About Credit Scores

You may know that different businesses from cell phones to home mortgages base a large part of their decision for giving you their services is based on your credit score. This score is a number between 300 and 850 and is often referred to your FICO credit score. FICO is short for Fair Isaac Company. This company got together with the three credit reporting agencies, Experian, Equifax and Trans Union, in the early 1980s and created a generic and uniform credit reporting score. Each company uses slightly different factors to give you your score, but a 720 from Equifax is equivalent to the same score from Trans Union. The credit agencies look at your current loans, other debts and financial obligations, and create a credit profile of you. They then take this profile and compare it to other people in similar situations and give you a rank based on those peoples' past credit performance and how likely they were to repay their debts. Your score is the supposed to represent how likely you are to repay your debts. Companies will have their own method for using credit scored to issue you credit or services. A normal evaluation would be that a person with a score of 650 and above has good credit and the process for getting more credit will be fast and easy. At the 620-650 range, consumers have average credit scores. They may need to show additional information like where their income comes from or talk with the creditor so that they may asses the person more carefully. The terms may not be as favorable as someone with a higher credit score. People in the low category, 620 and below, can normally still get credit, but the finance charges will be higher and with more restrictions. You are legally entitled to have free access to your credit report from each of the three companies once a year. There is a website that is a joint venture from all three companies at www.annualcreditreport.com. This site lets you view all the information in your reports and can help you resolve any inconsistencies in the report. Many people have been denied credit based on a low FICO score, only to find out that an old credit card still has a small balance and was never fully paid back. There have also been reports of video stores leaving bad information because of rentals that were never returned. In that case, the consumer had to pay all the late fees to have the bad mark removed. First, a company must have your social security number to get a credit report, and most video rental locations do not go this far. This does, however, make a point to show that there may be long-term consequences for misusing your credit. This also makes the point that it is fairly simple for a company to put a blemish on your credit report. If there is incorrect information reported against you, you have the right to remove it. First you should keep in mind that the problem can often be easily cleared up with only a few phone calls. You should keep in mind that it may be more difficult than this and may result in having to make your case in front of a judge in court. Keep track of everyone you contact and what was said. Keep in mind that if you have to argue your case in court, all of your detailed information about how you tried to fix the problem will be invaluable. Don't forget, your credit score is your reputation. In the past people would be issued credit because they knew the person and could estimate their credit worthiness. Today the economy is global and requires a universal system whereby someone who has never met you can gauge your credit worthiness. Your credit report and credit score is your reputation and it is your right and responsibility to fix your reputation if it gets tarnished.