Your Credit Score Secrets

There are many people out there who are unaware of what their credit score is or how much it already could be affecting their wallet or could in the future if habits are not changed. Lenders have been using your credit report score in determining whether or not to grant you a loan and to calculate your interest rate for some time now. The loan officer knows what a powerful tool for predicting future behavior the credit score can be and has proved over and over again to be.

Credit scores measure risk through mathematical calculations, using statistical research to view each consumer. FICO, which is the most widely used credit-score formula was created by Fair Isaac. FICO scores are now often requested for such simple applications in categories such as cell phone providers, utilitility companies, landlords and even prospective employers. It seems that your credit score can affect a lot more than just getting that low interest rate on that all important home or auto loan.

Managing your credit score and knowing your score and what is included on the report should be a priority for anyone. First you need to educate yourself on how your credit score is determined and calculated by these reporting companies.

In order to calculate the score of just one individual, FICO credit system uses 22 pieces of data, which they collect from each of the three major credit bureaus and use in their analysis. The system seems to break down into separate categories and then put together a composite of all category scoring into a final outcome. Payment history, types of credit used, current debt, length of your credit history and new credit are the determining factors in credit scoring.

Even though people may think so, income is not a factor in a credit score and does not reflect upon the final score. Individual or variable factors are not taken account in a credit score so that the final outcome is more mathematical and analytical in nature, not using personal feelings or considering circumstance. Credit scores are simply predictors for future behavior based on past experience and behaviors.

The lowest possible credit score to have is 300 with the highest rating an 850. The higher your score is, the lower the possible risk to a creditor, and the better your interest rates are going to be. Having a score that is 800 or above is hard to obtain, with only an average of between 13-18% of the population having an 800 or higher credit rating. The average median credit score is more on average between 700 and 750.

Your FICO score is different from your credit reports. If you want to take a look at your credit reports, this is ALWAYS the place to start when it comes to credit repair. In 2003, The Fair and Accurate Credit Transaction Act entitles you to a free credit report from each of the three major credit bureaus once a year. Make sure to request yours to keep up to date on what is changing on your report.

Staggering when you request the reports also helps you to keep up to date on any changes and staggering the reports will also help you to spot bad information sooner. Many places can help you to obtain your credit report. A comprehensive list is included below to help you to getting your hands on your credit report.

The most detailed information to be found online when it comes to credit scoring seems to be from the creators themselves. You can go to the Credit Education area for the most up to date information regarding your credit report and rights. They offer all three credit bureau’s reports, which is highly recommended.

Because credit reporting is based on time and all three agency do not run like clockwork when it comes to which tasks are at hand. When one bureau reports something and when another bureau dates something could vary greatly. It would be imposbbile for each bureau to keep track of there reports all on the same schedule.

You will find that each bureau has different schedules and ways of reporting which makes it the most advantageous to have all three reports. You want to be able to make sure that all three bureaus show the same things and that one does not report something that the others do not, which is often the case when one bureau receives a collection activity notice and the others don’t.

Your credit history affects your ability to borrow and even creeps up to attack how much money it costs you to borrow once you find yourself actually approved for something. Every creditor, lender or individual interested in someone as a prospective customer has a credit scoring system in place to use with the information you provide when submitting your application. An individual’s credit report is essential to anyone out there seeking credit and is very important to any loan officer.

Many think of credit scoring systems as very vague “Wizard of Oz” type all powerful machines which control your number at a high speed. These credit scores are based on a statistical system however and are as easy to explain as the mystical “wizard”. The systems that were created to calculate your credit score use real world data and enable the lendor or creditor to view the individual objectively.

Some of these include the number and the different types of bank accounts an individual has, outstanding debts, history of bill paying, debt to credit ratios, any collections accounts that have been brought against the individual, bankruptcies and other factors determined more by the individual and his or her financial portfolio.

By comparing the history and background of one individual against the background of thousands of other consumers with financial situations and payrates that are similar, one can better predict the outcome of a loan offer made to this individual. It is easier to predict future habits based on the person’s ability in their past and see whether it is likely that debt will be managed well and repaid in the agreed upon time.

The mathematical system used by credit scoring systems has proven to lenders that it can be a strong predictor of one’s future ability to repay their credit or debt to an individual company. The system created was designed to place more emphasis on history and less emphasis on individual statistics, which are variable.

You can request your credit report through a number of ways but it will not help if you do not have the education and knowledge in order to read it and determine what you can do to raise your own credit score. Make sure to arm yourself with the knowledge through the right book, audio tape or program and you can put your credit report to work for you and be on the path to a better credit score.

When working with people on credit issues and dealing with the complexities of a credit report score, one notices without question that the debt to credit ratio is important. The debt to credit ratio can have a huge effect on that important home or auto loan or that needed business loan. However when balanced correctly, in accordance with the set standards for good credit from the credit reporting agencies, the debt to credit ratio can provide the much needed improvement for your current credit score.

People are constantly commenting on what a good idea it is to make sure and pay off all of your cards every month in full to make sure to establish good credit and show that one can pay their bills. This is such a misconception and only leads to confusion. Having a revolving balance kept at the right percentage compared to your debt and you are on your way to a better credit report.

Learning about your debt to credit ratio can be one of the important steps to putting yourself in the right frame of mind for credit success. For most Americans the debt to credit ratio is to high and it can be hard to obtain any new offers or loans from banks or financial institutions. For example, you have resolving accounts totaling $10,000 but you currently owe $8,000 which gives you an eighty percent ratio, very high for a buyer of a finance deal to even take a second look at you.

Lenders make the bulk of their money through charging interest, not sending out pretty square cards or annual fees. When looking at any model designed for credit scoring, it likes you to maintain your balances and pay over a length of time and it is driven with your ability to do this, amongst other things.

Being a lender in an institution, if I could see that over a long period of time, you had been able to maintain long-term credit worthiness with a company, it would prompt me to want your business and “interest” as well. As a lender, I know the type of customer that I want to solicit my loans to.

Sub-prime Merchandise Cards can be a great way to balance your debt to credit ratio while still warranting that $350 purchase for that lamp you HAD to have at Macy’s. Sub-Prime Merchandise Cards are simply cards carrying a line of credit to buy merchandise from a specific merchant which in most cases turns out to be the company who originally sold you the card.

Some marketers, perhaps due to their obvious benefits to the consumer, have started to market these cards while misrepresenting and misunderstanding how they work in their advertising campaigns. Sub Prime Merchandise Cards report to one or more of the three credit reporting agencies and can help to even out your percentages quickly when it comes to debt to credit ratio.

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.