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  Helpful tips on understanding and fixing your credit:
 

Credit Bureau (Trans Union, Experian, Equifax) Scores range from 375 - 900 points, the higher the "FICO" score the lower the potential risk of default on loan repayment. The repository scorecards use up to 40 different variables to determine the risk associated in lending.  Credit scores reflect payment patterns. 

 

*** Delinquencies remain on your report for seven years (if your account is sold or resold to another collection company each record is dated based on the reported date by each company).  Public records remain for ten years.

 

                              

 

How data impacts score:

 

  •  35% = 
    repayment history: severity, recentcy, and frequency of delinquencies (lates, collections, chargeoffs) and public records (judgments, bankruptcy, foreclosures, tax liens, child support).  The more recent the delinquincy the more impact is has on the score. A 60 day late drops score more severely than a 30 day late.

 

  • 30% = Outstanding debt utilization (the proportion of outstanding debt in comparison to credit limit). The higher the balance versus the limit the more point reduction on your score.

 

  • 15% = History of credit establishment (age of account).  Newer accounts represent higher risk (score reduction) than established accounts.  Until a payment history is established there is no way of knowing if debt will be paid on time. 

 

  • 10% = Pursuit of new credit (credit inquiries).  Each inquiry has the potential of establishing more debt.

 

  • 10% = Type of credit being used (a finance company may have a more negative impact on score than a traditional lender).

 How to increase your score:

 

  • Pay down accounts - the greatest score increase will result by paying down the balance to 30% of the limit.

 

  • "Surfing" for a new lower rate credit card and transferring your balances can hurt your score.  (Inquiry may drop score, added debt may drop score, maxing out the available limit may drop score). 

 

  • Don't close an account until you've had it open long enouph to allow for the positive payment history to be reported (12-24 months).

 

  • If you've filed for bankruptcy or have no established credit - open a secure card/loan to establish or re-establish a positive payment history (12-24 months) on 3-4 tradelines. Enquire at your local bank for details and minimum amounts.  Be sure to open a "Secure" card, not a debit card so your re-payment history is reported to the bureaus.

 

  • Make sure your credit is being reported correctly.

 

  • Pay any outstanding collections, chargeoffs, judgments.

 

  • Time is a must.  Even if you increase the scores, recent deragartory information may cause a denial because of the payment history.  Lenders want to see on time payments over a period of time (24 months or more).