Basics Of Credit Reporting – Meaning Of Your Credit Score

So what does the credit score mean exactly. The FICO credit score has a range from 350 to 850. The higher your credit score, the better it is for you as it is supposed to mean that you are more credit worthy. The scores measures your likelihood of fulfilling your commitment on a new or existing credit over the next two years. In order to calculate the risk, the credit scoring model is compared historically to other consumers whose scores range within a few points of your own.

In other words, for certain range of credit score, there is a certain rate of delinquency over the next two years that is ascertained by the fico credit score .

For example, if your credit score is 599 or below, FICO sees that there is greater than 50% chance that you’ll fall behind on existing or new obligation over the next 2 years. Or perhaps even filed for bankruptcy. This does not mean that you will definitely default. It means hat there is a greater chance that you won’t pay a future bills on time.

The following table represents the FICO credit score range and the rate of delinquency associated with it.

Credit Score Range Delinquency Rate
350 — 499 87%
500 — 549 71%
550 — 599 51%
600 — 649 31%
650 — 699 15%
700 — 749 5%
750 — 799 2%
800+ 1%

Remember that the most important part about your credit history is the current status of your accounts. So if you’re behind on any account that is not defaulted, which is usually 120 days after the payment was due, contact the creditor to find out if you can rehabilitate them and start bringing them current.

If they have already been charged off or passed for collection, you may want to consider another strategy such as negotiation. The odds are that the accounts that have already been charged off or given to a collection agency have already had a negative impact on your credit score. Settling these account and having the “settled” status show up on your credit report will not worry your credit score too much because the negative impact that have already happened.

Once you have paid off any negative account and start paying your creditor on time, your credit score will keep increasing every month that goes by.

Even FICO Makes More Than One Credit Score

If FICO makes more than one credit score, which one should you order

As if worrying about different credit scores from different service providers was not enough, Fair Isaac Corporation itself makes more than one credit score. However, the good news is that these scores are usually created to serve specific lender needs and requirements. These are not available to consumes anyway. As far as you are concerned you will get your standard FICO score when you order it from www.myfico.com.The only variations could be in your 3 different FICO scores based on 3 different credit files with Experain, TranUnion and Equifax.

So essentially you have 3 FICO scores from each credit bureau and they all could differ each other, though not by much in most cases, due to different information in your credit file with each credit bureau.

A common confusion among consumers is regarding different credit scores from different credit scoring models. A common misconception amongst people is that there is one credit score and it is called the FICO credit score. FICO is indeed the pioneers of credit score calculation. It was developed by Fair, Isaac Corporation. While initially there was one FICO score today even the Fair, Isaac Corporation develops several different credit scores all of which are commonly referred to as the FICO score. Any score that is about by the Fair, Isaac Corporation is called the FICO score although there are different credit scoring models designed to be used by different kind of lenders. The kind of FICO score that is developed for the use of many kind of lenders and lending decisions are called generic scores. Besides these there are specialized and specific FICO scores meant for different kind of lending purposes such as automobile loans, mortgage loans etc.. There are even super specialized FICO score is designed for use by only one specific lender according to the requirement of the business. The most well known brand names of some Fair Isaac models are NextGen and FICO Classic Score.

The summary of this is that there are several credit scoring models in use today. Some estimates that these number in more than 1000. FICO scores are the credit scoring models are blocked by Fair, Isaac Corporation while FastStart is a credit scoring model that has been produced by Experian-Scorex which is a competitor to Fair, Isaac Corporation.

Understanding Your FICO Scores – Are You High or Low Risk Borrower?

The commonest kind of a credit score that is used by the creditors is known as the FICO score. FICO score was developed by fair Isaac and Corporation that was one of the first organizations to work on a credit scoring system. The credit scoring system represents the information present on your credit score as a three digit number. Since the credit score is based on your credit history it is supposed to represent your credit worthiness. The exact algorithm that is used in calculating the credit score is a trade secret. However, FICO has let’s known that the use more than 30 parameters to calculate the credit score of a person.

They have also let down the five most important factors that are taken into consideration what calculating the credit score. These factors are your payment history, credit utilization, mix of credit, age of credit frequency of credit applications.

The credit scoring model represents the likelihood a few making the payments on your loan or going into default. When the credit scoring model was first implemented many lenders used it to profile borrowers as a high risk or low risk consumer. Credit scoring is also widely used in the mortgage industry. It helps the creditors to streamline and quickly underwrite your loan application.

If you are considering your FICO score the new FICO score will fall somewhere between 300 and 900. Most of the consumers fall between the figure of 500 and 800. A score of 500 is constant to be a very low credit score which means that the consumer is a high-risk. The score of 600 is considered as a medium score whereas anything over 680 is usually considered to be a high credit score.

In the recent times sense the meltdown in the economy and the various problems faced by millions of Americans in reaping the credit that they borrowed, lenders have become more stringent and strict with their lending rules. This means that while some time back if a particular credit score qualified as a healthy credit score, lenders today require a higher credit score to approve you for credit.

Having a high credit score means that your application will be approved after only a superficial review whereas low credit score means that you may not qualify at all. If you have a sub-prime credit score that falls somewhere in between a high and low credit score you may be asked to provide various other documents to prove your income, job stability etc. You may also need to provide explanations for the negative entries on your credit report if you wish to be approved for your loan.

How Credit Mistakes Can Hurt Your FICO Score

The calculation of the FICO score is a complex process. It is hard to predict what the damage on your credit score will be in case you happen to make a credit mistakes such as late payment or defaulting. Different accounts have different information present on them and the result of a credit mistake will also depend on the information that is already present on your credit report. It is acknowledged that the difference in the credit score because of a credit mistake will also depend on the original credit score. The following are some important FICO patterns that you should remember and understand:

· the higher your credit score is the farther it can fall. A person with a higher credit score will lose more points than a person with a lower credit score for the same credit mistake.

· Bankruptcy will hurt your credit score the most since it will affect several accounts at the same time along with your payment history which forms to defy percent of your total FICO scores.

The following are two hypothetical examples of two people with different FICO scores and how the same credit actions affects them differently.

The person with the 680 score has:

· Six active credit accounts, which consist of three credit cards, an auto loan, a mortgage, and a student loan

· Eight years of credit history

· A 40% to 50% credit utilization

· Two late payments, a 90-day late credit card payment from two years ago and one 30-day late payment on the auto loan one year ago

· No accounts have been sent to collections and there are no public records (bankruptcy, foreclosure, etc.)

The person with the 780 FICO score has:

· Ten active credit accounts, which include seven credit cards, an auto loan, a mortgage, and a student loan

· Fifteen years of credit history

· 15% to 25% credit utilization

· No late payments ever

· No collections or other public records

How Different FICO Scores Respond to the Same Mistakes

FICO then tells us how many FICO points each person would lose if they made any of five credit mistakes.

· Maxing out a credit card, the person with the 680 credit score would lose between 10 and 30 points, while the person with 780 credit score would lose between 25 to 45 points.

· Missing one credit card payment (a 30-day late), the person with 680 credit score would lose between 60 and 80 points, while the person with the 780 credit score would lose between 90 and 110 points.

· Debt settlement, the person with 680 credit score would lose between 45 and 65 points while the person with the 780 credit score would lose between 140 and 160 points.

· Foreclosure, the person with 680 credit score would lose between 85 and 105 points, while the person with 780 credit score would lose between 140 and 160 points.

· Bankruptcy, the person with 680 credit score would lose between 130 and 150 points, while the person with 780 credit score would lose between 220 and 240 points.

The Difference Between FICO and FAKO Credit Scores

Any credit score that is not FICO is a FAKO credit score.

The difference between a FICO and FAKO credit score is really that simple. The credit score that was originally devised by the Fair Isaac Corporation is known as a FICO score. It is for of the most widely and commonly used credit score by many lenders and finance institutions. In fact many people use FICO score as synonymous with credit scores without being aware that there are other credit scores as well. However credit score is a general term whereas FICO credit score is a brand.

FAKO is just another term in the credit rating language jargon to quickly identify any credit score that is not a FICO score.

There are several other credit score being used by different lenders when the three national credit bureaus also having their own separate credit scores. At the time of writing if this post, the three credit bureaus continue to use FICO credit scores they have come up with your own system as well. Equifax has PLUS, Experian has BEACON and TransUnion has EMPIRICA.

Recently a new credit score called VantageScore has developed with co-operation amongst the three national credit bureaus. It is the only form of credit score that is supposed give uniform results across the three national credit bureaus provided the information in used is same.

If you are concerned about checking your credit score and confused between which one to check and follow them there are two things that you can do in this situation. You can either find out which credit score your lender uses and check that particular credit score for the purpose of knowing how your credit application is going to stand in review with that particular lender. However, if you want to get a general idea of your credit score then your best bet would be to check your FICO credit score from myFICO.com. The odds are that whatever credit rating your FICO score reflects will hold true across other credit scoring models as well.

You should bear in mind that there are several specialized credit scores that certain and lenders use to serve their lending purposes better. A mortgage lender may use a mortgage score whereas an insurance something may use an insurance score. However, it is most likely that if your FICO score is good then so will the other versions.

Where All You Get Your Credit Report and Fico Score

A need to order your credit report may arise in many situations a many people. Because a credit report is used for sowing different purposes and why so many different people that of using and checking your credit report is an important activity that every person must do at least once every year. Credit score credit report today is checked not only by lenders and creditors but by utility services, mobile phone operators, employers landlords and even hospitals. There are many ways in which you can access your credit report from a legitimate source.

Getting Your Free Annual credit report from AnnualCreditReport.com

This is the only legitimate way to get a free copy of your personal credit report from each of the three credit bureaus. You have been granted a right by the fair and accurate credit transactions act which is a federal law to access your credit report for free from each of the three major credit bureaus without any obligation Experian, TransUnion and Equifax.

Getting Your Credit Report Directly from the Credit Bureaus

You can also buy your credit report directly from the credit bureau. Each credit bureau has its own products and services to offer which includes a three in one report offer. Subscribing to 3 in one credit report offer means that you can view your credit report from all three national credit bureaus in one place and for one subscription fee. You can also get your credit report for free when you sign up for trial offer for one of the subscription services service. Commonly, a credit monitoring service is what the subscription is for.

Getting Your Fico Credit Scores From MyFICO.com

MyFICO.com is the only websites that sells fico credit scores. Fico scores were developed by fair Isaac Corporation over the creamy is in developing a method to calculate credit scores. MyFICO also sells and allows you to order your credit reports from the myFICO website. You can purchase individual credit reports or the three in one credit report containing all three credit reports and your credit score is.

Extra Free credit reports Every Year As per the Federal Law

Apart from the credit reports that is granted to you for free by the FACT act, there are other circumstances which are also gone by the same law under which you can order a credit report for free. These circumstances are:

If you have ever been denied credit based on the information present on a credit report — you’re unemployed and planning to look for work the next 60 days, you are on welfare assistance or you have been a victim of identity theft.

Under these circumstances you can also access your credit report for free from the credit bureaus.

Watch out for Impostor Websites When Trying to Get Your Credit Reports

There are many fishing scams related to credit notes. Apparently there are about almost hundred imposter websites for annual credit report.com. These websites either want to steal your personal information or want to trick you into signing up for a paid subscription service. In order to avoid such scams it is important that you visit only trusted websites to get your credit report, do not click on links in e-mails, if you do click a link on an e-mail check to see the address in your browser is the address you expected, enter personal information only into secure sites that have a URL beginning with HTTPs or with a lock in the lower right side of the browser or both.

How To Get Your FICO Credit Score

The most common credit score used by lenders and creditors is perhaps the FICO credit score. FICO credit scoring model was developed by Fair Isaac Corporation. Although different lenders may use specialised scores for the purpose of evaluating the credit worthiness of a borrow, the FICO credit is a great place to start to get an accurate idea of your credit rating and credit worthiness.

If your FICO credit score is in good shape, the odds are high that other credit scores that a lender uses will be healthy as well, barring some exceptions and anomalies.

You can order your FICO credit score directly from www.myFICO.com. This is the only place you can purchase your FICO score. You can order your FICO score based on your credit file with Equifax or TransUnion only. As off February 14, 2009 you can no longer purchase your FICO score based on your Experian credit file.

You can also purchase the credit scores directly from each of the credit bureaus. Remember that each credit bureau might have its own credit scoring model so your credit score could differ from each other and might be even different from your FICO score. Check before purchasing from the credit bureau, what credit score they are providing you with.

It should be mentioned that a great option here is to check your Vantage score. Vantage Credit Score is a model that has been created as a result of the 3 credit bureaus i.e. Experian, Equifax and TransUnion, collaborating with each other. This is removes the margin of difference between your credit scores from different credit bureaus. Since this score is based on the information on your credit report from all the 3 credit bureaus, your score will remain constant no matter where you buy it from.

Vantage score is available for purchase from the website of all the credit bureaus. It is also available for free from the website of CreditKarma.com. Read more about Credit Karma and their free score here.

Free Credit Score from myFICO Score Estimator

It’s true that government laws provide for a free annual consumer credit report to all citizens of the USA. Each individual who has a credit history can request a free copy of their credit report from each of the three national credit bureaus. However, the credit score is another matter altogether 

In order to see your FICO credit score, you have to buy one from the credit bureaus or directly from myFico.com

It is sometimes crucial and always advisable that a person be aware of what his or her credit score is. Especially if that person is going to be making an application for credit soon.

However, if you do not wish to pay a fee to see your exact credit score there are ways to get a close estimate of what your actual credit score is for free.

The most popular of these credit score estimators is the myFICO credit score estimator. It is available for free on the myFICO.com website. If you cannot locate a link for it, just do a search engine search with the terms ‘myfico score estimator’.

There are services online that can calculate an estimate of your credit score based on a series of questions. These questions are similar to the ones used to calculate your credit score by the credit bureaus and myFICO.com. They are aimed to get an idea about your payment history, credit utilization ratio, length of credit history, mix of kinds of credit etc.

An example of the question that you can be asked is:

  • Do you have a credit card?

Depending upon the answer to the above question, more follow up questions may follow such as:

  • How many credit cards do you have?
  • What is the total limit of all the credit cards combined?
  • How much balance do you carry on all the credit cards combined?
  • What is the balance on each individual card? And so on.

In order to get a fair estimate, you will need to provide accurate answers. It is a good idea to have your credit report with you since it can get hard to remember things like how long back your credit history goes and when was the last time you were late on a payment.

If you answer the questions accurately, the FICO score estimator will provide you with a credit score. However, remember that this is just an estimate and there is no guarantee of how accurate it is. Since it is not based on actual information from your credit report but on the information that you provide, you might notice a difference between the estimated score and the actual credit score.

It is strongly advised that you buy a copy of your actual FICO score before making any application for credit of importance. In fact, you should order a credit score at least once just for the educational purpose.  A credit score report is usually accompanied by detailed explanation of how your score has been calculated, what information on your credit score is influencing it both positively and negatively and how you can improve upon it.

Since you are reading this article, we can assume that you are interested in checking your credit score for free. There is another great resource that actually provides your with your Vantage credit score for free. You just have to sign up with your social security number. Visit CreditKarma.com to avail of their free score services. If you want to learn more about CreditKarma.com you can also read this post that we have written on them. You will get a fair idea of how they function and provide your with a free copy of your credit score.

How the new FICO 08 credit score different from the older one

Difference between the Old FICO Score and the FICO 08 Score

The FICO credit score is probably still the most widely and commonly used score by lenders. It is also the name that comes to the mind of people when they think of their credit scores. The FICO credit score was started by a corporation known as Fair Isaac Corporation and was one of the first credit scores to be used in the market. In January 2009 fair Isaac updated its credit scoring model and called it the FICO 08 by bringing about certain changes that would enable the lenders to predict the creditworthiness and the risk of consumers better.

The FICO 08 credit score has been designed to try and gauge the risk of lending belonging to a particular section of borrowers which includes sub-prime borrowers, new borrowers and the consumers who do not have much of a credit history in terms of open accounts as well as those borrowers who borrow credit actively. Under the FICO 08, consumers to have a good mix of credit accounts such as credit cards, mortgages and automobile loans will have a higher score than those with only one or two type of credit accounts. Borrowers will also receive points for paying loan balances well below the original amount.

Delinquencies will not hit the consumer who has a strong credit history. Even if one single account of a consumer is seriously late by more than 90 days is credit score won’t be affected so much if he has other deposit accounts that are in good standing on his credit report. But if several accounts are delinquent or late then the credit score will get affected as is normally the case with all the credit scoring models as well.

The rest of the things remained pretty much the same as with any other credit scoring model be it VantageScore or the original FICO score. A high credit utilization ratio will hurt your credit score while a person who utilizes a small amount of the total available credit will see a boost to their FICO 08 credit scores. It could be better for the consumer to have more active and positive accounts than closed accounts. The FICO 08 score will still calculate the credit scoring model by giving British the same factors and in the same proportion: 35% payment history, 30% credit utilization, 15% credit age, 10% recent applications and 10% mix of credit accounts. FICO 08 scores will still range from 300 to 850. Authorized users will be reported on the FICO 08 scores however the model has been designed to be able to distinguish between legitimate authorized users such as next of kin, spouse etc. from those that have been purchased for the purpose of credit repair and credit improvement. Your FICO 08 score will continue to be based on the credit report from the three national credit bureaus Experian, Equifax and TransUnion.

Though FICO 08 is available for use to lenders who use Equifax and TransUnion it was not yet available for purchase to the common consumer at the time that this post was written. There is no information at present as to when the FICO 08 credit score will become available for purchase. For now you can still purchase the previous version of your FICO scores from Equifax and TransUnion from myFICO.com.

3 Ways To Get Your Credit Report and FICO Scores

A credit report has become an extremely important document for a consumer.  Since lenders make lending decisions based on the information present on the credit report on, employers use it to assimilate the responsibility and character of potential employees, landlords use it to verify their future tenants and even certain utility services crosscheck the credit report before activating the service.  For this reason the federal law gives the consumer to write to view their own credit report for free from each of the National credit bureaus once every 12 months.  You had to make full use of this long to ensure that the information present on your credit report is accurate and that no suspicious activity has occurred under your identity due to identity theft or fraud.

There are three major ways in which you can access your credit report.

Get it Credit Report Free from annualcreditreport.com

Annualcreditreport.com is sites that has been established as a joint venture by the a national credit bureaus.  You can access your credit reporting for free from each of the three national credit bureaus that is Experian, TransUnion and Equifax once every 12 months.  This is the centralised site that consumer your free credit report according to the fair and accurate credit transactions act and is the only place where you can get a free credit report from the three major credit bureaus without any obligation.

Getting the Credit Report from the Credit Bureaus

You can also order your credit report from each of the three credit bureaus individually.  These reports will typically be chargeable.  The amount of money that you need to pay to access your credit report depends upon the state that you live in.  The view more complete information about the charges that are applicable in the state that you reside in, visit www.crediaid.com/free-credit-report.htm
the credit bureaus typically offer various different packages to sue different consumer needs.  You can sign up to the access a single individual credit report, a 3-in-1 package that gives you access to the credit report on from all the three national credit bureaus in one place or a credit monitoring service that allows you to check your credit report on as many times as you like not just for yourself but your entire family.

·    Equifax credit report products <http://www.equifax.com/credit-product-list/>
·    Experian credit report products <http://www.experian.com/consumer_online_products/index.html>
·    TransUnion (True Credit) <http://www.truecredit.com>

Getting Your Credit Report and Your Credit Score from My FICO.com

Fair Isaacs Corporation is the company that is credited with initially developing the first credit scoring model known as the FICO credit score.  Not only can you order your FICO credit score from the website of my FICO.com but also purchase credit reports either individually or 3-in-1 report containing reports from all the three national credit bureaus.

Qualifying for More Than Three Free Credit Reports

Even every eligible to receive a free credit report apart from the one that you access from www.annualcreditreport.com.  These circumstances include having been denied credit based on the information present or credit report, being unemployed and planning to look for a job in the next 60 days, being on welfare assistance or being a victim of identity theft. Under the circumstances you were entitled to a free credit report as well. Visit http://crediaid.com/info/03/free-credit-report-under-fcra-and-fact-act/ for more information on your free credit reports under the FCRA and the FACT act.

Warning For Ordering Your Credit Reports

At any given point of time be extremely careful where you order your credit report from.  There are several phishing and scan websites operating under the gimmick of providing credit reports.  Reports are that there are almost 100 imposter websites trying to misrepresent themselves as annualcreditreport.com.  These websites will either steal your personal information or trick you into signing up for paid subscription service.
Only was it trusted Web sites to get your credit report.  Do not take on offers and links sending e-mails.  Always check the address of the website in the address bar and if it is exactly where you went into to go.  Always fill in your personal details on secured websites that have their countries beginning with an HTTPS://.