FICO scores ( www.myfico.com) are the credit scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus - Experian, TransUnion, and Equifax and they are usually all a little different, sometimes by as much as 100 points.
Each FICO score is based on the information that each credit bureau keeps on file about you (and the info is often different at each one because they don’t share their data with each other). As the information in each of your credit reports change, your credit scores tend to change as well.
When you purchase your FICO scores and credit reports, you are getting a snapshot that is accurate at the time of your purchase. Remember that as the information in your credit report changes, your FICO scores can also change. We recommend checking all three of your FICO scores and credit reports at least once a year. You’re entitled to a free report each year from each of the bureaus but they only give you what’s on your report, not your credit rating.
A perfect score = 850
The higher your score, the easier it is to borrow money (loans, credit cards) and your interest rates will be lower.
Each of the three credit reports lists your: |
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Credit accounts (including all credit cards, auto loans, student loans) |
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Mortgages (home loans) in your name, including: Creditor and account number, Balance, Date opened, Payment history, Current status, such as “OK,” “Closed by customer,” “30 days late payment,” etc. |
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Inquiries: recent applications for new credit |
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Collections: when a collection agency is seeking you to repay a debt |
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Public Records: court judgments such as a bankruptcy, foreclosure, or tax lien |
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| The FICO Score Simulator (www.myfico.com) shows how your FICO scores from TransUnion or Equifax can change when you: |
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Pay your bills on time for many months |
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Miss a payment |
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Pay down your debt balances right away or every month |
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“Max out” your credit cards |
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Get a new mortgage |
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Get a new auto loan |
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Get a new credit card |
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Get instant credit at a department store |
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Apply for a new credit card and transfer balances to it |
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Declare bankruptcy |
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The Universal Default Clause: If you are late on ANY bill (and we mean any), your credit card companies can raise your interest rates automatically, AND they don’t even have to tell you. Imagine finding out your interest rate on your cards is now 29.9%? Ouch!
So, what can you do? |
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Use as little credit as possible (unless it’s going to make you money!) |
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Pay your credit card off each month (remember, credit card companies use compound interest AGAINST you). |
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Save up for the things you want. |
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