We all know credit references determine our worth to banks and other financial institutions. We know those credit scores can either haunt us or they can move mountains for us. What we might not know is how the scores are calculated, what the factors are that deem us worthy (or not) and who incorporates them into their decisions. You might be surprised at what these gems can and can’t do.

It’s important to understand what factors play a role in figuring one’s credit scores. You can be sure there’s a formula that’s used and it’s been the best kept secret in the free world for as long as there have been scores. These factors include:

• Payment Histories – Do you pay creditors on time? ie) have you paid your credit card every month?
• Debt to Income – Sometimes referred to as DTI and too much debt carried can drive scores down.
• Tax Liens – Is the IRS on the lookout for you? If so, they can haunt you forever (unlike traditional banks and credit card companies).
• Child Support Arrears – Yes, if you’ve been delinquent on child support payments, there’s a good
  chance it’s noted on your credit report.

Many people mistakenly believe only those businesses who lend money are looking at your credit report. Not so! A majority of employers are now pulling credit reports to determine if an applicant is responsible. If he’s having financial problems, there’s a good chance his mind won’t be on his work. Further, many employers won’t hire someone with bankruptcies or delinquent child support payments. If you’re looking at signing a morals clause for an employer, rest assured, your credit score is factored in to whether or not you’re offered a contract.

Just as banks and mortgage companies will obtain a credit history before they agree to carry your home loan, you also stand a chance of having apartment complexes or even individuals who rent houses request credit reports. It’s not uncommon these days.

The computer formulas that calculate a credit score are only as good as the humans who key your information. Mistakes happen. If you believe any of your three credit reports contain errors, your first move is to visit the three major agencies’ websites. From there, you can request a copy of your credit report to ensure the information is accurate. If it’s not, you can easily request to have the information investigated. If it turns out the information is indeed in error, the agencies will remove it; however, if the information is accurate, there’s a good chance it will remain on your report for up to ten years.