Credit Scores Free

Many articles have been written about the importance of having healthy credit. And nowhere is the state of your credit more important than when you apply for a home loan. For most people, a house is the most expensive thing they will ever buy and the overall health of your credit determines whether or not a lender will offer you an affordable home loan. Since the most common measure of financial health is a credit score, most potential buyers are urged by well-meaning sources to “check your credit score before you apply.” Many would-be homebuyers head to the Internet to do just that, and seeing that their score is sufficient, they head off, score in hand, to meet with a lender to discuss potential loans.

And then the lender drops the bomb – “Sorry, but your credit score is too low. You don’t qualify for the best interest rate.”

What happened? How can the credit score you buy be higher than the one the lender receives? The answer is a simple one – there is more than one kind of credit score. Each of the three main credit bureaus – Equifax, Experian and Trans Union, uses a different method of determining credit scores. While the scale and criteria they use are roughly the same, the formula is slightly different at each bureau, so checking with all three bureaus could provide you with three different scores. Or even four – the three bureaus are now also making use of a unified scoring system. But which one is the “correct” score?

Mortgage lenders almost universally check the FICO score, created by Fair, Isaac, and Co. The FICO score is similar to many others, but it’s the one that lenders are checking. That means that if you want to know exactly where you stand ahead of time, you need to check your FICO score yourself. And you need to make sure that the number you receive is, in fact, your FICO figure and not some other arbitrary score.

How can you do that? There are many places on the Internet where you can obtain a credit score, but not all of them will offer the FICO figure. Make sure that the site you visit offers the FICO score before you agree to pay. Equifax makes the FICO figure available on their site, as does MyFICO.com. If you aren’t sure, you might check with one of those two Websites. Making sure you have an accurate representation of your financial health prior to applying for a home loan is a great idea. Just make sure that you are looking at the same measure of financial health that your lender will use – your FICO score.

Have you ever wonder why your online application for credit can be approved in 60 seconds? Or get pre-qualified auto loan for a car without asking you how much is your income? Or why your interest rates on loans are different from the interest rates of your friends or neighbors?

Your credit scoring is the factor that affect all the above. It is your responsibility to main a good credit score. You will need to use it to get you a best available rate when come to apply for credit.

What is Credit Score?

Most of time credit score is refer as FICO score (Fair Isaac Corporation), it is a number based on the information in your credit file that shows how likely you are to pay a loan back on time, the higher your score, the less risky you are. You credit score is derived from three major credit bureaus: Exprian, Equifax and TransUnion. These 3 major credit bureaus will compile your credit report based on the information provided by the companies that gave your credit in the past. Based on the information such as your payment history, the length of your credit history and the type of credit your have and the amounts owed, the credit bureaus will generate your credit report. And based on your credit report, a number or scores will be assigned to you; this number will be range from 300 to 850. This magic number is your credit score, the higher the number the better you are.

When Your Credit Score Count?

Your credit score will play an important part when comes to applying loans or other credits, it may save you a significant of interest if you are have good credit score. When you apply for mortgage, car loan, business loan or credit card, the lender or credit company will assess how risky you are as a potential borrower, the higher your score, the less risk you pose to the lender and the more likely you will get a better interest rate for application.

You will be offered at a relatively low rate if your credit score is above 700 and if your credit score is above 760, you will get the best available rates because you are the lowest risk borrower at this high of credit score. You loan will be approved with high loan rates if your credit score is below 600, and if your credit score is really bad, you may be not be able to borrow at all.

Maintain High Credit Score

Now you know how important your credit score is and when it becomes important and you can use it as a tool to save cash. Hence, it is important for you to maintain your credit score at high level. Things that you can do to increase your credit score include:

Pay your bills on time
Keep balances low on credit cards
Dont open a number of new credit cards that you dont need
Have credit cards – but manage them responsibly

In Summary

Credit score is not just a number, it is a tool that you can control and use to save cash. It will become important whenever you need credits and it is an important factor to be considered by any financial organization before they approve your credit application. Hence, keep your credit score all time high.

When it comes to credit applications, the rule of thumb is this: If you want the best loan, make sure your score is the best it can be.

Think of your credit score as your report card. Now, you might think that you are already out of school; youre supposed to be done with report cards. Ah, but try applying for a home loan or an auto insurance and the first thing your lender is going to do is to check on your grade.

Your grade, of course, is your credit score. It is that three-digit number that measures the likelihood you will repay what you owe. How your credit score is calculated is based largely on the information found in your credit report. And that is why the first step in improving credit score is to get a hold of your credit report from all three major credit bureaus Equifax, Experian, and TransUnion.

Note, however, that your reports must come from all three bureaus. A credit report wouldnt be any good to you when improving credit score if it only comes from one credit bureau. Thats because there may be errors found in your report from one credit bureau that you might not see in reports from the other two. So for comparison purposes, get your credit reports from all three credit bureaus.

Once you have all three credit reports with you, the next step in improving credit score is to review them for any errors and mistakes. See if there are any line items there you are not aware of or credit accounts that you dont remember opening. Reporting any mistakes or errors to the credit bureaus immediately after you find them is vital to improving credit score.

Under the law, credit bureaus are obliged to conduct an investigation every time they receive a complaint about any errors or mistakes in the credit reports they released. Within thirty days, they are supposed to inform you about the outcome of their investigation and strike the errors from your credit report.

If you find no errors in your credit report however and your score still doesnt look too good, there are other ways of improving credit score.

Number 1: Pay your bills on time.

Lenders love punctual payers. Your credit score will likewise look better if you make your payments on time since payment history makes up 35% of your score.

Number 2: Reduce debts.

Another important step to improving credit score is to reduce your credit card balances. Your existing credit card debts are a heavily weighted factor in calculating your credit score so lowering them down or keeping them at a minimum will help you in improving credit score.

Keep Your Credit History Clean – Remove A Negative Credit Record From Your Credit Report.

It can make a difference of up to 18% in loan repayment costs.

For example, on a 30-year, 150,000 fixed rate mortgage, a borrower with the best credit score, 760-850, will pay 5.59%, or 860 per month, while someone in the worst score range will pay 7.18%, or 1,016 per month.

This can make a big difference to the household budget, so it’s to your advantage to keep your credit score as low as possible.
The 3 major credit bureaus, Experian, Equifax and Trans Union are similar and feature a “Credit Score”, which is derived from credit report information submitted to them about you.

Uner the Equal Credit Opportunity Act, a credit scoring system may not use characteristics such as race, sex, marital status, national origin or religion as factors, though they are allowed to use age.

Credit scores are determined by your bill-paying history, the number and type type of accounts you have, late payments, collection actions, and outstanding debt. The total number of points reflects how likely you are, statistically-speaking, to pay back a loan.

If you are denied credit, the Equal Credit Opportunity Act forces the creditor to tell you the specific reasons your loan application was denied if you ask within 60 days. Acceptable reasons include high balances on charge cards, or bad employment history. Unacceptable reasons include vague excuses such as “You didn’t meet our minimum standards”.

Sometimes you can be denied credit because of information on a credit report. The Fair Credit Reporting Act requires the creditor to give you the contact information of the credit report agency supplying the information.

The credit reporting agency can give you the information on your report, but only the lender can tell you why this led to your application being refused.

However your credit report may include inaccurate or incomplete information (credit records). Identity theft is a growing problem, and can take up to a year to resolve.

Nearly 10 million people fall victim to identity theft each year, costing consumers 5 billion and businesses 48 billion, according to the Federal Trade Commission.

In this situation you have to send letters to every one of the credit bureaus. Also learn your credit rights by familiarizing yourself with the Fair Credit Reporting Act (FRCA).

The FCRA gives you the right to dispute inaccuracies and omissions, and it requires credit bureaus to investigate your complaint (generally in thirty days), send you a prompt response and correct any errors.

The law as well requires the source of inaccurate information (such as a bank) to correct the record at the credit bureaus to which it initially provided the erroneous information.

Consumers working on their credit reports say many times their letters are ignored by credit bureaus. Consumers say even with proof a credit record isn’t theirs, its removal from their credit report can take 3 or even 4 challenge letters, because the credit bureaus will have only corrected the facts in their own files and not updated the credit report.

Send your dispute letter by REGISTED MAIL. Credit companies will respond faster if they know you can prove you filed a complaint on a certain date. Keep a record of when you sent the dispute letters and what date you should expect a response.

If you have received no defense to your claim after thirty to thirty seven days, send another registered letter requesting an updated credit report and demanding the disputed credit record be deleted.

If the bureaus don’t reply in the thirty days, it must be that the information they had on file was either inaccurate or unverifiable. In either case, based on data from the Fair Credit Reporting Act, the credit record must be immediately deleted from your credit report.

A few consumers have eliminated negative marks on credit reports just by going through this process of disputing credit records many times. Since some creditors will not take the time to respond, you can sometimes win by default.

Usually a bit of progress will be made with each challenge.Remember, the credit bureau would like you to quit bothering them because if you are not disputing the credit report, they can legally carry on selling it as profitable information.

Equifax is one of the top credit reporting bureaus and is well-versed in calculating your credit score based upon your credit history. Your credit score helps lenders to determine if you a credit worthy and your credit score can keep you from getting a loan from a lender.

To determine your credit score, Equifax uses a mathematical equation on information that is gathered from your credit file. This equation compares is against patterns seen on other files. The range of credit scores go from 300 to 850 and the higher it is, the better it is. As your information changes on your credit report, so will your credit score. It is very unlikely for some one to have the same score from month to month.

Equifax looks at many factors to determine your credit score. The following are just some of the factors that help them to calculate your score.

Payment History-If you have late payments reported on current or past accounts, these will lower your score.

Credit Owed-If you owe too much on your available credit, it will affect your score, especially if you are maxed out or close to it.

Credit History-How long youve had credit will also affect your score. If youve only had credit for a few months compared to several years, youre credit score will be affected.

Inquiries-If youve applied for credit with several lenders and creditors, it may lower your score.

Judgements, Bankruptcies, Collections-Any accounts that have been sent to collection or you have been taken to court on, including bankruptcy, will lower your score.

These, of course, are only a few of the factors that will influence your credit score.

If your credit score is not where you want it to be, there are ways that you can improve it.
The most important thing you can do to increase your credit score, however, is to pay your bills on time. If you do have a circumstance that you can not pay your bills, make sure you include a letter of explanation. This will be included on your credit report an calculated toward your credit score.

Whether you are applying for a credit card, a car loan, or a mortgage, one of the first things that lenders will look into is your credit score.

What is a credit score?

This is a whole bunch of numbers arrived at by calculating such factors as:

* Payment history
* Amounts owed
* Length of credit history
* New credit
* Types of credit used

Credit scores are released by the three credit bureaus Experian, Equifax, and Trans Union each of which provide different scores, based on different factors and credit rating systems. As such, each person actually has more than one credit score.

How important is your credit score?

When lenders let you borrow money, this actually translates to an investment on their part. They collect from the interest as well as the principal. However, like all investments, lending money involves certain kinds of risk. For instance, a borrower may miss out on his monthly obligations, or he may file for bankruptcy. If either of this happens, the lender will have lost in his investment.

So to minimize the risk of loss, lenders want to know as early as possible whether you are a good investment or not that is, whether you are a good borrower who pays his monthly obligations regularly. One way for a lender to determine the likelihood of a borrower to repay his obligation is to get a hold of his credit score.

The credit score released by any of the three credit bureaus reflects how good an investment you are. Each score is based on information that the credit bureaus keep on file about you. Based on such score, the lenders will be able to calculate how much and what loan terms (interest rates, down payments, etc.) they will offer you at any given time.

Thus, low credit scores generally mean higher interest rates and more stringent requirements for approval of your loan application. On the other hand, high credit scores generally mean lower interest rates and lower monthly repayments.

Is credit scoring really necessary?

There are many instances where the importance of credit scoring is stressed. For one, the availability of credit scores helps people get loans faster. Since scores can be delivered quickly, lenders can then approve loans faster.

Another advantage to having the credit scoring system is that decisions involving credits are fairer. Lenders can now base their decisions on facts, not on personal feelings or factors like gender, race, religion, nationality, and marital status, thus reducing discrimination in credit approval processes.

Since lenders can now approve loans faster, this translates to more credit available. The less time it takes them to mull through each loan application means more loans getting approved, since credit scores gives them more precise information on which to base their decisions.

You may not find out how bad your credit really is until you apply for a mortgage. Then you will quickly realize that the low interest rates everybody raves about these days, the rates that are a big part of the rising prices of real estate across America, don’t apply to everyone. To be specific, they don’t apply to you! If you have bad credit, you are not going to receive the same low interest rates on your home loan that your neighbor with good credit will.

Why not, you may ask. Well, here’s the thing. If your credit score is poor, banks and other financial institutions consider you to be a risky business partner. In order to lend you money, they have to insure themselves against the risk that you may default on payments. They do this by offering you a higher interest rate so their end of the deal looks a bit sweeter. For you, though, it means higher monthly payments and that you can afford to borrow less money than if your credit was better.

If you don’t even know if you’re considered a credit risk or not, don’t you think it’s time you found out? This is one of the smartest moves you can make, business wise, as it affects not only your mortgage but the interest rates you get on your credit cards, car payments and virtually every financial agreement you enter into.

Checking your credit score

When banks and others want to ascertain what kind of credit risk you may pose, they will consult your FICO score before doing anything. The FICO is like a report card of your credit. Your FICO score is a three digit number ranging from 300-850. You actually have three separate FICO scores, one for each credit bureau – Equifax, Experian, and TransUnion. These may not show the same score, since not every creditor reports to all three credit bureaus.

In order to make sure you see the same thing that your eventual creditors are seeing, order all three of your fico scores. Study them carefully. You look at the total score, naturally, but you also want to scrutinize the details carefully. Maybe that rent check last year that you sent in one week too late was never registered properly. This will definitely affect your overall score.

If you do find any errors in the reports, make sure to contact those responsible for that specific record and ask them to correct the entry. If you are lucky, a couple of phone calls will make a real difference in your credit score!