The consumer watch dog, the Consumer Financial Protection Bureau (CFPB) recently released a study regarding how consumer data is managed. The paper was titled “Key Dimensions and Processes in the U.S. Credit Reporting system: A review of how nation’s largest credit bureaus manage consumer data”. The report shared how negative information impacts the FICO score and Vantage Score.
You are probably most familiar with the FICO score which was developed by FICO and is used by a majority of the credit card companies, auto and mortgage lenders. The FICO score ranges from 300 to 850. VantageScore scores were developed by the three major credit reporting agencies (CRAs) Equifax, Experian and TransUnion and is not widely used. The score ranges from 501 to 990. For both scores, a high score means that the individual is low risk. Your goal is to have the highest score. Highlights include:
The higher your score is, the more the negative information impacts it. For example, a foreclosure for someone with a 780 FICO score drops by 140 to 160 points; compared to a 95 to 115 point drop for someone with a 680 FICO score. The drop is even more dramatic for someone with a bankruptcy. Note that even being currently 30 days delinquent on a bank card can reduce your score an average of 100 points with a 780 FICO score and 70 points with a 680 FICO score.
You can see why it is important to pay your bills on time. This has a major impact on your credit score. Your credit score determines the interest rate you pay for credit cards. auto loans and mortgages.
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.