A Credit Score Revealed

Your credit record contains:


Identifying information (your name, address, and social security number) Details concerning your current employment (your position, length of employment, and income) Specifics about your personal history (birth date, dependents, previous addresses and employment) Information about your credit history (how promptly you have paid your debts, how much and how often you've borrowed) All the consumer credit that has been extended to you over the past 7 years, including the names of the creditors, dates the accounts were opened, payment patterns over time, and names of joint owners or cosigners The highest and lowest balances from each of your creditors The number of payments made on time to each creditor The number of late payments and how late they were Names of companies or individuals who have requested a copy of your report within the last 2 years Information from public records (bankruptcy, overdue child support, civil suits, and tax liens)If you want to see approximations of how much weight certain factors are given in comparison to others.And from TransUnion's website, these are the kinds of "trades" (types of credit listed on your credit report) that go into a perfect credit score.A few (say, 3 or 4) revolving credit cards, each with very high lines of credit ($10,000+), and very low carried balances on only 1 (or maybe 2) of them at a time. At least one credit card (American Express, Diners Club, etc.). All tradelines at least 6 months old, and at least 1 more than 3 years old. No derogatory notations. Very few inquiries -- no more than 1-3 in a six month period. At least one "installment" tradeline in good standing, i.e., a mortgage, auto loan, or student loan Line of Credit.Appy For A loan -
The Inside On Credit Scores
Anyone who has ever applied for a credit card, loan, or cell phone has dealt with their credit score. This illusive three-digit number impacts the rates and terms you’ll receive on everything from a mortgage to car insurance. Understanding and managing your credit scores can help you save thousands of dollars on life’s big purchases. Here’s what you need to know about credit scores:
The Basics
A credit score is a numerical evaluation of your credit history used by businesses to quickly find out if you pose a risk to the company as a borrower.. Credit scores are calculated using complex mathematical formulas that look at your most current payment history, debts, credit history, inquiries, and other elements of your credit report. You have three credit scores, one each based upon your credit reports from Equifax, Experian, and TransUnion. Our recommendation would be FreeCreditReport.Com.it offers a Free 30 day trial, and your Credit Report and Score.
The Numbers
Credit scores usually range from 300-850, with 680 or higher considered to be “good.” Good credit scores help you get the best deals and lowest rates on major purchases. Your credit score may fluctuate each time something changes on your credit report.
The Models
There are thousands of slightly different credit scoring formulas (including FICO, Beacon and Empirca scores) used by bankers, lenders, creditors, insurers, and retailers. Each score can vary somewhat in how it evaluates your credit data. It’s normal for your credit score to go up or down about 40 points depending on which scoring model and credit report data is used
The systemYour credit score improves if you: Pay your bills on time Have at least 3-6 open and active credit accounts Have 1-2 loans Keep your credit card balances low Have a stable record of credit use Keep your accounts open for a long time Avoid too many applications for new credit If You have Bad Credit
Alternately, your credit score will decrease if you: pay your bills late, have too many or not enough accounts, max out your credit cards, haven’t had credit very long or apply for too many new accounts.
The myth
Checking your own credit data does not cause your credit score to decrease, contrary to popular rumor. You can check your credit reports as often as you would like without harming your score. Only when you apply for new credit or loans does a “hard inquiry” cause about a 5 point drop in your score. Now that you know all about credit scores, it’s time to see where you stand. Check your credit reports and scores online today. You can also read more about credit scores and how to keep your credit healthy in our learning center.
Understanding Your Credit Score
What does your score mean?
This rating system is meant to develop a snapshot of the risk you currently represent to a lender. Several parameters in your credit file, including length of credit history, number of open accounts, loans, mortgages, public records, and others are formulated to produce a three-digit score between about 300 and 950. There are other scores used by lenders and insurance companies (some of which are developed by FICO) such as Application and Behavior scores. These other scores take other information into account. Usually a lender will use a combination of your credit score with other factors when determining your risk. They all have the same objective, to determine the borrower's potential risk. Regardless of whether the score was generated by FICO or a system based on FICO parameters, they all yield an industry standard three-digit score. This score places the borrower in one of three main categories (we named the third one ourselves.)
Prime, sub-prime, and shaftedPrime If your credit score is above 680, you are considered a "prime borrower" and will have no problem getting a good interest rate on your home loan, car loan, or credit card. Sub-Prime If your credit score is below 680, you are "sub prime", and will likely pay a much higher interest rate on your loan.
Shafted Below 560 is the shafted score. At least that is how most lenders and credit issuers perceive it. You can still get a credit card but you will likely be hit with a security deposit or high acquisition fee. In addition to that your interest rate will likely be 22 to 23%. You can forget about most home loans and the majority of new car loans at this score. Below 560 is no place to be. You will pay much, much more in higher interest and unnecessary fees. You may even pay more for your insurance rates. A very low score can even prevent you from getting a job with many companies.
How are credit scores calculated?
The methods of calculating your FICO may differ slightly depending on the credit bureau. When obtaining your score from one of the Credit Bureaus it is important to understand that your score does not come directly from FICO. It is adapted to each bureau and is given its own name: Equifax uses "Beacon", Trans Union uses "Empirica", and Experian uses "Experian/Fair Isaac." These scores are also referred to as your "Bureau Scores."
Since your score is derived from your bureau data, it will change every time your reports change. However your score is calculated, it will always take into consideration many categories of information. No one piece of information or factor determines your score. As the information in your credit report changes, the importance of one or several factors may change in your FICO score. Lenders look at many things when making a credit decision, including your income and the kind of credit you are applying for. However, your FICO score does not reflect these facts as it only evaluates the information retained by the credit reporting agency.
What factors affect your credit score?

There are five factors which are used in credit scoring calculations that determine your overall credit score. Previous Credit Performance (Payment History) 35% A lender wants to know what your payment history is like. Have you paid everything on time, are you late on anything now, and so on. Your payment history is just one piece of information used in calculating your score, although it can be the very important.
Current Level of Indebtedness (Amount Owed) 30% How much is too much? Can the borrower pay me and still afford to pay his other bills? Not necessarily. Having available credit can actually help your ratio of debt to available credit. These are the types of questions that most borrowers want to know and the answers are almost as important as your previous credit history. Amount of Time Credit Has Been In Use (Length of Credit) 15% Generally speaking, the longer the credit history the better your score. However, this factor only makes up 15% of your total score so even young people, students or others with short histories can still score high overall as long as the other factors show good. If you are new to credit than there is little you can do to improve this part of your score. Open an account and be patient. Pursuit of New Credit (10%) Credit is much more popular today. Just look at the number of credit card offers you get via the Internet and in the mail. Consumers can now shop for credit and find the best terms to meet their needs. Each time someone runs a credit check on you, it creates an inquiry.
Fair Isaac has changed some of its calculations to account for these new trends. Specifically, they treat a group of inquiries - which probably represents a search for the best rate on a single loan - as though it was a single inquiry (note: this only applies to auto or mortgage loan inquiries.) For example, auto loan inquires that are within 14 days of each other only count as one inquiry. Types of Credit Experience (10%) A healthy mix of different types of credit, installment loans, retail accounts, credit cards, and mortgage. This score is not normally a key factor in determining your score but it can help a close score. Its not a good idea to try and open different types of accounts just to try and make this factor better. It will likely reduce your score in other areas. You should never open accounts you don't intend to use anyway. What type of accounts you have, and how many, can make a big difference. The optimal ratio of installment versus revolving accounts depends on your profile and differs from person to person. One factor that seems to have significant influence is your percent of open installment loans. Too many can lower this portion of your score.
Improving your credit score Now that you know how your score is calculated, you can begin making changes to your current financial planning. The besthings you can do are simple.
• Pay your bills on time. Sounds simple, but this is the biggest thing you can do to keep your score high. Delinquent payments and collections have a major negative impact on a score.
• Keep your balances low on unsecured revolving debt like credit cards. High outstanding balances can affect a score.
• The amount of your unused credit is an important factor in calculating your score. You should only apply for credit that you need.
• Make sure the information in your credit report is correct. If its not, dispute it with the credit agencies and/or with the creditor directly.
• Removing negative items on your credit reports has the biggest impact on your FICO score. Generally, negative items stay on your reports for seven years but you can hire a professional credit report repair service to do it for you.Credit scores and what influences them, according to Fair IsaacThis documentation part of our reporting on the Credit Scoring Conference we attended in July 1999.
How your credit score is calculated is truly a mystery, and is protected, if not by law but by the FTC. The statistical model (aka FICO Score) used by all three credit bureaus and in some form or other by all banking institutions was developed by Fair Isaac. This scoring model did not start out to be the industry standard, but since it was the most complete model used available at the time when the banking industry was interested in such information, it became an integral part of the credit granting process. The model took years to develop and Fair Isaac has all kinds of empirical data to back up the accuracy of their model. The lending industry, who finds comfort in numbers anyway, gets a warm, fuzzy feeling of fairness: since most everyone uses it, it gives the impression of everyone being measured by the same yardstick. Why doesn't Fair Isaac tell anyone exactly what goes into the model?The company maintains that their model is a proprietary system, and it is protecting itself - if it gave away the product, how would Fair Isaac make money? I can see their point, to a certain extent, but many (if not most) American and Canadian consumers are at the mercy of this statistical model. Most people don't realize that the credit scoring model is a product being sold to lending institutions and, of course, the credit bureaus. Aside from the fact that the mystery of the model is a big source of unfairness, is the model itself unbiased? At CreditInfoCenter, we get lots of questions about this, like "how do you raise your credit score?" What we found out is that lots of what goes into the score calculation is beyond the control of the consumer. Therefore, many people with a low credit score may be able to do nothing about it. OK, let's get right down to the actual numbers. While we can't give you the whole math model, we can sure give you a piece of it. At the credit scoring conference held by the FTC in July 1999, Fair Isaac gave the opening presentation and went over in detail some of the things used in calculating your score. The information I am giving out is based on the huge slide presentation given out by Fair Isaac at the July meeting.
Factors used to score you, in order of importance (information marked with a * is obtained from an application, not considered in a credit bureau score):
Major derogatory items on your report (bankruptcy, collections, foreclosure, slowpays)
•Time at present job
•Occupation (Professionals are given heavy weight)*
•Time at present address
•Ratio of balances to available credit lines (the lower the better)
•Are you a homeowner? (if you are, this is heavily weighted)*
•Number of recent inquiries
•Age (50+ is the best)
•Number of credit lines on your report
•Years you have had a credit in the credit bureau database So is this fair? Have you noticed that only two of the above items are entirely within your control? And what if you don't care for a professional (whatever that means) occupation?
According to the above scoring model, to get the highest score, you would have to: a) be at your job for a long time, b) be in a a professional occupation (like lawyer, doctor, banker, corporate officer, etc. - does webmaster count?), c) have lived in the same home (that you own, of course) for over 10 years, d) have had credit and loans for many years, e) be at least 50 years old, f) have almost no debt, g)and not have applied for any new loans for the last two years. Oh yeah, and h) have perfect credit.
Here are some of the actual numbers used to calculate your credit, but Fair Isaac says it isn't the whole model (which I do believe.)

Terms: Bank referenceWhether or not you have a savings and checking account. How would the Fair Isaac model know about your income? The only place would be off an application. Debt RatiosRatios of monthly credit obligations (credit cards, mortgages, car loans (not food, insurance, utilities) over monthly gross (before taxes) Income. Example: Your credit card bills, and car loans total $1,000/month. Your monthly gross income is $4,000/month. Your debt ratios would be 25% or 25. How would the Fair Isaac model know about your income? The only place would be off an application. % Balances Available
This refers to amount of available credit you have left on revolving credit, like credit cards. It is calculated by dividing your total credit used (over all of your cards) by the total credit limits (over al of your cards) you have. So if you have a total unused credit card limit of $10,000 and you have used $2,000 worth of this available credit, you have used 20% of your available credit. Years in File Number of years you have been in the credit bureaus files, approximately the same amount of time you have credit (though of course, not necessarily).


CreditSavy

– We offer easy credit repair and fast credit reports. Trust us for easy credit repairs and annual credit report today.

Comments

Hi,

I greatly enjoyed looking through your website and found an informative one for finance related topics.I have also some finance related web sites having more informations regarding various financial problems and its solution.So,I think it would be beneficial for both of us if we will join in a community and become link partners to each other.If you are interested then please contact me at- davidsimonds007(at)gmail.com

If you will be interested then I will show you my sites having pr 2 to 4

Thanks

Useful information for webmaster - By David Simonds
3^rd September 2008 - 8:16am

*Name:
*Email:
Website URL:
Title / Subject:
	Hide my email
*Comments:
*

Watch the latest videos on YouTube.com