Why is my FICO Score important for me?
Posted in Credit Report Request on 08/19/2010 11:31 pm by
Archive for August, 2010
How is your FICO score calculated in relation to the 3 credit bureaus?
Posted in Credit on 08/15/2010 09:29 pm by
newtobigd78 asked:
For example, if you have 3 scores from each of the bureaus and they are all different – e.g., 675, 700, 725 – is your FICO score the average of the three (700)?
Lloyd
For example, if you have 3 scores from each of the bureaus and they are all different – e.g., 675, 700, 725 – is your FICO score the average of the three (700)?
Lloyd
What Is A Good FICO Score?
Posted in Finance on 08/14/2010 03:16 pm by
Zach Ford asked:
Let’s talk about your credit score. It is a 3 digit number that came from your credit report; it is something that is compared to millions of other people. This numerical representation brings all of your credit history into one objective number. Statistically, it is the most frequently used financial score to predict the amount you can receive as a loan and the interest you will have to pay. It is one of the most important things in your entire financial life!
The range of the FICO score is from 300 to 850. It is computed based on the following factors: Payment History (35% of score) Amounts Owed (30% of score) Length of Credit History (15% of score) New Credit (10% of score) Types of Credit in Use (10% of score).
The Fact Act entitles everyone to receive a copy of their annual credit report, but unfortunately this does not include their FICO score. Equifax scores are the one used by lenders to determine the amount of money they will charge you and the interest they will put into it. It is recommended that you request and pay for this score. Once requested, the consumer reporting agencies will provide to you the information on as many as four key factors that are negatively affecting your FICO score. The information they will be giving will help you determine how to improve your financial standing.
At the end of the day, your credit score determines the amount of money you can have as a loan and the interest with it, of course the higher your FICO score, the better arrangements you will be able to make with different financial institutions.
Natalie
Let’s talk about your credit score. It is a 3 digit number that came from your credit report; it is something that is compared to millions of other people. This numerical representation brings all of your credit history into one objective number. Statistically, it is the most frequently used financial score to predict the amount you can receive as a loan and the interest you will have to pay. It is one of the most important things in your entire financial life!
The range of the FICO score is from 300 to 850. It is computed based on the following factors: Payment History (35% of score) Amounts Owed (30% of score) Length of Credit History (15% of score) New Credit (10% of score) Types of Credit in Use (10% of score).
The Fact Act entitles everyone to receive a copy of their annual credit report, but unfortunately this does not include their FICO score. Equifax scores are the one used by lenders to determine the amount of money they will charge you and the interest they will put into it. It is recommended that you request and pay for this score. Once requested, the consumer reporting agencies will provide to you the information on as many as four key factors that are negatively affecting your FICO score. The information they will be giving will help you determine how to improve your financial standing.
At the end of the day, your credit score determines the amount of money you can have as a loan and the interest with it, of course the higher your FICO score, the better arrangements you will be able to make with different financial institutions.
Natalie
5 Little Known Tips on How Having No Debt Affects Your Credit Score
Posted in Finance on 08/14/2010 03:06 am by
Rachel Robinson asked:
Can Having No Debt Improve Your Credit Score?
If you have no debt, you should be considered a financially responsible person and a prime candidate for loan acceptance, if you should decide to borrow money for any reason, right?
That depends. If you don’t have any debt simply because you have never borrowed any money from a commercial lender, then you also don’t have any credit history. And if you don’t have any credit history, most lenders will consider you a high-risk prospect because they have no way of knowing how responsibly you handle financial obligations.
FICO Score Effects
But if you have a credit history, and have simply decided to pay off all your debts, your decision will be reflected in your credit score. Your payment history–which for most people is a record of month after month of payments on various accounts–constitutes 35% of your FICO credit score. And you FICO credit score is a major factor in determining how much money you will be able to borrow in the future.
But what if you pay off all your debts, so that your record of monthly payments is suddenly halted in its tracks? What will that do for your FICO score?
Strangely, it will not do much to improve it in the long run.
Why Is Recent Information More Important to a FICO Score?
Your FICO score places much more emphasis on your recent financial transactions than it does on what you may have done in years past. Lenders love to know what you have been up to lately, and if you decide to close out all your loans, they won’t have much information at all to help them. You’ll still, almost certainly, be paying utility bills, and insurance, but neither of those is considered a long term debt, and in turn not affect your FICO score.
So how can you minimize your debt without minimizing your credit score? Keep a few low-interest, no-annual-fee credit cards open; maintain tiny balances on them; and pay them off each month. Most credit cards have grace periods during which no interest is charged, and if you pay off your purchase each month within those grace periods, you will boost your credit score without building your debt.
Watch Out When Dealing With Old Defaults
You may also be surprised to learn that if you once defaulted on a debt, and now have the financial means and desire,to pay it, doing so can actually hurt your credit score. How? Any time you take action which involves your credit, it shows up as a recent transaction.
Deciding to pay off an old default in your quest for no debt, may make it appear to be a new one, and new problems weigh more heavily against your credit score than old ones. If the default you want to correct is over seven years old, it’s more than likely been dropped from your credit report and is no longer used in determining your score. If it’s more recent than that, see if the collection agency which was managing it would be willing to agree in writing to remove it from your report before you decide whether or not to pay.
It may not seem sensible that having no debt, or wanting to pay off old ones, can hurt your credit score. But credit is all about what you have done for your creditors lately, so a little or no debt, responsibly managed, will actually look better than none at all.
Valerie
Can Having No Debt Improve Your Credit Score?
If you have no debt, you should be considered a financially responsible person and a prime candidate for loan acceptance, if you should decide to borrow money for any reason, right?
That depends. If you don’t have any debt simply because you have never borrowed any money from a commercial lender, then you also don’t have any credit history. And if you don’t have any credit history, most lenders will consider you a high-risk prospect because they have no way of knowing how responsibly you handle financial obligations.
FICO Score Effects
But if you have a credit history, and have simply decided to pay off all your debts, your decision will be reflected in your credit score. Your payment history–which for most people is a record of month after month of payments on various accounts–constitutes 35% of your FICO credit score. And you FICO credit score is a major factor in determining how much money you will be able to borrow in the future.
But what if you pay off all your debts, so that your record of monthly payments is suddenly halted in its tracks? What will that do for your FICO score?
Strangely, it will not do much to improve it in the long run.
Why Is Recent Information More Important to a FICO Score?
Your FICO score places much more emphasis on your recent financial transactions than it does on what you may have done in years past. Lenders love to know what you have been up to lately, and if you decide to close out all your loans, they won’t have much information at all to help them. You’ll still, almost certainly, be paying utility bills, and insurance, but neither of those is considered a long term debt, and in turn not affect your FICO score.
So how can you minimize your debt without minimizing your credit score? Keep a few low-interest, no-annual-fee credit cards open; maintain tiny balances on them; and pay them off each month. Most credit cards have grace periods during which no interest is charged, and if you pay off your purchase each month within those grace periods, you will boost your credit score without building your debt.
Watch Out When Dealing With Old Defaults
You may also be surprised to learn that if you once defaulted on a debt, and now have the financial means and desire,to pay it, doing so can actually hurt your credit score. How? Any time you take action which involves your credit, it shows up as a recent transaction.
Deciding to pay off an old default in your quest for no debt, may make it appear to be a new one, and new problems weigh more heavily against your credit score than old ones. If the default you want to correct is over seven years old, it’s more than likely been dropped from your credit report and is no longer used in determining your score. If it’s more recent than that, see if the collection agency which was managing it would be willing to agree in writing to remove it from your report before you decide whether or not to pay.
It may not seem sensible that having no debt, or wanting to pay off old ones, can hurt your credit score. But credit is all about what you have done for your creditors lately, so a little or no debt, responsibly managed, will actually look better than none at all.
Valerie
Four Things to Know About the Credit Score Scale
Posted in Finance on 08/12/2010 06:26 am by
Kyle Gentile asked:
The first thing to know about the credit score scale is there are several ways to score your credit. This makes for a wide variety of possible outcomes. For example, scoring can vary between models such as FICO and Vantage. The credit score scale on these two models is different. With the FICO score scale starting at 300 and going to 850. The Vantage Score scale goes from 501 to 990.
The second thing to know about the credit score scale is the different formulas used. To once again compare the FICO score and the Vantage score, the math is different. Just one factor like payment history carries a weight of 35% in your FICO score. In the Vantage score, the same factor weighs in at 32% of the score.
The third thing to know about the credit score scale is the score will vary on the credit report used. That is why when you get scores from each credit bureau you will see different numbers. This is because of the fact your different accounts only have to report to one credit bureau. When you view your credit report you will see different things on each report. The fact that your credit score is based on your three different possible credit reports will give you three different credit scores.
The last thing to know about the credit score scale is the credit model chosen by the majority of the mortgage lenders in the country. The FICO score is the one used. This has its roots in the expansion of consumer credit in the 1990′s. Seeing the effectiveness and the speed to which credit scores granted credit to consumers, the two mortgage giants, Freddie Mac and Fannie Mae, recommended the use of the FICO score. Since these two corporations are responsible for over half of the mortgages in the country, lenders heeded their recommendation.
If you are going to get a loan, you should always start by finding out your credit score before hand. Get all three, this way you are not surprised by anything the lender is going to say about your score. Also, on things like auto loans and other consumer purchases you should ask what credit bureau the lender uses. This will better prepare you for the loan process. Furthermore, if you are going to apply for a mortgage, you need to know your FICO score.
Terry
The first thing to know about the credit score scale is there are several ways to score your credit. This makes for a wide variety of possible outcomes. For example, scoring can vary between models such as FICO and Vantage. The credit score scale on these two models is different. With the FICO score scale starting at 300 and going to 850. The Vantage Score scale goes from 501 to 990.
The second thing to know about the credit score scale is the different formulas used. To once again compare the FICO score and the Vantage score, the math is different. Just one factor like payment history carries a weight of 35% in your FICO score. In the Vantage score, the same factor weighs in at 32% of the score.
The third thing to know about the credit score scale is the score will vary on the credit report used. That is why when you get scores from each credit bureau you will see different numbers. This is because of the fact your different accounts only have to report to one credit bureau. When you view your credit report you will see different things on each report. The fact that your credit score is based on your three different possible credit reports will give you three different credit scores.
The last thing to know about the credit score scale is the credit model chosen by the majority of the mortgage lenders in the country. The FICO score is the one used. This has its roots in the expansion of consumer credit in the 1990′s. Seeing the effectiveness and the speed to which credit scores granted credit to consumers, the two mortgage giants, Freddie Mac and Fannie Mae, recommended the use of the FICO score. Since these two corporations are responsible for over half of the mortgages in the country, lenders heeded their recommendation.
If you are going to get a loan, you should always start by finding out your credit score before hand. Get all three, this way you are not surprised by anything the lender is going to say about your score. Also, on things like auto loans and other consumer purchases you should ask what credit bureau the lender uses. This will better prepare you for the loan process. Furthermore, if you are going to apply for a mortgage, you need to know your FICO score.
Terry
Discover Your Equifax Range Of Possible Scores For Credit – Credit Score Inquires Don’t Hurt You
Posted in Finance on 08/12/2010 01:52 am by
Tim Gorman asked:
Consumers with scores below about 620 will pay significantly higher rates and fees to obtain a loan. At a time when financial literacy is a major public policy issue, the educational factor alone warrants a price most favorable to consumers. Consumers will also be entitled to receive from a CRA one free credit report in a 12-month period. The CRA will be required to provide the report within 15 days of the consumer’s requesting it. Consumers’ ability to obtain scores easily and at a fair price will further all three of these objectives.
Consumers should not be concerned about inquiries they make, such as ordering a credit report. Self inquiries don’t affect the credit score. Consumer reporting agencies and other companies sometimes use an estimated score to illustrate a consumer’s general level of credit risk. Consumers should pay their bills on time every month. Remember that 35% of the credit score is comprised of payment history. The Equifax range of possible scores for credit is somewhat flexible.
Consumers with scores in the 800 range get reason codes just as consumers with scores in the 500 range. The reason codes may be used in describing to the consumer the reason for adverse action.
Lenders will use your credit score to determine if you are likely to pay your bills and also help them place you with the appropriate repayment plan. For example, if you have claimed bankruptcy in the past, they might place you at a significantly higher interest rate. Lenders studied the relationship between credit scores and mortgage delinquencies. There was a definite relationship. Lenders use FICO scores to predict what kind of borrower you’ll be. Scores range from 300 to 850; the higher, the better.
Lender or credit card companies set multiple cutoff points. For example, if you are above 800, you might be offered the Platinum card. Lenders realize that many people occasionally pay late. Therefore, being late with a single payment is typically not as harmful as being late with two or more consecutive payments. This will be reflected in the Equifax range of possible scores for credit that you need to obtain your loan. Lenders may consider employment, income, expenses, assets and other factors when making credit decisions. Also, different lenders may weigh some of these factors more heavily than other lenders.
Lenders review credit scores along with the additional applicant information to decide whether they want to extend credit to borrowers who represent a particular level of risk. Typically, credit points range from 330 to 830.
Without a sufficient credit score, you either can’t get loans or you are paying higher interest rates for the loan you have. We have found that NFC(TM)/American Credit(TM) is the best choice for improving your credit report and obtaining a loan at the lowest possible rate. At what point can you expect to pay a higher interest rate? Check with your Equifax range of possible scores for credit to obtain your loan.
It does not mean that you cannot get a loan. Experts say that a person with a low credit score , say, below 600, will likely receive mortgage interests rates that are nearly 3% higher than someone with a score above 700.
Claude
Consumers with scores below about 620 will pay significantly higher rates and fees to obtain a loan. At a time when financial literacy is a major public policy issue, the educational factor alone warrants a price most favorable to consumers. Consumers will also be entitled to receive from a CRA one free credit report in a 12-month period. The CRA will be required to provide the report within 15 days of the consumer’s requesting it. Consumers’ ability to obtain scores easily and at a fair price will further all three of these objectives.
Consumers should not be concerned about inquiries they make, such as ordering a credit report. Self inquiries don’t affect the credit score. Consumer reporting agencies and other companies sometimes use an estimated score to illustrate a consumer’s general level of credit risk. Consumers should pay their bills on time every month. Remember that 35% of the credit score is comprised of payment history. The Equifax range of possible scores for credit is somewhat flexible.
Consumers with scores in the 800 range get reason codes just as consumers with scores in the 500 range. The reason codes may be used in describing to the consumer the reason for adverse action.
Lenders will use your credit score to determine if you are likely to pay your bills and also help them place you with the appropriate repayment plan. For example, if you have claimed bankruptcy in the past, they might place you at a significantly higher interest rate. Lenders studied the relationship between credit scores and mortgage delinquencies. There was a definite relationship. Lenders use FICO scores to predict what kind of borrower you’ll be. Scores range from 300 to 850; the higher, the better.
Lender or credit card companies set multiple cutoff points. For example, if you are above 800, you might be offered the Platinum card. Lenders realize that many people occasionally pay late. Therefore, being late with a single payment is typically not as harmful as being late with two or more consecutive payments. This will be reflected in the Equifax range of possible scores for credit that you need to obtain your loan. Lenders may consider employment, income, expenses, assets and other factors when making credit decisions. Also, different lenders may weigh some of these factors more heavily than other lenders.
Lenders review credit scores along with the additional applicant information to decide whether they want to extend credit to borrowers who represent a particular level of risk. Typically, credit points range from 330 to 830.
Without a sufficient credit score, you either can’t get loans or you are paying higher interest rates for the loan you have. We have found that NFC(TM)/American Credit(TM) is the best choice for improving your credit report and obtaining a loan at the lowest possible rate. At what point can you expect to pay a higher interest rate? Check with your Equifax range of possible scores for credit to obtain your loan.
It does not mean that you cannot get a loan. Experts say that a person with a low credit score , say, below 600, will likely receive mortgage interests rates that are nearly 3% higher than someone with a score above 700.
Claude
Best Practices in Availing a Bad Credit Mortgage Refinance Loan
Posted in Real Estate on 08/11/2010 06:31 pm by
Alan Lim asked:
When you are in a situation when you have poor credit but you want to refinance your mortgage, the best way may be to think of applying for a bad credit mortgage refinance loan. This kind of loan may offer higher interest rates and longer payment periods, but by applying you may just get lucky and get loan terms that best fit your needs. Here are some ways that you can prepare to apply for such loan that will help you in your situation.
Research
Be sure that you do the proper research on the different lending firms and banks that specialize in bad credit mortgage refinancing. Getting as many as you can, will offer you a variety of choices to check over and decide on. Create a matrix that will help you clearly compare the different loan terms that each offers. With this useful matrix, once all the fields are filled up, it will give you a clear picture on which loan to take and which not to.
FICO Score
Check on your credit report and make sure it is accurate and properly calculated. There have been some instances when the calculation of a FICO score has been erroneous. If you find any errors, be sure to report them straight away so that you can fully take advantage of the fact that you can probably apply for a loan with lower interest and more beneficial loan terms for you.
Refinancing Terms
With the many lending firms and banking institutes that are competing to offer the best service, when you have narrowed down your choices to three lending firms, make sure you get the best deal that fits your particular situation. Sometimes some terms are negotiable. Try your best to get the best terms that will help you save and will relieve you of your debt as well.
Alternatives
Many programs today offer bad credit mortgage refinance loans with great terms. The only drawback is that these programs are made for specific class of individuals. There are housing loan that are up for grabs for individuals who have special circumstances, like single mothers or even the handicapped. If you fall within a class that has special circumstances, it would be worthwhile to check out the loan opportunities that may be most beneficial to your situation.
These are some best practices that will help you get the bad credit mortgage refinance loan that best fits your needs. With this information, you can now begin steps to see if refinancing your home will get you the savings or agreeable payment terms that will best fit your finances.
Laura
When you are in a situation when you have poor credit but you want to refinance your mortgage, the best way may be to think of applying for a bad credit mortgage refinance loan. This kind of loan may offer higher interest rates and longer payment periods, but by applying you may just get lucky and get loan terms that best fit your needs. Here are some ways that you can prepare to apply for such loan that will help you in your situation.
Research
Be sure that you do the proper research on the different lending firms and banks that specialize in bad credit mortgage refinancing. Getting as many as you can, will offer you a variety of choices to check over and decide on. Create a matrix that will help you clearly compare the different loan terms that each offers. With this useful matrix, once all the fields are filled up, it will give you a clear picture on which loan to take and which not to.
FICO Score
Check on your credit report and make sure it is accurate and properly calculated. There have been some instances when the calculation of a FICO score has been erroneous. If you find any errors, be sure to report them straight away so that you can fully take advantage of the fact that you can probably apply for a loan with lower interest and more beneficial loan terms for you.
Refinancing Terms
With the many lending firms and banking institutes that are competing to offer the best service, when you have narrowed down your choices to three lending firms, make sure you get the best deal that fits your particular situation. Sometimes some terms are negotiable. Try your best to get the best terms that will help you save and will relieve you of your debt as well.
Alternatives
Many programs today offer bad credit mortgage refinance loans with great terms. The only drawback is that these programs are made for specific class of individuals. There are housing loan that are up for grabs for individuals who have special circumstances, like single mothers or even the handicapped. If you fall within a class that has special circumstances, it would be worthwhile to check out the loan opportunities that may be most beneficial to your situation.
These are some best practices that will help you get the bad credit mortgage refinance loan that best fits your needs. With this information, you can now begin steps to see if refinancing your home will get you the savings or agreeable payment terms that will best fit your finances.
Laura
Credit Scores Get a New Look
Posted in Finance on 08/11/2010 05:07 pm by
Frank Collins asked:
There is a much needed change in the way your FICO score will be calculated by Fair Isaac Corp., which calculates credit report scores for millions of Americans.
Fair Isaac claims its new credit scoring formula will be able to signal more accurately borrowers who are likely to default or get behind on payments. The new formula, called FICO 08, will be less stringent on consumers who rarely have late payments, but will more strict on consumers who are repeatedly late. Lenders expect this new scoring system to reduce defaults by consumers from 5% to 15%
A consumers FICO score, is a tool estimated to be utilized by a significantly large portion of the banking industry. Banks and financial institutions use them to analyze if a consumer is worthy of receiving lines of credit, home loans, auto loans, opening a checking account, insurance, mobile phone, getting hired, turning on utilities and more.
The new FICO 08 will not look or feel new to either consumers or creditors. The scores will still range from 300 to 850. The new system will continue to look at the same determining factors, including payment histories, large or small debts, length of credit histories, quantity of credit inquiries, and the credit type, to determine consumers scores.
The difference in the new FICO 08 system is it will work harder to separate the creditors who are a good risk from the creditors who looks like a bad risk. It targets those borrowers with sub-prime credit; people who are just starting to get credit; and consumers who are inquiring for new credit.
A benefit is that consumers who are categorized as less likely to default on loans or “low risk” will receive better scoring using the new FICO system, and people who have had past or recent credit problems will score lower than today’s system. The consumers who are in the center with less-risky profiles will begin to see better offers from lenders.
Normally, most credit scoring formulas categorized people with sub-prime credit into one large bowl. According to Fair Isaac’s new model, a borrower who is behind on payments on one account along with having other credit accounts in good standing will receive a higher score than before. On the other hand, an individual’s score could drop significantly more if they have numerous delinquent accounts.
Despite the new scoring model, people will still have to confirm the information in their credit reports to be accurate, error-free. If there’s inaccuracies, or unauthorized use, you may be a victim of the ever rising problem called identity theft. To combat identity theft, there is a new company called LifeLock that backs their product with a $1 million dollar guarantee that your identity will not be stolen under their watch. Their boss is even so bold as to give out their social security number without any fear. For normal check-up on your credit, you can contact the credit bureaus directly, Experian,TransUnion, and Equifax., to request a credit report copy. If there are any errors, misinformation, or ID theft be sure to contact the credit bureaus or the financial creditors.
FICO 08 is also targeting the growing half-truth business of permitting consumers to raise their credit scores by becoming an authorized user on another person’s good credit account. Recently, and even discussed on popular radio personal finance shows, credit repair companies are selling people with bad credit a chance to boost their scores by becoming authorized users on accounts held by strangers with better credit. The new FICO 08 will not award higher scores on credit card accounts for authorized users. In addition, it hurts the primary user who opened the account. This even applies to a child or a spouse. Now, you must stand on your own to raise your credit score which can certainly be done if you follow the principles.
Annette
There is a much needed change in the way your FICO score will be calculated by Fair Isaac Corp., which calculates credit report scores for millions of Americans.
Fair Isaac claims its new credit scoring formula will be able to signal more accurately borrowers who are likely to default or get behind on payments. The new formula, called FICO 08, will be less stringent on consumers who rarely have late payments, but will more strict on consumers who are repeatedly late. Lenders expect this new scoring system to reduce defaults by consumers from 5% to 15%
A consumers FICO score, is a tool estimated to be utilized by a significantly large portion of the banking industry. Banks and financial institutions use them to analyze if a consumer is worthy of receiving lines of credit, home loans, auto loans, opening a checking account, insurance, mobile phone, getting hired, turning on utilities and more.
The new FICO 08 will not look or feel new to either consumers or creditors. The scores will still range from 300 to 850. The new system will continue to look at the same determining factors, including payment histories, large or small debts, length of credit histories, quantity of credit inquiries, and the credit type, to determine consumers scores.
The difference in the new FICO 08 system is it will work harder to separate the creditors who are a good risk from the creditors who looks like a bad risk. It targets those borrowers with sub-prime credit; people who are just starting to get credit; and consumers who are inquiring for new credit.
A benefit is that consumers who are categorized as less likely to default on loans or “low risk” will receive better scoring using the new FICO system, and people who have had past or recent credit problems will score lower than today’s system. The consumers who are in the center with less-risky profiles will begin to see better offers from lenders.
Normally, most credit scoring formulas categorized people with sub-prime credit into one large bowl. According to Fair Isaac’s new model, a borrower who is behind on payments on one account along with having other credit accounts in good standing will receive a higher score than before. On the other hand, an individual’s score could drop significantly more if they have numerous delinquent accounts.
Despite the new scoring model, people will still have to confirm the information in their credit reports to be accurate, error-free. If there’s inaccuracies, or unauthorized use, you may be a victim of the ever rising problem called identity theft. To combat identity theft, there is a new company called LifeLock that backs their product with a $1 million dollar guarantee that your identity will not be stolen under their watch. Their boss is even so bold as to give out their social security number without any fear. For normal check-up on your credit, you can contact the credit bureaus directly, Experian,TransUnion, and Equifax., to request a credit report copy. If there are any errors, misinformation, or ID theft be sure to contact the credit bureaus or the financial creditors.
FICO 08 is also targeting the growing half-truth business of permitting consumers to raise their credit scores by becoming an authorized user on another person’s good credit account. Recently, and even discussed on popular radio personal finance shows, credit repair companies are selling people with bad credit a chance to boost their scores by becoming authorized users on accounts held by strangers with better credit. The new FICO 08 will not award higher scores on credit card accounts for authorized users. In addition, it hurts the primary user who opened the account. This even applies to a child or a spouse. Now, you must stand on your own to raise your credit score which can certainly be done if you follow the principles.
Annette
FICO Scores – What Counts
Posted in Finance on 08/08/2010 04:57 pm by
Nora Hansell asked:
FICO scores are credit scores that are calculated by the Fair Isaac Corporation using their own proprietary calculation methods. These calculations are very complex and are accomplished using a consumer’s financial data compiled by the three major Credit Reporting Agencies – Transunion, Equifax, and Experian. It is for this reason that a consumer has 3 FICO scores – one based on each CRA’s data.
In the past, consumers could purchase their 3 FICO scores from myfico.com. This is no longer the case. As of February 14, 2009, the FICO score calculated using Experian’s data is no longer available to consumers. It is, however, available to lenders.
FICO scores are not to be confused with credit scores supplied by the 3 CRAs. Each CRA uses its own software and methods to calculate a consumer’s credit score. These scores are not FICO scores. FICO uses the information provided to them by the 3 CRAs; however, they use their own software and methods to calculate genuine FICO scores.
FICO scores are the most widely used scoring method employed by lenders to ascertain the creditworthiness of those applying for credit of all sorts. It is for this reason that understanding FICO scores and how they are calculated is the single most important credit score information a consumer can have. This is particularly true for those consumers considering credit repair services or aiming to enhance existing scores.
The information below offers general information about how Fair Isaac Corporation weighs a consumer’s financial details. It is important to note that depending on what kind of credit a consumer is applying for, different factors will weigh more heavily than others. The lender considering you for a mortgage may be interested in different information than a lender considering you for an automobile loan.
The general categories used by Fair Isaac Corporation are not weighted the same. Every consumer’s credit report contains different information, and any detail can modify the weight placed on a piece of information in determining a FICO score. For this reason, one particular credit detail on one consumer’s report can impact that individual’s FICO score very differently than it might for a different individual with a different credit profile. In addition, a person’s FICO score will change as any detail in their credit profile changes.
These are some of the reasons why a general understanding of what information is valued in the calculation of FICO scores can help guide the consumer, as no one category should be considered more or less important than another. Instead, a consumer should strive to perform well in every category, and if their credit profile is lacking in a particular category, concentrate on fixing that category first.
FICO Categories
FICO uses five general categories including; payment history, amounts owed, length of credit history, new credit, and types of credit used. These categories are briefly described below.
Payment History
This category includes account payment information on accounts including credit cards, mortgages, loans, retail accounts, and finance company accounts.
Adverse information, such as bankruptcies and liens, collection items, and past due accounts.
The extent of adverse information, such as the length of past due accounts.
The amounts involved in past due accounts and collection items.
How recent any past due or delinquent accounts are.
The number of past due items and the number of accounts paid to as agreed to.
Amounts Owed
The amounts owed on accounts, with special attention given to certain types of accounts.
The number of accounts with outstanding balances.
The proportion of credit balances to credit limits.
The proportion of amounts owing on installment loan amounts.
Length of Credit History
This category takes into account the amount of time since specific types of accounts were opened, as well as the amount of time since recent activity took place on these accounts.
New Credit
The number of accounts recently opened and the type of these newly opened accounts.
Number of recent credit inquiries.
The amount of time since these accounts were opened and the amount of time elapsed since recent inquiries.
The effectiveness of reestablishing good credit after past credit payment difficulties.
Types of Credit
The types of credit accounts open and how these accounts are managed and used, whether they are loans, credit cards, mortgages, etc.
Consumers should be aware that FICO scores are typically only one factor that a lender will use when making decisions about a client’s creditworthiness. FICO scores do not take into account age, salary, employer, geographical place of residence, marital status and a number of other details that lenders may be interested in. The Fair Credit Reporting Act doesn’t allow FICO scores or other credit scores to reflect these types of information. This is why a consumer, when trying to obtain a mortgage from a bank or other lending institution, will be asked for information about salary, employer, etc.
Do not underestimate the importance of knowing what your FICO scores are or understanding how to try to raise them. High credit scores mean that you can borrow money at a more favorable rate, potentially saving you thousands of dollars over the long term. It is never too late to begin reestablishing positive credit by concentrating on making payments in a timely manner, only applying for credit accounts that are needed, and so on. Credit repair takes time and effort, and understanding the best methods to raise credit scores, especially FICO scores, is the first step.
Learn more about the changes to Experian based Fico credit scores.
Gilbert
FICO scores are credit scores that are calculated by the Fair Isaac Corporation using their own proprietary calculation methods. These calculations are very complex and are accomplished using a consumer’s financial data compiled by the three major Credit Reporting Agencies – Transunion, Equifax, and Experian. It is for this reason that a consumer has 3 FICO scores – one based on each CRA’s data.
In the past, consumers could purchase their 3 FICO scores from myfico.com. This is no longer the case. As of February 14, 2009, the FICO score calculated using Experian’s data is no longer available to consumers. It is, however, available to lenders.
FICO scores are not to be confused with credit scores supplied by the 3 CRAs. Each CRA uses its own software and methods to calculate a consumer’s credit score. These scores are not FICO scores. FICO uses the information provided to them by the 3 CRAs; however, they use their own software and methods to calculate genuine FICO scores.
FICO scores are the most widely used scoring method employed by lenders to ascertain the creditworthiness of those applying for credit of all sorts. It is for this reason that understanding FICO scores and how they are calculated is the single most important credit score information a consumer can have. This is particularly true for those consumers considering credit repair services or aiming to enhance existing scores.
The information below offers general information about how Fair Isaac Corporation weighs a consumer’s financial details. It is important to note that depending on what kind of credit a consumer is applying for, different factors will weigh more heavily than others. The lender considering you for a mortgage may be interested in different information than a lender considering you for an automobile loan.
The general categories used by Fair Isaac Corporation are not weighted the same. Every consumer’s credit report contains different information, and any detail can modify the weight placed on a piece of information in determining a FICO score. For this reason, one particular credit detail on one consumer’s report can impact that individual’s FICO score very differently than it might for a different individual with a different credit profile. In addition, a person’s FICO score will change as any detail in their credit profile changes.
These are some of the reasons why a general understanding of what information is valued in the calculation of FICO scores can help guide the consumer, as no one category should be considered more or less important than another. Instead, a consumer should strive to perform well in every category, and if their credit profile is lacking in a particular category, concentrate on fixing that category first.
FICO Categories
FICO uses five general categories including; payment history, amounts owed, length of credit history, new credit, and types of credit used. These categories are briefly described below.
Payment History
This category includes account payment information on accounts including credit cards, mortgages, loans, retail accounts, and finance company accounts.
Adverse information, such as bankruptcies and liens, collection items, and past due accounts.
The extent of adverse information, such as the length of past due accounts.
The amounts involved in past due accounts and collection items.
How recent any past due or delinquent accounts are.
The number of past due items and the number of accounts paid to as agreed to.
Amounts Owed
The amounts owed on accounts, with special attention given to certain types of accounts.
The number of accounts with outstanding balances.
The proportion of credit balances to credit limits.
The proportion of amounts owing on installment loan amounts.
Length of Credit History
This category takes into account the amount of time since specific types of accounts were opened, as well as the amount of time since recent activity took place on these accounts.
New Credit
The number of accounts recently opened and the type of these newly opened accounts.
Number of recent credit inquiries.
The amount of time since these accounts were opened and the amount of time elapsed since recent inquiries.
The effectiveness of reestablishing good credit after past credit payment difficulties.
Types of Credit
The types of credit accounts open and how these accounts are managed and used, whether they are loans, credit cards, mortgages, etc.
Consumers should be aware that FICO scores are typically only one factor that a lender will use when making decisions about a client’s creditworthiness. FICO scores do not take into account age, salary, employer, geographical place of residence, marital status and a number of other details that lenders may be interested in. The Fair Credit Reporting Act doesn’t allow FICO scores or other credit scores to reflect these types of information. This is why a consumer, when trying to obtain a mortgage from a bank or other lending institution, will be asked for information about salary, employer, etc.
Do not underestimate the importance of knowing what your FICO scores are or understanding how to try to raise them. High credit scores mean that you can borrow money at a more favorable rate, potentially saving you thousands of dollars over the long term. It is never too late to begin reestablishing positive credit by concentrating on making payments in a timely manner, only applying for credit accounts that are needed, and so on. Credit repair takes time and effort, and understanding the best methods to raise credit scores, especially FICO scores, is the first step.
Learn more about the changes to Experian based Fico credit scores.
Gilbert