Better Business Bureau: Knowing your credit score is crucial

November 21, 2013 

Earlier this month, The Fair Isaac Corp. said it is working with major credit card providers to provide monthly FICO scores for free.

The change is aimed at giving the consumer more understanding of where they are financially on a regular basis. Currently, Barclays and Discover are providing the score for free to their cardholders.

FICO scores are used in lending decisions such as applications for credit cards and interest rates on home loans. They range from 300 to 850 points. And, as such, it helps lenders determine whether a person is credit worthy. Consumer advocacy groups and lawmakers have pushed for more access to credit information as a way to prevent abuses from both lender and borrower. FICO doesn’t pay the banks or get compensation for the free-score offering. Banks buy FICO’s algorithm and data from the three credit-reporting agencies used to generate credit scores.

Credit scores differ from credit reports, which are provided by Equifax Inc. (EFX), Experian Plc (EXPN) and TransUnion Corp. FICO scores, are based on consumers’ credit histories and reveal their risk for defaulting on loans. A good credit score is anything higher than 700. Average FICO scores for U.S. consumers are around 690.

In 2008, The Fair Isaac Corp. changed its scoring system to be more forgiving of minor slip-ups to more accurately predict a borrower’s risk of defaulting on loans.

• Your FICO score might go up if: You maintain various lines of credit, such as credit cards, a car loan and a home loan, because it demonstrates your ability to manage different types of loans.

• Your FICO score might go down if: You have many delinquent accounts. While a delinquent account has always had a negative effect on your score, people with more than one delinquent account may see their score slip even more.

• No more piggybacking. BBB notes that piggybacking is a popular way for people with no credit or bad credit to increase their credit score.

Keeping your personal identity secure is crucial. Be aware that piggybacking means adding someone to your credit report (an authorized user). BBB is alerting consumers that the flip side is that credit repair services have cropped up that allow and encourage people to essentially “sell” their good credit to people with poor credit. In order to discourage this, FICO will not consider accounts where the consumer is only an authorized user.

BBB encourages consumers to request a free credit report once every 12 months. The three agencies give consumers a free copy of their credit report upon request once every 12 months. They also can sell people a credit score, which may be an “educational score” that differs from the one used by lenders. Free credit reporting is also available at or by calling (877) 322-8228.

Robb Hicken: 947-2115

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