With the current state of the economy and the credit industry, lenders are now requiring even higher credit score ratings than before to get the best rates. So a common question among would-be borrowers is, "How do I check my credit score?"
Most people have gotten the word that they are entitled to a free credit report from each of the three Credit Bureaus (annualcreditreport.com) each year. But do you know if you can check credit score for free?
Unfortunately, it's not free. But you can get your FICO credit score (along with 1 credit report) for $15.95 at myfico.com.
Remember, if you’re not working the system, it’s working you.
PapaJoe
Credit Score Checkcredit score ratingsfico credit scoreFree Credit Reportfree credit score
Q My credit score is 685. Is that good?
A Yes, your score falls with the "good" range of a FICO credit score. And you will probably be approved for a loan. But you will probably have to pay a higher interest rate than someone whose credit score falls within the FICO "excellent range". Check the credit score distribution chart below to see what percentage your score falls in compared to the rest of the country.
Credit Score Distribution
<-499 2%
500-549 5%
550-598 8%
600 - 469 12%
650-699 15%
700-749 18%
750-799 27%
800+ 13%
For more information on the FICO credit score ranges, see my October 20, 2006 post, FICO Score Range. And see my January 4 2007 post, FICO Credit Score Range, for more information on loan interest rates.
Remember, if you’re not working the system, it’s working you.
PapaJoe
credit score ratingspersonal credit score
A recent encounter with a friend reaffirmed my belief that managing your credit score is a critical and ongoing process. A friend had approached me to find out what she could, and should do to fix her credit score. I was surprised because she had always taken pride in having a good credit score for someone her age. So I asked, "What happened?"
She explained that in the process of moving to a new address, one of her credit card bills did not get forwarded. As a result she missed a payment on one of her six credit cards. Then the evil face of Universal Default popped up. Very simply put, Universal Default is a provision in a credit card agreement that says if you miss a payment with any creditor, that they can consider it a missed payment on their account and can adjust your interest rate. In her case, all six cards raised her rates. She went from having interest rates ranging from 0% to 9.99% to rates ranging from 21% to 25%. Her minimum payments increased dramatically and caused her to miss more payments. And a bad situation became a disaster within three months.
Some warnings to take from her situation:
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Have a list of all your bills and their due dates and mark them off each month as you pay them. This way if you never get a bill, or you lose it, you still know it needs to be paid and can get it paid on time.
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Don't drop and add credit cards to save a couple of dollars. Her experience was the creditors who were most willing to work with her were the ones that she had a longer history with.
- All other things being equal, pick and use the credit cards that do not have the Universal Default provision. The only problem with this is the credit card companies can change these provisions whenever they choose. i.e. they can add the Universal Default provision at any time.
A closing thought: It is your responsibility to pay your bills on time every month, bill or no bill.
Remember, if you’re not working the system, it’s working you.
PapaJoe
credit reportcredit score ratingsfico credit scoreunderstanding your credit scoreuniversal default
True or False?
I pay my MasterCard bill on time every month, therefore they cannot contractually raise my interest rate.
This is False if there's a provision in my contract called Universal Default. Quite simply it states, "If you fall behind on any payment in any account they can consider it falling behind on their account." That could include medical bills, utility bills, rent, etc. Your interest rate could go from low and reasonable to 25% or more.
Not all credit cards have Universal Default. When choosing a new credit card or deciding which credit card to keep or cancel, read the small print. Obviously choose the credit card that does not have Universal Default. The last number I saw said 45% of credit cards do not have Universal Default. They can change that anytime they want. So when they send you that notice saying your contract has changed, read the small print to see if Universal Default has been added or deleted.
Remember, if you’re not working the system, it’s working you.
PapaJoe
credit score helpcredit score ratingscredit score reportsficofico credit scoreunderstanding credit scoreunderstanding my credit scoreunderstanding your credit scoreuniversal default
True or False?
It is against the law when it comes to credit to discriminate against me because of my gender.
True.
Federal law prevents the credit industry from discriminating against you because of your gender, national origin, age, marital status, or the receipt of public assistance.
However, federal law does not specify what factors are to be used in determining your credit score.
The guidelines used by FICO are:
Your credit score is based on:
Remember, if you’re not working the system, it’s working you.
PapaJoe
credit score helpcredit score ratingscredit score reportsfico credit scoreunderstanding credit scoreunderstanding my credit scoreunderstanding your credit score
True or False?
You have no business relationship with this credit institution, but ABC Bank can pull your credit report without your approval?
True.
Credit institutions can pull your credit report without your approval. The logic here is they are reviewing your credit to determine if they want to market financial products to you. These inquiries, are called soft inquiries, and do NOT impact your credit score. Hard inquiries are when a financial institution reviews your credit report because you have applied for credit. These hard inquiries do affect your credit score.
Your employer, or prospective employer do need your approval to check your credit report. These inquiries do NOT affect your credit score. You have probably given your approval if you have completed a job application or filled out all of those forms during new job orientation.
More fun tomorrow.
Remember, if you’re not working the system, it’s working you.
PapaJoe
credit score helpcredit score ratingscredit score reportsfico credit scoregood credit score rangeloans credit scorepersonal credit scoreunderstanding credit scoreunderstanding my credit scoreunderstanding your credit score
While perusing the internet I ran across a true and false quiz regarding credit scores. As strange as it may sound, I found taking the quiz to be fun. So let's have some fun.
True or False
Your embarrassing credit score can be fixed by paying off your debt?
False.
Paying off your debt will definitely not hurt your credit score, but it will not be a miracle cure. Four of the factors that go into calculating your credit score are not influenced by how much money you owe.
So, these four factors will not change if you pay off your debt. One criteria however, how much you owe, will be positively impacted, but not enough to be a miracle cure for your credit score problem.
Come back tomorrow to have more fun with the next question. Remember, if you’re not working the system, it’s working you.
PapaJoe
credit score helpcredit score ratingscredit score reportsfico credit scoregood credit score rangeloans credit scorepersonal credit scoreunderstanding credit scoreunderstanding my credit scoreunderstanding your credit score
Recently I was approached and asked to help design a plan to help fix this person's credit score. He told me his credit score recently dropped from the mid-700's to under 600. The financial situation that caused this has been resolved and his goal now is to fix his credit score. He was confused by the different advice he had been given by several other people. i.e. Transfer the credit card balances to one credit card and cancel the rest, and pay the minimum balance on the credit cards and then pay cash for everything else. He was not aware of how his credit score was calculated. So I explained the guidelines, which are:
When I started to ask some questions, such as:
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"How many accounts on your credit report are showing a late payment?"
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"What are the credit limits on your credit accounts?"
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"How much disposable income do you have to put toward your debt?"
The answer to all of these questions was, "I don't know."
At that point, I realized that developing a plan to fix his credit score was putting the cart before the horse. First, I told him that he needed to develop a budget to determine how much money he had to put towards his debt. Second, he needed to get a copy of his credit report. Third, he needed to develop a financial plan, set goals on what he wanted to accomplish. i.e. Have the debt from the credit cards paid off in two years. Then he could look at the different possible ways to accomplish this goal. And finally he could evaluate the different possible ways of accomplishing the goal and pick the one that had the most positive impact on his credit score.
Remember, if y
