Credit Score Tutorial - Chapter 1: Introduction
Your credit scores can have a transcendental influence on your life.
Lenders evaluate loan applications using credit scores, and they use those scores to determine interest rates. Credit scores are used as part of the hiring process by employers, landlords, and insurance companies. Even wireless carriers run credit checks on prospective customers.
Our Credit Score Tutorial
Understanding credit scores is simple. Just spend 30 minutes working through our Credit Score Tutorial, and you’ll have the knowledge you need to get the most out of your credit repair program, steer clear of mistakes that hurt your scores, and maximize that crucial three-digit number. Let’s get going!
The History of Credit Scores
Earl Isaac and Bill Fair.
Bill Fair and Earl Isaac, two friends, founded Fair Isaac Corporation in 1956 to create and market their credit scoring idea. Fair Isaac, which began operations in a modest apartment in San Rafael, California, has expanded into a NYSE-listed business with annual sales exceeding $600 million. Known as FICO, their credit scoring system.
The World’s Most Influential Number
Early on, Fair Isaac marketed their scoring system to financial service providers looking to make quicker and more accurate credit decisions. Fair Isaac introduced an automated credit scoring software package in 1989, as companies began to realize the value of computerization, and credit card issuers quickly embraced it. But in 1995, the two largest players in the mortgage industry, Fannie Mae and Freddie Mac, mandated that mortgage lenders use FICO scores as part of their approval process. This was the major turning point that led to the nearly universal acceptance of credit scoring. What follows is history.
Life, credit repair, and FICO
Other credit scores exist, and the majority of them aim to gain market share. The Vantage Score is one of these scores. The FICO score is currently the undisputed leader and the factor that matters for your credit repair efforts. Lenders use FICO, with very few exceptions, and this is a practical fact. And when it comes to our credit repair program, everything—from the dispute letters we draft to the credit management advice we give our clients—is based on FICO’s algorithms.
How Credit Scores are Used
The Benefits of Credit Repair
Credit repair has a useful function. Although it is incredibly gratifying to have a spotless report and respectable scores, the real benefit of a successful credit repair goes beyond appearances. Money and access are factors in your credit scores.
Employment
Employers have been checking credit scores more frequently in recent years before making hiring decisions. Additionally, it is not unheard of for employers to check the credit scores of current employees and demand that they maintain a certain minimum score in order to keep their jobs.
Rental Possibilities
Credit checks are a common component of the tenant screening process used by landlords and rental communities. People with credit problems frequently struggle to find suitable housing as a result of this practice, which has become widespread.
Costs Associated with Insurance
Credit scores are almost always taken into account by home and auto insurers when determining eligibility and pricing. Your insurance premiums each month may differ significantly depending on the state of your credit.
Making a Difference with Credit Repair
Your credit is important to you for many reasons. Your credit reports can be made error-free, and credit repair can help to keep your scores as high as possible.
Credit Score Confusion
Market for Credit Scores
For consumers, obtaining their credit scores is challenging due to two market forces. The first is the aggressive marketing to consumers by Experian and TransUnion of their own proprietary scores, which, despite bearing only a passing resemblance to the FICO scores used by lenders, are marketed as “credit scores” without qualification. The score offered by Experian is referred to as the PLUS Score, and TransUnion, which previously marketed the TrueCredit Score, now offers the Vantage Score. To their credit, Equifax offers a FICO score for purchase, but because it is only based on information from the Equifax database, it only offers a partial picture.
Score Illusion
The ubiquitous FreeCreditReport . com and the credit bureaus’ marketing of credit reports and scores are so pervasive that the average consumer immediately equates “credit scores” with these advertised non-FICO scores. As a result, consumers shell out billions of dollars annually for scores that serve no useful purpose.
Money Speaks
It is important to note that credit bureaus may provide FICO scores. Lenders purchase the FICO scores they use directly from the credit bureaus. The credit reporting agencies are happy to sell FICO scores to lenders. Additionally, Fair Isaac would be pleased to see the credit bureaus sell FICO scores to consumers, just like Equifax does. However, Experian and TransUnion have chosen other paths for the time being.
How to Get Your FICO Scores