Credit reports and what the public doesn’t know.

Bankruptcies, lawsuits, monthly bills paid late and on time, loans, bank card accounts and mortgages acquired or earned over a lifetime are reduced by an intricate process down to a single three digit figure - the FICO score. Recent studies indicate that the public at large is quite unaware of how a credit score works, or how deeply it can affect their lives. The FICO score, ranging from 300 to 850, represents a borrower's credit worthiness to a potential lender, employer or landlord and usually accompanies a credit report. The credit score, created by Fair, Isaac and Co., is a distillation of a debtor's entire financial health.

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Listed below are a number of items that a study by the Government Accountability Office discovered:

• The credit bureaus are permitted to demand payment for credit scores, and so the no-cost credit report does not feature the FICO score. A cost free copy of the credit score would be great, but the Federal law that allows individuals to acquire a no-cost credit report from each bureau every twelve months does not mandate that the FICO scores be included. Seventy five percent of consumers believe that they can obtain a copy of their score for free annually.
• Many potential employers regularly check reports in order to avoid hiring individuals with a history of financial woes. Only one third of respondents understood that employers and insurance companies regularly use credit reports and scores to determine premiums or eligibility for employment.

• Bankruptcy can stay on the report for ten years; other financial irregularities usually stay for 7. Half were not aware that negative notations on their credit record, such as bankruptcy or a loan default could remain on their credit reports for seven to ten years.
• Only 50% of surveyed Americans realize that using credit cards or home equity lines of credit to their limit harms their FICO score. Financial professionals generally recommend that Americans keep their credit card balance to less than half of their credit limit. A tapped out bank card can seriously affect a credit score.
• The best way to keep track of your reports and FICO scores is to contact each bureau and acquire copies of that bureau's documentation so that you can compare notes from one credit bureau to the other. Seeking out copies of your report from every bureau also helps identify mistakes, which should be corrected quickly. Each bureau has their own scoring method, which provides different results. Only half of consumers know that there is no "universal score."
• Almost one half of the respondents believe that a FICO score can be increased by an increase in income. The FICO score is only a measure of a consumer's ability to repay as agreed, and not a measure of earning capacity.
• That such vital knowledge is so widely misunderstood is pretty disconcerting, as it is almost impossible to function in modern's society without a solid financial background. The ability to acquire employment, or insurance or an apartment is greatly dependent on a proven ability to pay bills on time, and an inability to understand that makes it difficult to obtain cash.

Anyone who would like to see just how thorough the financial information about them can be ought to get a copy of their financial history. The sooner one begins to repay bills on time, the faster one can get positive scores. As of September 1, 2005, everyone in the United States is eligible to acquire a copy of their financial history for free. The only way to increase a poor FICO model is to work harder to pay bills on time.