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All About Credit

It’s no secret; the economy is recovering very nicely from the coronavirus pandemic—as you can see in the GDP (Gross Domestic Product) graph below. And for the third quarter, GDP growth is forecast to reach even greater heights—a stunning 7%!


This strengthening has been a boon to both investors and consumers. As you know, the stock market, as evidenced by the S&P 500, has climbed 19% so far this year. Most investors have made money, and that pot of cash has helped fuel the current consumer spending binge, which grew 11.8% in the past month.

The downside is this: With the economic picture so bright, it’s easy to get ahead of ourselves and spend money we don’t really need to be spending.

Consequently, this is the perfect time to think about what shape you want your finances to be in when the good times inevitably end—which we know will happen with the next economic cycle. It’s smart to shore up your finances now, before that occurs.

And to find out just how good your financial condition is, you need to know your credit score.

You can’t turn on any television program without seeing an ad citing how easy it is to improve your credit score. In general, that’s just not true. Once your credit score has been damaged, repairing it can be much more complex than you might expect.

It’s actually pretty easy to damage your credit. When we’re young—unless our parents teach us about maintaining healthy credit relationships—we often do foolish things with our money. It’s not always due entirely to a laissez-faire attitude, but some fault must also be shared with the companies that bombard college students with easy-to-get credit cards. And that often turns into big trouble, leaving the students with a black mark on their credit report.

But bad credit decisions aren’t exclusive to the young. As we move toward our middle-age years, that same easy credit allows us to purchase a more expensive car that we can realistically afford or a house so expensive that we can’t furnish it, etc., etc.

Years ago, I used to manage a bank in Palm Beach County, Florida, in a very exclusive neighborhood. Many of the folks who parked their Ferraris in my lot also owned fantastic homes—on the outside. Not so much inside—their money was expended to buy the house, with little left over for furnishings. They were—literally—in over their heads, spending more than they earned to make an impression.

You get the picture.

Fortunately, these good economic times have helped a lot of folks get out of those kinds of tight credit situations. In fact, the Consumer Financial Protection Bureau reports that the average credit score in the U.S. stands at 710—an all-time high. That score is considered “good.” But it’s not “excellent.” And it’s the excellent score that you need to claim to get the best interest rates on your large purchases.

So, let’s explore how you attain that lofty goal.

What is a Credit Report?
We’ll begin with an explanation of a credit report, since that’s the primary driver of your credit score.

Credit reports are a compilation of your bill payment history, paid-off loans, current debt, and other financial information. Additionally, they go even further, peeling the layers off of your personal financial situation, telling would-be creditors where to find you—at work and at home—as well as whether you’ve been sued, arrested, or filed for bankruptcy.

With your credit report in hand, lenders will decide if you’re creditworthy—i.e., if you’ll most likely pay back the credit or loan for which you have applied.

That’s a big decision. But the next hurdle is equally important to you—determining what rate of interest they will charge you. And that largely depends on your credit score. When you are shopping for the biggest purchase of your life—a new home—the difference between a point or two extra in your interest rate (over 15 or 30 years) can cost you thousands of extra dollars that could be better employed elsewhere, like in your retirement accounts!

In addition, if you look for a new job or apartment, or even are shopping for insurance, you’ll find that a healthy credit report is essential. Your would-be employer, your landlord and your insurance company can review your credit report to determine how trustworthy you may be (especially if you are handling money in your potential job!), if you’ll pay your rent on time, and if you are likely to miss an insurance payment, which may ultimately raise your insurance premiums.

Credit reports are issued by credit reporting agencies (CRAs)—companies that collect and maintain your payment history information. There are three major bureaus, each of which manages its own records, which may or may not include all your accounts.

Credit Reporting Agencies: The Big 3
The three credit reporting agencies are TransUnion, Equifax, and Experian.

Equifax is headquartered in Atlanta, has approximately 11,000 employees and claims to “operate or have investments in 24 countries,” including Argentina, Australia, Brazil, Cambodia, Canada, Chile, Costa Rica, Ecuador, El Salvador, Honduras, India, Malaysia, Mexico, New Zealand, Paraguay, Peru, Portugal, Russia, Saudi Arabia, Singapore, Spain, the U.K., the U.S., and Uruguay. The company has leading market share in the southern and midwestern United States and says that it is the market leader in most of the countries in which it operates.

Experian is based in Dublin, Ireland, but has U.S. headquarters in Costa Mesa, California, operational bases in Nottingham, U.K., and São Paulo, Brazil, and has 17,000 employees in 37 countries around the world. In its early days, the company was focused on the western states in the U.S.; now it says, it is “the leading global information services company.”

TransUnion is based in Chicago, but has regional offices in Hong Kong, India, Canada, South Africa, Colombia, the U.K., and Brazil. The company has 8,000 employees.

As I said, they may not all have an inclusive picture of your credit history, so their credit scores for you may differ. With that being the case, if you want to get the best loan terms available, you should obtain a report from all three credit agencies to bring to your loan appointment.

These credit bureaus analyze your credit report and then calculate your credit score, which will generally range from 300 to 850. They are privately owned and are regulated under the Fair Credit Reporting Act (FCRA).

What is a Credit Score?
As I mentioned, your credit score is determined from the data on your credit report and is used by creditors to define your credit risk. Most credit scores (90%) are based on the FICO score associated with the Fair Isaac data-analytic company, but although they may all use the same FICO system, the three credit bureaus may use different calculations to come up with your score.

Your creditors may report to one or more of the bureaus, and when you apply for new credit, your lender may choose to use credit reports from all three agencies, or just one or two. Mortgage companies, however, will usually review all three reports, as most mortgage loans are sold to Fannie Mae and Freddie Mac, the country’s largest purchasers of residential home mortgage loans, who require this due diligence.

The following information is taken into consideration when computing your FICO score:

Payment history – Late payments are generally reported after 30 days past due; a late payment on a student loan from Sallie Mae is usually reported after 45 days past due; and Federal loans are not usually reported until 90 days past due. This is the most important part of your score, accounting for about 35%.

Outstanding balances – This includes outstanding balances on revolving lines of credit like credit cards as well as other secured and unsecured loans, with special attention paid to rising balances.

Credit utilization rate – This is the percentage of available credit used (the higher that percentage, the lower your score; generally, lenders like to see 30% or lower credit utilization). This is responsible for about 30% of your credit score.

Length of credit history – The longer, the better; this accounts for up to 15% of your score. When you apply for new credit accounts, that is called a hard inquiry, and can lower your credit score (at least initially). This accounts for up to 10% of your score. When you check your own credit, that’s considered a soft inquiry and has no impact on your score.

Credit mix – Both installment credit (loans with fixed monthly payments) and revolving credit (like credit cards, with variable payments and the ability to carry a balance). This can influence up to 10% of your credit score.

Derogatory information – This would include things like collections, foreclosures and bankruptcies that will have an effect on your score, and can drastically lower it, which can 1) prevent you from getting new credit; and/or 2) subject you to much higher interest rates than those paid by more creditworthy borrowers.

You’ll be happy to know that according to Experian, employment information, income or savings, where you live, alimony or child support and other information not appearing in your credit reports do not impact your credit score:

Explanation of the 5 FICO Credit Scores
To determine your credit score, each of the bureaus review the above information and look for patterns in your data that historically have been associated with late payments and payment defaults. The credit scoring models assess those patterns, and produce a score, generally a three-digit number, which sizes up your creditworthiness and risk.

It’s pretty interesting just how many consumers are conversant with their credit scores today. In my real estate business, it’s one of the first items many of my clients volunteer when they are looking to buy a home using a mortgage loan. And armed with a preapproval letter from their lender, it sure makes my job a lot easier when helping them find a home.

The FICO credit score is divided into five parts. The chart below depicts these levels, which are used by lenders to make their decision on the fate of your credit application.

FICO Score

These categories can be further explained as follows:

Exceptional: 800 to 850. These scores enable you to sail through your credit approvals processes and entitle you to the most competitive interest rates and lower fees.

Very good: 740 to 799. These scores will allow you to borrow at pretty good interest rates.

Good: 670 to 739. The average U.S. credit score is in this category, and these levels are deemed to be acceptable by most lenders but will usually come with higher interest rates than the two previous categories.

Fair: 580 to 669. A score in this range will probably disqualify you for standard mortgage loans and credit cards. Borrowers in this category may be considered subprime and will be charged higher interest rates.

Poor: 300 to 579. If your score falls within this range, you are probably not going to get a loan or a new credit card (unless it’s secured—more about that later).

As you can see from the lower portion of this chart, there are different scoring models—and ranges—depending on the type of loan you are pursuing (auto, mortgage, and credit cards), and tailored to the risk of default of that particular loan category.

You should know that FICO scores now have competition—VantageScore Solutions—which uses a score range of 300 to 850. You can see the breakdown below.

62 percent have fair score or better

VantageScores are calculated using the same criteria, but the level of influence the information has on your score varies.

Payment history (e.g., paying your bills on time) is most influential. The age and type of credit (the mix of loan accounts) and credit utilization rate (avoiding “maxed out” cards) are highly influential. Your total balances and debt (limiting debt to what’s prudent) is moderately influential. And your recent credit behavior and inquiries (new applications) and available credit (avoiding unnecessary credit accounts) are less influential.

VantageScores will also include derogatory entries mentioned above.

Whichever score used, it’s important to note that your credit score is not set in stone. With some effort, you can change your score for the better.

Why Your Score May Be Different among the Credit Bureaus
Your credit scores are probably not going to differ much among the bureaus. But if they do, it may be due to different data being reported to different agencies. As I said before, each agency may not have the same financial data for you. Your lenders, collection agencies, and court records supply the data to the agencies, but they may not supply everything to each agency.

Also, each bureau customizes its FICO scoring system to be the most predictive, based on the data they have collected on you, so your FICO score (your credit score) may differ among them.

Alternatively, the FICO scores may have been calculated at different times by the separate bureaus, which could affect your score. And as creditors report credit information to the credit bureaus at different times, one agency may be more updated than others.

You might also find discrepancies in scores if you have applied for credit under different names, like maiden names or previous married names, some, or all of which may not have made it into your credit history at the bureaus.

Lastly, there can be mistakes on your report, such as including someone else’s data on your account due to an incorrect social security number. That happened to me once, and I was surprised when the IRS told me I had not reported my income from Cuisinart, when the only connection I had with the company was the blender I bought!

Why You Should Frequently Check Your Credit Report
All of the above reasons should make you want to regularly check your credit reports, just to make sure that your personal and financial information is accurate, and that no one is fraudulently using your credit to open new accounts or misusing your current accounts. That way, you can correct errors immediately.

How to Get Your Free Credit Report and Score
Fortunately, you can get your credit report (and sometimes your credit score) for free—from several organizations.

As a result of COVID-19, each of the three major credit reporting bureaus—Experian, Equifax, and TransUnion—offered free weekly credit reports. Recently, according to the FTC, each bureau extended the timeframe for the reports through April 2022. gives you free access to your TransUnion report., 877-322-8228, or by mail: Complete the Annual Credit Report Request Form (PDF, Download Adobe Reader) and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. This free annual credit report will not include your credit score, but you can get your credit score from several sources, including the credit bureaus (for a fee).

Credit Karma bases its credit score on the VantageScore 3.0 model, a combination of credit scores and reports from TransUnion and Equifax that are designed to create a more consistent credit score. The data is updated weekly.

Credit Sesame is a credit monitoring service that offers access to your VantageScore directly from TransUnion. This service also gives you advice and suggestions regarding your score and offers $50,000 in fraud resolution assistance for free. And it also does not require a credit card to register. offers two free credit scores when you register on its site—your Experian score and your VantageScore 3.0, updated monthly. It, too, does not require a credit card to register. Like Credit Sesame, this site also offers money handling tips.

WalletHub offers credit reports from TransUnion and the TransUnion VantageScore. You’ll have to provide personal information such as income, expenses, and credit card debt, as well as your mortgage obligations.

Get Free Credit Scores from Credit Card Companies
Additionally, one or more of your credit card companies may provide your credit score on your monthly statement. I know my Discover Card does that. And so do the Barclaycard, Capital One Card, Chase Card, and First Bankcard.

The Top 10 Actions that Will Increase Your Credit Score
You may be happy when you receive your credit score, but if you’re not, there are some steps you can take immediately to improve your score. Other steps may require a longer time before your score rises.

  1. Review and monitor your credit report(s) to make sure they are accurate.
  2. You’ve probably seen the commercials for Experian Boost. The product claims to quickly help you increase your score by getting credit for making on-time payments for your phone and utility bills. And it’s free!
  3. UltraFICO is a similar program (and also free). It uses your banking history (savings account, length of accounts, paying bills through your banking accounts, and lack of overdrafts) to help build a FICO score.
  4. Stop making late payments.
  5. Ask for late payment forgiveness in case you accidentally missed a payment deadline. If you’ve been a good payer, your creditor may help you out.
  6. Keep your credit utilization below 30%. You may consider asking for an increase in your credit limit, which will improve your utilization ratio, and won’t decrease your score like applying for a new credit card would. But do not use that extra credit!
  7. Don’t close your paid-off credit card accounts, as those zero balances will help your credit utilization ratio.
  8. Become an authorized user on a family member or friend’s credit card. But make sure they have good credit!
  9. Apply for a secured credit card. You’ll have to pay an upfront deposit which will be used as collateral for the credit line. But beware, if you run your balance up and don’t repay as required, you can lose your deposit.
  10. Limit your requests for new credit. These “hard” inquiries will hurt your score for up to two years.

The Top 10 Actions that Will Decrease Your Credit Score

  1. Late or missed payments.
  2. Derogatory entries, such as collections or charge-offs, bankruptcy, lawsuit, judgement, foreclosure, and tax liens. These can stay on your credit report for 7-10 years and can keep you from not only getting credit cards or installment accounts, but also a mortgage. And as I mentioned previously, if you are able to obtain credit, you will pay a much higher interest rate than more creditworthy borrowers.
  3. A rise in your credit utilization rate, especially if it goes above 30%.
  4. A reduction in your credit limit which hurts your credit utilization ratio.
  5. Closing a credit card account which hurts your credit utilization ratio as well as the average length of your credit history.
  6. You paid off a loan, which can also hurt your credit utilization ratio and adversely change your credit mix. When I sold my last house, I didn’t immediately buy another one and I found that my credit score declined by 35 points! Thank goodness; it was only temporary, but I sure got a shock!
  7. Your credit card balance is higher than normal, even if it’s just temporary.
  8. You co-signed a loan or credit card application.
  9. You are a victim of identity theft or fraud.
  10. Hard inquiries, including applying for an auto loan or responding to a credit card offer you received in the mail.

How to Correct Errors on Your Credit Report
One of the advantages of regularly monitoring your credit report is that you will easily see any errors. And if you do find an error, know that you are not alone. A recent Federal Trade Commission study found about 5% of consumers had errors on their credit reports that were large enough to lower their credit scores.

If you do find an error, you’ll need to jump on it right away, by writing a letter with supporting documentation to both the credit reporting agency (Equifax, Experian, or TransUnion) and the information provider, such as banks and credit reporting agencies that sent the incorrect information to the credit reporting agency.

If that doesn’t correct the problem, you’ll next want to file a complaint with the Consumer Financial Protection Bureau at

If you are a victim of identity theft, file a report at and with the Federal Trade Commission (FTC).

Once you’ve filed your reports, make sure to re-check your credit report in 30 days to be sure corrections have been made.

Consider Placing Fraud Alerts or Freeze Your Accounts
While you are waiting for a resolution of the error in your credit report, you may want to place a fraud alert on your accounts. This will alert lenders and creditors that you have been a victim of fraud, and that they should double-check any credit applications in your name to ensure it is really you requesting the credit.

There are three different types of fraud alerts:

Initial Fraud Alert – This is used when you believe you are, or may become the victim of fraud. It is free and lasts for one year.

Extended Fraud Alert – This is for when you’ve been a victim of ID theft, and you’ve completed an FTC Identity Theft Report or police report. This, too, is free, lasts for seven years, and removes you from credit card and insurance offers for five years.

Active Duty Alert – This is used when you’re on active military duty. It is also free, lasts for one year, and removes you from credit card and insurance offers for two years.

Additionally, you can place a credit freeze. You can do this by contacting each credit reporting agency online, by phone, or by mail:

Experian:; 888-397-3742, or by mail:

Experian Security Freeze, P.O. Box 9554, Allen, TX 75013

Equifax:, 800-685-1111, or by mail:

Equifax Information Services LLC, P..O Box 105788, Atlanta, GA 30348-5788

TransUnion:, 888-909-8872, or by mail:

TransUnion LLC, P.O. Box 2000, Chester, PA 19016

If you place your credit freeze online or by phone, it will go into effect the next business day. If by mail, it will be in effect three business days after the credit agency receives your request. It’s important to note that a credit freeze does not expire. You have to lift it to revoke it, by contacting each credit reporting agency.

Credit Repair Agencies—Are They Worth it?
If you’re finding that repairing your credit is too overwhelming, there are some companies that will help you, but it will cost you—on average, $100 per month. But that fee may be well worth it!

A credit repair agency is most useful when you can afford your monthly bills, but your poor credit score is keeping you from qualifying for new credit, such as a mortgage or a car loan, or is causing you to pay high interest rates.

The role of the credit repair services is to review your credit reports for information that shouldn’t be there and dispute it on your behalf. And some of them will follow up regularly to make sure the information does not reappear on your report.

According to, credit repair services can help resolve accounts that do not belong to you, bankruptcy or other legal actions that were not yours, misspellings, which may mix in negative entries that belong to someone with a similar name — or may mean positive entries aren’t showing up when they should, negative marks that are too old to be included and debts that can’t be validated and verified.

This process can take a month to a year, or even several years, depending on the size of your credit repair. And, as I mentioned, you’ll have to pay them a monthly fee, and maybe a setup fee, too.

But there are seven significant advantages in using a credit repair company, according to

  1. An expert with lots of resources and leverage does the job for you.
  2. Credit repair companies work directly with your creditors.
  3. Credit repair companies work directly with banks, lenders, and credit card companies.
  4. Professional negotiation.
  5. Faster processing.
  6. Lower interest rates than you can usually negotiate for yourself.
  7. Advice on how to handle your existing credit accounts so that you don’t further damage your credit rating.

However, there is one big disadvantage in the credit repair arena, and that is the propensity for scammers. If a company claims to have more rights than you do, that it can remove negative information that is really accurate, or that it can help you establish a new identity using a credit privacy number, there’s no need to continue your conversation with that business.

Additionally, here are some warnings from the FTC to help you weed out the bad companies. Avoid credit repair companies that:

  • Insist that you pay them before they do any work for you.
  • Advise you not to contact any of the three nationwide credit bureaus.
  • Tell you to dispute information on your credit reports, even if you know the information is accurate.
  • Tell you to give false information on credit applications.
  • Fail to explain your legal rights to you when telling you what they can do for you.
  • Encourages false information on credit or loan applications.

And know that you have a three-day right to cancel a credit repair agreement without charge and are entitled to know the exact costs and an estimate of how long it will take to get results, according to the Credit Repair Organizations Act. Additionally, make sure you get a written contract detailing all of your legal rights.

There are several ways to find a reputable credit repair company, such as recommendations from your attorney, accountant, or financial advisor. You can also Google credit repair companies and make a list of established companies. Check their ratings with the Better Business Bureau and search for complaints in the Consumer Financial Protection Bureau database. Once you’ve winnowed your list, it would be prudent to interview each company before making a decision.

Lastly, lists its recommended credit repair organizations, by the state in which you reside. For example, here in Tennessee, the following six companies are recommended:

Credit Saint

Read Full Review

  • Three plans to suit customers’ needs and budgets
  • Choose 5, 10, or unlimited challenges per month
  • 90-day money-back guarantee
  • High success rate and quick results (90% of clients see changes in 90 days or less)
  • BBB accredited with an A- rating
  • Unique challenges, no form letters used
  • Cancel Anytime


(855) 226-5108


 Lexington Law

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  • Specializes in removing inaccuracies from: Collections, Late Payments, Bankruptcies, Foreclosures, etc.
  • Pricing starts at $89.95 monthly (after initial month)
  • Clients saw over 10,000,000 negative items removed from credit reports in 2017
  • Have hundreds of thousands of clients with credit help
  • Cancel anytime



Sky Blue

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  • Over 30 years in business
  • $79 per month - Includes all features
  • Fast dispute process – 15 items every 35 days
  • Guarantee – The only condition-free, full refund policy we found
  • Known for excellent customer service
  • Online account to track your progress 24/7
  • Need a break? Pause your membership with the click of a button




Read Full Review

  • Free credit consultation and credit report summary
  • Works with credit bureaus and creditors to resolve issues
  • Dedicated personal credit advisor assigned to each customer
  • Plans to fit nearly every budget
  • Cancel anytime
  • Track your progress with 24/7 access to your account dashboard
  • Ask about military, couples, and senior discounts
  • Rated A+ by the Better Business Bureau



In summary, it’s always better to start with and keep a good credit rating. But millions of folks have had times in their lives when they got off track, due to a myriad of reasons—some maybe not of their own making. Fortunately, there are resources available to help you repair your credit.

Bottom line, if you have a credit problem, don’t bury your head in the sand—it will only make your situation worse. Instead, tackle it right away, and begin rebuilding your credit so that you will be in an enviable position should an opportunity too good to pass up come your way, or just to make sure you are in a stable financial position during the next challenging economic cycle.