Credit Scores – Myths & Truths

The following questions and answers are a result of a Bankrate.com session on FICO® Scores. I have summarized the information posted by Rachel Bell.

1. Does the credit report include the FICO® Score?

The credit report does not contain any scores. The credit report contains your credit history gathered by the credit bureaus. It basically shows your history or use and repayment of credit. It also shows your pursuit of credit.

Your credit report should be checked for accuracy. You can obtain a free credit report once a year from http://www.annualcreditreport.com/. A credit score helps lenders understand the information contained in your credit report.

2. Will your FICO® Score be affected by applying for a line of credit or extending a line of credit?

The credit inquiry may show up on your credit report. This may affect your credit score depending on the type of credit and if you have made similar requests over the past year.

The FICO® Score will not be affected by shopping around for the best mortgage, auto or student loan within 30 days prior to scoring. Your credit score is not affected by seeing a credit counselor.

3. Are all credit scores FICO® Scores?

90 of the top 100 U.S. lenders use FICO® Scores. Other credit scores may be misleading and may not be accepted by these lenders. FICO® Scores can be purchased at www.myFICO.com.

Remember FICO® Scores are used by lenders to make their credit decisions. Other credit scores that are NOT labeled “FICO® Score” are prepared using different methodology and may be misleading.

4. Is your credit score used by lenders to give credit?

Credit scores are a quick way for lenders to understand your credit history. Each lender will approach a credit inquiry differently and many will consider other information to help them make an informed decision.

Establishing a high FICO® Score is a result of paying your bills on time, keeping your credit card balances low, and applying for credit only when necessary.

I have been told by mortgage lenders that the FICO® Score in many instances is different from other types of credit scores. You may think you have a 730 credit score but your FICO® Score may be substantially different. What I do know – the higher the FICO® Score, the better chance of obtaining credit at more favorable interest rates.