Credit Score Considerations
The exact details of a FICO (Fair Isaac Corporation) score are never made public. After knowing your score, do you always get into wondering how they came up with it?
Late payments always have a negative impact on your FICO score. Payments that are received more than 30 days after due date is considered late. Most creditors report every late payment and sort them out in different batches. That said, if you are late even just for a day, there is a possibility that your account will be reported alongside those that are 59 days late. It happened to many people.
Your credit balance displays how much money you have on you and just how responsible you are as a borrower. High balances create a negative impact on your credit score.
Never think of opening several credit card accounts at a time since this create an issue with your lender. For this reason, you might be subject to multiple credit inquiries. That is because you seem strapped for cash, which is actually quite harmless to your credit score.
If your credit cards are maxed out, you will not only suffer but your credit score will go plummeting, too. See to it that your balances are less than 35% of the available credit. It can sound quite difficult, but you can totally do it.
The longer your credit record is, the better it is for your rating. It is recommended that you have different kinds of credit card and never close down old ones since they will help you improve your score.
With some time and effort, it is possible to raise your credit score. Don’t let your credit score overwhelm you. If you’re unsatisfied, there are so many measures you can take to boost such score.
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Factors Affecting Credit Score
Credit score is too important in our lives to be too lax and not mind it. Even if you’re hit down low and your rating isn’t exactly ideal. You can always do something about it.
But sometimes, we all get confused. What do we have to focus on to boost our credit score, really? The factors that make up a credit score isn’t made public, but we have an idea what aspects in our financial lives we have to work on. Here are the most important ones.
1. Payment History
The golden rule is to always pay the bill on time. Delayed payments, even just for days, will affect your credit score negatively. Just so you know, payments that are done 30 days after due date will be considered late. Majority of the creditors report all delayed payments and report them to the credit bureaus in different batches. Therefore, if you are paying late even just for a day, your account could be reported together with those that are more than 59 days late.
2. Credit Balances
Your credit balances are there to show your prospective lender how much cash you keep and it can be an indicator of how good you are as a borrower. Higher balances on credit accounts are most likely to cause a negative impact on your credit score.
3. Recent Credit
Individuals who open multiple credit card accounts at a time could be a red flag to creditors. This just shows that you are strapped for cash, and lenders aren’t thrilled about it.
4. Utilization of available credit
If you’re the type of person who maxes out credit cards, well, fair enough, your rating will definitely suffer. It is recommended that you keep your balances down to less than 35% of the available credit. Difficult? Yes. Doable? Totally.
5. Length of credit history
The further your credit history goes , the better it will do good for your score. Just make sure that you have been good with your financial responsibilities!
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What Does Your Credit Score Mean?
Your credit score is a 3 digit number that is assigned as a convenient way for lenders to understand how credit worthy you are. It is often used to help them decide whether you qualify for credit and what the associated interest rate will be.
Anytime you apply for credit, your lender is likely to request a copy of your credit report which includes lots of information about your current credit standing. It will also include the numeric credit score. Since lenders can easily get their hands on this information, it is beneficial to you if you review the details yourself from time to time.
There are three companies that generate credit scores: Equifax, TransUnion, and Experian. They generate a number between 300 and 850. This number is often called the FICO score, which stands for Fair Isaac Corporation.
Here is a quick breakdown of the FICO score values:
• 720-850 – this is the range of average scores and better, a very good range
• 700-719 – rates may not be as good as above, but your credit is still decent
• 675-699 – at this level you are starting to lose out on the best deals
• 620-674 – you cannot get great terms here as loans will cost you extra
• 560-619 – this is really subprime so you’ll have to work to improve
• 500-559 – it’s going to be tough to get any loan
You can find another analysis of the numbers on our credit score rating scale page.
Among the factors that determine your score include your own credit history, the amounts you owed, how much remains, the duration of credit history, and the type of credit you have used.
You can improve your score by paying down any debts, staying well under your credit limit, and pay all bills before due dates.
Explore other resources on this website to learn more about your credit score and how to improve it.
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The Real Story Behind Every Credit Score
Did you ever receive a letter from your credit agency showing your credit score and the question running through your mind is how this happened? Well, that is the typical scenario a credit holder experiences when they see how low their scores got. Don’t you just hate that to happen to you all the time? After reading this article, you will never have to suffer from that again.
First thing to know is that your present credit score is based on your past payments which comprise 35% of your overall credit score. If you have been paying religiously, then there is no room for asking questions. But if you missed a couple or more due dates, then this could mean bad news for you. Although creditors have different standards on when they will account a late payment, it is still advisable to pay on time. Second, the 10% of your score comes from your variety of credit. This means having different categories such as car loan, house rents or simple credit cards show your capability to handle an array of credit options as long as you remember when to pay all of them of course. Third, 15 % of your credit score is based on how long you have a history of credits. The better you have handled them over the years would determine good score. Fourth, 30% comes from the total amount you owe. It is weighed parallel to your income. So make sure to make your debt lower than your income so as to keep you scores floating. And last but not the least, 10% of the credit score you owe from inquiries regarding your credit. This could mean an overdue or a forgotten due date which is totally not for the best.
The root of this mysterious credit score is the credit holder’s lost of control and lack of knowledge. As much as you want to put all the blame to the credit agency not informing you ahead, you have to accept the fact that you are responsible for the kind of position you are currently on. You can now do the calculating all by yourself. With all these explained in simple terms, ignorance of the policies is no longer an excuse.
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Foreclosure and Its Effect on Your Credit Score
Foreclosure is the lawful procedure that terminates the rights of a homeowner and gives the ownership to the mortgage lender. This happens when a homeowner fails to pay the monthly mortgage payment as agreed upon.
Foreclosures can greatly affect one’s credit score, but you can avoid it if you have control over your finances to begin with. If you have been included in the foreclosure listing, it can decrease your credit score by up to 250 points. The severity of this damage, however, depends on your credit history.
If you have been paying your credit card bills and other loans on time, it can positively alter the impact of the foreclosure. If the amount of your current debt is considerably lower than the amount of your available credit, then the effects of the foreclosure on your credit score can also be tempered.
Payment history makes up 35% of your total credit rating, and your late mortgage payments are included here. Current debt makes up 30%, the length of your credit history accounts for 15%, your credit card and installment loan balance makes up 10%, and your recently opened credit account makes up 10%.
Foreclosure accounts are normally listed in the Public Information category of your credit report and it will be there for seven long years. However, during that period, the effects of the foreclosure on your credit score lessen as each year passes by. New home loan applications will be considered three years after a foreclosure.
If, by error, the foreclosure is still present in your credit report even after seven year, you can file a complaint so that the credit bureau will have it removed. The three credit bureaus that are held accountable for the information in your credit file are TransUnion and Equifax and Experian.
If you’re not good at handling your credit, a foreclosure is inevitable. And even though the effects of foreclosure lessen with time, you still don’t have an excuse to live outside your means.
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Does Misdemeanor Affect Credit Score?
When you borrow money, the lender will be reporting it to the credit bureau. Such information will be displayed in a 3 digit score. The bureaus don’t make public how they come up with these scores. However, they look into the amount the person owes, the repayment behavior, the duration of the person’s credit history, the different types of credit that the person uses, and the number of credit applications that the person has.
The lower your score, the riskier you come off to the lender. People with poor credit can be denied loans or lent money at sizable interest rates. On the other hand, those that have good credit standing are lent money more conveniently at a low interest rate.
A credit report will have the person’s name, date of birth, address, Social Security Number, driver license number and address. The employment will also be involved. Moreover, it will display the amount that one has borrowed and was able to repay in the past 7 years, liens and bankruptcies included. If you happen to have defaulted on a debt or missed a payment, it would reflect on the report.
A person’s income or savings will not reflect on the report, though. It would also not display your criminal record, religious beliefs, medical history or sexual orientation. That being said, a misdemeanor will not show on your credit report. It will only be displayed if a criminal background check is done. Any misdemeanor will always be shown in one’s criminal record, it can give you a hard time landing a job. Misdemeanors don’t have any bearing on one’s desire to get a mortgage or credit card, but it could pose a problem when he/she wants to rent a home.
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Factors That Make Up Your Credit Score
Precise details of a FICO (Fair Isaac Corporation) score are never publicized. After having seen your score, do you wonder what factors credits scores are based on?
Being behind on payments always negatively affects your credit score. Payments that are received more than 30 days after due date is considered late. Majority of the creditors report all payments that are late and sort them out in different batches. So, if you are late even just for a day, there is a possibility that your account will be reported alongside those that are 59 days late. Yes, that can happen.
Your credit balance gives your lenders an idea of how much cash you have in hand and your credibility as a paying borrower. High balances create a negative impact on your credit score.
Don’t resort to opening several credit card accounts at a time as this may cause an issue with your lender. Because of such, you might be subjected for multiple credit inquiries since it will seem that you are strapped for cash, which isn’t doing any good to your credit score.
If your credit cards are maxed out, not only you will suffer but so will your credit score. Make sure that your balances are less than 35% of the available credit. It can sound pretty hard, but it’s totally achievable.
The longer your credit record is, the better it is for your rating. Have different kinds of credit card and never close down old ones as these will help you improve your score.
With a little more time and effort you can pretty much increase your score. Don’t let your credit score overwhelm you. You can always do something about it if you’re unsatisfied.
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Categories: Credit Score Articles Tags: balances, cash, Credit Score, credit score factors, FICO, FICO score, late, payments
What Makes Up Your Credit Score
If you don’t have any idea what goes into your credit score, you can’t do much about it. If you know what elements go into coming up with it and how it is calculated makes it possible for you to have more control over your financial status.
1. The most significant part of your credit score will have your history of making payments as a basis. This accounts for 35% of your total credit score. Then, if you have an impeccable record of prompt payments, then this is actually good news. Nevertheless, if you always forget to pay a bill, then it would be otherwise.
2. Your blend of credit makes up 10% of your score. Having a mortgage, car loan, credit card and maybe a store account that you pay on is a sign to the agencies that you can handle different credit options. See to it that you can handle all of them, though, given that not paying on time on even one type can count against you.
3. 15% of your credit score will be determined depending on how long you have had a credit history. Certainly, the better you have handled that credit in the past years, the better it will be for your score. However, it would still be better to have a more established credit record than a shorter one.
4. Second in weight to your payment history will be the total amount of your debt. This factor makes up for 30% of your score. The debt you owe is compared to your income in what is called the “debt to income” ratio. The lower it is, the better. You must target keeping your total debt at 25% or less of your annual income to have the best effect on your rating.
5. New inquiries into your credit can be an indication that you may be overextending yourself and account for 10% of your total score. The one exception will be the case wherein you are the one looking at your credit report.
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