FICO Myths

Common misleading things about FICO to know

To calculate a FICO score your report must contain at least one account which has been open for six months or greater. Also the report must contain at least one account that has seen some activity in the last six months. This provides enough recent information for the score calculation. - That is generally correct but when applying for the mortgage or other large loan, this won't be enough. More than often, banks want to see at least 3 recently active lines of credit in the last 12 months. Even requiring 4 lines is not rare these days. If you don't have those you have to go with alternative credit which is getting a bit difficult to obtain these days. Or someone will have to cosign. See the mortal danger of cosigning.

FICO score greatly affects interest rate of your loan. That is generally correct statement only if you are at 679 and under. For the scores of 680 and up you should not be affected  by more that .125% or even that. What it really affects in this case is a small chunk of your broker commissions. However, once you are below 680, your rate may jump in a hurry. A lot depends on other factors that affect credit rating.

FICO algorithm is different between bureaus. This is not correct. Each of the three credit bureaus uses the same FICO algorithm to provide credit scores. Although the scoring model is the same for each, the actual score is based on the credit data available in the consumer’s file, and may vary from bureau to bureau. A credit score may also vary, depending on the score model requested (Bankruptcy, Auto specific, etc).

The bureaus each market their credit scores under a different name. They used to be as follows:

Experian - FICO or FICO II
Equifax - BEACON
TransUnion - EMPIRICA

FICO Corporation continues improving and upgrading its FICO scoring model in order to provide the best credit evaluation possible. As of 2004, the next generation credit scoring model NextGen is being used by the bureaus. It adds the latest FICO innovations to credit risk analysis. And again, each bureau has its own market name for the new NexGen score:

Experian - FICO Advanced Risk Score
Equifax - Pinnacle
TransUnion - Precision

Start fixing your FICO score now -  How can I improve my credit score

¢ Home

¢ Site Map

@ 2003  InfoWeb Inc - All Rights Reserved

Bad-Credit-Advisor.com