Credit reports and misunderstandings are common

The FICO, or credit score, ranging from three hundred to 850, represents an individual's credit worthiness to a prospective lender or creditor, employer or landlord and frequently accompanies a credit report. Bankruptcies, judgments, debts paid late and on time, car loans, credit card accounts and mortgages acquired or earned over a lifetime are distilled by a complicated formula to a single three digit number - the FICO score. Current studies indicate that the public is relatively unaware of how a FICO score works, or how deeply it can affect their lives. The FICO, or credit score, created by Fair, Isaac and Co., is a distillation of a debtor's overall financial life.

Here are just a few things that a prominent study by the General Accounting Office found:

A number of potential employers frequently check records so that they may avoid hiring individuals with a history of money problems. Only thirty three percent of respondents were aware that businesses and insurance companies frequently use credit records and scores to calculate rates or eligibility for employment.

A "full" credit card can seriously affect a credit score. Only half of surveyed Americans know that using credit cards or home equity lines of credit to their limit hurts their score. Advisors generally recommend that individuals keep their charge card balance to less than half of their maximum.

Three quarters of those surveyed think that they can obtain a copy of their FICO, or credit score for no charge once a year. The credit bureaus are permitted to request payment for FICO scores, and so the no-cost credit report does not feature the FICO, or credit score. A cost free copy of the FICO score would be useful, but the Federal law that allows consumers to obtain a free credit record from each bureau every twelve months does not require that the scores be included.
 

The credit score is only a measure of a consumer's ability to pay back as agreed, and not a measure of earning capacity. About half of the respondents believe that a credit score can be increased by an increase in salary.

Seeking out copies of your report from each bureau also helps find mistakes, which should be repaired quickly. The ideal way to keep abreast of your reports and scores is to contact each bureau and obtain copies of that bureau's information so that you can compare notes from one credit bureau to the other. Just 50% of consumers realize that there is no "universal score." Each bureau has their own scoring model, which generates different scores.

One half were not aware that negative information on their credit report, such as bankruptcy or late payments could stay on their credit records for up to a decade. A bankruptcy filing can stay on the report for ten years; other financial notations generally remain for seven.

That credit record information is so widely misunderstood is somewhat frightening, as it is all but impossible to get by in contemporary's society without a good financial background. The ability to acquire work, or insurance or an apartment is heavily dependent on a demonstrated ability to pay bills promptly, and an inability to grasp that makes it tough to obtain cash.

Any person who would like to see just how comprehensive the financial information about them can be ought to get a copy of their financial history. The sooner one begins to repay bills promptly, the sooner one can get positive scores. The only way to improve a damaged score is to make a greater effort to pay bills promptly. As of September 1, 2005, everyone in the United States is authorized to receive a copy of their financial record for free.