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December 2003
Index of all past
Affiliate Corner columns
Helpful hints on
maintaining good credit.
by By Wade Phelps, Phelps Financial,
Inc.
and Linda Jones, Countrywide Home Loans
Credit is a way in which a lending institution
can evaluate your client's ability to pay back a loan.
Whether an individual is buying
a home or just getting insurance for a car, the company he or she may do business with
obtains a credit report to protect itself from the possibility of a default on the debt.
Along with credit comes something
called a credit score. A credit score is a numerical system developed in the 1980s in which a
lender can determine if he or she wants to do business with a particular person. Even though
each company has a different scoring system, each company uses one or all of the following to
determine the score:
- On time payments
- The total number of accounts
- Age of the accounts
- Total debt compared to available credit
- Number of accounts
- Recent inquiries
In general, most companies consider a
good credit score to be above 650, even though scores can range from 300-880. Though none of
the three big agencies (Equifax, Experian, and TransUnion) release how they calculate a credit
score, there are some consistencies learned over the years to help a potential client maintain
a good score.
- Make payments
on time
- Keep three to five accounts open at any one time
- Keep the balance on any credit card under
25 percent of its limit
- Limit credit inquiries
- Review credit periodically for any discrepancies
The Federal Trade Commission (www.FTC.gov) monitors credit agencies in attempt to keep
credit reporting accurate, but over 90 percent of all credit reports have at least one item wrong.
It is an individual's legal right to challenge any discrepancies on his or her credit report.
Challenging a discrepancy may not make
someone popular with the credit agencies, but the Federal Credit Reporting Act allows an
individual to dispute the accuracy of any account. A credit agency must investigate the
claim within 30 days.
Below is contact information for
the three major credit reporting agencies:
Equifax
www.equifax.com
P.O. Box 740256
Atlanta, GA 30374
(800) 685-1111
Experian
www.experian.com
P.O. Box 2104
Allen, TX 75013
(888) 397-3742
TransUnion
www.transunion.com
P.O. Box 3401
Fullerton, CA 92831
(800) 888-4213
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