Credit Reports & Scores Articles

Annually, eight million people file complaints about their credit scores Forty million reports have errors on them, created by a small monopoly of companies (including Experian, TransUnion and Equifax). The majority of credit reporting services require you to subscribe either online, the preferred method, or by mail. Lenders look at the range into which your score falls, and differences of a point or two matter very little. Given your credit history, you probably have apocalypse insurance and will pay off your loan no matter what happens. Keep in mind that your skilled, strategic use of credit protects your high score. You lose points for paying cash wherever you go. For example, a 721 credit score or a 722 credit score puts you in the category of a low risk borrower. If you have scored 675 to 719 your credit remains satisfactory, but you have fallen out of the big leagues.

If your FICO totals between 620 and 674 you will not qualify for some kinds of credit. Premier credit cards will decline your applications, and many cautious lenders will reduce your spending limits. Credit card issuers also may charge higher annual fees and make you pay larger penalties as a result of your poor payment history. If your FICO hovers below 620 you become a sub-prime borrower, facing severely limited credit options and enduring considerably higher interest rates. In addition, medical debts that had been considered delinquent but have since been paid by insurance will be removed from credit reports.

With a considerably below average FICO score, you also become a target for predatory lenders, the kind who assured mortgage borrowers, Of course, you can afford that million-dollar house on your hundred- dollar salary. A below average credit score warrants careful examination of your FICO report, suggesting some information may be outdated or incorrect; and your low score may warrant some work with a debt counselor or financial planner. Most of the changes to credit reports are the result of a settlement reached earlier this year between the credit reporting agencies and a group of state attorneys general. The bureaus will institute a 180-day waiting period before they enter medical debt onto a consumer’s report.

Unpaid medical debts – medical collections represent roughly half of all collection accounts on credit reports , according to the CFPB – will be treated very differently. The AG settlement includes several other consumer-friendly changes too, such as a requirement that the bureaus do a more thorough job of investigating consumer disputes. The bureaus must also get better about sharing information with each other when consumer credit reports errors are discovered. Fortunately, changes to the way credit scores are calculated — many that directly reflect the issues raised in the attorneys general settlement — have already taken effect in the latest scoring formula published by FICO , known as FICO 9. Unfortunately, FICO formulas are a bit like software upgrades, and it will take time — perhaps years — before banks adopt or integrate FICO 9 into their own scoring formulas.

The median FICO Score for consumers whose only major negative references are medical collections will increase by 25 points,” FICO says. Bills sent to third-party debt collectors that are paid in full will no longer count as negative entries in the FICO 9 formula. Meanwhile, there’s a continued drumbeat for credit scores to include other non-traditional factors. Credit bureaus TransUnion and Experian have both released studies in the past year suggesting that inclusion of payment histories from non-banking entities such as landlords or utilities would boost millions of consumers’ scores.

Borrowers with thin” credit histories, such as young adults or immigrants, could be heavily impacted by such a change. A list of all credit accounts in the individual’s name that are open today or were closed within the past seven years. These appear on credit reports for fifteen years if the lien is unpaid and for seven years after the lien is released. Credit scores were invented to make it easy for creditors to get a snapshot of an individual’s overall creditworthiness. Scores are based on an algorithm, or mathematical formula, developed by the company that computes and sells the credit score. Credit scores rely on information in an individual’s credit report at the moment the score is computed. So a score can change often, and it’s impossible to know why a score changed or to predict by how much a score will change because the score’s formula is a company secret.

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