I wrote in “Personal Finance 201: Credit scores” about how FICO scores are almost the only credit scores that matter. Most large financial institutions such as Bank of America, American Express, Discover Financial Services, and Citigroup, rely on FICO scores for creditworthiness measurement. Knowing your FICO scores is helpful in timing your credit application; a few points difference in credit scores can translate to thousands of dollars of payment on your mortgage.
Based on the table above, the difference between the first category and second category of credit scores translates to a difference between a 4.236% and a 4.014% on 30-year mortgage loan. For a $300k mortgage loan, the difference in payments is approximately $39 per month, which comes out to be around $460 per annum, or $14,000 over the duration of 30 years.
MyFICO is the consumer service division of FICO, the company that builds the eponymous credit scoring models. They offer a few credit score-related services, and I have had a chance to try out most of them. The one I find the most valuable and have been using for a year is a credit score monitoring service called Score Watch.
Score Watch alerts you when there is a change in your Equifax FICO credit score. Equifax is one of the three consumer reporting agencies (CRA’s); your Equifax FICO score is based on your Equifax credit report. The scoring model that Score Watch provides, called FICO 04 Beacon 5.0, is commonly used for mortgage lending. This is one of the reasons why Score Watch appears to be one of the priciest credit monitoring services in the market.
While Score Watch is a pricey service, the host of features it offers makes it worth it, in my opinion.
Score Watch monitors your FICO score in almost real-time. Every time there is a significant event happening to your Equifax credit report, Score Watch sends you an alert. Significant events include credit inquiries and new trade lines. You can also set Score Watch to alert you of credit card balance changes and FICO score changes, the latter being monitored every 10 days. This is about as extensive a credit monitoring service can be.
But what really distinguishes Score Watch from all other similar services is that it gives you FICO scores, the industry standard for credit scores.
In addition, subscribers to Score Watch receive a credit report with score. If you purchase an annual subscription, you get 2 credit reports with scores. For the duration of your subscription, should you see the need to view the whole Equifax credit report, you can buy a report from MyFICO at a 30% discount.
One particular feature I find fascinating about this service is the credit score history. With only a year and 10 months of history, my credit profile is quite thin, and thus my credit score tends to fluctuate a lot. Over a year’s time, I closely followed the impact of credit events on my score to learn how to maximize my credit score when needed.
Score Watch also gives you estimates for interest rates on credit products based on your current FICO score. As I am close to buying a car, I’m most interested in auto loans. If you’re looking to buy a house, you should pay attention to mortgages. This is what the estimates look like. I find this nifty. Do you?
Last year I purchased an annual subscription for $100. When the subscription ended a couple of days ago I went month-to-month for $10 a month. The official price is $15 per month, but if you give them a call you may be able to get the $10/month deal.
I consider Score Watch one of the most valuable credit monitoring services in the market. As I am getting closer to buying a car, knowing my FICO scores is becoming more important, and Score Watch is the only service I know that monitors FICO scores on a regular basis. If you anticipate searching for a mortgage, the money you save by knowing your FICO score may be worth many times the cost of Score Watch.
Here is the link to the product: http://www.myfico.com/Products/ScoreWatch/
If you have any questions about Score Watch, feel free to leave a comment below. I will answer from my experience.
Richard (Hiep Tran)