money to access.)

How is credit worthiness gauged using the credit score?

It depends on the type of loan a consumer is seeking. For example, a mortgage broker will give more weight to different credit factors than a credit card issuer.

Mortgages:
By Freddie Mac standards, borrowers with FICO scores above 660 are likely to have an "acceptable" credit reputation and their loan files need only a basic review. The credit risk is "uncertain" for those with scores between 620 and 660, with a thorough review of the borrower's entire credit history. A score below 620 indicates "high risk" with an unacceptable credit reputation that could make traditional financing difficult to obtain.

"Most very good FICO scores come in the mid-700s," explains Michael Feldman, a co-founder of MortgageIT.com. "You'll see standard pricing, assuming a FICO score above 680. A score above 720, the pricing gets better. If you get above 750 -- with some lenders in some cases -- you'd see another improvement in the points. On the average $200,000 (home purchase), it can mean up to $1,000 to a consumer. It's real money."

Credit cards:
Credit card lenders place additional weight on credit card-related information, such as how many times a person missed revolving credit payments. And the systems evaluate a college student targeted for a starter card differently than a platinum-toting stockbroker with a summer home in the Hamptons.

Auto lenders:
Auto scores, on the other hand, focus on "deal characteristics" in much the same way the mortgage scores do, David Shellenberger, product manager at Fair, Isaac and Co., says. They take into account things such as the amount a customer puts down, for example, as well as a borrower's debt-to-income ratio, length of time at one job and the like. As with credit card lending, information about past performance on similar types of loans is weighted, so a missed Nissan payment might be more important than an overdue Visa bill.

Why would knowing your credit score help?

Mortgage experts say you can use it to improve your creditworthiness and negotiate for the best possible terms.

"These are very intimidating transactions," says Eric Cunliffe, former president and CEO of HomeSpace Inc., now a division of Lendingtree.com. "A mortgage is probably the single biggest transaction most people make in their lives. The traditional approach -- 'no one will tell me where I stand' -- only exacerbates the process. If you have very good or excellent credit, you know you should be qualifying for the best rate available."

That won't happen, though, if the first time you look at your score is when you have the contract for your dream house in your hands and the clock to closing is already ticking.

"The problem is that lenders grade mortgages on a FICO score," Michael Feldman, a co-founder of MortgageIT.com, says. "At the point a lender is doing that, you can't change it. If you do it three to six months ahead of time, then you have ample time."