You'd better start reminding your neighbors to pay their bills on time!  Now, at least one of the big three credit bureaus is keeping track of credit scores by metro area as a reflection on your personal likelihood to pay your bills.

This should go in the "surely they've got to be kidding" file.  But its apparently true.  Trans Union, one of the big three credit bureaus and perennial defendant in Fair Credit Reporting Act lawsuits filed by the Kittell Law Firm, is tracking not just individuals' credit scores, but the average credit scores for metropolitan areas.  This means that, even if you pay all your bills on time, you are at risk for getting turned down for a loan or credit card just because the area you live in has a low average score, which, according to Trans Union, could indicate that you are less likely to repay your creditors.  

Calling them "metro ratings", Trans Union has determined the average risk for a collective group of people based upon where those people live.  Trans Union contends that a low metro rating does not just reflect a geographically localized group of lackluster bill payers, but could indicate places where the unemployment rate is high or that were hit hard by home foreclosures.  

Talk about hitting where it hurts.  Trans Union, who cares about nothing other than its bottom line, is now making it harder for entrepreneurs who want to start a new business in an economically deprived community to get a loan because the unemployed workforce who need the jobs the entrepreneur is trying to create have low credit scores because (duuuhhh) they are unemployed and can not pay their bills.  I have not seen a vicious cycle like that since employers started reviewing credit reports during the job application process, which lead to the old "you don't have a job so your credit score is low so I can't give you a job because your credit score is low" catch 22.  

So, neighbors of mine, don't be surprised if I start calling you once a month to make sure you are paying your bills timely, particularly since the area I live in (the Memphis Tenn-Miss-Ark area which us local folks call the Mid South) has the worst metro rating in the nation at a measly score of 638 (using a scoring range of 501 to 999).  

The complete list of the worst metro scores are:

Memphis, Tenn-Miss-Ark. 638;

McAllen-Edinburg-Mission, Texas 639;

Jackson, MIss. 642;

El Paso 650;

Columbia, SC 650;

Las Vegas-Paradise 650;

Little Rock-North Little Rock-Conway 651;

Baton Rouge 651;

Lakeland-Winter Haven, Fla. 651; and

Augusta-Richmond County, GA-SC 651.

The best metro scores are:

San Jose-Sunnyvale-Santa Clara, Calif. 700;

San Francisco-Oakland-Fremont, Calif. 696;

Madison, Wis. 694;

Honolulu 693;

Minneapolis-St. Paul-Bloomington, Minn.-Wis. 691;

Bridgeport-Stamford-Norwalk, Conn. 690;

Boston-Cambridge-Quincy, Mass.-N.H. 689;

Oxnard-Thousand Oaks-Ventura, Calif. 685;

Portland-South Portland-Biddeford, Maine 685; and

Seattle-Tacoma-Bellevue, Wash. 685.

What's next?  Trans Union tracking people's credit worthiness by the average score of their Facebook friends?  Now where was that "unfriend" button again?!

Or how about by party affiliation?  Interesting to note that the 8 of the 10 bad metro scores came from "red" states while all 10 of the best metro scores came from "blue" states.  I guess Trans Union will now be claiming that Democrats are better financial risks that Republicans!

Credit Score myths

Here's a link to a good article at Forbes magazine about three myths about credit scores.  I suspect a lot of people think the same thing that the author of this article used to think about her credit score.

Here's the article - http://www.forbes.com/sites/moneywisewomen/2012/06/21/3-myths-i-used-to-believe-about-credit-scores/

Another article about credit scores affecting insurance premiums

The Columbus Dispatch has published a well written article about the effect your credit score has on the cost of insuring your vehicle and home and how most consumers don't even know about how their good or bad credit history affects them.

A good point made by the article is how the use of credit scores when setting insurance premiums underscores why the accuracy of credit reports is so important. It's not like you can dodge insuring your car (which is required in many if not most states) and mortgage companies rightly require that a home be insured before financing the purchase. Thus, the protections afforded consumers by the Fair Credit Reporting Act are important because they help ensure accuracy. In fact, the FCRA requires that credit bureaus use reasonable procedures to assure maximum possible accuracy of the credit reports they generate.

Litigation pursuant to the FCRA is thus an important threat to keep the credit bureaus as accurate as possible. Without the threat of a lawsuit, the FCRA would be a dog without teeth - all bark with no bite. Many legislators who cater to the interests of businesses over consumers often want the litigation threat of new laws limited to non-private enforcement. Such a limitation means that a consumer can not sue due to a violation, only a government regulator type entity (i.e. the FTC or state attorneys general) can sue. And, even if willing to do so, most such entities do not have the manpower to do so. Hence the reason why private enforcement through private representation by attorneys is so important to the enforcement of the FCRA because, without it, the credit bureaus could run amok, causing havoc to the entire economy.

The article is here - http://www.dispatch.com/content/stories/local/2012/06/10/bad-credit-raises-cost-of-insuring-car-home.html - and includes personal stories of consumers with perfect driving histories that miss a credit card payment or two and suddenly are perceived as horrible drivers or more apt to have their homes hit by a tornado.

Craziness.

Awesome article about how to raise your credit score

Since stumbling upon Money Talk News, I have been very impressed with the research and writing of their articles, particularly on consumer issues.  Since starting this blog, I have read countless articles about how to do this or that, but most offer just basic advice that doesn't really help much.  Not so about articles from Money Talk News.  Their articles are almost always insightful and well written.  This article is no different.  I highly advise you to read it and follow its advice to raise your credit score.  Here's the article - http://www.moneytalksnews.com/2012/05/28/18-tips-to-give-your-credit-score-a-boost/#.T8QI6kmEAXk.blogger

Credit Scores Disclosed for Free Starting Tomorrow ...

but only when you suffer an adverse action based on a credit report, such as when your credit application is denied.

Starting tomorrow, July 21, 2011, the latest amendments to the Fair Credit Reporting Act go into effect.  The new amendments require lenders or other users of credit scores to include those scores on their adverse action letters they send consumers who suffer the adverse actions.  The publication of the score will be in addition to the reasons for the adverse action and the identity of the consumer reporting agency whose report was used in the decision to deny credit already required to be part of the adverse action letter.

This is a helpful change to the law.  Before, consumers would only know what score was assigned to them during a credit application if litigation resulted and the lender's files were subpoenaed.  Scores purchased even thirty seconds later from the consumer reporting agency could bear little resemblance to the score used in the adverse action, since lenders often use their own credit scoring models, which differ from the credit scoring models used by the CRAs.  If you do buy a score, buy it directly from FICO, as that's the scoring model most lenders use.

New Bill to Require Free Credit Scores if Passed

Way to go U.S. Representative Steve Cohen, a Democrat from Memphis, TN.  Even though I've never met him, I feel like I know Representative Cohen, since I live and grew up just an hour or so south of Memphis and our local TV stations all come out of Memphis.  Cohen was a TN state representative but is now a freshman U.S. Representative, having won Harold Ford's old spot after he left it to unsuccessfully run for the U.S. Sentate.

Cohen has introduced H.R. 4538, a bill which would amend the FCRA to require that the credit bureaus provide consumers with their credit scores for free with their annual free credit reports.  As I have reported on many times previously, every consumer is entitled to one free credit report from each of the three main credit bureaus (Equifax, Experian and Trans Union) each year.  To get that report, consumers must use the website http://www.annualcreditreport.com/ or submit the request form via mail that can be found on that site as well as at my firm's website http://www.merkel-cocke.com/.

The primary problem with the free credit report is that it did not include your credit score.  For a consumer to get their all important credit score, the consumer must pay extra (usually around $5) directly to the credit bureau.  While the credit scores sold by the credit bureaus are not your true credit score, they are still good barometers for what your real credit score is.

Cohen's bill, if passed, would eliminate this problem with http://www.annualcreditreport.com/ and help consumers everywhere.  Mr. Cohen, if you read this, please know I congratulate you on a very good bill and offer any help I might provide through my nationwide contacts to help get the bill passed.  I know practically every attorney nationwide that handles FCRA litigation on a regular basis and would be happy to help drum up support for your bill.

Does checking your credit report hurt your credit score?

I get asked all the time whether a consumer checking his or her own credit report hurts the consumer's credit score.  The short answer - no.  When you as a consumer check your own credit report by requesting a copy from one of the big three credit bureaus, it is considered a "soft inquiry", which is only seen by the and does not affect the consumer's credit score in any way.

When a third party, such as a potential creditor, views a consumer's credit report, that is considered a "hard inquiry" and is seen by others reviewing the consumer's credit report.  A hard inquiry can also potentially affect your credit score.  But not always.

For instance, when you go out trying to buy a new car, the car dealership(s) you visit usually shop your credit around to try to get you the best financing and, as a result, increase their chances at a sale.  This shopping around causes multiple "hard inquiries" on your credit report.  However, these inquiries are treated as one inquiry, rather than several, for the purpose of keeping the inquiries from dragging down your credit score.

But I know of no set of circumstances where requesting your own credit report from one or more of the big three credit bureaus would hurt your credit score.

Nice article with some good questions and answers, particularly for younger consumers.  The whole article is on the Chicago Tribune's website at http://www.chicagotribune.com/business/yourmoney/chi-tc-ym-started-bigda-0110jan10,0,4925763.story

So here are five common questions about credit scores, specifically FICO scores, the most widely used rating.


FICO scores range from 300 (the worst) to 850 (the best).
Q.  How do you establish a credit history and a FICO score?

A.  You need one credit account -- a student loan, auto loan, mortgage or credit card, for example -- open at least six months and reported to one of the three main credit bureaus: Equifax, Experian and TransUnion, says Barry Paperno, consumer operations manager for Fair Isaac Corp., the FICO providers.

Other bills, such as your rent or utilities, generally are not reported to the bureaus.

By law, you're entitled to one free credit report every 12 months from each of the three credit bureaus at annualcreditreport.com, the only site where you can access a free report.

You have to pay to get your credit score, however. If, for example, you request an Equifax report at AnnualCreditReport.com, you can buy the FICO score it's showing lenders for $7.95. Otherwise, you can buy scores for $15.95 each at myfico.com. (The Experian FICO score is available only to lenders as will the Equifax score after Feb. 14.)

Q.  Does carrying a credit card balance improve my rating?

A.  There is no advantage to carrying a balance, but the lower the better.

Nearly a third of your FICO score is based on your credit utilization, or the percentage of your credit limit that you use. Ideally, you want to charge no more than 30 percent of your available credit.

And even if you pay off your balance each month, it's unwise to charge the full amount of your credit limit. While lenders report to the bureaus every 30 days, the data may not reflect a payment, said Steven Katz, a spokesman for TransUnion. So it could look like you are using all of your credit.

Q.  Does it help my score if I close an old credit card?

A.  Generally, no. And it may hurt by raising your utilization ratio because you have less credit available.

In addition, 15 percent of your FICO score is based on your credit history (the longer the better). Closing an account you've had several years would shorten your history -- and lower your score.

Charge a small sum to the card every few months to keep it active and pay off the balance right away.

Q.  Will my score drop if I check my credit report?

A.  No. Applying for credit, however, does hurt your score so open new accounts sparingly.

One exception: If you are shopping for a mortgage or auto loan, FICO generally counts any applications made within a 45-day period as one. FICO recognizes you have to submit multiple applications as you shop for loan terms. [this is also true regarding car loan applications - those made within a short time of each other are considered one application].

Q.  How do late payments affect my score?

A.  Once you are 30 days overdue on a bill, your score could drop 60 to 110 points, depending on your credit file, according to FICO.

Your payment history makes up the largest portion of your FICO score, so don't pay late. If it's overdue, get back on track as quickly as possible. The more recently you've been late, the worse for your score.

"The key is to make sure you are paying at least the minimum due on time every month," said Katz of TransUnion.

On that last question, its important to note that a late payment alone does not affect your score, but a late payment over thirty days late does.  But its still a good idea to pay on time, since even one day late will cost you a $39 or so late fee. 

Fair Isaac loses antitrust lawsuit

A Minneapolis jury on Friday ruled against Fair Isaac and in favor of credit bureau Experian in an antitrust lawsuit filed by Fair Isaac against Experian.  Fair Isaac claimed that it had exclusive trademark rights to credit scores utilizing any score range that overlapped 300 to 850.  Fair Isaac claimed that Experian's VantageScore credit score violated its alleged trademark rights.  Unfortunately for Fair Isaac, the Minneapolis jury disagreed.

"Today's verdict is a victory for Experian and for American consumers," said Kerry Williams, group president of credit services and decision analytics at Experian. "By preventing FICO from further stifling competition in the marketplace, the jury's decision will increase consumer choice in credit scoring."

The jury also found that Fair Isaac committed fraud on the Patent and Trademark Office in obtaining its trademark registration.

VantageScore is the credit reporting industry's first credit score developed jointly by the three national credit reporting companies to deliver consistent, objective credit scores across their respective databases. VantageScore provides consumers and businesses with a highly predictive, consistent score that is easy to understand and apply. VantageScore utilizes a range from 501 to 990 that naturally aligns with well-known A, B, C, D and F grade intervals, and is used by four of the top five U.S. financial institutions and eight of the top 10 credit card issuers.

New York Times compares scores from different sites

The New York Times took the time to analyze and compare the different credit scores from each of the three credit bureaus and other websites where you can obtain your "credit score".  I use quotes because only some of the sites actually provide a score that is likely to be used by a lender.

For instance, the three credit bureaus each offer to sell consumers their credit scores.  But only Equifax uses a score that is actually based on a scoring model used by potential lenders.  Experian and Trans Union's scores are thus less useful to consumers than the score sold by Equifax. 

Also the congressionally required site http://www.annualcreditreport.com/ uses a FICO score, which is used by lenders.  You can also get this score via FICO's website.  But the credit score offered by http://www.creditkarma.com/ does not use a scoring model used by lenders.  The website http://www.quizzle.com/ is not mentioned in the article but also does not use a score based upon a scoring model used by lenders.

The full article is here - http://www.nytimes.com/interactive/2009/11/29/business/scores2.html. 

My thoughts on Credit Karma's free credit score

A reader named Marie posted a comment yesterday in response to my post about Quizzle.com's free credit scores - see http://fcralawyer.blogspot.com/2009/10/free-credit-score-at-quizzlecom-no-not.html.  Marie wanted to know my thoughts on Credit Karma's free credit scores. 

After getting over the initial shock of one of my faithful readers actually asking a question (which is what I initially hoped this blog to receive a lot of), I reviewed Credit Karma's website http://www.creditkarma.com/ as I had never heard of Credit Karma before Marie's comment.  I thought, perhaps, Credit Karma is a distant cousin of the mythical Credit Fairy, which I posted about here http://fcralawyer.blogspot.com/search/label/creditfairy.org. 

As it turns out, Credit Karma is a lot like quizzle.com.  It claims to provide free credit scores for those willing to register on its website.  It claims it pays for the costs of obtaining the credit scores by utilizing advertising dollars from selling ad space on its website. 

My initial thought was the same as quizzle.com, i.e. the site provides "a" score but not necessarily "the" score that your creditors receive.  That's because many large creditors utilize their own unique scoring models so there's no way to see that score before you apply (and maybe not even after you apply) to those creditors for credit.  Smaller creditors use standard scoring models, such as FICO.  Its possible that Credit Karma also uses a standard scoring model, but I searched their website up and down and could not find even a hint as to what scoring model they use.  Therefore, Credit Karma, like quizzle.com, is good for finding out generally how your credit score fares but don't count on it to be exact.  But, at least its free to find this out using Credit Karma or quizzle.com, whereas you'd have to pay the credit bureaus to get the same "almost" score.

One thing that did concern me about Credit Karma is how do they get your score without it being a hard inquiry on your credit report.  When you buy your score from one of the three credit bureaus, it does not impact your credit score because it does not count as an inquiry against your credit report.  However, when a third party accesses your credit report (i.e. to get the information needed to generate your credit score), it will show up as a hard inquiry and thus, potentially, negatively impact your credit score. 

Yet, Credit Karma claims the opposite.  Here's what they say on their FAQ page:

Will using Credit Karma lower my credit score?


No. Credit Karma is making the credit score request on your behalf. Inquires made on your behalf will not be shown to creditors and will not affect your credit score.

Maybe Credit Karma is some subsidiary of one of the three credit bureaus and that's how they accomplish getting your score without causing a hard inquiry.  Otherwise, I don't see how they do it and am a bit suspicious. 

Have any of you out there gotten your credit score via Credit Karma and then looked at your full report to see if a hard inquiry showed up?  Or have any of you used Credit Karma at all?  If so, I (and maybe Marie too) would be interested in hearing what you found.

New FICO scoring model may do more harm than good

From PRWeb.com:

New changes to the FICO® credit scoring model, dubbed FICO® 08, were recently made available to all three major credit bureaus (Experian, Equifax and TransUnion). While some are touting these changes as a win for consumers, Lexington Law®, a consumer advocacy law firm, cautions that FICO® 08 may instead cause millions of credit scores to decline.
Used by lenders to assess credit risk, credit scores are derived through statistical analysis of the information in a credit report. The FICO® scoring model translates this data into a single 3-digit number ranging from 300-850. Lenders use this number to determine whether a borrower is likely to repay his or her debts.

This new scoring model has received positive publicity because it excludes minor missed payments from negatively affecting credit scores. The model docks fewer points from credit scores for charged-off accounts of less than $100 and for isolated 30-day late accounts.

Some, however, believe that FICO® 08's scoring model does little for consumers.

"The industry is hyping FICO® 08 as a great thing for consumers because of the way the new scoring model reports some late payments" says John Heath, directing attorney for Lexington Law Firm, "However, no one has blown the whistle about how few consumers will benefit from the new model and how small of a benefit those few will actually receive."

"After all, isolated late payments and small accounts don't represent the bulk of the negative items found in consumer credit reports; a large number of collection accounts are for far more than the $100 threshold FICO® 08 uses. Additionally, those few consumers who have these types of mildly delinquent accounts may not see any scoring increase, because the prior scoring model already considered that a collection account might be isolated and for only a small amount."

A potentially more significant change, that has incidentally already received some negative publicity, is the increased weight placed upon credit utilization: FICO® 08 is more sensitive to the percentage of available credit consumers are currently using. This change will likely affect millions of Americans who carry higher or even maxed-out credit card balances. Those Americans may experience immediate reductions in their credit scores.

Recent economic conditions, during which credit card companies have reduced credit limits or canceled cards outright, has compounded this problem for consumers. FICO® 08's increased emphasis upon credit utilization means that consumers whose credit limits were reduced are more likely to experience greater credit scores reductions than they would have seen under the previous scoring model. Simply put, with the new scoring model, lenders are far more likely to view consumers who have had their credit card limits reduced as greater lending risks.

"Credit utilization ratios have a place in the credit scoring model, but to place more emphasis on this factor in today's economy is problematic," added Heath. "With today's strict lending requirements, even some very creditworthy consumers must pay higher interest rates because of their credit scores, resulting in higher profits for credit card companies and other lenders. With FICO® 08, credit card companies have more power over consumer credit scores. They can lower their customers' credit scores by simply reducing their credit limits."

Free credit score at quizzle.com? No, not really

Quizzle.com is getting a lot of buzz lately, particularly after being mentioned by Clark Howard as a place consumers can get their credit score for free.  While consumers can purportedly get a free credit score once every six months, the problem is that its not a credit score that actually used by lenders. 

In other words, quizzle.com is about as useful as say ... I don't know ... me telling you faithful readers what your credit scores are.  You right there, your score is 684.  You over there, your score is 575.  You in the red shirt, yours is 702.  Guess what, my credit scoring model is not used by lenders either, so its just as useless as quizzle.com's score. 

Don't take this to mean that I am suggesting buying your score from one of the credit bureaus like Experian, Equifax or Trans Union.  Oh, much to the contrary, that would be even worse.  Then you would be paying for a score that's also not used by lenders.  That's right, folks, lenders don't use the big three's credit scores either. 

Lenders typically do one of two things - they either set their own criteria for what's important to them, which means that particular lender's scoring model is unique.  Or lenders use one of the pre-made scoring models, such as Fair Isaac's scoring model.  So if you really want to get your credit score that could actually be a credit score that a lender might use, then you should buy your score from Fair Isaac by going to http://www.myfico.com/.  The basic credit report (from Equifax or Trans Union) and FICO's scoring model costs $15.95.  The myfico website touts this score as one "lenders use".

Credit Reports, not Credit Scores, Affect Employment Chances

As I have reported previously, potential employers have a permissible purpose to obtain your credit report with consumer consent.  According to Pamela Yip with the Dallas Morning News, the credit bureaus do not get your credit score with a credit report obtained for employment purposes.  Pamela reports the following as the positions of each of the credit bureaus:

• "The key point to consider here is that credit scores are not predictive of employment performance," said Steven R. Katz, director of consumer brand at TransUnion. "They are designed to predict the likelihood of such things as an individual defaulting on a loan or filing for bankruptcy."

• "We don't provide credit scores with an employment report because they're not extending you a loan," said Michele Boddavice, president of product management and development at Experian Credit Services. "There's no relevancy there to your credit score and an employment decision."

• Equifax doesn't "provide credit scores or files [credit reports] for pre-employment screenings," said spokesman Tim Klein.

Informative article about the problems with credit scores

I often tell people that ask (and even some that don't ask) that nobody can explain how a credit score is calculated, not even the people that work for the credit bureaus.  So many things affect your score - your payment history, how much you pay, your debt to income ratio, your debt to credit limit ratio, etc.  So many factors affect your score that it is virtually impossible to determine what exactly causes your score to be what it is.

Dale Quinn with the Arizona Daily Star delved into the calculation of credit scores.  Here's what he found:

Credit scores. Three-digit numbers that can cost consumers thousands of dollars every year.


The score influences interest rates for mortgages and car loans. It affects insurance premiums. Employers and landlords can even use the numbers to decide whether a person will land a job or secure housing.

And, consumer advocates say, the reports are often loaded with errors and arbitrary penalties that cost people money.

Kenneth Benner, a consumer advocate and retired broadcaster living in Marana, said the problem can be aggravated for those who are victims of identity theft, who can spend years trying to repair their credit scores. In the meantime, they pay the penalty with higher interest and insurance rates.

Benner has received grant money and is working on a research project examining how credit scores are determined. He is also a board member of the Arizona Consumer Council.

The difficulty of getting mistakes on credit reports fixed and the seemingly arbitrary method of reducing scores puts consumers at a disadvantage, he said.

Also, the scores from the three main credit bureaus — Equifax, TransUnion and Experian — can vary with little explanation to the consumer as to why. And that can make a difference depending on which score a lender looks at, Benner said.

For their part, the credit bureaus urge consumers to keep track of what's on their credit reports.

"We encourage consumers to review their credit reports regularly and to contact us if they see anything that doesn't look right," said Steven Katz, a spokesman for TransUnion. "Consumers are entitled to one free credit-report disclosure every 12 months from each of the three national credit-reporting companies and we encourage them to obtain these."

The problem with that, said Ed Mierzwinski, a consumer program director with the U.S. Public Interest Research Group, is that the credit report a consumer sees is not as detailed as one viewed by a lender.

Those reports can include information from individuals with similar names, and that can drive down a consumer's credit score, he said.

There's also a lack of transparency in how the scores are calculated, Mierzwinski said. While the system reduces human bias, it also lacks discretion a person would exhibit when examining the report.

"Credit scoring is based on credit reports, and credit reports are often full of mistakes," Mierzwinski said.

A January report by the National Consumer Law Center said as many one in four credit reports have serious errors.

And Mierzwinski said that number could be even higher.

He said the use of credit scores by employers and landlords should be banned. If someone defaults on a credit card, it doesn't necessarily mean he's going to crash his car, Mierzwinski said.

Melissa Stoloff, a spokeswoman in Arizona for the Allstate insurance company, said the company does use the scores to determine its customers' premiums and that research has shown individuals with high credit scores are a lower risk to insure.

"In rating and underwriting insurance we use several factors with credit being one of them," she said. "It's something that allows us to reward customers that are less likely to incur a loss with lower premiums."

Conversely, consumers with low credit scores will pay higher premiums, she said. Allstate has a contract with TransUnion and gets its credit scores from that bureau, she said.

Benner also pointed out that a consumer who is shopping for a good loan would be punished with a lower credit score because applying for credit reduces the number.

Essentially, Benner said, bureaus can see that as an increasing risk factor. The assertion was backed up by the Web site MyFico.com. But it did say searching for a good rate won't have too much impact on a credit score.

"Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto, mortgage or student-loan lenders within a short period of time," the Web site says.

Still, Benner said, even small drops in credit scores can mean hundreds of dollars in extra payments.

The full article can be found here - http://www.azstarnet.com/business/309735.

The true purpose of credit scores

Here's another good article on Examiner.com, this one by Mary Supinger. It explains the true purpose of your credit score as well as the benefits of exercising your rights under the Fair Credit Reporting Act. Here's the article:

"Given the current state of the mortgage industry, rates may be low, but the add-ons for low credit scores are getting higher everyday.

Make no mistake; no one cares about your credit more than you do.

You are the one who must foot the bill for bad credit so it is in your best interest to listen up and take action.

Because human beings input this information into the system and because all three credit bureaus (CRAs) have various servers across the country both good and bad information can pop up on your credit report.

Thankfully, most of that information is correct. Some of that information is incorrect or true, but negative. Depending on who you speak with, up to 72% of all credit reports contain errors. This is why you need to practice routine maintenance of your credit report; because items do pop up again after they have been removed. It can be maddening until you learn how to handle the situation and use it to benefit yourself.

In my business as a loan officer, I have been an expert witness in several court actions because creditors have injured a person’s credit profile.

One of my clients was awarded over $250,000 in cash and at least another $100,000 in benefit for the refinance of their home. All this because we paid attention and fought for the rights that we are all entitled to under the Fair Credit Reporting Act.

To sum things up, all of the credit repositories must have a completely accurate reporting of an item or they are required by law to delete the item. You can use this to your advantage.

Credit scoring has been around for years and years. Car dealers and insurance companies have used them for decades. When mortgage lenders began using them for making loans in the early 90’s it set in motion the mortgage banking and portfolio lenders ability to make loans based on 'credit risk factors'.

That means that the credit score told the lender a lot of what they needed to know in determining whether a borrower would make their payments on time.

The entire purpose of credit scoring is to determine whether a borrower will have a 90 day late on any account within the next 24 months.

That’s it; plain and simple. By knowing whether that borrower is at risk, it enabled mortgage and home loan underwriters the ability to make a 'bare facts' decision out of the loan approval.

It leveled the playing field.

You will still need to prove your income and assets with most types of borrowing, but the higher your credit scores, the better the price will be for that borrowing."

Tips on improving your credit score

While I don't agree with hiring a credit repair company to fix your credit, since most are scams, I do agree with the rest of the advice in this article by someone (the article doesn't identify who) that works for or owns a credit repair company. Here's the advice I do agree with:

"Beware of Store Cards

Department stores love to push their credit cards by offering a discount on your purchase if you sign up on the spot. This can be a good deal. But it is handy to know that store cards create triple trouble on your credit report. First, your score will be reduced because of the inquiry. Second, your score will be reduced because of the new account that will soon appear on your report. And third, store cards tend to give a low credit line, often just above your purchase amount. This can be terribly damaging as the FICO credit scoring model puts a lot of weight on the relationship between your balance and your high credit limit.

Watch That High Limit

I run a national credit repair company and speak to people all day long about their credit reports. One of the bits of advice that we like to offer our customers is to pretend they only have half the limit on their credit card that they really have. It takes some discipline to do this but it can make a big difference on your credit score. As soon as your balance exceeds fifty percent of your available limit your credit score will start to suffer. If your credit balances are currently close to your credit limits you might consider calling the credit card companies and asking them to increase your limit. You will be amazed at how fast this can make your score go up!

The Auto Shopping Credit Trap

I can’t tell you the number of times that we have looked at a credit report and seen multiple auto credit inquiries. When we ask our customer they inform us that they only went to two different dealers. Auto dealers will often shop for the best interest rate for you. If they shop with three auto finance companies you will have three credit inquiries. These multiple inquiries can have a significant impact on your score. This is not the auto dealers fault. After all, they are acting your best interest, but it is best to be aware of the possibilities. If you are shopping for a car I would suggest not providing your Social Security number until you are settled on the car you want.

[Ok, I don't agree with this one because I have been told numerous times by representatives of the credit bureaus and those (like me) that sue the credit bureaus often that multiple inquiries arising from a possible auto purchase are treated as one inquiry and thus do not overly affect your credit score.]

No More Mr. (or Mrs.) Nice Guy

Just about every day in the credit repair business we come across someone that was nice enough to co-sign for someone on a car loan. I’m sorry to say this, but chances are that if they need you to co-sign they will not make their payments on time. And this will kill your credit scores. I know that this is a tough call. It is hard to say 'no'. If this situation arises in your life I suggest an alternative approach. Go ahead and co-sign. But when the payment book arrives ask them to give it to you. Have them pay you instead of the auto finance company. You will make the payments on time. And maybe they will feel some extra obligation to make their payments to you on time as opposed to some anonymous auto finance company.

Don’t get complacent

Check your credit from time to time. In December of 2003 Congress passed the Fair and Accurate Credit Transactions Act (FACT Act) which, among other things gives you the right to get a free credit report from each bureau one time per year. This law was passed to protect you from the credit reporting errors that occur far too frequently. Don’t imagine that because you are doing everything right that the credit bureaus are reporting everything correctly. Get your reports and proof read them carefully. It’s your right."

To exercise that right, be sure to go to www.annualcreditreport.com as I explained here - http://fcralawyer.blogspot.com/2009/05/truly-free-credit-report.html. For the rest of the article about improving your credit score (even the parts I don't agree with), click here - http://www.firmenpresse.de/pressrelease2056.html.

A helpful site with lots of good information

Here's a nice site with lots of good information about your credit report and improving your credit score the right way - http://www.creditfairy.org/. Check it out.