What Is the Range for Credit Scores?

by Shelton on March 5th, 2016

filed under Credit Scores

What is a good credit score?

Fair Isaac Corp. produces the most commonly used credit scoring algorithm in the United States. FICO scores range from 300 to 850, and the higher the score, the better.

Each lender sets its own standards for what constitutes a “good” FICO score. But, in general, FICO scores fall along the following lines:

  • 300-629: Bad credit
  • 630-689: Fair credit
  • 690-719: Good credit
  • 720 and up: Excellent credit

The average FICO score was 695, according to the latest data as of April 2015.

But there are several commonly used credit scores, not just FICO. The increasingly popular VantageScore also employs a 300-850 scoring range, as do most other credit scores. “Good” or “excellent” scores depend on what an individual lender decides, but in general 720 and up is considered excellent.

Even if your score is in the low 500s, you may still be able to get credit, but it will come with very high interest rates or with specific conditions, such as depositing money to get a secured credit card. You may have to pay more for car insurance or put down deposits on utilities.

At the other end of the scale, borrowers with scores above 750 or so have many options, including the ability to qualify for 0% financing on cars or a 0% credit card.

That’s why you want good credit. Here’s how to get there:

7 steps toward a better credit score

  • Pick a score (FICO, VantageScore or another) and monitor it — we suggest monthly.
  • Check your free annual credit reports and dispute any errors.
  • Pay your bills on time.
  • Use less than 30% of your total credit limit.
  • Apply for credit only when you need it.
  • Keep old credit accounts open.
  • Watch your mix of credit types.

Find the starting point

The first thing to do is to see where you stand. Some credit cards offer free scores, and you may also be able to get a free score online. The important thing is to use the same score every time, as each weighs your credit history a little differently. (Doing otherwise is like trying to monitor your weight on different scales.)

So, pick a score and stick with it to monitor your progress. Advancements you make measured by one score will be reflected in the others.

And be aware that, like weight, scores fluctuate. Your score is a snapshot that can vary every time you check it.

Check your credit reports for errors

Next, check your credit reports — the information used to calculate your scores. You are entitled to one every 12 months for free from each of the three major credit reporting agencies, Equifax, Experian and TransUnion. You can access your reports at AnnualCreditReport.com.

Check them for errors, making sure your name, address and Social Security number are correct and that you recognize the accounts listed. (Here’s a guide on how to read credit reports.) If you believe there is an error, dispute it.

Because credit scores are derived from information in your credit reports, an error could potentially lower your score — and correcting one might improve it.

Pay every bill on time

Your payment history accounts for about a third of your credit score.

A late payment can stay on your credit report for seven years. The more recent the late payment is, the more it hurts. The later the payment, the worse the damage. Sixty days late is worse than 30.

If you are a few days late, your creditor is unlikely to report the account in arrears. If it’s more than 30 days, though, expect a ding. A single, recent late payment can deal a heavy blow to a good credit score, as much as 100 points if your credit had been considered excellent until then.

On the other hand, if you begin now to establish a history of on-time payments, your older late payments won’t matter as much. Nothing will improve your credit score faster than paying your debts.

Use credit sparingly

Your credit utilization also accounts for about a third of your score.

The more of your available credit that you use, the less likely you are to be able to repay your debts. In general, you need to use 30% or less to get the best credit scores.

Credit algorithms look at your credit utilization on both your individual cards and as a total against all your cards. That is, if you have two cards, one that is charged up to its limit and the other with zero balance, you would be penalized even if your total credit use is below 30%.

Keep credit utilization in mind when you decide which balance to attack first.

Another way to reduce credit utilization is to get a higher credit limit. If your financial situation or credit has changed for the better since you applied for the card, it might be worth calling your issuer to ask for a higher limit.

Apply for new credit only when you need it

New credit accounts for about 10% of your credit scores; applying for a lot of credit in a short time could hurt your score, as it represents increased risk that lenders won’t get repaid.

Inquiries fall in this category.

A “hard” credit inquiry involves an actual application for credit and can cause a small, temporary drop in your score. You are not penalized for shopping around for a mortgage or a car loan over the course of a few days or weeks; those inquiries are typically grouped together as a single hard credit pull.

A single credit card application may ding your scores, but this is often offset by having a higher credit limit that improves your credit utilization ratio.

A “soft” credit check, on the other hand, isn’t an application for credit and doesn’t affect credit scores. A soft pull is either informational, as when you check your own credit, or promotional, as when a credit card company makes you a preapproved offer or a personal loan provider quotes you a rate.

The length of your credit history matters

The age of your credit accounts for about 15% of your score. If you’re new to credit, the length of your credit history could hurt your score.

You might be able to counter it by becoming an authorized user on an older credit card, assuming the primary user pays on time and keeps balances low. Not all issuers report authorized users, so make sure the issuer does.

If you have established credit and have been tempted to cancel an older card, you may want to reconsider, unless there is a compelling reason — like a fee — to ditch it. (Even then, the issuer may be able to switch you to a different card and keep the account age.)

Have the right kinds of credit

There are several types of credit accounts, and consumers with high credit scores tend to have more than one. Your credit mix accounts for about 10% of your scores. Each account on your report will be noted as Revolving, Installment or Open.

Revolving accounts such as credit cards set a limit on how much you can spend, and you can repay either the minimum, the whole balance or anything in between. You can carry a balance until the day you die.

An installment loan applies fixed monthly payments against a specified payoff date. Paying off an installment loan demonstrates responsibility over time; that’s why a current mortgage is typically part of an excellent credit score.

An open account involves accounts where the entire amount is due at the end of the billing period. Typically these involve services such as cell phones and utilities, but also can include some gas station cards and credit cards.

The designation of each credit type can affect your score. For example, revolving credit card debt of more than 30% of your available limit can hurt your score. A debt consolidation loan could move that credit card debt over to the installment column, improving the credit utilization ratio on your revolving accounts.

Making it count

It’s smart to focus your efforts where they have the most impact. Keep in mind that credit applications, the kind of credit you have, and how long you have had credit — combined — make up only about a third of your score.

Although every little bit helps, it’s all but impossible to improve your score if you don’t pay on time.

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.

Image via iStock.

Cities With Lowest, Highest Credit Scores

by Shelton on March 5th, 2016

filed under Credit Scores

Borrowers in the city with the highest credit scores pay interest rates on mortgages that are 29 basis points less than borrowers in the city with the lowest scores.

The highest average credit scores of any metropolitan statistical area last year was 673. That was in the San Francisco-Oakland-Fremont, California, MSA.

The No. 2 MSA, which also had an average credit score of 673, was the
San Jose-Sunnyvale-Santa Clara, California, MSA. The area includes Silicon Valley.

Southwest Solutions, JPMorgan Chase and Mission Asset Fund Launch Peer Lending Circles to Boost Credit Scores of …

by Shelton on March 3rd, 2016

filed under Credit Scores

DETROIT, Jan. 28 /CSRwire/ – Southwest Solutions, JPMorgan Chase amp; Co. and Mission Asset Fund (MAF) today announced the launch ofLending Circles, a new social loan program that will allow Detroit residents to safely build credit through zero-interest loans. Participants make monthly loan payments and take turns receiving zero-interest social loans, ranging from $300 to $2,500. All loan payments are reported to credit bureaus, enabling participants to build a credit history, raise credit scores and work towards greater financial stability.

MAFs award-winning Lending Circles are a fresh take on social lending, helping participants build credit while increasing assets and improving financial health. The average credit score increase for participants is 168 points.

More than 30% of the people weve assisted with their financial situation in the last two years start with no credit history, and those with credit start with an average credit score of only 547, said Hector Hernandez, executive director of Southwest Economic Solutions. Lending Circles will enable our clients to build and enhance their credit so they can take advantage of opportunities to become homeowners, entrepreneurs and college graduates.

Bringing Lending Circles to Detroit is the next step in JPMorgan Chases $ 100 million commitment to Detroits economic recovery. JPMorgan Chase recentlyawarded MAF a $1.5 million, three-year grantto expand Lending Circles to even more communities across the country and develop new technology to connect clients with on-demand loan information. Southwest Solutions is part of a growing network of 53 Lending Circles providers and the first in the state of Michigan.

We are proud to partner with Southwest Solutions and Mission Asset Fund to expand Lending Circles to Detroit, said Colleen Briggs, Program Officer, Financial Capability Initiatives, JPMorgan Chase. Building a solid credit score is the critical first step to managing daily financial lives and accessing affordable capital to achieve long-term financial goals, such as purchasing a home or starting a business.

Of the 27 zip codes in the City of Detroit, the median credit score among residents is below 600 in all but one, according to Urban Institute tabulations of credit bureau data. Furthermore, a 2015 report from the Consumer Financial Protection Bureau reported that one in four Detroit households are underbanked. Without sufficient access to checking or savings accounts, Detroit residents often turn to payday lenders and check cashers to meet their basic financial needs.

Without credit scores, there are no lsquo;good options when you want to start a business or get a small loan, said Jose A. Quinonez, CEO, MAF. Now, with the support of JPMorgan Chase and partners like Southwest Solutions, we are working together to provide innovative solutions to help Detroit residents succeed.

About Southwest Solutions

For more than 40 years, Southwest Solutions has pursued its mission to help build a stronger and healthier community in southwest Detroit and beyond. The nonprofit organization provides more 50 programs and partnerships in the areas of human development, economic development and resident engagement. These three areas together form a comprehensive neighborhood revitalization effort that helps more than 20,000 a year. For more information, please visitwww.swsol.org.

About JPMorgan Chase amp; Co.

JPMorgan Chase amp; Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.4 trillion and operations worldwide. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management. A component of the Dow Jones Industrial Average, JPMorgan Chase amp; Co. serves millions of consumers in the United States and many of the worlds most prominent corporate, institutional and government clients under its JP Morgan and Chase brands. The firm uses its global resources, expertise, insights and scale to address some of the most urgent challenges facing communities around the world including the need for increased economic opportunity. Information about JPMorgan Chase amp; Co. is available atwww.jpmorganchase.com.

About Mission Asset Fund

Mission Asset Fund(MAF) is a San Francisco-based nonprofit dedicated to helping financially excluded communities namely, low-income and immigrant families gain access to mainstream financial services. Learn more atmissionassetfund.organdlendingcircles.org.

10 American cities with the best credit scores

by Shelton on March 2nd, 2016

filed under Credit Scores

Marcio Silva/iStockphoto

Earning a high credit score can open doors — literally.

Americans with good or excellent credit scores have an easier time qualifying for mortgages, renting apartments and finding lower interest rates for all types of loans.

Credit scores between 690 to about 720 are considered good, while people with scores above 720 to the maximum of 850 are viewed as excellent borrowers. While individuals receive their own credit scores based on their history with handling debt, certain types of credit scores tend to cluster by ZIP codes, according to recent research by Credit Sesame.

That often correlates with income, said Stew Langille, chief strategy officer at Credit Sesame. Residents in towns with lower median household incomes tend to suffer from lower credit scores, which can make borrowing more expensive for them. The flip side of the coin are higher-income towns, where Credit Sesame found residents have correspondingly higher credit scores.

Theres another link, as well: education, Langille said.

Areas that have higher education levels as well as higher income levels have higher credit scores, Langille said. Those with post-doc educations tend to be more responsible and more aware of credit. Theres a very high correlation with education level and credit score.

Of course, higher education and income are also linked, in that college graduates generally earn much heftier incomes than those with only high school educations.

The American towns with the highest credit scores tend to be clustered in California, which claimed six slots on the list.

Read on to learn more about the cities whose residents have the nations highest credit scores.

​The financial missteps that could doom your love life

by Shelton on February 29th, 2016

filed under Credit Scores

A secure financial footing has benefits far beyond staying out debt: it can also strengthen your love life.

Researchers are increasingly finding a link between a persons financial health and their relationships, with stronger finances linked to a better romantic outcome. Americans with higher credit scores are 14 percent more likely to find a partner within the next year than those with scores about 100 points lower, the Federal Reserve found last year.

Starting with the first date, people are seeking financial clues about each other, such as their professions or whether they graduated from college, which can be an indicator of income. As relationships progress, that can develop into increasingly frank discussions about debt, student loans and financial goals. Rather than indicating a shallow focus on money, these discussions can uncover important indicators about a persons values and goals.

Its not the credit scores in themselves that matter, but its a signal of how they view money, and how they view money as a tool to do other things, said Sean McQuay, credit cards expert at financial site NerdWallet. Its important as you date them that you are trying to learn about them, and exploring what their financial situation looks like, not to judge but to see if you are compatible.

More Americans With Bad Credit Are Getting Car Loans Now

by Shelton on February 28th, 2016

filed under Credit Scores

Americans owed more than $987 billion in outstanding auto loans in the last quarter of 2015, according to the latest report from Experian Automotive. Its the highest amount of outstanding auto loan debt since the company first started publicly reporting the data in 2006.

Auto loans as a whole grew 11.5% from 2014 to 2015, and so did loans to subprime and deep subprime borrowers (ie buyers with bad credit scores). In the fourth quarter of 2014, subprime and deep subprime auto loans made up 20.3% of all open auto loans, increasing year over year to 20.8% in 2015. That could be a good sign for people with low credit scores who need a vehicle. Getting a car loan with bad credit limits some of your options, but its still important to shop around for the best terms. Many common credit scoring models will allow consumers to apply for multiple auto loans within two weeks and count them as a single hard inquiry, to encourage people to search for the best deal.

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It helps to start the process by getting an idea of where your credit stands. The better your credit scores, the more likely you are to get approved and receive favorable loan terms. An auto loan can even help you improve your credit, as long as you consistently make your car payments on time.

[W]hile loan balances continue to rise and funding may be more easily attainable, it is critically important for consumers to stay on top of their monthly payments to keep the automotive market running on all cylinders, said Melinda Zabritski, senior director of automotive finance for Experian, in a news release on the data.

While 30-day delinquencies were down in the final quarter of 2015 from the same time in 2014 (from 2.62% to 2.57% of all loans 30 days past due), 60-day delinquencies were up slightly, from 0.72% to 0.77%. Remember that your payment history has the greatest impact on your credit score, and you can see how your auto loan affects your credit by viewing two of your free credit scores every month on Credit.com.

More on Cars:

  • Are There Car Loans for People With Bad Credit?
  • What to Do If You Can’t Make Your Car Payments
  • Top 5 Worst Car Buying Mistakes

Image: Stockbyte

Couples And Credit Scores: Is It A Match?

by Shelton on February 28th, 2016

filed under Credit Scores

So, as Valentines Day approaches, I thought Id give my readers love lives a potential boost by talking about the best way to boost their credit scores. Because if theres one thing that can dampen the romance in a relationship, its not being able to get that loan or that mortgage or even that perfect job due to lousy credit.

Five Steps to Better Credit

Hispanics Ready to Get Serious about Their Credit Scores

by Shelton on February 27th, 2016

filed under Credit Scores

WILMINGTON, Del.–(BUSINESS WIRE)–While Hispanic Americans are more likely to feel dissatisfied with their
credit scores than Americans overall (37 percent vs. 32 percent), the
Chase Slate 2016 Credit Outlook also finds that Hispanics are expressing
a greater desire to improve their credit score over the next year (72
percent), as compared to Americans overall (66 percent). Seventy percent
of Hispanics believe a higher credit score would lead to greater
happiness and opportunities compared to just 59 percent of Americans
overall. And the survey suggests that they believe they’re on the right
path, with 44 percent of Hispanics saying the choices they are making
today will definitely help their credit worthiness in the future,
compared to 39 percent of Americans.

Key Findings:

  • Hispanics scrutinize their personal finances more than other
    consumers. A majority of Hispanics negatively rate their personal
    financial situation (55 percent fair/poor vs. 45 percent
    good/excellent) – a contrast to Americans overall who are more likely
    to express a positive sentiment than negative (54 percent
    good/excellent vs. 46 percent fair/poor). In addition, just 10 percent
    of Hispanics rate their personal financial situation “excellent,”
    compared to 17 percent of Americans overall.
  • Ambivalence, fear lead many Hispanics to not check their credit
    score. Just over half of Hispanics (54 percent) have checked their
    credit score in the last year, compared to 60 percent of Americans
    nationally. Additionally, one-in-five Hispanics (20 percent) has never
    checked their credit score – six points higher than all Americans (14
    percent). Among Hispanics who did not check their credit score in the
    last year, when asked why, 40 percent said it’s because they had no
    reason to, 35 percent indicated that they meant to, but didn’t get
    around to it, while nearly one-third (29 percent) said it’s because
    they were afraid it would be a low number.
  • Hispanics recognize the value of checking their credit score (or
    their spouse’s). Although Hispanics appear less engaged with their
    credit history than Americans overall, they are more likely to believe
    they would have benefited from checking their score at certain
    instances in their life (60 percent vs. 53 percent), particularly
    before applying for a loan (57 percent among Hispanics) and before
    trying to buy a house (49 percent among Hispanics). Also, one-in-five
    of those Hispanics who have a spouse or partner (20 percent) indicate
    that they would have benefited from knowing their spouse’s or
    partner’s credit score before getting married.
  • Hispanic Millennials are even more determined to improve their
    credit scores. Although Hispanic Millennials are more positive
    about their personal financial situation than all Hispanics (50
    percent of Hispanic Millennials rate it Good/Excellent vs. 45 percent
    of all Hispanics), they are more likely to want to improve their
    credit score in 2016 (78 percent of Hispanic Millennials vs. 72
    percent of all Hispanics). Big factors in spurring the desire of
    Hispanic Millennials to improve their credit score are their interest
    in buying a house in the near future (63 percent of Hispanic
    Millennials vs. 50 percent of all Hispanics) and starting a family (26
    percent of Hispanic Millennials vs. 16 percent of all Hispanics).
  • Hispanics plan to take an ‘all bills, no-frills’ approach to
    improving their credit scores. The most popular plans among
    Hispanic consumers to improve credit scores include paying bills on
    time (65 percent), paying off debt (60 percent) and keeping credit
    card balances relatively low (41 percent).


“The optimism that Hispanics are feeling about improving their credit
score in 2016 reflects the passion and commitment to do better for
themselves and their families,” says personal finance expert and Chase
Slate financial education partner Farnoosh Torabi. “My advice to all is
don’t be afraid of knowing your credit score and understanding the
factors that impact it. Contrary to popular belief, checking your credit
score yourself does not negatively impact the score. This is the first
and most important step to start making improvements and to stay on top
of your credit health.”

“I am encouraged to see that so many Americans are motivated to improve
their credit score this year, chiefly because healthy credit can open
doors in the short-term, long-term and throughout one’s lifetime,
really. With more men and women on the path to achieving their goals,
that happier life they’re seeking could be closer within reach,” says
Pam Codispoti, President, Consumer Branded Cards, Chase Card Services.

Chase Slate cardholders have access to the Credit
Score amp; More feature that Credit Dashboard provides a
comprehensive view of their credit health through free access to their
monthly FICO® Score, along with the reasons behind the score,
the top positive and negative factors impacting it and tailored tips for
improving credit health overtime. The feature is available online at Chase.com.

About the Chase Slate 2016 Credit Outlook Survey

The Chase Slate 2016 Credit Outlook Survey was commissioned on behalf of
Chase Card Services to measure Americans’ understanding, attitudes and
perceptions around credit and credit health. The survey was conducted
via an online survey by Stratalys Research, an independent research
company. Interviews were conducted from December 2 – December 15, 2015
among a nationally representative sample of 1,000 respondents age 18 and
older, plus an oversample of 450 Hispanics to total 600 Hispanic
interviews. The credibility interval is +/- 3.6% for a sample size of
1,000, +/- 4.65% for a sample size of 600, and larger for subgroups.

About Chase

Chase is the US consumer and commercial banking business of JPMorgan
Chase amp; Co. (NYSE: JPM), a leading global financial services firm with
assets of $2.3 trillion and operations worldwide. Chase serves nearly
half of America’s households with a broad range of financial services,
including personal banking, credit cards, mortgages, auto financing,
investment advice, small business loans and payment processing.
Customers can choose how and where they want to bank: 5,400 branches,
17,000 ATMs, mobile, online and by phone. For more information, go to Chase.com.
For more information about Chase Slate, go to ChaseSlate.com.

Beware: Cupid is checking those credit scores

by Shelton on February 25th, 2016

filed under Credit Scores

The odds of whether a relationship will work out may have less to do with love and more to do with money.

As romantic as it sounds, it may just boil down to compatible credit scores.

The higher your credit score when a committed relationship starts, the less likely you are to break up after the first few years, according to new research by the Federal Reserve Board. Well-matched credit scores also bode well for a long-lasting love.

Credit scores reveal an individuals relationship skill and level of commitment, the report concluded.

Those with the highest credit scores were most likely to form long-lasting committed relationships. And the greater the mismatch between a couples credit scores, the more likely they are to separate within the first five years, the study showed.

Love and credit scores

by Shelton on February 25th, 2016

filed under Credit Scores

Thats the number used by the credit industry that evaluates your debt payment history. Your score determines your creditworthiness when it comes to such things as applying for a mortgage or obtaining a car loan.

Three economists reviewed data from the Equifax credit reporting company, covering millions of consumers over a 15-year-period that ended in mid-2014.

Heres where it gets a little deep: In their data screening, the researchers identified committed relationships by noticing when two individuals who had not shared addresses began to do so and continued to live together at least one year. The data did not distinguish between married and non-married couples or cohabitants.

The researchers said in the report that their goal was to examine how credit scores play a role in the formation of committed relationships, such as marriages and long-term cohabitations, as well as the couples ability to maintain the relationship.

Generally, what they found was this match: People tend to form serious relationships with people whose credit scores are in the same range.

Among the details:

–For every additional 93 points or so in a couples average credit score at the beginning of a relationship, their odds of separating during the second year of their courtship dropped by 30 percent.

–On the other hand, if the gap between a couples individual scores is greater than 66 points at the start of their relationship, the couple is 24 percent more likely to split up within their second, third or fourth year.

Poorly matched couples may face challenges in jointly managing household finances, such as managing debt, paying bills or saving for a rainy day fund, the report said.

The researchers offered another link between credit scores and successful relationships — trustworthiness. In other words, the report said, credit scores matter for committed relationships because they reveal information about general trustworthiness.

Does all this sound complicated? It really isnt.

To be sure, low credit scores can lead to financial stress, and those difficulties can often spill over into the relationship and destroy it.

One other takeaway from the Fed report: Dont make money a taboo topic with your spouse or dating partner.

A 2015 survey from TD Bank of people who were either married, engaged or in relationships found that couples who regularly talk about credit card debt, spending, saving and, yes, even their credit scores are happier in their relationships than those who discuss finances less frequently. And money problems are one of the leading causes for divorce.

(Questions, comments, column ideas? Send an e-mail to srosen(AT)kcstar.com or write to him at The Kansas City Star, 1729 Grand Blvd., Kansas City, MO 64108.)