Why Is My Credit Score
Lower Than Last Year?

Q:  I received a copy of my credit report last year and the score was 761. I have not applied for credit anywhere, but a year later my score was 448.  What made my score drop so low?

A:  It's definitely possible for a credit score to drop during a 12 month period even though you haven't applied for new credit. Without knowledge as to exactly what has happened in your financial life in the last year, it's hard to predict what might have caused this. That's because there are a number of factors involved in calculating your credit score. There are also a variety of companies that provide their own branded version of your credit score, using their own special (secret) formula. It can be a little complicated and cumbersome to understand how credit scores are derived, but there are some basic tenets you can use to extrapolate what might have caused your lower score.

The most important tenet is that your credit score is based on information in your credit report, so it's important that you go through all 3 of your credit reports on a regular basis to check for errors. The other critical fact is that you have 3 different credit scores, one from each of the 3 credit bureaus – Equifax, Experian and TransUnion. It's possible that your credit score of 761 was from one credit bureau and your score of 448 was from a different bureau. Credit reports from the 3 different bureaus can differ because creditors often report your credit information to just 1 or 2 of the bureaus instead of all 3. This means that you can end up with 3 very different looking credit reports and thus 3 different credit scores.

Many of the credit report monitoring services we review offer free 3-bureau credit scores and credit reports when you sign up for their trial, including our #1 ranked Identity Guard TOTAL PROTECTION®.  Our #2 ranked service, Privacy Guard has a 30-day trial for $1, and provides all 3 credit scores and reports when you sign up as well as monthly updates of your three reports and scores.

Let's talk about the factors commonly involved in calculating a credit score as detailed by the very popular FICO® Score. If any of these things has changed in the last year it could explain your lower credit score.  The percentages given indicate how heavily the category is weighted in determining your credit score.

35% = Your Payment History:  This is your track record for paying your credit accounts on time. It also includes any bankruptcies, foreclosures, liens or judgments against you. In order to maintain a good credit score you'll need to pay your credit off in a timely manner. If you aren't currently doing so, you should make this a high priority as 35% of your credit score is a sizeable chunk.

30% = Amount Owed:  When calculating your score, the amount of money you owe on your credit accounts is a large factor. Obviously, owing less is owing better than owing more but total credit utilization ratio is also taken into consideration. To understand this concept instead of thinking of each credit card and loan you have as a separate bucket, think of them as grouped together. For example, if you have 2 credit cards and on the first card you owe $2,000 with a $10,000 credit limit while the second card has a $3,000 balance and a $5,000 credit limit that means you have a credit utilization ratio of 33% ($2,000+$3,000 / $10,000+$5,000). To improve your score you should strive for a lower credit utilization ratio than what you currently have because a high ratio is an indication that you may be overextended.

15% = Length of Credit History: The amount of time you've had a credit history is also a factor, with a longer credit history being seen as more favorable. A part of this is the length of time you've had your credit cards. It's a good idea to keep all your credit cards regardless of how much you use them, because part of your score is based on the age of your oldest credit card.

10% = New Credit:  Any new credit accounts you've opened are part of your overall credit score, although they are weighted less at 10%. This includes the number of recently opened accounts, and the type and proportion of accounts that are recently opened. It also includes any credit inquiries on your credit report, as they indicate that you have applied for new credit and the potential lender is determining whether your are a good credit risk before extending the loan (or credit card) to you.

10% = Types of Credit in Use:  Another factor including in your credit score calculation is the type of debt you have – typically credit score companies like to see a mix of debt such as credit cards combined with an installment loan like a mortgage.

By going over all 3 of your credit reports you can see if any of the above factors caused your credit score to decrease. We recommend staying on top of your credit reports and scores at all times because credit reports (and thus scores) are constantly changing. Monitoring your credit reports can also help catch any fraudulent activity or identity theft.

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Does Credit Report Monitoring
Affect Your Credit Score?

Q:  Once I enroll in Identity Guard, will daily checking affect my scores?

 A: Daily credit report monitoring will not affect your credit scores. Neither will getting your own credit scores. This is because Identity Guard TOTAL PROTECTION® is acting on your behalf (and not as a third party) to access your 3-bureau credit reports, and you are allowed to access and check your own credit reports and scores as many times as you want without any repercussions.

We give Identity Guard top marks as a credit report monitoring service. Not only do they provide 3-bureau credit monitoring, but members get all 3 credit scores for free when they sign up. Additionally, Identity Guard provides a slew of identity theft protection features and computer protection software. Right now they are offering a special to NextAdvisor readers—a free 30-day trial and 25% off the monthly subscription price.

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How Often Can I See My Updated 3-Bureau Credit Report?

Q:  How often can I view my actual updated credit report from all 3 bureaus with Identity Guard?

A:  When you sign up for the Identity Guard TOTAL PROTECTION® free 30-day trial, you'll receive a joint 3-bureau credit report that you can view and print online. After this initial report, your 3-bureau report will be updated quarterly. Note that it is an updated report, and not a full credit report. This updated report includes changes to your credit report since the last report update—it does not include all information that is contained in your current credit report. We think this is a convenient feature because it makes it clear what changes have occurs on your credit reports since the last update. When you sign up for Identity Guard you'll also receive free 3-bureau credit scores, 3-bureau credit monitoring, Zone Alarm Internet Security Suite, anti-keylogging software and lost wallet protection.

If you're interested in getting more frequent credit reports and scores, we highly recommend Privacy Guard. Privacy Guard gives you a 3-bureau credit report when you sign up for their 30-day $1 trial. You'll also get your credit scores from all 3 bureaus. Then, every month thereafter you'll get your 3-bureau credit report and 3-bureau credit scores. These monthly updates to your scores and reports are definitely an advantage of the service. In addition, members will receive Norton Internet Security Online which includes antivirus, antispyware, antispam and antiphising protection, email and IM protection, password management and parental controls.

To learn more about credit report monitoring and see how our independent reviews rated popular services, click here.

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Will an Identity Theft Protection Service Prevent a Lender from Getting Information?

Q:  I am in the process of refinancing my home. I completed and submitted the applications, giving my social security number and other important information. I decided not to go with that Broker and now I am concerned about the information I provided. Will identity theft protection make it difficult for a lender to obtain information?

A:  An identity theft protection service will NOT make it difficult for a lender to get your credit information. Instead, most services proactively monitor for the use of your personal information, provide 3-bureau credit report monitoring and offer some sort of computer protection. Some include other goodies like free credit scores and lost wallet protection.

3-bureau credit monitoring does exactly what the term implies – it constantly monitors your credit reports at Equifax, Experian and TransUnion and will alert you if a change occurs. It does not prevent potential lenders from obtaining information on your credit report. Only a credit freeze will lock down your credit report and prevent new creditors from accessing it.

We strongly recommend identity theft protection, particularly if you feel your personal information may be at risk. Our top pick is Identity Guard TOTAL PROTECTION® because of their strong protection features. Identity Guard monitors public records for any changes to your name, scans databases for application or Social Security fraud, and monitors the Internet's black market for any use of your credit cards, Social Security number or other personal information. It also provides 3-bureau credit monitoring, Zone Alarm Internet Security software, anti-keylogging software, mobile security software and lost wallet protection. In addition, members will receive free credit scores when they sign up. Right now, Identity Guard is offering NextAdvisor readers a free 30-day trial and 25% off.

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Will Unpaid Taxes Show Up on My Credit Report?

Q: I can't afford to pay my taxes, if I set up a payment plan with the IRS, will that go on my credit report?

A: According to the IRS, it shouldn't affect your credit score, as long as you set up a payment plan with them. However, if you have already received a notice from the IRS and decide to wait to pay your taxes or don't contact the IRS right away, they will decide to put a Federal Tax Lien on your account. They will then send out a notice of public record about the lien and that will show up on you credit report and could do a lot of damage. You have only 10 days from the time you receive the payment notice from the IRS to set up the payment plan, so don't wait too long.

The good news? Unlike other credit history, a Federal Tax Lien can be removed from your credit report as soon as the tax debt is paid off, or if you enter into a payment agreement with the IRS to resolve the debt and get them to agree to lift the Lien.

If you want to check your current credit scores or credit reports, check out our credit monitoring section. If you need help finishing your taxes for last year, click on our tax preparation section.

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When credit report monitoring services send an alert, once the credit report has been corrected will the alert be removed too?

Q:  When a consumer is notified by a credit report monitoring service that something negative has been found on their credit report, once the negative item has been removed will the alert also fall off of their monitoring report?

A:  Credit report monitoring services monitor key changes to your credit reports, they don't affect the information found on these reports. This means that if you receive an alert of a change to your report this alert is not appended to your credit report. The alert is just to inform you of a change and will not become part of your credit report or affect your credit score. Some credit monitoring services may also display the alert information in your online account interface, but this is for your information only and no one else (i.e,. your creditors or potential creditors) will have access to it or even know it exists.

If you do receive an alert, make sure to review the information and determine if it is inaccurate or fraudulent. If so, you should file a dispute request with the appropriate credit bureau to have it removed or corrected.

We recommend credit report monitoring as an excellent way to stay on top of the information on your credit reports. We particularly like Identity Guard TOTAL PROTECTION® because it provides 3-bureau credit monitoring, 3 free credit scores at signup and additional identity theft protection. Right now Identity Guard is offering NextAdvisor readers a free 30-day trial and 25% off the subscription price, which makes it an especially good deal.

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Does Identity Guard provide all three ACTUAL credit scores or just a simulation?

Q:  Does Identity Guard provide all three ACTUAL credit scores or just a simulation of what your credit score would be?

A:  Our top-rated Identity Guard TOTAL PROTECTION® does provide 3 actual credit scores upon sign up, one from each of the 3 credit bureaus—Experian, Equifax and TransUnion. The credit scores are not simulations, they are real credit scores based on the CreditXpert scoring system.

Members will also receive a 3-bureau credit report and public record report when they sign up for the free 30-day trial and 25% discount. The 3-bureau credit scores, credit reports and public record are yours to keep, even if you decide Identity Guard isn't for you and cancel within the trial period. All-in-all we think Identity Guard is a great deal and an excellent credit report monitoring service.

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How To Get Your FICO Score

FICO credit scores are considered by many to be the "gold standard" of the credit score world. In fact, creditors often use FICO® Scores to help evaluate an individual's creditworthiness when they apply for a loan. If you're interested in seeing what your FICO® Score is, you can now purchase a one time access of your Equifax and/or TransUnion FICO® Score.

With FICO® Standard users get one credit score and report from Equifax or TransUnion. You'll also get an explanation of the positive and negative factors affecting your credit score. The Equifax and TransUnion information is sold separately, and each set of data costs $19.95. That means if you'd like both your Equifax and TransUnion FICO® Scores it will cost $39.90. At this point in time Experian does not allow the Experian FICO® Score to be sold to consumers (click here to learn why).

Although we think the FICO® Score system is great, if you think $39.90 for one-time scores is a bit steep or you want to know your Experian credit score, you might consider signing up for one of the free credit monitoring trials we review on NextAdvisor. These free trials often provide free 3-bureau credit scores, and although they aren't FICO scores they are still very useful for helping to evaluate your credit standing.

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What is the highest credit score possible?

Q: What is the highest credit score possible?

A:  Long story short, credit score values vary by credit score provider. For example, the popular FICO® Score (provided by Equifax Score Watch)  has a range of 300 to 850, so 850 would be the highest score you could achieve. Credit Xpert (provided by Identity Guard TOTAL PROTECTION®) and Equifax Credit Score (provided by Equifax Complete Advantage) also have ranges of 350 to 850. However the Vantage Score (provided by TransUnion TrueCredit) is different, starting at 401 and going all the way up to 901.

The most important thing to keep in mind is the actual credit score is meaningless without the "translation" or what that score represents in terms of credit risk. Each credit score provider has their own rating system, so a Credit Xpert 775 score has a "good" rating while a Vantage 775 score has a less favorable "C" (average) rating. A cost effective way to get your credit scores and keep track of them (and your credit report) is credit report monitoring. Several of our top-reviewed services offer free credit scores and reports when you sign up, and updated credit scores monthly or quarterly.

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How does credit monitoring affect your credit score?

Q: I've been told that your credit score can suffer if your credit report is checked too often in a 12 month time period. How does credit monitoring affect your credit score?

A:  Good news—first off, you can check your own credit score and/or report as many times as you want without it affecting your credit score. Checking your own credit score/report is considered a "soft" inquiry and will NOT affect your credit score in any way.  It also won't show up on credit reports given to third parties.

Additionally, subscribing to a legitimate credit monitoring service won't hurt your credit score.  That's because when you subscribe to a credit monitoring service you authorize them to act on your behalf to monitor your credit reports.  This means they can also check your credit scores and reports without it affecting your score.  If you're in the market for a credit monitoring service, take a look at our top-rated Identity Guard TOTAL PROTECTION® and PrivacyGuard.

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