Feel like credit scores are a bigger mystery than the Bermuda Triangle, crop circles, and the Loch Ness monster combined?


Youre not alone.


Internet-based services are making it easier for consumers to access their scores, also called FICO risk scores, and knowing those scores is the first step toward improving them, says Preston Ritter, marketing director of ACRAnet Inc., of Spokane, which provides credit-related services to businesses. With higher credit scores, consumers can increase their chances of being approved for loans or other forms of credit, and also can reduce the interest rates they pay on such borrowed money, Ritter says.


Improving your credit scores can open doors for you, he says. It can help you get loans cheaper, easier, and more quickly.


Lenders use a number of factors, such as income, employment history, and FICO scores, to make credit decisions. In recent years, though, it has become standard practice for underwriters to charge higher interest rates for consumers with poor credit scores, while charging lower interest rates to consumers with higher scores, Ritter says. Thats why monitoring and managing credit scores is advised for everyone, not just people with risky credit histories. Consumers with good credit who take steps to make it even better can save themselves money, Ritter says, whether theyre financing a car, buying or refinancing a house, or taking out a personal loan to buy holiday gifts.


Be proactive, Ritter says. Its your credit report, and it serves your best interest to know the content.


Credit scores first came about in the 1950s, when Bill Fair, an engineer, and Earl Isaac, a mathematician, formed Fair Isaac Corp. (FICO) and developed the algorithms used to derive them. Credit scoring was a relatively novel tool even 20 years ago, and lenders who chose to put their faith in the numbers then were on the cutting edge, Ritter says. Use of FICO scores grew in the 1980s, though, and Fannie Mae and Freddie Mac, the huge national mortgage buyers, recommended use of FICO scores for evaluating U.S. mortgage loans in 1995a significant step for credit scoring.


Today, businesses use credit scores regularly because, in general, the scores can help them reliably identify the accounts (or customers) that will pay you on time, Ritter says.


Terry Willingham, owner of Response Mortgage Services Inc., of Spokane, says that in the last few years the number of industries using credit scores to evaluate customers borrowing ability has grown exponentially.


Everything is hinged on your credit report now, she says. When you get homeowners insurance now, they run your credit. You might have a higher premium because of your score.


Fair Isaac has developed scores for the three major credit-reporting bureaus in the U.S.the Beacon score for Equifax Inc., the Empirica score for TransUnion LLC, and the Experian/Fair Isaac Risk Model score for Experian Information Solutions Inc. Its estimated that Equifax, TransUnion, and Experian together put into their databases about 2 billion pieces of information about consumers a month, Ritter says.


Cleaning up credit


When consumers or lenders order credit scores, they receive three numbers, one from each of the reporting companies, Ritter says.


It costs about $9 to pull credit scores from each of the three bureaus, or $30 to $40 to go to a central site, such as www.myfico.com or www.cdsw.com, to order all the scores at once. Myfico.com provides the scores as well as the top four reasons why the scores are what they are, and tips for improving them, Ritter says.


The reports should reflect the most current information about a consumer, such as what credit accounts they have open, the amount past due on delinquent accounts, and the time since there was activity on the accounts, among other information, he says. Sometimes, though, credit reports include errors.


The vast majority of these are honest mistakes, Ritter says. Those issues often are resolved between the consumer and the creditor, he says, but otherwise wouldnt have been resolved if the consumer never knew they were there.


Sometimes, creditors and consumers dont come to a resolution, in which case The consumers have the right to put a comment, to explain their perspective, on their credit reports, Ritter says. The creditor is the only one who can change the credit information on the report, though.


So, on the credit score scale of 300 to 850, what is a good score? Ritter says that fluctuates from lender to lender, but Willingham says with home loans, anything above 640 buys you a pretty good (interest) rate.


700, and they basically just take your temperature, make sure youre breathing, she says. If youre over 800, they dont even care if youre breathing.


Someone with a score of 700 or higher, for example, likely could obtain 100 percent financing on a house, she says.


Willingham says consumers often find on their reports a list of accounts that theyve forgotten. Someone might apply for a credit card at a retail store, for example, to take advantage of a promotional savings of 10 percent or so while theyre buying an item, pay off the balance, and cut up the card, but never close the account with the creditor. Even though they have no outstanding balances, just having the open accounts can hurt your borrowing ability, she says.


What I tell them to do is to call up (those creditors), close those accounts, and ask them to send a letter stating that theyre closed, Willingham says. I did this personally last year. I closed eight credit lines, and it raised my score 100 points.


The FICO Score Simulator, a product available on www.myfico.com, enables consumers to tinker with what if scenarios regarding their credit scores. When they pull their credit scores, they can select some variables and see how certain changes could affect them. They could find out, for example, how their scores would change if they paid their bills on time for six months and pay down their credit card balances by $750, but apply for a new credit card. The program recalculates their scores, showing them what they would be at that instant if those scenarios were to happen.


Quick. What are your credit scores?


Even if you happened to have pulled your scores 10 minutes ago and think you know the answer, they already might have changed. Ritter says thats because scores are fluid and based on several factors. They can fluctuate by the minute.


The data FICO uses to determine credit scores is split among five categories: the consumers payment history, length of credit history, amounts owed, types of credit used, and new credit, or accounts opened within 18 months, Ritter says.


At 35 percent, payment history is the most heavily weighed portion of the credit scores, and it includes information on retail accounts, credit cards, mortgages, and more, FICO says. It also encompasses bankruptcies, liens, collections, amounts past due on delinquent accounts, and other considerations.


Amounts owed, including the proportion of account balances to total credit limits, the number of accounts with balances, and related items, has a weighting of 30 percent in determining scores. The length of credit history, or the amount of time that has passed since accounts were opened, comprises 15 percent of the scores. Types of credit used, whether credit cards, loans, mortgages, or other accounts, and the type and amount of new credit each accounts for 10 percent of the scores, FICO says.


Two categories, length of credit history and types of credit used, would be affected negatively if a consumer had few or no credit accounts or only had them for a short amount of time, such as might be the case with young adults, Ritter says.


Just because scores fluctuate doesnt mean consumers need to be pulling credit reports once a week. Ritter suggests ordering reports once a year, unless youre preparing to make a major transaction, such as buying a house, in which case consumers should order a report ahead of time to position themselves for a low interest rate on the home loan.


Scores can go down if several different creditors pull reports on your credit, but consumers can pull reports on their own credit without penalty, he says. The system also is designed to recognize when a consumer is shopping around for something, so if six different automobile dealerships pull credit reports on you in a week, your scores wont take a nose-dive, Ritter says.


Credit scores also arent affected when reports are pulled for employment or insurance purposes or when creditors with which a consumer already has an account order them, he says.


Several companies bill themselves as providing quick-fix solutions to credit problems. These so-called credit-repair clinics often offer servicesfor $100 to $200that consumers could handle themselves, such as writing letters to creditors contesting what theyve reported to credit bureaus.


Sandy Moya, consumer reporting sales manager with Credit Bureau Services, of which ACRAnet is a division, says, Everything a repair clinic can do a consumer can do on their own.


She recommends working out credit problems with nonprofit credit-counseling organizations, such as Consumer Credit Counseling Service.


Ritter says the most successful ways to bolster Credit scores are to pay down the amount owed on credit cards and remember that time is on your side. As months go by, the score is going to go up once youve made some changes.


He adds, Theres no magic bullet. The key is to get current and stay current, and things will move in your direction.