DIY Credit Repair part Deux

As promised another hub on do it yourself credit repair. Due to the failings of banks, mortgage lenders and "too big to fail" corporations, lender approval decisions will weigh heavily on consumer fico scores more than ever before. The acronym FICO stands for Fair Issac and Company, which was founded in the 1950's by engineer Bill Fair and mathematician Earl Issac. It is a numerical system developed to quickly analyze a consumers credit file. In 1957, Conrad Hilton, hired the Fair Issac company to design a billing system for one of the first credit cards, Carte Blanche (thank you Conrad for that and Paris).

What is a fico score?

Fico is a three digit number, between 300 - 850, which gives potential lenders an idea of a consumers overall credit history. These scores assist banks, credit card lenders, mobile phone companies, insurance companies, landlords, government agencies and employers in determining your creditworthiness at a glance.

Lenders use the scores to evaluate the potential risk in lending money. If your score is on the lower end say 300 then the risk is high, if on the other hand you're score is at the higher end say 700 the the risk is low. Not only are the scores used to determine the risk factor, but they also qualify consumers for loans, interest rates and credit limits.

Credit Report and Fico Score what is the difference?

Credit Report - details your old and current account pay history and activity. This report lists every account you've ever held, and how you paid. It will reflect late payments, bankruptcies, foreclosures, judgments and collection accounts. You can also find on this report: inquires and credit utilization. In the last five years this report also validates your social security number and will immediately alert lenders to any discrepancies or fraud. Most credit histories will only go back seven years, and bankruptcies will continue to report for ten. Make sure that on the anniversary of your bankruptcy discharge date you contact all three bureaus and have this item removed.

Fico Scores- are not actually part of the credit report that is why when requesting a report complete with fico scores it will cost you. A fico credit score is based on your credit history and a calculation by the three major credit bureaus, Experian, Transunion and Equifax, using your current credit history on file with each. This is why it is advisable to monitor your credit at least once a year. The bureaus sometimes report credit items differently and it is up to the consumer to ensure the accuracy of their credit history.

How is the score determined?

• Type of active credit - 35%
• New credit - 10%
• Total of open balances - 30%
• Amount or length of history- 15%
• Pay history - 35%

From these percentages you can plainly see that the most important part of the scoring calculation is the consumers payment history and how much open debt exist. To heighten your scores you would need to address these two items first.

What's the big deal?

If you ever try to borrow money, buy an auto, secure a mortgage or get a better insurance rate your fico could become the obstacle that raises it's ugly head. All creditors, especially in this financial climate, will check your credit history and fico scores, and so will some employers in an effort to determine your risk factor.

I personally, dislike the fico scoring system. I feel it's bias and nothing more than legal redlining, but it is what it is. These three numbers will follow you for a life time, and it makes me wonder if these are not the "mark" referred to in the Revelations; 13:16 - 18 iof the Bible;

"He also forced everyone, small and great, rich and poor, free and slave, to receive a mark on his right hand or on his forehead so that no one could buy or sell unless he had the mark, which is the name of the beast or the number of his name. This calls for wisdom. If anyone has insight, let him calculate the number of the beast, for it is man's number. His number is 666"