With the economic crunch weighing down more consumers than ever, having a high FICO credit score is one of the best ways to stay afloat in these frightening times. One’s credit score determines the quality of loan offers as well as the interest rates borrowers are entitled too and there are ways to help improve your rating as errors do occur. Fortunately consumers can add 100 words to their credit bureau file to help clarify mistakes on their history.

According to Steve Bucci, author of Credit Repair Kit for Dummies “Twenty-five percent of credit reports have errors.” People who want to take charge of their financial health should make sure to order their free credit report scores annually and if there are discrepancies on there, do something about it. If mistakes are spotted they must work quickly and diligently to clean up their credit history.

One of the first things anxious consumers can do is contact the company that filed to negative comments. Sometimes a little communication can go a long way. A formal dispute may also be created, just provide copies of documentation to support your claim. Finally, under the Fair Credit Reporting Act, consumers have a voice. They can post100 words to their credit bureau file and clarify the situation, just make sure to post a well crafted pitch. 

The 100-word statement provides consumers a way to explain their side of the story. It needs to be concise, accurate and true and if it addresses specific concerns can help a lender make a decision in your favor.

Consumers trying to get creative with their finances should think twice about taking up a marketing offer for a no interest or deferred payment credit card. On paper, these cards look like a great way to finance luxury purchases at a minimal expense but the exchange for the payment flexibility can be a lowered credit score.

The negative impact is caused as follows. The limit placed on promotional rate credit cards tend to be very close to the amount actually being charged. An individual’s credit score is calculated by a formula heavily weighted by a credit utilization ratio. This ratio is determined by the portion of total available credit on all credit cards to the amount of credit actually being used at any given time. Experts advise maintaining a ratio range of 10% to 30% for a healthy credit score.

Gerry M., a California resident just recently opened a store credit card to finance the purchase of $3000 worth of home appliances as the 0.0% for six months financing offer made the overall costs easier to manage. He received a total credit limit of $5000 on the card and after the purchase he had a 60% credit utilization ratio for that card that got averaged into is total credit history. Despite paying off his bills in a timely manner, his most recent credit report showed a drop of nearly 10 points.

To avoid the negative affects of signing up for enticing credit card offers consumers need to fully read the fine print. All the credit card terms are different and the type of credit (either revolving like a credit card or installment like a car loan) can affect one’s credit score as well.

Credit card issuers are utilizing alternative strategies for weeding out potentially undesirable cardholders. To reduce the risk of losing more money from credit card payment defaulters, many lenders are not only reviewing ones FICO credit score, but are using a system called behavior-based risk assessments to either accept or reject credit card applications.

Now every time you apply for a new line of credit you’re past spending habits and patterns are going to be reviewed and compared to those of loan defaulters. If there are too many similarities between your shopping behavior and the negative models the chances of approval are greatly diminished.

Risk assessment is one of the first steps in risk management. Behavior-based risk assessment helps figure out the value of a behavior in relationship to being a recognized threat. Risk management in business is to help prevent loss by managing or limiting threats to the organization or the financial bottom line. Ed Mierzwinski a consumer advocate and the consumer program director for the U.S. Public Interest Research Group has noted the increased use of this archaic type of consumer profiling in the credit card industry.

Although card issuers are not releasing the specific details about what type of shopping behaviors they deem risky, consumers worried about the impact this system will have on them should take control of their resources. Mierzwinski suggests playing it safe by working towards reducing debt, shopping less and making timely payments.

Tightening credit cycle makes it more important to check your credit report more often.

More than ever, it is important to review and verify the accuracy of your credit report. While it makes sense to review your credit report ahead of a major loan or while re-building your credit, in today’s credit tightening world it’s mandatory. One example, credit card companies are lowering available credit and credit limits on your present credit cards based on intermittent review of your credit file. A mistake on your credit report can be the start of this and could lead to lower scores.

What to verify when reviewing your report? Accuracy. Mistakes are not uncommon, people have similar names and unfamiliar or inaccurate information can be an early warning of identity fraud. Other areas include:
• Personal information is accurate and does not include addresses or employers that are not yours
• Public records reflect correct information
• Account information, including date opened, credit limit, balance and payment histories are correct – especially late payment and charge-off history
• All accounts are yours and closed accounts have no recent history
• Inquiries should be reviewed to see who has recently received your credit report information

If you have excellent credit and use credit sparingly, checking your report for inaccuracies may be only necessary once a year.

If you find a mistake, then you have the right to dispute the information free of charge. You should contact the credit bureau that provided the information and dispute the inaccurate information. You can also contact the creditor and ask that accurate information be provided to the credit bureau.