Chess game

What is Credit?

Essentially, credit is accepting  something of value now with an agreement to pay for it later.  Moreover, there is usually a finance charge added by the lender. Consequently, moves made after establishing credit will impact your score.  In any case, a solid strategy will benefit you. 

You can find a plethora of information via the links provided.  Nevertheless, these aren’t affiliate links.  I merely, wanted to share information that is readily available to the public.  Know your rights, that’s a key component in financial literacy. Your Financial Path

Financial Literacy 101

The Fair Credit Reporting Act (FCRA) regulates your right to an accurate, error-free credit reports.  The FCRA doesn’t guarantee it’s removal, however, they give you the right to dispute misinformation. So, you can possibly increase your score by removing negative items. 

The Credit Repair Organization Act (CROA) advocates for integrity within the credit repair industry. Therefore, credit restoration agencies can’t charge you before they’ve performed their services, or make false claims/promises. The CROA is enforced by the Federal Trade Commission.

Consumer Rights

The Consumer Financial Protection Bureau (CFPB) determines how financial products and services are offered to consumers.

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Credit Report

There are three national credit reporting bureaus,  Experian, Equifax and TransUnion.  They provide a summary of your credit history, this is your credit report.  You can look at options to view your report via the itinerary link.  

closeup mage of credit report heading

Dispute

All three bureaus have an online dispute process, which is often the fastest way to fix a problem, or you can write a letter. It is our understanding that writing letters are more effective.  Additionally, if items are determined to be fraud, you can request a security freeze.

computer on desk with a credit score report print out on the desk too

How Disputes Work

The bureau must note the dispute and investigation on your credit file.  To add, this process should be completed in about 30 days.  The bureau must update you with the results.

There are a few decisions you’ll see such as, Verified: No change is made.  Modified: Revisions are in place.  Deleted: Removal of items.  Deemed frivolous: No further investigation will be made.

Look for lawsuits or judgments older than seven years after the judgment is entered, or after the statute of limitations expired, which can vary by your state.  Inquiries should automatically delete after two years, so dispute those if necessary.

computer laptop on desk

Credit Score

Essentially, your scores are used to predict credit worthiness. Your FICO®  and VantageScore are similar despite being different models… both range from 300 – 850. The FICO® is considered most accurate.   You can view your FICO® scores free via your ExperianAnother option would be your loan company or your bank.  Credit Strong offers your FICO® score free too. (Credit Strong is an affiliate link)

The FDCPA prohibits debt collection companies from using abusive, unfair, or deceptive practices to collect debts from you.

Are FICO® Scores and VantageScore® Different

Highlights:

  • FICO and VantageScore are two different companies
  • Both companies create credit scoring models
  • Their models give different levels of importance to different information in your credit reports

Did you know you don’t have only one credit score? There are many different credit scoring companies and credit scoring models, or differing methods of calculating credit scores. Credit scores are calculated based on the information in your credit reports.

Depending on which model, or even which credit bureau furnishes the information used in calculations, your credit scores may vary. Lenders and creditors may use your credit scores to help determine whether to approve your application for credit. Before approving you, they want to know: What’s the likelihood you’ll pay your bills on time? Lenders generally also have their own lending criteria, which may include other factors, such as your income.

Two of the biggest companies when it comes to credit scoring models are Fair Isaac Corporation, or FICO, and VantageScore. VantageScore is the result of a collaboration between the three nationwide credit bureaus – Equifax, Experian and TransUnion. 

Both FICO and VantageScore assign higher credit scores to consumers deemed as lower-risk borrowers, and both currently range from 300 to 850. 

FICO scores are generally calculated using five categories of information contained in your credit reports, with varying weight given to each:

  • Your payment history (35%)
  • The amounts you owe, or credit utilization (30%)
  • The length of your credit history (15%)
  • The mix of your credit accounts (10%)
  • Your new credit accounts (10%)

VantageScore is calculated with six categories of information contained in your credit reports. It doesn’t assign percentages to how much weight the categories are given, but instead describes their level of influence:

  • Your payment history (extremely influential)
  • Your credit utilization, or the percentage of your credit limits you’re using (highly influential)
  • The length of your credit history and your mix of credit accounts (highly influential)
  • The amounts you owe (moderately influential)
  • Your recent credit behavior (less influential)
  • Your available credit (less influential) 

However, there are some differences between the two to highlight:

Length of credit history – To have a FICO score, consumers must have one or more credit accounts that have been open for at least six months and has been reported to the three nationwide credit bureaus within six months. VantageScore credit scores can be calculated if consumers have one or more credit accounts that have been open for at least one month and one account reported within the past two years.

What does this mean for you? If you’re new to credit or haven’t used your credit accounts in a while, you may not have a FICO credit score, but you may have a VantageScore credit score. 

Hard inquiries – if you’re applying for a vehicle or student loan and shopping around for the best loan terms, both FICO and VantageScore count multiple hard inquiries for the same purpose on your credit reports as one inquiry for a certain period of time to minimize the inquiries’ impact on credit scores. The time period, however, generally differs. FICO uses a 45-day span, while VantageScore uses 14 days.  And while FICO only includes mortgages, vehicle loans and student loan inquiries, VantageScore will do the same for hard inquiries dealing with other types of credit, including credit cards. 

One note: All mortgage loan inquiries within about 45 days count as one inquiry, according to the Consumer Financial Protection Bureau. 

Collection accounts – If your past-due account is sent to a collection agency, it may impact your credit scores from either company. But FICO generally ignores smaller collection amounts, when the original balance is below $100. VantageScore, meanwhile, doesn’t factor in paid collections, but includes all unpaid collections regardless of amount. 

If you are applying for credit, you might consider asking which credit score the lender will use to evaluate your request. There is no one credit score used by all lenders and creditors, since there are so many credit scoring models. But knowing the differences in calculation methods can help you better understand what lenders may see when accessing your credit scores.” (equifax.com)

Footnote:

Equifax. “Are FICO® Scores and VantageScore® Different?” Equifax, Equifax, 1 Aug. 2019, www.equifax.com/personal/education/credit/score/difference-between-fico-scores-vantagescore/.

computer with credit score on screen sitting on a desk with pencil cup, plant, and phone. black woman checking her score

**Very Important**

CPN or Credit Privacy Numbers, this information is very important in the credit industry.  Financial literacy is vital. 

“If you’re struggling with poor credit scores, you know they can pose plenty of challenges. A poor credit score can keep you from getting approved for a credit card or a car loan. It can make renting an apartment difficult. So when you see an ad promising to help you start over with a new credit history by getting a CPN, it may seem like the answer to your prayers. But is it?

A CPN, or credit privacy number, is a nine-digit number that’s formatted just like a Social Security number (SSN). It may also be called a credit profile number or credit protection number. Companies that sell CPNs to consumers market them as a way to hide a bad credit history or bankruptcy. They’ll also claim you can use the CPN instead of your SSN to apply for credit with your new credit identity.

Does this seem too good to be true? That’s because it is. In fact, it’s illegal. Keep reading to discover the truth about CPNs.

Do CPNs Really Help With Bad Credit?

Companies selling CPNs market them as replacement SSNs, promoting the idea that CPNs are legitimate. For example, one site advertising CPNs claims the numbers are “fully tri-merged with the Social Security Administration.” (Sounds official, doesn’t it?)

In reality, these companies are scam artists. They may obtain SSNs by dubious means—often from children, senior citizens or prison inmates.

If you’re paying attention, you’ll spot plenty of warning signs that CPN sellers are involved in something shady. While SSNs are issued for free, companies will charge you money for a CPN—sometimes thousands of dollars. They may tell you to provide false information—such as a different address, phone number or email address—when you fill out credit applications using the CPN. Often, they’ll pretend this is a way to protect your identity—but they’re really directing you to create a false identity.

When you’re eager to repair your credit, it’s easy to ignore these red flags. But using a CPN can lead to much bigger problems than a poor credit rating. No matter how the CPN is obtained, using it on a credit application or anywhere else may be considered identity theft. In addition, lying on a credit or loan application or misrepresenting your SSN is a federal crime.

How Are CPNs Different From ITINs and Social Security Numbers?

The Internal Revenue Service (IRS) uses taxpayer identification numbers in administering tax laws. SSNs and Individual Taxpayer Identification Numbers (ITINs) are two types of taxpayer ID numbers. SSNs are issued by the Social Security Administration; they’re what most people use when filing taxes.

ITINs are issued by the IRS under special circumstances for some non-resident and resident aliens, their spouses and dependents who can’t get SSNs. An ITIN is formatted like an SSN, with nine digits and dashes; the difference is that all ITINs begin with the number nine.

CPNs are nine-digit numbers that resemble SSNs and ITINs.” (experian.com)

Footnote:

Axelton, Karen. “The Truth About CPNs, or Credit Privacy Numbers.” Experian, Experian, 13 Dec. 2019, www.experian.com/blogs/ask-experian/what-is-a-cpn-or-credit-privacy-number/.