Credit Scores by xusuqin


									                              Credit Scores
What is a credit score?
A credit score is a numerical expression based on a statistical analysis of a person's credit files, to
represent the creditworthiness of that person. A credit score is primarily based on credit report
information typically sourced from credit bureaus.

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. Lenders
also use credit scores to determine which customers are likely to bring in the most revenue. The
use of credit or identity scoring prior to authorizing access or granting credit is an implementation of
a trusted system.

Credit scoring is not limited to banks. Other organizations, such as mobile phone companies,
insurance companies, landlords, and government departments employ the same techniques.
Credit scoring also has a lot of overlap with data mining, which uses many similar techniques.

A credit score is primarily based on credit report information, typically from one of the three major
credit bureaus: Experian, TransUnion, and Equifax. Income is not considered by the major credit
bureaus when calculating a credit score.

There are different methods of calculating credit scores. FICO, the most widely known type of
credit score, is a credit score developed by FICO, previously known as Fair Isaac Corporation. It is
used by many mortgage lenders that use a risk-based system to determine the possibility that the
borrower may default on financial obligations to the mortgage lender.

    Here is the average credit score range to get approved for loans: Good credit scores bad

       Between 700 & 850 = Very good or excellent credit score
       Between 680 & 699 = Good credit score The Average American Credit Score = 682
       Between 620 & 679 = Average or OK score.
       Between 580 & 619 = Low credit score
       Between 500 & 579 = Poor credit score
       Between 300 & 499 = Bad credit score
       The average credit score to get approved for loans and credit cards is 660 -
       What credit scores is needed to buy a new car? Usually a 650 plus: 660 670 680 690
        700 720 730 740 750 plus
Terms to remember
- A bad debt is an amount that is written off by the business as a loss to the business and
classified as an expense because the debt owed to the business is unable to be collected, and all
reasonable efforts have been exhausted to collect the amount owed. This usually occurs when the
debtor has declared bankruptcy or the cost of pursuing further action in an attempt to collect the
debt exceeds the debt itself

- An identity score is a system for detecting identity theft. Identity scores are increasingly being
adopted as a means to prevent fraud in business and as a tool to verify and correct public records.

Credit Quick Facts

       What is the Fico credit score range? 300 - 850. The average American Fico credit score
        ranges from 660 - 735 for credit cards. A bad credit score range is 300 - 620. What is a
        beacon score
       The most important thing to know about how your credit score ranges, is that,
        70% of your score is based on the time period from today, back 2 years. Your
        score is figured on 7 years worth of data, but anything older than 2 years in figured in
        the 30 percentile. This is why it is so important to keep 3 to 6 lines of open, rated, good
        credit, on all 3 reports.

Timeliness of my bill payments (35 percent): Includes late payments, bankruptcies and
delinquencies. A 30 days late payment, a collection, a judgment can decrease my score 15-40
points for each entry even if it has been paid and shows paid in full. Catch these before 1 month
expires and I have a chance of total removal or non-placement.

Your outstanding credit (30 percent): Includes the amount of debt accumulated on your
credit cards as well as how much you owe on installment loans like car loans (compared to the
original amount of the loans). I've seen credit reports that show no late payments and the credit
score will be a low 600. It's because there are some accounts that show more than 80% in debt
against high credit limits.

The length of time credit has been active (15 percent): Takes into account how long your
had credit cards and loans have been active and how often you use them. Most banks look for "3
rated trades", or 3 accounts that have been open for at least 12 months. I've have seen credit
reports that have many reported credit items, but they haven't been active in 2 years. Now they
have no beacon credit fico score at all.

The types of credit I have (10 percent): Includes credit cards and loans such as installment
loans, mortgages and car loans. Small finance company loans and large numbers of open credit
cards can sink a good credit score as much as 20-40 points.

Any acquisition of new credit (10 percent): Assesses how much credit has been opened
over the length of your credit history. Opening a number of new credit accounts over a short
period of time may be detrimental to your good credit score range.

How to improve all three bad credit ranges!
      Pay bills on time. Pay UTILITY CONTRACTS OR ACCOUNTS like cell phones,
       medical bills, cable bills, satellite or dish network contracts on time or get listed as public
       records on your credit reports for being uncollectable in less than 90 days. Same as
       public records.. These utility contracts DON'T COUNT FOR GOOD CREDIT SCORES.
       These utilities only count for bad credit and collections "IF", you don't pay on time.
       Never let utilities go to collections. If you do, Which means you have gone past 90 days
       late and your account has been deemed UNCOLLECTABLE, Call them and pay them
       fast trying to make sure they do not report your late's to the 3 credit reporting agencies.
       Many or most times they will not report you if you pay them fast.
      Have at least 3 to 6 active accounts. 24 Months from today back equals 70% of your
       credit score. 3 - 6 active accounts means: 12 months payment activity on credit cards,
       home loans or car loans. Cell phones, cable, electric, rent, do not count for good credit.
       Utilities and medical bills only count as bad credit if you do not pay. Paying off these help
       your score if you have 3 - 6 lines of active rated credit cards, car loans, personal loans
       and home loans.
      Keep credit card balances low. 79% max. 30% best. Paying down balances
       instantly helps credit scores.
      Avoid Closing credit cards, especially accounts you've had for a long time.
      Avoid applying for new credit, loans and credit cards.
      Get a good job or 2, and budget
                     Credit Questionnaire
What is a Credit score?

How is the credit scores derived?

What is the credit score used for?

How many Credit scores do you have? ________ Name the Companies.

What is a bad credit score? __________

What is a Good credit score? _________

What are the effects of having negative credit score?

What are the benefits of having good credit?

What type credit score do you need for a car? __________

Based on your reasonability level currently what do you think your credit
score will be in the future?

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