Many of the credit repair secrets are found in your credit score and how that score was arrived at.
When applying for a loan, the loan officer of the financial institution
you may be working with will review your credit score to make a
determination of the risk involved in doing business with you.
According to Fair Issac Corp., and anyone else who may calculate a credit score, that credit score is a business model of a proprietary nature. The exact way that the score is determined is private.
Meaning one big fat secret that only an act of congress is going to let you in on.
That score is also determined by information contained and recorded about you at each of the three major credit reporting agencies. Each of these agencies could have slightly different information about you.
Another of the credit repair secrets (but is becoming less so) is
that companies don't have just one credit score formula but can choose
from several "credit score models".
Many times the model used will be one that reflects concerns that the lender wants to factor in. Dealing with a lender that will talk to you about your financial picture and what they look for when lending will help demystify some of the process.
The three credit bureau's have their own models that calculate a credit score. They then sell these to both consumers and businesses. They DO NOT sell the same scores to consumers that they sell to businesses.
Buying a score from one of the
credit reporting agencies can result in a figure that could be vastly
different from what a lender will receive.
Financial institutions may use these or other third party scores such as the ones developed by Fair Issacs.
The Fair Issacs' score models are generally the most used formula but like any company they have more than one product and produce a new formula every so many years. As the industry may feel it needs a new and improved model according to the economic current and consumer trends.
Another secret that is really more a problem is that the scoring range can be different among different models.
Especially if the creditor you are working with is not using a FICO (Fair Issac) model. Most of the Fico products stay in the 300-850 range.
Some others start lower and others go higher. For the most part in everyday life this should not be a concern for you.
However, if you are applying for a mortgage or a new car loan and your potential lender reveals your credit score (as they should), you will want to ask if that IS indeed a FICO score.
Otherwise you could be patting yourself on the back for a seemingly high score that only turns out to be average.
Say it's 750 which in a FICO classic would be excellent. You would be in line for a sweet deal. Then you find it's a Vantage score that has the high range in the 900's. You don't look so good now. Maybe you should have waited and worked on your credit a bit (if you have the time).
If that isn't all you have to think about another credit repair secret is that these credit score models also have what they call score cards that are used along with your credit score.
One of the newer FICO products is said to have 12 score cards!!
These score cards group people into categories of similar characteristics.
Fair Issacs isn't letting anyone know exactly what these categories are, but some of the typical ones are.....
those new to credit or thin files
little credit history
those with defaults
no late payments
One credit repair secret that is disturbing and can cause a
dramatic dip in your credit score, seemingly of no fault of your own,
occurs as a result of these score cards and what is referred to as a
score card hop.
This hop is a change in category due to regular ordinary credit history changes.
Here is one possible scenario:
Maybe you were in that category of little credit history but... you did have some credit. Maybe you added a line of credit and it's been over six months.
Now you have more history and you belong in another category.
That is the hop. You are in another category. In the little history category you looked better than others but now you are in a regular more established credit category.
Unfortunately there will be many others in this category with longer age of history and more varied types of credit than you. These make your credit history not look as good anymore.
YOUR SCORE GOES DOWN EVEN THOUGH YOU DID EVERYTHING RIGHT!!
It gets a bit complicated doesn't it????
If not down right ANNOYING!!
Or another one that makes you say HUH????
The expiration date of negative items comes and that negative item is removed and you think YEAH!! now my score will go up.
If you had been working on your credit before the negativity got removed then you probably looked good.
NEXT, You get bumped into a category with others that didn't have ANY negative items.
NOW you only look average as you are with others that never may have had the little bumps in their credit that you've had!!!
Some of these credit repair secrets could get you discouraged yet,...
the good habits that got you in that next category if continued will still help your score recover again.
And they will!!
The same things are still looked at in any score card;
Your payment history and level of debt
Keep these in control and overall YOU will be in control.