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Written by UFJoe
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Tuesday, 06 September 2005 |
The Fair Issac Corporation generates a so-called “FICO score”, which
means a lot to your credit. Think back to school days, you get an A on
your paper and you’re one happy guy/gal. If you get an F, watch out
because you’re in trouble when mom and dad find out! You won’t get in
trouble with mom and dad (well, you might biggrin.gif), but you will be
looked down on by the credit card companies. Well, what does that
really mean? Will the credit police break down your door? No, but
you’ll feel like they have a chokehold on your financial life. You
could see your APR jacked to the high heavens, your credit limit could
be decreased, and your account could even be closed. Also, it can keep
your from getting a new credit card, the mortgage rate you want, or the
loan you so desperately need for that one day in the future. Your
credit score is just like the grade your teacher gave you; it’s an idea
of how well you’ve done compared to your fellow peers. Where you rank
up compared to the average American’s credit is essentially what we
mean.
Now, before you’re ready to worry about your scores, there’s something
important we need to talk about first. No it’s not your new haircut;
it’s your credit report. By now you’re screaming “WAIT….I thought it’s
called a credit score”…….ahhh this is something different. Honestly,
it’s more important then your credit score. Your credit report makes or
breaks you in the credit world. Think of your credit score as a
sneak-peak of how your whole credit report looks. Unfortunately, FICO
scores don’t tell you anything about whether you’re the victim of
identity theft or what’s on your credit report at all.
First
things first, clean up your credit report. We can’t stress this
enough!!! Please CLICK HERE to learn how to do that. Now, that you’ve
cleaned up your credit report or at least made some major progress we
can talk credit scores.
There is much confusion about one’s
credit score and lots of times people mistakenly buy what they think is
their real FICO score. But it turns out to be something else, what we
call a FAKO score. FICO scores are generated using different formulas
and models depending on the credit bureau and whether it’s a score
specific for a mortgage or a credit card, etc.
It’s a big fancy
formula but suffice to say, it takes several things into account. Such
as age of accounts, type of accounts, inquiries, balances, credit
available, etc. Needless to say, you can’t put your thumb in the wind
and correctly guess your credit score.
When you’re ready to get your scores……..
There are the 3 major credit bureaus: EQUIFAX, EXPERIAN, & TRANSUNION. You’ll need 3 FICO scores to get the whole picture.
www.equifax.com sells EQUIFAX FICO scores
most
people like to buy their ScoreWatch product because you can quite often
get updates as to your current score, any other EQUIFAX product sold on
their website that includes a credit score is your EQUIFAX FICO
score............these are classical scores
www.experian.com sells FAKO scores (they're called PLUS scores)
www.myfico.com sells FICO scores from EQUIFAX, TRANSUNION, AND EXPERIAN
............these are classical scores
(if
you can’t get your score from www.myfico.com this is most likely
because you have a fraud alert on your credit file and you can READ
HERE to learn more about this)
www.providian.com offers PFICO EXPERIAN OR TRANSUNION scores to their credit card customers (PFICO is a real FICO score)
............these are credit-card or bank-card enhanced scores
www.transunion.com sells FAKO scores but www.transunioncs.com sells TRANSUNION FICO scores
............these are classical scores
classical
scores are generally the best indicator of credit-worthiness and a good
overall indicator of where your credit (mortgage, credit card,
auto,etc.) stands
credit-card enhanced or bank-card enhanced
scores are specifically indicators of credit worthiness with regards to
credit cards only (not mortgages, auto, loans, etc.)
auto-enhanced
scores or mortgage-enhanced scores are specifically indicators of
credit worthiness with regards to an auto loan or a mortgage
respectively
NOTE: ANY OTHER WEBSITE YOU CAN FIND THAT WILL GIVE
YOU YOUR SO-CALLED CREDIT SCORE IS WHAT WE (CB'ers) CALL A FAKO OR FACO
SCORE (MEANING THE SCORE IS NOT YOUR REAL FICO SCORE SO IT'S FAKE AND
YOU'RE JUST WASTING YOUR $$$)
FICO scores can be costly, so
don’t get caught up in constantly checking your score, remember it’s
more important to have a clean credit report.
Your actual FICO score ranges from 300-850, remember you have 3 separate FICO scores from the EQUIFAX, EXPERIAN, and TRANSUNION.
If you have below a 500, you have a BAD SCORE. Sorry no qualms about it, you have a bad score.
If you have a score in the 600’s you have an OK SCORE. It’s not bad, but it’s not terrific either.
If you have a score in the 700’s you have a GOOD SCORE. You’ve done very well.
(to be technical, 720 is the breakpoint for good/great scores………but we’re happy if you can get into the 700’s !!!)
Very
few people get much higher than 750, and frankly it doesn’t matter once
you get that high. You have excellent scores regardless.
What’s
the big goal here?...first clean up your credit report, second get your
score up. If you want something to shoot for score-wise, shoot for 100
points upward in 1 year. Once you break 720 sit back and relax because
you’re doing great!
Also, just because you have your credit
score today….doesn’t mean you can walk into the car dealership tomorrow
and say “I have an 800 FICO please give me the APR I want on my loan”,
the lender may calculate a completely different FICO score and if you
were to pull your FICO score again that day it may be different for you.
Remember,
a FICO score is a quick look at the overall status of your credit. It
may mean getting a better APR on that flashy credit card you want, but
it likely won’t determine whether you get the card or not (your credit
report will!).
Well that’s about it, but you’re probably still
wondering…..”Okay, now I understand FICO scores, but how do I raise my
score?” You’ll have to clean up your credit report to raise your score,
please READ HERE to learn how. |
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