You have undoubtedly heard about the importance of maintaining a good credit score, more exact a good FICO score, the score developed by the Fair Isaac Company to determine the creditworthiness of a potential borrower for lenders. In reality, it’s not just about maintaining a good FICO score, it’s about maintaining good FICO scores (plural). All 49 of them.
Yes, you heard me right, there are actually 49 different FICO scores out there. Not to mention the thousands of personal credit scores created by everyone from the Credit Bureaus to Credit Card Companies to Banks.
FICO has many different types of scores, depending on the type of loan you’re applying for. In fact, John Ulzheimer, a credit expert, has created a great chart showing a total of all 49 different FICO scores.
Why so many?
The Fair Isaac Company (FICO) has the basic formula known as the General Purpose FICO, which is used to calculate a consumer’s creditworthiness for all types of loans. The data which FICO uses to calculate their scores comes from the three major credit reporting agencies (Experian, Equifax, and TransUnion). FICO uses this raw data to create a single, three-digit score for each credit bureau. This means that there are three versions of the General Purpose FICO score to start.
FICO also has several other credit score formulas customized for the specific types of loans, such as auto loans, mortgages, and credit cards. Each of these is then re-branded and specially customized for each credit bureau. Finally, each formula may have multiple releases and updates, which are used at the lender’s discretion. And this is how we have 49 FICO scores.
This issue is currently being reviewed by the Consumer Financial Protection Bureau (CFPB), because each year consumers pay millions of dollars for credit scores from various websites but get a generic FICO or other credit scores which may be seemingly useless because the scores may vary by over 100 points.
So the next time you check your credit score, take the time to find out exactly what type of credit score it is, and whether or not it of any value.
Children are not supposed to have a credit report in their name, but new studies have found that the number of those who do is growing considerably, which can pose major problems for affected kids.
People under the age of 18 who have a credit report in their name are almost certainly the victims of identity theft, and this is a large and growing problem nationwide, according to a report from the Columbus Dispatch. Some studies have found that large amounts of kids have been a0ffected by identity theft, in which the crooks open large amounts of credit in their name and steal tens of thousands of dollars or more, and leave their young victims to carry the blame.
Often, this type of crime is carried out when a thief gains access to a kid’s Social Security number, the report said. Sometimes this can happen as a result of data breaches at hospitals or schools, and other times, their relatives may steal their identity. These youngsters are usually targeted because they will have no credit history and, since parents wouldn’t normally even think to make sure their son or daughter has a credit report in their name, the crime is unlikely to be discovered for a long time.
“These kids’ Social Security numbers are particularly valuable to thieves because they can go years without detection,” Bo Holland, chief executive of AllClearID, told the newspaper. “Because of privacy restrictions, the credit bureaus can’t share with parents what they find in their (child’s) files. So they don’t know who is using the Social number or what accounts were opened.”
The most common way a child who has been victimized by this type of crime discovers the problem is when they turn 18—sometimes even older—and apply for a line of credit, the report said. To their dismay, they may learn that they’re saddled with significant debts, such as those for auto loans, credit cards and sometimes even mortgages, that have gone long periods of time without payment.
One thing parents who are concerned about this type of crime can do is contact the credit reporting agencies and ask them to put a freeze on their kids’ credit until they turn 18 and are capable of obtaining some types of loans on their own.