Is Fair Isaac Company Being Fair With You?

Is Fair Isaac Company Being Fair With You?Is the Fair Isaac Company (FICO) being fair with the way they are categorizing you?
That’s right, we are all categorized into different tiers of creditworthiness according to the score we are assessed by the Fair Isaac Company. According to myFICO.com, we each fall into one of 8 categories which can provide credit issuers an assessment of potential future risk of bad debt. That assessment can be used by lenders, insurance agents, and even employers. Some of the score categories listed are 600-649 (12% of us), 650-699 (15% of us), and 700-749 (18% of us). 

Is Fair Isaac hurting you with these categories?
Your ability to borrow could be hurt if there are unfair errors listed on your credit report. Your score could be penalized due to those reporting errors. Unjustified errors on your credit report could cost you much more; not just in interest, but insurance rates, employment, and even the deposits you must put down on utility and phone services.

When does it help to have Fair Isaac categorize your creditworthiness?
Having an error free report that gives a true representation of your strong creditworthiness takes all the subjectivity out of lending decisions. Your correct and accurate score is a fair assessment of you versus your borrowing peers and puts you on a level playing field when it comes to borrowing money.
 
At one point in their history, credit bureaus used opinion surveys completed by Welcome Wagon representatives after visiting your new home. They reported on the appearance and value of your home, furnishings, and other belongings; even your job situation.

Why is a higher FICO credit score more important in 2013?
EVERYONE is being more cautious because no one can afford to make financial mistakes on bad debt. An article in the LA Times reported that banks will be ordering a second complete credit report right before closing mortgages. This is in addition to the original credit report that starts the loan process. You can expect banks, mortgage lenders, car financers, employers, insurance companies, and even phone and other utility companies to be holding you to a higher standard when checking your credit report and FICO score, as they have been less willing to take risks.  

According to Ken McEldowney from ConsumerAction.org - “Lenders are increasingly using risk-based pricing to make loans. If you don't find out your credit score, check your credit report and correct mistakes, you're going to be totally in the dark, and run the risk of paying far higher interest rates on loans.” Read this quote from a Quicken Loans representative in a recent article in the Tribune Review regarding the importance of your credit score: Story

Your FICO credit score is your character reference. What is it saying about you?
Is your FICO score always giving you a fair reference? Maybe not, and it is getting harder to find reputable lenders who will listen and consider your unique financial plight or one time financial hardship. Most people extending credit will look at the FICO score as an established reference source that offers an unbiased and fair assessment of you, versus other borrowers. When they ask the credit bureaus for a report on you, what will they be told? 
Talk to your “character reference” before your banker does!

If you interviewed for a new job and gave the name of a co-worker as a reference wouldn’t you want to have asked her, prior to being called, to present you in the best possible manner and highlight your strengths? The same is true with your credit report and score. Get to it before the lender does.  
Make sure you check your credit score and report well before the lender does so that you can eliminate harmful, incorrect information that detracts from your credit history being presented in the most positive light.

Other reasons to keep a good score.
There are many articles online that can tell you how to improve your credit score or what behaviors will make the score worse. What they don’t talk about as intensely though, is how you are categorized by your credit score and what impact that will have on your financial well being, having more options available to you during trying times, and eventually your overall quality of life. Learn more here.  

There hasn’t been any guarantees that 2013 will be more stable than recent years. Your good score could be a much needed lifeline, at some point. If you start to run into trouble it will be much easier to buy a smaller home, refinance debt, borrow cheap money, renegotiate insurance rates, and even find employment if your credit report is positive.

What can you do to make sure you are guarding your credit reputation?
Check your free credit reports – see what others are saying about you, make sure everyone hears your side of the story. Annual Credit Report

Recordkeeping – be excellent at keeping proof of what happened. The credit bureaus do a fairly thorough job of recording many facts about you. Be sure you are keeping records on your own finances and your interactions with the lenders you do business with.

Live on cash – Think real hard before using a credit card! Make every effort to avoid debt; find ways to raise your income, reduce your taxes, and reduce your costs; get creative and find new ways to get what you need without spending more money.

 

 
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