The Secret Credit Scores Banks Don’t Want You to Know About
Last Updated – June 3, 2010

There is big business in credit cards and knowing who is a good credit card customer and who is not is imperative to the bank looking for new customers. There are companies that furnish this information to the banking industry to drum up business. Ever wonder why you receive certain types of direct mail credit card offers? Wonder why a credit card company suddenly decreases your credit limit despite your perfect payment history? With the advent of the computer, many types of sophisticated modeling is available to the banking industry. The whole point of these models is of course, to maximize profitability.

Some of these consumer scores may not specifically have been developed to aid banks in credit decisions, but they are certainly beneficial to the credit industry. We’re going to cover a few of the most common ones.

The following chart may help you to understand how some of these models are used by banks to “prune” unprofitable customers, and help increase revenue from profitable customers.

© id/x partners

Revenue Score

This score predicts how much money a company is likely to make from a specific customer, based on past behaviors and payment history. You’ve heard of the term “credit card deadbeat”? A credit card deadbeat is the insider term used by credit card company executives and refers to all of the credit card users who pay off their bill each month promptly; in doing so, such customers pay no interest and prevent the creditor from making any profit.

This score can lead to the ironic situation where a customer with a perfect paying history may find their credit cards cancelled or credit limits lowered. This is because the credit card companies are actually losing money on unprofitable clients.

Behavior Score

Behavior score is a decision-making customer prediction tool based on customer behavior and life-style.

This powerful tool plays an important role in banking, credit card, insurance, and telecommunication industries as it helps solving business issues, such as:

• Contractual credit loss
• Fraud
• Bankruptcy
• Customer attrition or churning
• Account management

With the capability of identifying which customers will turn ‘bad’ in the future, scoring models can develop proactive strategy to reduce the potential loss months before the customers actually become bad. On the ‘good’ customer group, different sets of action can be taken to improve the profitability and retain the customers.

Here’s a paper on behavior score modeling.

Response Model

Response model helps businesses to better understand and anticipate their customer needs, behavior patterns, and value. With response model, it is possible to design, test, and implement more effective strategies for acquiring, growing and serving customers. Some of the areas that can be addressed with a response model are:

• Product cross-sell and up-sell
• Direct mailing solicitation
• Activation/promotion program

Transaction Score

A transaction score is generated for each purchase you make, and is used to determine whether the transaction should be approved. (Or whether it might be fraudulent.) This score also factors in the risk of whether or not the customer is likely to return the purchase, or whether questions concerning an online purchase will deter the completion of the purchase.

Your transaction score is based on profile data. Examples of this data:

• Contain summaries of historical data that include prior customer transaction data.
• Number of times a customer returned a purchase.
• Whether or not the customer will complete the transaction
• Number of previous fraudulent transaction connected to the consumer.
• Probability based on the likelihood that a user customer will terminate the transaction if the user customer is presented with an online shopping cart follow-up question set.

Collection Score

There is no single credit-lending business which has no delinquent customers. The collection scoring system is based on customer’s past behaviors in both non-delinquent and delinquent states, the system is able to determine which of delinquent customers has higher chance of collectibility/recovery, who should get harsher treatment, what is the cost-effective medium to use, etc.

This score is beneficial to collection agencies who have large portfolios of debt. Why spend a bunch of time and money on accounts which are unlikely to be collected?

Application Score

Your application score contains secondary information not factored into your FICO® credit score. Examples of this type of information are:

• Your age
• Where you live
• Your ethnicity (oh yes – this is factored in).
• Your profession, and whether it is a blue-collar or white collar job.

Bankruptcy Score

Your bankruptcy score is just what it sounds like: a measure of how likely you are to declare bankruptcy.

Researchers say the score typically surfaces when a consumer gives the bank permission to pull his credit report during the application process for a new loan, bank card or credit card, and during the periodic review of clients’ accounts to determine whether to increase a consumer’s credit limit.

What goes into a bankruptcy score? Of course, developers of the model are not giving out too many details. However, there are some clues. For instance, where you live can change your bankruptcy risk score. An Experian study ranked the states with the highest propensity to have consumers file for bankruptcy within the next year. The top five are:

1. Texas
2. Nevada
3. New Mexico
4. Louisiana
5. Arizona

With all the foreclosures out there, I’m personally surprised that that Florida and California are not on the list.

Attrition Risk Score

An attrition-risk score measures how likely you are to close your account. Lenders use this in combination with other scores to decide whether a customer is worth retaining.

In addition, research has shown that retaining existing customers is more profitable than acquiring new customers due primarily to savings on acquisition costs, the higher volume of service consumption, and customer referrals.

Myrtle Beach Credit Repair – Jason Carr 843.839.8578
Today, more than ever, good credit is a must. Our economy demands that consumers have near perfect credit to buy a home, an auto or obtain any type of credit line. At times these requirements can seem unrealistic or unattainable. The staff at New South Financial is here to help you improve your credit rating and achieve your dreams.

Increase Your Credit Score – Here Are Some Quick Ways
Last Updated – June 2, 2010

There are plenty of ways you can increase your credit score in 30 days. If you are planning to buy a home or car soon, you will need to get your credit cleaned up so you can qualify for that low interest loan! With a little forsight and due diligence, you can reap giant rewards in the form of a lower mortgage or car payment by qualifying for better loan.

1. Pay down your credit cards – Paying off your installment loans may can help your score, but typically not as dramatically as paying down — or paying off — revolving accounts like credit cards. The FICO model and even (from what we understand) the Vantage scoring system now used by the Big 3 weight credit card debt more heavily. Each individual card as well as your total revolving line should be below 25%. If your goal is to increase your credit score – forget about paying down your high interest rate cards first. Work on getting those balances down over higher interest rates to reap the most improvement in credit score.
2. Don’t use your whole credit line every month – Your available credit is averaged over your billing cycle, which is sometimes less than 30 days. If your limit is say, $5,000 and you charge $5,000, even if you pay it off each month, your credit balance is still going to show $2,500 (a 50% usage limit), which is going to make your score plunge.For most small business owners, their credit cards are the way they purchase goods and supplies every month. If the card’s limits are used to the hilt – this can hurt. But wait you say, these are business cards. Yes, they are and most small business owners still have to personally guarantee their business cards, which means they show up on personal credit reports. If you need to use all of the available credit line on your cards, you may want to consider getting a new card to spread out the credit lines a little.
3. Is your credit report correctly reporting your credit limits for your cards? If not, you can call your credit card issuer and ask them to update the list. You can also challenge the limits with the credit bureaus.
4. Don’t use credit card issuers who don’t report your credit limit – Usually this is a problem you only run into with secured credit cards, but were you aware that American Express cards and Capital One do not report credit limits? In this case the bureaus typically use your highest balance as a proxy for your credit limit, which is going to make you look like you are maxed out.
5. Ask a trusted friend or family member to add you to one of their old cards as an authorized user – The older your credit history, the better. If your mother agrees to put you as an authorized user on a card that she; had for 20 years, you could see your score increase dramatically. And with the authorized user plan, you don’t even have to have the card in your possession if “Mom” feels better about this plan. (You’ll have to work things out with her on this).
6. Ask a creditor for forgiveness – If you’ve been a good customer for years, but had a rough patch and missed a payment – you might be able to ask your creditor to “erase” a negative listing. You can do this with a goodwill letter. There is no guarantee that a lender will do this, but this method has had lots of success. Here is a sample letter to help you do this.
7. Get student loan payments current – If you have a student loan that you have defaulted on or have missed payments, you can enter into a “rehab program” which will get your account back on track after 12 months (ok, so it’s not a short-term strategy.) Sallie Mae regularly upgrades your loan status to “Paid as Agreed” if you make a series of 12 or so on-time payments.
8. Dispute old negatives – Say your insurance company never paid a medical bill and now you have a collections account. You can continue protesting that the charge was unjust, or you can try disputing the account with the credit bureaus as “not mine.” The older and smaller a collection account, the more likely the collection agency won’t have bothered to update good ole eOscar with the correct info and the credit bureau won’t be able to match up computer records.
9. Get a collection agency to agree to remove a debt from your report if you pay it – This method is called “pay for delete” and it works like a charm on smaller amounts of $500 and under, especially medical collections. Remember to get the agreement in writing before you pay them anything, and only send a money order after you get them to agree. Check here for more info on settling debts.
10. Dispute with original creditor – Our patented method of disputing with original creditors really works, especially accounts which have been purchased by other banks or are currently with a bank who has gone through some of those massive mergers in the last 10 years. And you have the cases (more common than you think) where some banks just don’t keep good records at all. This method is relatively quick.
11. Target “easy” errors – Target the easy errors on your credit report that have a big bang for the buck.
    • Negatives that truly are not yours: Late payments, charge-offs, collections
    • Any Accounts listed anything other than “current” or “paid as agreed” if you paid on time and in full.
    • Accounts that are still listed as unpaid that were included in a bankruptcy.
    • Negative items older than seven years (10 in the case of bankruptcy) that should have automatically fallen off your report.
    • Any account that is listed as “Closed by the credit grantor” when it wasn’t should be fixed as this is definitely a negative

You will notice, the first 3 items target paying down credit balances. This is for a reason – high credit balances can kill the credit score of someone who otherwise has perfect credit. It is weighted HEAVILY in your credit score. Get those balances down!

Myrtle Beach Credit Repair – Jason Carr 843.839.8578
Today, more than ever, good credit is a must. Our economy demands that consumers have near perfect credit to buy a home, an auto or obtain any type of credit line. At times these requirements can seem unrealistic or unattainable. The staff at New South Financial is here to help you improve your credit rating and achieve your dreams.

Do you need a specialist in credit repair? Just Call 843.267.7354

How to Remove Credit Inquiries

Hey Jason, I noticed there are a lot of inquiries on my credit report how do I stop people from checking my credit without my permission? Bruce

The first thing you need to know is there are two kinds of inquiries – soft and hard.

A soft inquiry occurs when a company buys your information from one of the 3 credit reporting agencies. For instance, let’s say Capital One wants to get more customers. They may contact Equifax and buy a list of men and women, 18-65 years of age, with FICO scores 680 or greater. They then mail those consumers a pre-approved or pre-qualified credit offer.

A soft inquiry doesn’t hurt your credit score. If you want to stop receiving those types of offers just go to www.optoutprescreen.com or call 1-888-5-OPTOUT begin_of_the_skype_highlighting              1-888-5-OPTOUT      end_of_the_skype_highlighting (567-8688).

A hard inquiry, which makes up as much as 10% of your FICO score, is logged anytime you apply for credit. That includes asking your credit card company for a credit limit increase or applying for a loan to buy a house or car. Hard inquiries stay on your credit report for 24 months, but only the last 12 month’s inquiries effect your credit score.

Authorized or Unauthorized?

The only companies authorized to pull a hard inquiry are those you authorize either verbally or in writing. When you apply for a loan or credit there is a document or clause included that authorizes the financing company, or any or their assigns, to obtain your credit for the purpose of determining risk.

What generally happens is when your account gets transferred or sold, each new company leverages that authorization to obtain new copies of your credit for their own purposes, whether that’s collections or to extend you new credit offers.

Let’s say you apply for car financing. The car dealer’s finance department pulls your credit and sends it to 3 different lenders. Those 3 lenders may also pull your credit under that same authorization. You now have 4 new credit inquiries.

3 years later the car dealer and the lenders all assume your lease is about to run out and you’ll be in the market for another car. Using that same authorization they may pull your credit and send you a pre-approved offer.

You have no idea that all these lenders are pulling your credit, so when you go car hunting you’re surprised to find your FICO score has dropped due to a large number of “unauthorized” inquiries.
Here’s How to Remove Unauthorized Inquiries

If the creditor has a signed authorization, then they are legally allowed to pull your credit. My objection is when they cause you financial problems by abusing that authorization months or years after you gave it. Insiders have told me that most creditors store those documents after 6-18 months.

How does that help you? Just send a certified letter requesting proof they are authorized to pull your credit. If they can’t provide proof, because they can’t find your authorization, then they must remove the inquiry.

Myrtle Beach Credit Repair – Jason Carr 843.839.8578 begin_of_the_skype_highlighting 843.839.8578 end_of_the_skype_highlighting
Today, more than ever, good credit is a must. Our economy demands that consumers have near perfect credit to buy a home, an auto or obtain any type of credit line. At times these requirements can seem unrealistic or unattainable. The staff at Carolina Credit Repair is here to help you improve your credit rating and achieve your dreams.
Do you need a specialist in credit repair? Call 843.839.8578 begin_of_the_skype_highlighting 843.839.8578

How to get a credit report for free

All Americans are entitled to free credit reports every year from each of the three major credit bureaus. The credit reports used to cost as much as $9.50 each.

The three major credit-reporting agencies, Equifax, TransUnion and Experian, are each required to provide consumers, upon request, a free copy of their credit report once every 12 months.

The reports will not be sent automatically. Each consumer must request reports one of these three ways:

• Go to AnnualCreditReport.com, which is the only authorized source for consumers to access their annual credit report online for free.

• Call (877) 322-8228.

• Complete the form on the back of the Annual Credit Report Request brochure, and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. The brochure, which can be ordered or printed, is available from the Federal Trade Commission. Click here for more information.

A credit report is simply a rundown of your payment history, listing your accounts, balances and your payment behavior for each. It is not a credit score, or FICO, the three-digit gauge of your creditworthiness used by lenders, employers and insurers. But credit scores do use the information on your credit reports in their calculations, so it’s important to spot and correct inaccuracies as quickly as possible.

What’s the catch?

You can order all three credit reports at one time, or at different times throughout the year. It’s your choice. But be sure to order from the centralized agency. If you go directly to the credit-reporting agencies, you will be charged unless you fit other criteria for a free report.

The new ruling doesn’t replace the other ways to receive a free credit report. You’re still entitled to a free credit report if: you’ve been denied a loan, insurance policy or job based on your credit report; you’re applying for unemployment or receive public assistance; or you currently reside in a state that already offers free credit reports from each credit-reporting agency (Colorado, Georgia, Maine, Massachusetts, Maryland, New Jersey and Vermont).

Watch for typos

You can access your information online at AnnualCreditReport.com, but if you don’t get the Web address exactly right or if you search for terms such as “free credit report,” you could get sucked in and scammed by one of the many credit report “impostors” currently inhabiting cyber-world.

The trio of reporting agencies established a single authorized Web source for customers to access the information for free: AnnualCreditReport.com. That is the only federally mandated source for free, no-strings-attached credit reports.

The rest of the Internet Web sites advertising “free” reports — more than 100 at last count — are in fact impostors whose real agenda is to steer unsuspecting consumers into a for-profit marketing enterprise, according to a World Privacy Forum in-depth investigation and report.

Dozens of the confusing sites are operated by Experian, Equifax and TransUnion, the big three bureaus who together run the government-mandated and authorized free-report site. In other words, while they run one Web site jointly that offers free reports, they’re also running dozens of other sites — often under different names — that charge for the same or additional services.

Where and how to get the goods

The same law that mandated free credit reports also covers other types of information about you, which include:

• Medical information. If you’ve applied for life, health, disability or long-term care policies, information about your health may have been reported to the Medical Information Bureau. This membership association of 600 companies is designed to help insurers detect fraud and deter applicants from lying on applications.

• Tenant history. No single company dominates this field, but one of the larger screening agencies is First Advantage SafeRent.

• Auto and homeowners insurance claims. ChoicePoint’s CLUE reports can be ordered at ChoiceTrust.com, while ISO’s A-Plus reports can be ordered by calling (800) 709-8842 or by writing A-Plus Consumer Inquiry Center, 545 Washington Blvd. 22nd Floor, Jersey City, NJ 07310-1686.

• Check-writing history. ChexSystems is the largest player in this arena. It maintains a database of people who have “mishandled” their bank accounts (typically by repeatedly bouncing checks). You can order a report online (ignore any reference to a “small fee”) or call (800) 428-9623 or send snail-mail to ChexSystems, Attn: Consumer Relations, 7805 Hudson Road, Suite 100, Woodbury, MN 55125.

• Employment screeners. A typical background-checking firm doesn’t maintain “permanent” files on consumers and instead puts together a one-time report for employers. Only companies that maintain databases of information on consumers must provide free reports. However, employers must get your written permission before a third party can run a background check, and you’re entitled to see the report if it’s used to deny you a job or promotion.

Myrtle Beach Credit Repair – Jason Carr 843.839.8578
Today, more than ever, good credit is a must. Our economy demands that consumers have near perfect credit to buy a home, an auto or obtain any type of credit line. At times these requirements can seem unrealistic or unattainable. The staff at Carolina Credit Repair is here to help you improve your credit rating and achieve your dreams.
Do you need a specialist in credit repair? Call 843.839.8578

Raise your credit score to 740

Credit scores are three-digit numbers lenders use to gauge your creditworthiness, and until the financial crisis hit, a 720 FICO credit score was enough to get the best loan terms. Even people with lower scores could get decent deals, and at the peak of the lending boom it seemed that no score was so low that it merited a rejection.

These days, lenders typically demand 740 scores for the best mortgage rates. Lower scores mean higher rates or perhaps no loans at all. Fannie Mae, the giant mortgage-buying agency, recently lifted its minimum score requirement from 580 to 620.

People with top scores are still getting credit card and balance transfer offers. If their issuers raise their rates or lower their limits, they can move their business elsewhere. People with weaker scores, by contrast, are finding their access to credit slowly strangled. Issuers can push them around, and credit seekers have little recourse.

Less-than-stellar credit can hurt in other ways. After all, credit information is used by:

• Insurance companies to evaluate applicants and set premiums.
• Landlords to decide who gets apartments.
• Employers concerned about higher risk of theft from those with troubled finances.

Clearly, cultivating good credit scores is an essential 21st-century skill.

The good news is that it’s possible to boost your numbers if you have a handle on your finances and you know how credit scores work. After all, the median credit score is 720 on the 300-to-850 FICO scale, meaning half the adult U.S. population has a higher score and half has a lower score. Forty percent have scores over 750, and 13% have scores above 800, according to Fair Isaac, the company that created FICO scoring. (You can get an idea of your relative standing with MSN Money’s free credit score estimator; it uses Experian’s Plus score ranges, which roughly align to FICO.)

Plenty of folks are handling their credit well enough to earn good scores. You can, too. But first you need to recognize that:

• You can’t raise your scores if your finances are still in free fall. If you’re unable to pay your bills, you certainly can’t fix your credit. Real credit score repair will have to wait until your financial crisis has been solved and you have enough money to cover your expenses, plus some extra to begin paying down your debts.
• You can’t raise your scores if you don’t use credit. Credit scores try to predict how well you’re likely to use credit in the future by how well you’ve used it in the past. So while living a cash-only lifestyle may do wonders for your wallet, it won’t boost your scores — in fact, without continuing use of some type of credit, eventually your credit reports won’t even generate credit scores.
• You don’t have to pay credit card interest to achieve great scores. “Using credit” is not the same as “carrying a balance on your credit cards.” Carrying a balance is expensive, bad for your finances and completely unnecessary. Many of us who have achieved 800-plus scores pay off our balances religiously, and we know you can build and keep great credit scores without ever paying a dime of credit card interest.
• You can’t expect overnight results. You’re likely to see improvement in your scores within 30 days if you pay down significant chunks of your credit card debt. But otherwise, credit repair takes time, and how much time depends on the many details of your credit reports. If you have serious black marks, such as bankruptcies or foreclosures, you can see significant improvement in your scores as time passes but you may have to wait until those negatives drop off your credit reports before you can join the 700-Plus Club.

Now that you understand the basics, you can use the following techniques to get your scores over 740.

You have to nail the basics

Patrol your credit reports. Your credit scores are based entirely on the information in your credit reports on file at the big three credit bureaus: Equifax, Experian and TransUnion. If the information is wrong, your credit scores could suffer. You can get your reports once a year for free from the government-run AnnualCreditReport.com; you can buy subsequent copies directly from the bureaus or from myFICO.com. Dispute any serious errors, such as:

• Accounts that aren’t yours.
• Reports of late payments when you paid on time.
• Bankruptcies older than 10 years or accounts that were wiped out in bankruptcy but are listed as still due.
• Other negative information that’s older than seven years. (The seven-year clock typically starts 180 days after the account first went delinquent.)

Get a major credit card. Retail cards and gas cards can help you build your credit history initially, but to get your scores into 700-plus territory you’ll want at least one big kahuna: Visa, MasterCard, Discover or American Express. If you can’t qualify for a regular card, consider a secured version, for which you make a deposit with an issuing bank. You can find offers at CardRatings.com, CreditCards.com, LowCards.com and Index Credit Cards, among other sites. Just make sure the card reports to all three bureaus, and try to get a card that converts to a regular credit card after 12 to 18 months of on-time payments.

Arrange automatic payments for every card or loan. Credit scores are extraordinarily sensitive to whether you pay your bills on time, so don’t let travel, a busy schedule or a simple brain cramp trash your scores. Most lenders will let you set up automatic payments that take an amount you specify — the minimum payment, a set dollar amount or the full balance — every month from your checking account.

Don’t let disputes go to collections. Yes, your insurance should have covered that bill; no, you shouldn’t have to pay for a broadband connection that doesn’t work. But if you let a commonplace problem like these escalate, your account will be turned over to collections and become a big black mark on your credit reports. Pay under protest and get your revenge in small claims court. (Don’t get sued yourself, though: Lawsuits and judgments are another major stain on your credit reports.)

Give your limits a wide berth

Pay down and spread out your debt. More than a third of your FICO score depends on how much of your available credit you’re using — your so-called credit utilization. The FICO formula likes to see big gaps between your balances (whether you pay them off each month or not) and your limits, especially on credit cards. (You’re rewarded for paying down installment debt, such as mortgages and auto loans, but your scores improve much more dramatically when you pay down revolving debt such as credit cards.) In short, it’s better to have small balances on several cards than a big balance on one card. For more, read “A debt payoff plan that works

.”

A balance is a balance. You have to worry about your credit utilization ratio even if you pay your balances in full each month. The balance that’s reported to the credit bureaus is typically the one on your last statement, not the balance that’s left over after you pay your bill. So if you charge $9,000 on a $10,000 card, it’s going to look like you’re using 90% of your limit (which is really, really bad), even though you paid off the balance in full when you got the bill.

Shoot for 10%. The less of your available credit you use, the more FICO rewards you. Keeping your credit utilization below 30% on your cards is good; getting it below 10% is even better. If you regularly use more, ask for a higher limit, spread your charges out on more than one card or make two payments every month — one just before your monthly statement closing date to lower the balance reported to the credit bureaus and a second one just before the due date to avoid late fees.

But don’t let your cards gather dust. Overloading your cards is a bad thing for your scores, but so is not using them at all. The scoring formula prefers to see accounts that are being actively used rather than sitting on a shelf. Even a little activity is better than no activity.

Push back against lower limits. Credit card issuers are reducing limits right and left. In fact, one banking analyst estimated that by the end of 2010, risk-averse companies will have slashed in half the $5 trillion in credit limits that existed before the financial crisis. This can be awful news for your credit scores, but you can, and should, try to push back. (Read “Thaw out your frozen credit” for details.) If you can’t get the issuer to reverse its decision, try to move your balance elsewhere.

Myrtle Beach Credit Repair – Jason Carr 843.839.8578
Today, more than ever, good credit is a must. Our economy demands that consumers have near perfect credit to buy a home, an auto or obtain any type of credit line. At times these requirements can seem unrealistic or unattainable. The staff at Carolina Credit Repair is here to help you improve your credit rating and achieve your dreams.
Do you need a specialist in credit repair? Call 843.839.8578

Even the most responsible borrowers slip up sometimes. Maybe a utility bill went unpaid after you moved and the missed payment went into collections. Or, perhaps there are unpaid library fines or parking tickets in collections that are hanging onto your credit history and affecting your FICO credit score, which is widely used by lenders to evaluate your ability to repay a debt.

With the newest version of the FICO credit-scoring system, however, minor delinquencies are now overlooked in calculating creditworthiness.

Under the updated scoring model, called FICO 08, small, missed payments lingering in collections with original amounts of $100 or less will no longer do damage to your credit score.

Consumers also are less likely to be penalized for any single delinquency if it occurred two or more years ago — and if their credit history is otherwise unblemished, says FICO (Fair Isaac Corp.), which developed the FICO scoring system.

“There’s more flexibility with missing a payment,” said Careen Foster, director of global scoring product management for FICO. “If you have a more habitual pattern of paying accounts late…you’re more likely to get penalized for that.”

If a consumer’s credit usage is high, that will be more likely to hurt his or her score with FICO 08. But getting close to your credit-card limits — even if you always pay on time — is penalized in some way in every FICO score, not only the recent edition, Foster said.

The new system has been available at all three credit bureaus — Experian, Trans-Union and Equifax — since last month.

The changes were made to provide lenders with a better risk assessment of borrowers, said John Ulzheimer, president of consumer education for Credit.com, a consumer education and advocacy site. FICO decided that one small library fine didn’t really predict whether a consumer was likely to default, for example.

With the changes, individuals who pose a low credit risk will probably see their scores rise a bit, and those who are high risk could see their scores drop, he adds.

The new FICO credit scoring model also addresses “piggybacking,” a practice used by credit-repair companies to help people improve their scores, Ulzheimer said. In piggybacking, an individual pays to become an authorized user on a stranger’s account. The account holder gets paid for allowing the person to be associated with the account, and the new authorized user is able to improve his or her credit score.

“It was a practice to…misrepresent what your credit looks like to your bank,” Foster said.

The new FICO aims to single out individuals who are named as authorized sources through deceptive means, Ulzheimer said. Those people won’t see their credit scores rise as a result. But the scores of legitimate authorized users will be treated as they always have been.

Improve Your Credit

While this new FICO model will help consumers’ credit scores in some cases, people still should take steps to improve their credit. Granted, it’s impossible for consumers to calculate their FICO scores themselves, said Rodney Anderson, of Rodney Anderson Lending Services in Plano, Texas.

“It’s almost like the Coca-Cola formula. No one has access to the Coca-Cola formula, no one has access to the FICO formula,” he said.

But by being proactive, you can start to work toward a higher score, something that will serve you well every time you apply for a loan.

Some suggestions:

•Monitor your credit reports and correct errors. Look not only for negative events on your record, but also examine the credit limits to make sure they’re accurate. If the credit limits appear lower on the report than they actually are, that has the potential to hurt your score, Anderson said.

•Pay bills on time and keep card balances low. Your payment history, and the amount you owe on your accounts as a ratio of the amount of credit you have access to, are important components of your score, Foster said. FICO 08 is more sensitive to high credit usage, and consumers may see a lower score if their reported balance on one or more cards is near the account’s limit.

•Take on new credit only when you need it. Some credit cards come with great offers, including a percentage off your bill if you sign up for one at the cash register. If you accept, make sure you’re getting a big enough benefit to make it worthwhile — taking on additional credit could end up dinging your score, Foster said

Myrtle Beach Credit Repair – Jason Carr 843.839.8578
Today, more than ever, good credit is a must. Our economy demands that consumers have near perfect credit to buy a home, an auto or obtain any type of credit line. At times these requirements can seem unrealistic or unattainable. The staff at Carolina Credit Repair is here to help you improve your credit rating and achieve your dreams.
Do you need a specialist in credit repair? Call 843.839.8578

What Is Credit Repair?