Did you know that agreeable people tend to have lower credit scores? You know the type: people who can’t say “NO” to those in need and will more readily say yes when people attempt to convince them. This is because agreeable people tend to be more willing to co-sign bad bets and cave in to [...]
If you’re unlucky, then it will be extremely difficult for you to get credit agencies to accept they messed up. This is at least from the view of a certain Tom Tupper, who saw his credit score take a 48-point hit from a payment he was never delinquent on. Tupper likes monitoring his credit reports, [...]
It’s become cliché how people say that you can enjoy the holidays simply by being in the company of people you love and that simple gifts can be made instead of bought. That’s true to a certain extent, but let’s be honest here – Christmas is a lot more enjoyable when you have the money [...]
By law, every eligible US citizen is now entitled to obtain a free credit report annually, upon request, from any of the 3 credit reporting bureaus – Equifax, Experian and TransUnion. But did you know that1: Credit reports cannot be disclosed to employers without the written consent of the prospective employee? Credit related transactions, yes, [...]
Credit card issuers may have been holding back when federal card reforms were still ongoing. Now that these reforms are done deals, though, we’re starting to see these issuers get bolder and bolder with their offers. Credit cards are now offering enough airline miles to get a round trip in a fair amount of time [...]
A lot of things affect our credit scores, yes, but there are some things that simply don’t play a role. A study conducted by Visa shows the percentage of people in the study “mistakenly” assume about what affect their credit scores; These are Employment history – 59.9%; past jobs and income levels don’t matter Interest [...]
Credit reporting agencies use complex formulas involving numerous financial documents to come up with the 3-digit numerical score banks and lenders use to determine a person’s creditworthiness. This is what pushes the reporting agencies to provide information that is as reliable as possible; working hard to come up with formulas and computations that improve over [...]
Want to know if your credit may be heading downhill? Here are some of the more common signs: You are only able to pay off the minimum amount required for credit card debt. You put off paying utility bills for “more pressing” concerns like debt and mortgage. You raid your retirement funds for one reason [...]
A credit score is a number assigned to an individual that shows his or her “creditworthiness.” Lenders use this score to predict whether an individual will regularly make payments on time or default on loan payments.
This 3-digit score is determined by your payment history, outstanding debt, length of credit history, new credit, credit inquiries from lenders and the type of credit you currently have. There are, however, different types of credit scores available on the market; each with its own interpretation of your credit history.
While the big three credit reporting agencies – Equifax, Experian and TransUnion – generally have similar methods of calculating credit score, they mostly operate independently of each other and receive their scores from different accounts. These agencies should ideally have very similar results as they use the same calculations, but differences do exist between these agencies.
For example, a person’s Equifax account may have details that his Experian account has not taken into consideration. This will have a definite impact on the overall credit scores provided by both Equifax and Experian.
The scores produced by these reporting agencies, however, are not the only scoring models that lenders use. FICO1, NextGen, BEACON, VantageScore and EMPIRICA are some examples that provide alternative credit scores used by the financial services industry. They usually produce the same results, but the main reason why so many scores exist is because some data are cheaper to license than others.
Banks, credit card companies and other lenders may sometimes pick credit scores with lower licensing fees. This allows them to cut down on expenses without having to sacrifice their ability to assess the creditworthiness of a potential customer.
The different credit reporting agencies do, however, present varying ranges of scores. For example, FICO, Equifax and TransUnion scores range between 300-850, while Experian scores between 330-830 and VantageScore scores between 501-990. VantageScore also assigns a letter grade from A to F in order to give them a more unique appeal.
| | |
| FICO | 300 - 850 |
| Equifax | 300 - 850 |
| Experian | 330 - 830 |
| TransUnion | 300 - 850 |
| VantageScore | 501 - 990 (A - F) |
Update: FICO has updated its credit scoring model, named FICO 082 to better gauge (than the classic FICO) the likelihood that consumers will repay their credit bills; while still retaining the same numerical range (300 to 850). However, FICO 08 is only available to lenders and is not available yet for consumer purchase.
Despite the varying ranges of scores, there is actually no “best” or most reliable score to choose from. Credit reporting agencies will often tout their score as being the only reliable and most predictive score. The final output number of each agency may differ, but these agencies generally adhere to the same guidelines for calculating their scores. This essentially produces different types of scores that mean the same thing.
To sum the whole thing up, consumers need to focus only on the greater implications of their credit score and not the exact score itself. Paying dues on time and limiting debt to reasonable levels will help make a person’s varying credit scores more attractive in the eyes of lenders.
Here’s a bit of trivia that might surprise you: you’re more likely to have a credit score around 694 if you use BellSouth as your email address domain, while you’re likely to get a score of just 640 if you use Yahoo!. This is according to a study done by CreditKarma.com1, which also revealed that [...]