<p><div class="image-container float_right"><div class="image"><img src="http://static5.businessinsider.com/image/5227b1dc6bb3f7bb7b316148-373-280/experian.jpg?maxX=480" border="0" alt="Experian" width="480" /><p class="source"><keyword id="6379677" type="COMPANY" weightage="60" keywordseo="Experian">Experian</keyword> / Facebook</p></div></div><span style="line-height: 1.5em;">Forget for a minute how complicated <keyword id="6354680" type="ORGANIZATION" weightage="60" keywordseo="credit">credit</keyword> scores themselves are. People are sometimes lucky if they even know where to find them.</span></p>
<p>The thing is, your <keyword id="6380214" type="UNKNOWN" weightage="60" keywordseo="credit-score">credit score</keyword> is not part of your traditional credit report. For some reason, the geniuses of credit reporting decided it'd be a good idea to offer the physical report for free once a year and dangle the actual score itself in front of us like a juicy carrot. </p>
<p>If you want to find out your actual credit <em>score</em> you usually have to pay and endure a barrage of ads for all sorts of different credit monitoring products in the meantime. </p>
<p>That all changed this year when two budgeting tools decided to change the game, offering credit scores to consumers for free. They are <a href="http://www.creditsesame.com/free-credit-score/" target="_blank">Credit Sesame</a> and <a href="https://www.creditkarma.com/" target="_blank">Credit Karma</a> and they are both an excellent way to track your progress. </p>
<p><span style="line-height: 1.5em;">The biggest difference between the scores offered by these two sites is which credit reporting agency data they are based on. Credit Sesame.com offers up the <a href="http://www.experian.com/consumer-information/national-risk-model.html" target="_blank">Experian National </a></span><span style="line-height: 1.5em;"><a href="http://www.experian.com/consumer-information/national-risk-model.html" target="_blank">Risk Score</a>, which is based on data collected by Experian only. </span><span style="line-height: 1.5em;">CreditKarma offers two scores - your </span><a href="https://www.creditkarma.com/article/vantageScore" target="_blank">VantageScore</a><span style="line-height: 1.5em;"> credit score and your </span><a href="https://www.creditkarma.com/question/what-is-difference-between-transrisk-score-and-fico" target="_blank">TransRisk credit score</a><span style="line-height: 1.5em;">, which are both based on <keyword id="260902" type="COMPANY" weightage="60" keywordseo="TransUnion">TransUnion</keyword> data. </span></p>
<p><span></span><strong>What that means for you: </strong>Not much, says John Ulzheimer of <a href="https://www.smartcredit.com/" target="_blank">SmartCredit.com</a>:<span style="line-height: 1.5em;"> </span><span style="line-height: 1.5em;">"</span><span style="line-height: 1.5em;">Your scores should be similar regardless of where you get them as long </span><span style="line-height: 1.5em;">as your credit data is similar. And, those scores are going to be </span><span style="line-height: 1.5em;">directionally similar to your FICO score. So, if you have great credit </span><span style="line-height: 1.5em;">you'll have a great score regardless of what model is being used.  If </span><span style="line-height: 1.5em;">you have poor credit you'll have a poor score regardless of what model </span><span style="line-height: 1.5em;">is being used." </span></p>
<p><strong><span style="line-height: 1.5em;">The bottom line: </span></strong><span style="line-height: 1.5em;">Whether you pay for your credit score or not, don't get too caught up in the number itself. Since there are so many kinds of scores out there and lenders pick and choose which ones to judge you by, it's nearly impossible to keep track of them all. Instead, look at which risk category you find yourself in (example: low risk, high risk, excellent, etc.). Like Ulzheimer says, if you have excellent credit with one scoring model, chances are you'll score well across the board. On a related note, that's another reason to check your credit report often at each credit reporting agency once a year - if there are any errors on your report, they could affect your overall score. </span></p>

Here's What You Should Know About Free Credit Scores

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/54171526eab8ea8e340c3930-1024-512/old-carissa-shipwreck-1.jpg" border="0" alt="old carissa shipwreck"><p class="source"><span><a href="https://www.flickr.com/photos/misserion/2275742553">Flickr / Erin</a></span></p><p class="caption">Is the new bill destined for a wreck?</p></img></div><p></p></div></div>Maxine Waters (D-CA) has introduced a bill in the House called the Fair Credit Reporting Improvement Act of 2014.</p>
<p>The bill proposes sweeping changes to almost all aspects of the credit reporting and credit scoring environments. It contains two or three provisions that would reasonably improve the credit reporting environment, but it also contains many more that would radically alter credit report data and <a href="http://www.businessinsider.com/americans-clueless-about-credit-scores-2014-8" target="_blank">credit score</a> capabilities.</p>
<p>The bill is sure to get considerable opposition, and rightfully so. Here's why …</p>
<h3>Unreasonable data retention limitations</h3>
<p>Today, bankruptcies can be maintained for 10 years and all other derogatory credit entries (collections, judgments, late payments, defaults) can be maintained for seven years.</p>
<p>The act would require that bankruptcies be removed from a consumer's credit report in seven years, and all other derogatory entries be removed after four years. The reason Ms. Waters gives for the reduction in credit reporting time frames: "Sweden limits the reporting period to three years and Germany limits the period to four years."</p>
<p>The most unreasonable aspect of the Waters' bill is a requirement for the credit reporting agencies to delete <em>any</em> adverse item within 45 days of it being paid or settled. That means if you settled your defaulted credit card debt or disposed of your home via a short sale, the item would be removed 45 days after the item was updated to show a zero balance, as if it never existed.</p>
<p>This would act as an incentive for some people to game the system by taking out large amounts of debt, defaulting, and then settling the debt knowing their <a href="http://www.businessinsider.com/heres-how-long-a-credit-misstep-stays-on-your-record-2014-8" target="_blank">credit reports</a> would be clean in less than seven weeks.</p>
<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/54120151ecad044d1706c6a5-1200-600/maxine-waters-3.jpg" border="0" alt="maxine waters"><p class="source"><span>Alex Wong / Getty Images</span></p><p class="caption">Rep. Maxine Waters (D-CA) has proposed the Fair Credit Reporting Improvement Act of 2014.</p></img></div><p></p></div></div></p>
<h3>Unreasonable dispute investigation procedures</h3>
<p>Today, if you challenge information with the credit reporting agencies, they are required to perform a reasonable investigation, which almost always includes them going back to the lender or collector and asking them to confirm that what they're reporting is accurate. This process is widely criticized by advocates as not being an actual investigation.</p>
<p>The Waters bill would require the credit bureaus to perform an investigation independent of contacting the furnishing party, which makes no sense at all.</p>
<p>How in the world would Equifax know the actual correct balance on your Chase credit card? How would Experian know if your Wells Fargo <a href="http://www.businessinsider.com/why-paying-off-a-mortgage-early-isnt-always-the-right-move-2014-6" target="_blank">mortgage</a> was or wasn't paid late? How would TransUnion know if you've never actually applied for an account with Verizon wireless? Of course the answer to all of these questions is, "they wouldn't."</p>
<p>Most of the incorrect information on credit reports isn't caused by the credit reporting agencies but is, instead, incorrectly reported by the banks and/or collectors. It's imperative that the credit bureaus be allowed to continue to go to those companies and ask them to check their records and documents to determine if what is on your credit report is accurate.</p>
<h3>Unreasonable changes to credit scoring models</h3>
<p>If the Waters bill were passed, then credit scoring models would not be able to consider any derogatory credit entry that was subject to a "Federal credit restoration program."</p>
<p>This one is especially confusing, because there is no such thing as a federal credit restoration program, which the bill defines as any federal program that assists a consumer to rehabilitate their credit. Are the feds really considering getting into the credit repair business?</p>
<p>Further, credit scoring systems would have to treat all auto, mortgage, and <a href="http://www.businessinsider.com/senator-elizabeth-warren-on-student-loans-were-facing-a-crisis-2014-9" target="_blank">student loan</a> credit inquiries that occur within 120 days of each other as a single inquiry in the consumer's score. No credit scoring model that is or was commercially available in the history of credit scoring has ever treated inquiries in such a way.</p>
<p>If this became the new standard, then it would render all 60+ FICO scores and all three VantageScore credit scores illegal to use, because they don't treat inquiries like that.</p>

The Newest Credit Reporting Act Doesn't Have A Chance

<p><div class="KonaFilter image-container float_right"><div class="image"><img src="https://static-ssl.businessinsider.com/image/53726f56ecad04e13a120ff1-663-497/young-man-walking-1.jpg?maxX=480" border="0" alt="young man walking" width="480" /><p class="source"><span><a href="https://www.flickr.com/photos/kamshots/307827728">Flickr / Kamyar Adl</a></span></p></div><p></p></div>Once you're out of school, it's pretty unusual to be asked about your SAT score. People will, however, ask you about your credit score.</p>
<p>Your credit score is a number that directly impacts major financial decisions, but for something so important, many of us don't really know much about it.</p>
<p>Below, we've spelled out the six basic things you need to know about credit - not to be an expert or to lecture your friends, but simply to function as a financially responsible adult.</p>
<h3>1. What it looks like</h3>
<p>Your credit score is a three-digit number between 301 and 850, and the higher, the better. Generally, you don't want your credit score to dip below 650, and you never want it below 600. Over 700 is largely considered a good score, and over 750 is considered excellent.</p>
<h3>2. What it's used for (and why you should care)</h3>
<p>Your credit score exists to help give lenders an idea of your trustworthiness.</p>
<p>The obvious loans are for your home and car, but someone expecting large-scale payments - anything from getting an apartment to opening a credit card - can run a credit check, explains Eric Adamowsky, cofounder of <a href="https://www.creditcardinsider.com/" target="_blank">CreditCardInsider.com</a>. "They use the number, in part, to determine whether you get a loan, and if so, how much interest you'll pay. Even a 2% difference in your mortgage's interest rate will be substantial over 30 years. That's <a href="http://www.businessinsider.com/credit-score-affects-the-cost-of-a-home-2013-8" target="_blank">thousands of dollars</a>."</p>
<h3>3. Who creates it</h3>
<p>There are three companies called credit bureaus that gather information about your credit activity and calculate your score. These companies are Experian, Equifax, and Transunion. Your creditors (for instance, your credit card company or mortgage lender) report your credit activity to them, and they then use a formula to calculate your score. </p>
<p>Each company will come up with a slightly different number for a few reasons: Some of your creditors might neglect to report activity to one of the bureaus, there might be an error in one of the company's files (if so, you can correct it), and each company will calculate your score each time it's requested, so it will vary along with your most recent activity.</p>
<h3>4. What FICO has to do with it</h3>
<p>Bureaus don't create the formulas used for the calculations. The most widely used formula comes from the <a href="http://www.myfico.com/crediteducation/whatsinyourscore.aspx" target="_blank">Fair Isaac Corporation</a>, known as FICO.</p>
<p><span>As CreditKarma CEO Ken Lin </span><a href="http://www.businessinsider.com/essential-credit-score-question-answered-2013-6" target="_blank">explained on Reddit</a>: "Each consumer has dozens of credit scores. You will never be able to see them all since many are not sold to consumers. This is further exacerbated by the fact that there are three bureaus, which means that each score has three variants. It is up to the bank to decide which credit score they want to use based on the price and how well the score predicts risk."</p>
<p>Since the FICO model is used most often, "FICO score" and "credit score" usually mean the same thing. "Most major lenders are using FICO, <a href="http://www.vantagescore.com/" target="_blank">VantageScore</a>, or a combination of scores," explains Adamowsky. "Since the methodology behind the scores is different, having multiple scores could give lenders a better picture of someone's credit risk."</p>
<h3>5. What it's based on</h3>
<p>The companies that create the calculations used to determine your score don't release the exact details to the public and are constantly tweaking them to best reflect a person's creditworthiness. "It's a bit of a black box in terms of what goes into your score," reflects Adamowsky. "Typically the breakdown isn't disclosed."</p>
<p>However, they're transparent about the factors that affect your score, and the general weight each factor has, if not the minute details of how.</p>
<p>For instance, <a href="http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx" target="_blank">FICO shares</a> this breakdown on their site:</p>
<p class="center"><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/53726a496da811a8102a127d-414-185/fico-score-breakdown.png" border="0" alt="fico score breakdown" /><p class="source"><span><a href="http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx">myFICO.com</a></span></p></div><p></p></div></div></p>
<p>"Payment history is probably the biggest factor in terms of calculating your score," says Adamowsky. "Any negative marks against your account, like a 30, 60, or 90-day delinquency, is certainly going to impact your score more than any other factors." (You can read more about that in our roundup of <a href="http://www.businessinsider.com/9-ways-to-destroy-your-credit-score-2014-4" target="_blank">ways to destroy your credit score</a>.)</p>
<p>The next most important, he says, is your <a href="http://www.businessinsider.com/having-one-credit-card-is-a-terrible-idea-2014-4" target="_blank">credit utilization</a>: how much of your available credit you're using. The less, the better.</p>
<h3>6. How to find yours</h3>
<p>Services like CreditKarma, CreditSesame, and Credit.com will give you your score for free. Note that since bureaus don't provide their exact formulas and since your score is constantly changing, what you see at these sites might not be the exact number a lender will see when you go for a loan next month - but experts agree that these estimates are accurate enough to get a solid idea of your score.</p>
<p>Note that AnnualCreditReport.com, the site that provides your free credit report from each of the bureaus once a year, is not the best place to consult. While your <em>report</em> is free, it charges you for the score. </p>

You Searched For "VantageScore" and got 3 results

Here's What You Should Know About Free Credit Scores

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