credit score

“Wasted” on Facebook? Your Credit Score Might Suffer.

Credit scores are, in theory, a measure of how likely it is that you will pay your debts instead of defaulting or declaring bankruptcy. They are extremely flawed, but it’s all the banks have got. In a search for ways to refine credit scores, FICO (the company that developed the most popular credit score) is considering using social media in its equation.

Fico [is] increasingly looking at data on a spectrum: with credit card repayment history at one end – the most reliable guide to creditworthiness – and at the other, information volunteered on social media platforms such as Facebook.

In short, posting dumb things to your public social media profiles may soon make your life more expensive.

Featured image by sanberdoo / CC BY 2.0.

When Free Credit Reports, Aren’t

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18 “free” credit report websites have been warned by the FTC to shape up, or they will be fined $3,500 per violation. Most require people to sign up for a paid service in order to get a “free” credit score or credit reports.

FreeCreditScore.com, which is probably the best-known “free” faker now charges $1 despite the name, so that it does not have to follow the FTC’s rule:

[W]ebsites offering free credit reports must have a disclosure, with links to AnnualCreditReport.com and FTC.gov, that appears across the top of each page that mentions free credit reports. Violators are subject to legal action that can result in penalties of up to $3,500 per violation.

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Repairing a Bad Credit Score is Getting Easier

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To repair your credit score in the past, you had to do a lot of guesswork. But because of the recent financial reform bill, lenders who refuse to loan you money will have to tell you why. They will also have to give you a copy of the credit score they used to decide to turn you down. This goes for employers, insurance providers, and anyone else who takes an “adverse action” against you based on your credit report.

Getting rejected sucks, but at least in the future you will know why, which means you can work to fix the problem.

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Fraud Alerts Will Not Hurt Your Credit Score

LifeLock has had its troubles, but its main tool—putting a fraud alert on your account every 90 days—does not hurt your credit score. It does, however, make it more difficult to get credit, because lenders have to jump through more hoops before approving a credit application.

So if you are not planning to try to obtain credit in the next 90 days, go ahead and use a fraud alert. Otherwise, know that placing a fraud alert on your credit files will make it more difficult to get credit.

Fraud Alerts Don’t Hurt Your Credit Score | NYT

Credit score basics

All the information out there on credit scores can be confusing. At the heart is the FICO score, which is what lenders use to determine your riskiness as a borrower.

Here are the main elements of the FICO score:

  • Payment history – Account payment information on specific types of accounts you may have, such as credit cards, retail accounts, installment loans (such as car loans), finance company accounts, mortgage, etc.
  • Amounts owed – How much you owe on different accounts, including the proportion of balances owed to total credit limits. (The lower this ratio, the better.)
  • Length of credit history – How long your various accounts have been open, as well as the time since the most recent activity in each.
  • New credit – The number of recently opened accounts as compared to your overall number of open accounts, tracked by account type.
  • Types of credit used – The number of various types of accounts you have (credit cards, loans, etc.)

There are also some “soft factors” based on your other borrowing behavior, such as judgments against you, late or missed payments, and more. Queercents has a great post detailing what you need to know about your credit score.

FICO 101 | Queercents

Deal with your debt; do not ignore it

Nobody likes to talk about their debt. Not me, not you, not anybody. But your debts do not like to be ignored. As I wrote in my column for Consumerist yesterday  , if you let your debts go into default and do nothing, it could end up hurting.

Credit card companies in particular want you to ignore your debts. While you do, they and the buyers of their debt will add bucketloads of fees and interest. Then, in a few years, someone will sue you for twice the original balance (or more).

Negative information may remain on your credit reports for seven years, ruining your credit and making everything you buy on credit more expensive.While you may be able to win your lawsuit if the original creditor or a debt buyer sues you at some point, that costs more money.

Even if you think you are judgment proof, think hard before deciding to do nothing. Judgments are good for ten years, and may be renewed indefinitely. While your creditors may have a hard time actually collecting, you may spend a lot of time fending them off.

Ignoring your debts is not a real option, even though it is the option most consumers seem to take.

(photo: Andres Rueda)

Gone in 60 seconds: 10 credit score myths

60-second video: Myths of credit | I Will Teach You to be Rich (via Lifehacker)

Getting your credit score is getting more confusing

February brings two big changes to FICO credit scores. First, FICO credit scores are calculated differently as of yesterday. Second, as of February 14th, Experian will no longer give consumers access to their Experian credit score, although lenders will still have access to the number.

First, the changes to the way FICO scores are calculated. Consumerist has a rundown of the changes, which include different weighting of factors like debts less than $100 that end up in collections, and a new emphasis on the “total picture,” whatever that means.

Second, Experian, for some reason, has decided to pull out of the consumer credit scoring party. Nobody really understands why Experian is doing this, and it is not clear whether consumers will ever be able to see their Experian-based FICO score when the change goes into effect.

The good and the bad of the new credit scoring formula | NewsChannel 5 (via Consumerist)
One Fewer Credit Score Accessible to Consumers | NYT

Get credit score estimates to go with your free credit report

You have the right to get a free credit report once a year, but that does not include your credit score, the actual number that lenders use to determine your creditworthiness.

Credit Karma is one of several credit score “predictors” that have cropped up in recent months.

Kara McGuire recently compared her actual FICO score, and says Credit Karma’s prediction (788—go Kara!) was in line with the real thing.

Free credit score? But is it any good? | Ka-Blog!

CreditKarma.com Makes Free Credit Score More Like FICO’s