Watkins: Credit Ratings and Credit Scores Part 1
By Boyce D. Watkins
Aug. 24, 2007, 12:01 a.m. - Weve learned in the past
about investing and managing money. Weve learned about the importance of money.
Perhaps youve even figured out why youre broke. Now, we can determine why the
bill collectors are calling your mamas house and youre only able to get a car
from places that bill you by the week. Perhaps you havent had these
experiences, but I dont want anyone to feel embarrassed. Its not about where
you are, its about where youre going.
Lets talk about CREDIT. Credit is critical, its crucial, and it can crucify you if you dont keep it together. It can keep your bank account enslaved like Kunta Kinte from Roots, and it can even keep you from getting a job. A lot of people ruin their credit while theyre young, and it takes years to clean up the damage.
Credit is a powerful drug, especially for young people. I see college students hitting the credit card crack pipe on a regular basis, only to look quite pathetic after they crash. Lets start with the basics and build from there. You arent going to learn everything from one article, so make sure you check back again next week.
What is a credit score and who gives it to you?
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There are three major credit bureaus, Experian, Trans Union and Equifax. They know more about you than a possessive ex-spouse: where you lived 10 years ago, how much you owe in student loans, and even that you bounced that check (or two or three) in college. They give credit scores, which range from 501 990 under the new VantageScore system. The score is somewhat consistent across agencies, but not all of them have the same information about your credit history.
Is my credit report always going to be correct? How can I check?
There are many ways to get a credit report. Under the Fair Credit Reporting Act, you are entitled, as an American citizen, to one free credit report each year. I recommend getting one at least every 3 6 months, so you can make sure nothing is out of whack. Another way to get a credit report is through Myfico.com, which has an option that allows you to get reports from all 3 bureaus at once. Dont waste any money on all the Suzie Orman extras that they sell, just send an email to me. Ive taught thousands of Suzie Orman types over the years, so you can get your advice first hand.
If you buy the report outright, its going to cost you about $8. Under the law, if you are denied credit for any reason, you can request a free copy of your report. Also, any company that denies you credit has to explain why. Send a copy of the rejection letter to the credit bureaus and they will promptly send you a report.
If you believe there is an error on your credit report, you do have recourse. The Free Credit Reporting Act allows you to force the credit bureau to explain everything on your report that you call into question. In fact, there is a legal time limit to how long they can take getting back to you. If you are not sure about an item on your report, draft a letter to the bureau challenging the item. They will then reach out to the company to determine the validity of the item. Should the company not respond or be unable to validate the item, it will be removed. The removal of negative items should have a positive impact on your credit.
Next time, we will talk about the factors that go into the calculation of your credit score. Until then, let this information sink in and get your mind prepared for the idea of improving your credit life and taking control of your financial future. Remember: its not about where you are, its about where youre going.
(Dr. Boyce Watkins is a finance professor at Syracuse University. He makes regular appearances in national media, including CNN, FOX and BET. He is also the author of Financial Lovemaking 101: Merging assets with your partner in ways that feel good. His column is published here every Friday exclusively on Redding News Review. You can reach Dr. Watkins by going to www.boycewatkins.com).
Read more of Watkins' columns
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