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Best, worst credit scores

by Broderick Perkins

(10/20/2010) Erate.com Exclusive - When TransUnion recently examined its data base for credit scores, a greater share of consumers in the Minneapolis, MN and Silicon Valley, CA areas had high scores, a larger share of consumers in two Florida metros had the worst.

For the first time, TransUnion, one of three major credit bureaus, ranked scores on an "A" (for excellent) to "F" (for failed) scale for Metropolitan Statistical Areas (MSAs) using its VantageScore credit scoring model.

Credit scores are a numerical rendition of a consumers credit worthiness. They are virtually always examined when you apply for a mortgage, credit card or other form of credit as well as insurance.

TransUnion's VantageScore credit scores range from 501 to 990, with higher scores representing a lower likelihood of risk for the lender and, for the consumer, a better shot at credit.

VantageScore scores of 901 or more earn an A; scores of 900-801 get a B; 800-701, C; 700-601, D; and 600-501, F.

FICO credit scores, another scoring system, uses numerical scores only ranging from 350 to 850.

"Because lenders have so many scoring models at their disposal, it's rare when the credit score they receive for a consumer and the score the consumer obtains for himself actually match, and that causes a lot of confusion," said Heather Battison, director of education for TransUnion consumer products.

"That's why the A-F, academic-style letter grade that comes with every VantageScore consumers obtain at TransUnion.com is so beneficial. If my grade is an 'A', I innately understand that means a lender is likely to view my creditworthiness in a very positive light; and that's primarily what I want to know," Battison said.

Using VantageScore, metro areas at the top of the class with consumers earning the most As were:

• Minneapolis-St. Paul-Bloomington, MN-WI - 23.5 percent.
• San Jose-Sunnyvale-Santa Clara, CA - 23.5 percent.
• San Francisco-Oakland-Fremont, CA - 22.9 percent.
• Washington-Arlington-Alexandria, DC-VA - 22.4 percent.
• Seattle-Tacoma-Bellevue, WA - 21.6 percent.

Markets suffering the most Fs were:

• Memphis, TN-MS-AR - 27.3 percent.
• Las Vegas-Paradise, NV - 26.2 percent.
• Riverside-San Bernardino-Ontario, CA - 25.2 percent.
• Orlando-Kissimmee, FL - 23.2 percent.
• Miami-Fort Lauderdale-Pompano Beach, FL - 22.8 percent.

As a percentage of the U.S. population the grading breakdown was:

• A - 10.9 percent.
• B - 26.9 percent.
• C - 20.5 percent.
• D - 22.3 percent.
• F - 19.4 percent.

How can you earn an A?

TransUnion says:

• Study your situation. Proactively manage your credit and risk for identity theft with an ongoing credit monitoring. You can accomplish this by regularly obtaining your credit report at AnnualCreditReport.com. Examine your report for activity, errors and omissions that you can change, correct or adjust.

• Don't be late. Pay on time. A history of late payments can lower your credit score.

• Manage your debts. Keeping high balances relative to credit limits on key credit accounts can have a negative impact on a score. Pay down debt. Keep balances at or below 30 percent of your total available credit to present the best possible financial image to lenders. Set budget goals and, whenever possible, use cash to lessen dependence on credit.

• Give yourself time. Long-term credit relationships and a diverse mix of credit accounts help boost your score. Avoid closing credit cards and other accounts that have been paid on time over a long period, as it can make your credit history appear shorter and could affect your score.

• Limit inquiries. Each time you apply for a new credit card, an inquiry will appear on your credit report. Frequent credit card inquiries can make it look like you have a cash flow problem and that can lower your score. However, when you shop for mortgage or auto loan rates over a two to three week period, credit scoring models typically factor the resulting inquiries together as a single item. This lets you to shop for good loan rates with little impact on your credit score.

 

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