Raise your credit score with this knowledge

If you're suffering from poor credit, there are several surefire ways to get your credit healthy again. Follow these tips and you'll be well on your way:

• Always pay your bills on time and pay down the total amount you owe. 
  (accounts for 35 percent of your score)
  If you forget all else after reading this, remember this one! This is the single most important rule for having a good credit score.
•  Keep a low credit utilization rate. 
  (accounts for 30 percent of your score)
  Let's say you have a credit card with a $10,000 limit. If you're carrying a balance month-to-month of $3,000, you're only using 30 percent of the total limit. But if your credit limit is suddenly dropped to $3,000, then suddenly you're using 100 percent of what's available to you. That's yet another reason to always pay down credit card debt as quickly as possible. You always want to stay at credit utilization of 30 percent or less.
• When you pay off a credit card, don't close the account. 
  (accounts for 15 percent of your score)
  Doing so only reduces your available credit and drives your score down. You want to have between four to six lines of credit. Be sure to use them twice a year -- even if it's just for a dollar store purchase -- and pay them off right away. That will keep them active in your credit mix.

If you're facing a huge new annual fee on a card that has a zero balance, try "leapfrogging." That's my term for using the 45-day window you have before any new terms of service go into effect to shop around. So once you get notice about a new annual fee, start looking around for other no-fee credit cards. Submit your application and once you get your new no-fee card, then go ahead and shut down the original one that wanted to spring a fee on you.

The remaining 20% of your credit score is comprised of what types of credit make up your credit mix (10%) and how much new credit you have in your life and how quickly you took it on (10%).

Building credit after paying off old debts

You have already done exactly the right thing in paying off your debt. Now you need to demonstrate that you have learned from your mistakes and can manage new debt.

Getting a pre-paid card will not help rebuild credit because pre-paid cards are not reported to credit reporting companies and, therefore, are not part of your credit report. If you can’t qualify for a standard credit card, you should consider a secured card where you deposit funds in a savings account to guarantee that your charges on the card will be paid if you fail to pay as agreed.

Apply with your bank or credit union for a secured card with a small credit limit that is reported to the national credit reporting companies. Use the card sparingly and pay off the balance each month. Over time you will build a history of positive credit management.

Eventually, the negative account information will be deleted, leaving only the positive account details.

Remember, you didn’t get into credit trouble overnight, and you can’t restore a great credit history overnight either. But you are definitely headed in the right direction. Time and patience are now your best allies.

Credit Advice

Reducing high credit card balances should help increase your credit scores because it shows you have better control of your debt and that you aren’t buying beyond your income.

Low balances mean lower payments. That reduces the likelihood that you will miss payments or get into trouble.

Low balances as compared to your credit limits also results in a low debt-to-limit ratio, which I have discussed in previous columns. A low debt-to-limit ratio is an indicator of low lending risk, which will be reflected positively in credit scores.

When you can pay in full each month, you also eliminate those expensive interest costs, enhancing your financial well-being.

The other important fact about reducing your balances is that you will almost certainly improve your physical well-being, too. As your balances go down, so does the pressure to meet the payment requirements, which results in reduced stress and even better physical health.

Participating in a quality credit counseling program is a very good step to take. During the program you should learn how to better manage your debt, establish and live within a budget, and take control of your finances.

In the long term, your credit history will improve and you will be a much happier, healthier individual.

SEPTEMBER 29TH, 2015

How Did That Get On My Credit Report?

One of the first questions that your new client might ask is “Where does the information on my credit report come from?” Credit reports are such a common part of the credit report business that many people often do not give them a second thought.

When starting a credit repair company, being an expert on this type of information will build trust with clients and help grow your business.

First, there are three basic categories of information included on a credit report. These are:

1. Basic Personal Information: This is pretty self-explanatory. Included on your credit report is your full name, date of birth, current address, social security number, and employment information.
2. Collection and Accounts: This is the information most people think of when discussing a credit report. This is usually separated into two buckets of information: All open lines of credit and all accounts that may be delinquent or in collections.
3. Public Financial Records: This can include bankruptcy filings, tax liens, or any judgments that affect your credit status.

All three categories of information are collected and applied to credit reports by different methods.

• Basic personal information is originally reported by the individual borrower when opening his/her first line of credit. This is updated throughout the borrower’s lifetime as new lines of credit are opened.

• Collections and account information is updated most frequently and proactively – usually monthly – by collections agencies and lenders directly to the credit bureaus.

• Finally, public records are the only pieces of information that are proactively collected by the credit reporting agencies solely for the purpose of reporting.

Credit reporting can be a complicated and confusing topic for those who are not experts in credit repair. As a credit repair professional, you have an opportunity to position yourself as a trusted advisor in all things credit repair. How credit reports are made and updated is a crucial component that your clients will surely benefit from learning.  

Additionally, you will want to educate your clients on the entire process, on how to change their habits  and things they can today to speed up the process. Help put them on the path to maintain their awesome credit long after your work is done.

10 tips for managing credit cards in 2015 Read

1. Be proactive about card security

Issuers will be rolling out EMV (Europay, MasterCard and Visa) chip cards -- which are much harder to counterfeit than traditional magnetic stripe credit cards -- over the course of 2015 as the deadline for new network rules on changing fraud liability approaches. But you can play a part in cutting down on card fraud by monitoring financial statements regularly and setting up alerts to readily spot suspicious charges.

You also can change any behaviors, like throwing paper statements in the trash, leaving smartphones unlocked and responding to unsolicited requests for bank information, that make you more susceptible to fraud.

2. Pull your credit report

Mysterious line items are a good indication that identity theft is occurring. Federal law entitles everyone to one free credit report from each credit bureau every year. You can obtain three reports -- one from each credit bureau -- all at once or you can spread out the requests across the year to keep an eye on your affairs.

3. Assess whether that annual fee card is worth it

Some annual fee credit cards are worth it; others are not. Often, the value of these products hinges on your lifestyle and your spending habits. For instance, if you travel often, you're more apt to appreciate a credit card co branded by your favorite airline that offers free checked bags, lounge access and complimentary upgrades.

Do a little number crunching to figure out if you're benefiting from the fee. This Bankrate calculator can help you determine if you're losing points or miles to interest. If you are, it may be time to switch to a more cost-effective payment method.

4. Don't be afraid to ask

If you do decide an annual fee card isn't worth it, don't be afraid to call your issuer to see if they will waive the fee. They alternately may be able to move you to a fee-free version of the card that will preclude you from closing the account, which will preclude the closure from affecting your credit score.

5. Learn what ancillary benefits your card may offer

In addition to rewards, many credit cards offer ancillary benefits, including extended warranties, price protection, purchase protection, trip cancellation insurance and even car rental insurance. These benefits can come in handy when you're out shopping or planning a vacation.

Figure out what perks your credit card entitles you to by reading through its terms and conditions. If the answer is "none" (and your credit score is in good shape), it may be time to shop around for a superior piece of plastic.

6. Read your credit card contract cover to cover

Now may be the perfect time to read through all the fine print of your current credit card contract. It's great to know about the perks, but you also should know about any lesser-known fees attached to the product.

You'll want to check whether your issuer has included in the terms and conditions an arbitration clause, which requires customers to settle disputes with the bank through an arbitrator rather than the courts. Plus, determine if your issuer is permitted to share any of your data with third parties as part of the card's privacy agreement.

7. Make a dent in your credit card debt

One of the best ways to trim your credit card debt is by prioritizing credit card payments. For instance, make larger payments on the card with the highest annual percentage rate first and minimum payments on cards with lower interest rates to curb costs.

You also should consider opening up a balance transfer credit card, which lets you move expensive debt over to a new card that features a limited-time, interest-free period on the balance and even on new purchases. Just make sure to read offers carefully. There could be caveats that prematurely render the interest-free period null and void.

8. Talk to your millennial about building credit

A recent Bankrate survey found 63 percent of millennials (ages 18 to 29) are foregoing credit cards completely, largely to avoid the debts that plagued many of their parents during the Great Recession. While a generation of debt-averse consumers isn't the worst thing in the world, it could cause problems for your millennial down the road. Namely, they could have a tougher time buying an affordable home or getting an auto or personal loan later in life.

Other data suggest the demographic may not be aware of these ramifications, so you might want to sit your college student down this year and go over the finer points of credit reports and credit scores.

9. Pay your credit card bill more than once per month

If you're deep in debt, it's a good idea to keep that credit card on ice for a while. But if you're simply worried about unconsciously running up a big bill you can't pay off at the end of the month, try a different strategy. Link your credit card to your debit card account and pay down the balance as often as every day, once a week or even twice per month.

This tactic keeps you on top of how much money is actually in your bank account and lets you take advantage of the benefits a credit card affords that other payment methods do not, including better fraud protections and rewards.

10. Figure out what type of credit card is best for you

Contrary to popular belief, there is no singular best credit card in the marketplace. Instead, the best product varies from person to person. For instance, if you need to make a big purchase, you should look for a low-interest credit card. On the other hand, if you pay your balances off in full every month, you'll want to look into a rewards card.

This Bankrate quiz can help you figure out what piece of plastic best fits your lifestyle. Compare credit card rates to get the best deal.

How to Maintain Healthier Credit

How to Maintain Healthier Credit

So what can you do?

Before one of these bills winds up in collections, to the extent possible, try to be very proactive about your medical bills. Even if you have good health insurance, don’t assume everything will be taken care of. Review your EOBs (Explanation of Benefits) carefully and contact the provider and/or your insurance company quickly if it’s not being taken care of.

If you are contacted by a collection agency about a medical bill, ask them not to report it if you pay it right away (assuming you believe you owe the bill). Some won’t report if the bill is resolved quickly.

Again: Having a collection account updated as “paid” generally does not help your scores, unless a lender is using one of the newer credit score versions. So aim for removal of the item if possible. Some agencies will work with you, others won’t.

If you feel the situation is highly unfair — you never got a copy of the bill, for example — you can try two things. One is to file a complaint with the Consumer Financial Protection Bureau. The other is to contact the original provider and try to get them to pull it back from collections so you can pay them directly. If they do, the account will usually no longer be reported.

If you are contacted by a collection agency and you don’t believe you owe the bill, you have the right under the federal Fair Debt Collection Practices Act to ask the collection agency to validate the debt. You also have the right under the Fair Credit Reporting Act to dispute it with the credit reporting agencies reporting the account.

How Medical Debt Can Impact Your Credit Score

Medical bills can be painful, and even more so when they hurt your credit. The damage can be significant. Doctors or hospitals don’t usually report medical debt to credit reporting agencies. Instead, they turn unpaid debts over to a debt collector, and it is the collection agency that reports them.

In fact, according to the Consumer Financial Protection Bureau, roughly half of all collection accounts on credit reports are due to medical debt, and these accounts can significantly damage consumer credit scores. A single collection account can cause a good credit score to drop 50 to 100 points — or more!

Many patients don’t realize how easy it is for a medical bill to damage their credit. They don’t understand that:

• Even if you are making payments on a medical bill, it may be sent to collections. (It’s a common misconception that if you pay something, they can’t send the debt to a collection agency. That’s not true.)
• Medical bills sometimes turn up in collections before the patient even gets a bill. At that point, the damage may have been done.
• Collection accounts are usually damaging, regardless of whether they are medically related. (More on this in a moment.)
• Paying the collection agency may not fix your credit. In most cases, those accounts are reported for 7.5 years and are often very damaging — paid or unpaid. (See the caveats below.)
• The size of the debt is not as important as the status of the debt. In other words, even a relatively small bill that winds up with a bill collector can harm your credit scores.

It is critical that you review your credit reports annually, and monitor your credit scores on a regular basis. (Think of it as a checkup for your credit health.) You can get a free credit report summary and score, updated monthly, at www.creditchecktotal.com. One survey by Credit.com found that 10% of those who reviewed their credit reports discovered a collection account they didn’t know about.

You have many different credit scores, not just a single one. (Even among FICO scores, there are many different versions.) The newest version of the FICO score, FICO 9 — ignores paid collection accounts, and medical collection accounts carry less weight under that model.VantageScore 3 also ignores paid collection accounts of all types.

But most lenders still use older versions of credit scores that do not give medical collections any special treatment. For that reason, you should assume that if you find a collection account on your credit report, it will likely be viewed negatively when you apply for credit, insurance or employment.

All Credit Repair Companies Are Not Created Equal

With thousands of credit repair companies conducting business opposite the country, anticipation the  correct way may be tough and intimidating but it is needed that you take the time compulsory to not usually find a creditable, but moreover find that the knowledge, experience an skill ti give the time of service you designed the optimal results you deserve. Your preference should not be impulsive. Choosing a bad credit repair firm will leave you exposed and increase the luck that serve damage will be caused to your personal credit record but on the other hand, selecting a great credit repair firm has the prospective to be of the most appropriate financial decision of your life by dramatically cleaning up your personal credit record and enhancing your credit score.

CREDIT RESTORATION TIPS!: Credit Repair Tips

CREDIT RESTORATION TIPS!: Credit Repair Tips: There are numerous methods to credit repair and if you have bad credit report ratings after that you need to think about recovering your cr...

More Tips on How to Fix a Credit Score & Maintain Good Credit

Payment History Tips

Contributing 35% to a FICO Score calculation, this category has the greatest effect on improving your scores, but past problems like missed or late payments are not easily fixed.

• Pay your bills on time.
  Delinquent payments, even if only a few days late, and collections can have a major negative impact on your FICO Scores.
• If you have missed payments, get current and stay current.
  The longer you pay your bills on time after being late, the more your FICO Scores should increase. Older credit problems count for less, so poor credit performance won't haunt you forever. The impact of past credit problems on your FICO Scores fades as time passes and as recent good payment patterns show up on your credit report. And good FICO Scores weigh any credit problems against the positive information that says you're managing your credit well.
• Be aware that paying off a collection account will not remove it from your credit report.
  It will stay on your report for seven years.
• If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
  This won't rebuild your credit score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. And seeking assistance from a credit counseling service will not hurt your FICO Scores.

Amounts Owed Tips

This category contributes 30% to a FICO Score's calculation and can be easier to clean up than payment history, but that requires financial discipline and understanding the tips below.

• Keep balances low on credit cards and other "revolving credit".
  High outstanding debt can affect a credit score.
• Pay off debt rather than moving it around.
  The most effective way to improve your credit scores in this area is by paying down your revolving (credit cards) debt. In fact, owing the same amount but having fewer open accounts may lower your scores.
• Don't close unused credit cards as a short-term strategy to raise your scores.
• Don't open a number of new credit cards that you don't need, just to increase your available credit.
  This approach could backfire and actually lower your credit scores.

Length of Credit History Tips

• If you have been managing credit for a short time, don't open a lot of new accounts too rapidly.
  New accounts will lower your average account age, which will have a larger effect on your scores if you don't have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.

New Credit Tips

• Do your rate shopping for a given loan within a focused period of time.
  FICO Scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.
• Re-establish your credit history if you have had problems.
  Opening new accounts responsibly and paying them off on time will raise your credit score in the long term.
• Note that it's OK to request and check your own credit report.
  This won't affect a score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.

Types of Credit Use Tips

• Apply for and open new credit accounts only as needed.
  Don't open accounts just to have a better credit mix – it probably won't raise your credit score.
• Have credit cards – but manage them responsibly.
  In general, having credit cards and installment loans (and paying timely payments) will rebuild your credit scores. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.
• Note that closing an account doesn't make it go away.
  A closed account will still show up on your credit report, and may be considered by a score.

To summarize, "fixing" a credit score is more about fixing errors in your credit history (if they exist) and then following the guidelines above to maintain consistent, good credit history. Raising your scores after a poor mark on your report or building credit for the first time will take patience and discipline.

How to repair my credit and improve my FICO Scores

It's important to note that repairing bad credit is a bit like losing weight: It takes time and there is no quick way to fix a credit score. In fact, out of all of the ways to improve a credit score, quick-fix efforts are the most likely to backfire, so beware of any advice that claims to improve your credit score fast. The best advice for rebuilding credit is to manage it responsibly over time. If you haven't done that, then you need to repair your credit history before you see credit score improvement. The tips below will help you do that. They are divided up into categories based on the data used to calculate your credit score.

3 Important Things You Can Do Right Now

1. Check Your Credit Report – Credit score repair begins with your credit report. If you haven't already, request a free copy of your credit report and check it for errors. Your credit report contains the data used to calculate your score and it may contain errors. In particular, check to make sure that there are no late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts is correct. If you find errors on any of your reports, dispute them with the credit bureau.
2. Setup Payment Reminders – Making your credit payments on time is one of the biggest contributing factors to your credit scores. Some banks offer payment reminders through their online banking portals that can send you an email or text message reminding you when a payment is due. You could also consider enrolling in automatic payments through your credit card and loan providers to have payments automatically debited from your bank account, but this only makes the minimum payment on your credit cards and does not help instill a sense of money management.
3. Reduce the Amount of Debt You Owe – This is easier said than done, but reducing the amount that you owe is going to be a far more satisfying achievement than improving your credit score. The first thing you need to do is stop using your credit cards. Use your credit report to make a list of all of your accounts and then go online or check recent statements to determine how much you owe on each account and what interest rate they are charging you. Come up with a payment plan that puts most of your available budget for debt payments towards the highest interest cards first, while maintaining minimum payments on your other accounts.

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Fix Your Credit

Banco FINANCIAL SERVICES provides you with an experienced credit specialist that is prepared to help you raise your credit scores as quickly as possible. We will also teach you how to maintain a good credit score.Each credit report has its unique set of issues, as a result our credit specialist will work with you to come up with a customized plan of attack to achieve the maximum results. You will have 24/7 access to monitor your credit score and credit progress through Credit Check Total a website that gives you FICO SCORES.

BANCO FINANCIAL SERVICES is a fully bonded credit restoration company that covers everything from charge offs to bankruptcies. Fees for our credit restoration services vary depending on how much work is involved by our credit specialist. After reviewing your credit report, our credit specialist determine a customized fee based on your situation and needs. BANCO FINANCIAL SERVICES main office is located in Livonia, MI. and we service nationwide. You can also call for an appointment 1800.442.1591 today and get started on Credit Restoration SERVICES start seeing results within 14 business days.

Experian vs. TransUnion vs. Equifax: What’s the Difference?

Experian

        There are a few differences in the way Experian reports data versus the way the other two agencies report data. For example, people who pay their rent on time will have the payments reflected on their Experian credit report. But with the other two credit bureaus, these payments won’t be on their reports. The only data regarding rent payments that will show up is negative rent data, which is data that reflects missed rent payments. Of course, the property management company has to report the rent data for it to show up on any of them. If you signed a lease with an obligation to make monthly payments for a specified period of time, then it will most likely show up on Experian. Experian credit reports also contain details about each transferred or closed account that you’ve had. These details include the month and year that these accounts will be taken off the credit report. In other credit reports, the only date listed for closed accounts is the last reported status date on the account. To figure out when the closed account gets taken off the credit report, you need to add 10 years to its last reported status date. Experian saves you the trouble of having to add 10 years to figure this out.  

TransUnion

        TransUnion provides credit reports that offer more details about employment than any other credit bureau’s credit report. The other two credit reports will just list the name of the applicant’s employer and nothing else. The TransUnion credit report will contain their employer’s name, position currently held and date they were hired. This information is important because it shows lenders how long the applicant has been with their current employer. If you were to try and obtain a mortgage to purchase a house, the mortgage company is going to check the TransUnion credit report to see if you’ve worked at the same company for at least two years. They won’t get this information from Equifax or Experian credit reports because the date you were hired is not on those.  

Equifax

        An Equifax credit report lists closed and open accounts separately from each other. As for the other two credit reporting agencies, they put all of the accounts together in alphabetical order. People who are unsure of their financial situation will want to have an Equifax credit report, so they can clearly see which accounts are open and which accounts are closed. This will help them determine their total debt by examining all of the open accounts together. The details of closed accounts can also be seen, such as why the account was closed in the first place. This helps lenders understand the outcome of the applicant’s past loans and debt obligations.

What is identity protection and Credit Monitoring Services?

 Identity protection is a term that refers to any security measure which helps prevent your personal information, such as social security numbers and credit card numbers, from being seen by unauthorized third parties. If the wrong people were to get your personal information then they could steal your identity and incur a lot of debt in your name that you will be responsible for. But when you take measures to protect your identity, you are preventing someone from doing this.

       

Identity Protection Online

Identity protection is most commonly associated with ecommerce and digital transactions over the internet. Any time you make a purchase online through a secure website, the personal and financial information you entered becomes encrypted as it is being processed through the server. The encryption will prevent any hackers or outside intruders from seeing this sensitive information. Modern day browsers let users know when they are on an encrypted page because a green padlock icon will appear on the top. This indicates 256-bit encryption, which is the most powerful encryption available on the internet.

Take Precautions

        Identity protection doesn’t always refer to security technology. It can also mean the simple measures that one takes to protect their own identity. This includes using your credit card only with merchants that you trust. It could also mean shredding all of your bank statements or other sensitive information that you no longer need anymore. Some identity thieves actually like to go through people’s garbage to steal their information. So a good investment into identity protection would be a paper shredder. Get creative and take personal measures like these to ensure your identity is protected.

Credit Monitoring Services

Credit monitoring services are usually offered by credit bureaus or credit management platforms, such as CREDITCHECKTOTAL.com. These services will keep track of your credit report every day and notify you if there is a significant change on the report. This change could be an updated credit score, an added debt account, or a judgment filed against you. If your identity were stolen then the first thing a thief would do is use your identity to take out credit cards or loans in your name. It is best to find this out as soon as possible so you can notify your bank and the credit bureaus that your identity was stolen. Otherwise, you will find out the hard way when the debt collector calls you or knocks on your door. By then, it will be too late because the debt owed will be enormous and you will likely be required to pay it all back. That is why credit monitoring services are so important. They will let you know whenever a new debt account is taken out in your name. If you didn’t authorize it then you know your identity was stolen.

Credit Monitoring Notifications

        When you sign up for a credit monitoring service through Experian, Equifax, CREDITCHECKTOTAL.com or any of the other credit management platforms, you will be given a choice as to how you want to receive your notifications. You can have the alerts sent to your email address or as a text message to your Smartphone. Choose the notification method that you check the most, which would likely be a text message because it will come right to your mobile phone wherever you are.

How late payments affect your credit report

Whenever you make a late payment on one of your current liens or debts, such as a credit card, it will have negative effects on your credit report card. Banks and lenders are very strict on the payment history of an applicant who is requesting a new loan. If the credit report even shows one month on a debt account that had a late payment, it will immediately be a red flag to them. A history of late payments shows lenders that you are a credit risk, which means they will be nervous about issuing you another loan or credit card. But if you have a history of on-time payments, they will likely grant you a new loan.

Credit Bureaus

        Lenders typically give debtors some leeway when it comes to late payments. For example, if you are two days late paying your mortgage premium then it likely won’t get reported to any of the three credit bureaus. Your lender will just charge you a late fee and add that to the premium. However, if your payment ends up being more than 30 days late, this is when lenders tend to get nervous. At this point they will notify the three credit bureaus, Experian, Equifax, and TransUnion, about the late payments. Once they are notified, the late payments will show up on your credit report for future lenders to see. This late payment history will stay on your report for up to seven years, which means it will be hard to get another loan during that time.

Credit Score

        When late payments are reported to the three credit bureaus you can be sure that your credit score will decrease. The payment history on a credit report affects 35% of your total credit score. All it takes is one reported late payment and your credit score could drop up to 35%. Of course, there are other variables that determine the percentage in which your credit score drops. It can depend on how late you were with the payment, what your credit score is and if you have a history of making late payments. So if you have a low credit score with a long history of late payments, then you might get the full 35% drop in your credit score. On the other hand, if you only had one late payment with a high credit score then you may see less than 10% in the drop.

Collections

        The worst thing that can happen is the lender sends your debt account to a collection agency. If you have a dangerous habit of making late payments that are well beyond the 30 day threshold, your lender may not be so patient anymore. They may just determine that your account is delinquent and then send it off to a collection agency for them to recover the debt. Even if you don’t have much debt on the account, a delinquency will surely cause more damage to your credit report than a few minor late payments. So if you have to be late with your payments then try not to be too late or else you might not get another chance to pay it again. The amount of days you can be late varies between lenders. Some lenders won’t take action with a collection agency unless you are 120 days late. But if you are frequently late beyond 30 days then they may do it anyways.

Answers to a Few Frequently Asked Credit Score Questions

Surprise! Credit scores are calculated differently depending on the methodology used and the credit bureau compiling the report. Learn what the differences are and take control  of your own financial responsibility.

By taking the time to understand how credit functions and how your credit score is calculated, you will not only gain invaluable information, but be able to take actions to improve your scores.

Through financial literacy, you will achieve more control over your financial security.

Are All Scores The Same?

No. Not necessarily.

FICO scores are the most common, with 90 percent of top lenders using the credit scores provided by Fair Isaac Corporation. Not all credit scores are FICO scores, though.

Because of FICO scores’ majority role, most information available relates directly to FICO scores for simplicity and practicality. That being said, it is important to be aware that there is always a slight possibility one or more of your credit scores is not a FICO score.

Your credit report should list if the score is a FICO score or not. If it is not explicit, you can always contact the agency to find out.

Furthermore, because the credit bureaus each calculate scores differently, a FICO score from one agency may differ from the FICO score from another agency. In other words, there can even be different versions of FICO scores.

One note: VantageScores is an alternative to FICO scoring and has gained popularity recently. Like FICO scores, it uses analytics to create a composite image of borrowers’ financial responsibility and reliability.

How Many Different Credit Bureaus Are There?

Three to be exact: Equifax, TransUnion and Experian.

For each of these three national credit bureaus, you have a separate FICO score.

While each of the bureaus compile essentially the same types of data, your FICO score could be different for each bureau.

What’s On A Credit Report?

Your credit report shows a lot more than just a single credit score.

• Identifying Information: Such as your name, current and previous addresses, SS#, dob and employment information

• Credit Accounts: Like credit  cards, auto loans, mortgages, etc.

• Credit Inquiries: When someone requests information regarding your credit history, those requests appear in this section

• Public Records: Legal documents from state and county courts can be collected by credit reporting agencies. These documents can be records of bankruptcy, foreclosures, suits, liens, wage attachments, etc.

• Collections: If you have any overdue debt from collection agencies, that information is also included

How Is My Credit Score Calculated?

Broadly speaking, FICO Scores are a composite of:

• 35% Payment History
• 30% Amounts Owed
• 15% Length of Credit History
• 10% Types of Credit
• 10% New Credit

You can tell the importance by the weight of each category, so if you are trying to improve your FICO score, look at amounts owed and payment history to begin with. Keep in mind, however, that even the categories with lower percentages can be influential. So, don’t overlook these areas simply because they do not carry more weight.

Note what the FICO score ignores:

• Race, ethnicity, religion, national origin, sex, marital status
• Age
• Salary, occupation, position, employer, employment history
• Location
• Interest rate changes
• Family support obligations, including child support and alimony (however, missed child support does stay on your report; the obligation itself to pay is not documented unless you fail to pay on time)
• Certain credit inquiries: employer, administrative, pre-approval, promotional or self/consumer-initiated inquiries

In other words, your identifying information and anything not found on your credit report does not influence the score.

Credit Scores Can Be Different Between Bureaus?

It is important to remember that while credit scores from different bureaus can vary, they should be relatively close if all of your collected information is identical.

It can happen, however, that the information compiled by Equifax, TransUnion and Experian is not all the same.

Each bureau uses particular methodology to optimize the predictive value of your credit history. In other words, the formulas for calculating credit  scores are in place to determine as accurately as possible how you will act and react financially in the future.

REMEMBER: Credit scores are a snapshot of your history used to paint your future financial portrait.

Why Wouldn’t Bureaus Have Identical Information On Me?

The most common reason would be that the collection processes are not the same.

Not all creditors/lenders are required to report. Because of this, your credit report may not reflect every line of credit you have.

For instance, some national department store/bank credit cards may not appear on your report – because it may not be required of that particular creditor, they may opt out of voluntary reporting.

If you find out that certain lines of credit are not on your report, you can always ask your creditors to report your accounts. They may not oblige, but it never hurts to ask. This can be especially helpful if you have been told by lenders that you have insufficient or no credit, but you do hold lines of credit; this can be an easy step to begin building that history.

Besides Different Information Collected By The Bureaus, Why Else Would My Scores Be Different?

• Timing: If your credit scores are not compiled at the same time, the data may have significantly changed – especially if you are just starting to build history and the length and breadth of your credit history is small.

• Names: Particularly relevant if you have had a surname change (through marriage or divorce, most commonly), but if you applied for a line of credit under a nickname or truncation of your legal name, that can cause fragmentation or incomplete files on the credit reporting agencies.

• Inaccurate/Incomplete Information: If addresses change or social security numbers are mis typed, information can also be divided and not compiled wholly.

Remember, your credit score is an indicator of your financial habits; it illustrates your level of responsibility and can be used to predict how you will handle finances in the future. When used as a tool to build your financial reputation, credit accounts can be have unparalleled benefits.

When used correctly, credit can be a saving grace and not a death sentence to your financial stability.
Educate yourself today and take control of your financial reputation.