Know the Score

Especially if you are recovering from bad credit, it is important to settle up on all of your lingering credit issues. If you have many debts or have recently gone through a bankruptcy, it can be difficult to keep track of how much you owe and to whom you owe it. To take care of this problem, you’ll need to order a credit report from each of the three major credit agencies. They are:

Experian Equifax TransUnion

These are the exact same credit bureaus that lenders and credit card issuers are going to order your credit score from, so it is important to know what they are going to see when reviewing your history. By looking over them yourself first, you get a chance to explain any bumpy spots in your history or dispute any inaccuries.

Dispute Inaccuracies and Settle Unresolved Issues

Once you get your credit report, review it carefully. If you find any debts you have not paid off yet, pay them off right away. If you find any inaccuracies or mistakes on the lenders part, dispute them right away.

First, notify the credit agency that reported the issue that there is an inaccuracy. Write a letter to each credit agency notifying them of the inaccuracy and let them know that you are disputing it.

Next, contact the business that reported the false claim. Call them on the phone at first and let them know you will be mailing them a letter as well. If possible, ask if there is an appropriate department to address your letter. Also, let them know that you have already contacted the credit reporting bureaus about the matter.

Call the agency, or include in your letter that you would like them to contact the business in order to resolve the dispute. Once you get the business and the credit reporting agencies in a dialog, things will go much smoother for you.

Once the matters are all resolved, get a hold of each credit agency again and make sure they include a record of the dispute and the inaccuracies resolution on all of your future credit reports. This lets lenders know that you have addressed all issues that appear on your credit report.

Learn about Secured and Unsecured Credit Cards

Depending on your situation, you may want to get either a secured or an unsecured card. A secured credit card is isssued by a bank or credit union and has a credit line that corresponds to a balance in another account. This balance acts as collateral for your loan in case you default. This minimizes the risk for the lender and can get you better terms on your loan.

An unsecured credit card has no collateral, thus making it harder to be approved for and riskier to use. However, some predatory card issuers will lure vulnerable borrowers in with overblown offers with the anticipation that they will rack up huge balances and accrue interest. Unsecured credit cards can also come with hidden fees and special interest rates that are designed to get more money from you.

Practice responsible borrowing habits

Pay off the entire balance each month. This will keep interest from building up. Always pay on time. Just one late fee can be a blemish on your credit report that can take a long time to go away. Don’t spend what you don’t have. Forget about cash advances, super checks, or keeping a balance over a long period of time. This leads to debt, debt, debt and interest. Stick with one credit card company. The longer you keep an account in good standing, the better it will look on your report. Keep an eye on your statements. Report any unauthorized activity or errors immediately. Negotiate better terms once you have stayed in good standing for about 2 years. Let your credit card company know that you are a responsible customer and deserve better rates.

Paul Basco provides expert opinions and reviews to help you apply for a credit card and compare credit card offers with getting a credit card.

Information provided by: www.gettingacreditcard.com

Today, however, due to a number of factors such as increase Identity Theft and mass media marketing campaigns there are very few who are not aware of the term Credit Score. The goal of this article is to add understanding on the personal to the recognition of that term.

A Credit Score is a number between 300 and 850 based on a statistical analysis of an individual’s credit activity. It is used to represent the credit worthiness of an individual. How likely that the individual will pay his or her debts. A credit score is based on their credit report information which is typically sourced from credit bureaus and credit reference agencies, typically from the three major credit bureaus.

Lending institutions, such as banks, finance companies, mortgage lenders, and credit card companies, use an individual’s Credit Score to evaluate the potential risk posed by lending money to that individual. Lenders use Credit Scores to determine who qualifies for a loan, at what interest rate the loan is issued, and what credit limits are determined.

The use of credit scoring prior to granting credit is a trusted system throughout the industry. Credit scoring is not limited to banks, however. Organizations, such as mobile phone companies and government departments employ the same techniques.

While there are many others, such as NextGen, VantageScore and the CE Score, The most widely known score in the United States is FICO, which is most widely used in the mortgage industry. FICO is an acronym for Fair Isaac Corporation, the company that provides the most well-known and most widely used credit scoring system in the United States.

The FICO score is calculated by applying statistical methods, developed by Fair Isaac, to information in one’s credit file and is primarily used in the consumer banking and credit industry. FICO scores show how likely it is that a borrower will default. No public information is available to determine what the scores mean in terms of statistics. A separate score, BNI, is used to indicate likelihood of bankruptcy.

As stated, banks and other lending institutions use Credit Scores as factors in their lending decisions. Whether credit is denied or approved, what interest is charged, what income level and asset verification is required is all based on an individual’s credit score.

The FICO score actually uses slightly different scoring methods to rate a consumer’s suitability for three different types of credit; mortgages, auto loans, and consumer credit. Each reflecting the different credit risks of these various types of lending. It is not unusual for these scores to differ by as much 50 points or more for the same borrower.

There are three major credit reporting agencies in the United States. Although often times inaccurately referred to as “credit bureaus”, these agencies; Equifax, Experian and TransUnion, also calculate their own credit scores. These additional scores differ depending on what they are meant to predict, what statistical methods used to determine a score, and what information is used and how it is weighted.

These additional Credit Scoring Systems are numerous and are agency specific. For example, Beacon, Beacon 5.0, Beacon 96, and Pinnacle scores are available only from Equifax. Empirica, Empirica Auto 95, Precision Score, and Precision 03 are available only from TransUnion. And, Fair Isaac Risk Score at Experian.

These various Credit Scores are developed for the different agencies by Fair Isaac, each differs and are periodically updated to reflect current consumer repayment behavior habits. The NextGen Score is a scoring model designed for consumers.

In an effort to make credit scoring more consistent across the board, in 2006 the big three credit reporting agencies introduced Vantage Score. Vantage Score uses a different number range from the FICO score. It ranges from 501 to 990 and also assigns letter grades from A to F to specific ranges of scores.

A consumer’s Vantage Score may differ from agency to agency, but the difference would be entirely due to differences in the information reported to the various agencies, not due to differences in scoring systems. Since FICO is still widely used by lenders, the agencies continue to offer FICO scores (or their closest equivalent) as well.

Most credit scores use a multiple-scorecard design. Each version may use individual scorecards, and an individual potential borrower is typically compared with other previous borrowers. In other words, a borrower with one 30-day late payment will be scored against a population with some similar delinquency. A borrower with two 30-day late payments will be scored against a population with like credit faults. The individual is then graded according to which variables indicate a risk within that group.

The systems used to generate credit scores are subject to federal regulations. The Federal Reserve Board’s Regulation B, which implements the Equal Credit Opportunity Act, expressly prohibits a credit scoring system from considering any “prohibited basis” such as race, color, religion, national origin, sex, or marital status. It also stipulates that credit scoring systems must be “empirically derived” and “statistically sound”.

In addition, if an adverse action, a denial of a credit application, is taken as a result of the credit score then the specific reasons for the denial must be provided to the individual denied. The statement “credit score not high enough” is insufficient. The reasons for denial must be specific; “too many delinquencies 60 days or greater” and such.

Credit scores are designed to measure the risk of default by taking into account various factors in a person’s financial history. Although the exact formulas for calculating credit scores are closely guarded secrets, the Fair Isaac Corporation has disclosed the following components and the approximate weighted contribution of each:

* 35% punctuality of payment in the past (30 Days Past Due)

* 30% the amount of debt, expressed as the ratio of current revolving debt to total available revolving credit

* 15% length of credit history

* 10% types of credit used

* 10% recent search for credit and/or amount of credit obtained recently

These percentages offer a limited guidance in understanding a credit score. For example, the 10% of the score allocated to “types of credit used” is undefined, leaving consumers unaware what type of credit mix to pursue. “Length of credit history” is also a murky concept; it consists of multiple factors two being the oldest account open and the average length of time an account has been open.

Interestingly, although only 35% is attributed to punctuality, if a consumer is substantially late on numerous accounts, his score will fall far more than 35%. Bankruptcies, foreclosures, and judgments affect scores substantially, but are not included in the very vague pie chart provided by Fair Isaac.

Because the three major credit agencies have their own, independent databases, each of us actually has three credit scores for any given scoring system. As these databases are independent of each other, they may contain entirely different data. Many lenders will check an applicant’s score from each bureau and use the median score to determine the applicant’s credit worthiness.

As a result of the FACT Act (Fair and Accurate Credit Transactions Act), each legal U.S. resident is entitled to one free copy of his or her credit report from each credit reporting agency once every twelve months. To guard against inaccurate information or fraud more often than yearly, one can request a report from a different credit reporting agencies available on the net.

This information is available from a number of websites across the net that offer an free credit report and use of their services for 30 days. After which, there is a monthly fee involved. The fee is nominal compared to the necessity of protecting your credit in today’s highly technological society where identity theft is becoming more prevalent.

In a time where identity theft and credit fraud in on the rise, the fee these firms charge seems like a small amount to pay to protect your credit and your good name. Having a good Credit Score is becoming more and more prevalent in our society. Here are a few examples of how:

In September 2004, TXU (a Texas utility company) announced it would begin setting individualized electricity prices based on credit score. However, due to negative press and pressure from the Texas Public Utility Commission, the plan was not implemented.

Credit scores are often used in determining prices for auto and homeowner insurance. Recently, some of the agencies that generate credit scores have also been generating more specialized insurance scores, which insurance companies then use to rate the quality of potential customers. These scores are unavailable to consumers.

Many employers reserve the right to do a credit check of job applicants, in the same manner they reserve the right to drug test potential employees. The fact is that your Credit Score is important. Rebuild-Credit.us is a sight committed to providing consumers with quality information concerning credit, how to get it, and how to maintain a quality credit score. It is recommended you take the time to visit them and read through the numerous articles and reports there.

Peter Bolduc is the Managing Editor for Rebuild-Credit.us,