Here are a couple of general rules for your consideration. Your minimum credit score needs to be at least 650. If your credit score is below 650 then there are ways to fix it. Here’s how it works…
A. You can challenge anything in your credit report. If the merchant can’t provide proof of their claim, then the item must be removed from your credit report. For example, if Department Store X says that you didn’t pay-off your $72 balance on your X card in 1997, and you say that you did, then Department Store X has 30 days to provide the documentation proving that the bill is unpaid. If they can’t prove their claim, then the outstanding debt is removed and you’re moving toward a higher credit score. If Department Store X is right and you do owe them $72, then you now know the problem and you have the opportunity to pay the $72… again you’re moving toward a higher credit score.
B. Get and review copies of your three major credit reports annually-more often if you are nearing pivotal junctures where your credit score is especially important.
C. Between the reports from Federal Trade Commission (“FTC”) and CBS News, it is estimated that somewhere between five and eighty percent of credit reports contain errors. Some errors are actually good for you and some are not so good. In my mid-twenties I checked my credit reports, and I was very happy to learn that not only had I purchased a new car, but I paid it off with a perfect history of payments. It was great for my young credit history-never did find the car.
D. Your credit score contains five components. Here are the five components and their degree of importance by percentage:
Your credit score is based on all of the items above. It is not a pass-fail circumstance for each of the categories. Your score is produced in the aggregate and that scoring constantly changes. The scoring for one person and their financial profile will be different from another person. The information presented here is for the fat part of the Bell Curve, but it provides solid guidelines.
E. If you are focused on an acquisition (or other type of loan) and your score is below the 650 mark, note that a business partner’s score that is 700 or higher can help to off-set your score. When lenders are considering borrower qualifications, they look at the entire “borrower” whether it is one person or a legion of people.