Improving Your FICO Score -- Correcting Errors

FICO scores are determined from data in your credit report. But many credit reports are in error. When I became aware several years ago that you could get a copy of your own credit report free from www.annualcreditreport.com, I pulled a report from one of the 3 credit-reporting agencies. When I saw the errors present in my report, I wrote a letter and had the errors corrected. I also pulled the reports from the other 2 agencies, found errors in them and wrote letters to have them corrected as well.

Since then, I spread out my reports among the 3 agencies, getting a sample from one of them every 4 months to get a heads-up if there's a problem. While I'm not in the market for loans, FICO scores can effect other aspects of life such as insurance premiums, and can even keep you from getting a job.

In my case it was fairly easy to get the errors corrected. Perhaps your situation is a bit more complicated. Check out this MarketWatch story How to Correct Your Credit Report for a six-step guide.

FICO scores are less of a concern. Paying your bills on time and not over-utilizing your credit line will go a long distance to getting you that high FICO score. And correcting errors may help as well.

Which Came First, the FICO Score or the Loan?

How does someone without a credit history obtain a loan? It's sort of like asking whether the chicken or the egg came first. I remember the difficulty I had in getting my first credit card -- and this was after I had obtained a mortgage. I was turned down even when applying as a student, not for a poor credit history but for no credit history. This was around the time FICO scores were introduced.

According to this article in the Kansas City Star, an alternative scoring method is being developed based on an individual's payment history for utility bills, rent payments, and even payday loans.

This alternative scoring method is not yet accepted by all lenders. However it may provide more options to those trying to break through the credit history barrier to get their first credit card.

Your Poor FICO Score can Cost You, Even If Debt Free!

It is discussed in this article on Yahoo Finance that your FICO score can result in increased premiums for auto insurance.

Furthermore, the Supreme Court recently ruled that the insurance companies aren't required to notify you that your poor FICO score has resulted in a higher premium charge.

The Yahoo Finance article goes on to give some standard advice, such as paying your bills on time, and not canceling credit cards that you've held for awhile.

This is all good advice. Additionally, you should obtain your credit scores annually at this site and not the one that advertises on TV as being "FREE". You can get one report from each of the 3 major agencies each year that truly is free. And you can space these reports out every 4 months as I previously discussed so you can more rapidly detect errors. And if you've never checked your credit report, you may find some surprises -- such as incorrect information that can be corrected.

No, your FICO scores are not free. But following good practices and correcting erroneous credit reports can only help your score.