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Most people don’t mean to ruin their credit and almost always don’t find out that they have ruined it until they are denied a loan, credit card or mortgage. By then its usually too late to fix the problem. In this section of the book we are going to look at the 33 most powerful things you can do to protect your credit. Credit is after all a fragile thing and it is startling how easy it is to sabotage excellent credit just because you failed to take a few preventative measures to protect it and treasure it.
1. Three Credit Scores Are Better Than One
One big mistake that most borrowers make is to simply live a life of ignorant bliss when it comes to acknowledging that there is not just one, but three credit bureaus from which credit card scores can be pulled.
Many people only pull one credit report because they are not aware that there is more than one credit bureau keeping tabs on them. These three credit bureaus are the private for-profit entities described in Part I – Experian, Equifax and Transamerica
The best way to get your credit reports is to purchase them directly from the three national credit-reporting agencies and then have them mailed to you.
2. Purchase FICO Not Consumer Reports.
As mentioned in the last chapter, do not be fooled by consumer reports that are often mistaken for credit scores. Always ask for FICO scores. If you want to have an accurate picture of your situation as it is in the here and now, don’t be led astray by a credit summary of any kind.
FICO scores are the modules created by Fair Isaac through which data is run for assessment purposes. These models are converted to software and then employed by each of the three national credit-reporting agencies in the form of a database. FICO scores are available to any lender or consumer who purchases a credit report …or so you would think.
Some credit bursa such as TransUnion and Experian aggressively market their own proprietary consumer credit scores. These scores are meaningless because lenders don’t use them. To avoid being led down the garden path in this manner ask specifically for FICO scores and not a consumer credit report. FICO Scores are called Beacon at Equifax, The Fair Isaac Risk Model at Experian and the Emprica at Transamerica.
Make sure that you are purchasing your FICO scores or you won’t be seeing the same things that your lenders or inquirers do. Instead you will be looking at a report that is designed to lure you into buying additional credit related reports, counseling and products.
You don’t want more credit (unless you have a slim history.) You want to know how to better maintain the credit that you have.
3. Don’t Trigger Unnecessary Inquiries
When you sign a credit application or give a lender your social security number you are automatically giving that lender permission to make a hard inquiry into your credit. Unfortunately every time you apply for a loan or credit it is reported as a negative comment on your report. Usually this comment appears as a line item on the bottom of your credit report. Commonly it is called a credit inquiry.
The minute that you sign away permission for an inquiry into your credit; the credit bureau sees it as an inquiry that you initiated because you need money. As the FICO system sees the need to borrow money as a bad thing, your initiation into the matter lowers your credit rating.
To avoid the accidental lowering of your credit due to unnecessary inquiries it is a very practical and good idea to ask a lender whether or not they will be making an inquiry into your credit before you sign on the dotted line.
The bad news is that a hard credit inquiry stays on your credit report for two years. However, the good news about hard inquiries they only count against your score for the first twelve months