The Credit Conundrum

[Jenifer Madson]

The Credit Conundrum

Conundrum: mystery, challenge, poser, problem, riddle. I think these words fairly well describe the process of understanding one's credit score in terms of how it comes to be, and what you can do to manage and improve it.

Credit scoring is one subject that I have to admit I'm fairly puzzled by. Just when I think I'm rocking along with a great history and the scores to match, a small business loan smacks my score down because the account is too new, and affects my ratio of what I owe to what's available to me. So my scores were high enough to get the loan, but I'm penalized in "credit-land" now that I have it.

The good news is, I don't need any credit at the moment, not for a house, or the business, or anything else I can think of, so the scoring fluctuations I've discovered won't hurt anything except my ego right now, but it does seem like a never-ending Catch 22 trying to figure out all the right things to do to keep your credit scores strong.

Take A Minute:
Have you checked your credit scores lately?

Make A Minute:
Visit the websites for the three credit bureaus*, and pay the $10 or so per bureau to get your three scores. Look them over very carefully for any discrepancies, and go to work on correcting any errors. Aim to bring your revolving balances down to less than 50% of what is available to you.

Try as I might, I couldn't find documents online that offered any hard and fast rules for how many accounts you should have, with what kinds of balances, for what length of time, etc., etc., to have the perfect credit score. What I did find was a fairly informative report on www.myfico.com, under Credit Education Documents, with some basic tips for credit maintenance. (It still doesn't explain the mathematical processes for coming up with the numbers) In the meantime, I'm back to the drawing board with mine. I'll let you know if I solve any more of the credit puzzle, and if you find any great resources on this subject, be sure to share them with us!

*Credit bureau websites
www.experian.com
www.transunion.com
www.equifax.com

[thubten]

In Colorado it is the law that each consumer be allowed to receive a copy of his/her credit report once each year. FreeCreditReport.com | Free Credit Report and Credit Score Online by Experian is a good place to start.

Each state's rules are different, but there's no reason to pay $10/report when you don't have to. Of course the agencies will try to upsell you, and you don't have to accept their offers.

[thubten]

Prosper.com is an online community of borrowers and lenders. This site allows individuals to borrow and lend, and it has an auction mechanism to allow for the lowest interest rate.

The interest paid goes directly to the individual(s) who made the loan. It is an amazing site and is a wonderful alternative to the more traditional bank or credit card loan.

[master01]

"A perfect score is pretty rare," says Ryan Sjoblad, a spokesperson for Myfico.com, a division of Fair Isaac. "Less than 1% has an 850." Fair Issac Corp. created the FICO score to help lenders determine individuals' credit risk profile. The score ranges from 300 to 850; the higher the score, the lower the risk to creditors.