Ken Black asked:


You need to know how credit scoring and your credit report works to get out of debt and improve your financial future. Here is what you need to know.

You may be wondering how some people can walk into a lending institution and get credit, or loans, while others that have the same income or job seem to get turned down or receive a higher interest rate. It is all about the risk factor and whether you are a safe risk, or a bad one, when you are being loaned money.

Creditors use a credit scoring system that gives them an idea of whether the person who wants to borrow money is likely to make their repayments, whether they have a history of not making repayments, or are likely to be unable to make the monthly repayments.

These credit scoring systems may go under several names. One of the most widely known credit scoring software applications is the FICO, or the Fair Isaac Corporation, and there are three variations of this software used by the three major credit reporting agencies.

What Exactly Is Credit Scoring?

Credit scoring is collected information about you and your credit history. Contained in a credit report is your bill paying history, as well as how many accounts that you already hold and what type they are. Things such as late payments, any collection actions taken against you, outstanding debts and how long you have had accounts are all considered. All of this information is compared with other consumers that fit the same profile as you to determine the type of risk that you are to the creditor.

The credit scoring system gives you points for each factor and the end result tells the creditor if you are likely to repay your debts. The total amount of your debt is then added up to give you a credit score. Your credit score is an indication on how likely you are to repay your debts and make your monthly repayments when they are due.

Find Out What What’s In Your Credit Report First - since you now know that everything in your credit report is vital to whether you are going to get the line of credit that you are applying for, it would make sense to get your credit report and take a look at what is in it.

Sometimes credit reporting agencies can make mistakes or place something on your report that is inaccurate. By checking your credit records for yourself, you can make sure that everything contained in it is true and accurate.

Before applying for anything, make sure that you obtain your credit report. An amendment in the federal fair credit reporting act now allows a consumer the opportunity to receive a free credit report when you request it, or at least each year.

You obtain your financial summary making a request to one or all of the major credit reporting agencies.

Read through your report and make sure that everything is accurate and you are happy with what has been included in the document. By reading through your report, you will also be able to see if there are good things or bad things listed on your report. This will have a bearing on whether you are likely to be given credit.

Why Credit Scoring Is Used, And Is It Fair?

Credit scoring is based on real information and statistics rather than the personal judgments of another person. Because of this, there is no variation in acceptance of a loan based on other things that are not statistically based facts. Different creditors often use different types of scoring models from agency to agency. Also, different models of the system are used for different lines of credit.

Under the equal credit opportunity act, no scoring systems are allowed to use race, sex, religion, marital status or a person’s country of origin to determine an individuals creditworthiness. Age is sometimes allowed as a scoring characteristic as long as the system is designed properly and those that are over a certain age are treated fairly and given the same opportunities as younger applicants.

If you are not given credit, or your application is denied, the creditor must provide you with the reasons why your application was rejected, either by notification, or by you asking the creditor within two months of being denied. A creditor must also give you a fair reason by law. The credit report system has been designed to make sure that creditors are as fair and objective as possible with those who are applying for financial assistance.

How To Improve Your Credit Score - credit score criterion can differ between creditors, but there are a few fundamentals that can be used to make sure that your credit is in good shape. These include things like:

-Paying your bills on time: Because your history is always taken into account when a credit score is determined, you can improve chances of acceptance by making sure that you have good statistics on paying bills and previous repayments.

-Evaluate your debts: Calculate your outstanding debts and compare them to your existing credit limits. If you are almost at capacity, consider reducing some of your debt before applying for more credit.

-What is your credit history: How long you have had a credit history is also important. If you haven’t had one for long, it can still work in your favor by having all of your payments made on time and low balances on your already existing credit.

-Have you made a lot of inquiries lately? This can have an effect on how your score is determined. Try to avoid applying for too many accounts, or lines of credit in a short time.

The best way to keep a good credit score, or start repairing your records, is to pay your bills on time and try to reduce some of the debt that you already have.

If you have damaged your credit score, it will take some time and perseverance, but, you will be able to repair your credit score as they are updated and subject to change over time with new information that is contained in your credit reports.

Michelle asked:


I want to fix my credit fast, because my husband and I want to buy a new house in about 6 months. There a lost of credit repair companies out there. They say that they can remove bad hits on your credit report.

Has this worked for anyone? If so, which company? How much did you have to pay them? How much did your credit score increase? How long did it take?

Thanks a bunch!

ohburr1 asked:


I am trying to find a good credit repair agency. I want one who states upfront what they do and does what they say. I have some credit issues and will like to get as much help as I can to clean them up over the next two to six months.

ALDREENA M. FEREBEE asked:


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By Aldreena M. Ferebee

What is a FICO Score?

A credit or FICO score is a numeric representation of a person’s credit profile and it is the name for the most well known credit scoring system. The acronym FICO stands for Fair Isaac Company, a California firm founded in 1956 by Bill Fair and Earl Isaac.

History

The FICO score has been around for many years, then in 1995, the mortgage and lending business started using them for the primary purpose of keeping down the expenses associated with Home Equity loans. These scores are now used by Freddie Mac and Fannie Mae in conjunction with their automated underwriting systems. In 1996 the Federal Government insisted on using a credit score on all credit reports. The scores are based on years of computer modeling aimed at predicting who might be a credit risk. There has never been a published model of how the score is derived. The secrecy of the FICO model reduces the likelihood of manipulation. The FICO score is used by all three credit bureaus (Experian, Trans Union, and Equifax). The credit bureau’s computers evaluates a complete credit profile and assigns a score that is used to estimate credit worthiness.

Purpose

Each bureau uses its own scoring system; each person being evaluated in the system will have 3 separate scores. When a person applies for credit and receives a high score, they are viewed as a better credit risk to lend money to than a person with a lower score. This rating system consist of several factors from your credit file that includes length of credit history, number of open accounts, loans, mortgages, and public records. The factors used are formulated to produce a 3-digit score between 300 and 950. If a person’s credit score is above 680, they are considered a “prime” or low risk in terms of the lender who wants to lend money, or the landlord who wanted to rent or lease to you. If your score is below 680, you are “sub-prime” and fall in the middle category in terms of risk of renting and leasing. It doesn’t mean you shouldn’t get a rental/lease, but you may be required to go a step further and provide a security deposit for the first and last month rent payment before a person moves in. Anything score below a 560 is considered a “shafted’ score and this person is not considered a good credit risk.

Elements of the FICO Score

The FICO model has 5 main elements:

1) Past payment history (about 35% of score) the fewer the late payments the better. Recent late payments will have a much greater impact than a very old Bankruptcy with perfect credit since.

2) Credit use (about 30% of score) Too many credit cards can bring down the score, however, closing these accounts can sometimes do more harm than good if the entire profile is not considered.

3) Length of credit history (15% of score) the longer the account has been open the better the score. Opening new accounts and closing seasoned accounts can bring down a score a great deal.

4) Types of credit used (10% of score) whenever a person uses a finance company account, it may lower the score. Bank or department store accounts are better accounts to be open.

5) Inquiries are (10% of score) multiple inquiries can be a risk if several cards are applied for or other accounts are close to maxed out. Multiple mortgage or car inquiries within a 14 day period are counted as one inquiry.

Other factors that affect your FICO score are:

Number of outstanding balances

Balances owed vs. credit available or high credit

Number of balances opened in the last 6 months

Too many revolving accounts

Too few revolving accounts

Excessive credit inquiries

Delinquencies

Too many accounts opened within the last twelve months

Short credit history

Number of 30, 60, and 90 day late payments

Public records that include; judgments, tax liens or bankruptcies

Length of credit history

Recency of any slow pay history

Balances on revolving credit are near the maximum limits

No recent credit card balances

Repairing your FICO Score

Now that you understand how the FICO credit score works lets look at how to improve your credit score. As you read above the credit bureaus use various components in order to get your credit score, this means that you will have to review these same components of your credit report in order to fix it.

- The first thing you must do to improve your credit score is fix the payment history category. Pay your bills on time, if you pay on time, creditors will not submit a past due report to your credit report. If you can’t pay on time, notify your lender that you need to work something out. Get current on past due accounts

- Keep low balances on your credit cards, stay well below your credit limit – 35% or lower is best. Don’t open new accounts just to lower your used credit ability – having too much credit is a risk too old accounts open if you’ve been a good borrower.

- If you have no credit start building your credit as soon as possible and when shopping for new credit, keep it all within a short time frame no more than 14 days or less. If a borrower has a bad history, they can improve their credit scores by opening a new account and managing it sensibly.

- Having installment debt (where you pay fixed monthly installments to eliminate the debt) is “better” than revolving debt or (open-ended credit card debt). Certain finance company debts (like buying a product with retailer financing) can lower your score. In long run, it will take time and discipline to improve credit scores.

In conclusion, your credit score can only be changed by the way that item is reported directly to the credit bureaus (Experian, TU, and Equifax). Fixing those negative factors in your credit report will raise your score. It is best to make these corrections before you try to purchase a home, because you can never be sure the exact impact a change will have on your score. When all negative factors are fixed, written confirmation from the creditor will be required to show the lender that your credit report is updated and all negative factors fixed and the way to do it follow this formula.

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Credit Repair Secrets - http://blessed476.sell2005.hop.clickbank.net/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 





















 

 

 

 









 

























 



 

Paige B asked:


There’s so many credit repair co. out there and I don’t know which have a good credentials or does it really work like they advertised?