Having credit issues?
It can happen to anyone and fixing a credit problem can be a frustrating experience. Hopefully I can cover a few areas today that can help you understand what a credit score is, how it is compiled and how it can affect your life.
Whenever you have a financial transaction that involves a loan of any kind, the lender will report the details to one or all of the three major credit reporting agencies, Trans Union, Experian or Equifax. These agencies then send monthly reports to Fair Isaac, which compiles all public information on you into a report for lenders, commonly known as a FICO score. Just like in sports, low scores are not going to be helpful. It is critical that you review your FICO report and find out if the information is correct. Recent studies have found that over 30% of FICO reports have incorrect information in them.
FICO scores are used everyday by lenders. Buying a car? The dealer will run a credit check on you and if your score is high enough you can drive off the lot with no money down and a new car. The dealer knows he can sell your loan to any bank and get his cash tomorrow. A low FICO score can make the dealer insist on a large down payment, higher interest rates or, in the worst case, no car loan at all. If your credit report had bad information, you could find yourself spending money on higher interest rates than you need to.
Before you make any purchase on credit or apply for new credit, you must contact the reporting agencies and review the information that has been collected on you and your credit history. Avoid the advertised “Free Credit Report” offers that you see on television. Most of these give you access to your credit reports for free only after you purchase a monthly program that monitors your credit reports and notifies you of any changes. These can end up costing you hundreds of dollars per year and do nothing to help your credit score.
Start out by going to www.annualcreditreport.com and finding our your credit score. This site is maintained by the three major reporting agencies as a result of a federal requirement that everyone gets on free look at their credit reports each year. You may be surprised by what you find. Look for incorrect spellings, wrong names and accounts with companies that you have never done business with.
File claims in writing with the agency, giving as much detail as you can about the error. By law the agencies have to contact the company that reported the financial transaction and verify or remove the listing. However, the credit bureaus have a dreadful record of correcting errors and you will need to review your credit report often to make sure the corrections are made.
Your credit score and credit report can affect major parts of your life. Will you get a home loan? Can you rent an apartment? What interest rate will you pay on a credit card? Did you know your car insurance rate is determined in part by your FICO score? Pay attention, your credit score may need a credit reboot.