Credit Score

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Credit Score

Your Credit Score Is Calculated Based On A Number Of Key Factors

Now you know something about how to establish and restore credit, how to protect credit, and what your credit report will do for you or against you depending on your payment history; let’s take a look at what has become the most important item in determining whether you would be a good risk for a loan, or not - and that is the credit score.

In 1996, the credit score became an accepted way of scoring your credit report in the U.S. The credit score or FICO score is used by all three reporting agencies to rate your credit and then the average is taken to obtain your final score. In 1999, the FTC went into great detail to explain how each credit score is determined, for now we’ll just say that it is a statistical number. It has gained such popularity because it is both comfortable and easy for use by the banking and lending institutions.

Factors used to score your credit score, in order of importance are:

1. Major derogatory items on your report (bankruptcy, collections, foreclosure, slow pays)
2. Time at present job
3. Occupation (Professionals are given heavy weight)*
4. Time at present address
5. Ratio of balances to available credit lines (the lower the better)
6. Are you a homeowner? (if you are, this is heavily weighted)
7. Number of recent inquiries
8. Age (50+ is the best)
9. Number of credit lines on your report
10. Years you have had a credit in the credit bureau database

When obtaining your credit report, the credit score will be the number that evaluates the activity on that report. If you determine that there is a mistake, or discrepancy that you would like to challenge, there are two ways to go about amending it. Cleaning up your report is straightforward enough so that you could raise your score by correcting any errors yourself. Or, if you prefer, there are many Credit Adjusting Agencies available for a fee.

No one can legally remove anything from your credit report, but if the reporting agency cannot verify your allegation, then it can be removed, and this may improve your credit score.

Here is the basic strategy for repairing your credit score:

1. Get and review your credit report.
2. Analyze your report.
3. Make a list of all items you consider to be questionable or negative. Clearly identify each item and explain why you dispute the information.
4. Write a dispute letter to each of the three bureaus.
5. Send the letter to the credit bureaus. Send it registered or certified mail, to insure a record.
6. Document your efforts. Record and file when you sent your letters, phone calls made and the results.
7. Wait for the bureaus to investigate your claims.
8. Analyze the results.
9. Was the item deleted or changed to your satisfaction? There is no charge for a reinvestigation.

If you don’t get the results you want, dispute the listing again. When corresponding with the bureaus, make sure to include all your pertinent information. This would include full name, birth date, Social Security number, current address, former addresses in last 5 years, photocopy of driving license showing current address and photocopy of Social Security card.

As with any other government agency, be patient with their return of your corrections! It should not take longer than 3-4 months to clear up your credit report, and even if you needed to dispute another item, there is no limit on the amount of times you may petition a discrepancy! Your efforts could certainly help you improve your credit score.

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