We will have a new credit scoring formula

We have to be aware about our credit score if we are looking for a home loan or some general purpose loan from a bank. Most of the time we don’t look satisfied with the credit score we have and have been complaining that the credit scores are unfair. But now the companies that calculate our credit score are doing something about it.

Many of us will have some or at least one late credit card payment and we would also have a genuine reason for this delay most of the time. "If I was late, it was just because I misplaced a statement," said card use Scott Shultz.

But now days, we people have been using credit cards just to get by. With rise in credit card debt, late payments are sure to happen sometime at least. Now FICO (Fair Isaac Company) that calculates the credit score is trying to get a credit score that exactly shows what is happening to an individual life.

Fico the credit calculating company has a secret formula that gives the credit score in the range from 300 the worst credit score and 850 the best credit score to determine person credit worthiness. According to John Gilligan, consumer credit counselor, diversity is good for consumers. "They like to see people have a mortgage, car payments, a credit card maybe...maybe two," he said.

With current scoring system, even one late payment could cause us loss of 100 points. But the new credit scoring formula will be more forgiving but will not be helpful for guys whoa re always late in their credit card payments.

"If you're delinquent on 2 or 3 of those items they will probably reduce your credit score more than they have in the past," Gilligan said.

Currently Fico credit score is just by 90 percent of Banks here in US. The new credit scoring formula will be in effect from this spring.

Via Link: 13wham.com

Fico credit score or Fako score to use?

We have been aware about Fico score the credit score developed and administered by a company Fair Isaac. Most of lenders and creditors use Fico score to decide whether to give you credit or not. With Fico score, there is one more credit score that is Fako score heard about quite often. We need to know what these credit scores are actually and which one is best and right for us to go for.

Let’s discuss it. Credit score is a generic term that is used to refer to numeric value given to your credit history. Our credit score is calculated on the basis of information available in our credit report.

There are many companies in the market today that sell credit score. All of three major credit reporting agencies Equifax, Experian and TransUnion have their own version of credit score. Exuifax has created Plus, Experian Beacon and TransUnion has developed Empirica.

Fako score is the term used for a score that is not Fico score. Fako score is that we obtain from individual credit reporting agencies Equifax, Experian and TransUnion. If you have purchased your credit score from anywhere but myfico.com, then that score is Fako and not Fico. Fako score is hardly used in credit industry and that’s why people call them Fako score – fake score.

Both Fico and Fako use inquiries from your credit report to calculate your credit score. Fico uses the inquiries made in the past year and Fako uses the inquiries that are made in the past 2 years.

All of creditors and lenders use credit score from companies they have business relationship. It can be credit bureau’s credit score or fico score or lenders own credit score. If you are aiming at improving your credit score then use Fico as your basis. If you are able to improve your fico credit score, all of other credit score will also automatically improve.

It is always a good idea to check credit report before applying for new line of credit. Fako scores are useless and Fico score will only give the true picture of your credit score.

Shopping more without dropping credit score with 14 days rule

Credit inquiries will not have much impact on your score much if you are able to make all of your shopping in a shorter period of time. Suppose I make some shopping on the April 1 and the lenders will have my credit score that day. In case I make some more shopping in April month, then all those inquiries will not have an affect on my credit score. But the inquiries that are making in the past months will still be counted.

Credit inquiries that are made in 14 days period will be counted as one. Suppose you made lots of shopping from April 1 to April 14, all of those inquiries will be counted as one. And in case you spread all of your shopping from April 1 to April 28, all of those inquiries will be counted as two. So you are going to harm your credit score in case you spread your shopping to many months.

But recently 14 days period rule was extended to 45 days rule in the new version of Fico rating system. It is up to the lenders whether they want to go for 14 days rule or 45 days rule. But from the customers prospective, still 14 days rule is in progress.

There can be some situations when you have to shop at different times. But to minimize the adverse effect on your credit score, try to make all of shopping in 14 days period or less.

Credit report freezing fee for Georgia consumers

According to a bill passed by Senate, Georgia consumers could pay a fee to freeze their credit reports. Senate Bill 361 would allow the bank officials to decide how much the credit report freezing should cost.

The House passed a similar bill in late January, capping the cost at $3. In case the two chambers agree on a compromise and also require Governor Approval, Georgia will be the 40th State to pass a law to freeze credit report. Credit reporting agencies have been demanding higher fees for this service.

Texas consumers have the lowest credit score

Report from a Credit research group shows that the Texas consumers have an average credit score that is 26 points lower than the national average credit score. Texas average credit score for six month period that ended in July, 2007 was 666 compared to 692 the national average.

Approximately 27 percent of people find their credit score decreasing during the study period with less than 1 percent finding their credit score down by more than 100 points. 41 percent of consumers were able to maintain their existing credit score and 33 percent of consumers were able to increase their credit score.

3 out of every 10 US customers were able to increase their credit score by 50 points in the six month period as indicated by Experian National Score Index. 33 percent of consumers improve their credit score by 50 points in the States of North Dakota, South Dakota, and Vermont.

What our credit score includes?

Our credit score is a three digit number and its range varies from 300 to 850. Our credit score is a big indicator of how we are paying our bills and whether we will have problems in getting new credit or will get it with ease and with lowest of interest rates. Credit score is calculated using the information available in our credit history.

When we apply for new credit, the creditors and lenders check our credit score to determine our credit history. By viewing your our digit credit score, the creditors just decide whether to give us new credit or not. The creditors and lenders can decide the same thing by viewing our credit report. But checking our credit score make their decision making process quite easy and less subjective.

Although there are many versions of credit score available. But the most commonly used version is Fico score developed by Fair Isaac Company. Today Fico score is used by many creditors and lenders before making decision about providing new line of credit or extending the existing credit to the customers.

There are many parts of your credit history that taken into consideration when calculating your credit score. There are some parts in the credit history that are more important than the other one’s like your payment history. Here is the list of information that is used to calculate credit score with their percentage of use:

• Payment history 35 percent: 35 percent of your credit score is determined by your payment history. Creditors and lenders are more interested in knowing how you have paid your bills in the past. If you are paying your bills late then they look at how late they are. Your late payments, collections and bankruptcy all affects the payment history part of your credit score.


• Your debt level decides 30 percent: How much you are currently in debt deciding the 30 percent of your credit score. The amount of debt you have taken in comparison to your credit limit is known as credit utilization. The higher the credit utilization you have, the closer you are to your credit limit and more lower your credit score will have. And if the case is reverse, you will have higher credit score. The best key will be to keep your credit card balances to 30 percent or less to that of your credit limit.


• Length of credit history determining 15 percent: the length of your credit history determines the 15 percent of your credit score. In general, the longer credit history is in favor of the customers and will help them in increasing their credit score. When you have a long credit history, the creditors and lenders will have better idea about your spending habits and paying habits as well. Thus factor also look at the age of your credit accounts and how long you have been using your credit accounts.


• Credit inquiries 10 percent: approximately 10 percent of your credit score is determined by how many credit accounts you have established. This factor take into consideration the number of accounts you have, their age, your requests for new credit and the length of time since credit report inquiries were made by potential lenders. Every time we apply for a credit, an inquiry is added to our credit report and remained there for the next two years. When we make too many applications for new credit, that indicates that we are in dire need of credit or are in some form of financial problems. Credit score take into consideration the inquiries made within a year.


• Mix of credit is 10 percent: approximately 10 percent of your credit score is based on overall mix of credit cares, loans, installment loans etc. The more balanced this credit mix is, the more credit score you have. In case you have different kind of accounts that’s in your favor as that indicates that you have experience in handling mix of credits.

Credit report freezing benefits and drawbacks

A credit freeze is a tool available to people here in US where they can block their credit report so that it becomes really hard for the identity thefts to get new credit and open new accounts by your identity. When you have set the status freeze on your account, no one even you cannot open an account by your name. Even the creditors, lenders and employers will not have access to your credit files. There are some benefits as well as freezing down your credit report:

After adding the freeze status to your credit files, your identity will have higher level of protection. In fact credit freeze is a good way to protect you against identity thefts. There are many drawbacks to this security freeze but this advantage may be worth enough to go for it.

1. Freezing of credit report is a time consuming and expensive process. You have to provide many certificates and pay $10 to each of the credit reporting bureaus.


2. In case you need credit or open new account, you will have to request the credit reporting bureaus to lift the freeze status on your report and once you have established the credit you will again have to ask them to refreeze your report. All this process will be time consuming and also have to pay more fees.


3. The security freeze will not stop the pre-screened credit card offers.


4. Existing creditors still will have access to your credit files and can send you promotional offer about their products and services


5. Freezing of credit report could also create some inaccuracies in your report when the companies' tries to update account information have problems in accessing your accounts.


6. Credit freeze cannot stop an individual to buy items from a stolen credit card number. Some critics consider credit freeze just a problem fro the consumers where they will not be able to apply for a credit card, or a loan or refinance a mortgage without lifting the freeze on their credit report and lifting the freeze will take time and money both.

Steps to follow for getting free credit report via phone

In case you are not willing to get your credit report online, then getting it via phone will be the best option. When you get from credit report via phone, you will be able to escape from hundreds of fraud website on the Internet that claims to be providing you credit report for free. Here is the exact process you have to follow to get it via phone:

1. Make a call to the number 1-877-322-8228 from your phone


2. With this type, you will have to provide some information about you like your name, current address, social security number, birth date


3. Once your identity verification has been completed, you have the option to choose which company credit report you want to get


4. When you chosen the companies/company credit report you are willing to get, will get it via mail within next four to five week time

Some tips to keep your credit healthy

• You should be sure that the information available in your credit report is accurate. Get a free copy of your credit report from all of three credit reporting agencies.


• Keep your credit usage to than 20 to 30 percent of your credit limit


• Think of keeping some credit cards with higher level of credit limits. In case any of your card issuer increases the fees or changes the terms, you have the option to transfer your balance to another card and stop using that/those cards.


• With high level of credit limit, you will be able to protect your credit score as the reduction of some credit by the card issuer will not look as if you are maxing out on your credit

Via Wall Street Journal

How to get your credit report via mail

Consumers often ask where they can get a copy of their credit report via mail. There is a provision in FACTA; consumers, who are not willing to get their report online, can get it via phone or mail. Follow the following steps to get your credit report via mail:

1. Download the PDF document (Require Acrobat Reader) available here


2. Take print of this document


3. Fill in all the information required in this form


4. Then send it to
   Annual Credit Report Request Service
   PO Box 105281
   Atlanta, GA 30348-5281


5. Your credit report is being processes in 15 days time and then mailed to your mailing address.

Getting free credit report online

Getting free credit report online is the easiest way to get it. You can’t obtain it from the individual credit reporting agency website. You have to visit the official website set by these agencies to get your credit report. Here the steps that one has to follow to get his free credit report online:

1. Visit www.annualcreditreport.com. This is the only authorized website for getting free credit report


2. From the window in the middle of the page, just below the "Start Here" select your state from the drop down menu available.


3. After selecting your State, press the "Request Report" button available


4. Then from the page that appears, fill in all the personal information required. In case you are staying at the current address for less than 2 years time, then you have to provide the information about your previous address as well


5. Then press the "Continue" button available at the bottom of the page


6. Select the company or companies from which you are interested in getting free credit report from the page that appears next. You have the option of getting free credit report from each of three credit-reporting bureaus once every 12 months.


7. It is a good idea to have your financial records in hand as the company you are willing to get credit report may ask your financial information to verify your identity.


8. The companies will offer you some other additional services with some fee. You should not go for these services except you really need them.


9. Then press the "Accept" button to admit their service agreement.


10. Now you have your free credit report available for print