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Of the credit reports surveyed, 29% contained serious errors that could result in the denial of credit, 70% contained mistakes or errors of some kind, 41% contained incorrect personal demographic identifying information, 20% were missing major credit cards, loans, mortgages, or other accounts that are critical to demonstrating consumer credit worthiness.
To the controllers of your credit file, you are just a number on a screen. They don't care about you or how they hurt you. They are a profit making organization who receives their revenue from the creditors. Yes your creditors! I you dispute items to the bureaus they will always side with the people who pay them, YOUR CREDITORS! Take control hire FLORIDA CREDIT FIX today.
Call Len Terry Today (407) 853-2400 Get Started in controlling your financial destiny!
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The 3 national bureaus are 3 companies (that means they make profit in exchange for service/goods). They are not here for your good. They are companies looking to get paid. However, the Federal Trade Commission (a.k.a. "FTC") created the FCRA (or Federal Credit Reporting Act) which regulated how the bureaus operate and the rules they are held to.
The 3 major companies are:
Your credit score comes from a company who made judging cards (approximately 10 of them, may more now as credit has progressed) to rate you compared to other Americans. The Fair, Isaac & Company took 1 million records from all the bureaus and started sorting them to find trends. The model became well known as the "FICO" model and is used by the bureaus. Think of it as a bell curve (small percentage doing extremely perfect or extremely awful, most of the numbers fall in the middle)
Creditors will likely use this score to evaluate your credit rather than actually thumbing through your report and looking at the actual detail. (this was the common trend, now practically everyone is just a Number. So make sure your number is accurate!). Creditors generally look for a score of 620 or more for most purposes. A score higher than 680 opens more doors and can often give you lower rates & larger purchases. Creditors make the rule for what score they fell comfortable with, and the FICO scores determine that score based on your history. So where do you fit in the picture? By having good credit history and looking for all the mistakes the bureaus make. An error by the bureau lowers your score, the Lender/Creditor does not review your report for accuracy (even if you have proof) it is all based on scores these days. (the score is supposed to take the review work away form creditors to make their job easier.)
So what things make up your score?… it is largely based on the following factors (see next section)
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We all know it. If you miss a payment, it shows on your credit. The problem is, this is one of the things scrutinized closest. This is the largest factor determined on your credit score .The number of unpaid bills you have, any collection accounts, or bankruptcies etc…impacts your score. And the worst part is the more recent the problem (in comparison to when the report was pulled by a creditor to issue credit), the lower your score might go. The credit model's main focus for score
In fact, even something as significant as a 30 day late payment can have a tremendous negative impact on your score if it occurred within the last few months.
Things to really watch out for are repeat late payments. If you have a late payment from 5 years ago, and another one from 1 year ago, it's possible that the FICO scoring might predict that you will have a late payment again since you now have a history of it.
One simple analogy that most people can relate to is car insurance. If you get in an accident 5 years ago and again recently, then we all know your insurance rates go up. They go up because you are a higher risk in that you have a repeated pattern of accidents. So make your payments on time if you have had late payments in the past, otherwise, they might be even more damaging than if it was just your first late payment ever.
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This area of you score determination is know as you "Utilization Rate". In other words you actual outstanding debt divided by the total available debt you have access to.
The scoring models look at the balances on your credit to rate you. Since this makes up 30% of the score, that means pay attention to your balances! A good rule of thumb is keep cards below 35% of their limit. Here is a guideline you can keep mental note of when arranging your bills:
Installment Loans (i.e. Mortgages, Car Loans/leases, students loans, etc) - balance is not the major issue since these accounts have a pay off period. However, if you are late on an installment note, your credit may be impacted negatively.
Revolving accounts (i.e. Credit Cards, store cards, etc…) have revolving terms, so they get analyzed based on balance. Compare your balance to the card limit:
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Starting from the date your credit is pulled and going back from there, you are assessed based on the time you have had credit open. The more time of using credit, the better. A longer track record gives insight to your credit habits.
Also, the length of time you have been paying creditors back gives the scoring system the chance to figure out if you have been paying all long or not. Someone with new credit (less than 5 years) might not have enough payment history to give an accurate gauge of how much credit they can handle.
Someone with a longer credit history has demonstrated the amount of credit they keep open and the balances they keep.
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When you apply for credit such as a car loan, credit card, mortgage, etc… a bureau inquiry is made and this is noted on your report. Many inquiries negatively affect your score as it seems you are applying for more debt. The most recent 30 days is the most important when applying for a mortgage, but the most recent 6 months can still impact you greatly. If you are planning on getting a mortgage, watch the number of credit inquiries you do!
The credit bureaus understand that people shop around for the best mortgage rate and need to have their credit pulled by a lender. So having your credit pulled multiple times by different lenders does impact you as long as all the pulls are within a couple weeks of each other.
Now there is a downside to that, if you apply for other credit like credit cards, department store cards, student loans, car loans, etc...during that time, then beware your score could drop significantly! So if you plan on buying the new house & the new car at the same time….our best advise is to WAIT UNTIL AFTER YOU CLOSE on the mortgage before buying a new car and applying for new credit cards. You should also keep in mind that having 3-4 inquiries that you apply for per year for a credit history less than 5 years is a safe average, if you have 5 to 10+ years of credit history, you can probably have closer to 7 or 8 inquiries that you apply for. Have more than that can drop the score by more and more points.
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How many trade lines (loans and credit cards) you have open. Even ones without balances on them. The more you have, the higher the risk. Some news that might be shocking to you is that not all credit cards are looked at equally. Having loans from finance companies or department stores can detract from your score. The flashy buy now for 0% interest and no payments for a year is usually the best giveaway that the card falls into the classification of department store card. Even though unbelievable, statistics have shown that people with department store cards and Finance company loans and cards have the trend of making more late payments than people with a standard credit card from Visa, MasterCard, American Express, Discover, etc…).
However shocking this may sound, if you have one of these cards, and a low score, this may be the culprit. You should do more research to find out if your credit card is a:
Tier 1 - Best Rating
Tier 2 - Medium Rating
Tier 3 - Worst Rating.
So, what credit score do you need to attain that coveted tier 1 status? There's no single answer. Each lender uses its own calculations and level of risk tolerance to decide which borrowers get the best rates. So while you may be a tier 1 borrower with one lender, you may have tier 2 or tier 3 status with another. examples of finance companies are: Beneficial Finance, Household Bank, American General, etc.
Examples of department store cards range from furniture store cards, to popular shopping mall department store cards. Even home improvement store cards are considered department stores cards.
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Bureau's Points Chart
Why Credit Scores Matter
Credit scores are decision-making tools that lenders use to help them anticipate how likely you are to repay your loan on time. Credit scores are also sometimes called risk scores because they help lenders assess the risk that you won't be able to repay the debt as agreed.
Having good credit is important because it determines whether you'll qualify for a loan. And, depending on the interest rate of the loan you qualify for, it could mean the difference between hundreds and even thousands of dollars in savings. A good credit score could also mean that you are able to rent the apartment you want, or even get cell phone service that you need.
Think of your credit scores like a report card that you might review at the end of a school term, but instead of letter grades, your activity ends up within a scoring range. However, unlike academic grades, credit scores aren't stored as part of your credit history. Rather, your score is generated each time a lender requests it, according to the credit scoring model of their choice.
Every time you set a major financial goal, like becoming a homeowner or getting a new car, your credit is likely to be a part of that financing picture. Your credit scores will help lenders determine whether or not you qualify for a loan and how good the terms of the loan will be.
However, credit scores are usually not the only things lenders will look at when deciding to extend you credit or offer you a loan. Your credit report also contains details which could be taken into consideration, such as the total amount of debt you have, the types of credit in your report, the length of time you have had credit accounts and any derogatory marks you may have. Other than your credit report and credit scores, lenders may also consider your total expenses against your monthly income (known as your debt-to-income ratio), depending on the type of loan you're seeking.
The information that impacts a credit score varies depending on the scoring model being used. Credit scores are generally affected by elements in your credit report, such as:
If you reviewed your credit information and discovered that your credit scores aren't quite where you thought they'd be, you're not alone. Since your credit scores use information drawn from your credit report, your credit activity provides a continually-updated basis of data about how responsible you are with the credit you're currently using. At Experian, we provide information that can help you see your credit in new ways and take control of your financial future. You can learn more about:
How to Get Your FICO® Score for Free
Understand the reasons that help or hurt your FICO® Score, including your payment history, how much credit you are using, as well as other factors that influence your overall credit.
Get Your FICO® Score
There is no minimum credit score needed to apply for most loans or credit cards. However, you are less likely to qualify for a loan or credit card and less likely to receive favorable rates when your credit score is low. If you are trying to qualify for a conventional loan or credit card with a low credit score, you may wish to wait until your credit improves, so you can ensure you get the best rates possible.
Some mortgage servicers such as the FHA provide general guidelines for those with credit scores on the lower end:
In some cases, you might not have enough credit history to have a credit score. Depending on your age, there are several ways to establish credit.
If you are under 21, you must have a cosigner or be able to demonstrate that you have an adequate source of income to pay back any credit that is extended. With responsible usage, a parent cosigning a credit card (or adding you as an authorized user to one of their accounts) is a great way to help establish a positive credit history.
For others, the best way to establish credit may be to work with your bank or credit union to open an account with a small credit limit to get you started. Opening a secured credit card is another way to get started building your credit. Then, with time and good account management, a good credit history (and scores) will be within your reach.
Credit scores are not included with credit reports. Additionally, credit scores are not stored as part of your credit history. Your credit score is calculated only when your credit score is requested. Your credit score can change over time, based on your credit history—including late payments, amount of available debt, and more.
Joint accounts are meant to help individuals who cannot qualify for a loan by themselves. With joint accounts, all of the joint account holders, guarantors, and/or cosigners are responsible for repaying the debt. The joint account, along with its credit history, appears on the credit report for all account holders. When all payments are made on time, the joint account can help build positive credit. However, if someone defaults on payments, all of the joint account holders will see the default on their own credit reports. Depending on the severity of the late payments and negative information, everyone's credit scores could be impacted significantly.
When you get married, your credit scores (or reports) won't merge with your spouse's. Joint accounts you share may appear on both of your credit reports, but your credit history will remain independent.
Another common question is whether checking your own credit report or score can hurt it. The answer is no. Checking your own credit scores doesn't lower them. Checking your own credit report creates a special kind of inquiry (known commonly as a soft inquiry) that isn't considered in credit score calculations. Without the risk of harming your scores by checking your credit report and scores frequently, don't steer away from viewing them as often as you need to.
FICO is a registered trademark of the Fair Isaac Corporation.
VantageScore is a registered trademark of VantageScore LLC.
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lEN tERRY, qUALIFING bROKER (bk3000273), gri rEALTOR & mANAGING mEMBER
aCTIVE mEMBER OF tHE fLORIDA & nATIONAL rEALTOR aSSOCIATIONS
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