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Showing items Tagged with: credit scoring
  • Getting the best credit score bang for your debt repayment dollars
    Submitted by: Jesse Campbell on January 27, 2016

    Getting the best credit score bang for your debt repayment dollars

    You've got some extra money and you want to pay down some debts. The question is, what use of that money will have the biggest impact on your credit score? 

  • Four things you don't know about the business of credit reporting
    Submitted by: Jesse Campbell on June 08, 2015

    Four things you don't know about the business of credit reporting

    Why should you have to pay for your credit report? How is it possible to have more than one credit score? There's a lot of confusion about the business of credit reporting - hopefully this will clear some of that up.

  • The five virtues of great credit
    Submitted by: Jesse Campbell on March 02, 2015

    The five virtues of great credit

    If you’ve ever gotten a loan or opened a new line of credit, you know that your credit score is important. Here’s something you might not know, however – the formula used to calculate your score is a secret.

  • If you want to improve your FICO scores… paying off credit debt reigns supreme
    Submitted by: sitecore\kmcgrigg on July 18, 2011
    When it comes to boosting your FICO credit scores there are a variety of strategies that will yield varying amounts of improvement.
  • What happened to FICO 08?
    Submitted by: sitecore\kmcgrigg on January 08, 2009

    Well, it’s 09. Makes me wonder what happened to FICO 08. Reminds me of the nearby dirt lot with a weary-looking sign that reads “Luxury Condos – Available Spring 2006.”

    Here’s the background: In 2007, Fair Isaac announced that they were reworking the math on their scoring model to be more lenient on people who make occasional financial mistakes, but harder on those who make repeat mistakes. The new formula was also supposed to address the issue of “piggybacking.” Piggybacking is a form of fraud perpetrated by people looking to improve their credit standing by unscrupulously using the role as authorized user to piggyback on a stranger’s good credit.

    Apparently, some people were unhappy that the new formula would also stop honest consumers from getting credit for being an authorized user on another person’s account. An example of a credible use for this practice would be when a parent helps their child to establish a good credit history by adding him or her to an existing account as an authorized user.

    The debate held things up. However, according to VideoCreditScore.com, Fair Isaac believes that they can figure out when someone is trying to piggyback on someone else’s credit score and will not allow those types of authorized users to benefit. That way, they can address the issue of piggybacking without yanking all authorized user entries. For more on this, check out this video titled FICO 08 Update.

    In addition to the piggybacking issue, there has been some legal action between Fair Isaac and the bureaus. Fair Isaac claims that the VantageScore (created by Equifax, Experian, and TransUnion) harms the FICO brand.

    So, where does all this leave FICO 08? I found this explanation following a Fair Isaac press release: Fair Isaac is working with the credit reporting agencies to make the FICO® 08 score generally available to lenders as soon as possible. It is scheduled to be available at TransUnion for customer testing by the end of January 2009, and at Equifax by second quarter 2009. For information on availability at Experian, please contact your Experian representative.

    Wonder if they'll change the name to FICO 09...

     

  • What exactly is an authorized user?
    Submitted by: sitecore\kmcgrigg on July 02, 2008

    There seems to be a lot of confusion about the role of an authorized user on a credit card account. An authorized user is someone who has permission to use another person’s credit account. They are not responsible for the account’s repayment and they are not able to make changes to the account. The primary borrower retains all control over the account and can add or remove users as they see fit.

    Many parents have taught their children how to use credit using this safety net. In the past, the account’s history was also reported to the child’s credit reports, helping him or her establish good credit. Unfortunately, this benefit was abused and no longer exists.

    People looking to improve their credit standing unscrupulously used the role as authorized user to piggyback on a stranger’s good credit. In response to this fraud, the Fair Isaac Company has removed authorized user accounts from its scoring model. Authorized user information is also excluded in calculating your VantageScore.

    The bottom line is that being an authorized user no longer has the potential to improve your credit score; however, it might be a good way to safely learn about the wise use of credit. If building good credit is a priority, consider getting a secured credit card instead.

  • Just when you thought you understood credit scoring
    Submitted by: sitecore\kmcgrigg on June 05, 2008

    I did a fun interview recently for CreditCards.com warning people not to obsess too much about their credit score.  Here is an excerpt:

    "People have a thing about being graded," says Kim McGrigg, communication specialist for Money Management International. Now that we can check our credit scores as often as we want, it's easy to worry too much. Some people even get competitive. McGrigg tells about a man who recently asked her why, despite the most strenuous efforts, he couldn't get his score above 812! (The average credit score is closer to 700.)

    While the article contains decent advice, I might not have been as clear as I could have been.  You see, I was referring to FICO scores that are offered by the Fair Isaac Corporation.  Until a few years ago, FICO was “the” credit score.  But in 2006, the three major bureaus (Equifax, Experian, and TransUnion) developed their own credit rating product called VantageScore.

    Consumers do not need to be too concerned about the fact that there are competing scoring products—after all, the basic rules of establishing good credit still apply.  However, to avoid confusion, it is helpful for people to understand that there are some differences between the models. 

    One difference between the scoring models is that FICO’s scale ranges from 300 to 850, while the VantageScore goes from 501 to 990.  For example, a FICO score over 700 is generally considered “good,” while a VantageScore in the 700s barely grades as a “C.”

    Another difference is the way the scores are calculated.  Following is a comparison of the variables.

    Vangage ScoreFICO Score
    Payment history 32% Payment history 35%
    Utilization  23% Amounts owed 30%
    Balances 15% Amounts owed 30%
    Depth of credit 13% Types of credit 10%
    Recent credit 10% New credit 10%
    Available credit 7%  

    You can purchase your FICO score from a number of places including MyFico.com.  VantageScores can be purchased from the bureaus.  If you’d like to save yourself a few bucks, try a free FICO Score Estimator from Bankrate or MSN.  And don’t forget that you are entitled to one free annual credit report from each of the three bureaus.  To order your free reports, visit AnnualCreditReport.com

    I know how important (and confusing!) credit scores can be, but I stick by my recommendation to keep it in perspective. As I said in the article, "No one's obituary should ever read, 'Stan was well respected by all three major credit bureaus.' "

  • Just when you thought you understood credit scoring
    Submitted by: sitecore\kmcgrigg on June 05, 2008

    I did a fun interview recently for CreditCards.com warning people not to obsess too much about their credit score. Here is an excerpt:

    "People have a thing about being graded," says Kim McGrigg, communication specialist for Money Management International. Now that we can check our credit scores as often as we want, it's easy to worry too much. Some people even get competitive. McGrigg tells about a man who recently asked her why, despite the most strenuous efforts, he couldn't get his score above 812! (The average credit score is closer to 700.)

    While the article contains decent advice, I might not have been as clear as I could have been. You see, I was referring to FICO scores that are offered by the Fair Isaac Corporation. Until a few years ago, FICO was “the” credit score. But in 2006, the three major bureaus (Equifax, Experian, and TransUnion) developed their own credit rating product called VantageScore.

    Consumers do not need to be too concerned about the fact that there are competing scoring products—after all, the basic rules of establishing good credit still apply. However, to avoid confusion, it is helpful for people to understand that there are some differences between the models.

    One difference between the scoring models is that FICO’s scale ranges from 300 to 850, while the VantageScore goes from 501 to 990. For example, a FICO score over 700 is generally considered “good,” while a VantageScore in the 700s barely grades as a “C.”

    Another difference is the way the scores are calculated. Following is a comparison of the variables.

    Vangage ScoreFICO Score
    Payment history 32% Payment history 35%
    Utilization 23% Amounts owed 30%
    Balances 15% Amounts owed 30%
    Depth of credit 13% Types of credit 10%
    Recent credit 10% New credit 10%
    Available credit 7%

    You can purchase your FICO score from a number of places including MyFico.com. VantageScores can be purchased from the bureaus. If you’d like to save yourself a few bucks, try a free FICO Score Estimator from Bankrate or MSN. And don’t forget that you are entitled to one free annual credit report from each of the three bureaus. To order your free reports, visit AnnualCreditReport.com.

    I know how important (and confusing!) credit scores can be, but I stick by my recommendation to keep it in perspective. As I said in the article, "No one's obituary should ever read, 'Stan was well respected by all three major credit bureaus.' "

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