Mortgage News: How FICO Credit Scores Get Gamed

Tuesday, February 12, 2008

How FICO Credit Scores Get Gamed

Today there was a very interesting article regarding FICO scores on Businessweek that talks about the dark side of the FICO credit score and mortgage lending.

The article is surprisingly clear on the techniques used to raise credit scores.

Generally, the thing that hurts the score the most is having too much debt vs. your outstanding limits. Anything you can do to get your available balances below 50% of the available limit will increase your scores.

Here is the calculation to figure out your balance to limit ratios.

Total Outstanding Balance / Total Available Limits = %

Instead of paying a so called credit doctor, you can often just call your existing card companies and request an increase in available limits and thats free.

If you have legitimate errors on your credit report you can also make use of the Fair Credit Reporting Act yourself by contacting each credit bureaus and following the credit dispute instructions.

- TransUnion
- Equifax
- Experian

The article is worth the read if your curious about how the FICO score system works.

If your not sure whats on your credit report you can request your free annual credit report from each credit bureau from the official public website

Remember that the most important thing is to just make your payments on time. After all when you borrowered the money thats what you agreed to do.

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