By Jackie Beardsley
CREDIT SCORE MISINFORMATION IS EVERYWHERE!
WHICH SCORE IS RIGHT???
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THEY ARE ALL RIGHT AND HERE'S WHY
Currently you have the 3 bureaus.
- Transunion
- Equifax
- Experian
- The scores are NOT calculating what you've done in the past.
- Scores are PREDICTING what you might do in the future!
They use the past to predict the future - ALL FICO SCORES ARE DESIGNED TO PREDICT a consumer becoming 90 days delinquent (or more) on a loan obligation within the next 24 months.
All 3 bureaus are supplying the same data to everyone. Credit Karma is getting the same information as the loan officer. The scores are going to be different because they are just an OPINION about the report.
There are 40 different FICO models commercially being used.
EACH industry has it's own specific algorithm, called, an INDUSTRY SCORE.
The models are specific for each industry.
For Example:
- an auto dealer wants to know chances of being late on auto loan.
- credit card companies care if you pay your credit cards.
- lenders are looking for the probability of being late on the mortgage.
COMPONENTS MOST AFFECTING CREDIT SCORES IN ORDER:
- PAST DELINQUENCIES
- DEBT RATIOS
- AVERAGE AGE OF FILE
- MIX OF CREDIT
- INQUIRES
Know and understand your credit! Balance equals liability.
The FICO model uses the % of the credit limit you owe, not the dollar amount.
The balance on cards is EXTREMELY important!!! So, what is the best percentage?
FICO says 30% that's good, however: BEST is 5-10%. IF you are responsible with spending then it's a good idea to get a card with a high limit. If you can keep that balance below 30% of your credit limit that is the best. If you have a card with a low credit limit, however, you maintain a high balance on it every month (even if you pay the balance off) you are going to be considered higher risk for being late with payments.
Late Payments?
Your credit card CLOSE date is very important to know. You are considered late with your credit card company if payment isn't received on the DUE date, however it is not reported late to the bureau until 30 days late. Everything is considered late at 30 days be it a mortgage, auto loan, credit card, etc. Look on your statement or call and ask what the 'close date' is for that account. The DUE date and CLOSE date are different dates. The close date is when they stop the activity for the month on your account and that is when the current balance is reported to the bureau.
If you pay down the balance by the actual 'close date', then it will reflect that nice low balance when it gets reported. VERY IMPORTANT TO KNOW!
Think of it like a snapshot in time. As an example: you have a 3-car garage which are the 3 bureaus. the doors are shut. Once a month they open and a picture is taken then they close. That is what gets reported. It's like a snapshot in time. Watch you balance percentage and focus on the close date when paying down the balance.
If I check my credit on my own is it a hard hit or soft?
Anytime you check your own credit, it is a soft hit.
Do I need LifeLock? That is a personal decision. You are already protected by the Fair Credit Billing Act.
If you would like more information or have concerns with your credit, please reach out to me! Your credit affects so many aspects of your life.
For all of your real estate needs, contact Jackie HERE.
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