Madam Money's Q & A: Is Race Considered in the Credit Score?

Have you (or someone you know) ever wondered if a person's race for financial situation affects or is considered in the calculation of their Credit Score?

Great Question!  Here the answer ...

Do you have a personal finance or credit questions?  Ask me and get answers!

Just email your question to Tarra@TarraJackson.com.

Making Money Matters Manageable,

Tarra Jackson

Get It Together! 5 Steps to Organizing Your Financial Life

Let's talk about organization. In today's society,the importance of keeping things organized has diminished because it takes time and dedication to make it happen effectively. If you are willing to take the steps, however, you will find that getting your financial house in order isn't quite as bad as it sounds. 
  
Here are five steps to help you on your path to financial organization, and ultimately, freedom from debt. 

• Collect all necessary documentation in a single location. 
• Take a day off each quarter from work, known as a "personal finance day," to gather your account information and place it in organized files. Ideally, there will be files for banking information, credit cards, investments, mortgages, and insurance. 
• If you are not utilizing your bank's online resources, sign up for an account. Many banks provide an array of tools that can also aid in organizing expenses and income. 

  

• Create a written budget, and review it monthly. 
• Once you have gathered all your account information in a safe, central location, create an accurate budget that includes a savings trigger and properly notates your money needs. Adjust spending in key areas such as food and entertainment, and allocate those funds to debt elimination and savings. 
• At the beginning of each month, review your budget. Holidays and special events will give your budget a different look than in other months, and your spending plan should reflect those changes to give you the best idea of where your spending should be for that time.

  

• Set a schedule for paying bills. 
• When creating your monthly budget, write down specific dates to pay various bills. As a rule of thumb, it is best to pay bills in bulk on key days of the month. For example, if Sam & Diane's mortgage is due on the 1st, their phone bill on the 5th, and electric bill on the 7th, it would be ideal to pay all three bills on the 1st. This ensures these bills are satisfied, and eliminates any chance of incurring late fees from the creditor, or overdraft fees from their bank. 

• Write down all one-time expenses for the year
• One stumbling block many face when embarking on budgeting is the occurrence of one-time expenses that pop up throughout the year. These may include license plate renewals, professional dues, or insurance premiums. Divide these costs by 12, so that you can include them in your monthly budgets. By employing this method, you can save towards those costs as they come, rather than losing large amounts of your monthly income in one fell swoop. 

• Shred, shred, shred!!
• If possible, invest in a shredder. In the age of rampant identify theft, it is imperative that you take every available precaution to protect your personal information. Not only will shredding documents keep you safe from possible theft, it also frees your home of tons of unnecessary paper. 

By taking these steps, you are, in a way, deputizing yourself to free yourself from the prison of indebtedness. It all begins with a willingness to say, "Yes, I'll do it." We'll be here to help you along the way. 

With you on the journey, 

Daniel Sims

 
Daniel Sims is the newest member of the Madam Money team. He is the creator & host of Financial Rebirth Live!, a personal finance podcast on BlogTalkRadio.com, and managing partner of RDSF Consulting in Little Rock, Arkansas. We look forward to his insights in the coming months. 

Top 5 Bad Financial Habits to Break

... Do you or someone you know have any bad financial habits? I do …
  

Most of us have one … or two … or several bad financial habits. From experience, my bad financial habits resulted in some very expensive mistakes. It’s ok! As long as bad financial habits are broken or at least controlled, they will have minimal effect on your financial success. The first step is identifying your bad financial habits.
  
Here are the top 5 bad financial habits to avoid that keep people from getting a positive grip on their finances.
 
Impulse shopping.  Impulse shopping happens unexpectedly sometimes. Think of shopping like alcohol. It should be done “responsibly” and can become addictive, if not careful. Make shopping a planned activity with a list or a budgeted amount.  Unplanned or impulse shopping may sabotage your spending plan / budget.  Also for large ticket items, give yourself 24 to 48 hours to shop for a better deal or to figure out if you really want it and can afford it. You’ll be glad you waited.
   
Retail therapy.  Retail therapy may help you to feel good for a moment but they buyer’s remorse is painful. When you are emotionally down, distraught or highly emotional, avoid shopping or making any large purchases.  The more emotional we are, the less financially objective we become.  Do something that doesn’t cost anything or very little, like go for a walk, spend time with family or friends, etc. Your bank account will thank you when you start to feel better.
  
Overdraft protection.  Overdraft or “Courtesy Pay” is so convenient! However, overdraft protection (a financial oxymoron in my opinion) is relatively designed to allow you to overspend. It allows or approved checks or charges to go through even when you do not have enough in your account for a Fee.  A fee of $27 up to $35 is charged to your account for every overdraft, even if the amount runs $1 or $5 over the amount you have in your account. Generally it is like a very short-term line of credit with a ridiculously high effective interest rate. Now was that cup of coffee really worth $40? Besides, we spend more when we use debit cards. Use cash instead.
  
Savings tampering.  Savings is money set aside for a specific purpose like emergency, down payment of a house or car, school, etc. Avoid using savings for something that is outside of its purpose. The best way to do this is to establish a savings account that is not easily accessible with a certain amount directly deposited every pay period. Savings accounts are supposed to grow, not be chiseled away. 
  
Financial promiscuity. Financial Promiscuity is when multiple credit cards are used for small purchases when cash should be used.  Avoid using credit to purchase that "value meal" or anything less than $50.  This will ensure that Financial STDs (Substantially Tremendous Debt) will not be slowly acquired.
  
By acknowledging our bad financial habits, we can focus on stopping and changing them. Some bad financial habits may be more challenging to quit than others, but it can be done.  Contact a financial coach to help with ideas and techniques of replacing bad financial habits with good financial habits to help you reach your financial goals faster.


Financially True, 
  

Tarra Jackson ... Making Money Sexy

Owing Taxes SUCKS!

… Have you (or someone you know) filed your taxes and ended up owing taxes back? I have.
  

Yes, owing taxes SUCKS, especially when it is an absolute surprise.  Some of us have owed taxes for several years. Owing the IRS is sometimes an unexpected bill that can’t fit in our already tight budget. Despite how we may “feel” about it, owing taxes is essentially another "Loan" that is owed.  Here’s how it is like a “loan," how it can affect your Credit Score and 3 Tips of things to do to avoid having to pay back taxes next year.

 

TOO MUCH, TOO LITTLE, TOO LATE

  

When “not enough” taxes is OR “too much” taxes are being taken out during the course of the year, it means that the exemptions on your W-4 or your tax deductions may be incorrect. But, here is how taxes are like a "loan.”

  

If “too much” taxes are being taken out of your check throughout the year, the government is essentially “borrowing” that money from you.  They pay the amount they “borrowed” in a lump sum called a “Tax Refund.”

 

Conversely, if “not enough” taxes are being taken out of your check throughout the year, you are essentially “borrowing” the money from the government.  The amount you owe in taxes is the “borrowed” money you must pay back.  The great thing is that if you are not able to pay it back in a lump sum, payment plans over a period of time are available to avoid additional fees and penalties.

  

HOW TAXES CAN AFFECT YOUR CREDIT SCORE

 

If the Taxes Owed is not paid within a timely manner, the IRS may report the delinquent taxes as a “Tax Lien” on your credit report under the Public Records section on your credit report. This will negatively affect the Payment History category of your credit score, which is 35% of the calculation. Also, the amount doesn’t matter. Whether you owe $500 or $5,000, the negative affect to the credit score will be the same.

  

If it is reporting on your credit report and you have paid the taxes due in full, make sure you get a copy of the Satisfied Tax Lien notice from the IRS. Also, dispute the information on your credit report, if necessary to have it updated as “Satisfied.”

As promised, here are 3 Tips of things to do to ensure that you don’t owe taxes next year.

 
 

TRUST BUT VERIFY

  

Some people love to DIY (Do It Yourself) everything, including their taxes. And there are great Tax softwares available to help you do your own taxes. You can even do your taxes online. If you choose to do your own taxes, just remember President Ronald Reagan’s quote, “Trust but Verify.”  This is important, especially if you owed taxes for last year.  Simply take your completed taxes to a tax accountant or tax professional so they can make sure that you didn’t leave out any new deductions or, better yet, you didn’t write off something that didn’t qualify.

 

KNOW YOU’RE PLACE

 

One of the reasons why people end up owing taxes is because they have the wrong number of exemptions on their W-4 forms.  Make sure to review, and update if necessary, your W-4 form with your employer annually, preferably at the beginning of each year. Consult with a tax accountant or tax professional for guidance.

 
GIVE YOURSELF CREDIT
 

Many people have turned their hobbies into a business. However, some of those people don’t give themselves credit by not taking advantage of available business tax write offs.  Not taking advantage of every eligible business tax write off is like giving away extra money. So, whether it’s selling your homemade secret recipe cakes or providing consultation, make sure you keep your receipts for all of your business related expense in one place, like an envelope for next year’s tax return.  You never know, certain business meeting meals up to your cell phone bill used for your business may be business tax write offs. Consult with a tax accountant or tax professional to understand what business expenses are tax deductible. 

The moral of the story is that winning the Tax Game is to GET NOTHING and OWE NOTHING! #IJS

   
Financially True,

   
Tarra Jackson ... Making Money Sexy 

Financial Spring Cleaning Tips

... have you (or someone you know) ever thought about doing some Spring Cleaning with your Finances? I have.
  

It's SPRING!!! Yes! It's that time again.  Out with the old to make room for the new!  Spring is the season of newness!  Time to put away all of the winter clothes and blankets and bring out or make room for the Spring and Summer stuff. If you are planning to do some spring cleaning this year, are you planning to do some Financial Spring Cleaning?


Financial Spring Cleaning is just as, if not more, important as Spring Cleaning in your home and closet. Here are a few tips on Financial Spring Cleaning with your Paperwork, Wallet, Credit Report and Budget.


PAPERWORK - SPRING CLEANING

• FILE ESSENTIAL DOCUMENTS / SHRED NON ESSENTIAL DOCUMENTS. If you have a desk, filing cabinet, drawer or box full of old bank statements, checks, bills, or other financial documents, sort through them carefully and keep only the important documents that you know you will need to reference at a later date. Do NOT just throw the documents away in the trash. If you do, you are begging to be a victim of Identity Theft.  If you do not own a shredding machine at your home or do not have access to one at your job, take your shred box to a local Shredding Company.  They are awesome!  Just dump, watch it get shredded and drive away! Search for a local Shredding Company or ask your local financial institution if they do Shred Events.

• GO GREEN / PAPERLESS.  Most financial institutions encourage their customers to sign up for electronic statements. This is more cost effective for them because they save money on paper, ink, postage and mail service. This is beneficial to you because you don't have to worry about more paper coming in the mail.  Don't fret! If you need to have a hard copy of your statement to audit or review, you can simply print you statements via online banking.

WALLET - SPRING CLEANING

• REDUCE THE PLASTIC.  If you have more than one debit or credit card in your wallet, you may be setting yourself up for over spending. Or worse, you may give that thief who stole your wallet access to all of your money and credit. Save the planet and just PICK ONE already! Only having one debit or credit card in your wallet to use for a purpose is the best way to control spending.  

• USE CASH! A wallet is for cash!  Keep cash in your wallet to see exactly how much you are spending.  The may help you with a new financial reality check.

CREDIT REPORT - SPRING CLEANING

• GET IT FREE! Before you decide to apply for credit anywhere, you should know your credit status. Lenders should NOT know your financial reputation before or better than you! Being afraid of what is reporting is no excuse for not getting a copy of your credit report.  You should know what creditors are saying about you. You never know, the stuff they are saying and reporting about your could be false "rumors."  You will want to nip that in the bud sooner than later. You can get a FREE copy of your credit report at least once a year at www.AnnualCreditReport.com or by calling (877) 322-8228.

• SET THE RECORD STRAIGHT! If there is false information reporting on your credit report, it is your obligation to set the record straight and get it corrected.  Creditors are going to notify you that they are reporting information incorrectly!  This is YOUR financial reputation we're talking about.  It will suck when you are declined for credit because of information that is incorrect. Each credit reporting company (Equifax, Experian and TransUnion) has an online process to dispute incorrect information. They also provide detailed instructions on how to dispute information via mail as well.  Get started at www.AnnualCreditReport.com.

  
BUDGET - SPRING CLEANING

• GET ONE! If you do not have a written budget, this is the time to get it together.  Once you see where your money is going money, it will help you make better financial decisions. If you need help creating a budget or spending plan, click here for my FREE eBook on 5 Steps to Building a Budget that Works. 

 

• UPDATE IT! A budget or spending plan is a living and breathing document. There are some things that may have changed within a year, which may require changes to your budget. So, if you do have a budget established, now is the time to review it and update it as necessary. Who knows, you may have a few extra bucks to save or to pay off another debt. Better yet, treat yourself if you were able to stay on target with your budget! You deserve it.

  

Click here for more tips or to schedule your FREE Financial Consultation.

3 Ways to Sabotage Your Credit Score

...Have you (or someone you know) ever wondered why when you think you are doing everything right regarding your credit, your credit score still takes a dive? I have.

  

Don't worry.  You are not alone.  I have been asked about this by numerous consumers and almost all of my clients.  The Credit Score is a calculation of credit performance behaviors that tell how risky you are to lend or provide a certain service to.

The quick way to remember the Anatomy of the Credit Score is S.P.A.D.E.  SPADE stands for 

• Spending (30%) - how much  of your credit cards or revolving debt do you use? 
• Payment History (35%) - how are you paying on all of your credit accounts? 
• Age of credit (15%) - how long have you had experience with credit? 
• Diversity (10%) - what experience do you have with different types of credit? 
• Exposure (10%) - how many times do you allow your credit report to be viewed?

What makes the credit score calculation so complicated is that there are some things that we do, that seem to be good common sense actions, that actually reduce our credit scores.

Here are the Top 3 Ways to Sabotage Your Credit Score.

#1:  CLOSING PAID OFF CREDIT CARDS

This seems like a wise and financially responsible thing to do right? RIGHT!!!  But, this action will actually have a negative impact on your credit score.  This affects the Spending category of the credit score, which is 30% of the score.  Credit scores rely heavily on utilization of revolving debt, like credit cards or lines of credit. So, if you close your credit cards, your utilization will be Zero. Not Good!  This is why you may see a dip in your credit score.

HELPFUL HINT:  Keep your credit card or line of credit balances at or less than 30% or the credit limit.

#2: OPENING DEPARTMENT STORE CARDS FOR 10% DISCOUNT
OK, Reality check ... You will not get a 10% on your purchase if you revolve a balance at 18% APR or higher.  The purchase will actually end up costing you more than the 10% you thought you saved.  Besides this misnomer, this action will have a negative impact on your credit score because it affects up to 3 categories of your credit score: Age (15%), Exposure (10%), and possibly Spending (30%)!  That's potentially 55% of the credit score negatively affected.

Here's quickly how this works: 1) You now have a new account reporting on your credit report, which affects the Age category; 2) That inquiry when they pulled your credit report to see if you qualified for the card affects the Exposure category; and 3) if the credit limit given is right above the amount you charged, this will affect the Spending category.

HELPFUL HINT: Don't believe the hype! Use a card you already have or better yet ... use budgeted CASH!

#3: THOSE PESKY SMALL COLLECTION ACCOUNTS
You know ... that small balance you didn't know you owed your doctor because your insurance didn't pay for it. Or that ticket you got in Atlanta. (Sorry ... venting).  Yeah, those.  Here's the thing, the amount doesn't matter when it comes to collection accounts.  So, whether the amount is $50 or $5,000, the negative hit is the same.

HELPFUL HINT: Check your credit report regularly or at least once a year. You can get a copy of your credit report for free at least once a year at www.annualcreditreport.com.


Financially True,

Tarra Jackson, Making Money Sexy!

"It's what they DON'T report that HURTS!"

... Have you (or someone you know) noticed that there may be some accounts or positive information that is not reporting on your credit report that could help your credit score? Well, I have!

   

We may all be familiar with the fact that there might be incorrect information reporting on our credit reports that are hurting our credit scores with Equifax, Experian and TransUnion.  However, were you aware that there may be positive information that is not reporting on your credit reports that may help your score?

    

Here are TWO (2) things to consider if positive information is not reporting on your credit report.

   

#1: SOME LENDERS DON'T REPORT! 

   

That's Right!  The credit reporting system is voluntary!  Therefore, it is NOT required for financial institutions, buy here pay here organizations, or apartment rental organizations to report to credit reporting companies. Therefore, you may find that your positive payment histories may not be reporting to help increase your credit score.  Some organizations only report negative information; or they may only report to one or two of the credit reporting companies but not all three.

   

HELPFUL HINT:  Before you sign a credit agreement for a loan, ask the organization or financial institution if they report to all three credit reporting companies. 

   

#2: MIX UPS!

   

If you share the same name and may have shared the same address with someone, like a family member (parent/child), trades may be mixed up and reported on the wrong credit file.  Credit Reporting Companies use the Name and Address as the primary matching triggers.  The secondary triggers are date of birth and social security number.  Therefore, this is a common mix up with parents and children who share the same names.

   

HELPFUL HINT:  Include any name suffixes like Jr., Sr., III, etc., on all financial documents and credit applications and agreements. Also, check your credit reports regularly to make sure all information is correct for you.  If there is incorrect information reporting, dispute the information immediately with each credit reporting company, if necessary.

   

Click Here to schedule your FREE Consultation!

What Your Credit Score Actually Means

Tom Murphy owns and manages rental properties in one of the Top 25 markets in the United States. His rents range from $750 to $1200 a month, but every tenant must pass the same test before they get a key to the front door.

“They've got to have a good credit score,” Tom told Debt.org. “I want to know if they have demonstrated responsible financial behavior.

“It’s nice if everybody says he’s a good guy and takes his family to church every Sunday and all that … but what I really want to know is whether he has a history of paying on time.”

Bankers, insurance companies, car dealers, utilities and plenty of other businesses would say “Amen” to that!

Are You a Good Financial Risk?

What a credit score really indicates is whether you are deemed a good financial risk, based on your history of paying bills. If you’re trying to get a home loan, a car, insurance for that home or car or just get the electricity turned on, the most influential factor in making it happen, is probably going to be your credit score.

“If you’re irresponsible about paying your bills, the general feeling is you’re likely going to be irresponsible about how you drive or when you pay your mortgage,” said Dave Viola, an insurance broker in the same city. “You still might get some insurance with a bad credit score, but you’d be flabbergasted by the rates.”

Representatives from banks, insurance companies, car dealers and property owners confirmed that credit scores do affect the terms and conditions of any agreement they make with a consumer. In most cases, the higher the credit score, the lower the monthly payment. And if the consumer’s credit score is at the low end of the scale, some companies won’t do business with them at all.

Credit Score Range

The lines of demarcation in credit scores, also known as FICOscores, range from 300 at the low end to 850 at the high end. The median FICO score is 723, meaning half of people with credit scores are below 723 and half are above.

The FICO scores are compiled by three companies:  TransUnion, Experian and Equifax. Each one claims to use a different formula in arriving at their score, but generally speaking it’s computed like this: Payment history (35%); amount owed and credit available (30%); credit history (15%); new credit (10%); and type of credit used (10%).

It would be wise to note what doesn’t affect your credit score, namely how much money you make, age, sex, race, religion, marital status and where you live. 

The problem for most people is that they don’t know their credit score and haven’t reviewed their credit report. Consumers are entitled to a free credit report every 12 months, one each from TransUnion, Experian and Equifax. The free report is available at annualcreditreport.com, but credit scores are not included. The Consumer Financial Protection Bureau estimates that only 20 percent of consumers request their free credit report.

If you receive your credit report and aren’t satisfied with what you see, there are some steps you can take to improve your credit history:

• Check the accuracy of the report. Incorrect information is the leading cause of consumer complaints about their credit history. Remember, all three companies that issue reports use different data, so get a free one from each company and check all data.
• Pay your bills on time. This is especially significant with credit cards and bank loans. Set up a bill payment reminder system, if necessary.
• Pay down the balances on credit cards.
• Do not open a new credit card account unless absolutely necessary.
• Maintain a good mix of credit (mortgage, car loan and credit cards).

Having a good credit score can mean hundreds or even thousands of dollars’ worth of difference in what you pay for a loan or insurance coverage. You can go online to see examples of the relationship between your credit score and the interest rate charged on your loan. In today’s tight lending market, consumers need to be at the high end of the spectrum to receive favorable treatment for loans or insurance.

Bill Fay writes and blogs for Debt.org. He is an award-winning writer with more than two decades of experience in the areas of news, sports and public policy.

Who's Afraid of the Big Bad "B" Word?

Some of us seem to be so scared of the Big Bad "B" word these days.  No...I'm not talking about BANKS, I'm talking about BUDGETING.  
 

Some of us equate Budgeting with Dieting; and the reason why we may fail at Dietingis because we feel like we are going to DIE of starvation.  But, If we "DIEt the right way by eating 5 – 6 smaller meals a day, we will always feel full.  The best advice for a new and successful Diet is to start with small changes and gradually do more to change our eating habits and execute an exercise regimen.  Next thing we know, we realize that this is not a DIEt...this is a new Lifestyle!  Congratulations!

 

This same concept is relative to Budgeting.  Budgeting is putting our Spending on a DIET.  The best and most successful Budget (Diet) is to start with small changes in our spending habits.  For example:  Instead of going to the vending machine every day for your midmorning snack, bring a small bag of wheat thins or baby carrots to snack on; or instead of going to a restaurant for lunch, make your lunch at home or pack up your leftovers from the night before and take it to work with you.  These small changes will save you a nice chunk of change and probably a few pounds if you did this for a whole week.

 

Before we start any new BUDGET or Spending Diet, here are 9 things that should be done to ensure success!!!

 

#1. Establish your Financial Goals. 

Where do you want to be financially in 30 days, 3 months, 6 months, and 12 months?  This only sounds hard but it's really not.  We do this mentally all of the time but we just don't write them down.  For example:  In 30 days, my Goal is to reduce my spending by $100 or more. In 3 months my Goal is save $300 or more. Keep your Goals S.M.A.R.T. (Small, Manageable, Attainable, Repetitive, and Timed).

 

#2. Assess where you are. 

Before you build your Budget, do a Spending Diary for up to one week. Write down everything you spend money on, regardless how small the amount. Do this on a daily basis to get an idea of exactly how much you are actually spending and what you are spending your money on. You'll be surprised how those $0.60 bags of chips, 2 times a day for a week, adds up.

 

#3. Determine areas of change. 

Look at your Spending Diary and determine what can be modified or eliminated without it feeling like you are on a Restrictive DIEt. Think BIG but start with small steps.  This is marathon not a sprint!

 

#4. Build your map towards your Goals. 

Write down the steps you need do towards reaching each financial goal. Again, be S.M.A.R.T. about it!  Sometimes we get selective amnesia, so it may help creating an electronic Financial Vision Board and place it in different areas around the house and at work. (PLUG: Make sure you sign up for my Financial Vision Board Class!)

 

#5. Take those small steps ASAP!!! 

My mother used to say, "I'm going to start my diet on Monday!"  She said that every Friday for years.  Execution is Key!  How do you eat an Elephant? ... One bite at a time.  Again, "Think BIG but start with SMALL steps."  Then, gradually do more. 

#6. Get a Budget Coach. 

Share your Goals and Plan with a financial success coach that you feel comfortable with, respect and will take their advice when necessary or required.  This person will assist in holding you accountable to meet your goals and be there to help you get back on track if necessary.  (PLUG: Contact me, Madam Money, to be your Financial Success Coach. I would love to help you with your new Money Management Diet.)

#7. Reward Yourself. 

Make sure you reward yourself at least once a month so that you won't feel deprived.  Don't overdo it with a Shopping Spree.  Rather, set aside money every paycheck for that new outfit you want or those gorgeous shoes you have to have!!!  Hint: If it is that Flat Screen TV you were about to get a loan for...STOP!!!...build it in your budget and save up for it.  Trust me; they will have more TVs when you are able to afford it.  It might even be on sale by then.

#8. Get a Credit Check Up! 

Get copies of your credit report from all three credit reporting agencies (Equifax, Experian & Transunion) to see what is being reported to make sure everything is correct. If it’s not, make sure you dispute it. Get your free copy at www.AnnualCreditReport.com.

   

#9. Don't be so hard on yourself. 

Give yourself a break!  Reaching your goals will take time and consistency.  So if you fall of the wagon ... dust yourself off, get back on, and begin again.  Trust me, it’s ok!

 

I am excited about your financial future and am available to assist you through this process!

Are Consumer Purchased Credit Scores Different from Financial Institution Credit Scores?

 “When consumers buy a credit score, they should be aware that a lender may be using a very different score in making a credit decision.” Richard Cordray,director of the Consumer Financial Protection Bureau (CFPB), said in an email statement.

The three main credit reporting agencies; Equifax, Experian & Transunion, use their own algorithms to calculate credit scores and they each have several ways to calculate it.  Fair Isaac Company also computes and sells credit scores, known as FICO Credit Score, has more than 50 scoring models.  This means that there are numerous variations of a credit score. The good news is, based on CFPB’s research found that most of the scores pulled by consumers and other organizations are consistent by at least 75%. Between 20% - 25% of the scores that consumers purchase were moderately different enough to move them into another credit grade that financial institutions use to determine what consumers may qualify for loan rates. The remaining 1% - 5% of the consumers’ scores was significantly different.

Note:  FICO offers a calculator that lists the range of interest rates offered based on FICO score.  This of course may differ based on the financial institutions rates offered.

What is not widely known is that there different types of scoring models that are based on the information the financial institution or business wants to analyze.  For example, a credit score for a credit report pulled by an auto dealership may differ from the credit score of a credit report that is pulled by a financial institution. This is because the auto dealer may mainly want to focus on a consumer’s payment history on auto loans, regardless of the financing company or financial institution.  However, the financial institution’s credit score may be based on a consumer’s entire payment history on all trades reporting on the credit report. Another familiar type of scoring model is the one used by Utility Companies.

Regardless the scoring model, the fact holds true that if you have good credit, you will have high or good credit scores on them all and if you have “colorful” or bad credit, you will have low or bad credit score on them all.  What important is that you understand the “Anatomy of the Credit Score.”

• 35% is based on your payment history.
• 30% is based on how much of your available credit you've borrowed against.
• 15% is based on the length of your credit history.
• 10% is based on the diversity of credit you carry.
• 10% is based on the number of “hard inquiries” from creditors to qualify you for credit or open an account.

Other types of scoring modes are Bankruptcy Scores and Fraud Shield Scores.  

A Bankruptcy Score determines the likely hood of a consumer to file for bankruptcy.  Many lenders use it to determine whether or not they will loan you money. A bankruptcy score also may influence the interest rate that you may qualify for on a loan. Bankruptcy Scores are not generally shared with the public.  The lower the Bankruptcy Score the better. A Bankruptcy Score of 1 – 100 is ideal. A score of 300 to 900 indicates that you need to improve your credit by paying down debt especially on revolving lines of credit, like credit cards.

A Fraud Shield Score identifies inconsistencies between application information and credit report data. Just as the credit score, the higher the score the better.  If you have low Fraud Score, the lending institution many request or require additional document to verify your identity.  Don’t give them a hard time though, it is for your protection.

As with anything, financial and credit knowledge is Key to your Prosperity. 

STEP 1: Understand where you are with your credit.

• Pull your credit report to see what is reporting.  You are able to get a least one free copy of your credit report from all credit bureaus. Go to AnnualCreditreport.com.
• If there are several past due payments or lots of collections reporting, you may want to save your money and work on restoring your credit.  Try the myFICO.com Credit Score Calculator to start. 
• If all accounts are paid as agreed with no collections reporting, you may want to invest in purchasing your credit score to see where you are. 

Start at FreeCreditScore.com.  The score may be free, but make sure you read the disclosures to ensure that you are not required to sign up for a monthly monitoring service.

STEP 2:  Ask for help.

Regardless of whether you need assistance with restoring your credit or improving your credit to increase your credit score, don’t be afraid to ask for assistance.  Below are a few great options to assist you.

Anngie Jenkins, Credit Score Queen

www.CreditScoreQueen.com

National Credit Educational Services

www.NCESNow.org

STEP 3: Assess your spending habits, budget and savings plan.

This is crucial with rebuilding or maintaining your credit.  Feel free to contact me for assistance through

• My monthly Common Cents Newsletter,
• My weekday Madam Money Minute Financial & Credit Tip Texts by texting MADAMMONEY to 46786,
• Registering for a Madam Money Financial BootCamp, or
• For One on One Financial Coaching contact me at the information below:

   

Tarra Jackson, Financial Coach

Prosperity Now Financial Management Services

Tarra@ProsperityNowFMS.com

(404) 852-6295

  
We are all looking forward to being a resource to you towards your Prosperity Now!