For a long time now, consumers have been able to get a free copy of their own credit report one time each year from each of the three main credit reporting agencies, TransUnion, Experion and Equifax.
And that has led some consumers to mistakenly believe that they are also entitled to a free credit score. But that is not true. Necessarily.

But now there are some changes. A new rule that just went into effect in January requires lenders to inform consumers if a poor credit score resulted in less favorable terms for the loan, such as a higher interest rate or a higher down payment.

Another rule will take effect this summer that will require lenders to give more borrowers free copies of their credit scores.

Under the rule that went into effect in January, the lenders will have two options to disclose and inform the consumer. One of these options is to provide the borrower with a copy of the credit score that was used to make the decision. If a credit score is given, further information should also be included that will explain the range of possible credit scores so the consumer can see where they rank on a National level according to their credit score.

The lender will also be required to disclose which one of the three credit bureaus, Experion, TransUnion or Equifax, provided the score.

The other option that the lenders have now does not require the disclosure of the actual score but rather a letter stating that the borrower was given less than the most favorable rate or terms because of their lower credit score. While this letter need not include the actual credit score, it must still disclose the credit bureau that provided the credit report and the credit score.

However, on July 21, 2011 that loophole will be closed and the lenders will be required to disclose the credit score if the low credit score was used to deny the credit or loan or if it was used to give the consumer less favorable terms than someone with a higher credit score. After July 21, the consumer should always receive a free copy of the credit score if it caused them a problem in obtaining the loan or if they obtained the loan but at less favorable terms.

So if you have been denied credit or if you have been given less favorable terms you can get a free copy of your credit score.

But if not, you will still have to pay for it.

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There are a lot of valid reasons for avoiding credit. However, there are also some reasons you should have credit.

Many mortgage companies are now requiring 3 open lines of credit along with a good down payment and a 750 plus credit score in order to qualify for a new mortgage to purchase a home. And with the mortgage crisis that is going on and the millions of foreclosures out there, this practice is just prolonging the agony of the bad market.

If there is a glut of inventory, which there is, and it is exceptionally difficult to qualify for a mortgage to purchase a home, how can the housing market get better?

And if you are an owner, who needs to move, but is likely upside down in your mortgage, meaning that you owe more than you could ever possibly sell the house for in the near future (remember, mortgages are hard to come by and there are probably hundreds of homes out there competing with yours) what do you do? Corporations in the same situation walk. Some people are starting to walk away, which of course, makes the market even worse. But what is the answer if you must move for whatever reason?

So if you want to buy a house with a mortgage in the future, you may need credit, good credit. And if you have had any difficulties in the past you may need to complete some credit repair.

So get a prepaid credit card. Use it regularly and pay it off. Then use it regularly and pay it off. And slowly expand, get a few more lines of credit, be careful of the type, however, as department store credit is not given as much value as a credit card or an automobile loan, but most importantly of all, pay all of your bills on time, do not charge more than 20% or so of your total credit limit, don’t shop for credit and get financially responsible.

If being financially responsible means avoiding credit, then avoid what you can but do what you have to do to get your house.

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While it seems that the majority of American’s are familiar enough with credit scores to realize how important they can be for their financial lives many still have confusion about the different aspects of credit scores.

From a new article on CreditCardGuide the information obtained from a recent survey jointly released survey by the Consumer Federation of America (CFA) and VantageScore solutions revealed that when it comes to credit many American’s are misinformed. On a 22-question credit score quiz the consumers only scored an average of about 60% of the questions correctly.

It is interesting to note that different demographic groups scored differently on the quiz. For example, the people earning over $100,000.00 a year scored high with 66% of the answers correct. Younger people, ages 35-45 also scored well with 67% of the answers correct. Consumers in the lower income groups of $25000.00 a year or less performed poorly with only 58% of the answers correct. But the group that scored the lowest of all was consumers ages 65 and above with only 53% of the questions answered correctly.

It is interesting to note that if a consumer had recently received a copy of their own credit report they scored higher. Another reminder there for you to obtain the free yearly copy of your credit report today if you haven’t done so recently. Go to annualcreditreport.com, they won’t try to sell you anything and you will be able to get your credit report completely free, no charge whatsoever.

There were some interesting gaps in the credit knowledge among the groups. For example, more than six out of ten consumers actually thought that age and marital status were used to determine a person’s credit score (no, neither one of these things are considered). Only six in ten were aware of the fact that credit scores are often used by cell phone companies and landlords. Unfortunately, credit scores are also often used to determine rates for insurance and also for employment applications, which is really important to know.

Anyway you have the opportunity to take an interactive web quiz about your own knowledge of credit scores at CreditScoreQuiz.org. See how you do and then compare yourself with other people taking the quiz.

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Your job and your income have absolutely no effect on your credit score. In fact, you could have an almost perfect credit score with no job, no income or reliable source of income provided you were able to always make your payments on time (yeah, you might have to be independently wealthy or something to always have the money…but…). Contrary to what some people may think, it is not essential to have a job or income to have great credit as both of those things are deemed irrelevant and are not even part of your credit reports and scores.

And a 30-day late payment in 2011 may be more detrimental to your score than a bankruptcy in 2010. The most pressing factor of how much impact something has on your credit is how recently it occurred. With credit, time heals all wounds, no matter how brutal they were at the time. So keep your payments current and if something bad happened in your past, time will pass and you’ll get over it. But if you are frequently late on your payments, that is over 30 days late….one or two days usually doesn’t count much towards reporting, your credit will suffer, over and over again.

Pay off your balance every month or keep a small balance, the experts are divided on this. Economically it is better to pay off the balance, keeps you from paying interest, however, having an unused credit card does not help your credit much. So if you’ve got it, use it periodically.

And don’t close out your old accounts. As we have mentioned here about a bazillion times the debt to available credit ratio on your credit report is crucial. Try to keep your debt at about 20% or less of your available credit and don’t close out available credit as that reduces it on the other side. The trick to good credit is having it available but barely using it!!

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There are some pretty vocal financial voices out there saying that your credit score is the most important number of your financial life. (Suze Orman for one).

And depending upon your own circumstances it may be. If you are unable to purchase a car unless you finance it, it may be important for you to have a good credit score.

If you want to purchase a home by taking out a mortgage you will also need to have a good credit score.

If you want to go to the nearest department store once a week and buy all of the latest fashions with a credit card, you don’t need a high credit score, rather you need cash and common sense.

And if you are unemployed or underemployed, your credit score is not the most important number but in your case the most important number is your income. You need to work on increasing that before you work on your credit score. You can’t maintain a great credit score without having some debt and you should never accumulate debt unless you have a secure income.

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Well it is not nearly as important as the banks, the lenders, the credit bureaus, the entire system will have you believe.

Of course, a high credit score can get you lower rates and better terms when you borrow money. A good credit score will also enable you to borrow money if you need to.

But there are many other things that are much,much more important for your financial peace than a credit score.

Saving for retirement, for example. Getting your finances in order so that you can save, another example. The peace of mind of knowing that you are not living beyond your means. The peace of mind of actually paying cash and owning whatever it is outright.

Credit scores are always skewed for the benefit of the lenders, the banks, the credit bureaus, the credit reporting agencies. Everyone or rather everything (since they are typically corporations which contrary to what some believe, are not human) except you, the consumer.

Credit scores will not make you or break you. Many people live with low credit scores everyday.

But focusing on your credit score to the detriment of your own financial freedom can break you.

Take care of yourself first. Pay yourself first.

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Well the perfect credit score is 850 but it seems that the worst possible credit score is only 300.

Even so, apparently it is rather difficult to get a 300, you have to hit bottom in every single category and then probably go back and do it again. However, it is highly doubtful that many people aspire to that goal.

You can, however, not qualify for a credit score and therefore not have one, since it takes 6 months after you open an account for it to be reported. But the way that usually happens is that you go from no score at all to a decent score.

Credit scores have been dipping though and very few people ever get to close to that 850 score either.

Read “How Low”.

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What used to cost you $15.95 is now free.

As of January 1, 2011 lenders will be required to tell you the reasons why you may have been charged a higher interest rate and most commonly this is because of your credit score.

For many years consumers have been able to receive free copies of their credit reports but they had to pay for the all-important number that provided the make or break for receiving credit or for receiving the most favorable terms.

Now many consumers will be able to receive this all-important information that can help them to put their credit back on the right track.

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In an interesting article from the Huffington Post, an individual requested information from his mortgage servicer, Bank of America, about who actually owned his mortgage. He did this through a website called “Where’s the Note?”.

As a customer you actually have the right to know who owns your note. However, after initially declining to tell him who owned his note, a few weeks later he received notice of the investor who actually owned the note.

And some other bad news.

His credit score was dinged 40 points, dropping from an excellent 780 to 740 (still excellent but it is the principle of the thing!!)

All for requesting information???!!!

Speculation that he might be interested in mortgage modification? He wasn’t requesting info on modification, just info about who owned the mortgage.

Read the entire article here at Honey, I shrunk the credit score

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With the current economy and the real estate bubble that has been experienced of late, credit scores are becoming even more important, well, high credit scores that is.

While the credit score cut off for getting the best rates and the best deals on financing used to be around 700 now it is getting higher and in order to qualify for the best rates you will probably need a score of 760. For now, anyway, so long as money is tight and banks are nervous.

And of course, there is all of the conflicting information out there about how to best manage your credit.

It is true that if you open a new account your credit score can take a hit. And if you close an account that you are not using your credit score could also take a hit. Much of it is sort of a “damned if you do and damned if you don’t” so you need to just do your best. If you need a new credit card, get it. If you don’t need it, don’t get it. If you’re not using a card you should probably try to keep it, even though you don’t use it because of the all-important debt to available credit ratio. If you have available credit, keep it available, you don’t have to use it and it may be best if you don’t but if you keep it available your debt to available credit ratio will remain high.

Best advice actually is to pay your bills on time and avoid excessive credit (and if you need credit repair, get it done!).

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