Jim Kemish asked:


Understanding the World of Credit Scores

Most people are not aware that most credit scores sold online are not the same credit scores that lenders use in making lending decisions. The score used by lenders is called the FICO score and it is the only score that counts. Unfortunately, the companies that sell non-FICO scores do not make it clear that these scores may vary widely from real FICO scores. Worse yet, the three credit bureaus that provide FICO scores to lenders are among the worse offenders in selling non-FICO scores to consumers!

One Score Three Names

The FICO score has been re-branded by each of the three bureaus for their own marketing, hence you will hear of three scores, although they are all driven by the same software. Equifax calls it a BEACON score, TransUnion calls it an EMPIRICA score, and Experian calls it the EXPERIAN/Fair Isaac Risk Model. The scores may be different because each bureau gathers information from a slightly different mix of creditors. If you look at your three reports you will notice that some accounts are missing on each bureau. Timing also plays a roll. A recent change in your credit may be picked up sooner at one bureau than another. You can purchase your real FICO score at MyFico.com.

Improve Your Credit Score Fast

So what makes your FICO score tick? And what can you do about it? Here are a few strategies that everyone involved in the credit repair process should know.

Check Your High Credit Limits

The relationship between your current balance and the available credit limit on your revolving accounts has a major impact on your credit score. Every revolving account on your report should be examined. If the high credit limit is understated send a dispute letter to each of the three credit bureaus asking them to update the information. If you have extra cash, pay down those balances and watch your score go up!

Increase Your High Credit Limits

There is one additional course of action that you should consider that can also reduce the ratio of your current balance to your high credit limit. Call each and every credit card company and ask them to increase your limit. They may or may not agree, but you might be surprised. Please keep in mind that you are doing this to improve your credit. Having a higher credit limit does not mean that you should use it.

Check the Age of Your Accounts

New accounts count against your credit score. Conversely, the credit bureaus will reward you for the accounts that you have maintained over time. When reviewing your three credit reports be sure to look carefully at the initial reporting date for each revolving and installment account. If the age of the account is incorrect on your credit reports send dispute letters to the bureaus. This is a great credit repair trick and well worth the effort.

Resurrect an Old Account

It is not unusual to discover an account on your credit report that you forgot about years ago. If you don’t have much credit please don’t cancel the account. If you no longer have the card in your possession I suggest that you call the company and obtain a replacement card. When you get it you should make a small purchase. The exact algorithm used in the FICO score is a secret, but based on our observations it is best to have some occasional activity on a credit card.

Double Trouble! Eliminate Duplicates

Look at your credit reports carefully. If you see the same account more than once it is probably hurting your score unless it is over three years old with a perfect history and a low balance. If it does not meet these criteria get rid of it now! Collection agencies are notorious for causing duplicate reporting errors. Only one collection agency can own a debt at a time. Essential credit repair tip! If a collection agency no longer owns the debt they are not allowed to report it. That’s the law!

Post Bankruptcy Cleanup

If you have had a bankruptcy you should take action to clean up your credit with all three bureaus immediately upon receiving your discharge. If you don’t feel up to the task of dealing with the paperwork I suggest that you hire a reputable credit repair company. A reputable credit repair company will be inexpensive and be able to do this for you very quickly. If you don’t take action to clean up your credit report it will not happen by itself. A comprehensive post bankruptcy clean up can have a dramatic impact on your credit scores within as little a sixty days after your discharge.

Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.

Jim Kemish asked:


When did credit scoring begin?

All of your credit repair efforts are designed to improve your credit scores. There may be no more important number in your life. But where did credit scoring start? The FICO credit scoring model was created in the 1950s by two Stanford University researchers, Bill Fair and Earl Isaac. Automated FICO scores were first made available in 1989 and initially utilized by credit card issuers. But credit scores really became part of all of our lives in 1995 when Fannie Mae and Freddie Mac, the mortgage giants, asked lenders to incorporate the use of FICO credit scores in their approval decisions. The rest is history. Fair Isaac Corp. trades on the New York Stock Exchange under the Symbol FIC, and reported revenues of over 800 million dollars in 2007.

Why are lenders scores different from the ones I bought online?

Lenders purchase FICO scores from the three credit bureaus. But with the exception of Equifax, the credit bureaus do not sell FICO scores to consumers. The scores sold by TransUnion and Experian are their own proprietary scores. These scores may vary significantly from your FICO scores. This can be very confusing for anyone in a credit repair program who wishes to monitor their credit scores. If you are working on credit repair and want relevant lender FICO scores you can purchase them at myfico.com.

Why do I have three credit scores?

The three major credit bureaus compile data on consumers, and sell credit reports and a wide variety of marketing information based on this data. The three credit bureaus compete with each other, but because lenders have adopted the practice of minimizing risk by reviewing all three bureaus, the three bureaus are perceived as being equally important. Each bureau licenses the use of the FICO scoring software from Fair Isaac and Company and applies it to their database to produce a FICO score. All three credit bureaus must be addressed in your credit repair effort.

Why are my three credit scores different?

There are three reasons for the differences in your scores. First, creditors do not necessarily report to all three bureaus – if you examine your reports you will probably notice many differences in the content. Second, the timing of the reporting of information by each bureau is different – if you used a credit card recently your new balance is likely to be reported by each bureau at different times. And third, Fair Isaac modifies the software from time to time, and the bureaus do not all implement the new version concurrently. It is pertinent to your credit repair effort to know that when correcting reporting errors the information on each bureau may be unique.

I’ve heard that there are two types of inquiries, what are they?

There are two types of inquiries. Hard inquiries will affect your credit scores, and occur when you apply for new credit. Soft inquiries will not affect your credit score, and are triggered most often by three different events; first, when you request your own credit report; second, when prospective lenders review your credit before offering you pre-approved credit; and lastly, when a current creditor conducts a periodic review of an existing account. Because inquiries have such a small impact on your scores, they are often addressed last in any credit repair effort.

How much will inquiries hurt my credit scores?

Soft inquiries, as mentioned, have no impact on your credit score. Hard inquiries are likely to lower your scores between 1 point and 5 points. Credit repair efforts revolve around your credit scores, and it is useful to know that the FICO scoring model considers everything on your report all together. The affect of an inquiry, like other information on your report, will vary depending on everything else in your file. The more credit you have, and the more established it is, the less of an impact a single inquiry will have.

How can I increase my scores?

The categories of data that will impact your scores are your payment history, your account balances, the length of your credit history, the balance of credit types, and the amount of new credit you have. Try to not make any late payments from this point forward. You should also attempt to pay your revolving balances down. And if you don’t have any open accounts, start the rebuilding process right away by opening two secured credit cards; your credit repair effort cannot succeed without open accounts, so take action today.

How much do my credit scores really matter?

Your credit repair effort should focus on improving your credit scores. Every loan you apply for will be underwritten based on your credit scores. Insurance companies are not allowed to consider your credit scores when pricing life and health insurance, but property insurers will consider your credit scores and may even deny you coverage if they don’t like what they see. In addition, prospective employers and landlords are likely to check your credit. Make sure your scores are where they should be when you need them. If you have credit issues, begin your credit repair effort immediately.

Copyright © 2008 James W. Kemish. All Content. All Rights Reserved.

CreditScoreAide .com asked:


A credit score is the only optimum rundown or breakdown of a consumer’s credit worthiness. Popularly known as a FICO score, in reference to Fair Isaac Corporation, the company is where the system originated and currently being made the basis in calculating the credit worthiness of a consumer with a credit score number.

A credit score is a condensation of all your credit report information by using a FICO formula designed to present to the lender a quick, precise foresight of the risk they may gamble or take in providing you a loan or credit. Most lenders have affirmed their belief to the credit score’s significance in simplifying the financing process and give more chances for consumers to obtain loans.

A FICO score may range between 300 up to 900. Obtaining a high score could mean better terms to get for your loan. Most credit scores you can get online but with corresponding fees. Lenders approve your loan and what interest rate to give you on the basis of your FICO score.

Credit companies have kept credit score information from the consumers until recently, starting July 1, California state law began requiring all credit bureaus to provide credit scores for consumers who request them.

The three major players like Equifax, Experian and TransUnion, are now into selling credit scores with credit reports to consumers for a fee.

E-Loan, a company who started a crusade for free credit scores have provided them for free last year through the net but without a credit report. Led by its president, Chris Lansen, E-Loan launched a campaign to give people free credit scores without a fee.

In the beginning, E-Loan was supplying free credit scores for about 42 days but was prevented by Equifax who stopped giving E-Loan information on consumer scores. It was learned, it was due to a FICO request, the company from which the credit bureaus scoring formula originated. The FICO score is the recognized yardstick of credit scores. E-Loan uses a different formula from a competitor, Neuristics. They call it CreditXpert Credit Score. Therefore, when E-Loan was forestalled in giving free credit scores, E-Loan turned to lobby their campaign to the State Legislature to compel the credit bureaus to supply them credit scores. Similar bills are expected to be filed this year at the US House and Senate. It is to the belief of E-Loan president and the company, each consumer will benefit and be able to manage better their credit, and debts like a pro if they are made aware of their credit scores together with the rates of interest that goes with it and the expected fees to pay. Knowledge of your credit score can give you leverage to negotiate better terms for your intended loan.

Therefore, a good advice will be, until a free credit score is provided to the consumer, it is wise to shop initially from the three major credit bureaus for their corresponding fees required to purchase a credit score for comparison.

William Brooks asked:


You are shocked when your loan is denied, or maybe you were approved, but the interest rate is much higher than you anticipated. How can that be you say? My credit score is good, I know I checked. Maybe it’s not as good as you think. It all depends on there you got it and what kind of credit score it is.

The fact is there are several different credit scoring methods. Credit scores calculated from the same credit reports can differ substantially from credit scoring method to credit scoring method. So how can you ever know what your credit score really is? Well, luckily, 75% percent of lenders use FICO scores exclusively and you can purchase FICO scores yourself–you just have to know where to go. (www.myfico.com)

FICO credit scoring is a numeric method of scoring your credit worthiness developed by Fair Isaac and Company. Your credit score is a number between 300 and 850 that tells creditors how likely you are to pay your bills. The higher the number, the better it looks to potential lenders and creditors.

The three major credit bureaus each have their own version of the FICO score: Equifax uses the Beacon system, TransUnion uses the Empirica system, and Experian uses the Experian/Fair Isaac system. Despite each credit bureaus’ use of their own versions, all systems are based the original Fair Isaac FICO scoring method, so each credit score calculated with these systems are generally called FICO scores. However, although most lenders do use FICO scoring, some lenders may have their own scoring methods.

There is only one place where you can get your FICO score from all three bureaus and that is at www.myfico.com. If you order your credit score from anywhere else, again be aware that these scores are “FAKOs” (or “fake”) and can differ considerably from your FICO credit scores.

Adding to the confusion is the credit bureaus themselves. Recently, Experian revealed that the national average credit score of its consumers is 678. This is very misleading to the average consumer. When you buy your credit report and score directly from Experians website, you are getting what they call the “PLUS Score,” which is NOT a FICO score, and is NOT used by lenders anywhere. (Equifax is the exception–you can buy your FICO score directly from them at their website; however, the only place to get all three scores together is at www.myfico.com.) The 678 PLUS Score reported by Experian is actually the average of consumers’ PLUS Scores, not their FICO Scores.

Clearly, the PLUS Score (and all Non-FICO scores) are useless. Not only that, but such hype misleads consumers into purchasing their PLUS Score thinking that they are getting the same credit score that their lender will use. Non-FICO scores are worthless not matter what the credit bureaus or any website selling non-FICO scores claim. Even a few points difference in your credit score can mean confronting the reality of the loss of thousands of dollars out of youSr pocket–a loss that you probably didn’t plan for. The next time you want the most accurate credit score available, do yourself a favor and get the industry standard: the FICO credit score.