Your Credit Score Secrets

By Amy Pedersen
A consumer’s application is taken and scored separately by their individual credit history. Credit report final scores are reflective of many differing factors in your financial history and current status. Generally, credit-scoring systems determine whether someone is creditworthy using analytical tools and statistics to produce results and insight into the future dealings with a particular consumer.

Each scoring system is unique and usually based on the particular needs of the financial institution or creditor. Some credit scoring systems award fewer points for example to people who have attained a certain age, such as late thirties or forties, with the thought that the older generation often has a relatively higher amount of debt.

While the law still permits these creditors to award points to age groups, they are required to use properly designed scoring systems when doing so and people who have reached the age of 65 or older must receive the maximum number of points in this situation. Your age can help or hurt your credit score based on your current financial status compared to others of your age group.

Most credit scoring systems consider a lot more factors than just the few named above. Sometimes your score can be based on as many as 15 or 25 different factors that relate to your credit past and present and financial status currently. All of the different factors that are taken into account simply predict your credit worthiness and help the lender to predict your future re-payment habits.Watch which questions you are asked on your credit application to try and determine which factors are used to determine your credit score.

Every credit application varies due to the nature of the scoring system and the type of information needed to make their statistical guesses. Each of the questions you see on the application has a purpose, consider your answers carefully. The creditor or lender is trying to determine what type of financial borrower you will be once they give their money to you.

While there are rules and acts put into force and designed to help the consumer, scoring systems are known for using such unique factors such as the type or year of car you drive to be a factor in determining your credit score. As long as they do not illegally discriminate on race, sex, martial status, national origin, religion, or age, they are allowed to use whatever category of factor they wish to figure your score.

By Amy Pedersen
I know a ton of people who are convinced that if you need to repair your credit, then the Fair Credit Reporting Act is where everything starts. The FCRA is simpy a single Federal Statute designed to help to protect the consumers instead of the Credit Reporting Agencies. Or another good way to put it would be to say it protects them FROM the Credit Reporting Agencies and their “somewhat shady” way of doing business.

While the FCRA is definetely the way to begin good credit repair, it is far from the end of the battle to a better credit score. Technically the FCRA simply regulates how the Credit Reportng Agencies treat consumers. Before this law was enacted in the early 1970’s, these bureaus were unregulated and could do and report just about anything they wanted and to anyone who was interested.

The FCRA can start you off to bettering your credit score if you are educated and know what it can do for you to help you both obtain and fix your report score. The FCRA assures that people can get their credit reports at a reasonable price or for free if denial of credit has been made. This can help you to get your credit report from all there major reporting agencies and starts you on the way to financial education on where you have gone wrong and right in your credit history. Attaining your credit report and knowing your scores is the first step to fixing your credit and the FCRA gives you this right for a much more reasonable cost than in the past.

The FCRA also regulates who has “permissible purpose” to acquire someone else’s credit report. This keeps the average joe or creditor from taking a “peek” at your report without your prior permission or with good enough reason as set forth in the FCRA. One great thing that came about with the FCRA was the delineation period. This means that once something has been placed on your report, the clock starts ticking and it is usually an average of 7 years before it has to be taken off. Bankruptcies can last as long as ten years or any bankruptcy related notations.

This is great news for consumers who have had there problems in the past but are now on the road to better credit and have imporved their financial positions. It pays to keep “doing it right” when it comes to credit and in a number of years, once these negative items are forced to drop off, it can really bring up a person’s score quickly.

It is important to remember when going about any credit report repair that these reports are NOT official government documents as some may be led to believe but they are simply put out by privately owned companies and regulated by the FCRA and Federal Trade Commission. These Credit Reporting Agencies are not officially sanctioned agencies but simply the average corporation just trying to make a buck.

Don’t let the Credit Reporting Bureaus reputation and huge monolith type presence fool you, the FCRA regulates them and is on your side, not theirs. Put the Fair Credit Reporting Act to work for you and fix your credit score now.

Credit Cards, Credit Reports and Credit Scores. These terms are not exactly new to any of us. Neither are the implications when our own cards, reports or scores are not at their “best”. Credit scoring, first created by a group of wacky statisticians at the Fair Isaac Corporation, affects everyone out there at some point or another. All of us consumers at some time, come across an application for product, merchandise, land or property. Our credit score suddenly looms before us at these times as hugely important, even though we may have neglected it for years or simply months. It is amazing how easy it is for a credit score to change in only a small amount of time.

In the late 1950’s, a small group of statiscians in Minnesota, the Fair Isaac Corporation, wanted to have a look at how what a consumer did in the past or “historical variables” correlated with what would happen at a later date or “future behavior”. Those wacky statisticians and what fun filled conversationalists they must be, huh? Bet they’re a laugh a minute at parties.

They weren’t surprised with their results once they were finished. Turns out that these eggheads quickly discovered that the best way to predict the way a consumer would act in the future WAS based on their history of behavior. To predict whether or not a person would become seriously delinquent, it was as easy as looking at how that person had previously handled similar accounts. And of course, without a hint of egotism from those wacky statisticians, the FICO Score was born. Anyone notice any similar initials from the name of the score an perhaps some corporation?

The FICO, which to the average layperson, who typically falls asleep when sitting and trying to listen to the scientific explanation of FICO, seems to be utterly confusing. Ever changing and updating each time that any new information is gathered or entered into it’s database, credit scores can be hard to understand. Scoring systems may even sound ingenious and while this may be true, there are still several problems facing credit scoring, some of which are scientific in nature.

When using statistics for anything, several problems can arise, such as the “r” value or whether something occurred simply out of dumb luck and can be termed an “anomaly” or random act or whether it was the “average” stuff that we are looking for. Finding averages can be pretty hard when it comes to us humans and all of our random wacky acts.

Placing people in “ranges” when it comes to scores, such as the consumers who score 650-700 on their credit report, can be detrimental to some in the group. Consumers in this group who display different financial habits than the average group member can be hurt by the bad financial decisions of their group, or in turn, sometimes for the people in the same group who display bad habits, their score can still end up higher than it should because of the good habits of the rest of it’s group.

What I guess I am trying to get at is that it seems that the FICO scoring system, while good at predicting statistical trends for large groups of people, falls short when it comes to the individual credit applicant. It seems that when nothing about a persons individual situation is considered, the impersonal and “fast and easy” automation can really affect some consumers, both positively and negatively. I would personally hate to be one of those people trapped in the 650-700 range and automatically judged by the worst behavior of the entire groups bad apple.

My grandmother always use to say, every family has a bad apple in it. I guess when you lump together a group of so many individuals and expect to find an “average” behavior, we are all just humans and choose to do some wacky things and display behavior simply uncharacteristic to us and yet remain still judged in the same category. How does the behavior of people in your credit group affect you and what a wacky bunch of scientists who could have made it easier by just going out and getting laid, instead of dreaming up this system that haunts credit applicants everywhere.