GOODE Thoughts: Notes from THE CREDIT CORNER

By Monique Swygert, Certified Consumer Credit Counselor

Credit Scores: What you don?t know may hurt you?.??

First, let?s talk about credit scores. A credit score is a summary of the information in a credit report at the precise moment that it is reviewed. A credit score is not part of your credit history and does not appear on your personal credit report. There is a cost to obtain one?s credit score, and these costs vary from reporting agency to reporting agency.

A common question is, ?Are all businesses required to report to credit agencies?? The answer is ?no?.? You see, the Fair Credit Reporting Act (FCRA) does not require businesses to report to any credit agency at all. Instead, businesses are free to report to one, two or all three of the Credit Reporting Agencies (bureaus) or not report at all.

Various companies choose to use credit scores from different credit scoring companies for different reason. For example, while a car salesman may refer to a Beacon Score when looking to finance you, a bank loan officer may refer to your FICO score. And a finance company may refer to a score called Fair Isaac.

Name of Score: EQUIFAX/FACTA BEACON

Average Credit Score 688

Range 334-818

Name of Score: TRANSUNION/FICO CLASSIC

Average Credit Score 708

Range 309-839

Name of Score: EXPERIAN/FAIR ISAAC

Average Credit Score 678

Range 320-844

The most significant aspect of the Credit Score is how it is computed. Some people will ask why is there not just one credit score, and the answer is because the three largest credit reporting agencies (Trans Union, Equifax, and Experian) are competitors. They make money selling your scores; it?s a very profitable business. These credit scores are not free, despite the commercials of a FREE CREDIT SCORE. Below is an overview of a possible breakdown of the way a FICO score may be computed.??

35%: Payment history - Late payments on bills, such as a mortgage, credit card or automobile loan, will cause a FICO score to drop. Bills paid on time will improve a FICO score

30%: Credit utilization - The ratio of current revolving debt (such as credit card balances) to the total available revolving credit or credit limit.

15%: Length of credit history - As a credit history ages it can have a positive impact on its FICO score

10%: Types of credit used (installment, revolving, consumer finance, and mortgage) Consumers can benefit by having a history of managing different types of credit.

????????? ? ?? 10%: Past credit applications
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Monique Swygert began her career in the Consumer Credit Counseling Service (CCCS) industry in 1998.? As a certified Consumer Credit and Housing Counselor with the largest CCCS, Money Management International, she counseled and educated thousands of consumers about their rights and responsibilities as it pertained to credit and debt.? She has been speaking, writing and conducting seminars regarding credit and debt for 10 years.

Source: http://goodethoughts.blogspot.com/2012/08/notes-from-credit-corner.html

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