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[Mo-facs] FW: Does you Know Your Credit Score?

Arendt, Cynthia CYNTHIA.ARENDT at dese.mo.gov
Thu Apr 12 09:28:10 CDT 2007 

 

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From: FeedBlitz [mailto:feedblitz at mail.feedblitz.com] On Behalf Of Dr.
Oleson - OFS Director
Sent: Friday, April 06, 2007 3:54 AM
To: Arendt, Cynthia
Subject: OFS Financial Tip of the Week

 

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 <http://financialsuccess.missouri.edu> 

University of Missouri-Columbia <http://www.missouri.edu> 
Personal Financial Planning Dept <http://pfp.missouri.edu> 
Dr. Mark Oleson - OFS Director
<mailto:financialsuccess at missouri.edu?subject=Financial%20Tip%20Blog> 

View Tip Blog & Past Tips
<http://financialtip.blogspot.com> 

 

 

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<http://feedblitz.com/r.asp?l=2014937&f=85884&u=1165686> CREDIT SCORING
<http://feedblitz.com/r.asp?l=2014937&f=85884&u=1165686> 

When you apply for credit, lenders want to understand the risks
associated with loaning money to you. Credit scores are what most
lenders use to determine your credit risk. The most commonly used credit
scoring model was created by Fair Isaac Corp. (the FICO Score). Credit
bureaus often use different names, such as the Beacon Score or Empirica
Score. Each, however, uses the same underlining methods as Fair Isaac.
Consumers have three credit scores - one for each of the three credit
bureaus (TransUnion, Experian, Equifax). Each is based upon the
information that particular agency keeps on file about you. Your score
will determine loan terms (interest rates, fees, etc.) as well as how
much a lender will offer you. The higher the consumer's credit score,
the less risk for a lender (FICO Scores range from 300 to 850). It is
possible to have no credit ... Many individuals don't realize that many
of the monthly bills paid (i.e., rent, phone, gas, utilities, insurance,
etc.) are not reported to credit reporting agencies [unless you miss
payments of course!]. Payment history for mortgages, student loans,
credit cards, store cards, auto, and other loan and revolving credit
accounts are typically reported to credit bureaus on a monthly basis.
For a FICO score to be calculated, your credit report must contain at
least one of these types of accounts [which has been open for at least
six months; also must contain at least one account that has been updated
in the past six months]. This ensures there is enough information [and
recent information] on which to base a score. 

How is the score calculated? 
The FICO score is calculated from a lot of data contained in your credit
report. The data is most commonly grouped into five categories: payment
history (35%), amount owed (30%), length of credit history (15%), new
credit (10%), and types of credit used (10%). The percentages indicate
the relative weighting of each area to the overall score. The following
site
<http://www.feedblitz.com/t.asp?/85884/1165686/http://www.myfico.com/Cre
ditEducation/WhatsInYourScore.aspx>  will allow you to see what specific
items constitute each of the five areas. 

While most lenders use credit scoring to make credit granting decisions,
each lender is likely to use a 'personalized' strategy to determine how
they are going to define a "creditworthy" customer or what an acceptable
level of risk is for a given product. There is no universally defined
"cut off" where if you're below a certain point you will be denied
credit regardless of where you go. The following MyFICO resource
<http://www.feedblitz.com/t.asp?/85884/1165686/http://www.myfico.com/myf
ico/CreditCentral/LoanRates.asp>  nicely illustrates the financial
benefits of having a strong credit score. In addition, more and more
people are using credit scoring as a way of evaluating risk in other
areas of life - employers, landlords, insurers, utility companies - and
the list is growing rapidly. 

* It is important to understand that a credit score is a measure of how
well you manage debt. Many people are debt-averse [or haven't relied on
debt to date] - there is nothing wrong with this; I would never suggest
going into debt merely to have a credit score. You will want to ensure
that when applying for insurance, a future mortgage, etc. that your
lender uses manual underwriting if you have 'no credit.' 

Getting your score ... 
I mentioned last week that the legislation (FACTA) that provides
consumers the opportunity to receive a free annual credit report does
not provide a free credit score. You have some choices - a simple score
estimator
<http://www.feedblitz.com/t.asp?/85884/1165686/http://whatsmyscore.org/l
esson/estimator> ; also, the e-loan resource I mentioned last week
<http://www.feedblitz.com/t.asp?/85884/1165686/https://www.eloan.com/mye
loan/viewscore> . If you're interested in purchasing your score [I also
have included some other types of scores to give you an idea of the
types of information available], you can go to the following sites -
current prices (as of 4/4/07) are listed. Read through the information
provided - all of the sites offer additional products beyond credit
scores (monthly credit monitoring, other 'packaged' services to go with
the credit score, etc.)... 

- FICO Score
<http://www.feedblitz.com/t.asp?/85884/1165686/http://www.myfico.com/Pro
ducts/FICOOne/Description.aspx>  (you choose report score is based on) -
$15.95 
- Equifax FICO Score and Equifax Credit Report
<http://www.feedblitz.com/t.asp?/85884/1165686/https://www.econsumer.equ
ifax.com/consumer/sitepage.ehtml?forward=cps_detail>  - $15.95 
- Experian VantageScore
<http://www.feedblitz.com/t.asp?/85884/1165686/http://www.experian.com/c
onsumer_online_products/vantage_score.html>  - $5.95 
- TransUnion Insurance Score
<http://www.feedblitz.com/t.asp?/85884/1165686/http://www.truecredit.com
/insurance?cb=TransUnion>  - $9.95 

Additional Credit Resources. 
- Credit issues
<http://www.feedblitz.com/t.asp?/85884/1165686/http://financialsuccess.m
issouri.edu/creditissueshome.htm>  
- Credit myths
<http://www.feedblitz.com/t.asp?/85884/1165686/http://financialsuccess.m
issouri.edu/tipoftheweek/creditmyths.pdf>  
- Credit scores by state
<http://www.feedblitz.com/t.asp?/85884/1165686/http://www.nationalscorei
ndex.com>  
- Credit statistics
<http://www.feedblitz.com/t.asp?/85884/1165686/http://www.myfico.com/Cre
ditEducation/AverageStats.aspx>  
- Improving your score
<http://www.feedblitz.com/t.asp?/85884/1165686/http://www.myfico.com/Cre
ditEducation/ImproveYourScore.aspx>  
- MyFICO
<http://www.feedblitz.com/t.asp?/85884/1165686/http://www.myfico.com>  
- Ordering free credit report(s)
<http://www.feedblitz.com/t.asp?/85884/1165686/http://financialsuccess.m
issouri.edu/tipoftheweek/freecreditreport.pdf>  
- Specialty credit reports
<http://www.feedblitz.com/t.asp?/85884/1165686/http://financialsuccess.m
issouri.edu/tipoftheweek/specialtyreports.pdf>  
- Vantage Scoring
<http://www.feedblitz.com/t.asp?/85884/1165686/http://financialsuccess.m
issouri.edu/tipoftheweek/vantagescore.pdf>  
- What is not in your score
<http://www.feedblitz.com/t.asp?/85884/1165686/http://www.myfico.com/Cre
ditEducation/WhatsNotInYourScore.aspx> ? 



Dr. Mark Oleson (OFS Director)

 

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