FICO Explained
What in the World Is a FICO?
When it comes to credit scores (also generically referred to as a credit rating), most Americans know that they are important and that they can have a major impact on our financial lives. However, very few know what goes into a credit score or just how influential it can be.
First of all, the term, “credit score” does NOT refer to a SINGLE scoring system. In the US, there are over a thousand credit scoring models in existence, created and used by hundreds of creditors and consumer reporting agencies. However, the most common credit scoring model (used in about 80% of all credit-based decisions) was developed by Fair Isaac Corporation (FICO for short). Continue reading “FICO Explained” »
What’s on a Credit Report?
Seriously, how are we, the average Joe or Jane on the street, supposed to build (or rebuild) our credit when no one ever teaches what’s on our credit to begin with? Well, here’s the answer:
• Contact information (no impact on credit score): It simply includes the names, addresses, employers, and, sometimes, marital statuses under which you have applied for credit in the past.
• Credit/Trade Lines: Details on the various lines of credit the consumer has had in the past 7-10 years, including balances, terms and their history of on-time payments. Continue reading “What’s on a Credit Report?” »
Why Should I Care about My Credit?
Credit (an agreement to repay a loan over time) is pervasive in our society. What used to be the exclusive privilege of the wealthy has only in the past half century or so became available to the masses. From buying a home or car to purchasing a burger, shake and fries, credit – whether in the form of a loan and a credit card – has become a familiar sight just about anywhere anything of value exchanges hands.
As credit’s popularity increases, so too do the purposes for which businesses use an individual’s personal credit history as a tool in making business choices. Decision-makers that are influenced to one degree or another by how an individual has used and managed their credit accounts include the following: Continue reading “Why Should I Care about My Credit?” »
Correcting Credit Report Errors from Defunct Creditors
Having taught nearly 500 personal finance classes since 2004 to over 8,000 individuals, it’s not often that I get a question about course topics that I haven’t heard before. I love it when I do, though, and that’s exactly what happened last week at a local housing authority. Here is the question:
What can I do if the title loan company to which I once owed money but have paid off in full has gone out of business but is still listed on my credit report with money owing? Continue reading “Correcting Credit Report Errors from Defunct Creditors” »
Myth or Reality: The Credit Reporting and Scoring Systems Unfairly Hurt Low-income Individuals
I’ve frequently heard from participants in my “Credit and the Interest Insomniac” workshops, as we discuss credit reports and scores and they have a real dollar-value impact on household finances, that it is not fair that individuals with less income have to pay higher interest rates. This is especially true when we I show how an individual with poor credit would pay $2,000 to $4,000 more annually for the same house as an individual with excellent credit. Participants assume that the person with poor credit is a low-income individual and the one with excellent credit is a high-income individual.
Yahoo Reports High Risk FICO Scores on the Rise
A Yahoo report of July 12, 2010 indicates that a growing number of US consumers have the ranks of high risk borrowers (FICO score of 599 or less). Following increasing foreclosures and delinquent debts due to the high unemployment and underemployment rates of the down economy, this segment of credit scores has grown from the typical 15% of consumers to over 25% as of April 2010. Continue reading “Yahoo Reports High Risk FICO Scores on the Rise” »
Debt Reduction Services in the News – KBOI CBS 2 – June 3rd, 2010
Make Sure You Get Credit, For Your Credit
I wanted to share the article and a link to the video of a news story that CBS in Boise aired yesterday featuring Debt Reduction Services Director of Education, Todd Christensen. Todd provides some little known information regarding utility services. Continue reading “Debt Reduction Services in the News – KBOI CBS 2 – June 3rd, 2010” »