What exactly is a credit score?
A credit report contains your entire personal credit history — from your first student loan to your current mortgage — and everything in between. Your credit score on the other hand, acts as a real time summary of your credit report. Think of your credit score almost like a ‘grade’ that lenders can use to determine the amount of risk involved in lending to an individual.
What is the definition of good credit?
Credit scores can range from 850 points at the highest end, and go down to 300 at the lowest end. However, the actual range of score categories can be industry specific, but the two most common score models are from FICO® score and VantageScore. FICO® has been an accredited scoring model for a long time and VantageScore 3.0 is a model developed by Equifax, TransUnion and Experian.
How is my credit score calculated?
You may recall that your credit score is essentially a number that summarizes the information in your credit report. Regardless of the scoring model used, your credit score is always calculated using the same data points (or “score factors”) from your credit report.
These ‘score factors’ are the variables that either have a positive or negative effect on your credit score. Some factors have more weight than others — below you’ll see these factors listed and what percentage of your score they make up:
- Your payment history (35%)
- Amounts owed (30%)
- Length of your credit history (15%)
- Newly opened credit accounts (10%)
- Types of credit being used (10%)
Which factors negatively impact my credit score?
As explained above, there are a number of score factors that can impact your credit score. Below are some examples of when they negatively impact your credit score;
- Too many credit inquiries (if you submit many applications for credit all at once)
- Too many serious credit delinquencies (not making payments in a timely manner)
- Too many recently opened lines of credit
- Average balance of revolving credit accounts is too high
- Too few installment loan accounts (installment loans= mortgages, auto loans etc)
What is a credit inquiry?
Credit inquiries are requests made by financial companies to better understand your credit worthiness. These companies use the information in your credit report to determine how much credit they should issue you and how likely you are to repay in a timely fashion.
There are two types of credit inquiries. “Hard” inquiries are typically when financial institutions look at your credit scores after you apply for things like for credit cards, auto loans, or home loans. “Soft” inquiries happen in cases where you are checking whether or not you are “preapproved” for credit or loans, and these soft inquiries do not affect your credit score.
Hard inquiries can begin to affect your credit scores if you have too many within a short period. It is critical to note, hard credit inquiries can only be made if you authorize them, so it is important to investigate inquiries that you do not recognize.
How do companies use my credit score?
Credit scores are used in many ways. They are frequently used by creditors, employers, insurance companies, and finance companies to determine a person’s creditworthiness. These institutions use your personal score to get a snapshot of your credit worthiness and make quick lending decisions. Creditors may also view your full credit report for more in depth and detailed information to help them determine their level of risk.
Are there any industry specific scores?
Yes, Equifax, Experian, and TransUnion also offer industry-specific scores. Industry-specific credit scores make it possible for lenders in specific industries to get a better assessment of certain factors that are in your credit file.
For example, a lender that is in the automotive industry may request a score model that more closely evaluates your auto loan payment history. Your score would then be based on the data in your report that best reflects that agency. Your overall credit score rating may also differ, depending on the score model that is requested (mortgage, auto, etc).
How do I get a credit report?
You can do this a few different ways. For instance, by federal law, you are entitled to a free copy of your credit report at annualcreditreport.com, once every 12 months. It’s important to note, however, that although this option includes credit reports from all three credit reporting agencies, your credit scores are not included.
A service like 3GldScr.com is a great alternative option if you’re looking for unlimited access to your triple bureau credit reports, scores and 24/7 credit monitoring services. A membership with 3GldScr.com also gives access to your personal credit profiles online 24/7, fraud alerts for any irregular or suspicious credit activity, and our fraud consultation services.
How often is my credit report updated?
Creditors send updates to the credit reporting agencies on a monthly basis, but the day of the month will vary. For example, you might receive an update from one creditor at the beginning of the month but one from another creditor at the end of the month. This is why it's important to be able to access your Equifax, TransUnion and Experian credit reports frequently.
What exactly is credit monitoring?
Credit monitoring is an ongoing service that continuously monitors your credit report for any changes. Changes to your report could include missed payments, brand new inquiries, or even new accounts. 3GldScr.com will contact you if there are any new alerts like these to your credit file.
Credit monitoring is also a very important tool for fighting identity theft, since you are alerted if someone tries to open an account in your name. Without credit monitoring, you could be at risk of someone stealing your identity and creating debt in your name.
With all these benefits and more, don't wait — sign up with 3GldScr.com today!