It wasn't all that long ago that
American's faced great financial crisis. As a nation, we struggle
with debt, and it keeps us from achieving a better life. Debt
Education is here to help you change all that ... just ask!
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ISSUES
FICO
The FICO score is used to make billions of credit decisions each
year, including more than 75 percent of mortgage loan originations.
In addition, more than 40 of the nation's 50 largest financial
institutions rely on the FICO score to determine an individual's
credit risk.
About Fair Isaac Company
Fair Isaac Corporation (NYSE:FIC) is the preeminent provider
of creative analytics that unlock value for people, businesses
and industries. The company's predictive modeling, decision analysis,
intelligence management, decision management systems and consulting
services power more than 25 billion mission-critical customer
decisions a year. Founded in 1956, Fair Isaac helps thousands
of companies in over 60 countries acquire customers more efficiently,
increase customer value, reduce fraud and credit losses, lower
operating expenses and enter new markets more profitably. Most
leading banks and credit card issuers rely on Fair Isaac solutions,
as do insurers, retailers, telecommunications providers, healthcare
organizations and government agencies.
A consumer-credit
report is a factual record of a person's credit-payment history.
Legislation governs who has access to a person's credit history,
but typically it is open to lenders who need a quick and objective
way to determine whether to grant credit.
Your credit
history is a record of how you handle your finances, especially
how well you pay back your debts. This credit history is reviewed
based on a generally well-established scoring system.
Credit bureau
scores are often called "FICO scores" because most credit
bureau scores used in the U.S. are produced from software developed
by Fair, Isaac and Co. They developed a confusing mathematical
formula to determine how high a risk you are as a credit applicant.
There are
other credit bureau scores, but FICO is used most often by creditors.
With FICO, a higher score is desirable. Be aware that other credit
bureaus may evaluate credit worthiness differently, and a high
score may mean a consumer is a bigger risk.
FICO
considers these factors (the approximate weight of each is in
parentheses):
Payment
history (35 percent) - Your score is negatively affected
if you have paid bills late, had an account sent to collection
or declared bankruptcy. The more recent the problem, the
lower your score. For instance, a 30-day late payment today
hurts more than a bankruptcy five years ago.
Outstanding
debt (30 percent) - If the amount you owe is close to your
credit limit, that likely will have a negative effect on your
score. A low balance on two cards is better than a high balance
on one.
Length
of your credit history (15 percent) - The longer your accounts
have been open the better.
Recent
inquiries on your report (10 percent) - If you have recently
applied for many new accounts, that may negatively affect your
score. Remember, promotional inquiries don't count.
Types
of credit in use (10 percent) - Loans from finance companies
generally lower your credit score. FICO says this is most important
when there isn't a lot of other information upon which to base
a score.
Keep in mind
that some companies may consider factors other than these when
determining credit worthiness.
YOU are the
original source of all this information. When you fill out an
application, the creditor reports activity on that account to
the bureaus. You can reduce errors by filling out the identifying
information accurately and consistently.
The
typical credit report includes four kinds of information:
·
Identifying information, such as your name and date of birth.
·
Public record information, such as whether you have filed for
bankruptcy in the past 10 years
·
Credit information, which includes your history of paying off
loans and the amount of credit you now carry.
·
Inquiries, which indicate whether you have been applying for
a lot of credit lately.
So,
what legally can be included in your credit report?
·
Your identifying information.
· Your employment history.
· Your credit information.
· Delinquent child-support payments, and court action
that has been taken against you as a result.
There
also information that cannot be included on your credit report.
This includes:
·
Your race.
· Your religion.
· Your driving record.
· Notice of a Chapter 7 bankruptcy that is more than
10 years old.
· Debts that are more than seven years old.
So
who has access to your credit report?
·
Potential lenders.
· Landlords.
· Insurance companies.
· Employers and potential employers (usually only with
your written consent).
· Companies with which you already have credit so they
can monitor your account.
So
you've applied for credit and discovered you have a low FICO score.
Why might that have happened? The top 10 most common reasons are:
· Serious
delinquency,
and a public record or collection filed.
· Derogatory public record or collection filed.
· Time since delinquency is too recent or unknown.
· Level of delinquency on accounts.
· Number of accounts with delinquency.
· Amount owed on accounts.
· Proportion of balances to credit limits on revolving
accounts is too high.
· Length of time accounts have been established is too
short.
· Too many accounts with a balance on them.
There's a lot of information to read through on the Debt Education
website, but we feel this is extremely important material. We
strongly recommend that you bookmark
this page right now. This will allow you to read
at your leisure, and should you need to attend to other matters,
easily return back here at your convenience.
The Debt Education website was built for you. Please explore
our website. You'll find resources and information on virtually
every aspect of financial planning and money management. These
debt delp resources are designed to help you get out of debt and
stay out of debt. You can achieve financial independence.
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