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Credit Scores - What are the types and why do they vary?

Posted on: 08th Apr, 2004 11:30 pm
A credit score is a 3 digit number that tells a creditor how creditworthy you are and how likely it is that you'll repay the credit once it is extended to you. These scores affect the interest rates you receive on mortgages, auto loans, credit cards, etc. In addition, when you go for an insurance policy or apply for a job, the insurer or employer may look at your credit scores. Even when you're looking to rent, your landlord would prefer it if you have a good credit/FICO score.

What is FICO score?

A FICO score is calculated on the basis of the FICO Scoring Model developed by the Fair Isaac Corporation. In most cases, when people talk about their credit scores, their FICO credit score is what they mean. Consumers can access different versions of the FICO score at the 2 bureaus - Equifax and TransUnion. These scores are known as the Beacon score and Empirica score.

Consumer FICO scores calculated by Experian are sold to lenders only and consumers can't access them. However, consumers can find their credit scores (based on Experian data) online at Experian. They can even request a free credit report from Experian, just like from other bureaus.

What is a good credit score?

Usually FICO credit scores range from 300 to 850. The higher your score is, the lower the risk to the creditor is when offering you a loan. A FICO score equal to or above 700 is considered a good credit score which will qualify you for some of the best deals at affordable rates.

What is a credit score chart?

A score chart helps you get an idea of credit score ratings based on the credit scores you have. The credit score chart is given below:
  • 730+ - Excellent
  • 700 - 729 - Good
  • 670 - 699 - Needs a closer look
  • 585 - 699 - Higher risk
  • Below 585 - Limited credit history

Can you get a free credit score?

Under the Fair Credit Reporting Act (FCRA), anyone is entitled to a free copy of their credit report once a year from each of the bureaus; but free credit scores are not available. You'll have to place an order with the bureaus and pay a fee (set by the Federal Trade Commission) if you'd like to get your credit score. You may apply for your credit scores online at www.annualcreditreport.com or contact them at their toll free number 877-322-8228.

What is the Credit Scoring system?

It's a system where the credit bureaus figure out your scores based on the information that is available from your credit report. The bureaus use a statistical program to compare the loan repayment history of consumers with similar profiles. Then they award points for each item that helps find the consumers who can easily pay down a debt. The total number of points adds up to your credit score.

Why do credit scores or FICO scores vary?

The major credit bureaus - Equifax, and Trans Union follow the FICO scoring model (developed by Fair Issac Corporation) to calculate a FICO score. But scores differ because they use minor variations in the FICO Scoring Model as well as assign different points to each item on your credit report.

Not all lenders/creditors and collection agencies will report your credit information to the same credit bureau. Therefore, the credit score you get from one bureau may differ from what you receive from another. In addition, your credit scores changes from time to time based on your credit transactions. So, make sure that your creditors update the bureaus with your latest credit details.

Do credit score ratings differ?

Credit ratings may vary from one lender/creditor to another depending upon the items (such as late payments on revolving accounts, mortgages, credit card balances,) they consider after reviewing your credit report. For instance, an auto loan provider may leave out an item that a mortgage lender would consider while providing credit score ratings.

Is Mortgage Credit score similar to the regular score?

Mortgage lenders consider the median score - the one that comes in between the maximum and minimum scores you receive from the bureaus. But often lenders may not use the median score in order to evaluate your creditworthiness because the credit report you pull from the bureau is based on the Consumer Model, where your lender may prefer to calculate the score using a different scoring system - the Mortgage Model.

The information used for both Models may be the same but the importance given to each tradeline account may vary. The Mortgage Model gives more emphasis to the tradelines that can affect your mortgage loan. Thus, your chances of getting a mortgage at a favorable interest rate may depend more upon your mortgage credit scores instead of your regular score.

Are there alternatives to FICO scores?

Apart from the FICO Scores, there are Alternative scores developed for consumers with poor credit. The Alternative scores are based on your payment history, outstanding loan balances, the type of credit accounts you have, and other factors.

As lenders pull your credit report from different bureaus, every lender will probably show different scores. Therefore, you won't get the same offers from different lenders. To avoid these discrepancies, the Vantage score has been introduced. A Vantage score ranges from 501 to 990 and is calculated the same way by each bureau thus giving you the same credit score, provided similar information is reported to each bureau

With the increase in the number of consumers who find themselves delinquent on their bills, lending standards have gotten tighter. Therefore, qualifying for a loan has become harder, especially if you don't have a good credit report or score. Especially when it comes to getting a mortgage, even those that are not supposed to be score driven require you to have a minimum 580 credit score. So, it's important to protect your credit standing and maintain a good score.

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Related Discussions
Will they automatically take them off after you have paid them if you file a dispute? I have like 3 that I have paid off and would like to have them remove from my report. Have you had that happen, will they remove them?
Posted on: 19th Mar, 2008 08:07 am
I just went to my report with experian and diputed the ones that I have paid in full.
Posted on: 19th Mar, 2008 08:21 am
OK, if you have paid them and they still exist, then request the bureau to remove it. You may to write a letter for this. But in general, such accounts are automatically deleted once you pay off the debt.
Posted on: 20th Mar, 2008 05:29 am
It was actually my son's credit I was thinking of. He had a cell phone and lost his contract because he lost his job.They turned it over to collections. As of yet he still cannot afford to pay the what they charged him for ending his contract before it ran out.I really don't know if they put it against his credit I am assuming they have.Was wondering if he settles it would they take it off if it was indeed on there. If you pay a settlement and not what was the actual cost will they still take it off?
Posted on: 20th Mar, 2008 01:24 pm
First your son needs to pull his report and see if it is there. Even if it isn't he should try to make some payment plan with the company before it does appear. I think once its on there they still list it but it will also say account paid. It still shows as a negative which isn't helpful. I know it costs alot when you terminate a contract. I hope he can work something out to his benefit.
Posted on: 20th Mar, 2008 03:03 pm
"OK, if you have paid them and they still exist, then request the bureau to remove it. You may to write a letter for this. But in general, such accounts are automatically deleted once you pay off the debt.
"


I have things on there that wer paid a long time ago, they show paid, but they are still there. I am trying the dispute way first.
Posted on: 21st Mar, 2008 03:29 am
I thought they still stayed part of your credit record? Are you getting anywhere with the dispute process Jbarto?
Posted on: 29th Mar, 2008 05:17 am
Just got back some results on my husbands disputes, they say updated on the paperwork that i got in the mail, but nothing has changed on the report, it is still showing one month late on the same bill that it shows under positive as never being late and paid off, does not make any sense to me, I think I am going to have to write them a letter on top of the dispute.
Posted on: 30th Mar, 2008 04:18 am
Do they do a seperate update or is what is there now, the only one that I will see?
Posted on: 01st Apr, 2008 04:02 am
I have no clue on this jbarto. You think it would have reflected on the credit report immediatley. It sounds like a real hassle. You would think the dispute would have cleared it up.
Posted on: 01st Apr, 2008 03:29 pm
I just talked to someone today and he told me that he used lexington law firm to clean up his credit, he said that they wrote all these dispute letters on his behalf to the credit reporting agencies and they removed alot of his negative items. I don't know how this would be any different than when the regular consumer disputes, but he said that it works. Has anyone done this.
Posted on: 01st Apr, 2008 07:28 pm
Never heard of them. Its good though to see someone is getting some positive results. Any price quote on them?
Posted on: 04th Apr, 2008 07:44 am
I have heard the name, I am just curious about what they charge, especially since credit repair has become so popular.
Posted on: 06th Apr, 2008 05:19 am
Credit repair is definately popular. This is why I think people need to be very careful when choosing this option. Look at how popular junk debt collectors became and then look at how many of them are actually creditable. When the good and bad become a mixed bag it quickly becomes a maze.
Posted on: 07th Apr, 2008 04:56 am
I got back some results on mine today, two of them stated update, one is now reading paid in full while the others remains about the same, still have a few more open ones out there so we will see what happens. Hopefully get some more good news. I think having the one state paid in full is a good start, don't know what effect it will have on my score, will have to wait and see. :D :D
Posted on: 13th Apr, 2008 05:10 am
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