Subscribe Feed (RSS)In life, there are two things you can be certain about: death and taxes. While you only die once, you’ll be paying taxes over and over and over again. Sometimes death can seem more appealing than the two!
Your Credit Score, Courtesy of Fair Isaac
Another certainty in this life, at least to for the American consumer, is their credit score – what is known as a FICO score. The Fair Isaac Corporation score is used by the three major credit reporting bureaus which are: TransUnion, Equifax, and Experian. That score will help lenders determine whether you will receive credit and, if so, at what terms. The higher your score, the better the chance you’ll be approved for a loan and at a favorable rate.
This week, Fair Isaac rolled out a modified version of their credit score, this one dubbed FICO 08. TransUnion is the first of the credit reporting bureaus who will use the new FICO method for calculating credit scores followed by Equifax in the second quarter. Experian is currently in litigation with Fair Isaac over another matter, so we don’t know when they’ll include with the new methodology.
More Accurate Predictor of Problem Borrowers
Supposedly, the new score will be an improvement over the way that the old one was calculated, as it will help creditors do a better job of predicting borrower defaults. In addition, it will be more forgiving of one time slip ups, but it will come down harder on repeat offenders. Scores will still range from 300 to 850 and Fair Isaac is expecting an improvement in lending decisions by as much as 15%.
Consumers may not notice much of a change for awhile, especially as many lenders use the score as only part of their methodology for determining whom they will lend to and for what terms. Some analysts believe that many mortgage lenders will not use the new calculation method until all three credit reporting bureaus are using it. Oftentimes, lenders will obtain credit scores from all three to determine one median score.
Get Your Free Credit Reports
For consumers, now is a good time to pull your credit reports to see if they are accurate and correctly reflect your personal information. Mistakes can impact your credit score, but they generally will only be fixed if you catch them. Thanks to an act of Congress, you can get free copies of all three credit reports at www.annualcreditreport.com. If you want you credit score you’ll pay a nominal fee for that service, something you can do when you order your reports.
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This is a good article, but it should also mention the power of credit monitoring which is so important, especially as banks and lenders are making it harder to get approved. Seeing your credit report for free is fine if you can see errors and correct them, but you also need to see your score and understand what that means. At sites like http://www.GoFreeCredit.com you can get those for free along with a free credit monitoring trial. Credit monitoring will watch your credit reports and scores and alert you if there are changes. It can also help fight against Identity Theft.
That’s true, JJ but as you mentioned their is a trial service, then charges are assessed when that period is up.
Most financial experts dismiss the importance of credit monitoring unless the consumer has already been victimized by identity theft.
By the way, if there are mistakes on a credit report, the reporting bureau is required to make the correction and provide an updated report for free.