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Credit ReportWhat You Don't Know About Your
Credit Report May Be Truly Devastating
The Next Time You Apply For A Loan

Here Are Just A Few Of The Facts That Everyone Must
Know So You Do NOT Make Bad Decisions That Cost
You Thousands Of Dollars And Cause You Years Of
Financial Headaches


Understanding Your Credit

In the U.S., credit bureaus collect and collate personal information and financial data on individuals from a variety of sources called data furnishers.

Data furnishers are typically creditors, lenders, utilities, debt collection agencies and the courts that a consumer has had a relationship or experience with.

There are only three major credit bureaus in the U.S.  Thank goodness there are not more.

They are Experian, Trans Union and Equifax (the Big 3) and together these companies have the power to literally make or break your ability to buy anything on credit.

The main thing to understand is that these organizations are for-profit businesses and possess no government affiliation.


Understanding FCRA

Due to abuses by the Big 3, Congress passed the Fair Credit Reporting Act (FCRA) in 1970.  It was a landmark piece of consumer protection legislation and has since been amended with the passage of Fair and Accurate Credit Transactions Act (FACTA) in 2003.

Under FACTA you are entitled to at least one free report each year from the three credit bureaus.  This is available from AnnualCreditReport.com.

Despite these attempts to protect consumers the credit system in this country remains full of questionable practices.

The credit bureaus are responsible for maintaining only accurate and up to date information in a consumer's report. 

Under section 607 (b) of the FCRA:

(b) Accuracy of report. Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.


They reality is that they don't.

In fact, one study by the US Public Interest Research Group found that...

-Twenty-five percent (25%) of the credit reports surveyed contained serious errors that could result in the denial of credit, such as false delinquencies or accounts that did not belong to the consumer;

- Fifty-four percent (54%) of the credit reports contained personal demographic information that was misspelled, long-outdated, belonged to a stranger, or was otherwise incorrect;

- Twenty-two percent (22%) of the credit reports listed the same mortgage or loan twice;

- Almost eight percent (8%) of the credit reports were missing major credit, loan, mortgage, or other consumer accounts that demonstrate the creditworthiness of the consumer;

- Thirty percent (30%) of the credit reports contained credit accounts that had been closed by the consumer but remained listed as open;

- Altogether, 79% of the credit reports surveyed contained either serious errors or other mistakes of some kind.


Facts About Credit Scores

A credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person.

Whether you're buying a home, a car or applying for a credit card, lenders want to know the risk they're taking by lending you money.   Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits.

Fair, Isaac and Company was founded in 1956 by Bill Fair and Earl Isaac.  The FICO credit scoring system was first introduced in 1970.

All credit reporting agencies determine your credit score using software from Fair Isaac and Company.   Since each of the three bureaus probably has different information about you, it is normal for your scores to be different.

FICO scores range from 300-850.  Just like in most sports, higher is better.

The median FICO score is around 720.  A "Bad Credit Score" is a relative term, but a credit score below 580 is pretty darn low  which makes it pretty darn difficult to get approved for any type of credit except at very high rates.

Today, most mortgage lenders require a minimum FICO score of 620 and that is likely to go up again.



Understanding Your FICO Scores

Your FICO score looks only at credit information in your credit report.  So, how much money you make has absolutely nothing to do with your credit score.

Don't be fooled by the credit bureau's so called "FAKO Scores."

Websites such as FreeCreditReport.com, FreeScore.com and TrueCredit.com do not offer your FICO score.

While there are other scoring systems, FICO is the system most widely used by lenders to make decisions.  Any other credit score is, therefore, pretty much worthless.

"Confusion reigns when buying credit scores.   Buying your credit score is supposed to give you clarity about your credit-worthiness.

But clarity may be the last thing you'll feel."

Jeanne Sahadi
Senior Writer
CNNMoney.com

Your FICO credit scores can affect how much money a lender will lend you and at what terms (interest rate). So, taking steps to improve your FICO scores can often help you qualify for better rates from lenders which can save you money!


Why Are Credit Scores So Important To Lenders?

Take a look a this chart. 

It show the delinquency rate in Red versus the percentage of the population broken down by various credit score ranges.

Facts about credit scores

Notice that people with a credit score under 650 are much more likely to get behind in their payments.

Banks and credit card companies know this is an indisputable fact.  That's why you will  pay much higher interest rates when you have a low credit score.

Factors That Affect Your Credit Score

There are five factors used in calculating your overall credit score.

Payment History - 35% of your score 

The first thing any lender wants to know is whether you have paid past credit accounts on time.  This is also one of the most important factors in a FICO score.

This includes any good and bad payment history for credit cards (Tier I), retail accounts (Tier II), installment loans (like car loans), finance company accounts and mortgage loans.

It also includes such things as public records, collection items, bankruptcies, foreclosures, suits (not the kind you wear), wage attachments, liens and judgments.

This is generally referred to as "Bad Credit."  According to Fair Isaac, the more recent and the more frequent, the worse it is for your score.

For most people with low credit scores, this type of derogatory information is what is doing the most damage. 

If this describes your current situation, you need our help.


How Much You Owe - 30% of your score 

If you have high balances on your credit cards and are close to your limit, it is affecting your score, even if you have made your payments on time. 

When a high percentage of a person's available credit has already been used, this  can indicate that a person is overextended, and is more likely to make some payments late or not at all.

It includes the amount owed on all accounts, and on different types of accounts.  FICO looks at both, the total and each open, revolving account.

A good rule of thumb is to keep your credit balances under 30%.


Length Of Credit History - 15% of your score


The longer you have had credit, the better the score as long as the credit you have has been in good standings. 

Your  FICO score considers the  age of your oldest account, the age of your newest account and an average age of all your accounts.

In general, a longer credit history will increase your FICO score. 

If it has been many years since you have used an account, it may not hold much of a score.  Using your accounts at least once a year will help your score.

TIP - Don't close old accounts, even if you are transferring a credit card balance to a new card.


New Credit - 10% of your score

People tend to have more credit today and to shop for credit via the internet and other channels more frequently than ever.  FICO scores reflect this reality.

However, research shows that opening several credit accounts in a short period of time does represent greater risk, especially for people who do not have a long established credit history.

Bottom line, don't open a bunch of new accounts.


It is also important to understand that every time you fill out a credit application, it counts as a credit inquiry.

Credit inquiries remain on your account for 24 months, but tend to have only a minor impact after 6 months.  However, too many inquiries will affect your score, especially when requested within a short period of time.



Credit Mix - 10% of your score

It's good to have a diverse mix of accounts. 

The FICO score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.

It is not necessary to have one of each, but it is good to have experience with both revolving and installment type accounts,.

In addition, your FICO score looks at the total number of accounts you have.  For different credit profiles, how many is too many will vary depending on your overall credit picture.


Clear as mud, right?


Your Credit Score and Your Money

Let's cut to the chase, shall we?  What does this mean in terms of money?

Take a look at the chart below...

Credit Scores and Monthly Payments

First, look at the monthly payment on a $150,000 home for someone with a FICO score of 620-639.  It's $980.00 per month.

But notice, the same person only pays $863.00 per month with a FICO score  of 680.  Just 40-60 points adds up to  $1,400 per year!!

It gets even more ridiculous as your score improves or the value of the house is higher.


After seeing this example, you should stop
what you're doing and call us right away! 






This was a real
God-send...

"Our home got wiped out when  Hurricane Ike devastated Houston and we couldn't get approved for a new loan due to some unknown judgments.  

Our loan officer told us there was NOTHING we could do and suggested we contact a reputable credit repair service in Houston.

Since we only had a few months on our lease we were unsure if credit repair would really work.

But within 4 months we were able to close on a new home in Humble, Texas.

This was a real God-send."

      Rod & Becky Yarbrough Humble, Texas

 

We were tired of wasting our
money on rent...

"We were tired of wasting our money on rent.  

We really wanted to buy a home, but were denied due to some old credit problems which we didn't even know we had.


Our RE/Max realtor told us to call a professional and we're so glad he did.

We thought it would take a year, so we were really surprised that BOTH of our scores jumped up over 100 points in just a few months.

We recently moved from Houston into our new home in Sugar Land and couldn't be happier."


Graciela Ribeiro &
Rodney Telfor
Sugar Land, Texas



Houston Credit Repair


Call The Credit Repair Experts!

281-727-0351


Houston Credit Repair

7941 Katy Freeway
Suite 401B
Houston, TX  77024


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