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Young Volunteers


How Do You Build a Credit Rating to Receive Money from Lenders?

The best credit rating will give you access to loans and credit cards with low interest rates.

There are factors that impact a credit rating and these factors determine credit scores. One guideline focuses on paying debts on time. Another guideline addresses credit utilization. This measures the balance-to-limit ratio on products such as credit cards. These categories must be prioritized because the reporting agencies – FICO Score and VantageScore – deem them important. These two categories constitute about 65% of the credit score. 


Paying debts on time makes up 35% of the FICO score. Paying debts on time constitutes 41% of the VantageScore. FICO and VantageScore make timely payments the primary factor when calculating credit scores. The reporting agencies provide credit ratings to three major credit bureaus: Equifax, TransUnion, and Experian. The reporting agencies sell credit reports and credit scores to the credit bureaus. The selling of credit scores to consumers and businesses is an important part of the FICO business model.

Approximately 90% of the top lenders use FICO. According to VantageScore, their organization helps people who lack access to some forms of credit. Some consumers have low credit scores or they need to establish credit through alternative methods such as becoming an authorized user on someone else’s credit card or asking landlords to report on-time rent payments to credit bureaus to establish their credit rating.

FICO and VantageScore are credit bureau models. They use mathematical calculations to determine a credit score for borrowers. These models impact credit scores because they apply different percentages to the following categories: payment history, credit utilization, amounts owed, length of credit history, new credit, and credit mix. Why do credit scores vary from one bureau to the other while they all use the same credit model?

There can there be a wide variance among credit scores when borrowers have identical credit histories because lenders - such as banks, automobile dealerships, and credit unions - report borrower activity to only one or two of the credit bureaus. Selective reporting determines these variations. Credit scores will vary widely because one credit bureau might not receive content that catalogues defaults or collection accounts.

The three main credit bureaus offer a service that allows consumers to establish credit history through alternative methods such as rental payments. If your landlord partners with Pinata, your rent payments can be reported to TransUnion for free. Another service is Self.  This gives renters the opportunity to report their payments to all three credit bureaus at no cost. The final service is Azibo. They report on-time rental payments to Equifax and TransUnion to boost the credit rating. The cost is $4.99 per month.

There are other ways to boost or enhance a credit score. Reporting utility payments is an alternative method for impacting the credit score. Here are some of the credit building products reported to the credit bureaus by IdentityIQ: electricity, gas, water, sewer, and Internet services. There is a fee for using IdentityIQ. Consumers can also use a service like Experian Boost to establish payment history through Experion.

These alternative services allow consumers who lack access to traditional credit building tools - such as credit cards - to generate a credit score that opens doors to a credit mix. To establish a credit score with VantageScore, borrowers need to have one credit account open for one to two months. There is no activity threshold. To create a credit score with FICO, borrowers must have one account that has been open for at least six months with some activity within the last six months.

VantageScore describes itself as credit with a conscience. They claim that they have created a more inclusive and equitable consumer credit marketplace by scoring roughly 94% of adults in the United States. This organization claims that they have developed programs to influence the reporting of rent and utility payments. While VantageScore offers these services, so do the three primary bureaus.

Rent constitutes a large expense for most people. While landlords are not required to report rental payments to credit bureaus, consumers can opt into rent paying programs to remove barriers to building a credit history. These opportunities boost the credit score and they also induce financial education. FICO scores lay the foundation for building wealth. You’ll learn how to control your credit rating.

To improve their credit score, consumers can apply for a service such as eCredable Lift to enhance their TransUnion credit report. There is a fee for using this service. If the consumers are responsible when paying their debts, they could use eCredable Lift to improve their ranking with TransUnion. There are other credit bureaus that offer credit building accounts for consumers with no credit history or for consumers who need to rebuild their credit. The goal is to attain financial security through a solid credit score from all bureaus.    

What is the best way to check a credit rating? Bureaus offer credit reports and credit scores. The report shows the borrower’s  payments and defaults.  Borrowers can obtain this information from bureaus that must supply consumers with one free credit report per week.

This service allows borrowers to see information provided to the bureaus by lenders and other companies. Businesses that report credit information can make mistakes that could be detrimental to the consumer’s credit rating. Credit reports allow borrowers to detect identity theft as well.

To get their credit score, borrowers have several options that include obtaining information from a credit monitoring service that usually charges a fee. Prices and services vary, so clearly determine the terms and conditions. Free is not always free. If a borrower is concerned about identity theft, credit monitoring services provide consumers with fraud detection assistance.

Credit scores can be obtained for free from banks, credit unions, or credit card issuers. Credit scores could be included on credit and loan statements. Here are two ways to boost and maintain credit scores: ensure that debts are paid on time and monitor credit utilization. Regarding credit utilization, ensure that you maintain a debt percentage that ranges from 10% to 30% of the product credit limit.



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