Floyd Dorrance asked:
When you think about “credit score”, what do you think of first? Which aspects of “credit score” are important, which are essential, and which ones can you take or leave? You be the judge.
How do credit bureaus compute one’s credit scores?
A lot of credit reporting bureaus or agencies gathers information on the subject of the debtor’s credit history or files from reliable private and public sources. They also collect data from the creditors who extended the loan to the debtor.
Accordingly, the information is clustered into five sets or categories with the corresponding percentages which reflect the importance of each category in the final computation of scores, namely: (1) Owed Amount – 30%, (2) History of Payments – 30%, (3) Duration of Credit Record – 15%, (4) Nature or Kinds of Credit Currently in Use – 10%, and lastly (5) Latest Credit Inquiries – 10%.
Generally, these credit bureaus calculate the debtor’s credit score using a three figure number which range from 300 up to 850. The higher the credit score, the better chance of acquiring low interest rates for the loan being applied for and a better opening for wealth accumulation.
The industry of credit-scoring has been generating different opinions and wide-spread reactions to the public. The consumers fear that credit-based rating or scoring will pose a negative impact or unjust rating to them and will affect their economic standing and other financial transactions.
Some credit bureaus justify their purpose of gathering information and making credit rating or scoring. For them, their work is to help lending businesses formulate efficient economic decisions.
The information about “credit score” presented here will do one of two things: either it will reinforce what you know about “credit score” or it will teach you something new. Both are good outcomes.
Others create a distinction between the credit-based scores of insurance companies which predicts the loss of propensity and the credit scores which is simply to predict the worthiness of a certain person to pay.
A distinctive company should develop its own credit-base rating or scoring algorithm to serve better the consumers. Here are some of the strategies adopted in credit scoring:
1. Forming a Credit Assistance Group/Team – they are the quick response group that will assist consumers calling through toll-free numbers. The public would certainly like to know the effect of credit records to their application of loans, mortgage, employment and/or insurance transactions.
Also included to the team’s responsibility is the making of reports on the personal credit insurance of the consumers. This report will show the consumer’s variable score and the comparison with the aggregate scores
In addition, the team will consider previous credit records and the possible effect of extraordinary events which resulted to low scoring.
They will help the consumers by directing or referring them to the right people who will be of much help to them in taking good care of their credit problems. They will also help in correcting errors in the credit records of the concerned consumer.
2. Revising a New Method in Credit Scoring- this simplified method uses nine variables instead of the usual sixteen. Their algorithm will compute the credit scores by designating or assigning 100 as a foundation score. From these base score, they either add or minus making the range of score from 50 up to 250. The lower the score, the more desirable it is as credit scores.
3. For those consumers with no credit records or whose credit histories are lacking, they will create a program which will specifically cater to these groups of creditors to somehow uplift their credit ratings.
With the continued research and study on the needs of the consumers, these credit scoring bureaus will truly make a difference to the lending and/or insurance world.
Now you can understand why there’s a growing interest in “credit score”. When people start looking for more information about “credit score”, you’ll be in a position to meet their needs.
MUSE
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Michael Killian asked:
Can I improve My Credit Score? The first and most essential trick to improving your credit score is insuring the accuracy of each of your credit reports. Only after you are certain of their accuracy should you begin planning other steps to improving your credit score.
Your credit score can be improved and maintained at its peak… if you know how to do it. I recommend reading Credit Score Basics in conjunction with this article.
Scoring models such as FICO (Fair Isaac scoring model) generally evaluate the following types of information in your credit report and are weighted as suggested by the percent shown:
On Time Payment – 35%
Have you paid your bills on time? Payment history typically is a significant factor. Your score will be affected negatively if you have paid bills late, had an account referred to collections, had a repossession, or declared bankruptcy. The age of the positive or negative comment is also important in this factor. For example, a 90 day late payment 3 years ago may be less important than a 30 day late last month. The more current the factor, the greater the weight.
Amount Owed Versus Capacity – 30%
What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score. Authorities suggest 30%-60% is desirable by creditors. Maintaining a low balance on multiple cards is better than high balances on one… but don’t run out for more cards to “even out” balances just before applying for a loan. Recent applications cost you as shown in below. You should note that a few creditors will use highest balance as your credit limit. For example if you have a $10,000 limit and have used only $1000, your limit will show not 10% but 100% utilization.
Length Of Credit History – 15%
How long is your credit history? Generally, models consider the length of your credit track record. A recently opened account will have less weight than an account 3-4 years old. An insufficient credit history may have a negative effect on your score, but that can be offset by other factors, such as timely payments and low balances. If you are going to close an account, try to maintain the oldest accounts as age of account matters.
New Credit Accounts – 10%
Have you applied for new credit recently? Many scoring models consider recency. Similarly, if you have applied for too many new accounts recently or had to many recent inquiries, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make “pre-screened” credit offers are not counted.
Types Of Credit In Use – 10%
How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies (rather than a bank) may negatively affect your credit score. There is also a hierarchy of debt beginning with a mortgage. This is followed by a secured debt such as a car, then unsecured debt (credit cards), then revolving charge cards and gasoline cards.
Most Important Issues
It’s likely to take some time to improve your score significantly. However, the most important issues to improved credit score are:
accuracy of report
on time payments
paying down outstanding balances
not taking on new debt.
The Final Analysis
You should also be aware that the Fair Credit Reporting Act (FCRA) is designed to promote accuracy and ensure the privacy of the information used in consumer credit reports. It is enforced by the Federal Trade Commission. Recent amendments to the Act expand your rights and place additional requirements on Credit Reporting Agencies as well as businesses that supply information about you to these agencies. Additionally, if you tell an information provider in writing that you dispute an item, a notice of your dispute must be included anytime the information provider reports the item to the reporting agency. All of this can affect your credit score in your favor. Note: the operative word is “CAN”.
Readers will probably be interested to know Mike, the author of this article, also offers a free debt elimination mini-course via e-mail. You can enroll at Debt Free In 7.5 Years.
HOGG
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Wittenhaque asked:
Credit help is a legal process used by both people in debt and their creditors to negotiate a settlement of an existing legal debt. Any person owing any type of debt has the legal right to negotiate with the creditors, however this practice takes time to master and certain skills to get the maximum benefits.
Credit Help can be done with correct negotiation with creditors, and is best done by hiring an experienced third party. Rather than trying to contact the creditors personally and do it yourself, hire an expert like New Life Financial.
Credit help companies correspond with creditors on your behalf and assist by establishing a monthly saving goal to raise money for the settlement of the debts.
Credit Help is offered with New Life Financial. New Life Financials’ Credit help program reduces your current unsecured debt balances 40-60% by arbitrating a settlement with your creditors.
Our Credit help program lessens the struggle and gives a plan to pay the debts.
How does this work? You will set aside, in a special account, a certain amount of funds every month that will go towards your accounts in the Program. Once you have accumulated enough settlement funds, we will finalize the negotiation with the creditors. You approve the Credit Help amount. Each person’s situation is different and negotiations with creditors will take place at different times depending on the particular creditor and the amount of the debt. One at a time, each of your debts will be paid at a huge discount.
How do you get started?
When you call, we will consult you in regards to your financial situation and will determine your eligibility for Our Credit Help program.
The goal of Our Credit help Program is to lower your debt.
Not only do we negotiate the amount you owe to the creditors, but, we also negotiate what is reported on you credit reports. We are very successful at this.
Credit Help has the lightest impact on your Credit Score and a closed, paid off account increases your credit score.
The only solution is Credit Help. Ethical, moral and aggressive use of your rights as a consumer.
We won’t charge you upfront fees. All costs will be disclosed.
Our Credit help Program offers the best way to reduce your debt and will quickly eliminate it.
For more information about Credit help, call at 888 746 1907 or go to: http://www. NewLifeFinancial.org
PENNY
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Saurabh Jain asked:
Debt consolidation credit help is for those who have fallen deep into the debt trap. If you have multiple debts you are finding hard to manage, and are afraid of bankruptcy or possession of your property, debt help is for you. By consolidating your debts, you can find the best way to pay your outstanding debts by making a single payment.
Bankruptcy Help
Many companies offer credit help. Use this to your advantage, look for as many quotes as you can before you settle for a particular service. If you have access to the Internet, then all you need to do is find the best free online consolidation quote.
Whether you want to find debt consolidation help, or need a free online quote, you can simply log in online and look for them. It is as simple as that. You need not run about looking for debt credit help, and settle for the first company firm that you come across. The power of the Internet gives you choices.
Through debt consolidation credit help, you can get the best deals on loans you may take to pay your consolidated debt. You can also find assistance and advice at lesser rates.
You can avoid bankruptcy by consolidating your loans. Most people run up huge bills on their credit cards. If you have more than one credit card, chances are you are paying installments on all of them. This can be inconvenient and even lead to financial trouble. Instead, why not consolidate the debts and pay a single installment on it. Better still, pay low interest. The creditors will be happy to get their money back and you can avoid bankruptcy.
Debt Help
You have many debt help options. You can look around for favorable quotes from debt consolidation companies. Never settle for the first quote you come across- this might not solve your problem of high interest loans, since these companies might lend to you on higher rates if your credit report is bad.
Do not lose heart, keep searching till you find a consolidation quote that suits you. Apart from lending you money to pay your consolidated debt, the company will also negotiate with the lender to get you the lowest interest rates. This is why you should be very sure before you hire the services of a debt consolidation company.
For all kinds of credit card debts, education loans and other debts, you can take recourse to debt consolidation credit help. These loans are easy to repay and help repair your credit rating as well. Do not delay, the quicker you get help, the easier it will be for you to get out of debt trouble.
LANEY
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Vikram kuamr asked:
It’s a serious problem finding out that you’re buried under debt. But don’t despair. It’s not the end of the world if you do. Of course, the first step that you have to do is take control of the problem and focus on coming up with some ways to solve it. There are a lot of valuable advices that you may heed to get you off your bad credit. Thanks to RCACredit, credit repair services are readily available for you and for everyone else needing to get themselves off bad credit.
RCACredit provides counseling for people with bad credit problems. Most of the time problems arising from bad credit stem from people’s lack of discipline especially when it comes to spending. People with credit cards particularly have the misconception that they their plastic money is there for them to live lavish lifestyles hereby causing them to mismanage their finances, which all ends up to bad credit. Now for your credit repair needs, it is best to consult a trusted credit counseling agency or company, such as RCACredit, who can readily give you helpful advice on how to build back your confidence when it comes to your credit standing. RCACredit is a legitimate credit counseling agency that provides not only advice on how you can get rid of bad credit but they also educate you on some credit repair techniques that should prove helpful for anyone wallowing in their credit needs.
RCACredit knows that it’s best to talk to your creditors about your bad credit problems instead of hiding from them. Like them, creditors will appreciate the effort as it will make your situation a little more under control. With RCACredit one should be able to outline the many ways in order to boost back one’s credit score by the various credit repair services that they have. With their help, one should be able to start out with a clean slate free of credit repair and all negative accounts from one’s credit report.
RCACredit has established a good name with its over 70,000 satisfied clients all claiming that RCACredit has helped them start anew with their credit life. With a simple questionnaire to fill up, one will be able to avail of RCACredit’s credit repair services and see advice from their competent staff who has never failed to give their clients what is due them.
One will be amazed at how RCACredit does it. Aside from helping you erase the bad credit record you have in the past, RCACredit will get you moving with your life with the possibility of being able to acquire bank loans despite your previous credit score. With their help, one should be able to recover his credit score and add up years of positive and good credit to one’s credit file.
But of course, all these credit repair services do not end there. RCACredit expects you to do your share too in taking care of the credit score that they promise to give you. Learning from your past mistakes when it comes to financial matters should give you an idea on how painful and difficult it is living with bad credit.
QUEZADA
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William Brooks asked:
You are shocked when your loan is denied, or maybe you were approved, but the interest rate is much higher than you anticipated. How can that be you say? My credit score is good, I know I checked. Maybe it’s not as good as you think. It all depends on there you got it and what kind of credit score it is.
The fact is there are several different credit scoring methods. Credit scores calculated from the same credit reports can differ substantially from credit scoring method to credit scoring method. So how can you ever know what your credit score really is? Well, luckily, 75% percent of lenders use FICO scores exclusively and you can purchase FICO scores yourself–you just have to know where to go. (www.myfico.com)
FICO credit scoring is a numeric method of scoring your credit worthiness developed by Fair Isaac and Company. Your credit score is a number between 300 and 850 that tells creditors how likely you are to pay your bills. The higher the number, the better it looks to potential lenders and creditors.
The three major credit bureaus each have their own version of the FICO score: Equifax uses the Beacon system, TransUnion uses the Empirica system, and Experian uses the Experian/Fair Isaac system. Despite each credit bureaus’ use of their own versions, all systems are based the original Fair Isaac FICO scoring method, so each credit score calculated with these systems are generally called FICO scores. However, although most lenders do use FICO scoring, some lenders may have their own scoring methods.
There is only one place where you can get your FICO score from all three bureaus and that is at www.myfico.com. If you order your credit score from anywhere else, again be aware that these scores are “FAKOs” (or “fake”) and can differ considerably from your FICO credit scores.
Adding to the confusion is the credit bureaus themselves. Recently, Experian revealed that the national average credit score of its consumers is 678. This is very misleading to the average consumer. When you buy your credit report and score directly from Experians website, you are getting what they call the “PLUS Score,” which is NOT a FICO score, and is NOT used by lenders anywhere. (Equifax is the exception–you can buy your FICO score directly from them at their website; however, the only place to get all three scores together is at www.myfico.com.) The 678 PLUS Score reported by Experian is actually the average of consumers’ PLUS Scores, not their FICO Scores.
Clearly, the PLUS Score (and all Non-FICO scores) are useless. Not only that, but such hype misleads consumers into purchasing their PLUS Score thinking that they are getting the same credit score that their lender will use. Non-FICO scores are worthless not matter what the credit bureaus or any website selling non-FICO scores claim. Even a few points difference in your credit score can mean confronting the reality of the loss of thousands of dollars out of youSr pocket–a loss that you probably didn’t plan for. The next time you want the most accurate credit score available, do yourself a favor and get the industry standard: the FICO credit score.
KAISER
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Jim Kemish asked:
Not all Scores are Equal
There are many credit scores available, but the only one that matters is your FICO score. FICO, by the way, is an acronym for Fair Isaac and Company, the developer of the score. This is the score that virtually all lenders use. Other scores attempt to approximate the FICO score, but frequently vary by a significant margin.
One Score with Three Names
The FICO score may be referred to by three different names. This is because the three bureaus have branded it for their own marketing. Equifax calls it a BEACON score, TransUnion calls it an EMPIRICA score, and Experian calls it the EXPERIAN/Fair Isaac Risk Model. Because of this you will hear of three different scores, although they are all a product of the same formula.
Why Are Your Three Scores Different?
Your three scores are different because each bureau gathers information from a slightly different mix of creditors. If you were to look carefully at your three reports you will notice that some accounts are missing on each bureau. Timing also plays a roll. A recent change in your credit may be picked up sooner at one bureau than another.
What is Included in Your Score?
Are you working on credit repair? Be proactive. But in order to influence your score it is essential to understand how it works. Here is an overview of the contributing factors.
Pay History
Your pay history is the big ingredient. This category includes installment and revolving accounts, as well as public records and collections. The age of a derogatory item diminishes its impact on your score. The first step in the credit repair process is to examine your report for obvious errors in this category which makes up 35% of your score.
Balances
Your account balances make up the next category. The relationship between the balance and the credit limit on your revolving accounts is a major factor. Anyone involved in a credit repair effort should minimize their revolving balances as much as possible. The relationship between the current balance and the original balance on installment loans is also taken into consideration. This category makes up 30% of your score.
The Age of Accounts
New credit will have a negative impact on your score, and those accounts that you have kept alive and healthy for years have a good impact. Closing old accounts is a common credit repair error to be avoided. This category makes up 15% of your score.
New Credit & Inquiries
New credit and recent inquiries are a factor. Many credit repair candidates open new secured credit cards for the long term benefit. But generally, anyone involved in credit repair should limit new credit activity. Either way you will lose a few points on this one. Fair Isaac weighs this at 10% of your score.
Type of Credit
The type of your credit is the final 10% of the calculation. Fair Isaac won’t define the perfect mix of mortgage, installment, revolving, and consumer debt, but in our experience the key to a long term successful credit repair effort is to be a moderate user of credit, make your payments on time, and try to keep those revolving balances down.
False Credit
As you begin your credit repair effort it is important to have reliable information. Amazingly, the same three credit bureaus that sell authentic FICO scores to lenders also sell unreliable estimated scores to consumers. Every day untold numbers of consumers go to TransUnion’s “True Credit” website and pay for what they believe to be their credit scores. What they get are deceptively named “TrueCredit” scores which vary significantly from the FICO scores used by lenders. Here is the (almost impossible to find) small print from the TransUnion website. “TrueCredit is not connected in any way with Fair, Isaac and Company; the credit score provided here is not a so-called FICO score. The credit scores of TransUnion may not be identical in every respect to any consumer credit scores produced by any other company.”
Real Credit Scores
Are you starting the process of credit repair? Do you want to see your real FICO scores? MyFico.com is the only place that consumers can purchase their authentic FICO scores. Want to save some money? It is handy to know that mortgage brokers typically look at all three FICO scores when pre-qualifying you for a mortgage. If you ask, they just might give you a copy of your report along with all three scores. It can’t hurt to save a few dollars!
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
HANNA
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tak3032 asked:
I want to know how do they determine the credit score point system. I know what is credit and how it works. But I want to know the numbers part like if someone runs your credit report it takes off 2points from your score, another is what if your late on your payment how much does it take off then and if I have a loan for a certain amount does that mean I get a big score or a low score? I have some old accounts (5yrs old) that need to be paid off but if I do pay them off will it really make a difference on my score? Next thing you know I pay them off and then my score only goes up by 4 or 5 points or will I even get a point. What would be the purpose then? At the same time if creditors do look at my report yes it would show paid off but the history would still show that I was delinquent for 5yrs. Whose gonna want to give me a loan any ways? Basically what is the point system and how is it calculated? Let me know so I can start to repair my credit. Much thanks and I appreciate it!!!
TATE
AMEFIKA asked:
When I apply for loans and tell the creditors what my credit score is they still run my credit. All the reports I read talk about the imporatnce of knowing your credit score and that’s fine. But what’s the importance of knowing my score when the creditors run it anyway? Also, how do we know that the rates that we qualify for are true based on ourcredit score? Is there a chart tat we can put our credit score up against and it tells us what rates we qualify for?
NEUMAN
