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## Credit Repair Now – Part I

In this series we will explain what you can do and have control over to fix your credit and improve your credit score. There are even a few things you can do that, when done the right way, legally count as instant credit repair. The first step in getting credit is to understand the credit scoring system and where your credit history places you within that system.

What is a credit card?

Your credit score is a computer-generated statistical/mathematical calculation that categorizes your credit history into a number between 300-850. The higher the number, the better your credit score. The only data the computer uses when it does your credit score is the information in your credit report – your credit history. Your credit score is a snapshot in time that will change whenever the information in your credit report changes. The key to managing your credit score is knowing what kinds of changes to your credit report will make the biggest changes to your FICO score—both positive and negative.

Your income, employment history, age, marital status, medical history and other personal information about you are not included in your credit report and have absolutely no effect on your credit score. So it’s not uncommon for someone with a blue collar job and an average income to have a credit score hundreds of thousands higher than an executive making six figures. Lenders consider income when they make a loan but the credit bureaus don’t when they do your credit score.

The credit score formula is secret but effective

The exact formula credit companies use to calculate your credit score is a closely guarded trade secret. Fair Isaac & Co., the company that invented credit scores and remains a leader in the credit reporting industry with its FICO Score, provides some guidance on the factors that go into calculating a score. The key to fixing your credit and improving your credit score is to stay on the right side of the most important credit scoring factors.

The average FICO credit score in the United States is 723. Half of people have FICO scores higher than 723 and half have FICO credit scores lower than 723. The average FICO score is about 687. There is no universal definition of “good” credit but this FICO score chart is a good guide to where different FICO credit scores fall on the scale between excellent credit, average credit, and forget it.

Which category your credit score falls into on the credit report is important because each category will pay a different rate for the exact same loan. In a tight credit market, the bottom three tiers of bad credit can be completely cut off from the credit market and unable to purchase a new home or car on reasonable terms.

Although this FICO score chart is derived from information recently published by Fair Issac, empirical evidence suggests that category breakpoints in today’s uncertain credit environment may be as much as 20 points higher than what appears on the chart. be more visible.

FICO SCORE CHART

760-850

LIVE CREDIT

700-759

VERY GOOD CREDIT

723

MEDIAN FICO SCORE

660-699

GOOD CREDIT

687

AVERAGE FICO SCORE

620-659

NOT GOOD CREDIT

580-619

Poor credit

500-579

VERY POOR CREDIT

Almost everyone knows that the higher your FICO score the lower the interest rate you will pay on any loan. Perhaps less well known is that insurance companies base their premiums on a variety of FICO scores. Cell phone companies base deposit amounts or even service charges on FICO scores. Employers use FICO scores as a proxy for character. The list goes on and on. Your credit score affects almost every aspect of your life and your lifestyle choices can help or hurt you even if you are not aware of the impact at the time.

The real meaning of the phrase “I want to fix my credit” is to do the things that you can control that will put you in the next higher FICO category.

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