Boost Credit Score

The three major credit reporting agencies -- Equifax, Experian and TransUnion -- each report consumer credit scores. Equifax and TransUnion base their credit scores on a FICO formula. FICO is developed by Fair, Isaac & Co. Experian relies on a formula it developed and calls the PLUS Score. The three credit reporting agencies also use VantageScore, a competing score technology to FICO and PLUS Score.

FICO, PLUS Score, and VantageScore are calculated using mathematical methods that incorporate credit history, amount of credit used and available, number of late and on-time payments, whether any payments due are in default, and other variables. The credit report lists specific accounts and financial history that go into the credit score. The proponents of FICO, PLUS Score, and VantageScore claim their scores are superior to the competition at predicting future consumer behavior. These claims are unsubstantiated because all three formulas are trade secrets and are impossible for third parties to test.

It is impossible for anyone other than the mathematicians at Fair Isaac, Experian, or VantageScore to tell you specifically when and how much your credit score will change based on you taking a certain action. I can give you a general idea based on my experience and observations, but nothing precise.

The most sure-fire way to raise a credit score it to pay all accounts on time. A second certain tactic is to reduce credit utilization. A third is to diversify the types of credit used, which the credit reporting agencies refer to as trade lines. Fourth, leave your oldest trade line open because it establishes a baseline for your credit history. Finally, credit reports are notoriously inaccurate. The Fair Credit Reporting Act (FCRA), a federal law, requires consumer credit reporting companies to report accurate information. If you find any inaccurate information in your credit report, you should dispute inaccurate derogatory notations.

Your Questions

1) Maintain a car lease or pay it off? A vehicle lease is a trade line, and an open current trade line will help strengthen a credit score. A closed trade line will not harm a credit score, but provides no positive movement either.

2) When will derogatory items be removed from a credit report? You can answer this yourself. In fact, you must answer this yourself because the credit reporting agencies do not have the time nor inclination to go through your credit report line by line and give you a estimation on each item.

The three U.S. consumer credit reporting companies have set up a Web site, toll-free telephone number, and mailing address through which you can order a no-cost, no-gimmick annual report. To order, visit AnnualCreditReport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can print this form.

After you receive your credit report(s), review each derogatory entry. Under FCRA §605 (a) and (b), an account in collection will appear on a consumer's credit report for 7½ years. The clock starts approximately 180 days after the date of first delinquency on the account. To learn when an account will be removed by the credit reporting agencies (TransUnion, Equifax, and Experian and others), add 7½ years to the date of first delinquency. Subsequent activity, such as resolving the debt, is irrelevant to the seven-year rule. However, if the debt is a tax lien, that can appear for 7 years from the date of payment. A bankruptcy will appear for 10 years from the date of the final order. Delinquent federal student loans can be reported indefinitely, i.e., for as long as they are delinquent.

3. What credit score is required to open a store or oil card? The general rule is 600, although a credit score is just one factor in the equation.

4. What credit score is required to get 0% APR vehicle financing? Mid to high 700s is the rule of thumb.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com