by Corey Goldstein
In this series of articles, I hope to reveal ways in which you can beat the system. You’ll access ways in which to stack the odds in your favor and against your creditors, allowing you to save thousands in costs and gain greater negotiating power with your lenders. My commitment is that you have financial freedom and power.
Long before we had credit score models the only system that we could use to judge a person’s character
was a human element… judging people. The process was slow, outdated and completely unreliable because of human error. If you owned a bank you would see that using people to determine “lendability” was not a good approach. Of course people do miss the days of personal banking care. It still exists, I assure you.
Credit granting models were built using payment information from tens of thousands of actual customers which made the scores have highly effective and predictable behaviors.
Simply said, credit scoring is a predictive model, that determines whether a person is going to file bankruptcy or not.
Lenders, governments, businesses, real estate investors and landlords, auto loan finance companies, credit card banks and employers all use credit scores to evaluate potential risks posed by either lending money to consumers or determining credibility. For example, people with six inquiries or more on their credit report can be up to eight times more likely to declare bankruptcy than people with no inquiries on the report.
So if you’re a real estate investor or simply looking to refinance the property, I recommend that you
invest focused time on rate shopping over no more than 30 days, as FICO considers this just one inquiry.
So how does your credit report look?
In this series we’ll dig deep into evaluating and understanding your credit from a home the perspective, so you can really read and understand your credit report – like an expert. So let’s start off with some basic facts about your credit report.
Here is a list of things that the credit agencies do not consider when evaluating your credit:
Religion, marital status, medical history, criminal records, Income, assets, Job, interest rates,
Race, if you had a bankruptcy older than 10 years ago, if you had charge -off over seven years ago, telephone, electric, water, cable, Internet and all utility companies are not considered in Consumer Reports – unless of course there is a collection. Also, your employment history, where you live certain types of inquiries such as promotional inquiries (from preapproval letters and credit cards)…none of these are factored into your credit score. There are many things that are not factored into your credit report.
So what’s actually contained on your credit report?
Suffice to say that you’re not going to get consistent reporting from Bureau to Bureau. Each credit report formats and reports information completely differently, and there are similarities. We will discuss this in later articles..
The items that are included in your credit report are your name, your address, Social Security number, birth date, employment information which is used to identify you. Trade line accounts such as your credit cards, bank cards, auto loans, mortgages, when you open them, your credit limits, the account balances and your payment history.
As a side note, the removal of credit inquiries can often be times be a real quick and inexpensive way in
which to increase credit scores. You just want to be responsible which items you dispute! (Did your scores ever go down after you disputed something? More on the reason why in the next article)
Public records and collections: Credit reporting agencies go to the courthouse and collect public record
information. They collect information about judgments bankruptcies, foreclosures lawsuits, wage garnishment liens and judgments, also child support.
States in the northern central part of the United States have some of the highest credit scores, states in the South
and Southeast have the lowest credit scores. There are 22 main score factors that determine your score
In our next article we’ll dig into the 22 main scoring factors that determine your credit score and the specific actions you can take to increase your scores and take responsibility and accountability for your financial success.
Corey Goldstein is the CEO of Fix My Report…for more information visit www.fixmyreport.com.