Monthly Archives: March 2013

Getting Different Credit Scores

I received a credit score from another service and it was different. Why is that?

Different Companies Providing Credit Scores

Getting Different Credit ScoresCredit scores are mostly referred to as FICO scores, however, the truth is there are several companies out there that can give out your specific scores. Each company can have their own version of your credit score, so that makes it more confusing on which score to believe in. Companies and lenders do not report to all credit bureaus, that’s why one score can be different from another. There are many score-giving models, yet they can be correlated but they all have one aim: to tell you how you fare and how your credit standing is.

Different Score-giving Companies Available:

  1. PLUS Score – This score is developed and provided by Experian Decision Analytics. PLUS is actually an acronym which stands for Plan, Live, Understand, Succeed. Ranging from 330 to 830, this is Experian’s (the credit bureau) own scoring system, and it’s described as an “educational score” for consumers. Lenders and creditors do not use this score.
  2. VantageScore – This is a generic scoring model developed by the three credit bureaus (Experian, Equifax and TransUnion) to compete with FICO. It ranges from 501-990, and has an equivalent letter grade according to how your score is. It claims to profile thin-file consumers (consumers with a short or limited credit history) more accurately, and is based mainly on a consumer’s actions on the credit file for the last 24 months.
  3. FICO – This is the score most creditors rely on, and is the most important score to take note of. This score ranges from 300 to 850, and is calculated statistically based on information of a consumer’s credit files. This is also the most widely used credit score sold and provided by the Fair Isaac Corporation (FICO).
    – Under the FICO Company, there is also another score model being given out, which is:
  4. FICO NextGen Score – Also developed by FICO, it is used to assess consumer credit risk. It is said to be a “major improvement” as it makes credit more available to people who need it. FICO NextGen Score ranges between 150 and 950.
    – Aside from the previously named scoring models, there are also other systems available however rarely used and relied on by consumers such as:
  5. TransUnion TransRisk Account Credit Score – This is a scoring model mainly developed by TransUnion and is being used by free score providers such as Credit Karma. Its scoring range is a number between 300 and 900. It also has a different range for home and auto loans which is a range between 150 and 950.
  6. Equifax Score Power / Equifax Credit Score – This score model is not based on a different scoring system. It is a name used by Equifax to describe the score that is generated by Equifax on their credit reports. Scores generated by Equifax range from 280 to 850, and can be used to calculate a score also for other credit bureaus.

All score models aim to show how consumers can be responsible for their debts. It can indicate how a borrower can be trusted in terms of lending money, or for granting them loans. However, since score models are given out and developed by different companies, it will be expected for them to have different results. Regardless of the credit score model being used, all of them serve the same purpose: to be used by creditors and lenders to base their decision whether to give you credit, and afterwards use them to determine the rates that will be given to you for payment.

Getting Your Credit Score

What is the difference between the credit scores provided by different bureaus?

Credit Bureau Information

A Credit Bureau or a consumer reporting agency is an organization responsible for gathering data from different resources to give credit information for several purposes. They are responsible for providing details to creditors on a borrower’s habits in paying and settling his debts.

The Three Major Credit Bureaus

There are three major credit bureaus in the United States, namely Equifax, Experian, and TransUnion.

  • Getting Your Credit ScoreEquifax
    – This credit bureau is based in Atlanta, GA, and is the oldest among the three bureaus, being founded in 1899. Aside from providing details about consumer credit, they also operate in the business sector as well as giving out insurance reports. They are listed on the New York Stock Exchange as the symbol EFX.
  • Experian
    – This bureau, on the other hand, has its corporate headquarters in Dublin, Ireland, and has operational headquarters in Costa Mesa, California. They are regulated mainly by the Fair Credit Reporting Act, and they are able to provide credit reports to customers. Credit scores on their site however do not indicate whether they are using FICO, VantageScore, or another different scoring system. They are listed on the London Stock Exchange with a symbol namely EXPN.
  • TransUnion
    – TransUnion also provides credit reports directly to consumers similar to the two other credit bureaus. This bureau is based in Chicago, Illinois, and they are able to provide credit information as well as credit management services.

How to Request for a Credit Report

Every year, it is recommended that you check your records and request for a copy of your own credit report. This is done to ensure all the details noted are accurate and up to date. The Fair Credit Reporting Act (FCRA) is set by the United States Federal Trade Commission (FTC) to ensure that you can ask for a copy from each of the three credit bureaus annually.

You can request for a report in three ways:

  • By mail – You have to fill up the Annual Credit Report Request Form and mail it to Annual Credit Report Request Service, PO Box 105281, Atlanta, Georgia 30348-5281. After they received your request, you will be able to receive your report in two to three weeks.
  • By phone – If you want to request through phone, you have to call 1-877-322-8228. A simple verification process will take place, and will also take two to three weeks for you to receive your request.
  • Online – If the request is to be made online, then you have to go to AnnualCreditReport.com and undergo as well as a verification process. You will be asked questions about your identity which is more on your finances and previous addresses or locations. The report is then viewed after a few minutes or even instantly.

Requests for copies of your credit report can be made, but it does not actually include your credit score. Credit bureaus and other score-giving models can give it to you but with a certain fee.

Fees Paid for Credit Report and Score Requests:

  • FICO Standard
    -This can give you your credit score, your credit report and even a FICO score simulator for $19.95.
  • Experian Report and Score
    – This includes the credit report and score, as well as credit dispute support which cost $14.95.
  • VantageScore
    – TransUnion’s website offers to give you your credit report and score for a $1 which involves a 7-day trial, after which you will be charged monthly if you don’t cancel the service. A TransUnion’s cost for a price of a VantageScore online is $9.95 and $7.95 if a hard copy is requested.
  • ScorePower
    – Equifax’s ScorePower includes an Equifax Credit Report and a FICO score. Aside from that, online disputes are also given assistance. It costs $19.95 for a 30-day duration.

Scores for the three credit bureaus can still vary because scoring models for the said companies are developed separately, thus resulting to slight score differences. Other credit bureaus may not have all your details on hand, or they may have the same information in different ways.

Understanding Your Credit Score

What’s the Difference between Credit Score and Credit Report?

What’s a Credit Score?                             

A credit score is a number found on a credit report that determines the capability of a borrower to settle his or her bills on time. It makes a lender confident to provide loans because he is able to see the borrower’s previous records in paying for his debts.

What is a Credit Report?

A Credit Report, on the other hand, is a summary of your history of payments for bills and other financial responsibilities. It is a complete review of a borrower’s past credit. It shows how you are in making payments for your bills and loans. Aside from that, it also includes other important information about the borrower.

Credit Report Consumer Information:

  1. Understanding Your Credit ScorePersonal Identity Details – This contains your name, address, Social Security Number (can be full or partial), date of birth, and even employment details
  2. Current Credit Details – This provides the details of your existing credit, be it credit card accounts, mortgages, and other types of loans that you may have. It can also indicate how long you’ve had those credits, as well as the terms and conditions, as well as the amounts that you’ve already paid.
  3. Public Records – This can state if you’ve already filed for bankruptcy in the past, and whether you have any cases filed against you such as tax liens or court judgments.
  4. Inquiries – It also includes a list of people who requested for a copy of your credit report.

You need to check on your report at least once every year to make sure no information is entered incorrectly. You can take advantage of the annual free credit report given out by the credit bureaus to ensure accuracy on the details provided.

Why are those two terms being interchanged?

The two terms mentioned are both significant parts of your credit history, as they are both important in determining how well your financial standing and future will be. It is necessary to differentiate these two as both are needed for you to understand your place in requesting for credit.

Main Differences and Significance of One Term to Another

Both terms namely credit report and credit score are important as they both signify the credibility of a person in regard to having debts and credit. It makes a creditor willing to provide financial assistance, and it helps a creditor as well determine the terms of the amounts they are going to agree on.

Every year, you can request for a free credit report, but the credit score is not included at all times, and you have to pay for a specific amount so that you can get the score as well as other features included.

It should be noted then that the credit score is found within the credit report, and the credit score summarizes the information found in the credit report that it is stated in. Creditors will check your credit history or credit report by seeing how long you have been having debts and how you fare in settling them. Afterwards, they’ll check your credit score to see if you are generally a high-risk or a low-risk borrower, and will take it from there.

Will Getting a Credit Report Lower My Credit Score

Will Getting a Credit Report Lower My Credit Score?

Inquiries on Your Credit Score

When applying for credit, the lenders or the creditors are looking onto your credit report to see if you are responsible enough to pay for your debts. They are given authorizations to receive a copy of your report from a credit bureau. These “looks” that they are making to your report are called inquiries. Each inquiry can make an impact to your score, depending on how long your credit history is, and on how many creditors are looking on your score.

How are Credit Scores Affected by Inquiries?

As mentioned previously, inquiries still vary. Most of the time, each inquiry deducts five (5) points from your score. Generally, it does not affect much, however it would matter if the borrower only has few accounts or does not have much yet of a credit history. Several inquiries done at once also indicate a high risk as it may describe the borrower as someone with a grave financial difficulty or even as someone that may possibly declare bankruptcy.

How can a low credit score be raised?

Will Getting a Credit Report Lower My Credit ScoreA negative rating on your credit report can stay on file for seven (7) years. It means that when you have bad debt, it will be seen by lenders in a significant amount of time. However, there are huge chances that creditors will look on your most recent activity, rather than dwelling on your previous records.  Since most part of your score is based on payment history and existing debts, it’s best to keep current ones paid promptly, and in their specified amounts. There are some tips given to borrowers with low credit scores that can possibly give them better ratings.

Here are some potential actions to possibly increase your score:

  1. Start fresh. Re-establish your history if you’ve had problems in the past regarding keeping a good track record in paying your bills. Try to open new accounts and pay for them on time.
  2. It was said that having a bad score is like gaining weight; it takes time to go back to its previous form (or score, in this case).  Quick fixes are not advisable because there are chances it might backfire.
  3. Pay existing bills on time.
  4. Check your credit score and see the areas you need to improve on.

Getting Your Own Credit Report

Getting credit reports make an impact to credit scores, but in this case, requesting your own reports do not affect your credit score, provided that it comes from organizations authorized to give credit reports to consumers such as myFICO. In those instances, own personal inquiries will not affect the FICO score.

Why Is Checking Your Own Score Important?

Checking your credit or FICO score is important because by doing so, you are able to see any errors or disputable items that you can raise for checking. You can verify if any payments are listed incorrectly, or if any fully paid debts still show any balances. You can also confirm if amounts owed for existing loans are correctly entered. By doing so, you are able to straighten out any discrepancies on your credit history, and aside from that, you can also avoid any chances of being a victim of identity theft.

Questions About Your Credit Score

What is a Credit Score?

Credit scores, also referred to as FICO (Fair Isaac Corporation) scores, are numbers that define a person’s capability to settle debts, and are used by businesses and financial institutions to check credit histories. It represents the probability that a person will pay for his financial obligations. Several score models are available; however the FICO score is the most widely used.

FICO

FICO is the acronym for Fair Isaac Corporation. It is the company that provides data management programs and services that are used by financial institutions such as banks, credit card companies, insurance firms, and other related organizations. Decision making services are also provided here, and that includes giving out the said scores. Aside from that, it also provides certain products related to credit. It’s the pioneer credit score-giving company and it’s based in San Jose, California.

What Comprises A Credit Score?

Simply put, a credit score is a number between 350 and 850 that summarizes your credit history in figures. The higher the score, the better your credit standing will be. An ideal score would be to get a 700 or more, because if not, you will be considered as a high-risk borrower.

Percentages that Make Up Your Credit Scores:

  1. Questions About Your Credit Score35% – This number represents the capability of the borrower to pay his or her debts. It will show how good a debtor the person is, and if the previous obligations are settled promptly. FICO focuses more on loans to gather this portion such as checking installment loans, mortgages, student loans, and most especially credit cards. If all loans are settled without any problems (e.g. skipping payments, delayed settling of bills), then this part of the credit score will be easy to fill.
  2. 30% – This is calculated based on your total current debts. Revolving lines of credit are most weighted in this area, and credit card holders are highly observed in regard to this. If you max out your credit cards most of the time, then this part of your credit score is affected. Staying within your credit limit gives you a high score on credit utilization which greatly influences your credit score.
  3. 15% – This percentage is referring to the length of time a certain borrower has his debt open. It also refers to the most current action a borrower has taken against his debt. It is also said that the longer your credit history, the better your score will be – it is because it gives out more information that creditors can use to gauge whether a person will be a good borrower or not.
  4. 10% – Inquiries also affect FICO score, and this is the percentage that gets affected. It highly advises a borrower not to apply for too many credit cards at once. Not only it will suggest that he is in need of credit due to a financial difficulty, also getting a denied application can also have an impact to the FICO score.
  5. 10% – Another 10% refers to mix of credit. You can get a good or even a perfect score on this category if you have several types of loans and are paying them promptly. It shows you can handle several types of credit and are dependable as a borrower.

Significance of Credit Scores

How important are credit scores to a borrower, and to a creditor?

A credit/FICO score is a three digit number that can be very important. If a person wants to have a credit card, his credit history will be checked. If that person will apply for a loan, his score will also be checked. Even buying a house or a car involves seeing your credit scores.

To a borrower, a good credit score can help them a lot as it will give them good interest rates. It also gives them good prices for insurances. For creditors, checking the said score is important because it tells them whether the borrower can be responsible enough to pay for the debts and loans they are going to provide that person. The only way for lenders to check how capable you are is to check your credit rating, so it’s definitely good to have it stay on a high and respectable number.