CALCULATING FICO SCORE

Obviously, The Fair Issac Corporation develops the FICO score which is a recognized credit score. FICO score is used my many lenders and it can be got from my FICO.com. Buying credit score through any other source is not considered as FICO score. Each credit bureau has their brand name. Credit scores got through Equifax is known as BEACON, and through Experian known as PLUS and through Trans Union as EMPIRICA.

DIFFERENT CREDIT SCORE FROM EACH BUREAU

Different calculation is done by every credit bureau like Equifax, Trans Union and Experian and hence turns up with different credit scores. Each credit report may contain various information The Creditors may not submit the reports to all the credit bureaus and hence all of them might not have the correct credit history.

CALCULATION OF CREDIT SCORE

The credit score is based on different information like credit age, debt level, credit inquiries, credit mix and the payment history.

SHOULD I HAVE CREDIT SCORE

The customer may not need a credit score, if he does not posses a credit history or if it is short. MYFICO.com says there should be one account at least during the last six months. A copy of credit report can be checked to find out the credit history.

MULTIPLE LOANS AND CREDIT SCORE

In order to get loans and credit cards a credit score is needed. Before starting with credit, a key credit card can be applied by checking with the bank. To get an assured credit card a deposit may be needed for approval. A friend can give assurance by co signing a card or adding the friend as authorized user for the card already owned by him.

While applying for car or home loan some people send in many applications for loans in order to get a good bargain in the interest rate. But some say this brings down the credit score but it may not be true all the time. If the loan is taken within fourteen days then it may not affect the credit score. Some lenders extend the date to about 45 days.

The credit scoring forms are designed in such a way that they usually find out that the customer is shopping around and do not put fine on them. Current FICO score omits mortgage and loan enquiries made to buy vehicles in  a time frame of 45 days. The older FICO score versions take 14 or 30 days limit. Once the time limit has passed the loan enquiries are considered as one. The influence of rate shopping on the credit score is determined by the credit score used by the lender.

10% of the credit score is determined by the credit enquiry. If the credit score is 700 then the penalty  will be 70 points if the enquiries are more. The scar made by the loan enquiry on the credit score depend on the number of enquiries entered on the credit report. If the number of rate enquiries entered in the credit report is more then any new enquiry made will affect the credit score since as the number increases the penalty also increases.

CELL PHONE BILL AND CREDIT SCORE

Credit score does not get altered due to cell phone charges, since credit report does not include cell phone charges. Credit score shall be influenced by non payment cell phone bill if it is sent to an unknown collection agency.

WHO ESTIMATES CREDIT SCORE

The different companies like FICO and credit bureaus like Equifax, Trans Union and Experian usually work out the credit score. Some times banks or some unknown vendors used by banks determine the credit score.

The information given in the credit report determines the credit score irrespective of which company calculates the credit score. Credit score calculated by various companies vary according to any one of the 3 credit reports used and the variation in the credit scoring algorithms of the various businesses.

CLOSING CREDIT CARD AND CREDIT SCORE

Credit score shall be influenced by closing a credit card. If a credit card having a balance is closed then it will affect the credit score. Credit Utilization is the credit availability which is being utilized by the customer. It forms 30% of the credit score and so if the credit card is closed the credit availability becomes nil and hence credit Utilization becomes 100%, thus dropping the credit score.

Generally, credit utilization is calculated using all the balances on credit card and the credit availability so even if the balance of the closed credit card is zero the credit score gets affected. Credit score gets affected by closing one of the credit cards since credit cards possess a balance of 30% of credit limits. Credit score falls down if the customer possesses stores credit cards only and closes a key credit card. The experience got from various credit products which include loans and credit cards and “10% of credit score form the mix of credit.15% of credit score is affected by the closing of old credit card  until the account is dropped from the credit repot after 10 years.

DELAYED PAYMENT VS CREDIT SCORE

Although the credit score gets affected by debt settlement the credit scores the points loss cannot be predicted.

According to FICO the score loss is determined according to the situation. If a customer with six hundred and eighty credit score with one delayed payment will lose forty five to sixty five points once the debt is settled for single credit card and the individual with seven hundred and eighty credit score without delayed payment will lose 140 and 160points. Credit score gets affected similarly if the same kind of credit profiles is being met. Credit score gets hurt by debt settlement if the settled credit cards are in excellent standing and when the customer ends up settling numerous credit card accounts. The information about debt completion will be in the credit report for seven years but as the detail gets older the impact on credit score becomes less. While buying FICO standard product through myFICO.com FICO score stimulator, which gives the influence of delayed payment on the credit score can be got. The Equifax or Trans Union credit score and report are given in FICO Standard.

BANK OVERDRAFT AND CREDIT SCORE

An overdraft is the amount spent more than that in the checking account. The bank pays off the money and charge overdraft fee by charging for every day the account remains negative. If the over drafts are settled in time they do not affect credit score. However if it is not paid back in time it will be listed upon the credit report and affect the credit score. Further, the amount will be kept in the credit report for seven years even after paying it off if the collection organization is not convinced to eliminate it.

If a check re bounces then also the credit score gets affected. A charge will be made by the credit company for re bounced check and the account shall be taken towards the credit bureau for delinquency. While issuing a check it should be carefully noted that he bank has sufficient money in the account for it and also any outstanding transactions.

The internal credit scoring scheme in the bank uses the credit report information along with account history. If such a system is used by the bank to calculate credit score then it gets affected by over draft which will affect to claim any loan or getting a credit card. The credit score as well as FICO score given through credit bureaus will not have any impact on over drafted amount unless the over draft is reported on credit report due to late payment or collection account.

DEBT SETTLEMENT AND CREDIT SCORE

Debt settlement affects the credit score but the amount of impact is not known. Usually, FICO score produced by FICO is according to two situations. The customer with six hundred and eighty credit score tends to lose forty five and sixty five points following debt settlement made for any single credit card and the customers with seven hundred and eighty credit score without delayed payments will lose around hundred and fifty points. Any credit profile of the same type will affect the credit score in the same way.

The credit score gets affected by debt settlement if the accounts in the credit cards are in good condition and if various credit card accounts are cancelled. The credit report will have the debt settlement data for nearly 7 years, but if the information is old then the impact will be less. While buying FICO typical product through myFICO .com then the FICO score stimulator can also be bought. It helps to tell the result of delayed payment on credit score. Equifax/TransUnion credit score as well as credit report is included in the FICO quality.

CREDIT UTILISATION RATIO

The sum of credit availability used is known as the credit utilization. About 30% in the credit score is affected by the credit utilization. The credit utilization can be lowered when the credit used is less and thus by lowering the credit utilization the credit score can be increased.

When the credit availability is not used then the credit utilization remains 0%. If the credit utilization equals 30% then it is ideal. In such a case the balance in credit card is carried away or if it is updated upon the credit report prior to the payment is sent. When the credit utilization goes above 30% then it affects the credit score.

When the cell phone invoice is not paid on time it affects the credit score, incase the information is sent to the unknown agent. The company FICO, and the credit bureaus Equifax, TransUninon and Experian and some banks estimate the credit scores. Credit score varies depending upon the information given in the credit report. If the credit card which has been cancelled has a remaining balance then it will affect the credit score. Delayed payment of credit card affects credit score. Debt settlement shall stay in the credit report for about 7 years and as the time passes by the effect of it on credit score diminishes. Over draft money affects the credit score. Further, the debt will be entered in the credit report, while it remains there for seven years if the collection agent is not convinced after repayment of the amount. While paying the credit card through check it should be noted carefully so that the check does not re bounce due to lack of money in the account. Each bank has its own credit scoring system. Debt settlement affects the credit score, however the amount varies.

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