CREDIT COMMON FACTS
Common facts that some fail to realize about credit.
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Many consumers today are quickly learning that:
There is more than one credit score.
Fair, Isaac & Company in California developed the original credit score, known as the FICO® score. However, many credit scores are used by lenders because the FICO® score is so common. In fact, most large financial institutions now develop and tweak their own credit scores–including the three national credit bureaus (Equifax, Experian, and TransUnion). Meanwhile, lenders often use the middle of the three bureau scores when making decisions, if not using a score of their own.
Credit scores change.
Credit scores fluctuate according to the age of accounts, current usage, the number of accounts, and the payment status contained in a consumer’s credit data. In fact, it may take up to 30 years to attain the best credit score because credit histories are not considered mature until they are 15 to 20 years old. Also, credit bureau scores vary; one score may be higher or lower than another.
Typically, credit scores range from 350 to 800. Good scores are usually considered to be 720 or 750 and above. Approximately 20 percent rank between 750 and 800.
Credit decisions are based on many factors, not just credit scores/data. Lenders often consider income, expenses, years on your current job, and educational levels when processing applications for credit. And, lenders often use the middle of three different bureau scores when making decisions.
Three major credit bureaus keep credit histories and generate credit reports about consumers.
The three bureaus are Experian, Equifax, and TransUnion. Your credit data may vary between the three bureaus, and some reports may be easier to read than others.
Residents of Colorado, Georgia, Maryland, Massachusetts, New Jersey, or Vermont are entitled to one free credit report by mail annually from each of the credit bureaus. Also, those denied credit, employment, or insurance are entitled to a free credit report within 60 days of denial.
The Fair and Accurate Credit Transactions Act of 2003 signed by President Bush on December 4, 2003, passed into law each consumer’s right to a free copy of their credit report once a year. Eligibility is determined by a consumer’s state of residence based on the rollout schedule set by federal law.
Credit report data may vary between the three bureaus.
Consumers are often startled to find erroneous information in their credit data. And, they are often shocked to find inconsistencies.
Consumers may dispute incorrect data with the credit bureaus, but only institutions granting credit may make corrections. Some disputes must be addressed to the lending institutions directly.
Judgments, liens, bankruptcies, and other public records are recorded by credit bureaus.
Your credit history may affect more than your financial life, including your career and personal relationships.
When you apply for a job, your credit may be checked. Your credit may be checked to qualify you for overdraft protection as well as to determine your ATM limit. Some insurance companies check their customer’s credit data when considering applicants or even setting premiums.
Meanwhile, errors in credit data or past troubles may not be discovered until couples apply jointly for credit (for example, a mortgage).
Not having at least one credit card and not using credit lowers a person’s credit score.
Lenders do not know how to assess the ability or willingness to repay debts if a consumer does not have or never uses credit. Consumers without credit histories or only minimal credit histories often are called “thin files.”
Using credit wisely improves your credit score.
Always making on-time payments is among the most important factors that maintain and improve good credit scores.
Meanwhile, using several credit accounts, while keeping balances less than 50 percent of each account’s credit limit, is better than using only one account close to that account’s credit limit.
Credit is highly individualized.
Credit is unique to every consumer. Because no two consumers have identical credit, what is good for one consumer may not be so for another, and vice versa.
At QC Credit, we personalize every CreditXpert product to match your own, unique “credit DNA.”
Applying for credit generates “inquiries.”
Any time consumers apply for credit or an installment loan, an inquiry is recorded in their credit data. Recent inquiries (a series may occur when shopping for an automobile, for example) lower credit scores. Meanwhile, pre-approved solicitations that invite consumers to apply for credit or loans are recorded as inquiries but do not lower credit scores until the invitation is accepted.
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