Definition of Credit. Credit Score Credit Report Fico
What it all means ď‚— Credit Scores ď‚— Fico Scores ď‚— Fair Isaac reports American Credit
scores break down along these lines. Credit score
Percentage
499 and below
2 percent
500-549
5 percent
550-599
8 percent
600-649
12 percent
650-699
15 percent
700-749
18 percent
750-799
27 percent
800 and above
13 percent
Fico Score Makeup 35% Payment history 30% Credit utilization 15% Length of credit history 10% Type of credit used 10% Recent search for credit
Information on Credit Report Identity information Credit information Public record information Recent inquiries
Why they are important Purchasing a home or car Starting your own business Renting an apartment Obtaining a credit card Obtaining a cell phone Getting a job
Who can see your Credit Score Employers Creditors Insurers Government agencies Anyone with a legitimate business need
Who offers a credit score Credit Bureaus The big three TransUnion Experian Equifax
Differences between companies Equifax TransUnion Experian
Improving your credit Payment history tips Amount owed tips Length of credit history New credit tips Types of credit use tips Keep debt to a minimum Manage new credit wisely
Ways credit can be hurt Overspending Late/Missed payments Cosigning a loan Job loss Identity theft Declaring bankruptcy
The “Five C’s” of credit Character Capacity Capital Collateral Conditions
Equal Credit Opportunity Act Credit Score can not be determined by Age Race Sex Receiving Social Security or Public Assistance Race or nationality of people in your neighborhood
The perfect score
Use credit responsibly Make payments on time Don’t spend what you can’t repay General rules of credit
Debt payments to income ratio <.20 Debt to equity ratio <1 Improve your “Five C’s” Review credit carefully Monitor your score
Characteristics of Higher Achievers Micromanaging competitively Zero missed payments 4 or more years Rarely apply for credit Only $1,200 on existing non-mortgage loan
Less than $600 on revolving accounts
4 or 5 accounts (open or closed)
2 credit cards Mortgage Car financing
Credit score myths Unsolicited credit card offers hurt your score
Only when you decide to sign up does your credit score get hurt
When you marry your credit score merges with the spouse
Your credit score is yours, and yours alone
Credit counseling hurts your score as much as bankruptcy
Studies show people who use credit counseling have no higher likelihood of defaulting so it does not affect your credit score
Checking your score hurts your credit
Applying new credit is what hurts your score, checking does not
Bad news lasts 7 years
Actually, it lasts 10 years
Revolving balances should be <30% of your credit
Higher achievers (FICO 760+) average only 7%
When you get a divorce your ex’s credit no longer affects you
Not true as long as joint accounts are held.
I pay utilities, cell phone, cable, etc. I should have good credit
They will check your credit, however they only report when you fail to pay.
Closing accounts helps your credit score
Having too many accounts hurts, but once open damage is done.
Credit horror stories Co-signing for a friend (Lee)
10 years it hurts his credit $10,000 in interest, late payments, and court fees Credit company did not once contact the co-signer Friend skipped out completely, and no one can find them Rarely, if ever, does co-signing benefit the signer This is an extreme example
Credit horror stories.. (cont) A Court judgment count as unpaid debt
Miss a child support payment, that affects your credit score.
Bill collectors gone nuts
Racial insults, threats to blow up a persons house.. And more.
Small business debt has now become personal debt
Capital One has begun reporting business debt to all three credit agencies
Surprise harm to your credit
Bank cuts your credit limit, your ratio usage just went sky high
Credit score FAQ When does a higher credit score not matter anymore?
Only when your credit score is about 770+
Can my lease affect my credit score?
Even if it’s broken it only can affect you based on unpaid rent.
Can I use a pre-paid credit card to improve my score?
No, this won’t affect your credit score.
How often does my score change?
Depends on how often information is reported.
I have limited or no history, what’s my score?
It’s fully possible there isn’t a score at all, or it’s a poor one. Work on your “five c’s” to change this.
Sources
www.answers.com/topic/credit-score http://www.bankrate.com/brm/news/credit-scoring/20031104a1.asp http://www.fdic.gov/about/learn/symbol/index.html http://en.wikipedia.org/wiki/Credit_score http://www.mycreditscorereview.com/creditbureaus.html http://recomparison.com/comparisons/100375/equifax-vs-transunion-vs-experian/ http://www.myfico.com/crediteducation/improveyourscore.apx http://credit.about.com/od/creditscorefaq/Credit_Score_Frequently_Asked_Questions.htm http://www.bankrate.com/finance/credit-cards/credit-card-horror-tales.aspx http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Expanded-quot-FICO-High-Achievers-quot-scores-of-760-and-above/td-p/111525 http://www.creditscoring.com/creditscore/fico/myths.html http://articles.moneycentral.msn.com/Banking/YourCreditRating/meet-the-credit-score-perfectionists.aspx http://articles.moneycentral.msn.com/Banking/YourCreditRating/4creditScoringMyths.aspx?page=2 http://money.cnn.com/2005/03/16/pf/debt/creditscore/ http://www.bankrate.com/finance/debt/11-credit-report-myths-4.aspx http://money.usnews.com/money/personal-finance/articles/2010/06/08/9-credit-score-myths-debunked.html http://www.askmen.com/money/investing_200/237_investing.html