The Vantage Credit Score is again making the news. What is it? It is a credit score that has been developed by the three major credit bureaus: Equifax, Experian and Trans Union.
It was designed by the bureaus to try to solve two problems. One problem was credit scores varying by up to 50 points depending on which credit bureau you used. And to eliminate which credit score you received.
It is a common myth that there is only one credit score. Currently, there are at least three different scores depending on where you requested the score from and what you requested. The most commonly used score is FICO, developed by the Fair Isaac Corp.. All three credit bureaus can provide this score, but two of the bureaus have their own score. Experian and Trans Union have their own credit scores Plus and True Choice respectively. If you request a credit score from Experian, are you getting a FICO credit score or a Plus score?
The other unspoken reason I think the credit bureaus are designing their own credit scores is to cut the Fair Isaac Corp. out of the picture. I do not have information on how the credit industry works, but I would be willing to bet your money that the credit bureaus must be paying the Fair Isaac Corp. to use the FICO formula. If they can stop using their formula, they can stop paying them money.
It's too early to tell if the Vantage Credit Score will catch on and replace FICO as the industry standard. The final decision will be made by the nation's lending institutions. What they decide to use will be what the credit bureaus provide.
Remember, if you’re not working the system, it’s working you.
PapaJoe
credit score reportsEquifaxExperianfico credit scorepersonal credit scoreTransUnionvantage credit score
True or False?
Once I have all of the information from my credit report, I still cannot calculate my own credit score.
True.
The Fair Isaac Corp., which designed the FICO score, has issued guidelines regarding which factors are included in your credit score.
These are:
But they have not, and probably never will, given a breakdown on how each factor is calculated. For example, 10% of your score is for the type of credit used.
But some unanswered questions are:
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Do I need to have a mortgage to get the maximum score in this area?
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How many installment loans is the right amount?
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Do I get penalized for having too many or too few credit cards?
That's enough to give you the idea. Even though you can't calculate your exact credit score, you can still manage your credit score. By using the guidelines you can develop a financial plan that considers these guidelines. The end result should be a higher credit score.
Remember, if you’re not working the system, it’s working you.
PapaJoe
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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?
Even though I pay my bills on time, I still have to check my credit report at least once a year?
True.
Errors on the credit report, especially errors indicating late payments or defaulted credit can severely affect a credit score. Most experts agree that errors in credit reports are very common. And some estimates have the error rate as high as 75%.
According to a July 2004 report by the US Public Interest Research Group, 25% of the reports contained errors that are serious enough to result in a denial of credit.
Remember, if you’re not working the system, it’s working you.
PapaJoe
credit score helpcredit score reportsfico credit scorepersonal 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
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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
