how’s your credit worthiness?

i started this in another forum and thought i’d post it here.

checking your credit score with credit karma (that annoying commercial) may not lower your score, but what they don’t tell you is that you’re getting a vantagescore 3.0 model, and not a true fico score (model 5, 8, etc). less than 10% of lenders use the vantagescore to determine credit worthiness. the vantagescore is useful for detecting trends in your credit worthiness but should never be used when talking about your credit score.

some credit card companies give you a fico 8 score for free and this is much more accuarate than a vantagescore. different lenders will use different scoring models (auto, credit card, mortgage, etc.). otherwise, you have to pay for your fico scores.

the three major credit reporting agencies (experian, transunion and equifax) use different formulas for credit scores and tradelines can report differently between the three companies.

a “good” fico score is around 720.

free credit reports are available every 12 months here:

https://www.ftc.gov/faq/consumer-protection/get-my-free-credit-report

your credit report will not come with your credit scores, but they are still important to obtain to ensure the information on there is accurate.

if there are inaccuracies on your reports you can dispute them with the credit reporting angency. do NOT dispute anything that is accurate to try and get it removed. this is fraudulent.

collection agencies....

if you owe a collection agency money, paying the debt is the right thing to do, but don’t expect it to come off your credit report or increase your score. according to the fcra (fair credit reporting act) removing a negative tradeline in exchange for paying the debt is called “credit bartering” and it is not allowed. a paid collection account will remain on your credit report until the statute of limitations has expired. this will vary depending on the type of debt. a paid collection account is still going to report as a collection account until it is removed. credit scores do not generally change when a collection account status goes from unpaid to paid.

government debts have different rules. some government debts can be removed by completing or entering repayment programs (dept of ed). if you have government debt in collections you may be subject to tax offsets and administrative wage garnishment, which means it’s all handled via paperwork and you will not be summoned to court. your employer has an obligation to cooperate in the administrative wage garnishment process. if you quit and change jobs, the government will eventually find you. if you’re really unlucky the government will also levy your bank account.

bankruptcy does not make your debt go away. it essentially makes the debt non-collectible.

chapter 7 generally wipes out unsecured debt. you still owe the debt but creditors can not collect on it.

chapter 13 is a structured payment program for people who don’t qualify for chapter 7, but need debt relief.

again, government debts play by different rules. generally, government debt cannot be discharged through chapter 7 but can be included in a chapter 13 filing.

most people don’t like talking about credit because they don’t understand it, or they have bad credit. the only way to overcome this is through education and setting the appropriate course of action.



i have 15+ years of collections experience, including government contracts and have numerous certifications in collections laws (fdcpa and various individual states) as well as fcra laws. i also have an education in law (civil, criminal, commercial) and i’m a licensed insurance professional.

 

Very good info, but didn't know going thru Credit Karma wasn't a true score.
Funny, where I worked for 12 years in the Title Dept., read or heard stories about some of our customers wanting their late payment history removed because it was hurting them from buying a house or something else needing financing. Many people don't understand late payment penalties, or how those add up to their loan payoff amount increasing. They then don't understand why the principle isn't going down. Payments go towards interest first. They could tear a motorcycle down and put it back together, but don't understand simple interest. Read your contract before signing it.
Duane

 

yes! then on top of it want delinquencies removed from your credit report? if that’s how it worked, there no point in having credit reports.

 

Well that's pretty good information, always nice to learn something new. I already knew that something free like credit karma was likely useless and most free things are just a way to push a product. Glad my credit co offers to let me view TransUnion and Equifax in their app.

 

I always wondered how accurate credit scores are from different places. I always assumed the most accurate (or at least most important) is the score I receive when applying for a loan. Credit karma always shows me a lower score, and the Fico score I get with my discover card shows a higher score. The last time I applied for credit was when I bought my truck, and it was right in the middle between the two.

 

some credit card companies give your fico 8 score, that’s the good one. others will give your vantagescore 3.0, that’s the bad one.

 

Just did a little research, and it appears that Discover uses FICO 8. Do you have any idea what most lenders use?

 

most lenders currently use the base model 8 fico score. but they can also choose to use industry specific scores (bankcard fico 8, auto loan fico 8, etc). and there’s even a fico model 9 out now but i don’t think it’s close to being standard yet.

keep in mind that in addition to your fico scores, lenders can also evaluate the specific information contained in your actual credit reports.

 

Makes sense. Thanks for the clarification

 

Man Op, you keep making well informed posts with data we should all understand, and is subject to my personal ire!

To set it straight, my credit is good, and will stay that way as long as I can help it.

What torqued me about not-so-Fair Isaac was when we bought my ‘06 taco. For the 9 years prior, my wife was a stay at home mom and we were a single income family. I paid all the bills, which included her credit cards. Every. Single. Dime. I wanted her on the title, just because that’s what we do. However, when we went to do the paperwork, since her score at the time was 722, and mine was 716, her name went on everything first because we could get a full point better interest. That in and of itself was no big deal. The big deal is this; How can someone who hadn’t earned much money at all for nearly a decade, have a better score than someone who works every day and handles their finances responsibly? I know the “how and why”, it was a rhetorical question. That’s why I call it not-so-Fair Isaac. Doesn’t matter what the excuse is, or how the formulae are devised (which are closely guarded secrets, as you know)...the whole concept of credit scoring is flawed badly, and yet is used to decide economic opportunities on a wide scale every day.

 

820 now. 545 fifteen years ago. Divorced killed it. It has taken 15 years to get it to where it is now.

 

Great post. Too many are ignorant, or don't care about these things.

I have been trying to assist someone in improving their financial life in several ways. Not with cash, but knowledge and development of good habits. There are a couple of collections items on their record that really will hold back their score (paid or unpaid) until they fall off.

Wife and I are cash buyers (we treat CC's as cash) so our score stays a bit hampered because we have no 'installment payment history'. As if that's a bad thing. And sometimes our CC balances are quite large, so we get a ding. Even though we've never made a CC payment other than the full balance.

But even in our case the score matters, if for nothing but insurance ratings.

 

Likewise. Ex wife was an authorized user on both of my cards, maxed them out with cash advances before skipping town (she did the bills, I was a trusting fool).

Took me 10 years to get out from under that, now maintaining low 800's.

 

I thought a good credit score was 740? When I was applying for a house loan back when lenders would tell me in able to have to lowest interest rate you would need a 740 score or higher.

In my personal experience, if you have good credit you have good credit. Meaning If and when I want something on credit I don’t think twice about running it; it always goes back up or it doesn’t drop enough to hurt me. I’m also an avid user of CC because I make them work/pay me to use their cards. My #1 rule is don’t spend more than you can pay off every month unless you have a 0% interest promo. That rule is easier said than done for a lot of people and is very easy to get carry away when you don’t see money moving from your bank account. Again YMMV.

 

Yes.

But we don't even bite on that, and would not recommend it, other than in an emergency. Unless you have no need for anyone to be looking at your score for a while (even soft looks) Because now your utilization has risen, another scoring factor, and your score will dip.

 

Like I said if you have good credit you have good credit. If I’m making a big purchase and there’s a 0% interest promo I’ll take it. Haven’t been turn down yet and my score doesn’t drop enough to hurt me. Short term, if I wanted to run my credit again for something it still does not affect my out come on getting the best rate or 0% promo.

Again this is for me, YMMV.

 

once you use a card, your utilization % increases which will lower your score. additional hard inquiries also lower your score and will typically effect your score for two years. need to weigh that out and see if it’s worth the 0%. but i get offers of 0% from my current credit companies as well. no hard inquiry there.

personal credit is a bit of a catch 22. it takes a while to establish good credit. and once it goes bad, it can take a really long time to get it back up. it’s not impossible though. just takes money and a lot of time.

 

psa!!!!!!

never fall for the credit repair services!!!!!!! a lot of them are operating illegally and their tactics are questionable at best.

never sign up for any debt management company either!!!

 

be careful who you add onto your accounts!! especially spouses. lol.

however, there is a difference between a co-applicant and an additional card user. either way, you’ll be on the hook to pay the card at the end of the day.

 

We have all been a trusting fool at one time or the other. I feel your pain.