3 Credit Bureau Report – Free Score

Chloe Lowther asked:




If you have recently obtained your report and found that you have a 650 credit score, you may be worried and perhaps even slightly confused. Why does it matter what the score is? Which credit bureau should you believe? What factors influence your result? Should you even be concerned?

Why does it matter what the score is?

When a new lender looks at an application for credit card debt, credit score is one of the factors they will use to assess whether to lend the funds in the first place. If they decide to grant the facility, your report will influence the credit limit and interest rate you get charged.

The higher the score the lower the interest rate you will pay and you may be awarded a higher borrowing facility. But it is not just credit card applications that it affects. When you come to renew your auto insurance or your home insurance, your insurer will also look at your credit score and may increase your premiums if he perceives you to be a higher risk than someone with a higher score.

Which credit bureau should you believe?

Your Experian credit score will be slightly different than the Transunion credit score which again will differ from the Equifax one. This is partly because there is no one defined way to calculate this figure and partly because all three credit agencies use slightly different information to compile your credit report. You are best working on an average of the three scores. Anything you can do to increase your rating will have a positive effect on all three bureaus.

What factors influence your result?

Before you can think about raising it, you need to know what factors affect it. The score itself is based on a lot of factors but the ones that seem to have the most influence are
Payment history – you need to make sure that the reports filed are accurate as often mistakes are made. It is estimated that this alone accounts for up to 35% of your score so it is important it is correct. Amount you owe compared to the credit limits you already have – if you are maxed out on your credit cards, your rating will suffer. So try to get those balances down. It is suggested that you keep them to less than 35% of the available credit which is easier said than done! Number of credit applications – the more applications for borrowing you submit the more your rating is going to be adversely affected. Don’t apply for any new borrowing unless you really need it and be selective who you apply to i.e. pick the lender with whom you have the most chance of success.
Should you even be concerned?

Yes, yes and yes. Your credit file has an impact on various areas of your life. You can improve it if you follow the proper advice. Steer clear of any “experts” who want to charge you fees for fixing your report. It is easy to do yourself and you need all those extra dollars to get rid of the debt once and for all.

Alma

John Rasor asked:




Let’s say you are what most people would consider a good person. You help out in the community, volunteer to help others and even show up on the front row for church every Sunday. You recently applied for a home loan and to your surprise were denied. How could this be? You’re a good guy or gal, and deserve this loan, right? Could you be on the credit bureaus blacklist?

Since there is no such thing as a “blacklist” within the credit scoring system the answer is no. You are not on a blacklist. Your credit history are based on nothing more than factual data that lenders have provided about your pay habits.

Your fico score has absolutely nothing to do with your age, marital status, race, sex, nationality or religious beliefs. Your occupation and length of time on the job also have nothing to do with how your credit score is calculated. Only information present on your actual credit report make up your credit score.

Pretend for a moment that you are an underwriter working through a mortgage loan application. What would be of the most importance to you? Ironically, underwriters look at the same thing that the credit bureaus do.

1. Payment history is a biggie. This tells the tale of whether or not you can handle what you currently have on your plate. If you are consistently 30 days late on your car payment, why would you think you are worthy of a home loan?

2. Credit history is also important. The age of your accounts reveals your experience with credit. Multiple accounts like credit cards, student loans, car payments with several years of history, especially with perfect payment status will surely pass the test for an approval.

3. Your debt load makes a difference in how you handle available credit. If all or even a few of your credit cards are maxed out a red flag pops up. People in control of their finances typically use credit cards sparingly or always pay them off in full each month.

4. Recent inquiries can wreak havoc if you’ve had too many. Multiple credit card applications make it look like you are in desperate need of more credit, or just credit in general. Its ok to have a few inquires with multiple mortgage companies within a 14 day window. The bureaus only look at these as one inquiry since most people will shop around for the best home loan.

It always makes sense to obtain a copy of your credit report either before you make a mortgage application or if you are declined credit as a result of a low credit score. There are several arguments for this statement. One is identifying potential errors and fixing them before your lender pulls their copy. Another is having the upper hand when applying for a mortgage. If you have a great credit score use it as leverage and tell the lender up front. Request terms based on it and make that lender wait to pull your actual credit report until you have received multiple offers.

Clinton

Ali Zane asked:




Kelly is a middle class blue collar Californian, who has made a conscious effort to keep a positive credit standing with all his creditors, ranging from his mortgage lender to his credit card company.He has prided himself in making prompt payments to all his creditors and not incurred a single late payment in his entire life. However, much to his horror he got turned down for a $300 limit Sears store card, the reason being a mere 589 Fico Score.

Credit scores also known as Fico Scores range between 300 and 850, with scores over 700 being considered respectable scores, score below 660 would find it difficult to get approved for even small credit cards , similar to the one Kelly applied for. Keep in mind that 58% of Americans have a Fico Score exceeding 700, 27% fall between 600 and 700, with the remaining 15% scoring below 600 *.

Now what caused Kelly to have a mediocre credit score despite having a flawless credit history?In order to answer this question we will look into how Fico Scores are calculated. Below are five factors that are used to derive your Fico Score:

Payment History – 35% Credit Card Capacity (Amount You Owe, compared to credit limit) – 30% Length of Credit History – 15% Types of Credit – 10% New Credit – 10%

Since 30% of your credit score is calculated by factoring in the percentage of your available credit being utilized, it is possible to have a poor credit rating despite having a good payment history by keeping your credit card balances close to maximum limits, which is what happened in Kelly’s case.

Now let’s study these five categories closely and figure out what you need to do to optimize your credit score.

Payment History-35%

This is the most self-explanatory category, simply pay your bills on time and do not be more than 30 days late on any bill, as creditors start reporting late payments on your credit at that time.

If you do foreseeing yourself being late on a bill , you are better off notifying the creditor in advance as some installment loans might allow a special 30 day forbearance without any adverse affect on your credit.

A recent late payment affects your credit more adversely than an older one, so do not be surprised to see a drop of 60 odd points on a new late you incur if you currently have a flawless credit history.

Credit Card Capacity-30%

It is not how much money you owe, but what percentage of your available credit limit you are using up. You are going to affect your score more adversely if your combined credit card limits are $500 and you are using $400 of it, as compared to using up $50,000 of $100,000 available credit.

Therefore you should carry balances on not more than a couple of credit cards and preferably keep their balances at 10% utilization of the credit limits of those accounts. Doing so can result in an increase of over 60 points.

Length of Credit History-15%

The older your credit history is the higher your credit gets propelled by this factor. You can expect someone with a 20 year old credit profile to have a relatively higher Fico Score than compared to someone that has had a credit profile for 10 years, considering all other factors are similar.

Types of Credit – 10%

This factor pertains to the assortment of the credit accounts found on your credit profile. In order to satisfy this category, one is expected to have open and active at lease one of each of the different credit accounts: a) Mortgage Account b) Installment Account c) Revolving/credit card account.

Of the three different types of accounts above, not having an open credit card account will affect your credit the most. So for those who do not have an open credit card, simply by acquiring one will result in a Fico Score boost of up to 30 points.

New Credit – 10%

Your score is also calculated by factoring in the average length of time accounts have been open on your credit report. Opening a new account contributes negatively to this factor, also it is not wise to close old accounts as they will lower this average. Therefore you will notice as accounts become more seasoned your credit score will propel provided no new accounts have been opened.

Also factored into this category are recent requests for your credit reports made by prospective lenders and the number of recently opened accounts you have. It is advisable to keep both at a bare minimum.

Now that you are able to better comprehend the computation of your credit score, let’s do a recap of what steps you can take to ensure the optimal Fico Score.

Ensure credit bureau data is accurate and dispute legitimate errors. Pay down the credit cards first that are near their limits (assuming interest rates are close to the same). Pay down total revolving balances, but do not close these accounts. (i.e. keep balances low and limits high). Move revolving balances to installment debt; but again, do not close the revolving accounts. Minimize new accounts, do not open any credit accounts unless necessary or if you are looking to diversify your mix of credit accounts. If you are transferring balances due to an offer from a new credit card company, a better strategy than getting a new credit card is to ask your current credit card lenders if they have any existing offers, rather than opening a new credit card. If you have closed some revolving accounts recently, a better strategy than opening up new accounts would be to call the lenders where he or she closed the account and see if they can re-open the same accounts and are able to keep the original open date.

Jennifer