Let me tell you why most sites shouldn’t promise to help improve your credit score.  One interpretation of the Credit Repair Organizations Act (CROA), is that when you offer to improve someone’s credit score via a product or service, you are to be designated as a credit repair organization.  According to the Credit Repair Organizations Act (CROA), once you are deemed a credit repair organization, you can’t take an upfront fee until your services are rendered.

Improve Your Credit Score

This act was written before the internet was really created, so no one knew how this would handled later on. No one thought about how companies selling services online would handle selling credit score improvement.

Outcome:

Most legit companies steer away from using terms like “improve your credit score” or “credit score improvement”.  These companies include most non-profit credit counseling organizations and other legitimate educational sites.  They call themselves “credit counselors” instead of “credit repair specialists.”

So, who uses this language “improve your credit score”?  It’s not always the good guys.   Search engines do a pretty good job of returning quality sites on this search, but occasionally some shady looking websites can get a high ranking for this term.

What are the magical tips to get credit score improvement?  There’s no magic, but there are things you can do, by yourself, without a high priced online company to help you.  The basic steps to improve your credit score:

• Pay your bills on time.  In fact, pay them ahead of time. You want credit score improvement?  Then, start by paying your bills when you get paid – every two weeks.
• Pay off your maxed out cards first.
• Keep your balances low.  People with great credit scores are only using 5% of their available credit. Paying your bills every two weeks helps keep your balances lower and that improves your FICO credit scores.
• Don’t apply for new credit cards, especially if you are about to try to get any loans or refinancing for your home/auto.
• Dispute errors on your credit report.  25% of us have score impacting errors on our credit reports.
• Don’t close down unused credit cards – those available balances help your score
• Let time be your friend.  The credit score system cares about recent behavior more than the past.  In 7 years most bad items will fall off your credit report.
• Build new credit
• Check your credit score via a monitoring service like myFICO Score watch or check it from time to time using the FICO Standard.

Credit score improvement isn’t hard, but it can take time.  Don’t fall prey to ads that say “200 points in 30 days” or  “You need a professional to help you”.   In most cases, you can improve your credit all by yourself. There is a lot of free information on how to improve your credit score, including the 100+ free videos on VideoCreditScore.com.

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Improve Your Credit Score

Consumers need to see how their credit score charts against other people and against what the lenders are saying the matching interest rates are.

The population of the U.S. is split when it comes to FICO scores.  About 40% of us have a 750 or above, but 55% have a 700 or above.

Population statistics are meaningless though.  You shouldn’t care if you are keeping up withe the Jones and the Smiths, especially if there scores are lower.    The key relationship is between FICO scores and interest rates.  Now, credit scores are not the only factor in determining interest rates.  I just met a woman with a thin file, but she was well off and willing to put down 50% on a home loan. She got a great rate.  But back to the more typical scenario, the one for the rest of us.

Note, that the chart from myFICO shows that the best interest rates go to 760 FICO scores and above.  This chart back in May 2005 used to have a top range of 720+, but was changed to 760 and above and has been this way ever since.

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Credit Score Chart – Episode #88

Credit Score Ranges by Model

• FICO score system goes from 300 to 850
• VantageScore goes from 500 to 990
• Experian’s PLUS score goes from 330 to 830

If you are thinking about a loan, you should know that most lenders use FICO scores and that it is well worth saving $1000s over the life of the loan to check your FICO scores instead of relying on non-FICO scores to guide you. In addition, all 3 FICO scores from all 3 bureaus should be checked if you are looking at a refinance or a home loan.

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Credit Score Range – Episode #87

Credit Score Review

When you get your credit score or credit scores, you need to review your score(s) to find out where you are and where you need to go.

To evaluate where you are, you need to know what kind of credit score you have. Is it a FICO credit score? One of the non-FICO credit scores? Once you know this, you need to look at the range of the credit scores to see where your credit score rates. By rates, do I mean percentile vs. others? No , that’s not that interesting, Who cares how you compare to others if the whole group is doing poorly? For instance, it used to be that a 720 was a great score and now a 760 seems to be the new great credit score. Therefore, you need to know where your score falls in relationship to the interest rates charged by credit score.

myFICO.com has a great chart on their home page that shows the relationship of credit scores to interest rates. This shows you where you fall. Have a great score? Great, make sure you get educated to keep your score high. We recommend FICO score monitoring product Score Watch. Low score? You might be tempted by those ads to raise your credit score. Don’t mind them, you can raise your score on your own. Even the FTC agrees with this. Don’t get tempted by credit repair shops as well. If anything, you want to seek out credit counseling from a U.S. Department of Justice approved agency.

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Credit Score Review – Episode #86

According to Fair Isaac, it is a 723. This is the FICO Score model used by a majority of mortgage lenders. But if you ask the folks over Vantage Score, you are probably going to get a much higher number as they have a scale that unlike the FICO range of 300-850 goes from 501-990.

You can get even more confused with the National Score Index which states a national average credit score of 694. This is based on a 330 to 830 range.

What does average mean anyway? Not many lenders are looking for average candidates these days. They want people with the best credit. And while an average of 723 used to be fine, now you need an above average credit score to get the best rates or even get a loan at all.

This is why it’s important to check your FICO credit score as it’s most likely the one your lender will use in your lending decision.

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Average Credit Score

Foreclosures and short sales will impact your credit score significantly!

How many points will my credit score drop from a foreclosure? There is no correct answer here, and anyone who tries to give you an exact point drop is guessing. I’d expect a 100-150 point drop for most folks from a foreclosure. A 200 point drop is more likely if you had a score over 750-800, but I suspect few people are in this scenario, as most people are looking at foreclosure after maxing out credit cards and being late on other loans.

The length of time your credit score needs to recover? Again, it depends, over a year in most cases. A foreclosure is not quite as damaging as a bankruptcy and a bankruptcy can take 18 months or longer to improve your credit score. Your score is not likely to reach the 800s until the foreclosure drops off your credit file and that will take 7 years. Remember, a bankruptcy takes 10 years to fall off your report.

Because of the credit crunch, Fannie Mae has stated new requirements before you can be approved again for a home loan:

• Foreclosure: 5 years from completion date; additionally between 5 and 7 years you can only purchase a personal residence, and must have a minimum of 10% down and 680 credit score. Also you can only do limited cash-out; no regular cash-outs are permitted. After 7 years you’re back at square one.
• Deed in lieu: 4 years from completion date; also 10% down payment required between years 4 and 7.
• Short sale: 2 years from completion date.
• Chapter 13 bankruptcy: 2 years from discharge date or 4 years from dismissal date
• All other bankruptcies: 4 years from either the discharge or dismissal date

In addition, you should know that a short sale is seen as similar to a foreclosure by the credit score models. Perhaps, you could get a break as the lender might not report the short sale -whereas a foreclosure will definitely be reported — but I wouldn’t count on this.

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How Much Will A Foreclosure Impact My FICO Credit Score? – Episode #49

What is a Good Credit Score?

We take a look at what other experts, industry folks and pundits think a good credit score looks like. My opinion is that a 760 and above is a great score.

We looked at quotes from all over the internet and discuss why a great score has changed over the past 5 years.

“While it’s theoretically possible to score at 850, most scores top off at 825, you can’t get much higher” -Maxine Sweet, VP public affairs, Experian

“There is no reason to go from a 775 to an 850, because you’re going to get the same rate”
- Linda Sherry, spokesperson, Consumer Action

The median score is 723 with most lenders requiring a score of 760 to get the best rates (the highest score is 850, but only 13% of people’s scores beats 800). – Kim Langford, Kiplinger.com

Shortfalls from excellent credit, defined as a FICO score of 800, have become very expensive. Even a score of 780 can cost a rate premium of 0.125 percent. The premium on a score of 700 is about 1.125 percent, and on a score of 600 it can be a prohibitive 2.625 percent. -Jack Guttentag, Inman News, Monday, February 23, 2009.

Today, a score of 740 or 750 will get you an account but might not qualify you for the lowest interest rates – Bill Hardekopf, of LowCards.com

“FICO score over 780 is good enough” – Don Taylor, Ph.D., CFA, CFP – Bankrate.com

“780 and above- If your credit score is within this range then, it is said to be excellent credit score and lenders will have no issues in giving you credit.”

“Today, however, all of the mortgage-qualification standards have been elevated. So you would probably need a 720 or above to qualify for the best rates.” – Home Buying Institute

“Generally speaking, a score of 700 or more gets you the best credit and fast loan approvals.” – Kathy Kristoff, LA Times

“A score above 700 is considered high.” – eHow.com

“A few years ago, people could get by with credit scores of 700 to 730, no problem. Now, if you are not north of 750, you won’t get the best rate, and you may not even get a loan at all.” – Sheryl Garrett, founder of the Garrett Planning Network.

The reality is the a “great score” is a bit of a moving target. At one point is was a 720 in many lenders eyes and now some lenders are saying an 800 is the top score in many cases. Of course, the other factors are important too. Someone with a 760 is willing to put 50% down vs. an 800 willing to put down only 20% might look more attractive to the lender. Others vary in their opinion, but even if someone else likes a 720 or a 740, wouldn’t you prefer to have a cushion? One thing is certain, you must be willing to work towards a good credit score. It’s not happening by accident in most cases any more. Understanding the credit system enough to know what’s hurting your score has never been more important.

In addition, we all have a different definition of good versus great.  I tend to skew towards a this definiton a good credit score gets the best rates while a great credit score allows for lots of leeway for events.  Someone with a 760 has a good credit score as they can usually get the best rates, but someone with an 800 FICO score has a great credit score.

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Good Credit Scores According To The Experts – Episode #40

Credit Score Scale

Credit score scales range and it really varies by which system you’re talking about. The FICO score system is the most used that range goes from 350 to 850. Then you have the VantageScore, this is relatively new and goes from 500 to 990. Then there is the PLUS score from Experian and this goes from 330 to 830.

Interestingly, the score ranges are all kind of about the same but be careful this can mean a big swing in your credit score depending on which system you’re using. You want to make sure when you’re looking your score that you’re looking at the score the lender is actually going to use and in most cases this is going to be the FICO score. To see how my score fluctuated between scoring models, check out my review of the TrueCredit 3 in 1 monitoring product. My non-FICO with them was 50+ points lower than my TU fico score I saw through the Suze Orman FICO Kit.

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What is the Credit Score and FICO Score Scale? – Episode #9

What is a Good Credit Score?

A good credit score depends on the scoring model. The best interest rates and lowest monthly payments are rewarded to FICO credit scores higher than 760. It used to be 720 on the credit score scale of 300-850, but the banks are tightening their lending standards. Check with your lender to find out what FICO score is getting the best rate offer and then target that score!

What’s interesting is that back in 2005, the best FICO credit score appeared to be a 720. But, myFICO updated it’s chart comparing fico scores with interest rates to have the upper bound be 760. This was only done for 30 year mortgages.

Today, the myFICO site shows that the best rates are:

• 760 and above for home mortgages
• 740 and above for home equity lines
• 720 and for 36 month auto loans

What about non-FICO [sometimes called FAKO] scores.

The VantageScore system goes from 501-990 and rewards an “A” grade for a 901 and above.

The PLUS score system goes up to 830 and while I can’t find a stated good score for this this scoring model, I think a 750 and above would be the highest band for great scores and the best interest rates.

Remember that most lenders are using FICO scores. It can lead to some apples to oranges comparisons if you get a non-FICO score and try to get the lender to use it.

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What’s a Good Credit Score? – Episode #4