The Birth of the Fair Credit Act
It took ages for the general public to catch on that their credit scores were being determined by some mathematical formulae concocted by Fair Isaacs. Just exactly how these scores are calculated is so complex that they have achieved an almost mystical quality.
Most people did not even know that a three-digit number represented their credit score mainly because the number was considered to be a confidential figure that was only ever seen by decision makers at the three main credit bureaus (Experian, Equifax and Transamerica). However thanks to the Fair Credit Act, which was passed just a few years ago, your FICO number is now just as much your business as it is the business of the credit bureau.
However even though you may now be able to see your credit score and know exactly where you stand it may be difficult for you to figure out what you did to earn it in the first place!
Fair Isaacs does and always has kept the exact calculation of the FICO number a big secret. The company has always feared that if people learned their methods that they could be adopted by people who wanted to beat the system.
Also there is a danger to those who make their living as lenders as well as damage to be done to the FICO’s reputation if people figured out how to change their behavior so that they could boost their scores
Of course, this is what this guide is all about – teaching you how to change your behavior to boost your scores! This is because in the past couple of years, more of FICO’s secret ways of your calculating your credit worthiness have been revealed by changes in government legislation.
It is more possible than ever to try and boost your credit score because resentment over the secret nature of FICO calculations finally boiled over in 2000 when a group of Internet based lenders called E-Loan took Fair Isaacs to task over their rating calculations.
In essence E-Loan did the taboo thing and revealed to consumers how Fair Isaacs calculates their scores. For about a month in 2000 people could go to the E-Loan website and take a free peak at their scores online. This allowed millions to ingest some simple information about how their credit scores were calculated by FICO. However it did not take long for FICO, the puppeteer that cuts the strings of disobedient credit organizations, to eliminate the website. Still a lot of damage was done to the company in terms of revealing its secret “formulae” to obtain good credit.
Even though the public has no real idea of how FICO calculates credit scores, the E-Loan betrayal started a succession of events that led to Congress passing a law in 2003 that gave all people the right to view their credit scores at any time. This law was called the Fair Credit Reporting Act and allows you at any time to look at your score, scan it for errors and request that any erroneous items be removed from your report without punitive action from a credit bureau.
In a nutshell this means that if you request to view your report, the credit bureau has to provide you with a copy free of charge. This put a lot of operations that formerly charged as much as $100 to procure your secret credit report for you right out of business.
It also means that if you write the credit bureau a letter asking a question about or disputing something that you have found on your credit, they have to respond back to you or they are breaking a law. T
The fact that credit bureaus are now, in theory required to be just as responsible to you as they are to their creditor type clients can be one of your most valuable cards to play if you ever find yourself in the position where you need credit repair.