The Fair Isaacs or FICO Score credit rating will be a mathematical summation of a consumer’s borrowing history – i.e. the likelihood he or she will repay funds. In theory, getting credit scores higher should just be a matter of common sense, but the actual equations are sometime the exact opposite of what you might expect. As with anything else, proper information will be key for the health and well being of those three little numbers which could play such a dramatic role in your future.
Rumor: Only the Wealthy Need Worry About FICO Credit Ratings
Truth: Household earnings have no impact on how the Fair Isaacs logarithms evaluate credit scores. In fact, the amount of money that you make will not even be mentioned to any one of the credit bureaus, and, as such, the FICO scoring matrix won’t be able to utilize the information. Similarly, the credit reporting agencies will not have any access to individual or family checking and savings accounts, and even top notch investment portfolios won’t make any difference at all.
Rumor: As Soon As A Delinquent Loan Has Been Paid, The Notification Shall Disappear From Credit Bureau Reports
Truth: Evidence of delinquencies and collateral deleterious data will stay on the reports of the credit bureaus for up to seven years past the original mark. Proof of Chapter 7 or Chapter 13 bankruptcy protection will be available for a full decade, but the negative repercussions of bankruptcy will be considerably lowered after only a few years.
Rumor: Once Something Appears On Your Credit Report, It’s There Forever
Truth: As a matter of fact, studies have shown that more than seventy five percent of the credit bureau reports have at least one egregious inaccuracy. Given the undeniable importance of credit ratings, you should take advantage of the free credit reports given out each year by the credit reporting bureaus under United States law to see just what has been put into print regarding your own situation.
Rumor: Avoiding Debt Will Raise FICO Scores
Truth: Excellent credit ratings are a direct result of the proper usage of credit so, as should seem obvious; an avoidance of borrowing could actually harm the FICO credit scores. Even if you’ve opened credit accounts but refrain from taking out debts (and then paying them back, promptly each month), that won’t make much difference in raising the overall numbers. Healthy debt plays a vital role in credit scores, so for those who are struggling with debt seeking debt relief will help in the long run with credit scoring
Rumor: Each Credit Report Will Essentially Show Equivalent Findings
Truth: All three credit reporting agencies (TransUnion, Equifax, and Experian) could show vastly different sets of information and, through errors or absence of data, generally contain enough disparities to have the FICO scoring system work up different numbers for each one. That’s the reason lenders of large sums like home mortgages will automatically pull all three credit reports and only look at the median score figured by all three credit bureaus.
Rumor: Your FICO Credit Rating Will Decrease Each Time It’s Calculated
Truth: While this is largely the case in terms of credit inquiries made by lenders wondering whether or not you’re a suitable risk for borrowing funds – though, still, the FICO score shall only droop by fifteen points – you won’t disturb the credit rating in any way by asking each credit bureau to send you a free credit report, available once per annum as guaranteed by federal legislation.
