Latest credit scores articles
Posted on 2015-11-04 08:00:56
Your credit score is a computer-generated number that summarizes the information in your credit report such as how you have handled past credit obligations and your current credit standing. This information is compared to statistical models to give your credit history a score. Credit scores are intended to predict how you will handle future credit obligations. The higher your credit score, the lower the risk a lender takes in providing you credit.
Many Credit Score Models
There are many credit scoring models in use today. Although the criteria used is similar for all models, there can be slight variations and scales. One scoring model may go from 300 to 850 while another may go from 500 to 990. Because so many different scoring models are used, there is no single “good” credit score. But a good credit score on one scale will usually translate to a good credit score on another scale.
Three Credit Bureaus
There are three primary credit bureaus—Equifax, Experian and TransUnion. The credit bureaus are independent companies in the same business. Some creditors may report your credit activity to only one or two bureaus. Your stellar credit record with a particular lender may not be reported to the credit bureau another lender uses to check your credit score.
Click To See Your Credit Score
Lender-Specific Criteria
Even with the same scoring model, every company sets its own criteria. What one lender calls a good credit score, another may call fair. Or, the standard may vary depending on the situation. For example, there may be a higher standard for a mortgage than for an automobile loan or credit card application.
Reliability of Credit Scores
Credit scores have stood the test of time for being powerful predictors of a consumer’s future credit performance. Lenders have found a strong correlation between credit scores and delinquency rates. Although they may seem to be arbitrary, credit scores allow creditors and others to evaluate applications consistently and impartially. Credit scores are not always the final word, however. Creditors may also review your credit report and take into consideration other factors from your application such as your income and employment status.
Why Your Credit Score Matters
Your credit score can have a significant impact on your life. With today’s technology, credit scores can be used day and night to make an instant assessment of your creditworthiness. Knowing and understanding your credit score can give you a financial edge that could put money in your pocket through lower interest rates and lower monthly payments.
Improve Your Credit Score. Free Consultation.
Proven Results. (877) 882-2256
Posted on 2015-10-21 09:00:41
Credit scores are designed to quickly and objectively predict your creditworthiness. Most credit scoring models consider five key factors. Focus on these 5 tips to improve your credit score.
Payment History
Lenders want to know how you pay your bills. Your payment history usually carries the most weight with any credit score model. A trend of late payments will not go unnoticed. Delinquent accounts and bankruptcies can cause your credit score to drop significantly.
Tip #1: Pay your bills on time, every time.
Amount Owed
Creditors are interested in how much credit you have already committed to, especially in relation to your credit limits. If you are near or over your credit limits, prospective lenders may be hesitant to issue more credit. Even if you pay your bills in full each month, your credit score may factor in a large closing balance reported to the credit bureaus.
Tip #2: Keep credit card balances below 20% of your credit limit. If you are using credit cards to build rewards, considering paying down the balance before the statement closing date.
Take a Look at Your Credit Score
Length of Credit History
A longer credit history is viewed favorably by lenders. It is rarely a good idea to close old accounts, even if you aren’t using them. It could shorten the credit history used to calculate your credit score. However, idle accounts will not help your credit score as much as using an account and making timely payments.
Tip #3: Don’t close old credit card accounts without good reason.
New Credit
Most credit score models look at “hard inquiries” on your report – those that result from a credit application you initiate. Unless they are excessive, inquiries usually have a minimal impact on your credit score. But go on a shopping spree opening new accounts, and the impact could be greater. New accounts will also lower the average age of all of your accounts, and that could negatively affect your credit score.
Tip #4: Don’t apply for credit that you don’t need.
Types of Credit Used
Having a proven track record with a variety of types of credit (mortgage, car loan, credit cards, etc.) is viewed positively by creditors. However, this factor does not weigh as heavily on your credit score as your payment history or the amounts you owe.
Tip #5: It is seldom wise to apply for credit you don’t need just for the variety.
Improve Your Credit Score. Free Consultation.
Proven Results. (877) 882-2256
Posted on 2015-09-03 16:05:00
Although there are many credit scoring models in use today, all are designed to quickly and objectively predict your creditworthiness. These 5 tips can help you keep your credit score on track.
#1 Pay your bills on time, every time.
Why it matters: More than anything else, lenders want to know how you pay your bills. So, your payment history usually carries the most weight with any scoring model. While a single late payment may have little impact on your credit score, a trend of late payments will not go unnoticed. Delinquent accounts and bankruptcies can cause your credit score to drop significantly.
See if your 2015 credit score is on track.
#2 Keep credit card balances below 20%.
Why it matters: How much you owe is another factor that typically carries a lot of weight with most scoring models. Creditors are interested in how much credit you have already committed to, especially in relation to your credit limits. If you are near or over your credit limits, prospective lenders may be hesitant to issue more credit. Even if you pay your bills in full each month, your credit score may factor in a large balance that you have not yet paid. If you have a high balance, considering paying the balance down before the statement closing date.
#3 Don’t close old credit card accounts without good reason.
Why it matters: A longer credit history is viewed favorably by lenders. For that reason, it is rarely a good idea to close old accounts, even if you aren’t using them. Closing an account can also lower your available credit, and that can raise the percentage of available credit you are using.
#4 Don’t apply for credit you don’t need.
Why it matters: Most credit scoring models factor in applications for new credit by looking at “hard inquiries” on your report – those that result from an application you initiate. Unless they are excessive, inquiries usually have a minimal impact on your credit score, but too many can cause a significant credit score ding. New accounts will also lower the average age of all of your accounts which could negatively affect your credit score.
#5 Know what your credit report says about you.
Why it matters: Credit report mistakes are common. Your credit score is calculated based on the information in your credit report. You are the only one who will know if the information on your credit report is accurate. Review your credit report periodically, and consider a credit monitoring service that will alert you whenever there are significant changes to your credit report.
Improve Your Credit Score. Free Consultation.
Proven Results. (877) 882-2256
Posted on 2015-07-30 09:00:51
There is no shortage of myths when it comes to credit scores. Here we expose the truth behind 5 popular credit score myths.
1. Checking your own credit report will hurt your credit score.
This myth is potentially self-destructive. Ordering your own credit report counts as a “soft inquiry.” Soft inquiries have zero impact on your credit score. Zero. They are not even visible to anyone else who may look at your credit report. Consumers can and should review their credit report periodically. It has the information used to calculate your credit score. Make sure your credit report is accurate.
2. There is only one “real” credit score.
There are hundreds of credit score models in use today. There are even multiple versions of the FICO credit score. Creditors often use industry-specific credit scoring models. An auto loan company, for example, may want a credit score that puts more emphasis on how you have handled past auto loans rather than an emphasis on how you have paid credit card bills. Consumers usually see a more generic educational credit score. The most important thing to consider is how you rate on the scale being used. Then look at the factors affecting your credit score.
See Your Credit Score Now!
3. Co-signing a loan does not affect my credit score.
Whenever you co-sign for a loan, you are accepting full responsibility for the loan. If the other party bails, you are still responsible in full for the debt. Details of the account will appear on both individual’s credit reports, and therefore be factored into both individual's credit score. If you have co-signed a loan, pay close attention to how the other party is handling the obligation.
4. High credit card limits hurt my credit score.
High credit card limits can actually work in your favor when it comes to your credit score as long as you don’t overspend. Most credit score formulas will consider how much of your available credit you are using. Less is better. When you lower credit card limits or close accounts, you are lowering the amount of available credit. That automatically raises the percentage of available credit you are using.
5. Carrying a credit card balance helps your credit score.
This myth is costing consumers money unnecessarily every single day. Your credit score does not benefit one bit when you make payments instead of paying a balance in full. Credit card issuers typically report your statement balance to the credit bureaus. Nothing indicates whether you made a minimum payment or paid in full. It is always better to pay in full and avoid paying interest.
Improve Your Credit Score. Free Consultation.
Proven Results. (877) 882-2256
Posted on 2015-07-01 09:00:49
High credit score rarely just happen. It is usually those who conscientiously think about their credit habits who have the highest credit scores. And it pays off. A high credit score will get you better terms on a loan that can keep money in your wallet instead of a creditor’s. That should be motivation to work hard and be responsible with your financial obligations. Here are habits of high credit score achievers.
Always pay bills on time.
This is a “no exceptions” rule. On most credit score scales, your payment history accounts for about 35 percent of your credit score. Even a single late payment can cause a significant drop. Surprisingly, the impact will likely be more serious for someone who already has a good credit score.
Keep account balances low.
In other words, avoid overspending. Most experts recommend keeping your account balances below 25% of your credit limit; some recommend as low as 10%. Even if you pay bills in full every month, most credit score models look at the balance reported by card issuers—usually your statement balance. If you use credit cards to earn rewards, consider paying down the balance before the statement closing date.
See How High Your Credit Score Is
Keep older accounts open.
There is certainly room for debate on this one with several things to consider. Every time you close an inactive credit card account you risk shortening your credit history, and that is one of the factors used in calculating your credit score. If you have other active accounts of a similar or older age, closing an account probably won’t impact your credit history. Closing an account can also affect your credit score by lowering your overall available credit. That means whatever credit you use suddenly becomes a higher percentage of your available credit.
Don’t collect credit cards.
Don’t apply for credit you don’t need. Those with the highest credit scores are actually those who use credit the least. When you open a new credit card, you may be doing it to get 15% off your purchases, but creditors view it as more credit available for possible misuse. Don’t impulsively open a credit account for a small savings on your purchase. It is rarely worth it.
A high credit score is a reward for responsible use of credit. The reward is well worth the effort. Credit score tracking with MyFreeScoreNow will help you see how your credit score is improving over time.
Improve Your Credit Score. Free Consultation.
Proven Results. (877) 882-2256
