In my interview with Judyth Piazza, founder of the Student Operated Press, I talked about how important it is to purchase a credit score from the right place. I wanted to share that interview with you (click on the link above) and make a few comments about the importance of where you purchase a credit score.

I keep seeing ads offering credit reports and credit scores, and I can understand why these offers might be alluring, especially now that the economy has taken a turn. But beware that you don’t purchase a credit score from the wrong place.

It’s a little confusing, but the process generally works like this:

The credit-scoring bureaus use a lot of different formula to generate a credit score. Based on who is asking for the credit score, they will apply a different formula. A lender who is considering whether to give you a car loan is interested in different aspects of your history than your landlord, so the formula will be tailored accordingly. For instance, greater emphasis might be placed on your installment payment history for the auto lender; the landlord’s score might place greater emphasis on your mortgage history.

When you pull your own credit report, the formula generates something called the “consumer score.” The consumer score is relatively generic. It places equal emphasis on your mortgage history, installment payment history, etcetera.

The problem with the consumer score, though, is that no lender will ever see it. Never. Not in a million years.

So the consumer score is worthless. Unfortunately, this is the score you will get if you purchase a credit score from most online sites.

To put this into perspective, I pulled my consumer score and my FICO score on the same day, just to see what would happen. I went to AnnualCreditReports.com and purchased my Experian, TransUnion, and Equifax consumer scores. All three reports showed a credit score above 720, the cutoff for receiving the best interest rates. In fact, my lowest credit score was 759.

This seems great, right? I can just go apply for a loan and get the best interest rate out there, right?

This is what a lot of people would have done, but I knew better about where to purchase a credit score. Through my mortgage company, I was able to purchase my Experian, TransUnion, and Equifax FICO scores. FICO is the score 90 percent of lenders use. This time, my highest credit score was 759. My lowest was 653—a whopping 67 points lower than needed to secure a loan at the best interest rate. A collection account had been added to my report (it was a mistake) and this one item was causing my score to drop significantly.

Imagine what would have happened if I had been preparing for a home loan and relied on AnnualCreditReport.com as an indicator of my credit score. I would have had two lousy options: 1) accept less-than-favorable loan terms; or 2) postpone purchasing my home while I clean up the mistake on my credit report.

This is the problem with most places you might go to purchase a credit score. If you want an accurate reflection of the credit score lenders will see, you must purchase a credit score from the right place. Go to www.720ficoscore.com to get the only score that matters: FICO.

Credit Secrets Revealed: Purchase Credit Score from the Right Place

I always get asked, what is the key to Raising My Credit Score Quickly?    I understand why the “quickly” is such an important part of the question.  See – getting denied credit is embarrassing!  Read my story….

Two weeks ago I was in Macy’s buying my wife a Christmas Gift, I was in line, and there were six people behind me.  The total bill was over $700, and if I applied for a Macy’s Credit Card, I could save $140.  I thought to myself…. “I have perfect credit, and I can save $140 for applying for a Macy’s Credit Card, let’s do it!”

I filled out the application, and I could practically feel the breath of the people behind me, in fact, I could hear the voices in their mind saying… “What is he applying for a Macy’s credit card for?  We are too busy!”  Actually, that is probably what I would have been saying as well.

After waiting for the instant approval, the lady told me, “You have not been instantly approved for our Macy’s Credit Card; you need to wait a few minutes, please have a seat.”

“What!”  I thought to myself.  “How can this be?”  I felt like telling them, “I’ve written a book on credit, I have perfect credit.”  In other words, “Accept me!”  As I was sitting next to the cash register hoping and praying that everything was going to turn out for the best, I could barely face the people that were behind me.  Under their breath I could picture them saying things like, “You deserve to be denied this credit card for holding us up!”

Let me tell you, it was the most stressful and embarrassing five minutes of my 2009!  Now I know why people ask me, what is the key to Raising Your Credit Score Quickly?”  That is what I’ll help you do this year, along with a few other things… let’s make 2010 our best year ever.  If you have a story like this, almost getting denied credit, or getting denied credit?  Share it with me below, we can bond together over our frustrations.

Avoid being a cosigner unless you are willing to assume financial responsibility if the borrower cannot make the payments. In fact, when you cosign on an account, you become just as much of a borrower as the actual borrower. When you cosign on someone else’s loan or credit card, your credit will be affected by all future activity on that account. If the person repays his loans on time, your credit will be affected positively. If the person is delinquent, your credit will be injured.

If you are already a cosigner, you should take the following steps to protect your credit:

•   Insist that bills be sent to your address, or track the account online. This way, you can determine whether the borrower is paying on time. If not, you will need to make the payments on the borrower’s behalf to protect your credit. To do so, make sure you pay a bill before it is 30 days past the due date. And, remove your name from the account (or insist that it be closed) the minute it becomes delinquent.

•   More effectively, decide to pay the bill directly and have the borrower pay you directly. This way, you will always be in control of payment.

•   Contact the creditor and see if the loan can be refinanced in the original borrower’s name after a year of timely payments.

The truth of the matter is that sometimes a loved one needs a cosigner, and refinancing in the borrower’s name only just isn’t possible. If this is the case, try finding a replacement cosigner. Let your friend or family know that because the economy has changed, you need to make adjustments to your credit profile, but instead of begging out of the loan, you will help find a replacement cosigner. Perhaps a grandmother or grandfather who does not plan on making any major purchases in his or her retirement years would be willing to cosign. For them, cosigning a loan would not be as detrimental as it would be for you.  In this way, you can protect your relationship and your loved one.

If you have any cosigning horror stories, share your stories below.

1.   Read the contract carefully so that you know what will happen if the primary borrower makes a late payment. Will the lender contact you before reporting to the credit bureaus?

2.   Track the payments online so that you know when the payments are due and when they are received. If the primarily borrower does not pay on time, make a last-day payment to ensure that your credit score is not adversely affected.

3.   Consider paying the bill yourself and having the primary borrower pay you directly. Of course, this comes with its own risks (what if the borrower never pays you?), but it allows you to control the payment, ensures that your credit report and the borrower’s credit report benefit from the score, and prevents any late fees or penalties from accruing. An even bigger benefit is that the borrower is less likely to default if it means looking you in the eye and explaining why he is not handing you the monthly check.

4.   Ask for collateral before agreeing to co-sign. This is not only a wise financial move, but it might also save your relationship. If the borrower defaults, at least you have some recourse.

5.   Refinance as soon as possible. After a year of timely payments, contact the creditor and see if the loan can be refinanced in the primary borrower’s name only.

The long and short of it is this: cosigning a loan is a risky move, no small favor to the primary borrower. That’s not to say you should never cosign on a loan, but if you do, be sure you take as many actions possible to mitigate the risks.

Have you been asked to be a cosigner? Tell us your story below!