NOT HEEDING THE ADVICE: “KNOW THY CREDIT SCORES”
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Many, many consumers confuse their CREDIT REPORT with their CREDIT SCORE. A credit report is not a credit score. A credit score is not a credit report. Your credit score is usually not reported on your credit report. You have to purchase your credit score separately from your credit report.
Many, many consumers tell me that they have a good credit score. And I ask them, “What is your score? Have you seen your score?” 50% of the clients who tell me they have “good credit” cannot tell me their credit score because they have never seen it.
NOT KNOWING THAT YOU HAVE MORE THAN ONE CREDIT SCORE
There are 3 major credit bureaus. Why are there 3 credit bureaus versus 4 or 5 or 6? The answer is found in the laws of the marketplace because that’s how many major credit bureaus have emerged. And each credit bureau has a credit score for you.
Equifax has a Vantage Score.
TransUnion has an Empirica Score.
Experian has Experian/Fair Isaac Risk Model.
However, the Credit Bureaus didn’t create the credit scores. A company by the name of Fair-Isaac Company created credit scores. Now it sounds like with the name “Fair-Isaac” that it’s going to be “fair,” and the name “Isaac” has this Biblical overtone and, therefore, you would say that the scores are “fair” and “truthful.” Mr. Fair was a statistician and an engineer as was Mr. Isaac, who formed a statistical modeling company called “Fair-Isaac Company” or abbreviated to “FICO,” and consequently, your credit score is called “Your FICO Score.” Fair-Isaac is listed on the New York Stock Exchange and is capitalized at 2 billion dollars. FICO provides the software for the credit bureaus to render a credit score.
Credit scores have been developed by Fair-Isaac Company and consequently your credit score is called a “FICO” Score, which is your Fair-Isaac Company Score.
Now here’s a very, very important tip. Credit lenders, banks, mortgage companies, credit unions, auto financing companies use your FICO scores in making credit lending decisions. Therefore, you must purchase your FICO scores.
NOT ORDERING YOUR CREDIT SCORES
BUREAU: FICO
TOLL: NONE
COST: [unclear in source]
WEBSITE: WWW.MYFICO.COM
COST: [unclear in source]
BUREAU: TRANSUNION
TOLL: 1-800-888-4213
COST: $4.95
WEBSITE: WWW.TRANSUNION.COM
COST: $39.90
BUREAU: EXPERIAN
TOLL: 1-888-397-3742
COST: $6.00
WEBSITE: WWW.EXPERIAN.COM
COST: $9.95
BUREAU: EQUIFAX
TOLL: 1-800-685-1111
COST: N/A
WEBSITE: WWW.EQUIFAX.COM
COST: $44.85
Experian includes your credit report and credit score for $9.95 and you must use a credit card. If you do not cancel your subscription, your credit card will be billed $9.95 per month for 1 year.
Credit lenders will take all 3 FICO scores and average them for lending purposes. You need all 3 credit scores and the best deal for obtaining your credit scores is: WWW.MYFICO.COM.
You also will be given with the WWW.MYFICO.COM report the reasons or areas for improvement that will increase your credit score.
After spending hours trying to figure out the best deal and the complications of ordering individual credit scores versus using WWW.MYFICO.COM, I assure you that you will be better off just using WWW.MYFICO.COM for your credit scores and then order individually your credit reports from the Big 3 Credit Bureaus.
To use the website, myfico.com, you will need a credit card and an email address. You give yourself a password and then have access for a period of time to the website. You should read the entire website and print out every page which pertains to your credit score, and establish a separate file with the information.
NOT KNOWING HOW TO “SHOOT FISH IN A BARREL”
How do you “shoot fish in a barrel” when trying to improve your credit score? Answer: Put the fish in a barrel.
Consumers go to the altar of credit, bow, and kneel. They pray that they will be accepted by the gatekeepers. They are humble and frightened. They simply do not know how to “shoot fish in a barrel.”
Before you apply for credit, obtain answers to these questions as follows:
- What is the FICO Score needed to be granted credit? Ask the credit lender. If they don’t tell you, don’t apply.
- What credit bureau or bureaus does the credit lender use before credit is granted?
- Does the credit lender or credit grantor have different rates for different FICO scores?
- If you have a good credit score (above 625) but have a bankruptcy, foreclosure, etc. on your credit report, how does the credit lender treat that information?
Even though your FICO scores qualify you, will you still be rejected because you have bankruptcy on your record?
“SHOOTING YOURSELF IN THE FOOT”
When you apply for credit, the credit lender makes an inquiry to your credit report. The inquiry will remain on your credit report for 2 years. And if you have been denied credit, you have “just shot yourself in the foot.” Frankly, an atomic explosion has been detonated on your credit report.
Do not apply for credit until you KNOW THE CREDIT GUIDELINES of the credit lender. If you know that you don’t meet those guidelines, do not apply. Another old saying that comes to mind is: “Look before you LEAP?”
If you are at a department store and they tell you that you’ll get 10-15% off the purchase price if you sign for their credit card and it’s all being done on the spur of the moment, do not do this on a wild-cat basis. First, even before you go shopping at a major store, call them. Ask for their toll-free number to obtain a credit card.
Call that number and talk to someone who knows the policies for granting credit. Get those guidelines before you apply. Don’t walk into a store and on the spur of the moment, because the sales clerk is presenting you the opportunity to get 15% off the sale price, apply for credit. Do your homework and research and that’s how you don’t shoot yourself in the foot.
NOT KNOWING THAT YOU CAN BE CLASSIFIED AS A CONVENIENCE USER OF CREDIT CARDS
A convenience user of a credit card pays off the credit card every month and never has a balance owed. But actually you get more credit point scores by not paying off your credit card every month. That’s right. It costs you in interest charges but it’s best not to pay off your credit cards every month. It’s actually best to carry a balance of no more than 25% of your line of credit on your credit card. Let’s say your credit card is good for $1,000. You should never have the balance go over $250.00 and instead of paying off the balance every month, it’s best to pay 1/2 of the balance each month for two months @ $124.00. Then, of course, pay it off completely.
I would recommend a pattern of paying off your credit card balance every month but for one or two months, let a small and modest balance remain on your account. Then pay it off completely and ahead of time. And then for the next quarter or 3 months, do not carry any balance on your card. Yes, you should bring the balance down to zero but it’s good to demonstrate that you have the financial ability to carry a reasonable balance on your credit cards for one or two months.
Do not carry a balance on your credit card for more than 2 months. Always bring your account balance down to zero. Also, you must be scrupulous in paying ahead of the due date. I can’t emphasize the importance of this simple strategy. I recommend that you make your payments at least 5 days before the due date and check every month that they properly posted your account. If you can pay on-line, this can insure that your payments are on time or ahead of time.
USING YOUR FULL LINE OF CREDIT IN ANY ONE MONTH
If you have a credit line on a credit card of $2,000 do not use the card to its maximum of $2,000 in any one month. Do not ever go over $1,500 on a credit line of $2,000. When you go to the maximum on your credit, you’ll be perceived as “risky” or “unstable”. If you do use the credit card for the maximum credit limit in one month, pay it off immediately. Remember, Connecticut is the land of steady habits.
NOT REALIZING THAT NOT ALL CREDIT UNIONS WILL HELP YOUR CREDIT SCORE
If a creditor does not report your excellent payment history to at least one of the 3 major credit bureaus, your FICO credit score will not reflect those payments. A creditor does not have to report your payment history to a credit bureau and if they don’t report your timely payments, you get no credit amplification to your FICO score.
Some credit unions do report to credit bureaus. You have to check to see if your credit union reports your financial history to the 3 credit bureaus before you agree to a loan. If one of the primary reasons for borrowing the money is not only to buy the car but also to improve your credit score, then it makes considerable sense to ask a loan officer if your payment history is reported to the credit bureaus. Ideally, they report to all 3 credit bureaus.
There’s a balancing act here. Say the only place you can get a car loan is at a credit union but they don’t report to a credit bureau. Then you have no practical alternative but to go with the credit union. But if it’s a choice between a slightly higher interest rate which would be reported to a credit bureau and a lower rate of interest which won’t be reported, I would recommend that if you are trying to improve your credit score, it’s worth the extra cost to go with the higher interest rate. However, please shop until you can get a competitive rate which will report your good payments to a credit bureau.
NOT UNDERSTANDING HOW DANGEROUS IT IS TO CONSTANTLY APPLY FOR LOANS
If you are applying for loans in order to obtain more favorable interest rates every week of the year, and especially if you get rejected for loans, this creates havoc with your credit score.
However, if you know that you are buying a car and you make 4 applications within a 2 week period, it has been reported that FICO will treat the 4 applications or inquiries as 1 inquiry. It makes sense to know what you want and to group your applications for credit within a 2 week period.
DO NOT USE RE-SELLERS OF CREDIT REPORTS TO OBTAIN YOUR CREDIT REPORTS VIA THE INTERNET
Many people order their credit reports from a company which provides all 3 of your credit reports in one report. This is called a merged credit report because all 3 credit bureaus are merged into one report. Also, it’s been reported that ordering this way can actually lower your credit score.
I highly recommend that you order your credit reports directly from the 3 major credit bureaus for several reasons:
Presently, under Connecticut law you can order your credit reports direct via US mail from the 3 credit bureaus for $15.30. TransUnion charges $5.00 and Equifax charges $5.00 as per Connecticut law.
Experian charges $5.30. When you order credit reports through the Internet or through a company which provides all 3 credit reports, you’ll usually pay between $29 to $35. And actually, the credit bureaus themselves charge more for their credit report when you order it through the Internet.
The Internet in this case is bad consumer shopping.
The merged credit reports which you order on the Internet are not as complete as the individual credit reports which you receive in the mail.
The merged credit reports from the Internet are more difficult to read than the credit report you receive in the mail.
When you order your credit report directly from each credit bureau and receive it in the mail, there’s not much likelihood that it will act as an inquiry on your credit report.
When you call the credit bureaus’ toll-free numbers, you can press a button which indicates that you have been rejected for credit. Many times, due to inquiries on your credit report, you’ll be mailed a copy of your credit report for free and it will arrive even quicker than if you had mailed a request for a copy of your credit report.
860-449-1510