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My Credit Plan Blog

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What type of an account should a responsible 18-year old first establish to generate high credit scores?

One of the critical factors to excellent FICO scores is how long is the longest account reference in your credit report. A checking account is not a credit reference and will not appear on your credit report by itself. Student and auto loans have a set period when they are paid off (some former students may argue that student loans never pay off). At that time when they are paid off, auto and student loans are closed and will eventually fall from your credit report.

A credit card is usually open indefinitely and can build depth in your credit report from time it is open. If the credit card is managed properly – no late payments, periodic use, and minimum balances, that credit card can push your FICO scores into excellent range. A consumer with an 800 level FICO scores will have a credit card open for at least four years.

Everyone worries about the credit utilization ratio, or balance to credit limit ratio, on credit cards. How is the credit card balance established when it appears in your credit report?

It is the balance on the lender’s reporting date. This date is usually once a month and initiated by the lender. It is when your lender sends your account information to the credit bureaus. It is this balance that will appear on your credit report for a month until the lender updates your account on their reporting date the following month. The date will vary from lender to lender. It is up to the lender when they report.  Some large lenders will report their loan to the credit bureaus

There are many different credit scores generated from dissimilar credit scoring models. Which credit scores are used by all mortgage lenders along with the company that offers them?

It is the Classic FICO Credit Scores

There are many credit score models found all over. These credit score models can produce a score that can be different by 100 points or more from one model to the next. One credit score model can tell you that you have a 750 credit score, while another will show you with the same information having a 650 credit score. It is crazy.

The bigger concern here – these companies do not tell you that the score model they offer is not the same one used by mortgage lenders – and the difference that can exist. Since one Classic FICO score point can cost a new homebuyer thousands of dollars more annually, knowing your actual Classic FICO credit scores is critical to know your true credit standing with mortgage lenders.

Why don’t these websites, lenders, or credit bureaus offer the same Classic FICO credit scores as is required by mortgage lenders? There are agreements already made between FICO, the major credit bureaus, lenders, and websites such as Credit Karma and Credit Sesame that prohibit the disclosure of these scores.

My Credit Plan can provide the Classic FICO credit scores because it is operated by Family Financial Education Foundation, a 501 (c) (3), non-profit certified credit counseling agency. In 2015, the Consumer Financial Protection Bureau ruled that non-profit credit counseling agencies could disclose their client’s credit report and Classic FICO credit scores to their client.

To read more about it, here is the link to the announcement:

https://www.consumerfinance.gov/about-us/blog/millions-of-consumers-will-now-have-access-to-credit-scores-and-reports-through-nonprofit-counselors/

How long does a “hard inquiry” impact your lender’s credit scores?

It is 12 months. More recent inquiries can have a greater impact than those older ones.

Hard inquiries lower a credit score because it shows risk to a lender. How? FICO has researched that those consumers who have six or more hard inquiries in a 12 month period are eight times more likely to file bankruptcy.

Like it or not -- it is a risk issue.

Do You Know Important Facts that Impact Your Credit Scores

What is the best credit account an 18 year old should first open to build scores?

How is the balance determined on your utilization ratio?

What specific credit score model is used by lenders?

How long does and “hard inquiry impact your credit scores?

Click on the link and find see if you know – takes one minute:

https://www.surveymonkey.com/r/MyCreditPlanOct19

For an expanded explanation, please go to www.MyCreditPlan.org/blog

My Credit Plan has 3x better results in credit score improvement than the nearest competitor - a 73 point average improvement. Provides your 3 FICO® scores and usually identifies MANY SOLUTIONS to improve your credit scores. 

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