- NBC Today Show
- Katie Couric
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Today show financial editor Jean Chatzky discusses the basics of your credit score.
Credit, Score, Report, FICO, Fair Isaac Corporation, Mortgage, Lender, Creditor, Bank, Employer, Landlord, Insurer, Insurance, Agencies, Equifax, Credit Bureau, Loan, Credit Card, Debt, Credit History, Paying, Payments, Personal Finance
"What Is a Credit Score?" Katie Couric, correspondent. NBC Today Show. NBCUniversal Media. 19 Mar. 2001. NBC Learn. Web. 4 November 2017.
Couric, K. (Reporter). (2001, March 19). What Is a Credit Score? [Television series episode]. NBC Today Show. Retrieved from https://archives.nbclearn.com/portal/site/k-12/browse/?cuecard=43148
CHICAGO MANUAL OF STYLE
"What Is a Credit Score?" NBC Today Show, New York, NY: NBC Universal, 03/19/2001. Accessed Sat Nov 4 2017 from NBC Learn: https://archives.nbclearn.com/portal/site/k-12/browse/?cuecard=43148
What Is a Credit Score?
KATIE COURIC, co-host:
Most of us are in the dark when it comes to how financial institutions make decisions about lending us money. Started today, that changes. For a fee there's a new service that will make your credit score available to you. TODAY financial editor Jean Chatzky is here to tell us all about it.
Jean, this makes me nervous. What's a credit score?
Ms. JEAN CHATZKY (TODAY's Money Editor): A credit score, a lot of people are--are somewhat aware that they have one, but they don't know what it is. It's a number that is attached to your credit report. The--a company called Fair Isaac takes all the information in your credit report and basically boils it down to this one score that most of the company's lenders for mortgages and auto loans use to make their decisions.
COURIC: So most of them. I mean, do all of them. Are there certain companies you could go to if you don't have a great credit score who might not have the 411 on that?
Ms. CHATZKY: They all use the information, so you are going to have to work on getting this score in shape. But no, 75 percent of the com--country's mortgage lenders use this actual score, so it benefits you to know what yours is and make sure that it's decent.
COURIC: OK. It's not only used by creditors, it's also used by employers?
Ms. CHATZKY: Employers, auto insurers, landlords. All of those people use the information in your credit report in some form. They may use this score, they may use a slightly different score that's cooked for their purposes. But this information follows you everywhere you go, so you really need to be very careful to protect it.
COURIC: And I guess the big news is that people can look up on the Internet their credit score for the first time, right?
Ms. CHATZKY: For the first time, the actual score. You can go to two different Web sites. One is called equifax.com, the other is called myfico.com. That stands for Fair Isaac and Company. And these are the two companies that have teamed up to offer it to you. The other credit bureaus will be doing so in the future, but this is where you can get it right now.
COURIC: OK. Over all, before we talk about how they add up and how they get to your credit score, how do people fair in general.
Ms. CHATZKY: Not as poorly as you might think considering all the bankruptcy information that's been in the news. Scores range from 300 to 850. On average most Americans are in about the 700 to 720 range. But a good one-fifth of people are below 600. And what the lenders have found is that half of those people represent most of the defaults on things like loans. So those people are going to have a very tough time getting credit.
COURIC: All right. Let's talk about how they add up your score. The first is a big chunk of it has to do whether or not--about whether you pay on time or not.
Ms. CHATZKY: Right. Creditors like to see that you have a good history, a good pattern of repayment. If you have one or two 30-day late payments over a long history, that's not going to hurt you as much as having a lot of them over a short period of time and very recent.
COURIC: OK. The next is what you owe. That accounts for 30 percent of the score.
Ms. CHATZKY: And it's not just the number. It's what you owe as a percentage of the credit that you have available to you. Creditors like to see that you can manage your credit, so they don't want you to owe absolutely nothing on your cards. But if you owe 80 percent of your limit, that's detrimental. Even 60 percent is detrimental. You want to keep it in the 20 to 30 percent range.
COURIC: Also, the time you've had credit accounts for about 15 percent.
Ms. CHATZKY: Right. You want to see a good credit history. And often when we come--go to try to clean up our credit we cut up those old cards in our wallet because they're the most expensive but, in fact, it may pay in terms of your credit score to just hold onto that card you've had the longest. Use it once a year, pay it off all the time.
COURIC: OK, mix of credit is 10 percent.
Ms. CHATZKY: They want to see that you can handle credit cards or revolving credit as well as installment loans on things like cars and homes. So having a mix is important.
COURIC: And pursuit of new credit is also 10 percent.
Ms. CHATZKY: Right. They don't want you to be out in search of more credit, more money, frequently, all the time. Now, a lot of people worry that if they're going out to look for a mortgage and they shop around and they look at 10 different lenders it's going to hurt them, it's not. Those are all looked at as one application. But going out month after month can really be a detriment.
COURIC: Now what if you see your score and you think it's incorrect, because I know everybody's had problems in the past. I know I moved and I got a car payment sent to the wrong address. All of a sudden it was like showing up on my credit rating.
Ms. CHATZKY: Right. I've had problems too. There was another person with my name and her information was showing up on my report. If you have problems with your score, it means that there's a problem with the information in your credit report. And the way this product is being packaged, you get both the score and the report and a list of all the reasons--the four top reasons that you're having problems so you know what you have to do to fix them. But if there's something wrong, you have to go back to the credit reporting agency and try to get it fixed.
COURIC: Wow. And that might be very time consuming and bureaucratic and tough to do. But is it worth it? I guess if it's a big mark against you it is, right?
Ms. CHATZKY: Yeah. You absolutely have to do the work. And it's not as much as a hassle as it used to be. I know that Equifax for one has a mechanism on the Web where you can actually just say, `This is wrong,' and just send them a little e-mail.
COURIC: Now, you pay a fee to get this score?
Ms. CHATZKY: Twelve ninety-five to get the score with the credit report. The credit report, by itself is typically about $8, although in some states you get it for free.
COURIC: OK. Jean Chatzky, interesting.
Ms. CHATZKY: Thanks.