Whats In Your Score?
CREDIT Scores are calculated from a lot of different credit data in your credit report. This data can be grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining your score.
These percentages are based on the importance of the five categories for the general population. For particular groups - for example, people who have not been using credit long - the importance of these categories may be somewhat different.
Payment History Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.) Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items) Severity of delinquency (how long past due) Amount past due on delinquent accounts or collection items Time since past due items (delinquency), adverse public records (if any), or collection items (if any) Number of past due items on file Number of accounts paid as agreed
Amounts Owed Amount owing on accounts Amount owing on specific types of accounts Number of accounts with balances Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts) Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)
New Credit Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account Number of recent credit inquiries Time since recent account opening(s), by type of account Time since credit inquiry(s) Re-establishment of positive credit history following past payment problems
Types of Credit Used Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)
Please note that:
A score takes into consideration all these categories of information, not just one or two. No one piece of information or factor alone will determine your score.
The importance of any factor depends on the overall information in your credit report. For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your score. Thus, it's impossible to say exactly how important any single factor is in determining your score - even the levels of importance shown here are for the general population, and will be different for different credit profiles. What's important is the mix of information, which varies from person to person, and for any one person over time.
Your CREDIT score only looks at information in your credit report. However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score. What is Not In Your Score Credit scores consider a wide range of information on your credit report. However, they do not consider:   Your race, color, religion, national origin, sex and marital status. US law prohibits credit scoring from considering these facts, as well as any receipt of public assistance, or the exercise of any consumer right under the Consumer Credit Protection Act.   Your age. Other types of scores may consider your age, but FICO credit scores don't.   Your salary, occupation, title, employer, date employed or employment history. Lenders may consider this information, however, as may other types of scores.   Where you live.   Any interest rate being charged on a particular credit card or other account. Any items reported as child/family support obligations or rental agreements. Certain types of inquiries (requests for your credit report). The score does not count “consumer-initiated” inquiries – requests you have made for your credit report, in order to check it. It also does not count “promotional inquiries” – requests made by lenders in order to make you a “pre-approved” credit offer – or “administrative inquiries” – requests made by lenders to review your account with them. Requests that are marked as coming from employers are not counted either. Improving Your Credit Score It’s important to note that raising your score is a bit like losing weight: It takes time and unless you know what to do, it may be necessary to consult with one of our Credit Score Specialist at Armor Credit Services LLC. It is good advice is to manage credit responsibly over time. See the following tips to help you raise your score. Payment History Tips   Pay your bills on time. Delinquent payments and collections can have a major negative impact on your score.   If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your score.   Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years. If you need assistance, contact a Credit Score Specialist at Armor Credit Services LLC.   If you are having trouble making ends meet, contact your creditors or contact a Credit Score Specialist at Armor Credit Services LLC. This won't improve your score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time.   Any interest rate being charged on a particular credit card or other account. Any items reported as child/family support obligations or rental agreements. Certain types of inquiries (requests for your credit report). The score does not count “consumer-initiated” inquiries – requests you have made for your credit report, in order to check it. It also does not count “promotional inquiries” – requests made by lenders in order to make you a “pre-approved” credit offer – or “administrative inquiries” – requests made by lenders to review your account with them. Requests that are marked as coming from employers are not counted either. Amounts Owed Tips   Keep balances low on credit cards and other “revolving credit”. High outstanding debt can affect a score. Your credit scores will be decreased when your revolving account balances exceed 30% of the account’s credit limit.   Pay off debt rather than moving it around. The most effective way to improve your score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.   Don't close unused credit cards as a short-term strategy to raise your score.   Don't open a number of new credit cards that you don't need, just to increase your available credit. Length of Credit History Tips   If you have been managing credit for a short time, don't open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a larger effect on your score if you don't have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user. New Credit Tips   Do your rate shopping for a given loan within a focused period of time. FICO® credit scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.   Re-establish your credit history if you have had problems. Opening new accounts responsibly and paying them off on time will raise your score in the long term. It is important to know how and where to do this. Armor Credit Services has pre-arranged new credit account programs with our financial industry partners so we can get you preferred approvals on these types of accounts.   Note that it's OK to request and check your own credit report. This won't affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers. Types of Credit Use Tips   Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix - it may not raise your score.   Have credit cards - but manage them responsibly. In general, having credit cards and installment loans (and paying timely payments) will raise your score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.   Note that closing an account doesn't make it go away. A closed account will still show up on your credit report, and may be considered by the score. Facts & Fallacies   Fallacy: My score determines whether or not I get credit. Fact: Lenders use a number of facts to make credit decisions, including your credit score. Lenders look at information such as the amount of debt you can reasonably handle given your income, your employment history, and your credit history. Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you although your score is low, or decline your request for credit although your score is high.   Fallacy: A poor score will haunt me forever. Fact: Just the opposite is true. A score is a “snapshot” of your risk at a particular point in time. It changes as new information is added to your bank and credit bureau files. Scores change gradually as you change the way you handle credit. For example, past credit problems impact your score less as time passes. Lenders request a current score when you submit a credit application, so they have the most recent information available. Therefore by taking the time to improve your score, you can qualify for more favorable interest rates.   Fallacy: Credit scoring is unfair to minorities. Fact: Scoring considers only credit-related information. Factors like gender, race, nationality and marital status are not included. In fact, the Equal Credit Opportunity Act (ECOA) prohibits lenders from considering this type of information when issuing credit. Independent research has been done to make sure that credit scoring is not unfair to minorities or people with little credit history. Scoring has proven to be an accurate and consistent measure of repayment for all people who have some credit history. In other words, at a given score, non-minority and minority applicants are equally likely to pay as agreed.   Fallacy: Credit scoring infringes on my privacy. Fact: Credit scoring evaluates the same information lenders already look at - the credit bureau report, credit application and/or your bank file. A score is simply a numeric summary of that information. Lenders using scoring sometimes ask for less information - fewer questions on the application form, for example.   Fallacy: My score will drop if I apply for new credit. Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called “inquiries”) will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score About Credit Reports Credit reporting agencies maintain files on millions of borrowers. Lenders making credit decisions buy credit reports on their prospects, applicants and customers from the credit reporting agencies. Your report details your credit history as it has been reported to the credit reporting agency by lenders who have extended credit to you. Your credit report lists what types of credit you use, the length of time your accounts have been open, and whether you've paid your bills on time. It tells lenders how much credit you've used and whether you're seeking new sources of credit. It gives lenders a broader view of your credit history than do other data sources, such as a bank's own customer data.   Creating Your Credit Report Your credit report does not really exist until you or a lender asks for it. It is then compiled by the credit reporting agency based on the information stored in that agency's file. This information is supplied by lenders, by you and by court records. Tens of thousands of credit grantors – retailers, credit card issuers, banks, finance companies, credit unions, etc. – send updates to each of the credit reporting agencies, usually once a month. These updates include information about how their customers use and pay their accounts. Your credit report reveals many aspects of your borrowing activities. All pieces of information should be considered in relationship to other pieces of information. The ability to quickly, fairly and consistently consider all this information is what makes credit scoring so useful. What’s In Your Credit Report Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information. Your social security number, date of birth and employment information are used to identify you. These factors are not used in scoring. Updates to this information come from information you supply to lenders.   Identifying Information. Your name, address, Social Security number, date of birth and employment information are used to identify you. These factors are not used in scoring. Updates to this information come from information you supply to lenders.   Trade Lines. These are your credit accounts. Lenders report on each account you have established with them. They report the type of account (bankcard, auto loan, mortgage, etc), the date you opened the account, your credit limit or loan amount, the account balance and your payment history.   Inquiries. When you apply for a loan, you authorize your lender to ask for a copy of your credit report. This is how inquiries appear on your credit report. The inquiries section contains a list of everyone who accessed your credit report within the last two years. The report you see lists both "voluntary" inquiries, spurred by your own requests for credit, and "involuntary" inquires, such as when lenders order your report so as to make you a pre-approved credit offer in the mail.   Public Record and Collection Items. Credit reporting agencies also collect public record information from state and county courts, and information on overdue debt from collection agencies. Public record information includes bankruptcies, foreclosures, suits, wage attachments, liens and judgments. How Mistakes are Made When a credit report contains errors, it is often because the report is incomplete, or contains information about someone else. This typically happens because:   The person applied for credit under different names (Robert Jones, Bob Jones, etc.). Someone made a clerical error in reading or entering name or address information from a hand-written application. The person gave an inaccurate Social Security number, or the number was misread by the lender. Loan or credit card payments were inadvertently applied to the wrong account. Average Credit Statistics Consumers vary immensely in what types of credit they use and how they use it. By analyzing a representative national sample of millions of consumer credit profiles, credit industry statistics reflect the following:   Number of Credit Obligations On average, today's consumer has a total of 13 credit obligations on record at a credit bureau. These include credit cards (such as department store charge cards, gas cards, or bank cards) and installment loans (auto loans, mortgage loans, student loans, etc.). Not included are savings and checking accounts (typically not reported to a credit bureau). Of these 13 credit obligations, 9 are likely to be credit cards and 4 are likely to be installment loans.   Past Payment Performance On average, today's consumers are paying their bills on time. Less than half of all consumers have ever been reported as 30 or more days late on a payment. Only 3 out of 10 have ever been 60 or more days overdue on any credit obligation. 77% of all consumers have never had a loan or account that was 90+ days overdue, and less than 20% have ever had a loan or account closed by the lender due to default.   Credit Utilization About 40% of credit card holders carry a balance of less than $1,000. About 15% are far less conservative in their use of credit cards and have total card balances in excess of $10,000. When we look at the total of all credit obligations combined (except mortgage loans), 48% of consumers carry less than $5,000 of debt. This includes all credit cards, lines of credit, and loans-everything but mortgages. Nearly 37% carry more than $10,000 of non-mortgage-related debt as reported to the credit bureaus.   Total Available Credit The typical consumer has access to approximately $19,000 on all credit cards combined. More than half of all people with credit cards are using less than 30% of their total credit card limit. Just over 1 in 7 is using 80% or more of their credit card limit.   Length of Credit History The average consumer's oldest obligation is 14 years old, indicating that he or she has been managing credit for some time. In fact, we found that 1 out of 4 consumers had credit histories of 20 years or longer. Only 1 in 20 consumers had credit histories shorter than 2 years.   Inquiries When someone applies for a loan or a new credit card account - in short, any time one applies for credit and a lender requests a copy of the credit report - this request is noted as an “inquiry” in the applicant's credit file. The average consumer has had only one inquiry on his or her accounts within the past year. Fewer than 6% had four or more inquiries resulting from a search for new credit. Credit Inquiries   What is a credit inquiry? A credit inquiry is an item on a credit report that shows a business with a "permissible purpose" (as defined under the federal Fair Credit Reporting Act) has previously requested a copy of the report.   Not all inquiries count toward your credit score. When you check your credit report, you may notice that a number of credit inquiries have been made, sometimes from businesses that you don’t know. But the only inquiries that count toward your credit score are the ones that result from your applications for new credit.   Inquiries that count toward your credit score. There is only one type of credit inquiry that counts toward your credit score. When you apply for a mortgage, auto loan or other credit, you authorize the lender to request a copy of your credit report. These types of inquiries, prompted by your own actions, appear on your credit report and are included in your credit score.   Inquiries that don’t count toward your credit score. Your own credit report requests, credit checks made by businesses to offer you goods or services, or inquiries made by businesses with whom you already have a credit account do not count toward your credit score. Credit checks by prospective employers also do not count. These types of inquiries may appear on your credit report, but they are not included in your credit score.   Your credit score is not affected when you check your credit. Checking your credit reports regularly to be sure they are accurate and error-free is a good idea. In fact, maintaining accurate credit reports is a part of good credit management, which can help to improve your credit scores over time.   Inquiries When someone applies for a loan or a new credit card account - in short, any time one applies for credit and a lender requests a copy of the credit report - this request is noted as an “inquiry” in the applicant's credit file. The average consumer has had only one inquiry on his or her accounts within the past year. Fewer than 6% had four or more inquiries resulting from a search for new credit. Glossary of Terms   Application scoring The use of a statistical model to objectively evaluate and “score” credit applications and credit bureau data in order to assess likely future performance. Scores help businesses make decisions such as whether to accept or decline the application.   Bankruptcy A proceeding in U.S. Bankruptcy Court that may legally release a person from repaying debts owed. Credit reports normally include bankruptcies for up to 10 years.   Charge-off The balance on a credit obligation that a lender no longer expects to be repaid and writes off as a bad debt.   Collection Attempted recovery of a past-due credit obligation by a collection department or agency.   Consumer credit file A credit bureau record on a given individual. It may include: consumer name, address, Social Security number, credit history, inquiries, collection records, and public records such as bankruptcy filings and tax liens.   Credit bureau A credit reporting agency that is a clearinghouse for information on the credit rating of individuals or firms. Is often called a “credit repository” or a “consumer reporting agency”. The three largest credit bureaus in the U.S. are Equifax, Experian and TransUnion.   Credit bureau risk score A type of credit score based solely on data stored at the major credit bureaus. It offers a snapshot of a consumer's credit risk at a particular point in time, and rates the likelihood that the consumer will repay debts as agreed.   Credit history A record of how a consumer has repaid credit obligations in the past.   Credit obligation An agreement by which a person is legally bound to pay back borrowed money or used credit.   Credit report Information communicated by a credit reporting agency that bears on a consumer's credit standing. Most credit reports include: consumer name, address, credit history, inquiries, collection records, and any public records such as bankruptcy filings and tax liens.   Credit risk The likelihood that an individual will pay his or her credit obligations as agreed. Borrowers who are more likely to pay as agreed pose less risk to creditors and lenders.   Credit score This term is often used to refer to credit bureau risk scores. It broadly refers to a number generated by a statistical model which is used to objectively evaluate information that pertains to making a credit decision.   Default A failure to make a loan or debt payment when due. Usually an account is considered to be “in default” after being delinquent for several consecutive 30-day billing cycles.   Delinquent A failure to deliver even the minimum payment on a loan or debt payment on or before the time agreed. Accounts are often referred to as 30, 60, 90 or 120 days delinquent because most lenders have monthly payment cycles.   Equal Credit Opportunity Act (ECOA) Federal legislation that prohibits discrimination in credit. The ECOA originally was enacted in 1974 as Title VII of the Consumer Credit Protection Act.   Fair Credit Reporting Act(FCRA) Federal legislation that promotes the accuracy, confidentiality and proper use of information in the files of every “consumer reporting agency”. The FCRA was enacted in 1970.   FICO® scores Credit bureau risk scores produced from models developed by Fair Isaac Corporation are commonly known as FICO scores. Fair Isaac credit bureau scores are used by lenders and others to assess the credit risk of prospective borrowers or existing customers, in order to help make credit and marketing decisions. These scores are derived solely from the information available on credit bureau reports.   Inquiry An item on a consumer's credit report that shows that someone with a “permissible purpose” (under FCRA rules) has previously requested a copy of the consumer's report. Fair Isaac credit bureau risk scores take into account only inquiries resulting from a consumer's application for credit.   Installment debt Debt to be paid at regular times over a specified period. Examples of installment debt include most mortgage and auto loans.   Insurance bureau score An insurance rating based solely on credit bureau data stored at the major credit bureaus. It offers a snapshot of an individual's insurance risk at a particular point in time, and helps insurers evaluate new and renewal auto and homeowner insurance policies.   Late payment A delinquent payment; a failure to deliver a loan or debt payment on or before the time agreed.   Revolving debt Debt owed on an account that the borrower can repeatedly use and pay back without having to reapply every time credit is used. Credit cards are the most common type of revolving account.   Score See “credit score”   Scoring model A statistical formula that is used, usually with the help of computers, to estimate future performance of prospective borrowers and existing customers. A scoring model calculates scores based on data such as information on a consumer's credit report. History of the Credit Industry In the United States, a credit score is a number typically between 300 and 850, based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person, which is the likelihood that the person will pay his or her bills. A credit score is primarily based on credit report information, typically from the three major credit reporting agencies. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system. While the most widely known score in the United States is FICO (which is most widely used in the mortgage industry), there are many others, such as NextGen and VantageScore. The FICO score and others FICO is an acronym for Fair Isaac Corporation (traded publicly under the symbol FIC) and refers to the best-known credit score model in the United States. The FICO score is calculated by applying statistical methods, developed by Fair Isaac, to information in one's credit file. The FICO score is primarily used in the consumer banking and credit industry. Banks and other institutions that use scores as a factor in their lending decisions may deny credit, charge higher interest rates or require more extensive income and asset verification if the applicant's credit score is low. FICO scores are designed to indicate the likelihood that a borrower will default. No public information is available to determine what the scores mean in terms of statistics. A separate score, BNI, is used to indicate likelihood of bankruptcy. In the US, four major credit reporting agencies (often inaccurately called "credit bureaus"), Equifax, Experian, TransUnion, and Innovis calculate their own credit scores based on information within their files. In order for a score to be effective, it must not only weed out borrowers who will likely default, but also not to weed out too many people with some blemishes, because this would eliminate many potentially profitable accounts for lenders. Scores, many with trademarked names, differ by what they are meant to predict, statistical methods used to determine a score, as well as what information is used and how it is weighted. For example, Beacon, Beacon 5.0, Beacon 96, and Pinnacle scores are available only from Equifax; Empirica, Empirica Auto 95, Precision Score, and Precision 03 at TransUnion; and Fair Isaac Risk Score at Experian. While these versions are developed for the agencies by Fair Isaac, they differ and are periodically updated to reflect current consumer repayment behavior. The NextGen Score is the newest scoring model, designed to give better scores to some consumers, who may not be at high risk of default, but their scores were diminished, under the Classic FICO score, because of unpaid fines and parking tickets, or other small matters. Many creditors still use the Classic FICO score, developed in 1989, because it has been extensively tested, and shown to be accurate. The scores use a multiple scorecard design. Each version uses 10 or more individual scorecards, and an individual is typically compared with similar others. (For example, a borrower with two 30-day late payments will be scored against a population with some minor delinquencies.) The individual is then graded according to what variables seem to indicate a repayment risk in that group. This feature may cause a borrower with delinquencies to score in the same range as a borrower without delinquencies. Nearly all large banks also build and use their own proprietary statistical models for credit scoring purposes, often in conjunction with the FICO score or other outside scoring formulas. The statistical models that generate credit scores are subject to federal regulations. The Federal Reserve Board's Regulation B, which implements the Equal Credit Opportunity Act, expressly prohibits a credit scoring model from considering any prohibited basis such as race, color, religion, national origin, sex, or marital status. It also stipulates that credit scoring models must be empirically derived and statistically sound. Furthermore, if an adverse action is taken as a result of the credit score (e.g. an individual's application for credit is denied) then specific reasons for the denial must be provided to the individual. A statement that the individual "failed to score high enough" is insufficient; the reasons must be specific. There are several generally accepted algorithms for extracting the primary contributing factors to a low credit score. One or more of these algorithms is typically used to supply a list of reasons when a loan applicant has been denied credit, in order to satisfy the Regulation B requirement that specific reasons are disclosed. Some consumers feel that these adverse action reasons are somewhat disingenuous, as the only determining factor for credit denials is a numeric score — the "reasons" are summed up only for the consumer. Each credit reporting agency has developed its own version of the credit score intended to compete with Fair Isaac's score. Although not as widely used, these scores (for example Trans Union's "TransRisk" score or Experian's "ScoreX" and "PLUS" scores) are less expensive than the FICO score. Consumers and lenders often derisively refer to them as "FAKO" scores, because these scores do not use official Fair Isaac methodologies. The cost savings of a non-FICO score are tempting to some banks and credit card companies, who need an accurate risk assessment on millions of accounts every year. For ease of use, these scores tend to be mathematically scaled so that they fall in the same general range as the FICO score. Fair Isaac offers scoring models for the U.S., Canada, and South Africa, and the firm also offers a "Global FICO" for many other countries. Makeup of the credit score The approximate makeup of the FICO score Fair Isaac discloses to consumers Credit scores are designed to measure the risk of default by taking into account various factors in a person's financial history. Although the exact formulae for calculating credit scores are closely guarded secrets, Fair Isaac has disclosed the following components and the approximate weighted contribution of each: 35% punctuality of payment in the past (only includes payments later than 30 days past due) 30% the amount of debt, expressed as the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits) 15% length of credit history 10% types of credit used installment, revolving, consumer finance 10% recent search for credit and/or amount of credit obtained recently The above percentages provide very limited guidance in understanding a credit score. For example, the 10% of the score allocated to "types of credit used" is undefined, leaving consumers unaware what type of credit mix to pursue. "Length of credit history" is also a murky concept; it consists of multiple factors - two being the oldest account open and the average length of time an account has been open. Although only 35% is attributed to punctuality, if a consumer is substantially late on numerous accounts, his score will fall far more than 35%. Bankruptcies, foreclosures, and judgments affect scores substantially, but are not included in the somewhat simplistic pie chart provided by Fair Isaac. Further, Fair Isaac does not use the same "scorecard" for everyone. The scorecards are segmented so that there are over 100 different scoring models that are applied to different individuals based on different ranges of input values (some scorecard segmentations include: age, depth of credit history, etc.) The implications of this segmentation are that while the approximate weighted contribution above may be an average across all scorecards, individuals receive different scores or weightings based on the scorecard segmentation in which they fall. Some consumers have noticed their scores decreasing by small amounts for no apparent reason. Current income and employment history do not influence the FICO score, but they are weighed when applying for credit. For instance, an unemployed individual with no other sources of income will not usually be approved for a home mortgage, regardless of his or her FICO score. There are other special factors which can weigh on the FICO score. Any monies owed because of a court judgment, tax lien, or similar carry an additional negative penalty, especially when recent. Having more than a certain number of consumer finance credit accounts also carries a negative weight (critics say that this causes a vicious cycle, locking people into continuing to use consumer finance companies). The number of recent credit checks also can weigh down the score, although credit agencies usually claim to allow for credit checks made within a certain window of time to not aggregate, so as to allow the consumer to shop around for rates. Range of scores A FICO score generally ranges from 300 to 850. It exhibits a left-skewed distribution with a US median around 725. Generally, 660 is regarded as potentially subprime and represents an important break point for credit worthiness. The performance of the scores is monitored and the scores are periodically aligned so that a credit grantor normally does not need to be concerned about which score card was employed. Each individual actually has three credit scores for any given scoring model because the three credit agencies have their own, independent databases. These databases are independent of each other and may contain entirely different data. Many lenders will check an applicant's score from each bureau and use the median score to determine the applicant's credit worthiness. A new Vantage score has been offered by all three credit bureaus to creditors since spring 2006. It will soon be available to debtors. Its range is from 501 to 990. It is graded A (901-990), B (801-900), C (701-800), D (601-700), and F (501-600). It remains to be seen whether the Vantage Score will replace the FICO score or even be accepted by many creditors. Non-traditional uses of credit scores In September 2004, TXU (a Texas utility company) announced it would begin setting individualized electricity prices based on credit score. However, due to negative press and pressure from the Texas Public Utility Commission, the plan was not implemented. Credit scores are used in determining prices for auto insurance. Recently, some of the agencies that generate credit scores have also been generating more specialized insurance scores, which insurance companies then use to rate the quality of potential customers. These scores are unavailable to consumers. Many employers now reserve the right to do a credit check of job applicants, in the same manner they reserve the right to drug test potential employees. Free annual credit reports As a result of the FACT Act (Fair and Accurate Credit Transactions Act), each legal U.S. resident is entitled to one free copy of their credit report from each credit reporting agency once every twelve months. This information is available at the government-sanctioned but credit reporting agency-operated AnnualCreditReport.com, by calling 1-877-322-8228, or by mailing the Annual Credit Report Request Form. However, the free report does not contain a credit score. A credit score may be purchased at the time of access for a nominal charge. Requesting a credit report will subject you to 'pre-screened' offers of credit cards. To prevent all three credit bureaus from making your address available to credit card companies for this purpose, you may opt-out by calling 1-888-5OPTOUT (1-888-567-8688). To guard against inaccurate information or fraud more often than yearly, take advantage of the Armor Credit Services Identity Theft service which provides you with quarterly credit reports. Credit Education Programs Credit Education is the practice of providing consumers with information analyzing their credit behavior. Credit education is usually practiced by trained professionals knowledgeable in the analytics of the and how consumer credit behavior affects both positive and negative credit eligibility. Credit education is usually assisted by sophisticated credit scoring models that mathematically assists the consumer, or counselor, in determining a credit improvement outcome. Credit Education has become an increasingly practiced discipline due to sweeping increases in the use of the credit score and its affect on the prices consumers pay for loans, insurance, housing and utilities. It is also the major factor in loan eligibility. Not to be confused with credit counseling, credit education does not focus on debt counseling or creditor negotiation, nor involves the practice of collecting debt from consumers. Credit counseling has consistently received negative publicity for its fee and management practices. Your Credit History Credit history or credit report is, in many countries, a record of an individual's or company's past borrowing and repaying, including information about late payments and bankruptcy. The term "credit reputation" can either be used synonymous to credit history or to credit score. When a customer fills out an application for credit from a bank, store or credit card company, their information is forwarded to a credit bureau, along with constant updates on the status of their credit accounts, address or any other changes you may have made since the last time they applied for any credit. This information is used by lenders such as credit card companies to determine an individual's or entity's credit worthiness; that is, determining an individual's or entity's means and willingness to repay an indebtedness. This helps determine whether to extend credit, and on what terms. With the adoption of risk-based pricing on almost all lending in the financial services industry, this report has become even more important since it is usually the sole element used to choose the annual percentage rate (APR). Adverse Credit History, also called sub-prime credit history, non-status credit history, impaired credit history, poor credit history and bad credit history, is a negative credit rating. A negative credit rating is often considered undesirable to lenders and other extenders of credit for the purposes of loaning money or capital. Consequences of Adverse Credit History The information in a credit report is sold by the credit agencies to organizations that are considering whether to offer credit to individuals or companies, it is also available to other entities with a "permissible purpose." The consequences of a negative credit rating is typically a reduction in the likelihood that a lender will approve an application for credit under favorable terms or at all. Interest rates on loans are often based on credit history in an almost backwards-intuitive way--the higher the credit rating, the lower the interest while the lower the credit rating, the higher the interest. In the United States, in certain cases, insurance, housing and even employment can also be denied based on a negative credit rating. Laws to protect consumers are in place however, to regulate this behavior. Interestingly enough, it is not the credit reporting agencies that decide whether a credit history is "adverse." It is the individual lender or creditor which makes that decision. Each lender has its own policy on what scores fall within their guidelines. The specific scores that fall within a lender's guidelines are most often NOT disclosed to the applicant due to its nature as a trade secret. In the United States, a creditor is required to give a reason for denying credit to an applicant immediately and must also provide the name and address of the credit reporting agency that provided data that was used to make the decision. The Credit Card Industry The credit card system is a type of retail transaction settlement and credit system, named after the small plastic card issued to users of the system. A credit card is different from a debit card in that it does not remove money from the user's account after every transaction. In the case of credit cards, the issuer lends money to the consumer (or the user). It is also different from a charge card (though this name is sometimes used by the public to describe credit cards), which requires the balance to be paid in full each month. In contrast, a credit card allows the consumer to 'revolve' their balance, at the cost of having interest charged. Most credit cards are the same shape and size, as specified by the ISO 7810 standard. How they work A user is issued a credit card after an account has been approved by the credit provider (often a general bank, but sometimes a captive bank created to issue a particular brand of credit card, such as Wells Fargo or American Express Centurion Bank), with which the user will be able to make purchases from merchants accepting that credit card up to a pre-established credit limit. When a purchase is made, the credit card user agrees to pay the card issuer. Originally the user would indicate their consent to pay, by signing a receipt with a record of the card details and indicating the amount to be paid, but many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet. Electronic verification systems allow merchants (using a strip of magnetized material on the card holding information in a similar manner to magnetic tape or a floppy disk) to verify that the card is valid and the credit card customer has sufficient credit to cover the purchase in a few seconds, allowing the verification to happen at time of purchase. Other variations of verification systems are used by eCommerce merchants to determine if the user's account is valid and able to accept the charge. Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the cardholder may dispute any charges that he or she thinks are incorrect (see Fair Credit Billing Act for details of the US regulations). Otherwise, the cardholder must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the entire amount owed. The credit provider charges interest on the amount owed (typically at a much higher rate than most other forms of debt). Some financial institutions can arrange for automatic payments to be deducted from the user's accounts. Credit card issuers usually waive interest charges if the balance is paid in full each month, but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid. For example, if a user had a $1,000 outstanding balance and pays it in full, there would be no interest charged. If, however, even $1.00 of the total balance remained unpaid, interest would be charged on the full $1,000 from the date of purchase until the payment is received. The precise manner in which interest is charged is usually detailed in a cardholder agreement which may be summarized on the back of the monthly statement. The credit card may simply serve as a form of revolving credit, or it may become a complicated financial instrument with multiple balance segments each at a different interest rate, possibly with a single umbrella credit limit, or with separate credit limits applicable to the various balance segments. Usually this compartmentalization is the result of special incentive offers from the issuing bank, either to encourage balance transfers from cards of other issuers, or to encourage more spending on the part of the customer. In the event that several interest rates apply to various balance segments, payment allocation is generally at the discretion of the issuing bank, and payments will therefore usually be allocated towards the lowest rate balances until paid in full before any money is paid towards higher rate balances. Interest rates can vary considerably from card to card, and the interest rate on a particular card may jump dramatically if the card user is late with a payment on that card or any other credit instrument. As the rates and terms vary, services have been set up allowing users to calculate savings available by switching cards, which can be considerable if there is a large outstanding balance. Because of intense competition in the credit card industry, credit providers often offer incentives such as frequent flier points, " gift certificates, or cash back (typically up to 1 percent based on total purchases) to try to attract customers to their program. Low interest credit cards or even 0% interest credit cards are available. The only downside to consumers is that the period of low interest credit cards is limited to a fixed term, usually between 6 and 12 months after which a higher rate is charged. However, services are available which alert credit card holders when their low interest period is due to expire. Most such services charge a monthly or annual fee. Grace period A credit card's grace period is the time the customer has to pay the balance, before interest is charged to the balance. Grace periods vary, but usually range from 10 - 55 days depending on the type of credit card and the issuing bank. The merchant's side Even some street market stands now take credit cards. For merchants, a credit card transaction is often more secure than other forms of payment, such as checks, because the issuing bank commits to pay the merchant the moment the transaction is verified. The bank charges a commission (discount fee), to the merchant for this service and there may be a certain delay before the agreed payment is received by the merchant. In addition, a merchant may be penalized or have their ability to receive payment using that credit card restricted if there are too many cancellations or reversals of charges. In some countries, like the Nordic countries, banks guarantee payment on stolen cards only if ID card is checked. In these countries merchants therefore usually ask for ID. Secured credit cards A secured credit card is a type of credit card secured by a deposit account owned by the cardholder. Typically, the cardholder must deposit between 100% and 200% of the total amount of credit desired. Thus if the cardholder puts down $1000, he or she will be given credit in the range of $500–$1000. In some cases, credit card issuers will offer incentives even on their secured card portfolios. In these cases, the deposit required may be significantly less than the required credit limit, and can be as low as 10% of the desired credit limit. This deposit is held in a special savings account. The cardholder of a secured credit card is still expected to make regular payments, as he or she would with a regular credit card, but should he or she default on a payment, the card issuer has the option of recovering the cost of the purchases paid to the merchants out of the deposit. Although the deposit is in the hands of the credit card issuer as security in the event of default by the consumer, the deposit will not be credited simply for missing one or two payments. Usually the deposit is only used as an offset when the account is closed, either at the request of the customer or due to severe delinquency (150 to 180 days). This means that an account which is less than 150 days delinquent will continue to accrue interest and fees, and could result in a balance which is much higher than the actual credit limit on the card. In these cases the total debt may far exceed the original deposit and the cardholder not only forfeits their deposit but is left with an additional debt. Most of these conditions are usually described in a cardholder agreement which the cardholder signs when their account is opened. Secured credit cards are an option to allow a person with a poor credit history or no credit history to have a credit card which might not otherwise be available. They are often offered as a means of rebuilding one's credit. Secured credit cards are available with both Visa and MasterCard logos on them. Fees and service charges for secured credit cards often exceed those charged for ordinary non-secured credit cards, however, for people in certain situations, (for example, after charging off on other credit cards, or people with a long history of delinquency on various forms of debt), secured cards can often be less expensive in total cost than unsecured credit cards, even including the security deposit. Security A smart card combines credit card and debit card properties. The 3 by 5 mm security chip embedded in the card is shown enlarged in the inset. The gold contact pads on the card enable electronic access to the chip. The low security of the credit card system presents countless opportunities for fraud. This opportunity has created a huge black market in stolen credit card numbers, which are generally used quickly before the cards are reported stolen. The goal of the credit card companies, as they say, is not to eliminate fraud, but to "reduce it to manageable levels", such that the total cost of both fraud and fraud prevention is minimized. This implies that high-cost low-return fraud prevention measures will not be used if their cost exceeds the potential gains from fraud reduction. Most Internet fraud is done through the use of stolen credit card information which is obtained in many ways, the simplest being copying information from retailers, either online or offline. There have been many cases of crackers obtaining huge quantities of credit card information from company databases. It is not unusual for employees of companies that deal with millions of customers to sell credit card information to criminals. Despite efforts to improve security for remote purchases using credit cards, systems with security holes are usually the result of poor implementations of card acquisition by merchants. For example, a website that uses SSL to encrypt card numbers from a client may simply email the number from the webserver to someone who manually processes the card details at a card terminal. Naturally, anywhere card details become human-readable before being processed at the acquiring bank is a security risk. However, many banks offer systems such as Clear Commerce, where encrypted card details captured on a merchant's webserver can be sent directly to the payment processor. The Federal Bureau of Investigation is the agency responsible for prosecuting criminals who engage in credit card fraud in the United States, but they do not have the resources to pursue all criminals. In general, they only prosecute in cases exceeding US$5,000 in value. Three improvements to card security have been introduced to the more common credit card networks but none has proven to help reduce credit card fraud so far. First, the on-line verification system used by merchants is being enhanced to require a 4 digit Personal Identification Number (PIN) known only to the card holder. Second, the cards themselves are being replaced with similar-looking tamper-resistant smart cards which are intended to make forgery more difficult. The majority of smartcard (IC card) based credit cards comply with the EMV (Europay MasterCard Visa) standard. Third, an additional 3 or 4 digit code is now present on the back of most cards, for use in "card not present" transactions. Controversy As mentioned, the merchant pays a negotiated fee -- typically 1-3% for larger merchants and 3-6% for smaller merchants -- to process credit payments. Merchants who accept credit card payments typically sign a "merchant agreement," promising that they won't offer different prices for card and non-card transactions. In some countries the fee may be significantly more. If customers were responsible for this fee, it would often discourage credit card usage. Some critics have observed that this results in what is effectively a hidden tax on all transactions conducted by merchants who accept credit cards since they must build the cost of transaction fees into their overall business expense. The end result is that other customers are essentially subsidizing credit card holder purchases. The cost of the convenience enjoyed by card holders and the profits taken from transaction fees by the card industry (which has come to rely increasingly on this revenue stream over the years) is partially offloaded onto the backs of the cash customer. Critics go on to say that further compounding the issue is the fact that the customers most likely to pay in cash are the least able to afford the additional expense (card holders are more likely to be affluent, non-card holders less so). A counterargument is that there are also costs to the merchant in other forms of payment. For cash payments these include frequent trips to the bank or use of an armored delivery service, theft, and employee error, such that cash is actually not cheaper for the merchant than credit cards. Some businesses may offer a discount for cash-paying customers. There is some controversy about credit card usage in recent years. Credit card debt has soared, particularly among young people. Since the late 1990s, lawmakers, consumer advocacy groups, college officials and other higher education affiliates have become increasingly concerned about the rising use of credit cards among college students. The major credit card companies have been accused of targeting a younger audience, in particular college students, many of whom are already in debt with college tuition fees and college loans and who typically are less experienced at managing their own finances. A recent study by United College Marketing Services has shown that student credit lines have increased to over $6,000. Credit card usage has tripled since 2001 amongst teenagers as well. Since eighteen year-olds in many countries and most U.S. states are eligible for a card without parental consent or employment, the likelihood of increased balances, unwise use of credit and damaged credit scores increases. An example of a credit card class action was where issuers were "rolling back" posting times to extract more late fees. The due dates were "rolled back" from 1pm to 10am because mail was delivered in the afternoon so due dates were actually rolled back to charge more late fees. The following banks are listed (with the amounts penalized) in this one particular class action. Providian: US$405 million Bank One: US$40 million Chase: US$22.2 million Citibank: US$15.5 million Another controversial area is the universal default feature of many North American credit card contracts. When a cardholder is late paying a particular credit card issuer, that card's interest rate can be raised, often considerably. Given this circumstance with one credit card, universal default allows other card issuers to raise the cardholder's interest rates on other accounts, even if those other accounts are not in default. In the United States, Congress has been slow to introduce credit card reform legislation. A push toward expanding the disclosure box and incorporating balance payoff disclosures on credit card statements could help clarify credit card debt's ramifications. Identity Theft Problem Identity theft is a term first emerging in U.S. literature circa 1996. The earliest internet references concern a lobby of the United States Federal Trade Commission for regulation concerning the criminal abuse of consumers' personal identifiers. The main concern for consumers is financial crimes exploiting their credit worthiness to commit loan fraud, mortgage fraud, lines-of-credit fraud, credit card fraud, commodities and services frauds. The common denominator to these crimes is a reliance by lenders and vendors on shared use of highly centralized national credit-rating services. With the centralization of financial services and the emergence of national retail outlets business no longer personally know their customers. These facts do not escape the criminals. Other consumer crime "identity theft" statistics include check kiting, the bleeding of personal savings accounts, and theft and fraudulent use of credit cards. With the rising awareness of consumers to an international problem, in particular through a proliferation of web sites and the media, the term "identity theft" has since morphed to encompass a much broader range of identification-based crimes. The more traditional crimes range from dead beat dads avoiding their financial obligations, to providing the police with stolen or forged documents thereby avoiding detection, money laundering, trafficking in human beings, stock market manipulation and even to terrorism. "Identity theft" in itself is an oxymoron, generating confusion in circles attempting to reconcile the term with the crime. In the purest linguistic sense, someone's identity cannot be stolen. Human identity is a psychological or philosophical conversation. However, a person's "means of identification" can be used unlawfully and their "identification documents" can be stolen. Some people prefer the term "identity fraud" to describe when their means of identification has been exploited for an unlawful purpose. Others believe the thief does deprive the owner of his identity by replacing his reputation with the thief's. Many uses of the term focus on the act of acquiring the personal information necessary to perpetrate the personation. A classic example of consumer-dependent financial crime occurs when Bob obtains a loan from a financial institution impersonating Peter. Bob uses Peter's personal identifiers that he has somehow acquired. These personal identifiers conform with the data retained on Peter by national credit-rating services. The identifiers include surname, given names, date of birth, Social Security number (U.S.), Social Insurance Number (Cda), current and former addresses etc. These data are all part of credit header information retained by credit-rating services. The crimes are self-revealing. When Peter defaults on payments the lenders become aware. With consumers being credit-dependent, the onus shifts to them to re-establish their credit-worthiness with the lending institutions and credit-rating services. Less commonly understood outside criminal intelligence and law enforcement circles is the impact of identification-based concealment crimes. As with credit-dependent consumer financial crimes, criminals acquire legally attributed personal identifiers and then clone someone to them for concealment from authorities. Unlike credit-dependent financial crimes, they are not self-revealing, continuing for an indeterminate amount of time without being detected. The crimes include illegal immigration, terrorism and espionage, to mention a few. It may also be a means of blackmail if activities undertaken by the thief in the name of the victim would have serious consequences for the victim. There are cases of identity cloning to attack payment systems, such as obtaining medical treatment. Techniques for obtaining information Stealing mail or rummaging through rubbish (dumpster diving) Eavesdropping on public transactions to obtain personal data (shoulder surfing) Stealing personal information in computer databases [trojan horses, hacking] Infiltration of organizations that store large amounts of personal information Impersonating a trusted organization in an electronic communication (phishing) Spam (electronic): Some, if not all spam requires you to respond to alleged contests, enter into "Good Deals", etc. Using another arguably illegal reason to victimize individuals who display their personal information in good faith, such as landlord-related fraud, where the Patriot Act is used to create suspicion on prospective tenants, and then using their personal information to commit fraud. This is a very common practice among slumlords, who violate Civil Rights and use the right to request background checks to defend their legal policies, which are later used to commit crimes; the laws themselves create this conflict and is a type of identity theft created and enforced by Federal law. Spread and impact of consumer-based "identity theft" Surveys in the USA from 2003 to 2006 showed a decrease in the total number of victims but an increase in the total value of identity fraud to US$56.6 billion in 2006. The average fraud per person rose from $5,249 in 2003 to $6,383 in 2006. The 2003 survey from the Theft Resource Centre found that : Only 15% of victims find out about the theft through proactive action taken by a business The average time spent by victims resolving the problem is about 600 hours 73% of respondents indicated the crime involved the thief acquiring a credit card The emotional impact is similar to that of victims of violent crime. Confusion over exactly what constitutes identity theft has lead to claims that statistics may be exaggerated. Precautions against consumer-based "identity theft" The following precautions are recommended by the US Federal Trade Commission: Shred documents and paperwork which contain personal information before you discard them. Don't give out personal information unless you know who you are dealing with. Never click on links in unsolicited emails; instead, type in a web address which you know Use firewalls, anti-spyware, and anti-virus software to protect your home computer; Don't use obvious passwords like your birth date or your mother's maiden name Keep your personal information in a secure place at home Be alert for discrepancies in your financial bills and statements and query them immediately Report fraud as soon as you detect it The following have also been recommended: Collect delivered postal mail as soon as possible. Use reliable ATMs at reputable sites only. Look for any suspicious attachments to an ATM and gas station devices which accept credit and debit cards, and if in doubt, do not use the ATM or gas station device, but report the problem. Be aware of your surroundings when using an ATM. Hide what you type on a keypad from others. Limit the amount of personal information you publish on the web. When shopping online, make sure the company is reputable, displays an approved security symbol and uses an encrypted page to take payment details. The encrypted page should not generate warnings about being signed by an unknown authority. When handing over your credit card, do not let it out of your sight. If you are traveling, tell the post office to hold your mail until your return or have someone you trust collect it. Drop outgoing mail in Post Office mail boxes like you find on street corners or at the Post Office (preferable). Avoid the threat of check washing by using Gel ink pens when writing checks. Stop pre-approved credit card mail offers either online or calling 888-5-OPT-OUT (888-567-8688). The following are specific to the USA : Protect your Social Security number. Don't carry your Social Security card in your wallet or write your Social Security number on a check. Give it out only if absolutely necessary or ask to use another identifier. In states where your driver's license number is your social security number, be equally careful about who sees your license. Don't order checks pre-printed with your driver's license or social security number. Freeze your credit, if available in your state so that no one can open any form of credit in your name. Request your own credit report each year and check the reports for inaccuracies and new lines of credit issued that you did not request Mortgages by Noone, LLC is licensed in Minnesota & Florida.