Understanding FICO Credit Score
What is credit scoring?
Your Credit Score is used by credit card companies, home equity lenders, auto loan lenders, and finance
companies. This score is most often know as FICO and serves as a snapshot of your credit history. A low score
can raise the price of your loan and a very low score can mean denial of your loan completely. Here are the
approximate percentages that determine your FICO Score:
Payment History 35%
Outstanding Debt 30%
Length of Credit History 15%
Types of Credit In Use 10%
Recent Inquiries 10%
Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and
your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments,
collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and
your credit report.
Because your credit report is an important part of many credit-scoring systems, it is very important to make sure it’
s accurate before you submit a credit application.
What does your score mean?
Prime- If your credit score is above 680 you are considered a “Prime borrower” and will have no problem getting a
good interest rate on your home loan, car loan, or credit card.
Sub Prime- If your credit score is below 680 you are “Sub Prime” and will likely pay a much higher interest rate on
your loan.
Cautious- Below 560 is the Cautious score. You can still get a credit card but you will likely be hit with a security
deposit or high acquisition fee. In addition to that your interest rate will be 2% higher
Improving your Credit Profile
To legally improve your credit profile, you should:
* Remember to pay all your bills on time. When you are delayed or delinquent in a payment, late fees are charged,
more interest accrues and your credit health is negatively affected
* Apply for a department store card or gasoline credit card, which are often easier to qualify for, and pay those bills
on time.
* Contact your card issuer immediately if you were unable to pay your bills on time or if you have found an error in
a bill. Be sure to make any complaints, and get corrections, in writing.
* Maintain a small number of credit cards and close unused accounts. Creditors look at your potential for going on
a spending spree and falling too deeply into debt. The more credit cards you have, the larger your debt potential.
* Keep your debts reasonable. Financial experts say that, as a rule, non-mortgage debt payments should not
exceed 10 to 15 percent of your take home pay each month. If your debts are higher than that, try to reduce them
before applying for another loan.
* If you are about to apply for a mortgage or car loan, it’s a good idea to check your credit history beforehand. That
way you can fix any errors and point out any blemishes that do belong to you in advance. It is common for reports to
have errors.
* Routinely check your credit report once a year. You should get a report from all three major credit agencies
because they may contain different information. The most common mistake is an account listed on your record
that does not belong to you.
What if I find errors – either inaccuracies or incomplete information – in my credit report?
Under the FCRA, both the consumer reporting company and the information provider (that is, the person, company,
or organization that provides information about you to a consumer reporting company) are responsible for
correcting inaccurate or incomplete information in your report. To take full advantage of your rights under this law,
contact the consumer reporting company and the information provider.
1. Tell the consumer reporting company, in writing, what information you think is inaccurate. Consumer
reporting companies must investigate the items in question – usually within 30 days – unless they consider your
dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization
that provided the information. After the information provider receives notice of a dispute from the consumer
reporting company, it must investigate, review the relevant information, and report the results back to the consumer
reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three
nationwide consumer reporting companies so they can correct the information in your file.
When the investigation is complete, the consumer reporting company must give you the written results and a free
copy of your report if the dispute results in a change. (This free report does not count as your annual free report
under the FACT Act.) consumer reporting company cannot put the disputed information back in your file unless the
information provider verifies that it is accurate and complete. The consumer reporting company also must send
you written notice that includes the name, address, and phone number of the information provider.
2. Tell the creditor or other information provider in writing that you dispute an item. Many providers specify an
address for disputes. If the provider reports the item to a consumer reporting company, it must include a notice of
your dispute. And if you are correct – that is, if the information is found to be inaccurate – the information provider
may not report it again
What can I do if the consumer reporting company or information provider won't correct the information I
dispute?
If an investigation doesn't resolve your dispute with the consumer reporting company, you can ask that a statement
of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to
provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay a fee
for this service.
If you tell the information provider that you dispute an item, a notice of your dispute must be included any time the
information provider reports the item to a consumer reporting company
| Copyright©2006 Noble Quest Realty - All Rights Reserved |
Mortgage Center
| |||||||||||||||||
 | |  | |  | |  |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |