Types of credit scores
There are primarily two types of scores – generic scores and custom scores.

Custom scores are generated by individual lenders, who rely on credit reports and other information, such as account history, from their own portfolios.

VantageScoreSM
VantageScore is the first generic credit score developed cooperatively by Experian and the other national credit reporting companies. This score uses the same exact formula across all three credit reporting agencies. Learn more about VantageScore.

Why lenders use credit scores
Before credit scores, lenders physically looked over each applicant's credit report to determine whether to grant credit. A lender might deny credit based on a subjective judgment that a consumer already held too much debt, or had too many recent late payments. Not only was this time consuming, but also human judgment was prone to mistakes and bias. Lenders used personal opinion to make a decision about an applicant that may have had little bearing on the applicant's ability to repay debt.
 
Credit scores help lenders assess risk more fairly because they are consistent and objective. Consumers also benefit from this method. No matter who you are as a person, your credit score only reflects your likelihood to repay debt responsibly, based on your past credit history and current credit status.

Credit score factors
Score factors are the elements from your credit report that drive credit scores. For example, your total debt, types of accounts, number of late payments and age of accounts affect credit scores. Score factors indicate what elements of your credit history most affected the credit score at the time it was calculated.
Score factors are the key to improving credit scores. They tell you what you must address in your credit history to become more credit worthy over time. Score factors are usually consistent from one score to another, so addressing the items identified by the score factors can help you improve other credit scores.
 
Lenders are required to provide consumers with the most significant score factors when they are declined credit.

Create a positive credit history
Your credit report shows how well you managed your financial responsibilities during a certain period of time. Negative information drops off over time, but the positive information remains.


To create a positive credit history:
 
• Print clearly when applying for credit.

• Consistently use your complete name. Providing complete, accurate and consistent identification on your credit applications helps set up your credit history correctly from the beginning. It also minimizes the chance that your credit file will be incomplete or mixed with another consumer's file.

• Pay your bills on time. Most lenders look at the most recent information on a report. So if you've paid your accounts on time for the last two to three years, the lender may weigh that more heavily than a series of late payments from five years ago.

• Set up a budget, and live within it. In the age of self-help and empowerment, managing your finances should top your list.

• Review your credit report 60 to 90 days before making a major purchase (such as a home or car).


Getting Help

If you begin to fall behind on your payments:

• Contact your lenders. Ignoring the situation will only add to your problems. Many lenders will work with you to set up a different payment schedule or interest rate. It never hurts to ask.

• Pay your bills when they're due. If you have an overdue bill, unpaid debt, tax lien or judgment, pay it off. You may find it easier to pay one affordable consolidating loan rather than several separate accounts.

• Stop using credit until your finances are under control.

• Look to professionals if you need assistance or if you don't have time to develop your own plan. Quality nonprofit credit counseling organizations help consumers understand credit reports, contact creditors, manage debt and set up budgets. You might also find credit management help at your local community college or community center.


Be an educated consumer
Going to a credit repair clinic will not be of help to you. There is nothing any credit repair clinic can legally do for you – including removing inaccurate credit information – that you can't do for yourself for free, and their fees can be substantial, ranging from hundreds to thousands of dollars.


The Credit Repair Organization Act is a federal law that prohibits credit repair clinics from taking a consumer's money until they have fully completed the services they promised. It also requires such firms to provide consumers with a written contract stating all the services to be provided and the terms and conditions of payment. Consumers also have three days to withdraw from the contract.


FRAUD PROTECTION
In a country where consumers owe more than $1 trillion on their credit cards, estimates of $2 billion to $3 billion in credit card fraud losses may not seem all that terrible. That comes out to just two to three one-thousandths of one percent. But it is terrible to victims of fraud. Though they may be protected financially, they are forced to endure major inconvenience. Additionally, we all pay for the costs of fraud in the form of higher prices, higher interest rates and increased inconvenience.
 

There's no single definition of fraud, but some types of credit fraud that occur include:
 
• Identity theft: the unauthorized use of personal identification information to commit fraud or other crimes

• Identity assumption: long-term victimization of identification information

• Fraud spree: unauthorized charges on existing accounts
Sources of fraud


Just as there are various types of credit fraud, there are also different ways that credit thieves gather your personal information:
• Using lost or stolen credit cards
• Stealing from your mailbox
• Looking over your shoulder
• Going through your trash
• Sending unsolicited email
• False telephone solicitation
• Looking at personnel records

Discovering fraud
There are several warning signs that credit fraud may be occurring:
• Strange charges show up on billing statements
• Bills arrive from unknown or unfamiliar sources
• You receive calls from creditors or collection agencies
• Your credit report contains inquiries or information about accounts that you did not open 
 

Resources:


Debt Settlement And The Real Truth