Working to restore your credit is not always an easy endeavor, especially if you have more than one account in arrears which is affecting your credit score. With an easy to use online credit score estimator, sometimes referred to as a credit score calculator, you can estimate approximately what your current score is as well as what it will be in the future.
Six Questions to Answer Using a Credit Score Estimator
There are actually six different categories which most online credit score estimators use to calculate a rough approximation of your current score. Of course you will need to know what has been reported to the credit bureaus (Equifax, Experian and/or TransUnion) along with how much money you currently owe in back debts. This will also include current debts, such as outstanding balances on credit cards. The questions usually fall into these categories:
- Negative items listed on your credit report
- Number of open and closed accounts listed on your credit report
- Total of all credit card accounts
- Sum of all current credit card balances
- Within the past 6 months, how often you have applied for credit
- The age of your oldest loan or open credit card
However, the second question usually has multiple parts. The number of open and closed accounts listed on your credit report also fall into rough categories. For example, you may be asked how many of the following accounts are listed on your report:
- Credit Cards
- Finance Accounts
- Auto Loans
- Student Loans
- Other types of loans or revolving lines of credit
Each web site you visit will have a different variation of these questions, but they will be quite similar. The purpose for this is because your FICO score is based on certain criteria and in order to estimate your score it is important to have the information handy for the calculator to evaluate and give weight to.
How to Get a Copy of Your Credit Report
There are a few ways in which to get your credit report, all of which are free but some ways will not reflect on your credit score. The first thing you should realize is that every time a creditor runs your credit history it will reflect on your credit report. If you apply for credit and are denied, you are legally entitled to a copy of your credit report for free but keep in mind that each inquiry is reflected on your report as is the fact you were denied credit. The law also states that each and every consumer in the United States is entitled to a free copy of their credit report from each of the three credit reporting agencies one time per year.
Many people contact each of the reporting agencies individually but this can be time consuming. There are, in fact, credit monitoring companies that can help you get your free credit reports while also monitoring any changes that occur. There is a fee for the credit monitoring service but the reports themselves are free. Every time a change occurs on your credit report you are notified of the change which enables you to keep tabs on whether or not there are any errors or fraudulent entries being made.
Once you have a copy of all three credit reports for free, you simply plug in the information requested on the credit score estimator and you will have a pretty close approximation of what your FICO score will be. Remember, the government entitles you to a copy of your credit report so that you can monitor what is being reported but you would need to pay for a copy of your credit score. For this reason, many people regularly take advantage of free online credit score estimators.
There are a multitude of consumer advocate groups up in arms about the way in which the three credit reporting agencies, TransUnion, Equifax and Experian are rating consumers’ ability to pay future debts. It all ties into the new laws pertaining to credit cards and the ways in which those agencies are allowed to rate your income.
According to Liz Weston writing for MSM Money, lenders are now using a new ‘secret’ way to evaluate your creditworthiness, the income estimation model. In fact, there are more than one model for estimating consumers’ incomes as all three of the credit reporting agencies use their own version. This is significant because lenders not only look at your credit history, but how you can be expected to pay further credit. In other words, they look at your income.
However, the problem with this is that the credit bureaus are not required to actually report your creditworthiness based on reported wages. They make their own models based on certain criteria such as how you have paid your bills in the past, the amount of outstanding credit and then they come up with some kind of calculation that will project how much more money you could feasibly borrow and still be able to make the payments on. In fact, you are not even required to report how much money you actually make.
Unless they can get this information from the Internal Revenue Service (you would need to give permission) they have no way of knowing what you make which is why many decisions are based on your history of making payments. Lenders figure if you have been paying your bills on time then obviously you are making enough money and if you have been paying them steadily, then you are probably creditworthy for future loans.
In addition to these unfair methods of evaluating your creditworthiness based on the amount of money the reporting agencies ‘feel’ you are making, they will not provide your actual wages to lenders unless they pay for them. Now consumers are getting what amounts to a double whammy because lenders are not apt to pay extra for the information on your actual income. Instead they will simply base their decision on what the reporting agencies tell them your creditworthiness is for future loans.
When it comes to your credit score, there are certain things which won’t actually count for or against you. While these things may matter to a lender, they are not allowed to base your score on the length of time you were on your job, how much money you make, whether you have been refused credit, how long you have lived at your current address, and whether or not you own your home.
It’s amazing how all this adds up to the fact that lenders can pretty much do what they want when it comes to approving new loans. You could have an exemplary credit history but if the reporting agencies say you are not creditworthy then you may lose the loan. You might only make $8 an hour and be in debt over your head but if you have found a way to pay your bills on time a lender might grant you a loan for $100k.
Because of all these inadequacies in the reporting and decision making processes, consumer advocate groups are calling for tighter reins on the ways in which consumers are evaluated. In the meantime, it is vitally important to monitor your credit report, get a copy of your credit score and make sure that all information is as accurate as possible. Since this is all that a lender has to go on, you want your credit report to shed the best possible light on your ability to pay a loan.
For two weeks the price of stocks has been plunging on Wall Street which is causing a great deal of anxiety among economists in the United States. There are growing concerns that we may be heading back into a recession of the enormity experienced in 2008, or worse.
Anyone who is just working their way out of the financial difficulties they experienced during that year and the year to follow will need to pay special attention to events as they continue to unfold. If you are just at the point of building up your credit score to a point where you may be ready to apply for credit, you may want to put a hold on that – at least temporarily.
What is causing so much concern is that lower stock prices indicate that many Americans’ wealth is shrinking as well. With lower confidence in the market they will be less likely to invest, less likely to spend and employers will certainly be less likely to take on new hires.
According to an article published in Yahoo! Finance, when the Dow’s average plummeted by 513 points, it is indicative of the fact that investors have growing concern over the European debt crisis and the problems we are having here at home with our own national economy.
When these types of drops in stock prices become evident, consumers will invariably spend less money which will further compound the problem. As we watch our bank accounts thinning down we are less likely to make major purchases and this fact alone places more strain on already endangered jobs. We saw this with the automobile industry at the height of the debt crisis in 2008-09.
New reports released by the government state that consumer spending was reduced for the first time in almost two years, 20 months to be exact. Retailers across the board from budget stores to high end luxury shops are seeing a drop in spending which is also an indicator that another recession just might be on the horizon. Whenever consumer spending drops significantly, it is a direct reflection of the uncertainty among consumers.
For those who have been struggling to pull themselves out of a financial hole they found themselves in within recent years, this news is all the more depressing. If it were not for the fact that we have just begun to see the light of day after our most recent depression and if it were not for the fears infiltrating the EU that Spain and Italy would soon default on debt, it might not be so bad.
However, if things continue as they are going at the moment, now is not the time to apply for any new credit if at all possible. What you may want to do is get a copy of your credit report, make sure everything is accurate, and then sit tight until you see which way the wind is blowing. If the economy rebounds then you may want to apply for credit, but if it continues to be uncertain, hold tight a bit longer.
The point is, you have already been victim of a poor credit score and are trying to rebuild it step by step. While times of economic crisis are not the best times to apply for credit, you may be forced to do so under certain conditions. If you have no other alternative than to purchase on credit, at least take the time to shop around a bit for the best loan at the lowest interest rate. In other words, if at all possible protect yourself from becoming a victim once again of a floundering national economy.
There seems to be widespread misunderstanding as to the impact that medical bills have on a consumer’s credit report but as it stands now, even those bills which were eventually paid in full do remain on the credit history for a full 7 years. This may or may not have an impact on a person’s creditworthiness since some lenders view these bills with greater or lesser weight. Even so, they are there and they do lower your credit score.
According to CNN Money, legislation which was recently proposed could erase old doctor bills from your credit report. The House Committee on Financial Services will eventually review the Medical Responsibility Act of 2011 which was proposed earlier in the year. In fact, the bipartisan Act may even come before the house as early as this fall, which is only weeks away.
One of the key benefits provided for in the Act would be the fact that medical bills would no longer be a factor in a consumer’s overall credit score. In fact, CNN’s report states that removing just one medical bill from a person’s credit report could improve his or her credit score by an amazing 50 points. This just might be enough of a boost to place that consumer in a better position to qualify for credit.
Part of the problem Americans now face is in direct relationship to the job market. Within just the past 2 years more than 57% of workers who became unemployed also lost medical insurance benefits. Now, without a job and medical insurance, they are forced to seek out emergency care or other medical services that don’t require an upfront payment. Unfortunately, without a job these consumers are also unable to pay those bills as they come in.
According to a recent study conducted by the Commonwealth Fund, 30 million adults in 2010 were contacted by credit collection agencies because they had unpaid medical bills. The study did however find that 44 million adults in America said they were actively trying to pay down those debts. In any case, once the debt is reported it will have a direct negative impact on your credit score as it now stands.
Unfortunately, there are opponents who feel that it is unwise to remove medical debt because this will portray creditworthiness when in fact that consumer is greatly in debt. While the amount of medical debt in question needs to be under $2,000, it is still an indication of that consumer’s ability and willingness to pay debts timely. This is a huge concern to the American Bankers Association.
The controversy is in the fact that some people really did fall on hard times while others had the ability to pay their medical bills and simply refrained from doing so. If enacted, this law would benefit both groups, which would be a travesty of justice, according to an ABA spokesperson. Further, all three of the major credit reporting agencies said that expunging medical debt would take away a lender’s predictive ability which is largely based on a consumer’s credit history.
It has been noted that most patients don’t leave their medical provider with the intention of not paying their bills but are sometimes either unable to do so or are unsure what is covered by their medical insurance. Some of the blame is being placed on insurance companies as their coverages and co-pays are difficult for the average consumer to understand, but in the end, the bottom line is that the responsibility still lies with the consumer.
In any case, it will be interesting to watch how this unfolds as the House debates the Act when it is brought before them this fall. Those who have unpaid medical bills on their credit reports would be well advised to follow this Act as it makes its way through the legislature.
Even the United States government isn’t immune to debt and this is a problem which is all over the news of late. Not only can the government not meet their current debt, but it also looks as if there is a possibility they will go into even greater debt all in the name of stabilizing the economy. Perhaps someone in Washington should have been looking at the government’s annual credit report!
U.S. Economy Cause for Concern in Foreign Markets
Not only are Americans worried about the state of the economy, but foreign nations are also a bit concerned. Those who are especially vigilant in watching what is going on here would be countries such as China to whom we are in debt. The growing concern is that the United States will default on its debt which has a rebound effect throughout the entire world. But what does this say to those of us who are concerned about going to college and the availability of government grants and guaranteed student loans?
Some Grants Already Cut
Although students who will soon be going back for the fall session have already been told what the amount of their Pell Grant will be, there is still concern as to whether or not that money will be available. Summer Pell Grants were already cut which led many students to fall behind in their certification programs while others will need to finish up a degree program after the fall session. More and more students are inundating the financial aid offices of their colleges and universities looking for information on whether or not they will be getting their money which is necessary to continue on in their education.
Uncertainty Grows in the Department of Education
According to CNN Money, the Department of Education is trying to work as closely as possible with the Treasury Department in order to get particulars on how the present state of the economy will affect students who rely on government aid to pay for their education. It is this growing uncertainty which should be teaching us all a lesson.
The Importance of Good Credit Standing
Consider the worst case scenario. What would happen to your college age children if the government did default on their debt and were unable to offer adequate funding to those students who rely on it to pay for tuition, books and even the cost of living? As parents we may not have adequate credit standing to take out a personal loan or even a secured home loan which is based on our credit score and credit history. As is evidenced by the current crisis in the United States government, defaulting on debts would almost certainly affect future credit.
Taking Steps Now to Avoid Future Problems
Even though there is some amount of optimism in the short term, these problems may not soon go away. Parents are advised to keep an eye on their own credit scores by requesting a free annual credit report from the three reporting agencies. Take care of debt problems now in the event that government funds will not be available in the future to help put your children through college.
By requesting your free credit report from the three reporting agencies, Experian, TransUnion and Equifax, it is possible to begin repairing bad credit before it gets any worse. Whether you have fallen behind on bills, have been the victim of identity theft or simply have erroneous marks on your report which can easily be remedied, you can’t begin to fix what you don’t know is broken! Your child’s academic future may very well depend on your credit score if the government is unable to continue offering current grants and student loans.
According to reports released by some of the leading financial analysts in the country, there are an amazing amount of inaccuracies on your credit report that can hold you back from getting what you want out of life. It is not good enough to put your credit report on the back burner until you are contemplating a major purchase or investment of some type because by then the damage could already be done!
Who Has Been Sitting in My Chair?
Your credit report is so much more important than you know because it can have a direct impact on virtually every area of your life, from getting that dream job to renting a condo on South Beach. By the time you clear up errors or fraudulent entries it could be too late. The guy next door is going to work every morning sitting at the desk which should have been yours and you are still stuck ten miles inland on the outskirts of the Everglades while some stranger is sitting on your balcony sipping frozen daiquiris. Perhaps it sounds like a modern day rendition of Goldilocks and the Three Bears, but someone could be sitting in your chair because you were busy looking the other way.
Where Should I Be Looking?
We know that identity theft is a huge issue since we are living in the digital age. You should be getting a copy of your credit report annually to make sure that it contains no inaccuracies which need to be corrected. If you find any blemishes due to charges you didn’t make, it could be a mistake but it could also be identity theft! Unless you know what is there you have no way to counteract human error or downright fraud. Some experts even advise that you check your credit report more often than once a year. According to a recent article found on the MSN Money website, you can space your three annual credit reports from the major reporting agencies, Experian, TransUnion and Equifax, evenly throughout the year. Also, you may wish to join a credit monitoring service that will alert you any time there is activity on your report.
Pay Attention to Details!
Also mentioned in the MSN Money report was the fact that we fail to pay attention to important details. While we are busy looking at what is listed on our credit report we forget to make sure that all of our personal information is accurate. Make sure your contact information is correct as well as any other personal identifying information such your Social Security number or date of birth. You would be amazed at how often these are incorrect on credit reports! This is especially important if you have been working diligently to restore your credit. If your personal identifying information is incorrect then it stands to reason that any progress you make may not be on your free annual credit report! Those clerks in the reporting agencies are not detectives so they more than likely will not hunt down the right person to add positive marks to their credit history.
The key to good credit (in addition to paying your bills on time!) is to keep a watchful eye on what your credit report is saying about you. Reporting inaccuracies are much more common than most of us are led to believe and often the ultimate cause of being denied the things we want most in life. Someone could indeed be sitting in your chair at the moment because you were too busy looking the other way.