Tracy Becker Credit Expert and Author

What you should know about credit and scores.

Start the New Year off right. Here are some general tips to help you understand credit and scores a bit more. Feel free to share these tips!

- Credit scores are formulated based on what appears on credit bureaus in the moment credit is pulled by the bank. Making sure credit is updated prior to the bank evaluating your credit report and scores can help the mortgage application process.

- Balances on revolving credit accounts (credit cards, overdraft on checking, and some lines of credit) weigh heavily on scores as they increase and get closer to aggregate limits. Keeping balances at 7-10% of limits can help scores. Once consumers pay balances down they should be kept low for at least two months prior to loan application to insure credit stays updated and reflects the lowered balance to limit ratios on this debt. Creditors and credit bureaus don’t usually update changes immediately.

- When ordering credit scores online consumers must be sure they are ordering similar scores used by banks to evaluate risk. These scores can be purchased at www.myfico.com. Other scores can have very different ranges and cause consumers to believe their credit is higher than the Fico score reflects.

- Consumers should buy the Equifax and Trans Union standard Fico scores. If both of these scores are over a 740 it is considered excellent credit.

- Since opening and closing credit can hurt scores please do not take this action

Get more information on our website and connect with us on all social media at www.northshoreadvisory.com.

Understanding the Vast Business of Scoring

Scoring thresholds for approvals and better rate offers on loans have become higher while lenders of all kinds depend on scores to evaluate and curb risk making it essential for all of us to understand who creates these scores, where they are offered, and what the variations are.

It is always important to note that there are many scores and each may have a different range. For example, if you pull a Fico score the range is 300-850 and anything above a 740 is excellent. If you pull a Vantage score the range is 501-990 and it has letter grades A-F. If your Vantage Score is a 740 it does not mean you have excellent credit.

Most consumers think all scores come from the bureaus which is also false. Fico created the first scores for lenders to evaluate risk. When banks found themselves getting sued for discrimination due to underwriters (bank employees) being the sole authority for rejecting applicants, the demand for a score to use as an indicator of risk became prevalent. This was a way for the focus to come off the banks when consumers were rejected. Fico is and always has been a separate company from Experian, Trans Union, and Equifax. The Fico scores used by lenders are scores created by Fico for the purpose of each bureau to sell to lenders. The bureaus use their Fico version score formula for lenders to evaluate the information the bureau compiled on a specific consumer in the form of a number. The lenders pay a fee to the bureau for this service. Equifax and the other bureaus pay Fico a royalty when using the Fico formula created for them. Equifax, Experian, and Trans Union did not create any Fico scores.

There are many models of the Fico Scores made specifically for Experian, Trans Union, and Equifax and each bureau has separate names for their versions:

Equifax has Beacon 09, 05, & 96 or you might see these same versions displayed on the report as Beacon 5.0 and 9.0 as well. There is also Pinnacle 1.0 & 2.0 which is Equifax Fico next generation.

Trans Union Fico scores are called Fico Risk Score Classic 08, 98, or 04. There is also Fico risk score Next Gen. The old name of the Trans Union Fico score was Empirica.

Experian has the Fico Risk Model 08, V2, V3 and Fico Advanced Risk Score 1.0 & 2.0. Experian use to call its score Fair Isaac Risk Score.

Although some of these scores are outdated they may still be used by banks. You can find the name of the model used to the left, right, or above of the score itself on a merged credit report.

Besides Fico scores, there are hundreds of other scores created by each bureau and sold for many purposes to lenders, insurance companies, credit card companies, landlords, finance companies, telecommunication companies, and much more. There are scores that decipher which consumers might be more likely to default on a mortgage already extended, scores that give insight into which consumers should be offered lower interest plus higher limit credit cards. Some scores even predict those who are more likely to go into strategic default on a mortgage loan. There are even global scores used by large corporations doing business internationally.

Just to give you a glimpse into varied scores here is a list of just a small portion of scores that one of the bureaus offers for sale:

In the Market Models
Income Insight
TAPS
National Risk Model-National Equivalency Score
Decision Insight
Credit Migration Solutions
Collect Score
Auto Risk Model
Bankruptcy Watch
Retail Risk Score

These are 10 of 100’s of scores offered by bureaus to corporations as a tool to help identify consumers and existing customers that will bring more profits as well as those that will deliver potential loss.

When we think of credit scores we think of consumer scores used to evaluate risk for mortgages and those that we as consumers buy online. But understanding the vast business of scoring can help us with the big picture. Since we are all being evaluated and watched through these algorithms it helps to get a clearer view of how they work within the corporations that use them.

Find out more information on my website www.northshoreadvisory.com.

ABC’s of ID Theft

Recently a client came to us with questions about ID theft and a very unusual situation that he experienced. Since most people would not expect this to occur I thought it is a great example to share. This was his question to us:

About six months ago I wound up having to stay in a hospital for minor surgery. Everything went well and there were no issues with my physical health, however, my credit health took a dip. I recently learned the hospital had an employee that stole and sold patients personal information including, social security numbers, addresses, etc. Last week, I found out that someone had opened three cell phone accounts in my name and took out insurance on the phones as well. What should I do to protect myself?

Identity theft is one of the most popular crimes that consumers fall victim to. The first step is to contact the cell phone company and make sure they know this is fraud. Ask them to guide you through the steps to be taken. They will also give you a fraud package or form which you will fill out and send back to them. Make sure to keep a copy in a file for yourself, jot down the names and ID numbers of all you speak to (noting what was said), and get something in writing from the creditor confirming acknowledgment of the fraud. You must also make a police
report and keep a copy with your records.

You should also order your credit reports from www.annualcreditreport.com. You are entitled to a free copy annually from each of the three major credit bureaus: Experian, Trans Union, and Equifax. By ordering these reports you will not hurt your credit score at all. When you receive the reports look through them carefully taking note of any accounts you do not recognize. At the end of the reports there will usually be a section showing “inquiries viewed by others” and “inquiries viewed by you”. The first type is the one of concern. It is a list of creditors who have pulled your credit and may have approved the opening of accounts in your name. If you see any accounts or inquiries that you do not recognize call the creditor for further investigation. It is also a good idea to call all your creditors and alert them as to what has occurred. This allows them to watch for suspicious activity and protects you from liability if the thieves have more information than you realize. There is no need to close accounts if there has not been theft activity.

You must place a Fraud Alert on your credit. Fraud Alerts are a way to let creditors know precaution must be taken before allowing the opening of credit in your name. A note will be listed on your credit profile alerting all creditors to contact you directly before approving credit. Once you place a fraud alert with one credit bureau the others will be notified automatically.

In many cases when a creditor or hospital has a breach of security like this they offer a free credit monitoring product to consumers at risk. This allows them to watch their credit daily. Most of these monitoring products offer access to fraud alert protection as well. Take the monitoring product if offered and it will guide you through listing a fraud alert on your credit. If a monitoring product is not offered you can go to any of the 3 bureaus listed below and fill out a fraud alert form directly. There are two types of fraud alerts: 90 day and 7 year extended. It is best to take the extended one for extra protection if you can. All of the bureaus offer credit monitoring products for purchase as well. If you did not get a free credit monitoring offer it is a good idea to buy your own monitoring product. This will give you continued security and credit management in case other items pop up that have not yet been reported. If you live in NY and ID theft insurance is offered with these products make sure to read the fine print since most exclude NY residence from coverage.


1. Experian: 1-888-525-6285, www.experian.com to add an alert and view your report immediately.

2. Equifax: 1-800-525-6285, www.equifax.com

3. TransUnion: 1-800-680-7289, www.transunion.com

For more information and details about ID theft and protection visit: http://www.ftc.gov/bcp/edu/microsites/idtheft/.

Also filing a complaint with the FTC may help to catch criminals nationwide: https://www.ftccomplaintassistant.gov/.

Credit Question

Q: I ordered all three of my credit reports from Experian, Trans Union, and Equifax and I paid to buy my scores as well. Please tell me why two of the three scores might be so different from the third? Experian was a 740, Trans Union a 620, and Equifax was a 625?

A: Without seeing your credit report, it is hard for me to say exactly what is causing this large difference in scores, but I can make a very good guess. Collection agencies represent lenders, creditors, and service providers that have not been paid, and are hired to collect bad debts that consumers owe to the original creditor. Sometimes, these smaller agencies try to save costs by reporting to only two of the three credit bureaus. By reporting to even a few bureaus, they are able to damage a consumer’s credit enough, while saving money. As a consumer, as long as your middle score is low, it will affect your ability to get financing and credit approvals. Your best bet is to send me a copy of your credit report tracy@northshoreadvisory.com so I can give you a definitive answer.

If anyone has any credit questions leave me a message or send me an email at ask@northshoreadvisory.com.

Credit Question

Q: What is the right credit score to order before buying real estate?

A: Most mortgage banks use a Fico score. This score can be purchased at myfico. Consumers can buy their Trans Union and Equifax Fico scores but cannot buy an Experian Fico score. Experian does not allow myfico to use the information updated on their bureau reports in the sale of scores to consumers. If both the Trans Union and Equifax Fico scores are above a 740 the consumer should be able to enjoy the best rates based on the credit score qualification of loan approval. Pulling your own credit reports at myfico will not hurt your credit scores.

If you have a credit or real estate question you can visit the ask.elliman website.

Don’t forget to become a fan of North Shore Advisory, Inc’s facebook page and if you want to receive up to date credit tips and tricks send us an e-mail at info@northshoreadvisory.com to subscribe to our newsletters!

Late Payments/Late Fee’s & Credit Scores

Most consumers do not realize there is a difference between having a late fee removed/waived or having a late payment removed. A late fee for sending a payment in beyond the due date could cost $25 -$75. This is nothing compared to the amount of extra interest you might pay on a 30 year mortgage due to a late payment listed on your credit profile. Late payments updated on a credit profile could cause scores to drop hundreds of points. The higher the credit score the more it will decrease. The late payment could be a $10 Victoria’s Secret bill or a $10,000 monthly mortgage payment. Either of these events can be catastrophic for a credit score. If a consumer has been late and tries calling the creditor to discuss the possibility of removing the late payment, they must be clear that it is the late payment on the credit report that needs to be updated rather than being concerned about the late fee incurred. It is rare that a creditor will remove the late payment on the credit report but common for them to waive the late fee incurred. When applying for a mortgage a Fico score of 740 could be the difference between 1-2% interest reduction or an approval on a loan. If a consumer has a new late payment a 740 score could drop to a 640 causing the interest rate to increase or a complete rejection of the loan application. Consumers must be very careful about making payments on time if they want to have the best credit scores and opportunity. A client hired us to increase his credit score by working on the removal of a recent collection account. His current score was a 690 and he needed a 740. He was a wealthy business owner and had a monthly mortgage payment of $19,000. We were able to remove a collection that was placed on his credit report for cell phone service he felt was frivolous. We were able to remove it & his score increased to a 740. He was able to refinance and reduce his monthly payment down to $12,000 a month. He wound up saving $7000 a month and $84,000 a year. “Great credit brings great opportunity”

(Source: northshoreadvisory.com)