01 Sep 2018

Credit Scores, Do You Need Top Secret Classified Access?

Credit Scores are like the secret room in a government building that only the highest level security personnel can access. No one really knows how exactly they are scored, but we do know some things. Here are six things that you may not have known, but are very beneficial:

  1.  There is no absolute number: The comprisers of the widely accept FICO allow different lenders to customize their own system, so lenders will not all give you the same score. Also, each of the three bureaus –TransUnion, Equifax, and Experian– has a proprietary scoring model. To make things just a little more complicated, the credit bureaus got together and invented VantageScore a few years ago to compete with FICO.
  2.  Different scores, different scales: Your FICO score can range from 300 to 850. For the best mortgage rates you’ll need a 760 or better, but a 720 should get you into the top tier of lending for auto rates. Approximately 10% of lenders use VantageScore, which ranges from 501 to 990, and has grades of A to F. The best rates go to consumers in the A range (above 900). If you get denied for credit, the lender must disclose your grade and the factors it used to deny you.
  3.  Like a doctor, do a credit check up: You can monitor your credit yourself by printing out your scores for free once a year at annualcreditreport(dot)com. But the reports will not include your credit score. You’ll about $8 to get the bureau’s proprietary number. Since the majority of lenders use this FICO score, this is the one you want. You can get your score from myfico(dot)com from Equifax or TransUnion, but not Experian, for $20.
  4.  Free doesn’t really mean free: If you are looking for something close to your score, ballpark style, go to www.credit(dot)com. You’ll get free estimates of your FICO and VantageScore along with Experian’s own PLUS score. Sites like freecreditscore(dot)com and creditreport(dot)com will give you a score, but only if you sign up for a free trial period to a credit-monitoring service. If you don’t cancel in time, it will cost you $15 to 20$ a month.
  5.  Maintain your credit health: All of the scores measure the same factors from the information in your credit file, and they all indicate the same thing, creditworthiness. We’ve talked about the biggest factor, keeping a good limit-to-balance ratio on your revolving cards (below 30%). Pay down your bills on time. Have a variety of loans if you can, installment (auto, student debt), revolving (credit cards), and mortgage–this will boost your score, but don’t take out credit just to diversify your credit.
  6.  It’s not static: All of the information on your credit files is always in flux, and so is your score. If you are about to apply for a loan, this is when you need to be checking your score and reports. There are mistakes that may be hurting you that you don’t even know about and can get fixed for free. Pay down your balances as much as you can. And if you aren’t applying for a big-ticket item anytime soon, it doesn’t matter much what your score is tomorrow, but when in doubt, refer to number five above, maintain good credit health.