How to Repair Your Credit (Part 3)

Continuing with the How to Repair Your Credit series, today, we’re going to talk about the oh so important credit score, where and where not to purchase it, what makes up your score, what impacts it and what doesn’t. Your credit score may be the single most important number in your life. I like to say that your credit score is your adult report card. Its what you are judged on when you wish to purchase a car, a house, and even car insurance! The higher your credit score the better. But I’m sure you didn’t need me to tell you that!

Step Five – Purchase Your Equifax and TransUnion Credit Score

In my opinion, there’s only more place to purchase your credit score: myFICO (FICO is the acronym of the Fair Isaac & Company). Why? Because it’s the standard credit score in the United States with 90 of the top 100 largest U.S. financial institutions using it to make consumer credit decisions. Its the one that everyone wants to know: home mortgage lenders, car loan officers at credit union, and even your car insurance company. Most in the industry consider your FICO score to be your “real” credit score and refers to nonFICO scores as a FAKOs.

There are hundreds of websites where you can purchase your credit score (I’m sure you’ve heard some of their catchy jingles on television). And they all use different scoring models to determine your score. So the score you receive from those websites may be much different than your FICO score. I’ve seen a difference of up to twenty points! For me, before I apply for anything, I like to know exactly what my score and what the banks will see. I don’t want wonder if it’ll be off by a certain number of points.

A consumer has three FICO scores, one for each credit report provided by the three major credit bureaus: Equifax, Experian and TransUnion. Unfortunately, you can only purchase your Equifax and TransUnion FICO scores. Experian ended its agreement with myFICO.com in 2009. However, you can purchase your Experian credit score on their website, but it is NOT a FICO score. The only people who can pull your Experian credit score is a bank lender when you apply for a mortgage. My husband and I are looking to purchase a house this year and I’m excited about finally learning my Experian FICO credit score. Both Equifax and TransUnion FICO scores are available for $15.95 each.

Additionally, TransUnion and Equifax sell credit scores on their website, but they are NOT FICO scores.

I can hear you now. Do I need to buy both of my Equifax and TransUnion credit scores? The answer is YES!! You need to know what both of your scores are for two main reasons. 1.) They will not be the same score. Inevitably, your two credit reports will have different information on them so they will not be the same. For example, I have a friend who has an old tax lien on her Equifax credit report. But the tax lien is not on her other credit reports. The tax lien is currently making her TransUnion credit score higher than her Equifax credit score by 15 points. 2.) Different businesses/companies pull different credit reports. For example, in the south where I live, when you apply for credit, the businesses here pull your Equifax score and credit report. So important to make sure I know what my Equifax credit score is.

What Makes Up Your Credit Score?

Payment history: (35 percent) – Your account payment information and payment history. Delinquencies, collections, and public records are the biggest destroyers of your credit score. A late payments and collections can lower your credit score anywhere from 30 to 100 points.

Amounts owed: (30 percent) – How much you owe on all your accounts. Credit card utilization is heavily weighted. For example, if you have two credit cards with $1000 limits, but you owe $900 on them, your credit card utilization would be 90%. This is considered high. The desired credit card utilization is below 10%. High credit card utilization can lower your credit score from 10 to 60 points.

Length of credit history: (15 percent) — How long ago you opened accounts and time since account activity.

Types of credit used: (10 percent) — The mix of accounts you have, such as revolving and installment. Credit cards are considered revolving accounts. Student loans are considered installment accounts.

New credit: (10 percent) — Your pursuit of new credit, including credit inquiries and number of recently opened accounts.

**Personal or demographic information such as age, race, address, marital status, income and employment don’t affect your score.

Range of Scores

What number is considered a good credit score? On a scale that usually goes from 300 to 850, it’s generally accepted that any score above 720 is a good credit score. According to the myFICO blog, in 2011, 62.3 percent of people had a credit score between 749 and 300 and most people in that range fell between 650-699 (12.1 percent) and 700-749 (15.5 percent). To help you understand the range of scores, take a look at the credit rating scale below.

• Between 700 and 850 – Very good or excellent credit score
• Between 680 and 699 – Good credit score
• Between 620 and 679 – Average or OK score
• Between 580 and 619 – Low credit score
• Between 500 and 579 – Poor credit score
• Between 300 and 499 – Bad credit score

If your scores are not in the first second categories, don’t worry! That’s why I started this blog, to show you how to increase your credit score by repairing your credit reports. Stick with me, you’ll have the score you want soon!

Next in the How to Repair Your Credit Series: How to Analyze Your Credit Report

Previous in the How to Repair Your Credit Series: How to Obtain Free Copies of Your Credit Report

Picture Source: myFico.com