Credit, Credit & My Credit » BEACON SCORE

What are Beacon Credit Scores? What do they mean? How do you read them?

admin — Wed, 04 Aug 2010 08:56:18 +0000

Beacon scores are the first thing most mortgage lenders look at when sizing up a borrower. Beacon Credit Scores are a single number that summarizes your credit situation and shows lenders what kind of risk you’re likely to be as a borrower. The name Beacon is actually a brand of credit score issued by Equifax, the largest credit-reporting agency in Canada. Trans Union, another widely used agency, also issues credit scores under a different name.

Beacon Credit scores are based on a complex formula. They range from 300 to 900, with 700 being near average. Individual scores can change every month. While no one knows the exact formula (except the inventor, Fair Isaac Corporation), Beacon scores are roughly based on:

-Previous payment history (About 35% of score)
-Current level of indebtedness (About 30% of score)
-Length of credit history (About 15% of score)
-Number/frequency of new credit enquiries (About 10% of score)
-Types of credit you have (About 10% of score)

A high credit score is about 750 or above. This typically qualifies borrowers for the best possible rates and terms. A low score is below 620. In this case, you might pay a premium interest rate and find it harder to qualify for a mortgage. As of October 15, 2008, 620 will be the absolute minimum credit score for insured mortgages. That means you’ll need at least a 620 score to qualify for good rates on mortgages with less than a 20% down payment.

Keep in mind, the exact score needed depends on the type of mortgage you require. For example, mortgages for the self-employed, or for rental properties, often require higher scores.

Last but not least, there are several “Beacon-killers” to be aware of. Two things that hurt your score the most are payments over 30-days late (even on tiny balances) and maxed-out credit cards. If your credit is weak, however, don’t despair. There are several ways to re-establish your credit and improve your score. Two good resources on this and other credit questions are www.equifax.ca and www.transunion.ca .

How to Understand a Beacon Score

admin — Wed, 04 Aug 2010 08:48:40 +0000

The term Beacon score refers to your credit score. It is often referred to as your FICO, which is an acronym for the credit score model developed by the Fair Isaac Corporation. Your credit scores tells the lending institution the probability of your paying your debt by the due date each month. The Beacon score is a factor in determining your ability to secure credit. It also determines the interest rate you will be able to obtain on your credit.

Step 1

Acquire your free credit report. You can obtain your credit report for free by visiting the Annual Credit Report website (see Resources). You are allowed one free credit report annually from each of the three largest credit report agencies. The three major credit reporting agencies are Experian, Equifax, and TransUnion.

Step 2

Understand the components of your Beacon score. Your credit score is based on a calculation as disclosed by the Fair Isaac Corporation. It is based on a number of factors with approximate weights given to each as disclosed by the FICO. Late payments, bankruptcies and collections, current debt, length of account existence, type of credit such as installment, revolving or finance company, and applications for new credit and inquiries all play a role in the calculation. As expected, late payments and current debt are heavily weighted in the calculation.

Step 3

Know a good credit score. From a minimum of 300 to a maximum of 850, there is a wide range in credit scores. In general, a credit score of 650 is considered to be the lowest credit score required to obtain a fairly good credit rate.

Step 4

Compare your credit score to that of the range. There is an inverse relationship between the credit score and cost of borrowing. That is, a higher credit score results in a lower interest rate or cost of borrowing. See the Resources section for the link to the Fair Isaac Corporation interest rates and credit scores.

Step 5

Obtain your credit report every 12 months to review for errors.

Tips to Increase Your Beacon Credit Score

admin — Wed, 10 Mar 2010 11:48:28 +0000

Knowing you have a low beacon credit score is not a good feeling. Most people find out they have a low beacon credit score only after they get turned down for a loan or credit card that they so desperately needed. The sad part is that for many people this situation could have been avoided if they just followed a few simple steps to keep their credit report clean.

Tips To Keep Your Credit Score High

Pay Your Bills On Time- This may sound like very basic advice but the truth is many people let bills slide and pay them late thinking nothing bad will happen,nothing could be further from the truth!

If you pay a credit account thirty days late just one time it can drop your credit score as much as 100 points in a single month. To make matters worse that late payment is now on your record for the next seven years and it ill take at least 12-24 months of good pay history to recover from that one late payment.

Do Not Max Out Credit Accounts- Another simple thing that can bring your score down fast is having to much debt. When determining your credit score the reporting agencies weigh heavily on how much your balance to limit ratio is. If you have to many accounts that are over 45% of the limit then your beacon credit score will start to go down.

If you find yourself in this situation you can call the credit company and see if they will give you a credit line increase, this will automatically reduce you limit to balance ratios and bump up your scores a good amount, usually within 30 days.

Do Not Over Apply For Credit- Another very damaging practice is to apply for credit with a bunch of different lenders in a short period of time. This will throw up a big red flag and your credit score will drop if you continue to have your credit report pulled.

Certain types of credit report pulls are not as damaging as others. For example having your credit pulled 6 or 7 times for a mortgage will not hurt your beacon credit score as much as having the same amount of credit report pulls for a car loan or charge card.

Clean Up Your Credit Report- Old and negative information can bring your credit score down quickly as well. Old and incorrect information can be removed with simple credit repair tactics and is a great way to boost your score in 45-60 days depending on the amount of negatives you are trying to get removed from your credit report. If you are unfamiliar how to do credit repair you may want to hire a company to do it for you are take the cheaper way and buy a DIY credit repair kit and do it yourself!

Beacon Credit Score – What is It?

admin — Wed, 10 Mar 2010 11:47:08 +0000

A common misconception among consumers is the idea that they have a “credit score.” The truth is, consumers have three scores. A Beacon credit score is just one of those scores. It is the rating marketed by Equifax. Trans Union, and Experian market their scores under different names but the underlying process by which the scores are calculated is about the same.

However, businesses most likely will think of a myFICO score or a VantageScore or Plus Score. Typically, even though consumers contact a credit reporting agency to secure their credit report and accompanying score, the grade is most likely computed by one of the aforementioned credit score agencies.

For instance, Experian announced recently on its website that “As you may be aware, Experian® has opted to discontinue its relationship with myFICO effective February 14, 2009. This change by no means eliminates your ability to obtain your credit score and assess your creditworthiness.” It appears that Experian has opted to compute and compile its own credit ratings for consumers as Experian will continue to use myFICO for its business clients.

Usually, when a person speaks of his/her rating, such person fails to acknowledge that what is meant is one of three credit numbers since seldom will one’s credit score be the same at all three bureaus. That is why it is a good idea for consumers to obtain all three scores and then take the average of these as his/her credit score.

A consumer rarely knows which of the credit bureaus a particular creditor will use and some creditors might get data from more than a single credit reporting agency. That is why it is so important for potential borrowers to know that a Beacon rating or score is just one of three credit to which attention needs to be paid.

Fico Beacon Score Vs Vantage Credit Score

admin — Wed, 10 Mar 2010 11:40:09 +0000

You have probably heard the term ‘credit score’, but are you aware there are two major types? Here we will review the major differences between the FICO Beacon score and the Vantage score. Understanding how these work will improve your chances of building a solid history of paying on time.

The typical FICO rating will range from 300-850, with 850 being excellent rating. Typically, a measurement of 620 is the dividing line between prime credit (lower interest rates) and sub-prime (much higher rates). With this in mind it is easy to see how maintaining as high a measurment score can save you a considerable amount of money in the long run.

To determine the differences between a FICO score and a Vantage let us look at how the FICO score is calculated. Typically it is calculated as follows:

35% based on payment history. More weight is applied to recent payments as compared to past payments.
30% based upon the amount of debt you are carrying.
15% based upon length of payment history. The longer the better.
10% based upon recent inquiries. The fewer the better.
10% based upon your credit mix. The more diversified (mortgage, car loan, cards, etc) the better.

The Vantage was developed by the three major credit-reporting agencies as a better representation of one’s creditworthiness. While the FICO score remains the most popular, the Vantage is catching on. These scores runs on a scale of 501-990 and issues a letter grade to the measurment. Let us look at the components of the Vantage to see how it differs from the FICO.

32% based upon payment history. Similar weighting as FICO.
23% based upon total credit available.
15% based upon the portion of your score contributed by your outstanding balances.
13% based upon the kinds of credit held and how long you have held them.
10% based upon the number of recently opened accounts and number of recent queries.
7% based upon the total dollar amounts you could potentially use.

The FICO Beacon score was once synonymous with the term ‘credit score’, but the Vantage score seems to be gaining ground. As shown above there are differences between how the FICO score and the Vantage score are calculated. Understanding how each score is calculated can help you make better credit decisions to maintain an excellent credit rating

Your Beacon Credit Score and the Reasons Behind It

admin — Wed, 10 Mar 2010 11:38:31 +0000

Would you like to increase your beacon credit score as fast as possible? But before we jump into the details, it it important to note that BEACON and FICO can be used interchangeably. A FICO score is simply another name for credit score. But, more often than not, the FICO score is called the beacon score.

It turns out that the Equifax (arguably the largest consumer credit reporting agency) is the only agency with the right to market the FICO credit scoring algorithm invented by the Fair Isaac Corporation. In other words, Equifax distinguishes its credit-scoring model by using the name of beacon.

Case in point…take a quick look at the different scoring models credit reporting agencies use:

1. NextGen – A broad-based next generation credit bureau risk score.
2. Beacon – The scoring model used by Equifax.
3. EMPIRICA – The scoring model used by TransUnion
4. Fair Isaac Risk Model – The scoring model used by Experian
5. Industry Option SM – Scores used by major credit reporting agencies in the bankcard, auto loan, installment loan, and personal finance loan industry.

As you might have guessed, every agency will undoubtedly provide you with a different score. So, bite the bullet and order your credit report from the three major credit-reporting agencies to see what your average is.

With that being said, your beacon credit score is going to be paired with up to four reasons for your credit score.

The Fair Isaac Corporation holds the copyrights to the complete listing of reason codes and reason statements that are provided to creditors and prohibits the recording, retransmission, or use of its listing for commercial gain.

Here’s a list of the most frequently used codes and statements.

· Amount you owe on your accounts: 01
· Your level of accounts that are delinquent: 02
· You have too many accounts with balances: 05
· Your proportion of balances to credit limits on your revolving accounts (credit card) is too high: 10
· Your delinquent accounts are too recent or unknown: 12
· The amount of time your accounts have been established: 14
· The Number of accounts with outstanding balances: 18
· You have serious delinquencies and public records or collections filed: 38
· You have serious delinquencies: 39
· You have a derogatory public records or collections filed: 40

Quite honestly, you can use these reason codes and statements to plot your course of action in order to increase your beacon credit score.

Identify the problems with your credit rating. You are in a position to correct those problems.

Beacon Credit Score Explained

admin — Wed, 10 Mar 2010 05:33:52 +0000

If you want to check your credit score so that you can buy a house of get a loan for a business, you will need to check with all o the three credit bureaus which are Experian, Equifax, and TransUnion.

They each follow variations of the FICO credit scoring system. The beacon credit score is used by the Equifax bureau and this score is based on certain factors of your life including jobs, income, changes of address, enquiries and debts.

The reason that banks will want to see your beacon credit score is that they can assess how able you are to pay back the loan that they give you. This score will also determine how much the interest rate will be on that loan.

The credit scores range from 300, which is bad, to 850 which is brilliant, but most people range between 600 and 800.

To get a favorable bank loan and good interest rate, you beacon credit score must be above 750. This can save you so much money per year because of the amount of interest that you will have to pay.

The beacon credit score can be higher with low interest rate banks wanting you to have a beacon credit score of 640, and middle to high interest rate bank wanting a score of at least 540. A perfect score would have to be close to 850.

Even though this can be difficult to achieve, the banks do use all three models to ascertain the loan that they give. The factors that are looked at are arranged in the following percentages.

The timeline of your bill payments will count for 35 percent and includes late payments, and missed payments. Outstanding credit is 30 percent and can differ depending on how much the installments are compared to the loan amount.

By reshuffling your money, you can improve your credit score dramatically. The amount of time that your credit has been active is 15 percent and this means that you should not close any accounts if you are in debt.

Just pay them off and keep the account active. They want to see that you have been using your account for more than a year to get better credit results. The type of credit that you have counts for 10 percent so always use a reputable source and do not open too many small finance credit cards.

Acquisition of new credit can lower your beacon credit score so do not open too many credit cards in a short space of time.

If you want to assess your beacon credit score you can find many places online where you can do that and have the results in less than 24 hours.

You can also find calculators that will let you determine your score and help you to improve it before you approach any banks and lenders. The trick to keeping a high credit score is to only take out a loan when it is absolutely necessary and to pay it back on time.