Abigayle Drysdale asked:




What’s a good credit score? That depends upon the reporting agency assessing your history. Some scores are lower than others, depending upon a person’s financial behavior. Some people find the need to increase their scores after a time of lower trending scores. Maintaining and repairing a credit score can take as little as two months, depending on how low your score is.

Pay down all revolving cards. Your overall score may be decreased by late payments, missed payments, or high balances on your cards. Paying credit cards completely off every month can actually cause a lower FICO score while keeping the balances low and paying regularly above the minimum required can help raise your score. Credit cards are excellent tools for credit and should be treated as such.

If your debt is larger than what you earn, your credit score will be lower. Lowering your debt in relation to your income can help increase your FICO score. If you are unsure where your score currently lies, you may check your credit score online with one of the three major credit reporting agencies (Equifax, TransUnion, Experian). Also, you should always choose wisely the credit you apply for. The more checks that are performed on your account, the lower your score will be.

It is not impossible to raise your score but it must be maintained once raised. Enlisting the help of a good credit counseling service as well as a financial planner can help in doing this. Though it may take as little as two months, you should be prepared to work at raising your score over two or three years. There are some items, such as defaults or bankruptcies that can take ten years to disappear from your history. The most important thing to remember is that you should responsibility for your own financial life. Work to keep your score high and reap the financial benefits.

Danny

W. M. Blake asked:




Everyone has a credit score. It is inevitable and impossible to avoid being sought out by creditors. Once you are in debt, it is an up hill battle to gain control over it again. Your score reflects how well you have maintained your credit.

What Is an Average Credit Score?

The average score for most people is between 650 and 700. This score is right in the middle of where you should be. The best possible score is 800 and the lowest is 300. If you are in the middle or even close to being on the low end, you should think of ways to improve your score.

How to Make Your Score Better

There are a number of ways to improve your credit score. The most important thing you can do is pay your bills on or before the schedule payment due date. Anything that is paid late will be reflected on your credit report in a negative way. Paying your bills on time will also help you to lower your balances, which will make it easier to pay your debt of quicker. Do not make hasty decisions about your debt. Try to stay away from higher rate loans with high balances. These types of loans will take longer to pay off in full and stay on your credit report longer.

Consolidate Your Debt

If you are really having a hard time making your payments and just living day to day and not having to worry about bill collectors constantly calling you, then maybe you should look into a debt consolidation loan. There are loan programs out there that are designed to help you get your debt under control. Lower interest and lower payments make it easier for you to pay off the loan and increase your credit score a lot faster.

Check Your Credit Report

Everyone should look at his or her credit report at least once a year. You can obtain a free copy of your credit report by getting online and simply typing in “free Credit report”. Checking your credit report will give you the opportunity to confirm that all the information in your report is correct. You will be able to check and see if there is anything bad on their and what you can do to get it off of your report.

April

Steven Anna asked:




When it’s time to fix your credit score, there are two options: you can spend the time to learn the requisite aspects of the credit reporting business, or you can utilize a professional credit repair service. There are benefits to taking either path.

Option one is repairing your own credit. The big benefit of repairing your own credit is that the financial cost is minimal. Most people find the credit repair process daunting and confusing, but once you understand how it all works, it is certainly possible to go it alone. One thing to keep in mind is that fixing your credit score on your own will probably be a time consuming undertaking.

The first step of the process is obtaining your reports from the three primary credit bureaus; Experian, Trans Union, and Equifax. You will notice right away that the reports do not match; that’s because each company has their own set of reporting standards. This is why it is critical to obtain credit reports from all three of the bureaus. Review and compare the three reports, and make a list of all the inaccurate items.

The next step is to write letters to each of the credit bureaus to dispute each of the erroneous entries. Note that you need to write a separate letter for each specific item that you are disputing to each bureau that lists that particular account.

Within a month you should receive a letter back from the applicable credit bureau with a disposition for your dispute. Follow up with each applicable bureau until all of the erroneous data has been corrected.

Option two is to utilize a professional credit repair company to help you fix your credit score. Credit repair companies can help you fix your credit score fast because they have an intimate knowledge of exactly what actions influence credit score and by how many points.

A good credit repair company also has direct contacts that they deal with regularly at the credit bureaus which is certainly going to quicken the pace of the action. Depending on your circumstances, it is possible to increase your credit score as much as 200 points in a matter of weeks. The downside is that you have to pay them for their service.

The bottom line is that whether you choose to hire a credit repair company, or you decide to go it alone depends on if you would rather spend the time to do it yourself or spend the money to hire an expert… just like most things in life.

Loretta

Jeremy Zongker asked:




When you apply for credit one of the first things almost all credit officers do is check your credit score. Although not all of those officers explained to us what a credit score is, we are all rated according to it and the offers we receive were all dependent on that score. This is why understanding your credit score is of utmost importance, and for future reference at least basic knowledge should be acquired. In the following paragraphs we will tackle understanding your credit score, realizing what your credit score means and analyzing what you can do to improve it.

Credit score is actually computed as an average of several elements from your credit report. This report is typically broken into five different sections and each of these sheets will represent a piece of the final score. Each category of credit report information occupies a certain percentage in the final score. To begin with, it is essential to say that the highest percentage is taken by the category made up of credit and payment history. An issuer will look at all types of payments: credit card payments, retail accounts, installment loans and so on. He or she will particularly look at the number of delayed or not paid payments, time passed since the last skipped payment, number of problematic accounts as compared to accounts in good standing.

The next thing taken into account when computing the score is the total amount owed. These amounts are looked at in their absolute value and also in proportion to the credit limit. The number of accounts with balances is also relevant. The third thing issuers analyze is credit history, or how much credit you’ve had and for how long. Understanding your credit score is essential to you and you need to know that the length of all credit lines and their activity will be monitored and will matter significantly in the final credit score. Also, remember that all scores take into consideration recent credit activity. This category includes number of credit inquiries, new opened accounts, their amount, the time since they were opened and of course reestablishment of credit history if there were any issues in the past. Last, even if many people do not regard it as important the type-element is also significant – that means that the type of credit line you have (credit card, installment, mortgage) also plays a role (about 10% of the final score) in computing your credit score. You also need to understand that your credit financial report is the basis of computing your score. Each of the above mentioned elements is specific to every one of us, and as such if for some people amount owed is the major factor for others credit history is essential, therefore it is impossible to give exact percentages as to how much an element weighs in the final credit score.

Understanding your credit score, none the less, is not the only important aspect, managing it is also important. You will be able to improve your credit score if you follow a few simple tips. First of all, try to pay all the bills in time. This is more important than any of the other factors. If it’s not possible to pay on time you can usually get away with paying the bill within a 30 day window of the due date. If you miss this date it is almost certain to end up on your credit report. Keep balances low on your credit cards and other revolving credit and try to pay off debt. Also avoid moving credit from one credit card to another. The low intro rates many companies offer for balance transfers can be very helpful, but it takes a toll on your credit score. It is also recommended that if you plan for applying for important credit soon, avoid opening too many other new accounts. When in doubt, hire a financial consultant. Most people may see this as an expensive luxury that they can’t afford, but in reality financial consultant prices are fairly reasonable. Even a single visit can help you drastically improve your credit score, and if that results in a lower interest rate on a large loan it will more than pay for itself. A consultant will also be able to explain the credit score better.

All in all, what you need to know is that credit score influences depends on your credit report and it directly influences your credit payments and amounts. The higher the score the lower the interest rate and the payment will be. Taking into account the importance of this indicator, understanding your credit score will automatically mean you have more chances to improve and make it higher and therefore benefit from better loans.

Sherry

John Dow asked:




There is a new FICO credit scoring system called FICO-08 that was designed to better serve the credit industry. The two major changes are about small inconsequential infractions and people who piggyback onto others good credit history. This new scoring method has been in testing for the past 6 months by over 400 different companies.

Your credit score is a number, somewhere between 300 and 900, that is determined by your credit history and a basis used for predicting whether you will pay your debts. The FICO credit score is the most often used method in determining creditworthiness of individuals by credit granting companies. FICO stands for Fair Isaac Corporation and they created the first credit scoring system in 1958.

This FICO credit score was originally designed to address investments but was updated to rate individuals in 1970 when credit cards became more popular. The three major credit bureaus, Equifax, Experian, and TransUnion, use the FICO scoring method to provide information to many lending institutions. Both the credit bureaus and the lending institutions may add additional enhancements but the FICO score is usually the base used most often.

Lenders can use FICO credit scores to determine if an individual qualifies for a loan, the interest rate, and what their credit limits should be overall. No one knows the exact methods that are used to determine the actual FICO credit scores; it’s a closely guarded secret. The main concern being that people will try and misrepresent information to mislead the scoring method.

The goal of this new credit scoring method was to lessen the impact of one or two late payments. Anyone can have a lapse of memory, or be on vacation, or even in the hospital when a payment is due and blow it. This type of scenario should not have a major negative impact on a credit score.

The new scoring system now ignores minor delinquencies of $100 or less or a single delinquency when determining your credit score that are over two years old. However, if there is long-term evidence of tardy payments, it will still have a negative impact on your score.

Another change has to do with the amount of credit used or how close you are to your over all credit limits. As an example, if your overall credit limit has been determined to be $20,000 and you are at $18,000 in credit used, this will have a negative impact. This has always been a factor but more importance has been attached to that factor in the new scoring method.

Another area that has been adjusted is where one individual has piggybacked onto another individual’s credit. The most common method for this type of scenario is when someone without credit or a low credit score is added to another individual’s credit card account that has a better credit score. This practice is widespread and people actually sell this type of service.

In order to eliminate this type of practice, the new scoring system grants no advantage. The new FICO-08 scores will single out individuals who are named as authorized users and no credit for this practice will be assigned. This is a good example why the credit scoring methods are not disclosed to prevent this type abusing the credit system.

Not all lenders are using this new method but most will probably adopt it over the next year. Mortgage companies who use private investors, Fannie Mae and Freddie Mac, or normal conforming loans still have not adopted the new method. But most lenders in the auto, regional banks, and credit unions have started using FICO-8 scoring.

Roberta

Jed C. Jones Ph.D. asked:




Your credit score follows you wherever you go: when you move, when you change jobs, and when you apply for a new credit card or get a new loan.

The big three credit reporting agencies are Equifax, Trans Union, and Experian. They all use the same formula to calculate your score, but each one bases the calculation on slightly different information about your credit history. Hence, your score from each agency is a bit different. These agencies make millions of dollars each year by collecting this credit-related information about you and then selling it to businesses and creditors who request it.

If your credit score is lower than 720, you have either a fair or a poor credit score. This means you will not qualify for the best rates on credit cards and loans. Luckily, there are proven ways to improve your credit score.

Here are 5 ways to raise your credit score.

First, you must check your scores regularly from all three agencies. You can actually get your credit score for free online once every 12 months from each of the big three reporting agencies. It is also advisable to subscribe to any number of monthly online credit reporting services that give you regular updates each month. They will also inform you of any changes to your score.

The second step to raising your score is to be sure to correct any obvious errors in your credit report. There may be errors related to your current mailing address, glitches indicating you missed payments that you actually made, or erroneous charges attributed to you that you never actually made. You must fight and then correct each of these errors, one-by-one, by contacting each of the big three agencies separately. Note: when you contact an agency, they may ask you to show evidence of the error. At this time, they may also require that you send copies of documents that prove your own identity, such as a valid driver’s license or a passport.

Third, make sure you are paying all of your bills on time. If for some reason you are behind on your payments, contact each of your creditors and ask them for an extension on your payment due dates. You may also sometimes be able to negotiate a lower minimum payment for certain credit cards or other accounts.

Fourth, you can actually improve your credit score by opening new credit cards or store accounts. While this sounds like financial suicide for someone who already has a low credit score, having more credit extended to you actually improves something called your credit-to-debt ratio. In other words, the more credit you have, the better. Of course, the trick is that you must not borrow against the newly-acquired debt instruments. Hint: try to open new accounts one at a time every 3 months or so, and be sure to watch out for cards with high annual fees.

The fifth way to raise your score is to transfer all of your existing credit card balances to your lowest-interest cards. This could save you $100s per month in lower debt payments, which will help you pay down your existing debt faster and thereby help raise your credit score. Watch out for high balance transfer fees, but sometimes even paying these might be worth it if it means saving more money in debt payments.

Raising your credit score can be one of the smartest financial moves you make. Spend the necessary time and effort improving your credit score now and enjoy the long-term benefits of lower debt payments and the ability to qualify for more types of lower-interest loans.

June

Jo Jude asked:




How your credit score is calculated

Credit score information allows lenders to gauge a credit applicant to see if he or she is worth the risk of availing credit. After all, credit institutions are a business and need to profit from their investments in terms of lending their money resources. It is sensible business practice that they try to lend it to people who are responsible enough to pay them back later.

Lenders and credit institutions try to assess each credit application by looking at the applicant’s credit score information. Through it, these institutions will be able to determine if an applicant is worth the risk. The credit score is obtained from information based on the past credit activities of the applicant as well as other related information. All these can be found on the applicant’s credit report.

Your Credit Score

A credit score is calculated using the various information contained in the credit report. Different factors come into play when a credit score is calculated. A designed formula is used by credit reporting agencies to come up with the credit score. The formula takes into account the information from the credit report, both good and bad, to come up with the appropriate score.

In order for this score to be calculated, the credit report must have, as a minimum, one account which is at least six months old & one that has been updated for the same period. This will ensure that there is enough recent information in the credit report from which to base the calculation.

Payment History

Payment history accounts for about 35 percent of the credit score. This includes payments made on time as well as late payments. Public records can find their way into the credit report such as late or non- payments, bankruptcies, lawsuits, etc. These all may be considered when computing the credit score.

Amount of outstanding credit

The amount of credit that you have availed in the past accounts for about 30 percent of the credit score. Not only is the total amount looked upon but also the amount borrowed from different accounts. The balances on certain accounts may also affect the credit score. Maintaining a small balance for example, will have a positive effect on the credit report and may help keep your credit score up.

Credit History

The length of your credit history accounts for 15 percent of your credit score. Your oldest account and the average age of your other accounts are taken into consideration when calculating your credit score. Also considered is the length of time that has passed since you have used certain accounts.

The number of new credits availed accounts for about 10 percent of your credit score. This includes the length of time that has passed since you have opened a new account. The number of credit requests in a one year period is also considered.

The various types of credit that you have availed accounts for 10 percent of the information that goes into the calculation of the credit report. Revolving credit, such as credit card debts and personal loans or mortgages, is also taken into account.

Conclusion

The formula used by the different credit reporting agencies in calculating your credit score do vary slightly from company to company but they all follow a very similar process.

Hector

Jeff Schuman asked:




You can spend years reliably and responsibly paying all your bills on time and building up an excellent credit score. But unfortunately unexpected things like medical bills or divorce can happen which can impact your score.

Here are some tips to help you to get through this and improve your credit score.

The important thing to remember is that nothing is forever. If you are late on a payment or even have to file bankruptcy this does not impact you forever. So what should you do if negative items occur?

First of all, if you feel that the item was inaccurate or misreported, then you can contact your credit reporting agency and challenge it. The credit bureau has a legal obligation to investigate and confirm whether or not the report was accurate.

If they can’t do this within 30 days, then they have to remove the negative item or correct it so that it reflects accurate information.

The next important thing to do is to make sure that the situation doesn’t continue to deteriorate. Try to pay all your bills on time. If at all possible, try to avoid paying any bill more than 30 days late since these get reported and reflect negatively on your credit score.

And if you are able, pay down the open balances on your credit card bills. If the amount of debt you have as a percentage of your available credit goes up, it negatively impacts your credit rating. So try to get your balances paid down as much as possible and you’ll find your credit score increase.

Beatrice

Scott Paul asked:




Do you know your credit score? How do you interpret your score and repair it if necessary? Credit scores are a big part of our financial stability and future. In order to secure the best future for you and your family you NEED to have good credit. A huge step to improving your credit is to understand the credit bureaus and how they formulate a credit score.

If you own your own home, or car, or taken out a car loan you are probably familiar with credit lines. If you have good credit you can get low interest rates and if you have poor credit you will have high interest rates or maybe secured loans. Credit score scales are basically all formulated the same way.

They look at you previous credit history, which would include poor credit history, faulted loans, late payments, amount of the payments, number of payments, number of loans, length of time you have had credit, credit cards, checking account lines of credit and so on and so forth. All these things impact your credit and if you are late on payments or are never using credit at all it will take a long time to improve your credit. The best advice to get good credit is to use it often, but use it in small amounts that are easy to pay off on time so you don’t shoot yourself in the foot.

Another thing people don’t often think of is that credit inquiries and credit applications also affect your credit score and make you look suspicious.

Barbara

Robert S Holland asked:




Lenders check your credit when you apply for credit. If you are looking to buy furniture on credit, buy a new car, get a mortgage on a new home, your credit is reviewed. When the lender pulls your credit report it is considered an inquiry. Those inquiries count against you on your credit report.

They count against you because lenders think that you are looking around for credit and if you get all of the credit you may be a bigger risk. That risk relates into a problem for you. The credit bureaus will count that risk into their calculations on your credit score. Because it is a negative risk, it so reflects on your credit report.

Some people say that inquiries don’t hurt your score and other say they only affect your credit score a little. But they can affect your credit score and if you have a lot of inquiries, you will see a definite change in your credit score.

So try to keep your inquiries down. If you need a car, then I suggest that you apply for any automobile loans all at one time. This will give you several inquiries all at once and will appear that you are “shopping” for a car loan. When the bureaus see a group of inquiries all at one time they group them together and they do about as much damage as 1 inquiry rather than several.

The same is true for other things as well, such as a Home Mortgage. If you apply at several mortgage places and they all run your credit, it will appear that you were shopping for a Home mortgage. The damage is greatly reduced.

Just remember if you get accepted for all that credit, you will have a new problem. You will have a lot of “new credit”. This new credit will lower your score (because of the age of the account(s) and raise your available credit limit (in comparison with your income). But if you see any hard inquiries (the ones that count against you) that you did not apply for, dispute them and do the credit repair.

Andrew