Written by the in-house credit analyst Jay Turner. Need more info email us @ email@example.com.
Summer is in full swing and things are definitely heating up. Guys and girls have spent the last couple of months hitting the gym and eating right to shed those remaining few holiday pounds to fit into bicep-hugging Tees or torso-flattering bikinis. I’ve been amazed watching friends, family, and colleagues slimming down and toning up for summer, especially my brother who lost an amazing 30 pounds in eight weeks to join the Navy. The dedication that people often display in their weight loss goals is indeed inspiring, and I completely understand the drive that keeps people on track. When you’re sculpting your body, you give yourself a goal, you develop a routine, you stick the plan, and BAM! Anyone can transform into a sexy beast.
However, I’ve observed that sometimes the psychology of transforming your body does not necessarily translate into transforming your credit profile. I believe there are several reasons for this, but the biggest one in my opinion is the state of ignorance or denial that folks often have about their credit. So while you’re jogging off that last bit of water weight or getting the final striations on those calf muscles, I want to challenge you to take a critical look in the money mirror to see if your credit profile is as banging as your body for the summer.
Over the next two months, I’ll be providing you with a primer on improving your credit called Hot Six for the Summer. Each week I’ll pose a core question that will invite you to become more aware of your credit and take steps toward whipping it into shape if it’s not already. Alright, let’s play…
Question one: What’s your credit score?
If you’re looking to upgrade your ride, get a mortgage on that sweat deal of a house, take out a student loan for fall semester, or grabbing a new credit card, it is imperative that you know your FICO score, the magic number that lenders rely heavily upon to approve or deny you credit. Not only does your FICO score affect if you will be extended credit from a lender, but it also determines your interest rate and how much you can borrow. According to Steve Ely, president of North American Personal Solutions at Equifax.com, with today’s skin-tight lending standards, you need a score of 720 to be considered as having good credit. You’ll need better than 760 to get into the excellent tier of loan products.
This is somewhat a trick question, since you will most likely have three different FICO scores — one from each of the three credit reporting bureaus: Equifax, Experian, and Transunion. Since lenders report differently to the three bureaus, you will find that information contained in your credit reports, and subsequently your scores, can vary from one report to the next. I remember several years ago having a FICO score in the low 500s on my Equifax report and in the high 500s on my Transunion report. The reason for the large discrepancy was that I had a collection for an unpaid utility bill on the Equifax report that was not being reported to Transunion.
The takeaway here is that you should check your credit scores across all three bureaus before applying for a major loan (car, house, student loan, etc). Your lenders will often have access to all three scores and will use the middle score in their decision-making. Also keep in mind that your credit score is calculated by a variety of criteria and can rise and fall in bounds or increments.
With that said, you must be careful about where you purchase your FICO scores. Only myFICO.com and Equifax.com sell Equifax and Transunion FICO scores to average Joes like you and me. Experian FICO scores are no longer available to consumers. Purchasing your credit score from any other source, including scores sold directly by Experian and Transunion, will result in you obtaining what I jokingly call “FAKO” scores. These fake FICO scores are based on proprietary scoring models and are usually not used by lenders to make lending decisions. FAKO scores might be cheaper, but you get what you pay for.
I also highly recommend enrolling in a credit score monitoring service, like Score Watch through MyFICO, so that you always have a pulse of on your credit standing. For $12.95 a month (or $9.95 a month if you purchase a yearly subscription), you can follow changes in your score over time, which will keep you informed of how potential lenders view you.
All journeys great and small begin with the initial step of knowing where you are. Learning your FICO score at the beginning of your summer credit workout is like hopping on the scale before beginning a diet. You have a clear idea of where you’re starting and can set a realistic goal for what you’d like to achieve. The path to better credit is not easy, but it is doable if you understand the rules of the game.
What’s your target credit score?
Just one of ‘fatboyfavs’