questionscan somebody explain credit score to me?

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Call upon the mighty @magic cave she could probably answer your questions better than most

Here is one of her answers on how the score is calculated -

http://deals.woot.com/questions/comment/e197c274-0cd7-41bb-9067-265296c7672a

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In my opinion (and that's all this is), having credit is only necessary when you want to borrow money.
You might want to borrow a little bit, for a car. You might want to borrow a lot, for a house. You might want a line of credit for daily expenses, like a credit card. Your credit score tells your lenders how trustworthy you are, and how likely you are to pay them back.

A lot of things will change your credit score. While the exact formula is unknown, there are some variables that are know.
1) If you make your credit payments on time, you'll have a high score.
2) If you use a lot of of your credit monthly, compared to how much you're given, you'll have a high score.
3) The longer you have credit, the higher your score.
4) The amount of credit obtained compared to how often you search for credit.

Above, number 4 answers your question about checking credit. Whenever you apply for credit, a credit check is done. If you have a lot of credit checks compared to credit obtained, (cont)

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cont.... it can lower your score.

It doesn't hurt to check your score every once in a while. I'm not sure, but I think credit searches only stick around for a couple years. It may be a much shorter time.

Hope this helps.

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It is an assessment of what kind of lending risk you will be. If you are a higher risk (don't pay on time, already have high debt) they will charge you more interest for loans.

A large number of credit checks in a quarter suggest you have attempted to open a lot of loans or credit cards. That is why it is considered a negative.

Basically never miss payments and keep your revolving (credit card debt) low and you will have good credit.

Strangly if you have never had debt in your name you will also have a low score. That is why it is suggested to open a cc at 18, even if you never use it anywhere.

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Checking your credit score can make your score go down, but only by a few beacon points -- When you check your own score, you're only doing a soft pull so it doesn't have an impact in the same way as if you apply for a loan or credit.

When I did collections years ago, I was sometimes asked if the late payment had impacted their credit. I would explain like this: You get marks for paying on time and you get marks for paying late. You missed a payment and at this point it hasn't impacted your credit report. It won't impact your credit as long as you make the late payment before it hits a 30-day-late mark.

Having good credit doesn't only affect your ability to get a loan. It can also affect your ability to get a job. A lot of employers (banks mostly) will check credit of new hires. I'm not sure of the legalities of this, but I would imagine the better your credit, the more responsible you appear to be.

(cont...)

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(cont...)

If someone never pays a bill late, they're more likely to be at work to make sure they get the money they need to continue to pay those bills.

A few tips for you:

Your best bet for good credit is to always pay more than is due. For example, you have $10 due. Paying even just $11 as opposed to $10 will show that you paid more than was owed, increasing your score a little more than it would if you'd only paid the minimum.

Also, be sure not to carry revolving, unsecured loans for long period of times. Carrying that credit card balance of a couple grand for a few years impacts more than your interest rate. It can drag your available credit down and increase your interest rates in the future.

Never close a credit card while you have a balance.

Having a credit card with a $0 balance looks good, but having a stagnant credit card with a $0 balance doesn't. If you're not going to use the card on a regular basis (more than 5-6 times a year), then you should close the account.

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Credit also impacts car insurance. Each company is different. Based on what I've heard (again, what I've heard) some it's up to 50%.

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It does impact your car and homeowner's insurance. Better credit, cheaper premiums. Most employers will check your credit, if you're a new hire, as part of your background check.

This is good reference material --> [http://apps.suzeorman.com/igsbase/igstemplate.cfm?SRC=MD012&SRCN=aoedetails&GnavID=84&SnavID=20&TnavID=&AreasofExpertiseID=20](Link to Suze Orman - Get Your FICO Score)

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credit scores go up when you keep lines of revolving credit open for a long time, and when you use credit cards / loans; particularly when you accrue interest. they were created to help credit companies, not you. just monitor your reports and score using these free sites and don't worry about the # as much as people who want your $$ attempt to get you to: annualcreditreport.com + creditkarma.com

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I was pretty sure it was magic number made up by wizards and elves that is used to control your financial life, and if you want to change it you must journey to the Mountains of Doom and battle them to the death.

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For the record, Freecreditreport.com is garbage. I don't know if they still have ads all over the teevee these days, but if you're looking to check your score, go to the websites pinchecat gave.

I think there's a lot of legal pushback against employers checking your credit right now, but it is still a reality. It doesn't help that it's much more difficult to get a credit card at 18 then it used to be. I know college aged kids who want to build credit, but have only limited and awful options. Better than extending thousands of dollars of credit to the least responsible people on earth, but it's still far from ideal considering the negative effects of having bad or no credit.

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As always, there's an amazing amount of good information around here.

annualcreditreport.com is the "official" site set up by the three major credit reporting companies in response to governmental requirements that people must be able to obtain their credit reports (but NOT their credit scores) for free once a year. The scores were deemed to be proprietary information and therefore excluded from the mandatory "free access" rules.

That said, creditkarma.com (connected to TransUnion) and quizzle.com (provided by Experian) will each provide you with scores for free as often as you wish, as long as you don't mind also getting occasional email from them. Since they're the two smaller credit reporting bureaus, I use them for freebie info and once a year or so I actually pay Equifax about $16 for their full score-included report

[continued]

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[continued]

Your credit score is more important today than it was 10 years ago. It often plays a role in your search for a rental apartment, car insurance, and employment opportunities. I generally advise everyone to make the effort to build and maintain a good credit rating, even if they think they don't really need to worry about it, since unexpected situations can arise in which it could quickly become important. I often talk to people (especially elderly retired folks) who prefer to pay cash for everything but discover that's problematical when they want to buy a new car or an emergency arises. I often suggest obtaining a low-limit credit card and using it just for gas purchases; write a check to the credit card company each time you fill the tank, and when the bill arrives just send the little bundle of checks in as payment. Result: no credit-card balance and a growing good-payment history.

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@theoneill555: "Call upon the mighty @magic cave she could probably answer your questions better than most"

I'm both laughing and blushing!

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One last piece of arcane info that amuses me: the rightfully maligned freecreditreport.com site is powered/owned by Experian, which also powers/owns the quizzle.com site I recommend above. Different products and marketing styles for different customer bases, I guess.

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Thanks everybody, especially @magiccave @stark @capguncowboy @craigster38 and others who helped as well. Also, thanks to @gideonfrost for keeping this thread light and fluffy. I think I understand it now...for the most part. I'm still a little confused about checking my credit score. I understand it drops if I check it all the time, especially if it's being checked by an institution for a loan or something like that, but if I just check it so that I know what it is, will that impact it as well? For those of you who pay attention to your credit score, how often would you recommend checking it? I use Mint to keep track of stuff, and every 6 months or so it says that my credit score is out of date and that I should update it by checking it and resubmitting it. Is this ok to do or will it negatively impact my score?

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@oo7slice: Every six months isn't going to hurt it.
I personally like to do a yearly credit check at the beginning of each year, but that's just me.
Best of luck!

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There's some misinfo and missing info here.

First, checking your credit report annually and getting the agencies' scores does not impact your credit score at all. It's a good idea to check your credit report regularly to make sure the creditors on there are accurate, accounts that are supposed to be closed are closed, etc.

Now, applying for credit like a loan or credit card dings it a couple points. This is a hard hit/pull/inquiry.

Second, institutions that you already have credit with area allowed to get regular updates. This will not impact your credit score. This is a soft hard hit/inquiry.

cont.

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cont.

Third, no one has really mentioned the different types of credit scores which is very very important. The three credit agencies - Experian, TransUnion, and Equifax all generate their own credit scores ranging from the low of 200-300s to the highs of mid 800s, depending on the agency. This is nice and all but the lenders don't care about those numbers because they use the FICO score.

There is a new VantageScore that the three jointly created that ranges from 501 to 990. I'm not sure who or what uses these because most of the world uses FICO scores.

FICO is for Fair Isaac Corp which pioneered the credit score and has different models for different industries, i.e. one model for car loans, one for home loans, one for boat, one for commercial, etc. It's easy to get the credit agencies' scores but you generally won't get the FICO score until you apply for a loan and if they lender will let you have it.
cont.

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Your FICO score is made up of:
- 35% payment history (don't miss payments!)
- 30% credit utilization (lower the better)
- 15% length of credit history (longer the better)
- 10% types of credit used like installment, revolving, mortgage (more diverse the better)
- 10% recent hard pulls (fewer the better)

Hope this helps.

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@oo7slice: Your credit score won't drop if you check it. It only drops if several merchants or lenders check it. It's weird: if you're car-shopping and go to five different dealers looking for the best bargain, and if they all run your credit, your score will probably drop a few points the following month. Harumph. Deal hunting is what you should be doing, after all. Solution: unless you're ready to buy a car right then, don't ever give a dealership enough information to pull your credit, and if you think they're angling to do so, tell them clearly they do NOT have your permission to do so. (My son the Demon Shopper told one overly eager salesman if they ran his credit he'd cross them off his list of options.)

You can space out the free reports by requesting one from a different bureau every three months, and then on your next quarterly request, pay for one with scoring from Equifax. Updates every three months, score once a year, total cost under $20.

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@first2summit: Just a small clarification. At least to some extent, I think you're over-generalizing when you state that lenders don't rely on scores from credit bureaus but instead use a FICO scoring.

I know at least one large credit union that uses Equifax in their consumer-lending decisions, and I suspect there are others as well.

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@magic cave: Yes, I will admit to the generalization or the SAT mistake of writing "all."

I also want to throw out a credit and identity theft protection suggestion. Instead of a credit monitoring service, you can do what's called a "credit freeze" on your accounts. Basically, it stops anyone from doing a credit check. It's $10 to set up one with each of the agencies though free if you've been a victim of identity theft. If they can't pull your credit, then they can't take out a loan or credit card in your name. You can "unfreeze" your credit reports if you're applying for a loan. The agencies will allow you to specify the unfreeze period from 1 to 30 days or remove the freeze altogether.

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@first2summit: The "freeze" suggestion is a good one -- thanks for adding it to the heap of good info this question generated!