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What are FICO Scores?

May 19, 2018 by  
Filed under Blogs, Credit Score

Credit Score FICO

If you’ve ever applied for any type of credit ranging from credit cards to mortgages or auto loans you have probably heard the term FICO score. That’s because there’s a 90% chance that your lender used the FICO credit scoring model to determine your creditworthiness and ability to repay the debt. In short, a FICO score is the preferred credit scoring model for the majority of the lending industry.

According to a recent CEB TowerGroup analyst report, FICO Scores are used in over 90% of U.S. lending decisions. That means that your FICO score determines not only whether you will be approved for a loan but, also the interest rate that you will be charged among other loan terms like the amount of down payment which you will need in order to be approved.

FICO, short for the Fair Isaac Company, developed the credit scoring model back in the 80’s to help lenders gauge a consumers likelihood of becoming 90 days or more past due on a loan within the next 2 years. Ever since, lenders have been using the FICO score to objectively and consistently determine the risk of lending to a borrower.

The FICO score, there are actually 49 different FICO scores, is a 3 digit number that typically ranges from 300-850 though, some industry-specific FICO scores can range from 250-900. A higher FICO score represents a lower credit risk and a lower FICO score represents a higher credit risk to the lender.

Good Bad Credit Score Chart

The FICO scores themselves are based on the data collected from your credit reports managed by the three major credit reporting agencies (Experian, Equifax, and TransUnion). This data is then quantified in a mathematical algorithm to determine a credit score.

Every lender has their own standards for determining what constitutes a good credit score and the terms/interest rates that they will make available to a consumer at a certain FICO credit score but, the average FICO score in the U.S. is 695 and in order to qualify for the best programs with the best terms you should set your goal for at least a 740 FICO score.
Every industry also has their own FICO scoring model setup to determine what they deem to be a creditworthy borrower. Auto lenders care more about your previous auto lending history and mortgage lenders care more about your previous home loans, so, FICO created scores for those industries which weigh certain accounts differently. Auto lenders use FICO Auto Scores while most credit card companies use FICO Bankcard Scores.

Different Credit Scores

More Information
How your FICO credit scores are calculated
5 Components of your FICO credit scores
Why are your credit scores different
Why your FICO credit scores matter

 

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Assurance. Our Credit Repair process was developed by experienced attorneys.

Speed. Documents are typically processed and sent out for investigation within 3-5 days.

Support. Award winning customer service guarantees your satisfaction.

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A New FICO Score is Here

May 16, 2018 by  
Filed under Blogs, Credit Score

Credit Score FICO
According to the Fair Isaac Company, FICO recently released a brand new variation to it’s FICO credit scoring model. FICO Score 9, FICO Auto Score 9, and FICO Bankcard Score 9 have all recently hit the market and although adoption of the new algorithms is so far very limited, we can assume that over the course of the next few years more and more lenders will start using this new scoring model. So let’s take a look at this “new generation” FICO score and the impact that it will have on your ability to get credit.

What’s New With FICO Score version 9?

One big change to the new version of the FICO score is that it no longer takes paid collections into account when scoring your credit. Previously, a paid collection would still be considered a red mark on your credit report and lower your FICO score but, the new version of the FICO 9 score does not score PAID collections. Therefore, if you paid off a third-party collection, no matter whether it’s $5 or $50,000, it will not have a negative impact on your FICO 9 Score.

NOTE: 90% of credit borrowing decisions are calculated using the FICO score but, most lenders are still using older versions of the FICO scoring models which take paid collections into account which still lower your credit scores.

Different Credit Scores

Another significant change to the new FICO score is that it scores medical collections differently from other collection accounts. In previous models, all collection accounts were scored the same whether they were for charged-off credit cards, utility bills, or medical bills. The new scoring model from FICO treats unpaid medical collection accounts differently than other types of unpaid collections. If you have unpaid medical collections on your credit reports, they will have less of a negative impact on your new FICO score than other unpaid collection accounts.

Finally, in order to help consumers with very a limited credit history, FICO version 9 includes a new algorithm used for scoring rental history. When reported, your rental history factors into FICO 9 score by taking a comprehensive view of your rental paying history. This should help millions of Americans who pay their rent but, don’t have a credit score, get a fair assessment of their creditworthiness.

Ultimately, it may take years or even decades for this new scoring model to be fully adopted by the lending industry or it may never happen altogether but, it’s nice to know that the powers that be are working on making lending a much more fair and accurate assessment of a consumer’s creditworthiness.

 

Why Choose CreditFirm.net?

Assurance. Our Credit Repair process was developed by experienced attorneys.

Speed. Documents are typically processed and sent out for investigation within 3-5 days.

Support. Award winning customer service guarantees your satisfaction.

CreditFirm.net Review

Why Are Your Credit Scores Different?

May 6, 2018 by  
Filed under Blogs, Credit Score

Credit Score Differences

Ever wonder why your credit scores are so different? You apply for an auto loan and your FICO score is 704 and a few weeks later you apply for a credit card and your score is 654. One inquiry could not have possibly dropped your credit scores 50 points in just 2 weeks but, this is a real issue that a lot of people face on a daily basis.

So, let’s dig down into why your credit scores vary so much.

First off, the variation in credit scores is due to the fact that there are dozens of different credit scores with different score ranges. There are 49 different FICO scores, some with a range of 300 – 850 and other industry-specific FICO scores which range from 250 – 900. VantageScore v3.0 ranges from 300 – 850 but, VantageScore v2.0 ranges from 501-990. The PlusScore ranges from 330 – 830 but, an Equifax Power Score ranges from 280 – 850, so depending on the type of scoring model that you’re looking at, the score will vary.

A 720 FICO Classic v5.0 score will place you in the “Good Score” range and mean that you should be able to get approved for some of the best rates and terms on loans but, a 720 VantageScore v2.0 puts you in the “Bad Score” range leading to high-interest sub-prime terms and interest rates.

On top of that, even scores that have the same ranges vary depending on the type of industry that is pulling your reports. FICO scores for the mortgage industry give more weight and importance to previous mortgage loans, auto lenders have different FICO Scores (i.e. Auto Industry Option Score) which gives more weight and importance to previous auto loans. If you apply for a credit card you will get a completely different score because the score that Credit Card companies use gives more weight and importance to previous credit card accounts, etc….

Finally, The Fair Isaac Company (FICO) gives lenders the ability to modify their scoring models so if Chase bank pulls a credit score using the same model that Citibank uses, you still might end up with a different score since Chase may have modified certain data points in the algorithm to adjust for their internal analytics of what constitutes a creditworthy consumer. Ultimately, no 2 credit scores are going to be the same unless you’re having them pulled from the same credit bureau, via the same scoring model, from the same lender.

Now that we have all of that out of the way, let’s take a look at the most simple and obvious explanation of why your scores could vary. That answer, of course, would be if you have your credit scores pulled from different credit bureaus. The 3 credit reporting agencies (Experian, Equifax, and TransUnion) are 3 private companies which maintain 3 completely different credit files for each consumer. Some credit furnishers don’t report to all three bureaus, instead, they may only report to one or two of the bureaus leading to different information reporting on your credit reports. So, if your Experian credit file is reporting 13 inquiries, 6 collections and 2 charge-offs and your TransUnion credit file is reporting 4 inquiries, 1 collection, and 1 charge-off, you can understand why your scores may differ. The different information would lead to different scores, it is not uncommon to see a 50 point discrepancy between scores reported by different credit bureaus.

So the next time you see a large variance in your credit scores, don’t be surprised. Instead, do your due diligence and find out what is causing the discrepancy.

And if you’re interested in improving your credit scores, CreditFirm.net is always here to help.

 

Why Choose CreditFirm.net?

Assurance. Our Credit Repair process was developed by experienced attorneys.

Speed. Documents are typically processed and sent out for investigation within 3-5 days.

Support. Award winning customer service guarantees your satisfaction.

CreditFirm.net Review

Another New Credit Score Is Coming

April 13, 2017 by  
Filed under Blogs, Credit Score

VantageScore

If you use CreditKarma.com you might be familiar with the fact that the scores they report are sometimes 5 points off your actual FICO score and sometimes 50 points off. Well, get ready for more fun as the most popular credit score for consumers and least used credit score for lenders gets an overhaul.

VantageScore, a collaborative project from Experian, Equifax, and TransUnion gets it’s 4th upgrade and it will undoubtedly cause a lot of confusion.The VantageScore was created back in 2006 when the credit bureaus noticed a trend of consumers interest in their own scores. Instead of selling consumers scores which they had to buy from other companies – the credit bureaus now had their own scores they could profit off.

So what’s the big change you ask?
Well, this new iteration of the VantageScore will score how much of your debt you actually pay off every month. In short, consumers who pay their credit card debt off in full every month will see their scores increase while those that transfer the debt from month to month will see a decrease in their scores.

According to TransUnion, consumers who do not pay off their cards in full each month are 3 to 5 times riskier than people who pay in full each month. And VantageScore v4.0 will be the first score tracking and scoring this data.

What does this mean to you?
Pay your credit cards off every month to get the most out of your VantageScore and make sure that your credit card balances are under a 20% utilization when the creditor reports your information to the credit bureaus.

What else is new?
VantageScore v4.0 will completely ignore medical collections which are older that 6 months and have been paid by insurance. Unpaid medical collections will see a significant decrease in their impact to your score.

In Conclusion
VantageScore v4.0 is set to be released Fall of 2017 so, you may notice some changes in your scores on CreditKarma.com, CreditSesame.com, Quizzle.com, etc… but, don’t forget one very important thing. At this point, those scores are completely useless because very few lenders actually use the VantageScore scoring model for their lending decisions.

Your Credit Score Is About To Get a Shakeup

Credit

Mark this date, July 1, 2017.

This is the date when 12 million consumers could see their FICO credit scores increase and more importantly this is the date when millions of Judgments and Tax Liens will be purged and deleted from credit reports.

As part of a nationwide settlement from over 30 states, the 3 credit reporting agencies. Experian, Equifax, and TransUnion, will remove these public records from consumer credit reports if the lien or judgment does not match a minimum of 3 out 4 criteria which are name, address, date of birth, and social security number.

This does not mean that ALL judgments and tax liens are going to be deleted but, those 12 million consumers with at least 2 errors on their accounts can expect to see their scores increase about 20 points come July.

But, that’s not all, the new guidelines will also include a requirement that public records are checked and updated at least every 90 days – if the guideline isn’t followed, the judgment and tax liens are to be removed off the credit reports.

This is a big win for consumers and a huge step in the right direction toward accuracy and fairness.

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