| Credit Score FAQs Where did credit scores come from?
In 1950, two mathematicians—Fair and Isaac—developed models to predict risk. They spent years of research to discover which factors were actually reliable predictors of your performance after the credit was applied for.
What is the purpose of credit scores?
To lend without human prejudice of any kind and to reduce the cost of business losses that are passed on as increased costs to all consumers. Credit scores facilitate check cashing, credit card offerings and car loans. They impact the salability of loans to the secondary market. Credit scores speed up monetary transactions with fewer losses.
What is the range of credit scores and how long are they good for?
Generally, 300 is a goose egg and 850 is perfect. Credit scores are an instantaneous snapshot of your level of risk at that moment in time. When we pull your credit report, it is good for 60 to 90 days, but the score could actually change daily! We provide personalized coaching on things to do and not to do to impact the score
Does the scoring model factor in race, gender, religion, marital status, income, nationality and sexual orientation?
No! The scoring doesn’t even factor in the interest-rate of the card.
Your industry is risk driven like the insurance industry, isn’t it?
Yes. Even if you were an excellent driver but drove a fiberglass corvette, your insurance would be rated higher risk because the cost of repairing your crashed car has been proven to be higher. In the same way, all your credit cards may be paid as agreed, but you may have a lot of them. This increases your level of risk especially if some family medical emergency happened. You may be likely to have delinquent credit. That spells higher risk to the lenders. That translates into larger down payments and higher interest rates.
What do the numbers actually mean?
Each range of numbers indicates a different set of odds for paying your obligations as agreed. Scores under 600 mean 1 bad payer for every 8 good payers and usually means higher rate lending. 680 to 699 means 1 bad payer out of 55 and are very good scores. 720 to 759 raises the odds to 1 bad payer out of 323. These are excellent scores! Above 800 means 1 bad payer out of 1292! So if you were lending a billion dollars of your money monthly, who would you like to give it to? Major breakpoints are under 660, under 625, under 610 and under 580. These risk levels are measured in 20 point ranges from 740 downward.
What should I do to improve my score?
Unfortunately, things that you may think will improve your score may do just the opposite. We invite you to visit us before taking action on your credit report.
What are the 5 main factors that determine the score?
1) 35% PAYMENT HISTORY: Judgments, liens, collections, recent lates, bankruptcies and foreclosures severely lower your scores.
2) 30% CREDIT UTILIZATION: If the total of all your revolving balances is less than 19% of the total of all your credit limits, your score goes up! Low balances on 3-5 credit cards is better than high balances on a few cards! Don’t close any accounts until you talk to us first!
3) 15% HOW LONG YOU’VE HAD THE ACCOUNTS: Closing older accounts to surf low-interest cards will lower your score. Generally, lenders look for stable paid-as-agreed accounts that you’ve had for a long time!
4) 10% CREDIT TYPE: Using finance companies will lower your scores compared to bank and department store cards.
5) 10% INQUIRIES: Your request for new credit (paperwork you signed) raises your level of risk. If you’re shopping cars or mortgages, multiple inquiries in the same 2 weeks only count as one deduction.
You’ve got challenges? We’ve got solutions!
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