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It is easy to find information concerning credit today, TV, Newspapers and internet are loaded with information, but sadly, much of that information is inaccurate. Here are just a few of some common credit myths circulating today:

Credit Myth: “You share a credit score with your spouse.” (Now, you might think that sounds absurd, but I assure you it’s far more widespread than you think.)  Your spouse and your credit report and scores are looked at individually.  If you have joint accounts, they’ll show up on both your credit reports.  If you get an authorized user account for your spouse, that’ll also show up on your report.  However, if none of your accounts are joint, and you don’t have any authorized user accounts, there will be nothing that will affect your score for one another.

Does Your Spouses Credit affect Yours

Credit Myth: “Your credit score only counts when you’re looking to borrow money.”  Huge Myth!  Your credit score, right now, is looked at for almost everything you do.  Increasingly, when you’re applying for a job, they look at your credit score.  When you’re applying for auto insurance (in most states), homeowner’s insurance, life insurance, they look at your credit score, they look at your credit history.  That’s why it’s so important to clean your credit up.  Make sure that your credit’s reporting accurate information.  If you have derogatory credit that’s truly yours, you work to rebuild credit. 

Credit Myth: “Making multiple payments to a creditor in a singular billing cycle improves your credit.” Could not be further from the truth! The truth is, there is only one payment per billing cycle that is reported to the credit bureaus from creditors. Multiple payments or trying to split up payments so that it “looks like” there is more payment activity on an account can actually hurt the consumer, how…….a lot of times if a payment is due on the 10th of the month and a partial payment is received on the 1st of the month and then a 2nd payment is received on the 15th of the month, if the payment made on the 1st was equal to at least the minimum payment due there will be a late charge which will be charged to the account no matter how large a payment is made on the 15th. Best advice, make your payments once a month on Credit Cards, Installment Accounts and Mortgages and pay them at the same time each month so you develop a habit of paying on time.

Credit scoring started in the late 1950’s to support lending decisions in large department stores.  The concept was revolutionary and by the end of the 1970’s most of the nation’s largest commercial banks, finance companies, and credit card issuers used credit scoring.  It became widely accepted once Fannie Mae and Freddie Mac fully endorsed the use of the FICO score for home mortgage lending.

The FICO Score

The FICO score was first created in 1956 by William Fair and Earl Isaac when they created their company Fair Isaac Corporation (FICO).  Their system used a mathematical model (algorithm) and a computer to help depict consumer lending risk.  To be more specific, the FICO score originally was designed to represent or predict a consumer’s risk of going 90 days late on an account within the next 3 years.
 
Until 2001 consumers were not even allowed access to their credit scores. This changed when California adopted a law stating consumers were entitled to know everything about what is on their credit reports.

Where did credit scores come from

At the same time FICO started developing customized scoring models for each individual credit bureau.  Today each bureau still has their own specific FICO designed score.  Which is one of the reasons why you will very seldomly see all three of your credit scores be exactly the same at the same time. Equifax commonly names their score model BEACON.  Experian many calls their model Experian/ Fair Isaac Risk Model.  And Trans Union has named theirs simply FICO.
 
Even though the bureaus have their own FICO models, in 2006 they decided they wanted a bigger piece of the pie and announced their intent to design their own credit scoring model.  Today that model is known as Vantage Score and is offered on the credit monitoring sites owned by the credit bureaus.  The intent of the bureaus is to have Vantage Score widely accepted by lenders to eventually replace the FICO score.

The Vantage Score

Even though the bureaus have their own FICO models, in 2006 they decided they wanted a bigger piece of the pie and announced their intent to design their own credit scoring model.  Today that model is known as Vantage Score and is offered on the credit monitoring sites owned by the credit bureaus.  The intent of the bureaus is to have Vantage Score widely accepted by lenders to eventually replace the FICO score.
 
Vantage score is VERY different than FICO.  For one, FICO’s credit score scale ranges from 350-850 while Vantage ranges from 500-990.  This is a BIG difference in scores and can be very confusing to consumers and lenders.  A 700-credit score with FICO is “A” credit, but with Vantage a 700 score would be classified as “D” or poor credit. There are also many different algorithms used by the FICO depending on why a credit report is being pulled, an example may be someone looking to open a $1500 Revolving Account with a department store is going to get a much different score than if they are applying for a $35,000 car loan, simply because the type of account which is being applied for. And those “free” credit score offers should not be looked at as anything but a possible trend of how your scores is going due to the fact that when you are looking at those sites and requesting your score(s) you are not even applying for anything, so there is no risk calculation used in that particular algorithm. Stick with a TriMerge Mortgage Credit Report for the most accurate FICO scoring for yourself.

In order for your Credit Profile/Report to be accurate the law states that there must be 3 standards which must be met and present for every item on a credit report to continue to appear on a person’s credit report. These standards are:

  • First, items must be reported within the allowable time periods.  It must be reporting timely information.
  • Second, item must be 100 % accurately reporting all the information on the account.  So all of the information on the account – name of the creditor, account number, status, date of last activity, date the account was opened, date of last delinquency, balance, payment amount and history, all that information must be reported 100% accurately.

KNow how to read your credit report

These are the three thresholds that every item that they’re putting on a credit report must meet.  If it doesn’t meet it, they must delete it.

A cross all media platforms today you will find information on almost any topic or subject, but sadly, much of the information concerning credit is inaccurate. Here are some common credit myths being thrown about:

Credit Myth 1: “Multiple credit inquiries will hurt your score, each and every time.” In older Fair Credit Reporting Act (FCRA) models, inquiries had a greater effect on your score because they counted every inquiry for automotive and every inquiry for mortgage. So if you were shopping around for the best deal on an auto loan, or shopping around for the best deal on a mortgage, your credit score got dinged for each one. The FCRA models realized that this was discouraging intelligent consumers from getting the best deal, so they adjusted the model to only count automotive and mortgage inquiries that are done within a certain period of time to be counted as one single inquiry.

Credit Myth 2: “It will take you seven years to improve your credit.” This is another widespread myth. In actuality, it’s an ongoing process to improve one’s credit. It doesn’t take a certain amount of time. Most negative items will remain on your credit report for up to seven years, as long as they are accurate, can be verified, the credit bureau and creditor reporting the item can and will provide the appropriate validation of the debt and the debt actually occurred within that period of time being reported. Of course, many items are NOT accurately reported, and are not verifiable, therefore they can and should be removed.

Regardless of whether or not individual line items can be corrected or deleted, though, you can start to improve your credit by maintaining a positive payment history, maintaining lower balances and low utilization rates on your credit cards, and establishing new accounts to get your new payment history going smoothly again.

Credit Myth 3: “A serious financial crisis like as a foreclosure or bankruptcy permanently hurts your credit score.” Foreclosures will remain on your credit report for seven years, Bankruptcies can linger for seven to ten years: this is entirely dependent upon how the bankruptcy gets filed. A Chapter 13 will remain for seven years, whereas a Chapter 7 will remain for a decade. Note, however, that the actual bankruptcy in the public records section will remain there for ten years either way. But one must remember that the reporting of a Foreclosure or Bankruptcy on a credit report must meet the same criteria that any other item must meet in order to stay on a persons credit report and that is that all reported information pertaining to that foreclosure or bankruptcy be reported accurately and be able to be verified and validated by both the party reporting the item and the party recording the item. Absent of that verification and validation the item must be removed from the credit report regardless of when it originally took place.

The important take-away point is that although these are certainly long periods of time, it’s not permanent, and there are many things you can do after a financial crisis to reestablish your credit and get your credit back on track.

These are just a few of the Credit Myths you find today reported online, on TV and published in Social Media and other news outlets. Don’t be fooled, you can take control of your financial and credit future by handling your current finances responsibly and be demanding your rights under the law that ALL information that is being reported about you be 100% accurate 100% of the time.

FICO now competes with Vantage Score but Equifax, Experian and TransUnion still offer both score options. This is partly because FICO is so widely used and accepted by commercial lenders and is the only credit scoring system recognized and used by the Federal Government when determining the credit worthiness of a consumer for a government guaranteed loan.

The goal of the credit bureaus has been to wean users off the FICO model and start using Vantage Score instead due to the fact that the credit bureaus have to pay FICO a royalty each and every time a FICO score is pulled. However, due to the overwhelming majority of lenders and credit issuer’s familiarity with the FICO model, the Vantage Score has not taken the credit world by storm as fast as the “Big 3” would have liked
All three credit bureaus now offer Vantage Score in addition to FICO score to calculate the credit score, instead of only offering FICO’s.

When using “programs” such as Credit Karma, and MyFreeCreditReport.com the consumer will think that they are looking at a FICO score, but in reality, what they are looking at is the Vantage Score generated by the credit bureau(s). Which by the way is designed to generate a higher score than a FICO score and in the opinion of this writer is done so on purpose to give a consumer a false sense of what his/her credit score really is.

In reality, it really makes no difference in credit score variations. Credit score variations are inevitable because the data the credit bureaus collect is still derived from different sources, not all data furnishers report their information to all of the credit reporting agencies. So, the problem of varying credit scores will not be solved by the new Vantage Score.

The three bureaus are branding the Vantage Score as something that will help banks and lenders further hone the subprime categories. Subprime lenders are those banks and lenders dedicated to borrowers with poor credit or harder to approve loans. Subprime loans have higher interest rates and fat lending fees.

In today’s credit crunched economy, this is a fast-growing market and the credit bureaus are hoping to use that as a selling point for Vantage Score. Slick marketing!

Unlike FICO’s traditional 300 to 850 scale, the Vantage Score goes from 501 to 990. Here is a breakdown of the scores with the respective rating:

  • A: 901–990
  • B: 801–900
  • C: 701–800
  • D: 601–700
  • F: 501–600

As one can see, simply by virtue of the Vantage Score scale starting 351 points higher than the traditional FICO Score scale, a consumer may look at a Vantage Score of 680 and think that is a pretty good score, but in reality, that would equate to much lower FICO score. It can all get very confusing and unfortunately (in the opinion of this writer) that is exactly what the credit bureaus are going for.
For additional information and help regarding any credit issue please feel free to contact The ASCENT Network.

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It is easy to find information concerning credit today, TV, Newspapers and internet are loaded with information, but sadly, much of that information is inaccurate. Here are just a few of some common credit myths circulating today: Credit Myth: “Your credit score only counts when you’re looking to borrow money.”  Huge Myth!  Your credit score, right … Continued

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Credit scoring started in the late 1950’s to support lending decisions in large department stores.  The concept was revolutionary and by the end of the 1970’s most of the nation’s largest commercial banks, finance companies, and credit card issuers used credit scoring.  It became widely accepted once Fannie Mae and Freddie Mac fully endorsed the … Continued

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In order for your Credit Profile/Report to be accurate the law states that there must be 3 standards which must be met and present for every item on a credit report to continue to appear on a person’s credit report. These standards are: Third, The item must be verifiable.  The item in question must be … Continued

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