A credit score is either a blessing or a curse cast down upon you from the digital cloud.
A score of 740 qualifies you for the best interest rate on a conventional mortgage. A score under 640 means ugly interest, and a number under 620 makes it very hard to get a mortgage at all.
This measure of your worthiness -- generated by a soulless computer -- also affects the deals you'll get on car loans, credit cards and auto insurance.
So, let's look at ways to tweak your score higher.
Such tweaking is part of George DeMare's business. He is managing partner of Midwest Mortgage Capital, a mortgage lender in west St. Louis County. "I deal with people with 640 scores all day long," he says, and he looks for ways to push them up.
Lately, he's taken to lecturing on the mysteries of scoring, to audiences around the region. His main advice: Pay your bills on time, and borrow sparingly. That's the best way to fix credit over time. But if time is short, there are other maneuvers you can make.
First, a word about scoring: Most of the blessing and cursing comes from king of credit scoring Fair Isaac and Company. The company, better known as FICO, provides the software used by many major lenders and credit reporting companies. FICO uses five variables for scoring credit; its main rival, called Vantage, uses six.
With a FICO score, your on-time payment history is the biggest factor, accounting for 35 percent. The amount you owe influences 30 percent of your score; the length of your credit history is responsible for 15 percent; the type of credit used and new credit you've added recently each affects 10 percent. (On-time payment history also is the biggest factor with Vantage, accounting for 32 percent.)
Scoring formulas are tailored for different lenders. If you buy your score from a credit company, know that it may not be the score your lender sees.
The scores are derived from information on your credit report. The report tells how much you owe, how close you are to maxing out your credit lines, and whether you pay bills on time. The report also scans public records for bankruptcies and court judgments against you.
So, the first step in boosting a score is to make sure the credit report is accurate. It's often not. In a recent Federal Trade Commission study, a quarter of consumers found errors on their reports that could affect their scores.
A clerk's finger slips on a key and somebody else's debt is reported as yours. The system confuses similar names. It has trouble telling John Doe from John Doe Jr. and John Doe III. "We see a lot of Junior's accounts reported on the Third's credit," DeMare says.
Court judgments often stay on reports after they've been paid off, DeMare says. Collection agencies are not diligent about reporting satisfied debts.
You're entitled to a free report once a year from each of the three major credit bureaus -- Experian, TransUnion and Equifax. You can get it at annualcreditreport.com or by calling 877-322-8228. If you're denied credit because of your report, you're entitled to another free one.
If you find a mistake, contact the reporting agency. That usually does the trick. The Federal Trade Commission found that four out of five consumers who complained won a change in their report.
The agency is supposed to check with the creditor to see if the information you challenged is correct. If the creditor doesn't respond within 30 to 45 days, it comes off your report. And therein lies potential for mischief. Some consumers challenge legitimate credit blotches, hoping that creditors will be slowpokes or goof. DeMare considers that "immoral."
