Thread: The truth about credit scores

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AMOUNTS OWED (30% of your score)

•Amounts owed on Revolving accounts
•Amounts owed on all accounts
•In some rare cases, Lack of balances
•Number of accounts with balances
•Proportion of Balance to Credit Limits on Bank Revolving or other Revolving accounts
•Proportion of Balance still owing on installment accounts

LENGTH OF HISTORY (15% of your score)

•Time since accounts have been opened
•Number of recently opened accounts
•Time since account activity
•Proportion of new credit vs established credit
•Re-Establishment of new credit following adverse payment problems

TYPES OF CREDIT USED (10% of your score)

•Number if various types of accounts following past payment problems
•Number of various types of accounts (Credit cards, Retail Accounts, installment loans, mortgages, consumer finance accounts, etc.)

NEW CREDIT/INQUIRIES (10% of your score)

•Number of recently opened accounts
•Number of recent inquiries
•Time since inquiry
•Time since account opening
Your credit score takes into consideration all of these factors. In some situations, one factor can have a larger influence on one persons credit score. This depends on each individual credit situations and credit history. It is almost impossible to say exactly how much each factor will influence ones credit score due to the limitless possibilities.

ADVICE GIVEN BY CREDIT BUREAUS IN REGARDS TO HAVING AN IMPROVED CREDIT SCORE: “manage credit responsibly over time.”

PAYMENT HISTORY TIPS

•Pay your bills on time (Obvious. New late payments of collections have the large impact on the score. Only 30, 60, 90, 120, 150, 180+ lates report on your credit.)
•If you are past due for any reason, Get Current! (The longer you remain current and pay your bill on time, the higher you credit score will be)
•Paying off a collection or any other type of account will not remove it from your credit report. •Be careful about closing accounts (this may result in losing valuable credit score points associated with that account)
AMOUNT OWED TIPS

•Keep balances low on credit cards and other revolving accounts (A general rule of thumb here is to keep your balances below 50% of the credit limit or high balance. In most cases it is beneficial to remain under 30% of the credit limit or high balance)
•Pay off debt instead of moving it around. (One of the most effective ways to improve your credit score is to pay down the balances on your credit cards or other revolving accounts. Owing the same amount but having fewer open accounts may result in a lower credit score. Keep as many of your revolving account below 50% of the credit limits of high balance. It may be beneficial to consolidate debt onto one account if you can get two or more account balances below 50% of the credit limit or high balance that were otherwise above that limit. •Don’t open new accounts to increase your available credit. (This can backfire and actually lower your score. This is most likely due to that idea that new accounts may lower your credit score and add inquiries)
LENGTH OF CREDIT HISTORY TIPS

•If you have a credit history that is not well seasoned, stay away from opening new accounts to rapidly. (New accounts generally bring the scores down temporarily especially if you have a lack of credit or a lack of established credit history. Rapid account build up can be seen as a risk factor.)
•Re-Establish yourself after prior payment history problems. (Opening new accounts responsibly and paying them off on time will increase your credit score in the long term. This may not be a suitable strategy for increasing the scores in the short term)
•Try to avoid Consumer Finance companies when possible. Too many consumer finance companies can be seen as an adverse factor. What is a consumer finance company? It is a creditor known to lend to consumers with less than perfect credit history.
TYPES OF CREDIT TIPS

•Apply for and open accounts only as needed. (Opening new accounts is not a short term solution.)
•It is a good rule of thumb to have 5 open and active revolving accounts along with 2 installment accounts
CREDIT INQUIRIES

A credit inquiry will appear on your credit report when your credit report is pulled. There are many types of credit inquiries. Inquiries must be made with Permissible Purpose. You do not necessarily need to give a creditor or party authorization for them to have permissible purpose.

HARD INQUIRIES (These inquiries affect your credit score. When you apply for a mortgage, auto loan, credit card or other type of account, you authorize the lender to obtain a copy of your credit report. These types of credit inquiries when prompted by your own actions appear on your credit report and will impact your credit score.)
• Avoid an excessive amount of inquiries. (What is excessive? This depends on the depth of the credit profile. 5+ inquiries may be excessive for people with a lack of credit)
•If you are shopping for a mortgage or automobile and you know you will incur multiple inquiries make sure you have your credit pulled within in a short, focused amount of time. Depending on which scoring system you are dealing with, you may have a 15 day, 30 day or 45 day window to shop for and apply for credit for the purpose of obtaining a mortgage of automobile financing thus incurring inquires without the inquiries counting against you separately. The scoring system recognizes that you are shopping and will count the multiple inquires as a singular inquiry if it falls within the allotted time frame.
ACCOUNT REVIEW INQUIRIES & CONSUMER BASED INQUIRIES
•These types of inquiries do not affect your credit score. When you choose to pull your own credit report through an online resource such as TrueCredit.com or Myfico.com it is considered a consumer based inquiry and will not affect your credit score. Also, many of your creditors or collection agencies have the ability to pull your credit report to review your account activity. Credit reports pulled by a prospective employer when applying for employment will not affect your score. PROMOTIONAL INQUIRIES
•In many cases a company will pull your credit report in order to send you pre-approved credit offers or other promotional offerings. These inquiries do not affect your credit score although there is much non-sense about an increase of credit scores upon prohibiting the ability of creditors to pull a promotional inquiry. •To prohibit the ability of creditors pulling your credit report for Promotional purposes you must OPT Out by calling 888-867-8688
AVERAGE CREDIT STATISTICS (From Fair Isaac)


•Average consumer has 13 credit obligations
•Of these 13 items, 9 are likely to be credit cards and 4 are likely to be installment loans
•40% of credit card holders carry a balance of less than $1000
•48% of consumers carry less than $5000 of debt on all non-mortgage loans
• 37% carry more than $10,000 in non-mortgage related debt
•Typical consumer has access to $19,000 on all credit cards combined
•More than half of all consumers with credit cards carry a balance less than 30% of their total credit limits
•14% of people are using over 80% of their total credit limits. •The average consumer’s oldest account is 14 years old. •25% of consumers have credit histories longer than 20 years
•1 in 20 consumers have credit histories less than 2 years old

This is really a very good post and totally truth about credit scores.
with the help of secured loan you can increase your credit score.

Actually the problem with secured loans is that they are installment loans and often times take less than a year to pay off. We are only pated on what is open and active so after the installment loan is paid off the loan closes itself out and the consumer loses all the points they accumulated that year on that loan. The best types of accounts are Revolving accounts and secured credit cards are the best way to increase credit scores. They never close and it's important to have accounts open for as long as possible. Every day I see credit reports with numerous secured installment loans and I have to break the news to the client that all those trade lines they thought they were building are worthless to your credit score once they are paid off. The problem is that new accounts do not even rate as positive for the first 6 months they are open and by the time they get old enough to start helping they are close to being paid off and then they close and never really get to a point where they are benefiting the consumers score. I do not recommend those type of trade lines. I would stick to secured credit cards. Just make sure to keep the balances down to below 30% to maximize your points.

Correction...

Originally Posted by creditrepgal

actually the problem with secured loans is that they are installment loans and often times take less than a year to pay off. We are only rated on what is open and active so after the installment loan is paid off the loan closes itself out and the consumer loses all the points they accumulated that year on that loan. The best types of accounts are revolving accounts and secured credit cards are the best way to increase credit scores. They never close and it's important to have accounts open for as long as possible. Every day i see credit reports with numerous secured installment loans and i have to break the news to the client that all those trade lines they thought they were building are worthless to your credit score once they are paid off. The problem is that new accounts do not even rate as positive for the first 6 months they are open and by the time they get old enough to start helping they are close to being paid off and then they close and never really get to a point where they are benefiting the consumers score. I do not recommend those type of trade lines. I would stick to secured credit cards. Just make sure to keep the balances down to below 30% to maximize your points.

Interesting info, CRG. I guess most people have a car loan and a mortgage almost their whole lives, so they can still have long-term trade lines open and active, even if they choose not to use credit cards. But for those who have paid off their car and home, and choose not to use credit cards... their scores won't be as good even if they have no negatives.

Do you have an authority source for this info that you could link to?

Well car loans are typically no longer than 5 years so if you buy a new car it will only ever be a 5 year trade line. 30% of your credit score is based on your revolving accounts (credit cards) and another 10% is based on the Diversity of your credit (different types of credit so in total 40% of your possible POSSITIVE points are contingent on you having revolving accounts. You have to think of credit scores in terms of negative points and positive points. You do not start out with an 850 and get docked points for bad credit. You start out with a 0- and work your way up gaining good credit. You can go to our website at www.werepaircreditfast.com to learn more. We are all board certified credit experts. Certified by the National Board of Credit Education. There is not a lot of information readily available online so we try to make sure we get as much of it out there as possible. Credit scores were not created to benefit the consumer. They were created to benefit banks and the credit bureaus. Bottom line is that the banks and credit bureaus make more money off those with bad credit than those with good credit. Banks charge higher interest rates to those with bad credit. Bureaus make money off a person’s credit being ran. The guy with a 750 is going to walk into a car dealership and typically get the first loan he applies for whereas the guy with the 612 credit score will have his credit ran multiple times trying to obtain financing.
It is important to understand that having REV accounts equates to over 280 of your positive points. If anything a consumer should obtain an account like Fingerhut or a jewelry account that they can keep open but only have to use once in a while but that is not a credit card burning a hole in their pocket. Accounts do not have to be credit cards and long as it is a credit line possible at a place they have little interest in shopping at. Take a look at our website and feel free to contact me with any questions.

Originally Posted by Magic69

Interesting info, CRG. I guess most people have a car loan and a mortgage almost their whole lives, so they can still have long-term trade lines open and active, even if they choose not to use credit cards. But for those who have paid off their car and home, and choose not to use credit cards... their scores won't be as good even if they have no negatives.

Do you have an authority source for this info that you could link to?

You have to be more specific. A "pre-paid credit card" does not report to your credit report. Theses types of cards can be purchased at walmat, 711 and other similar stores.
A secured credit card is a card that DOES report to your credit bureaus although you want to make sure you are using one that reports to all three and you are basically borrowing against your own money.

Originally Posted by miminom

There are many benefits to using a prepaid credit card.
A prepaid credit, also known as a secured credit card
is defined by bank rate as a credit card that, “…requires
a cash collateral deposit that becomes the credit line for
that account prepaid debit cards

Originally Posted by CreditRepGal

THE TRUTH ABOUT CREDIT SCORES


Many people reading this article think you have a pretty good idea of how credit scores work. But do you really? You would be surprised to learn that much of what you think helps or hurts your credit score will actually do the contrary or have no effect at all. There are so many rumors, lies, exaggerations and urban myths, when it comes to how exactly credit scores are calculated. You will be shocked to know that only 35% of your credit score is affected by your payment history. So what about the other 65%? What else besides payment history is affecting my credit score?

Given the fact that credit plays a huge roll in our lives as American consumers, don’t you think that credit education would be a primary concern for our youths? But you don’t learn this stuff in schools. You don’t learn this stuff when you open a credit card.

According to Nellie Mae survey, “21% of undergraduates with credit cards carry balances between $3000 and $7000.”
Credit card solicitors pay colleges "admission fees" to come onto campus, set up tables, and sell credit cards to students.


WHAT ITEMS ARE IN YOUR CREDIT REPORT?



•Identifying Information (name, address, date of birth, employment information. Updates to this information come from information you supply to lenders)
•Trade Lines (All of your credit cards and other accounts; date that you opened the accounts, your credit limit, high balance, current balance payment history etc)
•Credit Inquiries (Voluntary and involuntary inquires such as: Account Review Inquiries, Hard Inquiries, Promotional Inquiries)
•Public Records and Collections (Collections, BKs, Foreclosures, Suits, Wage Garnishments, Liens and Judgments)
ITEMS THAT ARE NOT INCLUDED IN YOUR CREDIT SCORE

Although this information may be reflected elsewhere on your credit report, it is not taken into consideration for your credit score.

•Your Age
•Race, Color, Religion, Nationality, Sex or Marital Status
•Occupation, Salary, Employer, Length of Time of Employment
•Location of Residence
•Interest rates charged to you on credit cards or other account
•Any item reported as Child Support or Rental History
•Certain Types of Inquiries (consumer initiated inquires or promotional inquiries)
WHAT GOES INTO CALCULATING MY CREDIT SCORE???

· What goes into your credit score can be grouped into 5 general categories
· The impact of each factor can verify due to different credit scenarios

PAYMENT HISTORY (35% of your score)

· Payments made on time (Car loans, Mtgs, retail accounts, installment loans, credit cards etc.)
· Public Records (BKs, Judgments, Tax Liens, Suits, Wage Adjustments)
· Severity of Delinquency (length of time past due)
· Amount past due on accounts or collections
· Time sense delinquency or attachment of public record or collection
· Number of past due or derogatory accounts
· Account paid as agreed

Your credit forum is very important for you...it's tell all about yours credit history and your credit score...!

what is in your credit report is not nothing new but it can really help you, especially if you about to do something financially big to see what your financial chances are.