- 1 Which Credit Bureau Score Is Usually The Lowest
- 2 Which Credit Score is the Most Accurate?
- 3 How Credit Score Impacts Mortgage
- 4 wiseGEEK: What is a Minimum Credit Limit?
- 5 How Many Points Will A Collection Affect Your Credit Score?
- 5.1 How Many Points Will A Collection Affect Your Credit Score?
- 5.1.1 The amount of the collection debt is essentially irrelevant
- 5.1.2 The number of collection debt matters somewhat
- 5.1.3 Paying off a collection debt CAN lower your credit score
- 5.1.4 Are medical collections left out from your credit score?
- 5.1.5 Removing a collection account will usually translate to a score boost
- 5.1.6 Overview of Collections: How Many Points Will A Collection Affect Your Credit Score?
- 5.1 How Many Points Will A Collection Affect Your Credit Score?
Which Credit Bureau Score Is Usually The Lowest
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Which Credit Score is the Most Accurate?
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When I talk to friends about credit cards, they eventually always ask me how many credit cards I currently have. I am not embarrassed, so I tell them I currently have 24 open credit cards (full list here). The usual response is “doesn’t that kill your credit score?”
My favorite response is: “my credit score is good enough to get 24 credit cards, so it must be pretty good.”
But lately, I’ve been thinking about their question and I wanted to see if I can get a more accurate number for what my credit score actually is. I use free online credit monitoring services Credit Karma and Credit Sesame (learn more here).
Let’s start with Credit Karma. According to their website, my “credit score” is 756 based on TransUnion Credit Score data. The reason I use “credit score” in quotes is because it is a FAKO score, not a FICO score. What that means is that Credit Karma (and Credit Sesame) get the raw credit data from one of the 3 big credit bureaus and analyses it to create their own “credit score.” Most of the time their “credit score” is very similar to the real credit score, but sometimes their are differences. One important point is to check that date that your “credit score” was produced, which in this case is March 28.
Moving on to Credit Sesame. Their website reports a 794 “credit score” as of March 2, based on information from my Experian credit report. As you can see, there is a big gap between Credit Karma’s 756 and Credit Sesame’s 794. But wait, you say. That credit score is from March 2, while the Credit Karma score is from March 28. Good catch.
Between March 2 and April 2, I did a massive 5 card App-O-Rama (link) and Credit Sesame shows that my “credit score” dropped 18 points. Ouch! So now if we compare the new Credit Sesame score to Credit Karma’s score, the gap is much smaller (776 to 756).
My new Discover It Credit Card that I got during my March App-O-Rama also provides my free credit score. According to Discover’s FICO Score my credit score is 745, based on data from TransUnion’s credit report. Since Credit Karma uses TransUnion also, this is a great way to compare scores. TransUnion says my “credit score” is 756, while Discover says my FICO score is 745. FICO is always preferred over any other “credit score” because FICO is the most accurate number. So, I will assume my TransUnion Credit Score is exactly 745 (as of March 20).
One of the perks of having the US Bank Club Carlson Credit Card is that you get free access to your Experian Credit Score every month. The only problem is that I think my account is broken. It has showed a 734 for the last 3-4 months and have not “updated” since February 22. I wish this tool would work, but as of now, it is not reliable.
Last, but definitely not least, is a report that came with my newly approved US Bank FlexPerks Credit Card. In the report, it shows that my Experian credit score as of March 13 (day of my App-O-Rama) was 715 based on Experian’s credit data. There is no doubt that my score is down from there, but the actual decrease is unknown at this time.
So which score do you go with? Like my weight, my credit score is continuously going up and down by small increments. To make your life easier, it is best to refer to your credit score as a range between 2 scores. So in my case, I would say my credit score ranges from 715 on the low end to 745 on the high end. What does that mean? I’m not exactly sure, but like I tell my friends, “my credit score is good enough to get 24 credit cards, so it must be pretty good,” and that’s all that matters to me.
P.S. I believe Barclays offers free “credit scores” as well, but I don’t have any Barclays credit cards. They hate me, so please don’t ask me where my Barclays score is, thank you!
If you have any credit score related questions, please leave a comment below. Have a great day everyone!
How Credit Score Impacts Mortgage
If you have decided to apply for a mortgage, there are a number of important details you need to go over first. One of these is the term “Credit Scores” which are basically three-digit numbers based on a detailed analysis of your credit reports. These scores establish whether you meet the criteria to obtain a mortgage thus forming the basis of the approval of lending a mortgage. How credit score impacts mortgage is very important regarding what type of mortgage or financing one can quality for. A mortgage lender also uses credit scores to decide factors related to your mortgage such as interest rate, mortgage installments, and amount of loan.
Taking into consideration the significance of these credit scores, legislations have been passed to allow or give users access to free annual credit score reports. Since these reports are usually free, you should keep an eye out for companies that require you to pay for a credit score reports.
Credit scores are based on multiple models. However, two of them are most commonly used worldwide. These models are as follows:
This credit model estimates your credit score on a fixed range of 300-850 where 300 represents the minimum or lowest credit score, and 850 represents the highest or the best credit score. Most commonly use, many mortgage lenders use FICO scores to determine whether a mortgage applicant qualifies for one or not. While applying for your FICO score, you can choose from three different bureaus. Each bureau uses a different sub-model to calculate FICO scores, so choose one that best fits your needs.
This credit score analyses a user’s credit reports in a different way in comparison to FICO scoring. Instead of assigning you numbers from a given range, it allocates letter grades. Unlike FICO scores, all credit bureaus vantage letter grades represent the same credit scores, which are as follows:
- A represents a maximum score that is between 901 to 990.
- B represents a score that is between 801-900.
- C represents a score that is between 701-800.
- D represents a score that is between 601-700.
- F represents the lowest score that is between 501-600.
How does Credit Scoring help customers?
Credit scoring is a major mortgage qualification boost, especially for those who have had a negative credit history and have recently managed to achieve a good or credible credit report.
Improving a credit score not only increases your chances of qualifying for a mortgage or a loan, but it also provides a possibility for obtaining the best interest rates. For those who are looking for ways to improve or raise their existing low credit scores, some of these tips below might prove quite helpful:
Reach out to your respective credit bureaus and request them to erase incorrect information or records of late payments from your credit files.
Pay and settle unpaid debts and debit card balances to reduce debit from your credit reports, thus increasing your credit.
Follow the above guidelines to attain a good credit score, thus increasing your chances of getting a mortgage approval and a good mortgage policy. For more information on how to improve your credit score in order to better qualify for a mortgage, contact our real estate professionals today!
wiseGEEK: What is a Minimum Credit Limit?
The term minimum credit limit is often used in relation to credit card accounts. When a person is approved for a credit card, the credit card company typically applies a limit to the amount he can charge using the card. Often, however, a credit card company has a range of credit limits it will offer to cardholders, and the minimum credit limit is the lowest limit it will offer to new credit card applicants. In most cases, individuals with the lowest credit scores are given credit limits that are closer to the minimum, while those with better credit scores may enjoy higher limits. While a person may start out with the minimum credit limit, he may not necessarily keep that limit for the entire time he has the card; credit card companies often offer credit limit increases.
In many cases, a person who wants to apply for a credit card considers the credit card company’s minimum and maximum credit limits. For example, a credit card company may advertise a minimum credit limit of $300 US Dollars (USD) and a maximum limit of $3,000 USD. This basically means a person who is approved for a credit card from this company will have a credit limit of at least $300 USD but not more than $3,000 USD.
Usually, credit card applicants have no way of knowing how much their credit limits will be before they apply for a credit card. Most credit card companies decide how much credit they will provide after checking an applicant's credit score. A credit card company typically uses an applicant’s credit score, as well as other information the applicant provides, to decide whether the applicant represents a high lending risk or a low risk. An individual who has a poor credit history is typically a high risk and will likely receive a limit that is close to the company’s minimum. On the other hand, a person with a high credit score could possibly receive the maximum credit limit, or close to it.
Most credit card companies provide opportunities for credit card holders to increase their credit limits. Even a person who starts out with the minimum credit limit may enjoy an automatic credit limit increase after he has proven himself responsible by making payments on time. Others may call their credit card companies to request increases after they’ve kept up with the payments for a significant period of time.
2) @browncoat - The whole point of a credit card, from the company's view, is for you to spend more on it, so they can charge you more fees and interest.
And the interest rates are often really big. Even the best credit cards are usually around 15% interest.
On the other hand you need a credit card so you can show that you are a responsible person and build up a good credit rating. I've known some people who managed to get an $8000 limit and immediately began spending on it. Money they would never be able to afford to pay back even without the enormous interest charges.
It's much safer to keep to the minimum credit card limit.
1) I try to keep my credit limit as low as possible. I only have a credit card so I can make purchases online, or sometimes there are other occasions it is good to have one.
But I know that I could take it too much for granted. And really, I keep it close to empty, just paying the minimum payments when I have to.
I'm worried if I increase the limit, I will spend too much on it.
How Many Points Will A Collection Affect Your Credit Score?
Are you asking yourself, “How many points will a collection affect your credit score?”
We have answers for you. And we’ll also delve into how collections work, and what you can do to bring your score back up.
How Many Points Will A Collection Affect Your Credit Score?
Credit scores are highly important.
Not only can they help you get mortgages, loans or higher card limits, but they can also help if you’re seeking employment. Some employers might look at your credit score before they even consider hiring you. Due to this, many of us work to boost our credit scores as much as possible.
Every time we view a collection account on our credit report, we cringe from knowing these accounts have a negative effect on a credit score. Those accounts show up each time a collection agency reports debts to credit bureaus. The resulting effect it has on a credit score is usually devastating.
However, there are a few ways to avoid collecting accounts from damaging your credit score. Keep reading to discover how collecting agencies work.
The amount of the collection debt is essentially irrelevant
This means if the debt is over $1, it does not matter how much you owe. Instead, the debt impacts your credit score the same way, regardless of how high the dollar amount is. For instance, if you have a debt of $200 and it lowers your score by 50 points, a $100,000 debt would drop your credit score by the same—50 points.
The number of collection debt matters somewhat
The biggest hit to your credit score will occur when that first collection account reports. Each additional collection will have more of a marginal impact. As long as the collection agencies are not continuing to update the account every month, the score impact will lessen over time.
Paying off a collection debt CAN lower your credit score
The date the collection debt shows up on a report is very significant. For example, a debt may have been defaulted on with a bank in 2011, but when it got sold to the collection agency in 2016, they will report the open date as 2016. That date does affect scores – the more recent, the more negative impact. A collection account is a derogatory “event” on your credit, regardless of whether it is paid or unpaid.
Ninety-five times out of one hundred, the payment of a collection will have zero impact on scores (payment of an original creditor account is very different – we are just talking about third party collections here). Further, if the reporting of a collection has not been updated at all for two or more years, paying that collection could drop your score because the date of last payment will become current.
But yes, there is a way to pay a collection AND have it improve your scores. Keep reading.
Are medical collections left out from your credit score?
No, not when you’re dealing with FICO scores. Many argue that medical debt is separate from other kinds of debt. This is because it is often beyond your control. Also, it can drop more than 100 points off of your score, and can stay on your report for 7 years. The current FICO algorithm does not differentiate between medical collections and any other type of collections – they all impact scores equally. Some of the confusion which arises regarding medical debt is due to the fact that when you are getting a mortgage, medical debt may be subtracted from your Debt-to-Income Ratio. But that is separate qualification criteria that has nothing to do with FICO scores.
Removing a collection account will usually translate to a score boost
When contacting a collector to settle, you should always try to get them to agree to a “payment for deletion.” There is a good chance it will boost your scores. The only way to know in advance of calling to settle, is to run a “what-if” simulation. Basically you will want to run a scenario that shows how many points you would gain if you paid the collection (typically 0), versus how much your score would increase if the account was completely removed.
There are two options that can provide you this information: 1) if you are working with a mortgage company and they have pulled your credit in the last 30 days, they can run such a simulation; or 2) you can sign up for www.privacyguard.com and run the analysis – this three-bureau monitoring site has excellent simulation capabilities. The scores are consumer scores, not FICO, but the question here is which collection(s) should you try to pay or delete, based on the potential score improvement you may see. Of course, there may be other reasons for you to pay a collection you believe you owe, but if you are looking for a score improvement, follow the instructions above or call us – we use these tools all the time.
Not all collection agencies will agree to a payment for deletion. These agencies have contracts with the bureaus to pull and report credit. The bureaus don’t want collections removed from credit reports (for several reasons that tie to protecting their business model); if the bureaus see too many deletions, they can stop doing business with the collector (which means the collector is out of business). If you go through the simulations above, you will know whether deletion is required and it will help guide your decision whether to pay.
Remember, collections will fall off your report 7 years from the date of your first missed payment with the original creditor. It doesn’t matter how many times the debt gets resold, unless the collector re-ages it (which can happen). Furthermore, every type of debt has a statute of limitations for collection (which varies by state and type of debt) where, when reached, you are no longer legally obligated to pay. Knowing whether your debt is time-barred will help you in settlement negotiations.
After 180 days of no payments, a creditor thinks you will not pay anything at all on your credit card bill and they charge-off your account. A charge-off is a highly detrimental entry that stays on your report for 7 years from the date it first became delinquent.
After an account has been charged off, creditors often utilize third party debt collectors to attempt to collect a payment. The original creditor may continue to own the account, but assign it to the third party for collection. In that case, only the original charge off with the balance will be reporting. However, if the creditor sells the debt, a new collection account will report to your credit file, so now you have two major negative items all on the same debt: a charge-off (with zero balance) and a collection (with a balance). It takes a toll on your credit score.
It’s a good idea to consider settling with the original creditor before they sell the debt and the collection account shows up. Payment should also stop any further account updates and allow the charge-off to age.
The more severe the delinquency, the more money that is past due, and the more recent the collection all produce a devastating hit to your credit score.
If your credit scores are in the 700s, the first collection can cost you well over 100 points. If you have lower scores and other types of negatives, the new collection will have less impact but it will still be significant. Since the FICO algorithms are extremely complex, and the details of how they work are kept highly secret, we cannot describe exactly how many points your score will drop due to a charge-off or a collection. However, it will most likely amount to a lot, and you can always run the what-if simulations described above to find out for your particular case.
Overview of Collections: How Many Points Will A Collection Affect Your Credit Score?
Collections can happen to anyone, whether you are already responsibly managing your credit or if you have arrived at difficult times financially. The trick is to rebuild your credit, and Go Clean Credit can help.
Need to know more about how many points will a collection affect your credit score? Let us know! To enlist the help of a trustworthy, effective credit repair company, contact Go Clean Credit today.
No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.
We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away, or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.