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The Credit Scores FAQ For United States Residents


Disclaimer: The following information is for your reference only. In case there is an error, please correct me. I will not responded to any losses incurred.

Table of Contents

1. Who saved my credit record?

In the U.S. there are 3 credit bureaus available. They are Equifax, Experian, and TransUnion.

Equifax

Experian (formerly TRW)

Trans Union

credit score

2. What is inside the credit report?

Personal Information:
Name, social security number, date of birth, current address, previous address, employer information.

Credit cards, housing loans, installment loans:
Account number, account status, date of opening balance, the residue (balance), credit (credit Line or credit Limit), minimum repayment amount, payment records, etc.

Query (inquiry):
There are two types of inquiries: hard inquiry and soft inquiry.

A hard inquiry is you authorized your bank or credit card company to proceed for inquiry. This can have a negative impact on your credit score.

A soft inquiry is the other type of inquiry such as getting a copy of the report on your own, or credit card companies want to do promotion and result in the inquiry. A soft inquiry has no effect on the credit score.

Debt collection records (collection)
Public records: Bankruptcy, mortgages, freezing of assets, court litigation.

3. Who is interested in my credit score?

Banks or lending institutions, insurance company, employers, landlord.

4. Who provided the record?

Banks or lending institutions, insurance company, debt collection company, government, court.

5. How long a credit record is kept?

– Usually 7 years
– Bankruptcy: 10 years
– Less than $75,000 loan: unlimited duration
– Criminal Record: unlimited duration
– Less than $150,000 life insurance: unlimited duration
– Litigation or outstanding court cases: 7 years or until the restraining order expired, whichever is longer.
– Inquiry: 2 years

6. How to get a copy of the credit report?

When you apply for credit cards or your loan applications get rejected, you can get a free copy of your credit report according to the instructions on the rejection letter. You can write, make a phone call or request from the credit bureau’s web site. Currently, the residents of some states can get a free copy every year. And the U.S. Congress has passed the law that all residents will get a free copy every year.

7. How if you found out there is a mistake in your credit report?

File a dispute according to the instructions in the report.

8. Why there is no information on insurance and employers in the report?

Insurance companies and employers may not report it.

9. What if my personal information gets stolen?

a) Inform the bank and credit card companies.
b) Notify the fraud department at one of the three credit bureaus and place a fraud alert on your credit file.
c) Close down your stolen accounts.
d) File a police report.
e) File your complaint with the FTC.

10. What are using for credit score calculation?

Now the most commonly used credit score is the FICO credit score. It is based on the calculation of records in the credit report. Since the three credit bureau’s records may not match, the scores that you get from the three credit bureaus can be varied. You can get more information at www.myfico.com.

11. I can’t find the credit score in my credit report?

You need to purchase an additional credit score copy.

12. What credit score is considered good?

Credit score in between 350-850 is good. When applying for loans, consumers with high credit scores will get better offers. For consumers with credit scores of greater than 650, they normally can get their mortgage approved without any problem. Consumers with a credit score of greater than 720 can get the best car loan.

13. Factors that affecting your credit scores

– Bad credit records (such as bankruptcy, collection, default payment, late payment)
– Credit history (the longer the better)
– Open accounts with the balance.
– Use of credit (1-2% is the best,> 50% is negative)
– Inquiry (the hard inquiry within two years get a negative effect, especially within 6 months)

14. How to improve credit score?

Always make your repayment on time!

15. How many credit cards should I own?

Credit cards that have debts in them will affect your credit score. There is no effect on how many credit cards you own. You can just put your unused credit cards at home. If you cancel your unused cards, they may affect your credit history.

16. It is good to have a higher credit limit?

In general, the higher the credit limit the lower the use of credit which can be a positive effect on the credit scores. The higher the average credit limit, the credit limit for your new credit card application is generally higher. Last time, the high credit limit may get the adverse effect for your mortgage applications, but now mortgage agencies no longer concerned about this.

17. How to quickly increase credit limit?

a) Call for a rise in credit limit every 6 months, especially right after you repay a big amount of your credit debt.
b) When having big-ticket expenses (like purchase of computers, pay for college fees), call for a raise of your credit limit as well.
c) Apply for credit cards that have more decent credit limit such as MBNA, AMEX, CHASE, and PROVIDIAN.

18. Is there any inquiry happening when calling for a rise of credit limit?

You can ask the customer representative when you call for the raise. If online application is pre-approved, normally there is no inquiry occurred. However, if you need to fill up a bunch of personal information, an inquiry is likely to occur.

19. Usually spend less, how to have balance?

– Help your family or friends to buy big ticket items.
– Use the balance transfer checks without transaction fee to pay rent.
– Doing some balance transfer at some time if no transaction fee is required.
– During the 0% APR on purchase period, only make the minimum repayment every month.

20. What is the suitable number for balance/credit limit?

You should keep it at 30-50% for some time, as this will help in raising your credit limit. When your credit limit is raised, it is easy for you to maintain the best balance/credit limit. When you want to apply for credit cards or buying a car, you can reduce the balance to quickly improve your credit score.

21. It is good to pay off all my debts?

The balance/ credit limit on your monthly statements can make an impact on the credit scores. Purposely not to pay off your bill in full will not get any positive impact on your credit scores. This is not advisable as you still need to pay for the interest. Of course, this is exceptional during the 0% APR period.

22. Will balance transfer affecting the credit score?

The use of credit will affect your credit scores. If the ratio is too high after the balance transfer, it will have a negative effect on the credit scores. However, this effect is short-term, once you paid off the balance you are in good shape again. And due to the balance transfer, you may possibly get a higher balance/credit limit.

23. Will my credit score get affected if not using a credit card for a long time?

No direct effect, but the credit card issuer is not going to happy to see this.

24. Is there any effect on my credit scores if I open many bank accounts?

There is no saving and account checking account record in the credit report.

25. Can home mortgage and car loan be shopped around?

Can. The same type of inquiry within 14 days is counted as only once. Apply for a loan within 14 days before on the same type of inquiry will not affect your credit score.

FICO

As we know now, all credit scores are calculating by using the FICO formula. Since credit bureaus are of different entity, the credit score that you get from these 3 bureaus may be varied.

credit score

Most of the loan companies will remove the highest score and the lowest score from the credit report, and use the middle score for calculation. When two people applying for a loan at the same time, if the income for the first applicant is much higher than the second applicant, then they will use the credit score from the applicant who has a higher income. If the incomes for both applicants are almost the same, then they will use the lower credit score.

Checking Your Credit Score

There is a website www.annualcreditreport.com that allows everyone to get a free credit report from three different credit bureaus once a year. But the credit report will not have the credit score. If you want to know your credit score, you need to pay $7 plus to each credit bureau. After you print out your credit report, look carefully to ensure there is no error in the report. If you found a remark indicated you have a late payment but in fact you never do so, you need to make a dispute to them in order to fix the report. It may take about 30 days to 3 months to fix the report.

My Own Credit Score Checking

I just make a checking on my credit report recently and I found my credit score is 806, which is getting reduced by 25 points compared to 2005. I examined through the whole report but can’t find any negative record. Then why my credit score is reduced? My analysis concludes that in 2005 I do not have any loan, neither do I have any debts. And in August 2007 I bought a new house, I got the maximum limit for my loan, which is basically 100% of the loan balance (because the first year of the repayment of principal is all interest.) This is the reason why my credit score is reduced.

There is also another web site to assess your credit scores BankRate Credit Score. When you enter into the web site, you will have to answer the 10 questions that related to credit score. Once you have done, you will receive your estimated credit score based on your answer was given.

I tried to make the assessment, and the score I got is 770-820, which is quite close to my real credit score. The advantage of this site is that you can try to alter the answer if the credit score is raised, then you can just follow the answer to repair your real credit score. However, there is one thing you need to aware of: If you are going to apply for a loan within next few months, you better don’t try the assessment as you may get a negative effect by doing so.

Credit Score Range – Know the Facts

A lot of people these days can obtain their credit scores but have no idea what to do with it; in fact some of them do not even know what it is. Therefore it is quite appropriate that before you do anything with your credit score range you should actually understand what a credit score is and what credit score ranges actually mean. Depending on how perfectly charges are disbursed by an individual, these details are computed in the form of a FICO or credit score range that starts from 300 to 850. This range is necessarily required when evaluating credit score because without it the score would be meaningless.

credit score fact
credit score fact

Why is it so important

Credit score ranges should in fact be considered vital and a highly important asset. You might not be able to acquire any sort of loan if your scores drop down to below a certain point, so always make sure you pay careful attention to them. When you are applying for a loan a majority of the lenders always pay close attention to your credit score. The only factor most of the lenders count are these scores, as they are what determine the sort of loan terms and interest rates you would be eligible for when receiving a loan. Since a credit record determines quite a variety of things its importance should never be underestimated. These situations include:

  • Car Loans
  • Being hired for a job position
  • Down payment amounts
  • Insurance premiums
  • Mortgage types available when you buy a home

When you are trying to understand the credit score range it is always best to start from the top and work your way down. The most reliable score range currently which is most commonly being used is the FICO and the ranges mentioned here are based upon it.

800 to 850+ Credit Score

800+ credit scoreIf you want to have basically flawless credit then your credit score should range in between 800 to 900. Scores ranging in between 800 to 850 are quite common these days whilst  finding a credit score as high as 900 seems to be rare but there have still been reports of this high score. Often right from the moment a consumer’s credit profile has been established they may even  have an 800 credit score immediately but banks and lenders will still not actually consider it unless there is some credit history supporting this.

On the other hand, the lowest rates on loans such as auto insurance, mortgages and credit cards can be obtained by the borrowers who have years of solid history accompanying their 800 to 900 credit score. Almost 13% of the population currently have scores within this bracket.

720 to 799 Credit Score

720 credit scoreAnyone who wants to have great credit while benefiting from similar interest rates and approval rates that would be obtained with a credit score in the range of 800-850+, should have a credit score of between 720 to 799. A credit score in this bracket means that the credit check performed when applying for any loans is very thorough and in comparison with the 800-850+ range there can also be several differences in the pricing incentives as well. Nonetheless, consumers do not have to be concerned if their scores end up in this category because these are still considered to be excellent credit scores. In fact almost about 27% of the population has credit scores that are falling into this bracket from 750 to 799.

680 to 719 Credit Score

680 credit scoreConsumers usually have a good credit rating if their score falls in this bracket which ranges from 680 to 719. It is considered as a good credit score range. Borrowers in fact still get to qualify for a variety of loans and rental or auto leases even though it is not as perfect as the ratings mentioned above. On the other hand unlike excellent credit, borrowers with good credit would have to deal with slightly higher interest rates. Also particular types of financing like the lowest auto insurance premium or an A-paper mortgage loan cannot be availed by borrowers whose credit scores fall in this credit score range even though their score is not considered bad.

620 to 679 Credit Score

620 credit scoreFrom 620 to 679 is the credit score range where all the credit scores are considered to be ‘OK’. When borrowers who have an ‘OK’ credit score try to apply for a lease, loan or mortgage their chances of approval are slightly lessened whilst they have to face more restrictions. There is no reason for anyone to be concerned because only a few number of scores end up in this credit score range. Nonetheless evaluating your score and making an effort to improve it, is important. Since the lowest rates are not secured if your scores are in this range, you also do not lose too much money.

580- to 619 Credit Score

580 credit scoreThis is where “ok” and “good” turn to “bad”. Credit scores in this range are clearly below average, and you will have a difficult time securing a loan, or applying for a credit card. If you are able to secure financing, you’ll find higher interest rates for low credit scores. If your credit score falls in this range, you definitely need to evaluate your credit report and take measures to raise your credit score.

Many consumers with credit scores in this bracket are considered “sub-prime” and may have to work with bad credit banks and lenders to secure financing.

500 to 579 Credit Score

500 credit scoreHaving credit scores in the range of 500 to 579 is a rather bad sign. An individual’s credit report will most probably contain major derogatory marks such as bankruptcy, collection, charge off, foreclosures or late mortgage, if their credit score belongs to in this credit score range.

Below 500 Credit Score

500- credit scoreFinally it all comes down to the worst credit score which falls below the 500 bracket. Very little positive data and a lot of major derogatory marks would then be present in the credit report. With such a bad credit score there are certainly no hopes of availing a loan.

Warren Paine

Warren is the senior mortgage loan officer who has worked in mortgages and loan industry since 1995. He study in Harvard and major in Finance with a Bsc. Honor Degree. He possesses a Paralegal Certificate as well.

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