Have you ever wondered why your credit score is so important or better yet what the heck it means? Your credit score is a number that is reported by three (3) Credit Bureaus, Experian, Equifax and Trans Union to show your creditworthiness so that a lender can make a decision on whether or not to lend money. The Credit Bureau does not decide if you are credit worthy, they only report the history. Credit Card Companies, Banks, Mortgage Companies, or anywhere you buy a new or used vehicle will report to one or all three Credit Bureaus. The interest rate is then based on this number. If your number is above 650 you will probably get a good interest rate or what is called prime. Anything below that will be questioned and dealt with on an individual basis. If you have medical bills or certain circumstances (like life) that interrupted your “normal” credit history this could be explained and forgiven by the lender you are trying to get a loan from. Another name you may hear for Credit Score is FICO (Fair Isaacs Corporation)

FICO
Fair Isaacs Company does not reveal the exact formula it uses to compute this number. However, what is known is that the calculation is broken down into five categories with varying levels of importance. These categories are payment history, amount owed, length of credit history, new credit and type of credit used. All of these categories are taken into account in your overall score.

The payment history reveals how well you have met your prior obligations. It also looks for previous problems in your payment history such as bankruptcy, collections and delinquency. It takes into consideration the size of these problems, the time it took to resolve them, and how long it has been since the problems appeared. The more problems you have in your credit history, the weaker your credit score will be!

The next largest component is the amount that you currently owe. While this category focuses on your current amount of debt, it also looks at the number of different accounts and the specific types of accounts that you have. This area is focused on your present financial situation, and a large amount of debt from many sources will have an adverse effect on your score!

The other categories (length of credit history, new credit and type of credit used) are fairly understandable. The longer you have a good credit history, the better. Common sense dictates that someone who has never been late with a payment over twenty years is a much safer bet than someone who has been on time for two years. Also, people who apply for credit a lot probably already have financial pressures causing them to do so, each time you apply for credit your score gets lowered a little. And finally, a person with only one credit card is less risky than a person with Ten (10), so the more types of credit accounts you have, the lower your score will be. Some people are under the impression that the more credit cards they have the better their credit……..NOT SO!

CREDIT REPAIR
If you find that there is something showing up on your report, the first thing is not to panic or freak out. Unfortunately mistakes on credit reporting are not all that uncommon. And even though it’s a pain in the neck, there are steps you can take to fix the situation. It’s most important to stay persistent, and document the process. (To learn more about credit reports, see Consumer Credit Report: What’s On It and The Importance Of Your Credit Rating.) For a local credit repair professional I suggest Sherri Elam at Millenium Mortgage. www.MillenniumMortgage.biz she has longevity in this business as well as doing loans and refinancing.

DOCUMENT AND DISPUTE
I personally recommend a professional to dispute any discrepancies. But if you should try to handle this yourself, understand there are laws. Under the Fair Credit Reporting Act (FCRA), the credit reporting agencies are responsible for correcting inaccuracies and incomplete information on credit reports. This allows you to contact the reporting agencies, which publish the documents, to correct any inaccuracies you may find.

Write a Dispute Letter
When writing your dispute letter to the credit bureaus, be sure to include a clear explanation of your reasoning, along with any relevant evidence or documentation that helps support your case. You should make copies of all your correspondence, and be sure to send everything via registered or certified mail, so you’ll have a record of when it was sent and received.

Stay In Contact
When you contact the agency, they are required to investigate the issue within 30 days. The agency will pass on the dispute and information within it to the entity (person, business or other organization) that provided the information to the credit agency in the first place. The information provider must also investigate the complaint and report its findings back to the reporting agency.

If you’re right, then the change is made on your credit report and you should have a more accurate credit report. If your dispute isn’t resolved, for whatever reason, you can ask to have your dispute statement included along with your credit report when anyone accesses your report.

Keep a Paper Trail
As you start to send letters and officially challenge your creditor and/or credit bureaus, you’ll need to create a good, organized system to keep track of all your correspondence and where each issue stands. Often it takes repeated phone calls and letters before you achieve any resolution, so it’s helpful to have records of previous communications, along with copies or notes on the company’s response. Each time you have a phone conversation with a creditor, be sure to record the date and time, the name and title of the person you spoke with, and whatever was agreed upon as a result. Even after you’ve managed to resolve an error, it’s a good idea to hold onto your paperwork for at least a few years; it’s not uncommon for an item you’ve worked hard to remove to somehow, someday, reappear. You need to save all the envelopes as well, this will show dates of mailings. That’s why having a paper trail will be invaluable.

As you can see this is why I highly recommend a professional. Everything is time sensitive and must be addressed within the allotted time by law. I have been a Realtor a long time and helped clients and friends with their credit issues as well as mine. Sometimes it simply may be a mistake with the wrong name or address. So don’t panic or freak because you got turned down for a loan. You have a right to view YOUR credit report and dispute!