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Question: I know a lot goes on behind the scenes
related to credit reports. How does this affect
me?
Answer: It is important to remember that your
credit report is not just for your information.
Your credit history is the business of companies
who sell insurance, lend money for home mortgages,
rent homes and employ you. These companies
subscribe to the services of credit reporting
agencies that collect information about you and
provide it to them for business purposes.
Your credit history is a written record that
summarizes what type of credit you have used and
your history of making payments on time. As a
consumer, you have a right to see your credit
report from each of the three credit reporting
agencies, but, until recently, one of the most
important pieces of information that companies
could get about you - your credit score - was not
available to you.
Called a FICO score, which is based on a
complex formula created by Fair, Isaac & Co., your
FICO score is widely used to evaluate whether you
will be granted credit and at what rate. Your
score also determines auto and homeowner insurance
rates, mortgage rates and more. Most of us want
the best FICO score we can get, and to help toward
that end, Fair Isaac has decided to market
additional services directly to consumers.
For a fee, Fair Isaac will teach you how your
score is compiled and how to improve it. People
planning to refinance mortgages can learn to get
better interest rates by upping their credit
scores. Another fee-based service lets you know if
someone is stealing your financial identity.
You can learn about your FICO score on the Web at
myfico.com. For $12.95, you can see your FICO
report online for 30 days. In answer to criticism
that explanations of credit factors are too vague,
Fair Isaac plans to add a calculator to this site
in the next month so consumers can try out
different ways to raise FICO scores.
Although the opportunity for consumers to
learn to better their credit scores is not
perfect, it is worth it for most of us to delve
more deeply and understand these scores better.
Low FICO scores result in higher charges for many
financial products. Some people can raise their
scores by canceling unused credit cards. In other
cases, it means avoiding additional debt and
making sure there are no errors on your credit
report.
For more information, contact your local
Colorado State University Extension office. |
