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Everyone should have good credit

Category: Credit Basics

Minimum Requirements for a FICO Score

While many consumers fret over having low credit scores, others, including many seniors and young adults, face a less discussed challenge: Having no FICO score at all. Many of these folks, especially those with long credit histories, are clueless as to why they have no score.  Hopefully this post will explain why.

In order to have a FICO score, you must meet these three requirements:

  • Have no death certificate or death notation in your credit file;
  • Have at least one account in your credit file that’s a minimum of 6 months old;
  • Have at least one account in your credit file that has been updated in the last 6 months.

These criteria make it easy to see why college students or retirees who’ve paid off their mortgages, cars and other debts long ago have no scores. Remember that even positive tradelines can be removed from your report after 10 years.

Credit Basics: Hard Pull vs. Soft Pull

This post is part of our series on the basics of personal credit.

HARD PULL – A third-party inquiry of your credit report that affects your credit scores and is visible by others. Each hard pull typically lowers your credit score by a few points and having too many inquiries in a short period of time is a common cause of credit denial, which is why hard inquiries should be closely monitored and managed. Hard pulls remain on your credit report and visible to others for up to two years from the date of the inquiry, but they only affect your credit score for the first year.

SOFT PULL – An inquiry of your credit report that does NOT affect your credit score and is visible only by YOU. There are many types of soft inquiries, including most types of account reviews by your existing creditors. When you access your own credit report, it is a soft pull.

GOOD TO KNOW

A popular credit myth is there is a law which dictates how long a hard inquiry can stay on your credit report. There is no such law. However by convention all three credit bureaus delete inquiries older than 2 years.

Another popular myth is that multiple inquiries of the same type, such as mortgage or auto loan inquiries, acquired within a 14 or 30 day period are viewed as a single inquiry for credit scoring purposes. This is partially true, but the problem is that this benefit only occurs when all of the inquiries are coded the same way by the various entities pulling your credit, which they rarely are. Also keep in mind that even if you acquire 10 hard inquiries that only reduce your score as if they were 1 inquiry, all 10 will still be visible on your report and taken into consideration.

TIPS & BEST PRACTICES

Before applying for credit that you know will involve a credit pull, ask the potential creditor if they can use a soft pull instead of a hard one. You’ll be surprised at the number who will. After all, the creditor gets the same data either way.

Try to spread your hard inquiries among your three credit profiles (Trans Union, Equifax and Experian) so you don’t accumulate too many in one place. Before applying for credit, ask the potential creditor which bureau they use or look them up in the Credit Pulls Database.

Think carefully before disputing an inquiry. Although inquiries can be legally disputed like any other incorrect information in your credit file, doing so frequently gets a fraud alert attached to your file (because disputed inquiries are often a sign that someone has fraudulently applied for credit in your name without your consent). Don’t get me wrong, if your identity has been stolen or someone is applying for credit in your name without your consent, you should by all means dispute the fraudulent inquiries and do everything else prudent to protect yourself. But if the inquiry is legitimate, you’ll find that having a fraud alert on your file will be a much bigger headache than the few points you’ll lose by letting it remain.

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