Beacon/ FICO scores and how they affect you?
The three main crediting bureaus, Experian, Equifax, and TransUnion, use different variations of the FICO credit scoring system. Beacon credit score systems are used by the Equifax bureau. There are various factors which influence the Beacon scoring system or reports. These include employment status, income, enquires made, debts, payment history and other related factors. Most of the banks and other financial institutions check the FICO or Beacon scores so that they can determine the creditworthiness of debtors and their repaying capacity.
Misconceptions about these scoresThere are various kinds of misconceptions about these scores. But these can lead to poor credit scores for debtors if they are not rectified. These common misconceptions are-
a) Accumulation of credit cards is bad
Accumulating too many credit cards is not bad at all. The factor which affects your credit score is the frequent requests to get credits. Having too many credit cards will not affect your credit score. It is the way you use them which will show on the credit score. Contrary to this misconception having more available credit will help you to improve your credit scores, especially if you can keep your balances low.
b) Closing credit card and bank accounts
Most people close older bank accounts and credit card accounts thinking that it will hamper their credit scores. But instead keeping credit card and bank accounts with good revolving credit will help to improve your credit scores. The closure of such accounts leads to an immediate drop in your credit scores as a credit history is being erased from the report.
c) Opening of accounts that are marked open is bad
Opening accounts which are marked open is not bad. This is not a priority if you are trying to improve your credit scores. Having an open account like this can actually help to get more available credit and also get good standing in history.
d) Debt consolidations does not help to improve credit scores
It is true that debt consolidation has risks but these are minor as compared to the huge advantages that they provide. With the help of a debt consolidator multiple debts can be easily settled. Legal advice on controlling spending habits and getting out of debts are also provided. It ensures settlement of all debts and at the same time improves your credit score drastically. Your FICO scores are improved with each settled debt.
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