The Credit Challenge

Most of the time that I am in conversation with people about their credit score and credit report, they often underestimate the importance of these 3 magical numbers, their credit score.

The obvious reasons that you want to take care of your credit score are either to get approved for a loan or to get a lower interest rate whenever you borrow money.

Yes, these are crucial, but there are other, often overlooked, needs for having a great credit score.

Here are a few that you should be concerned with.  When you …

• Open a bank account
• Are looking to rent an apartment
• Are trying to set up your utility services
• Apply for a new job
• Are looking to get insurance (auto, renters, and others)
• Are looking for expand on the credit that you already have

As you can see, there are many benefits to having a stellar credit score.  For that reason, I want to give you a small gift.  Click on Good Credit Score and you will get instant access to an audio interview on how to attain and keep a high credit score.

Do you know anything about the Fair Credit Reporting Act?  If you don’t, you really should because they are your rights.

For those of you that don’t know, you have certain rights as it pertains to a credit report.  Most of us think that the banks and lending institutions are the only ones with rights when it comes to your credit report, but that’s not true at all.

So, what should you know about the Fair Credit Reporting Act?  Here’s a couple things that are helpful to know.

• Your credit report has everything to do with your credit payments, credit history, and credit record and nothing to do with your age, race, marital status,  national origin, religion, or even if you receive public assistance.
• You MUST receive a decision on your credit inquiry within 30 days.  Whether you are approved or not, the lenders only have 30 days to notify you with their decision.  After 30 days they are in violation of the Fair Credit Reporting Act.  If you weren’t approved, they must include a detailed statement of why you were denied credit and also mention your rights, including access to a free credit report.
• The Fair Credit Reporting Act also gives you the right to a free copy of your credit report from all three credit bureaus once every 12 months.  Go to www.AnnualCreditReport.com for your free credit report.  It is good to see your credit report and look for any errors or identity theft, among other things.
• You have a right to dispute any inaccuracies on your credit report, and creditors must respond to you within 30 days.  If you were right or the creditor cannot show proof, they must remove that negative account from your report.  If it cannot be removed, then you have a right to include a 100 word statement or explanation for consideration and clarification on the item that you disputed.

As you can see, there are many rights that you have under the Fair Credit Reporting Act.  It’s important that you know them because you may be missing out on getting your credit report for free or even settling for a lower credit score that you really deserve.

If you are interested in finding out more tips like this, be sure to visit here Fix Your Credit Score to get a free audio interview on obtaining a credit score of over 700.

If you are looking to improve your credit report scores quickly, now is the time to get started. With the way the market is going, there’s no telling where the requirements for obtaining financing is going. We have gone from needing little credit for obtaining 100% financing on homes to having near-perfect credit report scores and still not qualifying for a mortgage.

With this in mind, here are some great strategies you can utilize right away to jump start your credit report scores.

1. Create Some Balance: While paying down installment debt (car, school, mortgage, etc.) will definitely boost your credit report scores, paying down or paying off revolving debt, such as credit cards, can cause a quick jump in your score on your credit report. The trick is to get and keep your balances below 30% of your credit limit on each card.

For faster results, attack those cards with balances closer to their respective credit limits first, as opposed to those cards with simply the highest debt. Remember, if you pay off any credit cards completely, do not close your accounts as it may drop your credit report scores since you are eliminating a trade line from your credit profile. Canceling those cards may inadvertently undo all of your hard work.

2. Know Your Limits: Make sure that your credit card issuers are reporting the correct limits on your accounts to the three major credit bureaus. Without an available limit, your account will appear to be maxed out at its highest reported balance each month. This could cost you up to 80 points in certain instances and drastically drag down your credit report scores.

Some creditors, such as American Express® and certain cards issued by Capital One®, actually have a policy of not reporting available credit. However, most companies will report your credit limits on your credit report if you ask them in writing.

3. Take Some Credit: If you have a credit card account in very good standing, make sure that all three credit bureaus know about it. Just like your credit limits, some creditors don’t report your information to all three credit companies – this is why credit report scores often vary between bureaus.

If this is the case, give them a call to find out why. Correcting this oversight could provide a significant boost to your scores on your credit report. Also, if you’re in very good standing, ask your creditor for a lower rate or higher credit limit. This will increase the gap in the debt you owe versus the credit you have available. Sometimes hinting about closing an account can suddenly bring out the generous spirit of certain card issuers. Give it a try. The worst they can say is no.

4. Protect Your Interests: Your credit is calculated based solely on the information available to your creditors. If you have a Home Equity Line of Credit, make sure it’s listed as a mortgage or an installment account on your credit reports and not a revolving debt. This alone can boost your credit report scores, because it will not appear as a revolving account with a high balance.

If you had a bankruptcy, be sure that all items associated with the bankruptcy are being reported correctly, that is with a zero balance. This action could increase your score by 50 to 100 points. Because simple mistakes like these can wreak havoc on your credit report scores, it’s important to monitor your credit every four to six months.

5. Even the Score: If you find information on your credit report that you believe is inaccurate or incomplete, then you have the right to dispute it free of charge. For the fastest results, visit the appropriate credit bureau’s website and file a complaint online. If supporting documents are necessary, you have to file your dispute by mail. Just working out these corrections will automatically increase your credit report scores without spending any money on lowering your other expenses.

Take these tips and be sure to put them to use.  As you can see, it isn’t very difficult to boost your credit report scores anywhere from 20-100 points within a couple weeks.

Many people are on the constant hunt to have a great credit score, or even improve the credit score that they have. Although this is a worthy cause, it is important to start your journey of obtaining excellent credit by understanding the way credit really works.

Once you are familiar with the way the credit report system works, you would be better equipped in how to dramatically increase your score, as well as maintain the high score you have managed to obtain.

So, what is the credit report system and how does it work. Great questions, and I am about to tell you just that.

First of all, your credit score is a number that represents your credit risk based on a number of different factors. These credit scores range from 300 to 850, and the national average is right around 675. The reason this number is so important is because it is a gauge that lending institutions use to determine the likelihood of you paying your debt in a timely fashion.

To get a little more specific, the score that you are given is based on the last 24 months of credit history, and using those historical facts, the credit report system determines the likeliness of you paying your account 30 days past due within the next 90 days. That sounds confusing, but it is really quite simple.

Here’s an example. If you are late on your payment this month, but haven’t been late over the last 24 months, your score will be impacted because the chances of someone having a late payment within the next 90 days is greater than someone who has never been late. However, the impact is far less than someone else who has been late several times within the last 24 months.

You can imagine that the higher your credit score, the lower credit risk you are and the more likely you are to be given credit at low rates. That is absolutely true.

Also, credit scores in the low 600s and below will often have problems obtaining credit, while scores of 720 and above will usually give you access to the best interest rates available. I like to say that once you reach a 720, you are like Noah, where the seas parted before him. Well, lenders will start parting for you!

So let’s also talk about how these credit bureaus arrive at your score. There are three main credit bureaus, Equifax, Transunion, and Experian, and each of them use different methods to arrive at your score.

Most credit bureaus use the FICO system, which comes from its developer Fair Isaac Corporation Company. This is by far the most used software since the Fair Isaac Corporation developed the credit score model used by many in the financial industry and is still considered one of the leaders in the field.

Using the FICO system, the credit bureaus and lenders are quickly able to see patterns in your credit, and then the system will provide them a score based on the finding.

Credit reports are compiled by the credit bureaus, which ultimately use the information from lending institutions and other agencies that provide your credit information to the bureaus. The type of information that is collected and factored into your score include the balance on your accounts, how many accounts you carry, the length of time that you have had established credit, the mixture of credit types, late payments, and credit inquiries.

As you can see, there are many factors that are included to determine your credit scores. There are also some important things to take note of. Your age, sex, and income do not count towards your credit score.

One can never know exactly how the credit scoring model works, however, the more information that you consume regarding credit, the easier it becomes to maintain excellent credit. Knowing this information is critical in not only establishing and managing your credit, but also repairing it.