Credit Scores 101 -- Understanding Your Credit Score

Understanding how your credit score is calculated can help you improve your credit score, and pay less money in interest on the credit you are offered. A lot of people treat their credit as if it doesn't matter. That's like telling the grocery store clerk, I know it's only $100 worth of food, but I want to give you $200 instead!

Your credit score is important, and a bad credit score will cost you thousands, possibly tens of thousands, of dollars over just a few years time if you don't maintain a good credit score.

Three Major Credit Repair Bureaus

These are the three major credit bureaus (aka credit reporting agencies): Equifax (EQ), Experian (EX), and TransUnion (TU). You’ll need to find out all three of your FICO scores to properly grasp your overall credit picture.

What is the range of FICO scores?

FICO (aka Classic or BEACON) scores can range from 300 to 850, but the majority of scores usually fall within the 600s and 700s.

FICO, FAKO, HUH?

FICO, FAKO, Credit Score, PlusScore, ScoreX, Vantage are all the same right? WRONG!

FICO = The score lenders use and the only score you care about.

FAKO = Any score that isn't a FICO. Most people like to buy the ScoreWatch product because you can quite often get updates as to your current EQ FICO score. myFICO Identity Theft Security Deluxe is similar to Score Watch except that is monitors TU. There is no FICO monitoring service for all three credit reporting agencies.

ScoreWatch

myFICO Identity Theft Security Deluxe

www.myfico.com sells FICO scores for EQ and TU.

**Update** July 2013, EX FICO scores are now available too.

www.truecredit.com or www.transunion.com sells FAKO scores only.

www.transunioncs.com used to sell FICO (TU score only) but no more.

Two Reasons You Can't Get a Score from MyFico

There are generally two reasons why you might not be able to get a score from MyFICO. Your score does not contain enough positive data to calculate a score, or there is a fraud alert on your file.

• Classic or BEACON FICO scores are generally the best indicator of credit-worthiness and a good overall indicator of where your credit (mortgage, credit card, auto,etc.) stands.
• Credit card enhanced (or bankcard enhanced scores) are specific indicators of credit worthiness with regards to credit cards only (not mortgages, auto, loans, etc.).
• Auto-enhanced scores are specific indicators of credit worthiness with regards to an auto loan. Consumers cannot purchase auto-enhanced scores.

Your actual FICO score ranges from 300-850, remember you have three separate FICO scores for each credit reporting agency EQ, EX, and TU.

Scores higher than 720-750+ are ideal. Any higher really doesn't matter. Once you get this high, you have excellent scores regardless.

Also, just because you have your score today doesn’t mean you can walk into the car dealership tomorrow and say “I have an 800+ FICO please give me the APR I want on my loan”, the lender may calculate a completely different FICO score and if you were to pull your FICO score again that day it may be different for you.

Remember, a FICO score is a quick look at the overall status of your credit. It may mean getting a better APR on the credit card you want, but it likely won’t determine whether you get the card or not (your credit report(s) will!).

                                                                                                     -- from http://ficoforums.myfico.com/

If you're ready to explore your options for purchasing a home -- whether you do so with conventional mortgage lending, or through seller financing, or Rent to Own -- Happy Home Solutions can help. Call or Text Adam at 630-697-4500. We always have Rent to Own homes available!