What Your FICO Score Means To Others


For banks, loan issuers and mortgage companies, a FICO score is a measurement of how risky borrowers will pay back monies owed.  This helps determine what interest rates to charge and, in some cases, whether people may be trusted to borrow at all. They will see if you pay your bills on time, if you miss payments, if you overcharge and try to settle for lower amounts, if you have IRS or house liens, if you owe child support payments or if you have trouble managing your accounts and staying within your credit limits.

 

 

The ideal borrower will have an overall credit score of 720 – 850. Anything over 650 is at least “good.” A bad credit score would be 500 or less.

 

What Your FICO Score Means To You

 

For you, this three-digit number could mean $200,000 extra on your mortgage or $2,000 extra on your auto loan. Your FICO score could get you turned down for credit cards, small business loans, student loans or other lines of credit. There have been reported cases of people not getting the jobs they want because their credit scores were so poor. In essence, a good FICO score means you are a responsible borrower and it’s not just something you can feel proud of, but also is something that will save you a lot of money.

 

What Lowers a FICO Score?

 

-Missed / late credit card or monthly loan payments
-Missed / late rent or mortgage payments
-Not making the minimum monthly payments
-Maxing out credit cards
-Owning too many credit cards
-Shutting down credit card accounts
-Bankruptcies, repossessions and tax liens
-Failure to pay child support
-Accounts in collections
-Having only one type of credit
-Not having enough credit
-Transferring credit balances
-Settling debts for less than the total amount owed
-Incurring library or parking fines
-Using more than 25% of your credit limit

 

How to Improve a FICO Score

 

Video: How to Improve a FICO Score

 

-Get your credit report and dispute any inaccuracies
-Be sure your positive payments are being reported to the credit bureaus
-Pay your bills on time each month, at least making the minimum payments
-Pay your credit card balances down to 25% of the limit (or less)
-Aim to pay your credit cards off in full each month
-Don’t close out old cards unless you have more than four
-Keep the oldest credit card accounts open
-Don’t open new 0% interest card accounts
-Have a diverse credit portfolio including a revolving loan and credit cards
-See a credit counselor or debt consolidator if you can’t make ends meet

 

What Credit Repair Companies Promise & Deliver

 

grow your credit score-Learn what actions are negatively affecting your credit score.
-Receive an alert you’re your score has improved.
-Dispute credit card, installment loan and collection accounts.
-Boost your score by more than 100 points overnight.
-Qualify for lower interest rates, saving you thousands.

 

You can have all this for $14 - $40/month. Or… you can do it yourself for free! According to the Federal Trade Commission’s Jodie Bernstein, they have seen “legitimate, not-for-profit credit counseling services,” but they have never seen a legitimate credit repair agency.

 

Often a credit repair company will dispute information on a credit report and, if the creditor does not verify the information within 30 days, the negative hit will be taken off the report, thus boosting the score. However, what often happens is when the 30-day period expires, a few straggler creditors will reply in 31 or 32 days and the hit reappears, causing the client to rehire the credit repair company for another month.

 

Employee Identification Numbers are another classic credit repair scam. Clients are urged to create a separate EIN, different than their social security numbers, through the IRS and use that when applying for credit. However, the practice of using two EINs at the same time is a felony under federal law!

 

Video: Credit Report Scams

 

How Can I Fix My Own Credit?

 

Repairing your own credit score is easier than you think. First, visit www.annualcreditreport.com to obtain a copy of your free credit report from Experian, TransUnion or Equifax. By law, each company is required to send you a copy of this report, if requested, every 12 months. However, it’s recommended that you choose just one for now and order your other ones later in the year to see if your efforts have yielded any noticeable improvements.

 

Next, you must scrutinize your report for any discrepancies, inaccuracies, duplicate entries or other errors. According to the US Public Interest Research Group, 79% of credit reports contain serious errors.

 

FICO Score ChartIf you find an error, you can contact the credit bureau either by writing a letter or viewing your report on their website and clicking on the “dispute” button to explain why that debt is not valid. Be sure to include your full name, mailing address, social security number, date of birth, the name and account number of the disputed item, and the reason for the dispute. You may also provide back-up statements or supporting evidence pertaining to the account if you have it, although it’s not always needed.

 

If your creditor does not respond to the dispute inquiry in a timely fashion (usually about 30 days), then the negative information will automatically come off your report! Often creditors are so inundated with requests they won’t even bother to prove your debt. Be careful not to dispute the same item more than once, though, or your account may be flagged for “frivolous disputes,” in which case it’ll be really difficult to argue legitimate mistakes.

 

What Negative Information Can I Dispute?

 

One of the most obvious errors to look for is the “statute of limitations.” Federal law says that a negative hit can remain on your account for up to seven years. Bankruptcy will remain on your report for up to ten years. If you see that the close-out date goes back longer than this, then you can easily have this information removed.

 

In some cases, someone with a name similar to yours may owe money on several accounts that have accidentally appeared on your credit report by mistake. This is an easy fix with the bureau, which can be verified by double-checking your address, birth date and social security number.

 

An estimated 22% of all credit reports listed a mortgage or loan twice.

 

Occasionally, people are victims of identity theft and had fraudulent accounts opened using their names and social security numbers. Don’t expect this particular problem to disappear overnight. You may need an account freeze or fraud alert placed on your file and a federal investigation. Often applications, transaction records and copies of your signature can exonerate you.

 

You can also add other accounts to your credit report so more positive information is included to balance out your score. According to US PIRG, 8% of all reports are missing creditworthy information. For instance, mortgage loans, store charge cards, credit unions, travel cards, entertainment cards and gas credit cards that are in good standing should all be included on your account.

 

How Can I Contact the Credit Bureaus?

 

TransUnion
P.O. Box 1000
Chester, PA 19022
1-800-888-4213

 

Equifax
P.O. Box 740241
Atlanta, GA 30374
1-800-685-1111

 

Experian
P.O. Box 2002
Allen, TX 75013
1-888-397-3742