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6 Revelations for Better Credit
Let’s face it your credit score is akin to your financial report card in life. We need not share the ever expanding number of items your credit score directly influences from your lifestyle, the car you drive, where you live, and so much more.
One of the emerging trends in our brave new world is employers checking job candidates credit score, before offering them a position. In other words, not only is a bad credit score expensive, it can also prevent you from being hired.
1. The Nitty Gritty On Your Credit Score
Look, your credit score is exactly like your Grade Point Average or GPA. This little three digit number is calculated by a third party company called FICO or Fair Isaac Corporation. This isn’t the only credit scoring company, however your FICO score is used by the overwhelming majority of lenders.
Your FICO score can be as low as 300 or as high as 850 and generally a score below 650 is considered less than perfect credit. FICO will calculate your score based upon the information contained on all three of your credit reports with Experian, Equifax, and TransUnion.
There’s five factors that contribute to your score including payment history, amounts owed, types of credit, length, and new credit. The two biggest components are your payment history and your amounts owed, which will discuss in detail coming up.
As per your length of credit history, which is worth roughly 15% of your credit score, this is looking at how old each of your specific credit accounts are. Naturally the older the better. Additionally your types of credit is worth about 10% and your new credit is another 10% of your FICO score.
The types of credit you have is examining exactly what you’ve been financed for. The big picture is to have a diverse mix such as a mortgage, car loan, credit cards, etc. The idea being the more diverse your accounts, the more favorable you’ll be viewed by the credit scoring algorithm.
Your new credit is dealing with how often you’re applying for new lines of credit. As in how frequently are you attempting to finance a purchase. Keep in mind these three components of your credit score cumulatively represent only 35% of your overall score. With normal use, you should be fine, and it’s much wiser to invest your time and energy fixing credit on the big two components: payment history and amounts owed.
Get a FREE credit consultation with certified FICO professional by calling toll-free 1-877-418-7596.
2. Your Credit Reports
You have three credit reports, one from each credit bureau Experian, Equifax, and TransUnion. Now you’re entitled to grab a free copy of each of these three reports, every 12 months and you can request these by visiting AnnualCreditReport.com.
It comes as a shock to most consumers to discover your credit reports often contain different information, and further it’s disturbingly common to have inaccurate items on your credit reports. In fact the Federal Trade Commission (FTC) spent eight long years studying the accuracy of consumer credit reports.
What’d they find? An alarming one in five credit reports contains an error! Moreover one in ten reports contain an error serious enough to significantly damage your credit score. In other words, because of someone else’s mistake millions of Americans credit scores are damaged and this doesn’t account for the billions of dollars in higher interest rates, fees, and the embarrassment of potential rejection.
Your credit reports are not official or government documents. All three credit bureaus are for profit businesses that merely collect information about consumers and then sell that to lenders. It’s not only common but incredibly easy to have a totally bogus listing appear on your credit report, and even if you haven’t been a victim of identity theft.
There are processes, procedures, and even laws passed by Congress with the intention to empower the average consumer to fix these mistakes. Most notably the credit report dispute process which will discuss coming up. The takeaway here is to be vigilant about your credit reports and the information contained on them so you can avoid getting credit slapped by someone else’s mistake.
3. Utilization Ratio
Your utilization ratio is credit geek jargon for your available credit to debt. As in how much total credit do you have available and how much of that available credit are your currently using, as in your debt.
It’s fine to have substantial debt with a mortgage, car note, student loans, etc. The key is your revolving credit lines such as a credit card. Obviously if your credit card is maxed out, when you apply for new credit you won’t appear as the best credit risk to potential lenders.
Instead, you want to keep a monthly balance on your credit card at about 30% of the limit. For example with a $1,000 limit you’d want to keep a monthly balance of about $300. This of course will show you having $700 of available unused credit, and thus improve your utilization ratio.
This component falls within your amounts owed component, and is worth about 30% of your overall FICO score. There’s reports claiming to optimize this factor and boost credit score, you want to keep your balance at a mere 10% of your limit. The point is you have available and unused credit you should see a credit score boost, because you’ll appear to be in a secure financial position.
If you’ve had difficulty being approved for a traditional unsecured credit card, it’d be in your interest to examine a secured MasterCard or Visa. Please, make sure your account will be reported monthly to all three credit bureaus.
The big difference with a secured account is that you must first make a security deposit, and then you’ll be issued a credit card with a corresponding limit. For instance, if you deposit $500 you’ll be issued a card with a limit of $500. It’s true a secured credit card will be reported slightly different than an unsecured account, however with responsible use it’s an effective tool to build good credit.
Get a FREE credit consultation with certified FICO professional by calling toll-free 1-877-418-7596.
4. Create a Trail of Positive Payment History
It should come as no surprise, one of the tenants of fixing bad credit is to pay your bills on time. This is the biggest component of your credit score at 35% and if you have less than perfect credit, we must begin creating a trail of positive on time payments.
This will help display that you’ve turned over a new leaf in life and are meeting your financial responsibilities, even if there’s a few dings in the past. It’s an essential ingredient for a good credit score.
5. Clean Up Credit Report Errors and Negatives
As we’ve discussed millions of American’s have serious errors on their credit reports, and that’s screwing their credit score, according to our government and the FTC. Did you know this has been a problem since the 1970s?
This is why Congress passed the Fair Credit Reporting Act (FCRA) way back in 1970 and have continually updated and made amendments to it including providing consumers the right to get a copy of all three of their credit reports every 12 months. The purpose of the FCRA is to give the average, everyday, run of the mill consumer the ability to remove these abundant errors from their credit reports.
You see, these errors and further the negative items on your credit reports, is much like failing your under water basket weaving course in high school. It matter’s not, if you have an A in all your other classes, your GPA is still going to be royally screwed.
While you’ve surely heard it’s somehow illegal to remove so called accurate bad credit from your credit report, before seven long years. This is hogwash! Listen, the FCRA clearly says the maximum amount of time an item can remain on your credit report is seven years. As in there’s no minimum amount of time any item must remain on your credit report.
In order to clean up credit report errors and derogatory listings, you’ll need to utilize the credit report dispute process. You can do this by filing a dispute with each credit bureau online, over the phone, and by old fashioned snail mail.
Once the credit bureaus receive your dispute and deem it valid, then they’ll conduct an investigation, by contacting the company reporting the information and request verification. A little known secret is a staggering number of credit bureau investigations result in a lender not verifying the account, and the credit bureaus, in accordance with the FCRA, must then erase bad credit listing in question. This is how to clear credit history errors, inaccuracies, and derogatory listings, and legally.
Sounds easy, right? That was the idea, but in predictable fashion our politicians have screwed us all, once again. For some inane reason, our politicians have chosen to give the credit bureaus the authority to decide which consumer disputes are valid, and which are invalid.
On invalid disputes the credit bureaus, don’t have to investigate. To any human creature over the age of eight years old, it’s painfully clear the credit bureaus only have financial incentives to deem every consumer dispute invalid. This is because the credit bureaus are private for profit businesses, and they only spend money that’s otherwise profit, when they do investigate consumer disputes.
Yet the credit bureaus have investors and for two of the three bureaus, stock holders to answer too. As in there’s no reason on God’s green earth for them to spend money investigating consumer disputes, because this is less profit and smaller returns to their investors.
This is why the credit bureau dispute process has come under heavy fire as of late including a 60 Minutes report that showed just how non compliant the credit bureaus are with the FCRA. And a brief glance through history reveals multiple fines issued to the credit bureaus by the FTC and for egregiously violating consumer rights.
The most notable occurring just a few short years ago, when the credit bureaus were required to create toll-free phone numbers to handle consumer disputes. But, they weren’t required to hire or even have staff members actually answer these phones. This resulted in consumers waiting beyond unreasonable amounts of time on hold, with some consumer’s reporting over 30 hours on hold. Yes, the FTC did once again fine all three credit bureaus for this defiant behavior.
6. Get Help
As a result of the politicians and their illogical predictable trickery and the credit bureaus pseudo compliance with the FCRA, the credit repair industry was birthed. Now you don’t have to hire anyone and you can repair bad credit yourself, however be prepared for a grueling, drawn out, frustrating war. And not a one time battle.
Should you doubt these truths or be a victim of false beliefs in our politicians, you should consider Julie Miller’s story. She invested two years trying to fix blatant errors on her Equifax credit report and eventually filed a lawsuit, and subsequently won and was award $18.6 million by a jury in Oregon.
We certainly hope your situation isn’t as dire as Julie’s, she’s simply one of the millions of American’s whose alleged rights are being trampled by the credit bureaus. The attorney general for Ohio, Mike DeWine, said the credit bureau dispute process is broken and “a secret operation that is so hard to crack.”
This is why we encourage our members to consider legal and legitimate credit repair services. The top credit repair companies are very affordable. In total you should only be paying a few hundred dollars for a top company.
Get started on the path today of better lifestyle, and future pride in your credit score, and get a FREE credit consultation with certified FICO professional by calling toll-free 1-877-418-7596.
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