Helping You Avoid Life's Financial Mistakes

What Are The Different Types of Credit Scores?

January 23, 2012 By 2 Comments

What Are The Different Types of Credit scoresNot all credit scores are created equal, not even close. Did you know there are actually different types of credit scores?

Here are the 5 most popular types…

1. FICO

Hands down, FICO is the most popular type of credit score. It was first launched in 1958 and today, well over 90% of the largest lenders use it. All of the best credit cards and loans will take into account your FICO score when reviewing your application.

The FICO range is 300 to 850, but rarely will you find someone near the bottom or top. To put things in perspective, only 2% of Americans have a score between 300 and 499. And to be above 800 puts you in top 13%. The median is reportedly 723.

2. VantageScore

The credit bureaus have to pay Fair Isaac (the owners of FICO) to use their formula. So for that reason, they decided to join forces a few years ago and come up with another type of credit score – the VantageScore – but so far it hasn’t gained much traction.

It runs on a 500 to 990 scale and every 100 points corresponds to a different letter grade; 500 to 600 = F, 601 to 700 = D, 701-900 = C, 801 to 900 = B, and 901 or higher = A. This helps you gauge quite easily how good (or bad) your score is, unlike FICO which doesn’t have a neat breakdown like that.

But does the VantageScore matter? Well it is used by some lenders, but the estimated market share has been pegged at less than 10%. So while it may be a good way to see where you stand, it definitely is not a replacement for knowing your FICO score.

3. PLUS Score

You know those annoying commercials for FreeCreditScore.com? Well, they give you the Experian PLUS Score. If you look in the fine print on their website, you will see this:

Yep that’s right… the PLUS Score isn’t even used by lenders! So I would take it with a grain of salt.

Its scale runs from 330 to 830 which is somewhat similar to FICO, but because this type of credit score model is different, there’s no way to use it for an apples-to-apples comparison with FICO.

4. TransUnion TransRisk Score

Like Experian, the credit bureau TransUnion also decided to develop their own scoring model. They call it the TransRisk score and it runs on a 300 to 850 range. Sure, that is the same as the FICO range, but again you have to remember we are dealing with a totally different formula hear. So just because you have a 730 TransRisk, it doesn’t mean your FICO would be 730, too.

Just like the PLUS Score, this one is yet another so called “educational score.” So when you apply for a credit card or mortgage, the lender won’t give diddly-squat about what your TransRisk number is. The only places that use this are some websites which sell or offer credit scores directly to consumers.

5. Community Empower (CE) Score

Rounding out this list of credit score types is yet another which you will encounter on a few personal finance sites, but lenders rarely use it (Wikipedia says it’s also licensed to banks, but I don’t know of any which use it).

It runs on a 350 to 850 range and probably the most well-known site that uses it is Quizzle.com.

Rather than tying it to credit card offers, you will see this score mostly associated with mortgages. Why? Because the creators for this type of credit score – CE Analytics – use it for Community Empower, a lease-to-own program that is their bread and butter business.

Are You Mixing Them Up?

I have found that on my site CreditCardForum, many people erroneously use these scoring types interchangeably. Obviously that’s a bad thing, since they all use different formulas.

For example, someone might post a comment about the US Airways MasterCard and say “I got denied with an 800 credit score.” This confuses people reading it, because it probably would be assumed that was in reference to an 800 FICO. When in actuality, the poster was referencing an 800 VantageScore… which indeed might not be good enough to qualify for a US Airways MasterCard (nor many other airline credit cards).

So when you check your credit score, not only do you need to know what type you are getting, but you also need to know what types other people are talking about on the forums and blogs. Since there are only two websites which sell FICO to consumers (MyFICO.com and Equifax.com) there’s a good chance the score you are getting is something different.

This guest article was written by Mike, who eats, breathes and sleeps credit on his website. Not only is he constantly updating CreditCardForum.com’s “best credit cards” list, but also stays busy covering topics relating to credit scoring, debt, and other personal finance matters on there.

Filed Under: Credit Reports

Where To Get Free Credit Monitoring At No Cost To You

January 11, 2012 By Leave a Comment

Want free credit monitoring?

I recently received an email from Credit Karma saying that they are now offering a free credit monitoring service on top of their free credit score program.  So in this article I’m going to give you all the details and why you should do this.

Features

With the free credit monitoring services you are going to get a bunch of great tools to help you manage and protect your credit from getting trashed.

  • Email Alerts – First off, as member you will receive proactive email alerts anytime their is a significant change with your credit.  On top of that it will also inform you if you if you are going to be delinquent on a bill or debt that you owe on to help prevent you from destroying your credit.
  • Identity and  Credit Theft Protection –  With Credit Karma they will constantly watch over your credit for any suspicious activity and let you know as soon as something happens.  So if someone decides to open a new credit card in your name without your consent you will be notified immediately.
  • It’s Fee Free Always – As a subscriber with Credit Karma you don’t have to worry every paying for it.  Their are no trial based subscriptions to worry about or a free program and a paid program to upgrade to.  The reason this program is free of charge is because Credit Karma makes their money by selling products on their site such as credit cards, savings accounts, and auto insurance.

How To Get Started

To get started follow my 3 simple steps.

Step 1: Sign up for Credit Karma.  To get started sign up for a free Credit Karma Account.  This will enable you to get your free score and simulator.  To learn more about these features check out my Credit Karma Review here.

Step2: Sign up for free credit monitoring.  Once signed up for an account click on My Profile in the upper right corner.  From there scroll down and click on Credit Monitoring Services.  From there you just have to click the little box to allow them to email you on any changes on your credit report.

Step 3: Relax.  Finally, in the last step you can relax.  Now that your credit and identity are being monitored you can rest asured you won’t get hacked, scammed, or have your identity stolen.

One Final Thought…

As a final thought I would like to mention about this free credit monitoring services is that this program only monitors your credit and identity. It doesn’t fix it if something does happen to you, and their is a big difference between the two.

With this free credit monitoring service they are just merely informing that something my be wrong with your credit and identity.  Fixing the issue will be up to you.

For example, if someone hacks your credit card numbers and tries to open a new account Credit Card account they will not stop them, they will only inform you that someone has done this to you.

So have you signed up for the free credit monitoring service through Credit Karma?  Feel free to share you thoughts, comments, tips, and questions below.

Cheers!

Filed Under: Credit Reports

How To Freeze Your Credit Report In 3 Easy Steps

October 10, 2011 By Leave a Comment

how-to-freeze-your-creditA few years back a close family member of mine was checking out at a local Walmart.  As she packed up here things and left about a half hour later she got a phone call from her credit card provider explaining she had some recent transactions on her card from Las Vages, Sweden, and countless other places around the globe.

From here they stopped all further transactions because her identity had been obviously stolen.  So in this article I’m going to give you a simple way to prevent this from happening you by showing you how to freeze your credit report.

What Is A Credit Freeze

Before I get into the how part of this article you may be wondering what is a credit freeze?  To put it simply, it’s a way to prevent people from opening any new credit in your name.

For example, if someone were to obtain your name, address, date of birth, and your social security number they could easily open a new credit card in your name.  Then these criminals will typically stake out your place waiting for the card to show up in your mailbox.  Once they have the card it will be to late because the next thing you will get is a bill in the mail, and the crimials will be long gone.

However, when you freeze your credit report it doesn’t protect you from all identity theft.  If  someone were to obtain your credit card information they could use it since it is already an existing line of credit, however if they wanted to increase the amount of credit they would not be able to do so.

So now that we know what a credit freeze is let’s see how do you freeze your credit.

Step 1: Guidelines and Fees

In order to freeze your credit you will have freeze it with all 3 credit bureaus, and you will typically have to pay a fee around $3 to $10 to each of the credit bureaus, however if you’re a victim of identity theft you will typically be able to freeze your credit for free.   Below is a clip of what the fees are for Ohio.

feesohio_credit_freeze_fees

If you would like to see what the fees are in your state you can check that out here.

Step 2: Complete The Online Application

Once you’ve determined your states guidelines and and fees on how to put a freeze on your credit report the next step is to complete the sign up application.  Their are two ways fill out the application. The first option is to sign up through certified mail , however this can take some time to do.  That’s why I suggest the second option, complete the online application.  Below is a link to each of the 3 bureaus freeze applications.

Once you get to the application page you will see a form pop up that will ask for some basic information.  The picture below is what the basic sign up form will look like.

freeze_infoStep 3: Place A Freeze And Confirm

Once you’ve filled out the application you will need to select and confirm that you would like to place a credit freeze on your account.  At this point you will also receive a 10 digit security PIN number through the mail.  Once you have this done rinse and repeat with the other 2 credit bureaus.

I know this sounds to simple to be true but that’s it.

How To Thaw Your Credit

Finally, at some point you may want to thaw your credit so you can apply for credit or get a loan.  To do this you will need a few things.  The first thing you will need to decide is whether you want to permanently remove the freeze or temporaily remove it.

For a temporary removal you will need these things.

  • Your 10 digit security PIN which you were given when you instated the freeze.
  • You will need a date range in which the freeze will be lifted.  Not all states will allow this.
  • Information of the third party who will be accessing your credit info.

For a permanent removal you will need 2 things.

  • Your 10 digit security PIN which you were given when you instated the freeze.
  • 2 forms of identification.

To instate a thaw on your credit you can do that here.

Final Thoughts…

As a final thought on how to freeze your credit consider the reasons before you do it.  If you are going to apply for a loan or new credit card it may not be a good idea to freeze your credit since you will need to access it on a regular basis.  On top of that it will cost you a lot in fees as well.

So what are you’re thoughts?  Feel free to share your questions, thoughts and comments below.

Filed Under: Credit Reports Tagged With: , , , , , ,

Excellent Credit Score – 8 Factors That Make Up A Great Score

September 19, 2011 By Leave a Comment

In my last article I talked about how to fix a bad credit score, so in this article I’m going to go a step further and cover what makes up an excellent credit score and show the 8 main factors that determine what your score will be. So if you’re someone who wants to understand just how your credit score and report works this article is for you.

What Is Considered An Excellent Credit Score

When it comes down to it their are all kinds of different scoring models for determining someones credit.  In fact the 3 main credit bureaus, Equifax, Experian, and Transunion all have different ways of determining your score and the weighting that is given to a specific area of your score.

However a typical score will range from as low as 300 to as high as 850, and depending on the range of your score it could determine how lenders might perceive you.  For example, the picture below show where my current credit score falls in the overall picture.

excellent_credit_score

If you notice in the picture above a credit score falls in 5 general areas.

  • A which is a score of 750 to 850.
  • B which is a score of 700 to 750.
  • C which is a score of  625 to 700.
  • D which is a score of 575 to 625.
  • F which is a score of 300 to 575.

So now that we know the range a score my be within lets cover the factors that determine that score in a little more detail.

Factor 1: Open Credit Card Utilization

Weight Factor:  High

Open credit card utilization determines as a percentage how much of your credit is being used on a monthly basis.  This percentage is determined by dividing the total amount of credit card debt you currently have by the available credit.  The higher this percentage the more it will damage your credit score.   Below is a picture of my current scoring in this area.

credit_card_utilizationI actually score well in this area, but if you would divide $849 by $8000 you would see that I only use around 11% of my total credit limit which is very good.  Take some time to figure yours out now.

Factor 2: The Average Age Of Your Open Credit Lines

Weight Factor: Medium

Age plays a very important role in your score.  Think about it if you have an older credit line they could make the assumption that you can handle your credit decently.  To determine your average credit age simply total up the age of each open credit line and divide by the total number of open credit lines over the total age.  Below is a picture of what mine looks like.

average_age_of_open_credit_linesIn my case I’m pushing 7 years on my age which is fairly good.  If you look at the chart above and you have an average age of 8 years or more you would be scoring really well in this area.  In my case I score a B in this area but in a few years by just letting age do it’s thing I will improve my score.

Factor 3:  Percent Of On Time Payments

Weight Factor: High

Making your payments on time can make or break your credit score.  In fact when I worked in financial services I worked with a loan officer who explained it as the kiss of death.  The reason being because it only takes one time to miss a payment and it can have a huge effect on your score.  Below is a picture of mine.

percent_of_on_time_paymentsBy looking at the picture above it’s easy to tell why I have an excellent credit score with 100% of all my payments made on time.  In fact if I were to miss 1% of my payment which would be 1 payment in my case it would have a significant effect on my score, that’s why making all of your payments on time is so important.

Factor 4: Total Accounts

Weight Factor: Low

By now you’re starting to get a good idea of what’s an excellent credit score and factors that are not but we are now only just half way through on the factors that determine your score.  When it comes to the total accounts that you carry creditors will usually give those that have more accounts a better score since it show other lenders are willing to grant credit.  I don’t typically agree with this since some people prefer to pay everything in cash and it’s usually these people who get burned playing by the rules and can’t get a loan as a result.  To prove my point look at how I rank in this area.

total_accountsI actually rank very poorly in this area because I only have two accounts.  Now I could open more accounts but I choose not to because I don’t want to open myself up to the possibility of more debt.  Good thing for me though that it carries a very low weight factor because I’m not planning on changing this any time soon.  I should also mention if you have a similar problem with this like I do you could try upping the amount of credit on a current credit line.  I’ve found this to be a nice fix.

Factor 5: Hard Credit Inquires

Weight Factor: Low

A hard credit inquiry is typically only ever placed on your credit report when you apply for credit, such as a credit card, or loan of some sort.  I should also mention that when you check your credit score with an online site such as  Annual Credit Report that it is considered a soft inquiry and has not effect on your score what so ever.  Below is a picture of mine.

hard_credit_inquiriesIn the chart above you can see I don’t have any inquiries at this time however I’m currently in the process of buying a new house and this will actually have a small negative effect on my score as a result. However it’s a necessary evil if I want to buy a new house.

Factor 6: Derogatory Marks

Weight Factor: High

These are marks that count very high against your credit such as bankruptcy, tax liens, and foreclosure.  In fact these marks can take anywhere from 7 to 15 years to have removed from you credit score, and some marks can stay on indefinably. For example, if you had a tax lien against you and you didn’t pay it off that mark could remain on your report until you pay it off.  Below is picture of my marks.

derogatory_marksObviously, I don’t have any issues in this area but by having  just one mark in this area it could significantly lower my score, so take my advice stay way from these type of marks and you will save yourself a ton of financial hardship.

Factor 7:  Total  Debt

Weight Factor: High

The last 2 factors I’m going to cover in this article are not necessarily going to be scored in your credit report, however the total debt you carry plays a big factor if you want to get a loan for any reason.  Having to much debt shows lenders that you may not be able to pay it off and may not be able to handle any more debt.  In my case I have very little debt, check out the chart below.

total_debtI should also mention paying down your debt in full is one of the quickest ways to improving your score.  To learn more about how to do this check out my 8 Step Debt Plan.

Factor 8: Debt To Income Ratio

Weight Factor: High

The final factor to consider is your debt to income ratio.  This is a ratio that determines how much of your monthly income goes towards debt payments.  For example if you earned $5000 a month and had a total of $1500 in debt payments a month you would have a debt to income ratio of  30%.  Below is what my debt to income ratio looks like.

debt_to_income_ratio

The lower your debt to income ratio the better but if you want to have the best chance of getting approved for a loan try to get your debt to income ratio down to at least 36% or less.

Questions or Comments?

Now that you know what is an excellent credit score do you have any questions or comments to add?  Is their anything that should be added or do you have a question about your own credit score?  You credit is very important so take the time to check your report now.

Filed Under: Credit Reports Tagged With: , , , ,

How To Fix A Bad Credit Score In 5 Actionable Steps

September 13, 2011 By 3 Comments

bad-credit-scoreRecently, I’ve been in the process buying a new house and as a result I’ve been thinking about the role my credit score and report is playing in this process.  Think about it, if I have a bad credit score I could go from getting an interest rate of 4.5% or better, to a rate of  6% or higher.  On a $120,000 mortgage that’s a payment difference of $600 to $720.

This prompted me to check my credit score.  Now luckily in my score it’s in pretty decent shape at a 741, but this isn’t the case for everyone so in this article I’m going to walk you through the steps I take to fix a bad credit score.

Step 1: Check Your Score

The first thing you need to do before you can fix your score is you need to know what it is.  To do this I suggest checking it in 2 different places.  The first place to go is AnnualCreditReport.com.   This site is sort of the official place to check your credit report.  Here you can get all 3 of your credit reports entirely for free.

These reports are also fairly detailed, however in order to get the score for each report you are going to have to pay a fee.  Now if you don’t exactly like this option don’t worry I agree with you 100%.  This is why I suggest you also check another site I like called CreditKarma.com.

With Credit Karma you can check your credit report and score all for free.  Now you don’t get all three scores or reports but rather one report and score which all comes from Trans Union.  On top of that with Credit Karma you also get a simple report card that shows you exactly how you are doing in each individual area of your credit report.  Below is a picture of mine.

credit_report_card

Action Step: Go to Annual Credit Report and Credit Karma and sign up now for your free credit score.

Step 2: Check For Faulty Credit Issues

Did you sign up and check your score?  If you didn’t stop what you are doing and don’t move on till you have done this.  Trust me when you have your credit score in front of you, you’ll start to get that feeling of empowerment, which means you’re on the right track.

OK, now that you have your credit report in hand we are one step closer to improving your bad credit score.  The next thing you need to do is scan your reports for any mistakes.  It may take some time to actually fix some your financial mistakes on your credit report but when it comes to mistakes it will allow you the chance to erase a bad credit score.

Here are a few reasons mistakes tend to show up on your credit score.

  • Similar Names.  A common mistake found on peoples credit reports is when two people have very similar names.  For example, if you have a last name of Smith it would be easy to get information crossed.  In fact a close family member of mine had this very thing happen to him.
  • Sr. Versus Jr.  Another issue that typically comes up is when a father who has the same name as his son.
  • Stolen Identity. Finally, if someone would happen to steal your identity without your knowledge they could open new accounts and do some terrible damage to your credit score.

Action Step: Take the time to look through all three of your credit reports from annual credit report to see if their are any mistakes.

Step: 3: List Out Possible Solutions

Now that you’ve gone through your credit reports and searched out all the mistakes it’s time to get down to business.  The easiest way to erase bad credit report scores is to break your report down into specific areas and Credit Karma does a great job at this.  So in this section I going to refer back to my credit report which I showed you in the beginning, and list some possible ideas as to how I could improve my score.  To find your credit report card go to Credit Karma, sign in, and click on the tab credit report card.

  • Increase The Age Of My Credit. This is a hard one to fix because you can’t just magically whisk a wand and the age of your credit will go up.  Instead, the only way to fix this issue is to let time do it’s thing, besides the average age of my credit lines are 6 years and 7 months and anything over an average of 8 years will give the best score.  On top of that I will not want to close any accounts because if I do I could risk shorting my age and lowering my credit score.
  • Open More Lines Of Credit. Another problem I see with my credit score is the amount of credit lines I have open.  In my case I have to open lines and one closed line of credit.  To fix this all I would have to do is open another line of credit or increase the amount of credit on an existing line.  However if you have bad credit scores it may be hard to do this and it may take some time for things to heal before you can even think about opening another line of credit.
  • Lower My Debt. Finally, the last thing I could go about fixing a bad credit score is to lower the overall amount of debt I have.  According to my credit report I have a total debt of $849.  By paying off this entire debt I would in effect lower my debt to income ratio to 0%.  Now I know a lot of you have far more debt than I do but one of the quickest ways to improving your score is to cut down the debt you have and to improve your debt to income ratio.

Action Step: Now that I’ve found a few areas I can use a little help with on my credit report how about you?  Take the time now to look at your credit report card on Credit Karma and list some possible solutions to improving your credit score.

Step 4: Test Your Ideas

Now that we have some ideas of what we could do to improve and how to fix your bad credit score it’s time to test are ideas and see how much they might just improve are score, and the best way to do this is with the credit simulator from Credit Karma.

The first thing I tested was what would happen if I would cancel my oldest credit line.  Obviously, it had a negative effect on my credit score but not enough to really drag my score down to much.  In fact the simulator suggest that my score would only drop from a 741 to a 739.

closing_my_oldest_credit_line

The next thing I did was is I increased the credit line on one of my credit cards by $5000 and I also paid off my current credit card balances.  By doing this my credit score increased from a 741 to a 774, not bad!

increase_credit_and_pay_offAction Step: Run several different scenarios with the credit simulator to see what has the most positive effect.

Step 5: Implement Your Plan

Now that we’ve tested our ideas and we know what’s going to give us the best positive result going forward it’s time to implement the plan.  If you have a lot of problems with your score don’t try to do everything at once.  Stick to fixing one thing at a time.

For example, in my case I would work on paying off my credit card debt first and once I have this done I would work on increasing my credit line.  In fact I found in my research that increasing an existing credit line has a more positive effect than adding a new credit card or loan.

Action Step: Implement your plan one part at a time.  List the solutions in the order you want to complete them and get started now to erase your bad credit score.

A Final Thought…

Is their anything you would add or like to comment on?  Feel free to give your input or ask a question.

This article was recently featured in the Carnival of Personal Finance by Mrs. Nespy’s World.

Filed Under: Credit Reports Tagged With: , , , , , ,

Getting The Cheapest Credit Score: A Credit Karma Review

October 1, 2010 By 9 Comments

Finding the cheapest credit score and report these days can be an easy thing to do these days.  However not all online credit sites are the same.  For example, at annual credit report dot com they claim to give you the cheapest credit report however once you sign in you can get your free report from all three credit bureaus however the credit score will cost you.

This seems to be the typical way most credit sites are set up however their is one site that is changing all the rules and that is Credit Karma, and in this article I’m going to cover why they have  the cheapest credit score online and much more.

The Pro’s About Credit Karma

The first thing that is so great about Credit Karma is that they don’t beat around the bush when it comes to getting your credit score, in fact once you’ve input all of your information they will show you your credit score immediately.   Below is a screen shot of my credit score.

credit_score

Now any site can give you a credit score but the best part about this is that they don’t just give you the score and the report but they also break things down for you and give you report card based on how well your credit is doing.  As you can see below my average credit report was givena “B”.

overall_rating1

However they don’t just stop their they also break your credit score down and show you where you are excelling at and where you are not.  For example in the picture below of my credit score you can see that I’ve been given an A in open credit card utilization and an A in the percent of on time payments.  However, I seem to be lacking in the age of my credit and the number of accounts I have.

detailed_reports

Next another great feature to this site is that they also compare your credit against others to see how you are doing overall.  For example, in my credit report I rank in the top 77% in the Credit Karma community and 79% in my home state of Ohio, and for my age I rank in the top 82%. Not bad at all.

credit_compare

Finally, one of the best things about this site is that they have what it known as a credit simulator.  This is a great tool that can give you a lot of what if answers.  For example, in the picture below I did a simulation where I showed what would happen to my credit score if I would open a credit card with a $5000 limit.  The simulation showed me that my credit score would increase as a result.

credit_simulator_

However, you can do more than just that.  You can also see what would happen if you would file for bankruptcy, go into foreclosure, or if you missed payments on your debts.  The simulator may not be exact but it will give you a good idea what will happen to your credit score.

The Con’s About Credit Karma

Of all the things that are so great about Credit Karma their is one down sides I should mention to make this a fair and balance review.   The one down side to this site is that they don’t show you what credit bureau your score is being pulled from.

Further more they are not showing you all three credit scores either.  The downside to this is that a bank will pull any one of the three scores you have from the credit bureaus and if you happen to have a negative mark on that score it may stop the bank from giving you the loan.

Who Is Credit Karma For

Now that we’ve covered the pro’s and con’s you might be wondering who Credit Karma is for.  Their are a few people that fit the type for a site like this.  First off, if you are someone that has bad credit this site is perfect for you since it will show you right were your problem areas lie with your credit and on top of that it allows you to run different simulations to show you how you could improve your credit over time.

This could also benefit you if you are looking to open a credit card, get a car loan, or even refinance your mortgage.  The report that Credit Karma will give you will show you how lenders might react to your report and what kind of rates you might be able to get.

Finally, Credit Karma makes sense for just the average and ordinary consumer who want to protect and build their credit.  If your credit is in danger Credit Karma will let you know and show you ways to protect it.

Call To Action

Is Credit Karma right for you?  You might be wondering what is all this going to cost me?  The answer is nothing, that’s right.  It’s free to sign up with Credit Karma and get started today.  With the cheapest credit check around you would be crazy not to get signed up today and get your cheap credit score.

To get started go to Credit Karma and sign up for your free account.

Filed Under: Credit Reports Tagged With: , , , , ,

Cheap Credit Score: 6 Simple Steps To Getting Your Credit Report

July 5, 2010 By 3 Comments

In a recent article I covered what 3 place you could get your cheap credit report from for free, so in this article I going to cover one of those option in a little more detail and show where and how to get a cheap credit score report and walk you through the entire process step by step.

Where To Get Your Cheap Credit Score From

If your looking to get a cheap credit report I recommend getting it from Annual Credit Report.  This site is actually the official site setup by Trans Union, Equifax, and Experian to get your free report from, in fact all other credit reporting sites will actually get the same information from this site and in some cases make you pay for the same info you could get for free.

However when it comes to getting your free credit report you will only be able to get each of the 3 credit reports once a year.  Although I suggest you don’t get all three of them at one time, instead I recommend you pull one every 4 months.  This way you will be able to see your credit reports throughout the year, which will help you track and monitor your credit in case you would happen to spot a mistake or problem.

One final thing I should mention before I move on is that you will be able to get your credit report free but you will have to pay for the score itself, which will cost you around $15.  The score you will get can range from 450 which is very low to 850 which is around the highest.

Are you ready to get your cheap credit report and score now?  Let’s move on.

How To Get Your Credit Score

Step 1: Pick A State

The first page you will come upon is the home page of the Annual Credit Report where they will ask you to pick the state that you live in currently.

annual_credit_report_select_a_state

Step 2:  Fill In Your Info

Next, once you have selected the state that you live in you will have to fill out some simple and  quick information. This will include your full name, date of birth, social security number, and address.  However if you have not lived at your current address for more than 2 years you will have to list the previous one as well.  Then fill out the security question at the bottom and move on.

required_info

Step 3:  Pick One Credit Bureau

Next after you are done you will have to pick which credit bureau you will want to get your report from.  Again, I suggest you only pick one every 4 months and in my case I picked Trans Union since they were the first one at the top.

pick_company

Step 4: Answer Specific Security Questions

Next you will be transferred to the Trans Union website where you will be able to get your free report.  Once you get to the opening page you will have to click continue to get started.  This will bring you to the next page were Trans Union will need to verify your account and that it is really you by asking you a couple of security questions about your accounts.

For example my questions asked my how much the credit limits were on both of my credit cards.  If you are not sure about some of this information you may have to get your latest credit card statements out to see what your current credit limits are.

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Step 5:  Review Your Report

Once you have answered the questions you will be able to see your credit report.  Once you get there you will be able to see all of your credit cards and loans that you have.  You will also see a chart that shows you the last 48 months of your credit history.

acciount_infoThe chart above is a key which shows you if you are current or not with your credit.  In the actually report each month will be labeled with either the green box that says OK, or one of the other six boxes.  Each credit card and loan you have will have a 48 month history like this, below is a sample of one of my actually credit cards.

credit_picture

Obviously, you can see that the last 48 months on this particular card were very good and I’ve paid them all on time.  On the very left side of the chart it shows how many times I was late on my credit card, luckily none at all.

Step 6: Claim You Credit Score

No that we know how to get the report, I will show you how to obtain your cheap credit scores online.  To do this all you need to do is click on the button at the top that says Your FREE credit score.

credit_scoreAt this point just fill out all of you current information like email address, social security number, create a user name, password, and security questions.  Like I mentioned before this will cost you, Trans Union charges a $15 a month fee with the first seven days free and you can cancel at anytime.

A Final Thought…

As a final thought to this article I should mention how important it is to get you credit score and check it regularly.  You never know what might be on your report and if you do find something that doesn’t belong there make sure you contact the company you got it from and dispute it in writing.

This may take some time to get done but can be one of the fastest ways to cleaning up your credit score and improving it.

Chris

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How Cutting Your Available Credit Can Hurt You

August 14, 2009 By 1 Comment

In yesterdays post I talked about how age plays a role in your credit score, in today’s post I’m going to discuss what role the amount of credit you have plays a role.

How Cutting Your Available Credit Can Hurt You

Your available credit plays a big role in your credit score, even bigger than the age of your credit.  Cutting your credit available is usually a common pitfall that most people do without even realizing it.

One of the most common reasons people do it though is because they may want to get out of debt, so they cancel their credit cards to stop racking up the debt.  Another way might be if you just didn’t use the card anymore and wanted to cancel it.  I’ve even heard of people who have had their card canceled because the credit card company deemed the card not active enough.

Whatever the reason cutting too much of your credit can have some serious affects on your score unless done properly.

Here’s An Example To Illustrate My Point

Let’s say you have several different forms of credit available.  Below is just an example of what someone might have.

  • Credit Card #1 with $5000 of available credit
  • Home Equity Line Of Credit with $25,000 of available credit
  • Credit Card #2 with $1000 of available credit
  • Department Store Card with $1000 of available credit
  • Credit Card #3 with $500 of available credit

With all the different credit lines available you have $32,500 of available credit.  Let assume in this example that you have no debt on any of these credit lines that means you have 100% available.

Now at this point you should be showing a great credit score but let’s say you decide to cancel your home equity line of credit.  By doing this you would be cutting 77% off thus negatively affecting your credit score, a lot.

Now just because you canceled one credit line doesn’t mean that it’ll affect you the same for canceling a different credit line.  Let’s say you would cancel credit card #3 with $500 of available credit.

This would be a loss of 1.5% of your total credit available.  It would still be a negative effect to your credit score but not as bad as canceling the home equity line of credit.

How To Avoid This Mistake

If you plan on canceling a credit line, close a smaller one first.  As in the example above I would cancel credit card #3 first.  However what if you like credit card #3 because it has some really great benefits.

In this case I would look to canceling the next credit line with the lowest credit available, but what if you really wanted to cancel the home equity line of credit?  In this case I would contact the lender and ask to lower the amount of credit available slowly over time.

If you lower the bigger amount down in smaller increments over time it will affect your credit score but as a result of it being done over time it will not affect your score as bad.  Also remember that if you do cancel or lower any credit lines make sure you do it slowly over a period of time.  This won’t affect you score as much as doing it all at once.

Next time you go to close credit lines remember this article and you won’t have any problems.

Chris

This post was recently featured on The Carnival Of Personal Finance by Budgets Are Sexy.

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How Old Credit Cards Can Erode Your Credit Score

August 13, 2009 By Leave a Comment

Today’s tip is pretty simple, follow it and you’ll be fine.  However this little financial mistake could cost you and your credit score if you’re not careful.

What Age Has To Do With Your Credit Cards

Age has a lot to do with your credit score.   It’s just one of the vital parts they use to calculate the score itself.  So what does it have to do with you?

Good question.

The age of you credit cards is very important.  The credit bureaus calculate it by taking the ages of all your accounts and averaging them all together.  Let do an example to illustrate the point.  Let’s say you have five credit cards all started at various different times.

  • Card 1# is 15 years old
  • Card 2# is 10 years old
  • Card 3# is 5 years old
  • card 4# is 3 years old
  • Card 5# is 1 year old

Together, the average age of you credit cards is almost 7 years.  Not bad, but let’s say you stopped using your 3 oldest cards and decided to cancel them.

What is your average age then?  Your average would have dropped from 7 years to 2 years.  Thus, negatively affecting your credit score.

How To Avoid This Mistake

To avoid this hazardous mistake look at canceling your newer credit cards first.  These cards won’t affect average age as quickly however this may be tough to do if the newer card is offering you some big rewards.

If that’s the case cancel the next most recent card. Also, don’t cancel more than one card at a time. Wait at least three to six months before you decide to cancel the next one.

If you follow these tips you’ll have fewer hiccups with your credit and be able to keep an older credit average.

Chris

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Cheap Credit Report: 3 Websites You Can Get Free Credit Reports And Scores

May 5, 2009 By 10 Comments

Recently I’ve been searching around the net for ways to get a cheap credit score and report.   After doing all of the research, I came up with three possible sites which give you your credit report for cheap and in some cases, your score for free as well.

Before I get started though I should mention that although these sites may mention your score and report, they  don’t represent your real number but a close approximation.   Your real score is kept by the Fair Isaac Corporation, or FICO.  These sites are just a great place to get a cheap credit report online.

www.annualcreditreport.com

2009-05-04_2019Annual Credit Report is a great site to obtain your cheapest credit report from each of the three major credit bureaus, Experian, Transunion, and Equifax.  However, if you would like to get your score you will have to pay for each of them.

The cost for getting your score will be around $8 each.  By law, you are allowed to receive your free reports every 12 months but the score isn’t included.  Also, if you want to view each report you will have to jump through a few extra hoops and sign up for each credit bureau.

www.quizzle.com

With Quizzle it’s altogether different.  Unlike the last site, Quizzle only requires you to sign up one time and you are done.  With Quizzle you get a lot more than just a report.

First, you get your credit report and score.  However, the score is only based on one of the three reporting companies, Experian.  In fact, Quizzle gave me a higher credit rating than of the other two.

2009-05-04_2020Second, Quizzle also gives you their own rating.  They base this score off of several things including your current mortgage, extra cash you have, your current credit score, and even the appraised value of your home.  They base the score out of 100, so the higher your score the better you rank.

Finally, best thing about Quizzle is that it tracks more than just your credit score and report. It also tracks your home value, helps with your mortgage options, helps with budgeting, and also helps you set up an emergency fund or in Quizzle’s terms, a Rainy Day Fund.

As you can see there are many advantages to using Quizzle.

www.creditkarma.com

credit_karmaWith Credit Karma again you have to sign up and create an account.  Once inside you will get some great and useful tools.

First off,  you will be able to see your cheap credit reports, and in this report I noticed my score was different than my Quizzle score but not too far off.  In fact, Credit Karma will give you a snapshot of you score and show you even where you fit in as the national percentile, your local percentiles, age percentiles, and by your email address.  For me I was in the top 75% percentile on the national average.  Pretty cool.

Lastly, the thing I like best about Credit Karma is the Credit Score Simulator.  Here you will be able to test ideas on your credit score such as if you were to buy a new car.  How would that affect your score?  Or if you would refinance your home, how would that affect your score?

You can test a ton of ideas here, everything from going through bankruptcy, to collections, to adding more credit to your credit cards, to closing  a credit card, to allowing one account go overdue by 30, 60, or even 90 days.

When it comes to Credit Karma this is definitely one tool you’ll want to play around with.

Which Website Should You Use

In my opinion of all three of these sites I wouldn’t simply use one.  I would use all three.  This way you can get several different views of what others are saying about your credit situation.  In fact all three sites showed me a different credit score.

What sites do you use to check your credit score and report?  Leave a comment and tell us about it.

Chris

This post was recently featured on The Carnival Of Personal Finance by Earn What You Spend.

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Clearing Your Credit Score

September 26, 2008 By Leave a Comment

You and Your Credit

When you are in debt the sad thing is that sometimes the only way out of it is to take out another loan, of course there is always the sting in the tail though.

The problem is when you need a loan, you know they are going to be looking at your credit. If you are frowning as you read this, you know your credit report is not what you want it to be, and you also know that there is something you should be doing about it.

Your problem may be that you don’t know what to do. Many people have no idea how to fix their credit, though some ways are simply common sense. Above paying your current bills on time, what do you need to know to repair credit score?

The first step to repair your credit score is to know what it is and to understand why yours may be lower than what you want it to be.

  • Paying your bills late can affect your score.
  • Having charge offs can be ever worse.

See the bright side of this though. Take this as a lesson to show you the importance of servicing your loans and debts in a timely manner. Also use this as a time to step back and evaluate your life style. Do you really need to take out another loan and get into more debt?

Some times there is a painful answer like selling the Jeep and buying a runner, but the long term gains are immense if you plan properly as you can use the funds to clear your debt and credit rating, or if it were on finance use the spare cash to settle some of your other debt thereby giving yourself a firmer financial footing.

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