Good credit depends on proper credit reporting

Don't think good credit is important? Wrong. Good credit is essential if you want to qualify for loans to buy a business, a new auto, a new home. Bad credit costs. Getting your free credit report is of little value if you don't know how important correct credit reporting methods are to your financial health.

Hear what these three credit expert resources are saying on the subject of credit reporting:

From www.Experian.com:

Credit Check: Why Should I Care?

Why is it important to check your Experian credit report regularly? Many people frequently pay attention to their credit scores when they buy big-ticket items such as a new car or a home. While these are some of the most familiar reasons consumers monitor their credit reports, credit scores and reports actually are used for many other reasons as well. A good credit score can get you better rates on common necessities such as car insurance premiums, cell phone contracts and apartment rental agreements. Some employers even check prospective employees’ credit reports before making final hiring decisions. In addition, despite increased public awareness of identity theft, the crime continues to grow. Therefore, monitoring your credit report and score has never been more important.

From the FTC:

Having a good credit report means it will be easier for you to get loans and lower interest rates. Lower interest rates usually translate into smaller monthly payments.
Information about you and your credit experiences, like your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical formula, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor. A total number of points — a credit score — helps predict how creditworthy you are; that is, how likely it is that you will repay a loan and make the payments on time. Generally, consumers who are good credit risks have higher credit scores.

From the website www.debtworkout.com:

Many of those unfamiliar with credit reports share a mistaken belief that credit reports display a near perfect accuracy. In reality errors on a credit report occur with alarming frequency. Reporting agencies rarely verify or cross check information unless they have a specific reason to do so. Therefore it becomes the obligation of each individual to verify the accuracy of their own credit report and begin the process of correcting inaccuracies of the credit report.

Learn more with these resources available from Amazon.com and take action to fix credit and boost your credit score as soon as possible:

The Road to 850: Proven Strategies for Increasing Your Credit Score

You're Nothing but a Number - Why achieving great credit scores should be on your list of wealth building strategies

Credit Report and Score: Secrets of the Credit Reporting Agencies

FICO reveals how credit scores are calculated

When myFICO.com details what goes into a "credit score," they admit that it's not a simple numerical score used by all lenders:

They claim:

"In general, when people talk about "your score", they're talking about your current FICO score. However, there is no one credit score used to make decisions about you. This is true because:


Credit bureau scores are not the only scores used.

Many lenders use their own credit scores, which often will include the FICO score as well as other information about you.

FICO scores are not the only credit bureau scores. There are other credit bureau scores, although FICO scores are by far the most commonly used.

Other credit bureau scores may evaluate your credit report differently than FICO scores, and in some cases a higher score may mean more risk, not less risk as with FICO scores.

Your credit score may be different at each of the main credit reporting agencies."

Each credit reporting agency will wind up considering what that agency deems relevant to determine your "creditworthiness." This differs from Equifax, Experian and TransUnion, the Big 3 credit reporting agencies.

Most importantly -- your credit score changes all the time.

The reason for this goes as follows:

"As your data changes at the credit reporting agency, so will any new credit score based on your credit report. So your FICO score from a month ago is probably not the same score a lender would get from the credit reporting agency today."

Check out www.myFICO.com today and learn more about the ins-and-outs of credit scores, before you need to apply for a new home loan or new car.

More information is available in these books at Amazon.com:


Your Credit Score, Your Money & What's at Stake (Updated Edition): How to Improve the 3-Digit Number that Shapes Your Financial Future

The Road to 850: Proven Strategies for Increasing Your Credit Score

Fix My Credit Software 2009

The Credit Secrets Bible

What Your Credit Rating Says About You

Our readers ask: "What is my credit rating?"

Your credit rating is an estimate of your creditworthiness. It doesn't judge you. It factors in your past credit actions, your current circumstances and calculates how likely you are to repay a loan on time. Your credit history plays a big part in this, as do your credit habits. You can change your habits, so you can also change your credit rating for the better too!

The main credit rating you will need to deal with is the FICO credit score used by most lenders in the United States. This credit score provides a lender with a numberical 3-digit score that estimates how well you follow through on credit obligations in the past, and therefore, how likely you are to repay a loan on time in the future. creditors whom you have borrowed from in the past -- whether it's a department store charge card or a local furniture store or a car dealership -- report your payment history to the credit bureau. Your FICO score is then extracted from this data, along with other factors like income, history of credit inquiries, lines of credit and the amount you owe, and credit card balances compared with the credit line extended for each card.

It is important to remember that neither the credit bureaus or Fair Isaac Co., the corporation which developed the FICO scoring credit model, can rate your creditworthiness publicly. They can only report privately to their customers -- the banks and lenders who subscribe to the FICO scoring system -- and these lenders then make the evaluation as to how much risk they are willing to take when they decide to lend you money.

If you have defaulted on past loans, or if you have been slow to make on-time payments on past credit card accounts or business and/or personal loans, then your credit rating will be lower than someone who has regularly paid their debts on time without fail.

Can Bankruptcy Boost Your Credit Score?

Here's a unique twist on credit scores found at SmartMoney.com:

"The decision of whether to file for bankruptcy protection is
not an easy one. Among the numerous concerns, one that is
typically front and center is the worry that your credit rating
will be so damaged that securing a loan — even at a lousy rate
— will be darn near impossible. "

True. Their editors have hit the credit score problem squarely on the head. We've been preaching that one needs to carefully protect their credit rating for years on this blog. But the following caught us by surprise, and we'd like to share this with our readers:

"But here's some surprising news: In many cases, the damage done
to one's credit score isn't nearly as bad as expected. Over the
long run, obtaining a score high enough to make you eligible
for very competitive rates isn't out of the question. "

That's good news when it comes to bad credit might not be ALL bad! You can read more of this interesting article at:

http://www.smartmoney.com/debt/advice/index.cfm?story=boostscore