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Understanding the World of Credit Scores

Most people are not aware that most credit scores sold online are not the same credit scores that lenders use in making lending decisions. The score used by lenders is called the FICO score and it is the only score that counts. Unfortunately, the companies that sell non-FICO scores do not make it clear that these scores may vary widely from real FICO scores. Worse yet, the three credit bureaus that provide FICO scores to lenders are among the worse offenders in selling non-FICO scores to consumers!

One Score Three Names

The FICO score has been re-branded by each of the three bureaus for their own marketing, hence you will hear of three scores, although they are all driven by the same software. Equifax calls it a BEACON score, TransUnion calls it an EMPIRICA score, and Experian calls it the EXPERIAN/Fair Isaac Risk Model. The scores may be different because each bureau gathers information from a slightly different mix of creditors. If you look at your three reports you will notice that some accounts are missing on each bureau. Timing also plays a roll. A recent change in your credit may be picked up sooner at one bureau than another. You can purchase your real FICO score at MyFico.com.

Improve Your Credit Score Fast

So what makes your FICO score tick? And what can you do about it? Here are a few strategies that everyone involved in the credit repair process should know.

Check Your High Credit Limits

The relationship between your current balance and the available credit limit on your revolving accounts has a major impact on your credit score. Every revolving account on your report should be examined. If the high credit limit is understated send a dispute letter to each of the three credit bureaus asking them to update the information. If you have extra cash, pay down those balances and watch your score go up!

Increase Your High Credit Limits

There is one additional course of action that you should consider that can also reduce the ratio of your current balance to your high credit limit. Call each and every credit card company and ask them to increase your limit. They may or may not agree, but you might be surprised. Please keep in mind that you are doing this to improve your credit. Having a higher credit limit does not mean that you should use it.

Check the Age of Your Accounts

New accounts count against your credit score. Conversely, the credit bureaus will reward you for the accounts that you have maintained over time. When reviewing your three credit reports be sure to look carefully at the initial reporting date for each revolving and installment account. If the age of the account is incorrect on your credit reports send dispute letters to the bureaus. This is a great credit repair trick and well worth the effort.

Resurrect an Old Account

It is not unusual to discover an account on your credit report that you forgot about years ago. If you don’t have much credit please don’t cancel the account. If you no longer have the card in your possession I suggest that you call the company and obtain a replacement card. When you get it you should make a small purchase. The exact algorithm used in the FICO score is a secret, but based on our observations it is best to have some occasional activity on a credit card.

Double Trouble! Eliminate Duplicates

Look at your credit reports carefully. If you see the same account more than once it is probably hurting your score unless it is over three years old with a perfect history and a low balance. If it does not meet these criteria get rid of it now! Collection agencies are notorious for causing duplicate reporting errors. Only one collection agency can own a debt at a time. Essential credit repair tip! If a collection agency no longer owns the debt they are not allowed to report it. That’s the law!

Post Bankruptcy Cleanup

If you have had a bankruptcy you should take action to clean up your credit with all three bureaus immediately upon receiving your discharge. If you don’t feel up to the task of dealing with the paperwork I suggest that you hire a reputable credit repair company. A reputable credit repair company will be inexpensive and be able to do this for you very quickly. If you don’t take action to clean up your credit report it will not happen by itself. A comprehensive post bankruptcy clean up can have a dramatic impact on your credit scores within as little a sixty days after your discharge.

Jim Kemish is the president and founder of Sky Blue Credit Repair Services. Sky Blue offers professionally managed credit bureau disputes, debt validation, and FICO score counseling. Sky Blue has been dedicated to providing intelligent customized credit solutions since 1989. Jim is a graduate of New York University and holds a degree in economics.

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