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[G122]Get Free Credit Scores

by Ian Webber, Ian

Many people starting a credit repair program are under the misconception that the credit bureaus are in some way connected to the government. It is easy to understand this perception. But, as influential as they are, the credit bureaus have no government blessing, charter, or otherwise. They are big business. There are three credit bureaus that count. They are Experian, Equifax, and TransUnion. They are in the business of gathering credit data about you and selling it to potential creditors.

The Fourth Contender

There is one other credit bureau of substance called Innovis. Innovis is a significant player in the credit data markets, but is not a concern for your credit repair effort. They specialize in gathering and sorting data for pre-screened credit card offers. The mortgage giants Fannie Mae and Freddie Mac were instrumental in the accent of Innovis when, in 2001, they demanded that their mortgage servicers report payment histories to Innovis. At the moment Innovis operates behind the scenes, but there have long been rumors that they are planning an assault on the consumer market.

The Credit Score of Choice

Almost without exception lenders use a single type of credit score in making loan decisions. This is called the FICO score and will become a focal point of your credit repair project. FICO is an acronym for the inventor of the score, Fair Isaac and Co. The three bureaus sell these FICO scores directly to lenders and have re-named them for marketing reasons; Equifax calls it a BEACON score; TransUnion calls it an EMPIRICA score; and Experian calls it the EXPERIAN/Fair Isaac Risk Model.

Your Scores May Vary

At the outset of your credit repair project you may want to benchmark your effort by checking your credit scores. You will notice that your scores with the three bureaus are different. This is because each bureau receives data from a different mix of creditors. Some creditors report to all three bureaus, but many don't. If you examine your three reports you will see that some accounts are missing on each bureau. Reporting schedules also play a roll. Changes in your balances are normally picked up sooner at one bureau than another.

The Makeup of Your Score

The precise formula for calculating your credit score is kept secret. But Fair Isaac offers a significant amount of information about the rudiments. If you are looking for credit repair results it is wise to familiarize yourself with the basics. As you start to work on optimizing your scores you will begin to develop an intuitive grasp of the nature of the scoring model.

Payments

Your payment history comes first and plays a major roll. This includes installment and revolving debt payments. The age of each derogatory event reduces the impact it will have on your score. For credit repair purposes, don't worry about the past, just make sure that you make all payments on time from now on and you will be fine. Fair Isaac says that this category represents 35% of your score.

Balances

Your balances are the next category, and although in second place, they may be the most important to your credit repair project and to any effort you are making to optimize your scores. Revolving balances carry the most weight, and the relationship between your balance and the limit on your revolving accounts is the key. Installment balances come into play as well; older, time-tested installment debt will help your scores. Fair Isaac indicates that this category makes up 30% of your score.

Age

The age of your credit plays a role as well. New credit will depress your scores for the simple reason that it is untested. You may need to build new credit as part of your credit repair project, but as each month passes the negative impact of new accounts fade quickly. Old accounts are a credit repair asset and should be preserved. This category makes up 15% of your score.

Inquiries

Credit inquiries have a negative but small impact on your scores. Inquiries indicate to the FICO model that you are planning to incur new debt. Fair Isaac credit score engineers will lower your scores temporarily when you have inquiries as a warning to prospective lenders that your budget may be facing new challenges. The impact of inquires fade quickly. Fair Isaac weighs this at 10% of your score.

The Right Mix

Last and least, the type of credit makes up the final 10% of the score calculation. This last category brings to light the fact that there is an ideal mix of debt types for credit score perfection. Fair Isaac does not reveal what the perfect mix is, but when it comes to credit repair success you should focus on building a nice balance of accounts, making your payments on time, and keeping your revolving balances down.

If you are planning to start a credit repair effort you might want to establish a benchmark for your progress; some objective means of marking the results of your efforts. Your credit scores are the logical way to measure your improvement. But getting your credit scores is not as simple as it seems. If you attempt to buy your scores online you are likely to encounter a dizzying array of options, many of which make little sense. It turns out that there is not just a single score, nor are there only three, one for each credit bureau. The crazy reality of the credit score market is far less clear. Are you ready to explore the world of credit scores?

It Starts With the Credit Bureaus

In brief, the three credit bureaus maintain credit data on consumers. Credit scores are based on this credit bureau data. Lenders base their lending decisions on a score called the FICO score. Lenders purchase these FICO scores from the credit bureaus, but the credit bureaus do not own the FICO scoring software, they license its use from Fair Isaac Corp, the creator of the FICO model.

One Score Three Names

The credit bureaus rebrand the FICO scores they sell to lenders. Experian calls their FICO score the Experian/Fair Isaac Risk Model, Equifax calls theirs the BEACON score, and TransUnion calls it an EMPIRICA score. All of these scores utilize the FICO software. The reason that there are differences in your three FICO scores is because creditors do not all report to all three bureaus. In addition, there are timing differences in the release and processing of data between the creditors and the credit bureaus; if you pay off a credit card Experian may update your balance in three weeks, Equifax in five weeks and TransUnion in eight. In addition, Fair Isaac updates their software from time to time, and the credit bureaus do not all adopt the new release simultaneously.

The Plot Thickens

So far we have described the relationship between the credit bureaus, Fair Isaac, and lenders. Unfortunately, there is more to the story. In a perfect world if you wanted your scores for credit repair or other purposes you would just purchase them from the credit bureaus. You would then know exactly what a lender will see when they make a decision on your loan application. But the credit bureaus have decided not to sell FICO scores to consumers. Instead, with the exception of Equifax, who sells a genuine FICO score, they have created their own credit scores and sell them to consumers. These bureau scores have little numeric resemblance to a FICO score, often differing by over 100 points. This is completely useless for credit repair, and not only because of the numeric difference, they also behave differently; you can't optimize your FICO score by optimizing a bureau score.

Ignorance is Not Bliss

If this leaves you wondering why anyone would spend good money on a credit score that has no resemblance to the score that a lender will see, I'm sorry to say that the reason is that the millions of people that buy these scores do not know. And the reason they don't know is that the disclosures provided by the credit bureaus are almost impossible to find. It is a fact that if Experian and TransUnion were to put their disclosures in plain English, in plain sight, no one would buy their scores.

Your Credit Repair Problem

But let's go back to our little problem. You are getting your credit repair project rolling. Where can you get your real FICO scores? Prior to February 13, 2009 you could go to MyFICO.com, the Fair Isaac website and purchase all three FICO scores. But as of February 13th Experian has declined to let Fair Isaac sell the Experian FICO score. This has raised a cry of concern from many consumer advocates, but the fact still remains. At the time of this writing you can only purchase your Equifax and TransUnion FICO scores.

The Solution

Work with what you have. Get your two FICO scores. If you want all three scores to benchmark your credit repair results the only option now available to you is to get them through a lender. This may not be as hard as it sounds. If you plan to get a mortgage in the near future you might contact a mortgage broker. They will run your credit as part of the pre-qualification process, and if you ask, they might give you a copy of your report which will show all three scores. Good luck!

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Ian Webber has sinced written about articles on various topics from Home Management, Credit Loans and Free Credit Report Score. Ian Webber is an expert in consumer law and credit repair. Ian is a graduate of the London School of Economics and The University of Chicago where he earned his LLM. Ian consults with one of the leading online. Ian Webber's top article generates over 5400 views. to your Favourites.