Credit Repair and Credit Scores
Credit repair is on everyone’s mind these days. And credit scores are for sale everywhere. There is only one problem. None of these advertised credit scores are the same as the credit scores that lenders use when making credit decisions. Whoa. That’s right. People spend huge amounts of money to buy credit scores which they mistakenly believe are relevant to their life. What the heck is the story? You want to know? Okay. I’ll tell you!
Lenders Use FICO Scores
Lenders use a type of credit score called the FICO score. FICO stands for Fair Isaac Corporation, the creator of this important score. The credit bureaus gather consumer credit data and run their data through the FICO credit score software to produce the scores that lenders use to make decisions.
Avoid Knockoff Scores
If you are starting a credit repair project or plan to get a loan in the near future and want to know where you stand you should purchase your FICO scores. But if you buy your scores from one of the credit bureaus websites you will get the bureaus own proprietary scores. And you will be no wiser than you were before because these knockoff scores can easily be 100 points different from your FICO scores; deceptive for your loan information, and useless for benchmarking your credit repair.
It’s About Money Honey
Alas, the credit bureaus realized they could make more money by creating their own version of a credit score and selling it to the public. If they sold genuine FICO scores to consumers they would have to pay fees to Fair Isaac. Lenders demand FICO scores; it’s a simple fact, they would never settle for less. Consumers on the other hand seem to be clueless. But there is a reason that consumers are clueless, the credit bureaus don’t offer any transparency, just a sales pitch.
Credit Repair and the Right Stuff
It’s all about your FICO scores. If you are going to benchmark your credit repair effort or plan to get a loan these are the only scores that matter. And you can get them online at the website for Fair Isaac Corporation, MyFico.com. The cost is about $50 for all three scores. Now are your ready to hear how these important scores work? Here is a mixture of the information published by Fair Isaac and some practical credit repair tips from yours truly, and I do know a bit about this, so listen up.
Major Credit Repair Weight
Fair Isaac is happy to tell you that the major part of your credit score is based on two categories. These are your payment history, weighing in at a hefty 35% of your score, and your account balances, tipping the scale at 30% of your total score. This is a bare bones fact, and much useful credit repair info is left unsaid, so I guess I’ll say it. If you care about your credit scores you need to focus on your revolving balances.
Revolving Account Bombs
Revolving balances are the lynchpin of your credit scores, and hence your credit repair effort. You can have a decade of perfect credit under your belt. You may have paid off a dozen cars and made every payment on time, but if you run up your credit card balances to the max and then check your credit scores you are in for a rude awakening. Maxed out credit cards will devastate your scores. Do you want some numbers? Okay. A maxed out card can erase 100 points from your score. An over-limit card can knock 150 points off; it’s a credit repair disaster. But wait, there is more.
Credit Repair Leverage
I don’t want you to feel like this is all bad news. Revolving debt is conversely the most powerful credit repair tool you have at your disposal for pumping up your scores. FICO recognizes 5 different balance tiers: 20, 40, 60, 80, and 100 percent usage. If you are getting a loan in the near future and have the resources to pay your balances under 20% of the limit your scores will be shining.
The Rest of the Story
The other ingredients relevant to your credit repair task include the age of your accounts, coming in at 15% of your score, new credit and inquiries at 10%, and the type, or mix of credit at the final 10%. These remaining ingredients are minor and for most people will take care of themselves as life goes on. I should, however, add that it is valuable credit repair advice to avoid opening new accounts before applying for a major loan, and to keep those inquiries to a minimum. Cheers!
Copyright © 2008 Ian Webber. All Content. All Rights Reserved.
By: Ian Webber
Posts Tagged ‘Credit Decisions’
Credit Repair Shocking Insights
February 27th, 2010Credit Repair – Big News About Authorized User Accounts
January 1st, 2010
Questionable Credit Repair Practices
A small sub-set of the credit repair industry has been operating in a gray area of the law by selling authorized user accounts to consumers. Many credit repair customers have been willing to pay significant amounts of money for these accounts, and the credit score benefit that comes with them. According to the Fair Isaac July 31, 2008 press release, those days are officially over.
A Brief History
The FICO credit scoring model considers, among other things, the payment history of your credit cards as an indicator of your credit worthiness. Until now, FICO also applied the payment history of authorized user accounts in their calculation of the score of the authorized user – an interesting point as these accounts reflect the credit worthiness of the primary card holder, rather than the authorized user.
The Birth of Credit Repair Card Sales
A number of credit repair companies picked up on this loophole and began to sell authorized card memberships to people wanting a quick score boost. Soon lenders caught on and decided to fight back; justifiably so, as these accounts artificially skewed the credit scores of borrowers, making good credit decisions unreliable.
The End is in Sight
Fair Isaac Corp. has now taken steps to preserve the integrity of the FICO score by eliminating the score benefit of authorized user accounts sold by so-called credit repair companies that chose to operate in this questionable market. If you have considered buying authorized user accounts from one of these credit repair operations to get a quick bump in your credit score, forget it.
The End of the Credit Repair Gray Market
The new, updated, FICO 08 release includes a fancy sorting algorithm which reportedly will allow legitimate authorized card holders, such as spouses, to continue to receive the score benefit, while effectively blocking cards that were sold in the credit repair gray market. Spouses are clearly safe, and based on the language of the July 31, 2008 press release, so, we believe, are child accounts.
How Does the Magic Work?
If I had to guess, I’d say that Fair Isaac tests for a relationship between the primary card holder and the member user. I’d also guess that they are testing for the number of member users per primary account. In other words, primary accounts that have more than one or two authorized users will be blocked for sure. This in itself would eliminate the majority of the gray market accounts because most of these accounts were sold multiple times.
Make Your Credit Repair Plans
Fair Isaac’s new approach to the authorized user account problem is very even-handed and should provide comfort to spouse and child card holders, as they should be able to continue to enjoy the score benefit of their accounts. But if you are making a credit repair effort and have purchased authorized user cards and are counting on them to maintain your score, it’s time to make other plans.
Finding the Right Solution
Ethical credit repair is also the most effective. Truly successful credit repair is about a genuine reshaping of your credit. You might have been able to artificially increase your credit score by purchasing an authorized card membership, but this was never an effective long term solution.
Credit Repair Done Right
If you are in a credit repair program and want to improve your credit scores, there is an effective and reliable way to do so. Build your own credit! If your credit scores are below the level that will allow you to get unsecured credit cards, get secured cards. Secured cards are cost effective, the accounts are yours, and before long you will be enjoying improved credit scores. That’s the right approach to credit repair.
Copyright © 2008 James W. Kemish. All Content. All Rights Reserved.
By: Jim Kemish
Credit Repair, Do Something Now!
December 24th, 2009
Many people do not think when it comes to signing on the dotted line to make a purchase by credit card or loan. When the bill comes in, it can be time for credit repair or reduction! Bad debts can ruin your lifestyle and even your health through stress.
When it comes to making credit decisions, most individuals are always making assumptions, and nearly all of them assume the most unpleasant. Creditors, debtors, heck, almost everyone today, all base their theories and decisions on assumptions and usually all assumptions, from the beginning of time, have brought about nothing but failure and heart ache.
When folks fall short on paying their bills in a timely fashion, many of the credit companies assume that the debtor (the person owing the money) doesn’t have the funds to pay the money owing. Numerous creditors, with the supposition that you aren’t able to pay your bills, will usually propose an deal or else even lower the amount owing so that you are able to pay off the debt.
This is one step to credit repair. However, it takes ‘you’ to get in touch with the creditors to let them make them aware your inability to pay. If you have lots of bills on hand and each and every one of the bills are pressing, it makes you feel the need to payoff the debt that benefits you the most of all.
After the amount of one bill is paid, you are now able to use that amount from the following paycheck to pay off another one of the bills. When you follow this tactic, it allows you to reduce your bills slowly but surely and so repairing your credit.
If you don’t have the funds to repay the entire bill at once, pay the minimum amount so that you are able to carry on applying the technique to the rest. Practically all debtors assume they are in debt and there exists nothing they can do to resolve the problems that plague their lives everyday.
Credit Counsellors are more prone to help you to find a way to repair your credit. Credit Counselling is one possible way when you don’t see any other way out yourself.
These professionals act closely with you and your creditors, and proceed toward a resolution. This is a certain way to get the creditors off your back and work out an accord with your debts, and reduce the stress level that comes along with undue fiscal burdens.
If you have secured loans, it’s always most wise to find a way to pay these bills first.
Unsecured loans pose a threat that, however, pale in comparison with secured debts.
A select few of the nonessential bills can include credit cards. Given that you are accountable for this debt, however, the worst that happens with credit cards is that you loose your privileges.
Check your conditions, terms & agreements since a select few credit cards may permit you to pay only the interest portion on the credit cards. This will give you the time you need to find a way for paying the card balance. A few cards can even allow you to pay the minimum balance on the card and allow you to keep the card in your possession.
Paying off your debts can be a long process but also a rewarding one. No more late night calls from the bill collectors or even being afraid to answer your phone for fear it is the dreaded creditor on the other end. Having your credit under control can be a huge stress relief making life much happier by providing more peace and harmony.
By: Randy Rowles
