1. Experian - Web page: Experian.com
Phone #: (888) 397-3742
2. Equifax - Web page: Equaifax.com
Phone #: (800) 685-1111
3. TransUnion - page: TransUnion.com
Phone #: (800) 916-8800
CREDIT SCORE: is a number used by financial institutions and credit card companies to determine risk level when issuing you a loan or a credit card.
CHECK YOUR SCORE: You are entitled to one free credit report per year from each of the major credit bureaus.
All credit scores are not FICO Scores. For over 25 years, FICO Scores have been the industry standard for determining a person's credit risk. Today, more than 90% of top lenders use FICO Scores to make faster, fairer, and more accurate lending decisions. Other credit scores can be very different from FICO Scores—sometimes by as much as 100 points, I usually see 20 to 25 points difference.
What's in a name? When it comes to FICO Scores versus other credit scores, the answer is "quite a lot."
FICO Scores are used by most creditors, chances are when you apply for a mortgage, an auto loan, credit card, or a new line of credit, the bank or lender is looking at your FICO Score.
The reason? Lenders know what they are getting when they review a FICO Score. FICO Scores are trusted to be a fair and reliable measure of whether a person will pay back their loan on time. By consistently using FICO Scores, lenders take on less risk, and you get faster and fairer access to the credit you need and can manage.
FICO Scores use unique algorithms to calculate your credit risk based on the information contained in your credit reports. While many other companies design their credit scores to look like a FICO Score, the mathematical formulas they use can vary greatly.
I personally use FREE apps (Credit Karma, Credit Wise, & Credit Sesame) as a guide, of course always keep in mind your score is probably lower. Check your FICO score, monthly, annually and before applying for any type of credit line.
1. Billing cycle
The billing cycle for a credit or loan account, refers to the number of days between statements. The length of a billing cycle can vary per credit or loan provider but typically lasts between 20-45 days. Once the billing cycle ends, the provider will send a statement to the borrower based on the activity during that cycle.
2. Principal Balance
The principal balance refers to the unpaid portion of a loan or credit account excluding interest and other fees. The amount of a payment that goes toward principal and interest or other fees will be defined in your agreement. In order to pay a loan in full, the principal balance must be $0.
3. Interest rate
Interest rate is a percentage of the principal balance charged by a loan or credit provider for lending money. The borrower’s credit score can have an impact on the interest rate they pay. Good credit sometimes you pay 0 interest up to 36% plus many added fees
4. Annual Percentage Rate (APR)
APR is an annual rate, which takes interest and other fees into account. The rate is represented as a percentage number and can vary per bank or lender.
5. Minimum amount due
The minimum amount due is a monthly payment that a borrower needs to pay to keep their account current and avoid late fees. The amount of this payment could be a fixed installment or a percentage of the outstanding balance on the account. (No matter what pay at least this amount, missed payments will hurt your credit for a long time)
6. Payoff amount
A payoff amount is the total dollar amount that must be paid to close a debt. The payoff amount could be more than the principal balance because it may include unpaid interest, late charges and fees. To receive a payoff amount, the borrower may need to request a quote from their lender or credit provider. Some lenders and credit providers may include a prepayment fee in the payoff amount as well.
7. Refinance
Refinancing is the process of moving one or more debts to a new loan or changing the terms of an existing loan. The reasons for refinancing may vary per borrower but some potential advantages include a lower interest rate or an extended loan term. There are some possible drawbacks such as additional fees that can reduce the overall benefit for the borrower. You should consider the overall cost of refinancing. Common forms of debt that are refinanced include car loans, student loans and mortgages.
8. Down payment
Down payments are a one-time cash payment that is submitted early in the loan application process. The amount of the down payment is traditionally a percentage of the item’s full purchase price. For example, the down payment for a mortgage could equal 3.5-25% of the home’s total value. In addition to improving the odds of getting a loan approved, a down payment may lower the monthly payment and reduce the interest rate. When applying for a mortgage or vehicle loan, a down payment could be required by the bank or lending institution.
9. Cosigner
A cosigner is a person, other than the primary borrower, who signs a credit or loan application with the primary borrower. Adding a cosigner to a loan application can potentially strengthen the odds of approval if the cosigner has a higher income or credit score than the primary borrower. If the application gets approved, the cosigner will be equally responsible for repaying the debt and assume legal liability to pay the debt in full if the primary borrower defaults.
10. Collateral
Collateral is an asset or property that a borrower pledges to a lender to secure the repayment of a loan. The type of collateral required by the lender could be fixed or flexible depending on the loan type. However, in order for a loan to be secure, the value of the collateral must be equal to or exceed the loan amount. If the amount is not paid in full or the loan defaults, the lender may take possession and sell the collateral to try to regain their losses.
11. Credit Utilization
This is how much of your available credit you're using. And it's easy to calculate, too. To calculate the credit utilization of your credit cards, just divide your total credit card balances by your total credit card limits. Then multiply that number by 100 for the percentage. It is good to keep your credit utilization under 30%. I recommended under 10%, since lenders see a low percentage as a sign that you're capable of responsibly managing debt..
12. Hard Inquiry
A hard inquiry occurs when you've taken an action (i.e., applied for credit) and a business/lender "pulls" your credit report in order to review your credit. This type of inquiry can affect (drop) your FICO® score up to about 5 points. On the other hand, a soft inquiry doesn't affect your FICO® Score because it isn't generated by applying or shopping for credit. An example of a soft inquiry is your checking your own credit or a lender sending you a "pre-approved credit offer" without your applying.
13. Credit Mix
This term is used to define the different types of credit that make up your credit report. From credit cards, student loans to mortgages and auto loans, your credit mix has an impact on your credit - accounting for 10% of your FICO® It's important to remember that although a good mix of credit can have a positive impact on your credit score, it's not wise to apply for credit you don't need
14. Payment History
Your payment history, which is a big portion of your credit report, is a crucial element of your credit score. It also helps determine if you can (or can't) get approved for loans at a decent interest rate. This history includes a listing of all your different accounts & their payment status - specifically if you've been current with all your payments. Your payment history accounts for 35% of your FICO® Score. Don't want to miss a payment
15. Install Credit/Loan vs Revolving Credit
An installment loan has a pre-determined length, an end date (the loan's "term") and is repaid with scheduled, periodic payments. The loan typically includes an amortization schedule showing the reduction in principal through the installment payments over the loan's term. Examples: Mortgages, auto loans & student loans.
Revolving credit is credit that a borrower can repeatedly use and pay back without having to reapply every time the credit is used. Two common forms of revolving credit are credit cards and lines of credit. There is no set payment plan and you are able to borrow up to your limit. Since this type of loan is riskier for the lender, interest rates are typically higher for revolving credit than installment credit.
ACH:.Automated clearing house, an electronic network for fund transfees such as bill payments & payroll direct deposit.
APR: Annual percentage rate, an interest rate stated as a full-year rate. APR can include fees associated with a loan, giving the borrower more information about the cost of the loan.
APY: Annual percentage yield, the effective annual rate of return taking into account the effect of compounding interest.
Check clearing: The process of the funds in a check becoming available for the payee to use. When the funds are fully available, the check is said to have "cleared."
Checking account: A deposit account that allows unlimited withdrawals by writing a check or with a debit card.
Co-op network: A collection of ATMs or branch networks that can be accessed by credit union members.
Credit union: A nonprofit and tax-exempt savings and lending cooperative organization that's owned by its members, who vote for the board of directors that oversees management.
Direct deposit: A transfer of funds directly to a recipient's deposit account without the need to deposit a paper check and wait for it to clear.
Deposit insurance: A financial product that protects depositors from losses if a bank or credit union where they have deposited money fails. Most deposit insurance is provided by the federal government or a state government agency.
Funds availability: The amount of money in an account that the account holder can use. When the account balance is higher than the funds available, it often reflects that the funds in a check deposited to the account have not yet cleared.
Remote deposit capture: A technology that enables bank customers or credit union members to scan paper checks and transmit check images electronically to be cleared and have the funds deposited.
Share account: A savings account offered by a credit union rather than a bank.
Share certificate: A certificate of deposit, or CD, offered by a credit union rather than a bank.
Share draft account: A checking account offered by a credit union rather than a bank.
National Credit Union Administration: A federal government agency that regulates federally chartered credit unions and insures their deposits.
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