What Credit Scores mean to you

Just filled out a credit card application form? Surprise, the only thing most credit card granters consider is a computer generated credit score based on the information in your current credit report. Why? Because it is the cheapest, fastest way to get a credit card in your hands so it can start earning money for them from vendor and interest charges.

Statistically, they know they can rely upon the credit scores. It is an unnecessary expense to have credit applications read by human beings. All they need is enough information from it to locate your credit report file and the score that will be compiled from it.

Your applicant information will only be looked at if you go into default with them. They will then use it for skip tracing, proving fraudulent use of the card and in initiating legal actions to recover what you owe.

If your credit score is too low you are going to have problems getting a car loan, renting an apartment, getting insurance or another credit card. What is too low? It depends upon who has compiled the score. Scores usually range between 501 and 901. Over 800, the world is your oyster. Under 600 you will most likely learn to live without credit. The battlefield is between 600 and 700. You don’t want to be below 700.

The following are some tips to help you improve your score:

(1) The most obvious, pay what is owed as soon as it comes due. Consumer credit reporting agencies have a rating system separate from the score that goes from R1 to R9. The best risk is an R1. This is stated to mean, "pays within 30 days of payment due date or not over one payment past due". An R9 is "bad debt; placed for collection; moved without giving a new address." R1s will generally have high credit scores but not always. An R9 will have a score below 600.

(2) Check your credit report at least once a year. Credit reporting agencies process billions of "facts" annually. This is done in an automated fashion by computer programs, with minimal human intervention. Allowing for just a one percent error factor, this means that millions of errors are made in matching information to files. Some one else’s negative information may be effecting your score, check every line in your report. There are three dominant credit reporting agencies in the USA: Equifax, TransUnion and Experian. You have to check all three. While much of their information is from the same sources, they each have different policies on how and what information is displayed.

(3) Limit your credit applications. One of the biggest fears credit granters have is that someone who knows the system, is setting them up for a big loss. These con artists patiently establishing credit with dozens even hundreds of credit granters. Small amounts are paid on each of the cards each month. At a set point, the con artist max out their cards, sell the assets they have bought and disappear. Hundreds of thousands, even millions of dollars can be involved. Thus, the creditor’s computer systems are always on the look out for individuals filing large numbers of credit applications or changes in purchasing habits. If you are an R1 be very selective about seeking new sources of credit because applying to too many, too quickly, will result in a lower score as your existing creditors limit their risk by lowering your score.

(4) Take care of payment disputes immediately. Having a disagreement with a store or a credit card company about what is owed? You know you don’t owe the money and you refuse to pay it. Being right can hurt your credit score if it shows up as past due in your credit report. Don’t pay a debt you don’t owe but be very aggressive about quickly taking your dispute to a senior level in the company that says you owe them money. If you do get involved in litigation with a supplier you have a right to add comments to your credit report to explain the situation. These explanations should force the suspension of the credit scoring system and make the creditors review your report manually.

5. Is your credit card debt getting higher and higher every month?. Are you having difficulty just making the minimum balance payments? Tear up those credit cards. Use cash. Adjust your life style to your income, if you don’t, a forced bankruptcy will adjust it for you.

Scores allow credit granters to restrict credit but they also allow credit to be extended. Each year, a creditor will budget for how much they will lose to bad debt. They keep within their budget by raising and lowering the credit score limit below which they will not go. If they are having a good year with profits higher than expected, they will try to make the results even better by taking a chance in accepting credit risks that they would not have taken on previously. What this means is if you have been turned down for a credit card by one supplier, you may well be accepted by another whose debt portfolio is in much better shape.

Credit is a privilege, not a right. If you want to have a score over 800, use credit as a convenience, not as an income extender. Creditors are always eager to loan money to those who don’t need credit. It is all about risk.