We all know having a good credit score is important as it makes financing more affordable. Yet, unless you've delved in deeper with adequate research, you may not know some important details that can assist in achieving a high score. Below you'll find tips that range from interesting to helpful in improving your credit score.
Fact # 1 - To begin with, there are dozens of credit scoring models marketed to lenders. However, the most popular score is FICO (used by 90% of lenders), followed by VantageScore which is a collaboration between the three major credit reporting agencies (CRAs) Experian, TransUnion and Equifax. These are the scores most likely to affect a loan/credit approval.
Fact # 2 - To receive a credit score from FICO, you must have at least six months of credit history in addition to newly updated information on your credit report within six months. VantageScore, however, only requires one month of credit history and will accept information reported to the CRAs within the last two years before expiring your score.
Fact # 3 - Credit scores and credit reports are different. Reports display the credit usage history of a person, including closed and open accounts, credit limits, amounts owed, and payment history. The score is based on this information and it ranges from a high of 850 to low of 300.
Fact # 4 - Checking your credit report is categorized as a soft inquiry (or soft pull) and does not affect a score in any way. However, a score is negatively impacted when creditors/lenders check to determine someone's creditworthiness via a hard inquiry (or hard pull) like when you apply for a credit card, mortgage or an auto loan.
Fact # 5 - In 2011, there was a study conducted by SubscriberWise, a CRA for the communications industry, which discovered the average credit history for those with a perfect 850 FICO score was 30 years. Length of credit history accounts for 15% of your credit score.
Fact # 6 - Many personal finance experts recommend that you not use over 30% of your available credit as it's an indicator of risky behavior to lenders. Amount of debt owed carries a 30% weight on a FICO score.
Fact # 7 - Occupations that usually check credit reports before hire are generally in finance or executive level positions. However, the military, law enforcement and temporary service positions will also check your report.
Fact # 8 - Employers aren't the only ones interested in your score, your date may be too. There's a dating site called CreditScoreDating.com which matches individuals who manage finances well. Bankrate surveyed 1,000 adults and found surprisingly that 42% would be influenced by someone's credit score before dating (more women than men deem credit scores an important factor).
Fact # 9 - Good news: Medical debt will have less of an impact on your score thanks to a 2015 settlement from the New York Attorney General and the three CRAs. Unpaid medical debt cannot be added on a person's credit report until a 180 day grace period. This allows more time for insurance providers to pay claims. The Consumer Financial Protection Bureau (CFPB) found in a study that 59% of debt in collection accounts is medical related.
(image from Pixabay)
Fact # 10 - In addition to a credit score, you also have an insurance score. Based off years of credit scoring data, a connection between financial issues and insurance claims had been discovered. It became evident that those with shaky monetary practices seemed to file more insurance claims than those who manage their finances well. You can purchase your auto insurance score from these three providers: LexisNexis, FICO Auto Score 9 XT and CreditVision Auto Score.
Fact # 11 - Many credit card issuers now allow holders to view their score for free. Some include Citi, Capital One, Disocver, Chase and Barclaycard.
Fact # 12 - Though it's not a good idea to pay your bills late, late payments are generally not reported to the credit bureaus before 30 days overdue. So don't fret over a plummeting credit score; just pay as soon as possible.
Fact # 13 - According to a study by the FTC, 5% of consumers had serious errors on their credit reports that would cause them to pay more for acquiring a loan. It's recommended to view your credit report every year (for free) from each of the CRAs through AnnualCreditReport.com.
Fact # 14 - Based off Experian's data, 27% of consumers with a fair credit score (580 - 669) will become delinquent. However, only 9% of those with a good credit rating (670 - 739) fail to make timely payments.
Fact # 15 - Thanks to the Experian RentBureau program (est. 2010), paying rent on-time will improve your credit score. Prior to that, regular rent payments did not affect your credit score; just protected you from being evicted.
More helpful resources:
https://www.is650agoodcreditscore.com/650-credit-score
https://en.wikipedia.org/wiki/Credit_score_in_the_United_States
https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-and-keep-a-good-credit-score-en-318/