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What Is A Credit Score And How Is It Calculated?
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Your credit score is your financial reputation
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Your credit score is a number between 300-850 that indicates your credit worthiness, financial reputation and potential risk to lenders
Credit bureaus calculate your credit score by analyzing information from your credit reports
A good credit score will help you achieve your financial dreams and goals
Credit bureaus calculate your credit score by analyzing information from your credit reports
A good credit score will help you achieve your financial dreams and goals
Can I Build Credit And Increase My Score Without Going Into Debt?
YES...
IF YOU HAVE AN OPEN CREDIT CARD ACCOUNT OR HAVE BEEN APPROVED FOR A NEW ONE, HERE IS AN EASY STRATEGY
CREDIT FACT: The credit bureaus will calculate higher credit scores for consumers that have 2-3 active credit cards plus 1-2 installment loans including a mortgage
TO HELP BUILD CREDIT BEFORE APPLYING FOR A CREDIT CARD OR AFTER BEING DENIED
- Use your credit card to pay your utility bills or another type of expense that you already pay on a regular basis
- Whenever possible, use it for companies that do not charge extra fees for paying with a credit card
- On the credit card company's website, schedule it to automatically be paid in full each month by the due date
- Your credit score will start increasing while you're establishing a steady payment history
- To avoid incurring debt, leave the credit card at home in a safe place and do not use it to make any other purchases
CREDIT FACT: The credit bureaus will calculate higher credit scores for consumers that have 2-3 active credit cards plus 1-2 installment loans including a mortgage
- When your score is high enough, apply for another credit card and follow the same strategy for another monthly expense
- Once again, avoid incurring debt by leaving all of your credit cards at home in a safe place and do not use them to make any other purchases
TO HELP BUILD CREDIT BEFORE APPLYING FOR A CREDIT CARD OR AFTER BEING DENIED
- Authorized User - ask a family member or friend that has good financial habits to include you on one of their credit card accounts, and their monthly activity will be included on your credit reports (you do not need to have a credit card for their account)
- Secured Credit Card** - use a security deposit or savings account to guarantee your credit line, then maintain a balance of 25% or lower to mazimize your credit score
- Credit Builder Account** - make monthly payments to a lender and then receive the funds at the end of the loan's term, some lenders may have fees or require a membership
Are There Different Types of Credit Scores?
YES...
FICO and VantageScore use different criteria and each scoring model is updated periodically
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These examples for FICO and VantageScore are for educational purposes only. Please request personalized financing details from your lender.
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Credit monitoring tracks your scores, allows us to import your data each month for status updates and provides other valuable benefits for your overall financial health
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There are many different types of credit scores including FICO and VantageScore
FICO scores are recommended when you have a specific goal in mind including a house, a car or a major purchase
The mortgage industry, auto industry and many other companies require FICO scores
VantageScore is sufficient if you are simply interested in being better prepared financially in general
These scores may be reported by companies that offer free credit scores
However, it is not calculated the same as a FICO score
Is My Credit Score Important?
YES...it has a major impact on your finances
CONSUMERS WITH GOOD CREDIT SCORES
Generally receive financing with favorable interest rates
And other benefits
Generally receive financing with favorable interest rates
And other benefits
HAVING A GOOD CREDIT SCORE CAN SAVE YOU THOUSANDS OF DOLLARS ON
Real estate...a new home
Autos...a new car
Payments for your credit card accounts, student loans, refinancing and more
OTHER BENEFITS
Landlords give first preference to applicants with good credit
Utility companies waive security deposits
Insurance companies offer better rates
And so much more!
Real estate...a new home
Autos...a new car
Payments for your credit card accounts, student loans, refinancing and more
OTHER BENEFITS
Landlords give first preference to applicants with good credit
Utility companies waive security deposits
Insurance companies offer better rates
And so much more!
CONSUMERS WITH LOW CREDIT SCORES:
May be denied when applying for credit cards and other types of financing
May require higher down payments to receive approval
May be charged higher interest rates
May be denied when applying for credit cards and other types of financing
May require higher down payments to receive approval
May be charged higher interest rates
How Mistakes Negatively Impact FICO
***The following mistakes can significantly lower your credit score***
Spending the maximum amount on a credit card
Making a payment 30 days late
Debt settlement
Foreclosure
Bankruptcy
Spending the maximum amount on a credit card
Making a payment 30 days late
Debt settlement
Foreclosure
Bankruptcy
What Is Included In A Credit Score Calculation?
What Causes My Credit Scores To Be Different?
The 3 major credit bureaus include Equifax, Experian and TransUnion
Some credit furnishers only report to 1 or 2 credit bureaus
This results in different credit scores from each bureau
ACCORDING TO A RECENT STUDY BY THE FEDERAL TRADE COMMISSION
Many credit reports have errors on them
Some of those errors are serious enough to negatively impact your credit score
Each credit bureau may have different errors, which also contributes to different scores
Some credit furnishers only report to 1 or 2 credit bureaus
This results in different credit scores from each bureau
ACCORDING TO A RECENT STUDY BY THE FEDERAL TRADE COMMISSION
Many credit reports have errors on them
Some of those errors are serious enough to negatively impact your credit score
Each credit bureau may have different errors, which also contributes to different scores
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We Will Help You Dispute Negative Items On Your Credit Reports
Some of the information in your credit report may be correct, incorrect or not reported in full compliance with consumer credit laws.
- All negative information can be disputed, even if it's correct
- We can help remove inquiries and negative items, and as a result, your scores will usually increase
- The laws that protect consumers allow negative information to be removed when the credit bureaus and credit furnishers do not verify them within 30 days, or the collection agencies do not validate them within 30 days
Information That Cannot Be Included In a Credit Report
- Age, marital status, or race
- Medical information (unless you provide consent)
- Chapter 7, 11 and 12 bankruptcies more than 10 years old
- Debts more than 7 years old, including Chapter 13 bankruptcies and delinquent child support payments
- Tax liens and judgments are not included, however lenders can search for them in public records and this may impact your ability to qualify for credit
The Maximum Time Period
That Negative Items Can Remain On Your Credit Report
The Statute of Limitations starts as soon as a consumer fails to make an agreed upon payment
Consumer laws specify the maximum number of years that information can be included on a credit report
Some negative items that are inaccurate, unverifiable or still being reported after the Statute of Limitations expires can be removed by successfully disputing them
Consumer laws specify the maximum number of years that information can be included on a credit report
Some negative items that are inaccurate, unverifiable or still being reported after the Statute of Limitations expires can be removed by successfully disputing them
- Inquiries: A minimum of 1 year from the date the inquiry was made. Most inquiries will remain for 2 years. Hard inquiries occur when you apply for new credit and may lower your score. Soft inquiries occur when someone is requesting information about your credit profile without extending credit, such as employment background checks or pre-approved credit offers.
- Delinquencies (30-180 days): 7 years from the date of the initial missed payment (the original delinquency date).
- Medical Collections with an original balance less than $500: These accounts are no longer reported to the credit bureaus.
- Medical Collections with an original balance of $500 or more: These accounts are removed when paid. In addition, unpaid medical collection debt will not appear on a consumer’s report for 1 year, giving consumers more time to work with insurance companies and/or healthcare providers.
- Other Collection Accounts: 7 years from the date of the initial missed payment that led to the collection (the original delinquency date). When it is paid in full, it will be marked as a "paid collection" on the credit report.
- Charge-offs: 7 years from the date of the initial missed payment that led to the charge-off (the original delinquency date), even if subsequent payments are made for the charge-off account.
- Closed Accounts with Delinquencies and Late Payments: 7 years from the date they are reported closed, whether closed by the creditor or by the consumer.
- Closed Accounts In Good Standing: 10 years from the date reported closed.
- Lost Credit Card with Delinquencies and Late Payments That Occurred Before the Card Was Lost : 7 years from the date the creditor is contacted.
- Lost Credit Card with No Delinquencies: 2 years from the date the creditor is contacted.
- Chapter 7, 11 and 12 Bankruptcy: 10 years from the filing date.
- Chapter 13 Bankruptcy: 7 years from the filing date.
- Accounts Included In A Bankruptcy (Chapter 7, 11, 12 and 13): 7 years from the date reported as being included.
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Credit Basics
Knowledge Is Power
A credit score...
indicates your credit worthiness |
Many credit reports...
have serious errors on them |
Removing negative items...
will help to increase your scores |
