Raising Your Credit Score--Same Rules Apply with the New Scoring System
Raising Your Credit Score--Same Rules Apply with the New Scoring System
The big three credit reporting agencies announced yesterday that they had created a new credit scoring system called VantageScore that will reportedly make credit scores more accurate.
Bill Hardekopf, CEO of LowCards.com, wonders if these agencies introduced this new system for another reason.
"This appears to be a new way for these credit agencies to generate revenue. These agencies used to have two revenue streams--the credit report and the credit score. The Federal Government made these agencies start giving the credit reports away for free and thus, took away a significant portion of their revenue. Now, these agencies need to convince consumers that they should pay to see their credit score. By working together and offering a consistent score, these agencies have generated a tremendous amount of publicity and tweaked the consumers' interest in credit scores. It looks like the three credit reporting agencies have come up with a way to recapture some of their lost revenue."
The new scoring system will take a few months to take effect. Hardekopf says the key for consumers is to raise their credit score, no matter which scoring system is in place.
"The same rules still apply for getting a good credit score and keeping it," says Hardekopf. "Consumers can save a significant amount of money by making sure they
follow some basic rules."
Some of the suggestions from LowCards.com for getting a good credit score are:
-Carrying a lot of debt will pull your score down. Creditors view you as a risk of default if you are at the limit with your credit cards. Pay down your balances so that your debt ratio will be small or pay them off altogether. If it will take a while to pay down your debt, then try to increase your credit limits which will also bring the debt ratio down. Just be careful not to use this as an excuse to charge more.
-If you have a good credit card, keep it. Keeping a card and building a good payment history helps build your credit score. Creditors want you to have a long, dependable credit history. Even if you have had problems in the past, get current and stay current now.
-If you are just getting started, don't open a lot of new accounts because they will lower your average account age. This has a larger effect on your score than if you don't have a lot of other credit information. Fast account buildup looks risky if you don't have an established history.
-Having another loan like a car loan that you pay on time each month will also help build your score. Get into the habit of paying all bills including mortgage and utilities before the due date.
-Get a checking and savings account.
-Avoid filing bankruptcy if possible. This is the most destructive action you can make with your credit score and remains on your record for at least seven years.
-Stay current with child support payments.
-Avoid co-signing for loans. If they don't pay or go into default, you are responsible.
-Limit your response to credit card offers. Even if you don't get the card, just responding to the offer shows up on your credit history because the credit card company pulls a copy of your credit report. This creates a red flag for creditors if there are more than four or five of these during a six month period. However, your score is not affected by multiple inquiries for auto loans or mortgages. These are usually treated as a single inquiry
-If you have bad credit or are re-building your credit, the only card you may qualify for is a secured card. If you do get one of these, make sure it reports to the credit bureaus- you may have to pay an additional fee for this. Read the terms and conditions to find this out. Here is a comparison of secured cards.
http://www.lowcards.com/poorcredit.asp
-Monitor your credit report. By law you can now receive one free credit report from each of the three credit reporting agencies (Equifax, Experian, TransUnion) each year. Use this to make sure all of the information in your credit report is accurate. Unfortunately, mistakes do appear and it can hurt your score if you don't catch it and correct it. You have the legal right to ask them to fix mistakes. The credit bureaus have 30 days to check the error and correct it. The must delete the information if they can't verify it.
The good news is that even if you have had problems in the past, credit scores can be improved over time.
LowCards.com (http://www.lowcards.com) is an independent website that helps consumers compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. Created by Hampton & Associates, the company has been analyzing the credit cards and supplying objective websites on various consumer expenses for five years.
The big three credit reporting agencies announced yesterday that they had created a new credit scoring system called VantageScore that will reportedly make credit scores more accurate.
Bill Hardekopf, CEO of LowCards.com, wonders if these agencies introduced this new system for another reason.
"This appears to be a new way for these credit agencies to generate revenue. These agencies used to have two revenue streams--the credit report and the credit score. The Federal Government made these agencies start giving the credit reports away for free and thus, took away a significant portion of their revenue. Now, these agencies need to convince consumers that they should pay to see their credit score. By working together and offering a consistent score, these agencies have generated a tremendous amount of publicity and tweaked the consumers' interest in credit scores. It looks like the three credit reporting agencies have come up with a way to recapture some of their lost revenue."
The new scoring system will take a few months to take effect. Hardekopf says the key for consumers is to raise their credit score, no matter which scoring system is in place.
"The same rules still apply for getting a good credit score and keeping it," says Hardekopf. "Consumers can save a significant amount of money by making sure they
follow some basic rules."
Some of the suggestions from LowCards.com for getting a good credit score are:
-Carrying a lot of debt will pull your score down. Creditors view you as a risk of default if you are at the limit with your credit cards. Pay down your balances so that your debt ratio will be small or pay them off altogether. If it will take a while to pay down your debt, then try to increase your credit limits which will also bring the debt ratio down. Just be careful not to use this as an excuse to charge more.
-If you have a good credit card, keep it. Keeping a card and building a good payment history helps build your credit score. Creditors want you to have a long, dependable credit history. Even if you have had problems in the past, get current and stay current now.
-If you are just getting started, don't open a lot of new accounts because they will lower your average account age. This has a larger effect on your score than if you don't have a lot of other credit information. Fast account buildup looks risky if you don't have an established history.
-Having another loan like a car loan that you pay on time each month will also help build your score. Get into the habit of paying all bills including mortgage and utilities before the due date.
-Get a checking and savings account.
-Avoid filing bankruptcy if possible. This is the most destructive action you can make with your credit score and remains on your record for at least seven years.
-Stay current with child support payments.
-Avoid co-signing for loans. If they don't pay or go into default, you are responsible.
-Limit your response to credit card offers. Even if you don't get the card, just responding to the offer shows up on your credit history because the credit card company pulls a copy of your credit report. This creates a red flag for creditors if there are more than four or five of these during a six month period. However, your score is not affected by multiple inquiries for auto loans or mortgages. These are usually treated as a single inquiry
-If you have bad credit or are re-building your credit, the only card you may qualify for is a secured card. If you do get one of these, make sure it reports to the credit bureaus- you may have to pay an additional fee for this. Read the terms and conditions to find this out. Here is a comparison of secured cards.
http://www.lowcards.com/poorcredit.asp
-Monitor your credit report. By law you can now receive one free credit report from each of the three credit reporting agencies (Equifax, Experian, TransUnion) each year. Use this to make sure all of the information in your credit report is accurate. Unfortunately, mistakes do appear and it can hurt your score if you don't catch it and correct it. You have the legal right to ask them to fix mistakes. The credit bureaus have 30 days to check the error and correct it. The must delete the information if they can't verify it.
The good news is that even if you have had problems in the past, credit scores can be improved over time.
LowCards.com (http://www.lowcards.com) is an independent website that helps consumers compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. Created by Hampton & Associates, the company has been analyzing the credit cards and supplying objective websites on various consumer expenses for five years.
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