Taos: good article about reparing your credit
I found this interesting and helpful. Hope you enjoy it.
These days, a clean credit record isn't just important if you're shopping for a loan: It could even affect your career. Potential employers, landlords and insurers routinely examine credit reports. "Having a good credit score is far more important now than it ever has been," says Ken McEldowney, executive director of Consumer Action, an education and advocacy group based in San Francisco.
Yet many consumers battling to improve their credit score have found the fight frustrating, costly and even futile. Some pay hundreds of dollars to credit-repair services or adopt strict credit regimens, only to find that their scores won't budge.
That doesn't discourage people like Simon Hernandez, who spends hours each quarter studying his credit report as part of his quest for a score of 750. The 34-year-old Denver respiratory therapist plans to buy a house sometime next year and fears his score in the mid-600s won't get him the best rates. He has two credit cards that he uses for gas and groceries and has sworn off applying for any other type of credit. Despite his diligence, he occasionally sees his score drop for no apparent reason. "I've spent hours looking to see if I'm missing something on my report," he says.
The basic steps to build and maintain a good credit score haven't changed: Pay your bills on time and don't max out your available credit. Payment history accounts for about 35% of the FICO score, while the amounts you owe -- including the number of accounts with balances and the fraction of available credit used on credit cards -- accounts for another 30%. Other factors include the length of credit history and the types of credit used.
Another key step: Get a copy of your credit report. At annualcreditreport.com, you can get a free report from Equifax Inc., Experian Group Ltd. and TransUnion LLC, the main credit-reporting companies that provide records to lenders. (Consumers generally must pay to get their actual FICO scores.) Search reports for mistakes -- more than a quarter of reports contain errors, according to a survey by the U.S. Public Interest Research Group, a Washington-based advocacy group. Dispute errors with the credit bureau as well as the lender. If the lender can't verify the information within 30 days, it will typically be removed from the report.
Also note whether credit-card issuers are reporting a credit limit for your account. Issuers don't always report these limits, and that omission may cause your highest balance on the card to be treated as your limit. That can make it appear as if you're using most of your available credit, dragging down your score.
Consumers shopping for a loan can protect their credit score by moving fast. The FICO system, aiming to distinguish between a search for lots of new credit and comparison shopping for a single loan, ignores all mortgage and auto-loan inquiries made in the 30 days before scoring. If you find a loan within that period, the inquiries won't drag down your score while you're rate shopping.
Some popular strategies to boost credit ratings can actually backfire. While some consumers assume that applying for new credit will raise their available credit and boost their score, "You don't want to increase your limits in a short period of time because that can be a great sign of risk," says Rod Griffin, senior manager of public education at Experian. And though it may seem prudent to close old credit-card accounts that you're not using, that can also sink your score.
New credit-scoring models, meanwhile, are putting new wrinkles into the credit-repair game. Fair Isaac's new FICO 08 scoring model, for example, disregards "authorized user" records when calculating scores. Bottom line: People's credit scores will be affected by cards on which they're named as account holders, not authorized users. Experian and TransUnion plan to offer lenders the new scores in coming months.
Fair Isaac took this action after concerns were raised about credit-repair companies charging consumers to be listed as an authorized user on a credit card of a stranger. The new FICO model means people who have little credit history aside from their authorized-user status should apply for their own cards or get listed as a joint account holder.
Relative to older versions of FICO, the new model also generally places more emphasis on having a variety of credit types, such as installment loans and revolving accounts like credit cards, while increasingly penalizing people who use a big chunk of their available credit. Since the credit bureaus have developed their own scores to compete with FICO, consumers should know which one they are getting when they order their credit score. FICO scores from the three main credit-reporting companies are available at myfico.com.
Some consumers are discovering that all their tinkering is having little effect. Darrell Booker, 30, a database administrator in Richmond, Va., has tried all sorts of strategies to boost his score. Over the past year or so, he has tried to get some late payments removed from his credit report, disputed a paid account that showed up on his credit report as unpaid and paid hundreds of dollars to a company that promised to help him clean up his credit. But the only real boost to his score came when he focused on paying off his credit cards.
"Let me focus on things I know I can totally control," he says, "and that's reducing my debt."