Posts Tagged ‘Payment History’
What Determines Your Credit Rating?
Why is it important to know how your credit score is calculated?
The main reason to know and understand how credit rating is calculated to help you learn what to do in order to keep your score as high as possible. If you have a low credit rating, understanding how it’s calculated can help you determine what problems you should correct in order to improve it. Understanding how your score is calculated also helps with your financial planning by allowing you to take in account the effects of any given action on your credit rating.
FICO
In the United States, FICO is the leader of the credit-rating industry and each of the “Big Three” credit reporting agencies – Equifax, Experian, and TransUnion – use various FICO-developed systems to calculate credit scores. The exact formula used by each of the Big Thee is a closely guarded proprietary secret; however, FICO has provided the public with a basic outline of what factors are taken into consideration and what importance they have in the calculation.
Payment history
The most important factor in calculating your credit score is your payment history. This is the record of your payments to creditors. Your payment history shows whether or not payments were timely. Defaulting, missing payments, and late payments are all part of your credit and payment history. This part generally accounts for 35% of your credit score, meaning that a bad payment history is one of the worst hurdles to a good credit score. Most notations on credit history stay on your report for seven years, regardless of if the debt has been settled or paid.
Credit usage ratio
Your credit usage ratio is a comparison of the amount of credit you have immediately available to the amount of credit you have actually used. The more unused credit you have available, the higher the score. This is a somewhat tricky metric because it only takes into account your open credit accounts, so sometimes paying off an account and closing it can hurt this part of your score. Having a lot of open credit accounts, but keeping them paid down, will boost this portion of your score. Your credit usage ratio is usually weighted at about 30% of your score.
Length of credit history
The third factor, the length of your credit history, counts for about 15% of your credit score. The purpose of a credit score is to give lenders a clear view of your debt-paying habits, so the longer your credit history, the more information there is for lenders to consider. This is a factor that the consumer can’t really affect in a meaningful way, but it suggests that it is to your benefit to start establishing credit as soon as people. The less history there is, the less value your credit score has to potential lenders.
Types of credit used
The various types of credit a persons uses are also taken into consideration, with diversity of credit being viewed favorably. If you only have one type of loan, like a revolving credit card account, this portion of your score will be lower. Having several different types of debt – credit card debt, non-revolving bank loans, a mortgage, a car loan, and so on – will increase this part of the score because it indicates to lenders that you understand how to manage different types of loans. The types of credit you have used constitute about 10% of your score.
Recent credit inquiries
Although credit scores are used for other purposes than applying for new loans, the FICO system generally assumes that recent credit checks mean you are actively applying for credit.If there are several recent inquiries, it’s assumed that you’ve been trying to borrow from several lenders, which is viewed negatively. The more recent inquiries you have, the lower this part of your score. This factor is weighted as about 10% of your credit score.
How is this information helpful?
By understanding how your credit score is calculated, you can make more prudent financial decisions that can help improve your score. For example, since your credit usage ratio is so important, when you pay off a credit card account, it may be a good idea to keep the account open and not use it, rather than close it. Likewise, when you’re presented with the choice of applying for an additional loan to keep other obligations current, or missing payments on an existing loan, understanding how the score is calculated can help you make a better decision about the right course to take.
What Are The Credit Repair Information For People With A Bad Credit Repair Report
Many individuals are looking for a credit repair method to decrease the debt load that they are carrying, especially when the person is battling a bad credit repair report as well. When looking for repair methods, there are several things that the person must keep in mind in order to get the best price and the quickest approval for the method that they desire.Verification of the individual’s credit history, payment history and the amount of debt on him is done before applying the procedure. When using these factors to determine whether the person should be using a credit repair method, a bad credit repair report can result in the person receiving a much higher price for bad credit repair help or being rejected by the company outright.
Review Your Options When You Have Bad Credit Repair Report
When looking with a company for a credit repair method, there are several things to keep in mind.The important thing is to avoid the first methods that the person may find which cannot be the best one according to his situation. In many cases, a person that has a bad credit repair report is so desperate for a solution that they will use the first method that they see regardless of the terms and choose whatever method that looks like it may work. It is best to review several different methods to find out which ones will offer the best results.
Be Wary Of Deals
It is always great to find repair methods with prices and little effort involved, but the person must be careful to make sure that the low price is not just a hook to get the person to accept the method. In some cases, the price will change after a brief introductory period, after which the price will rise dramatically higher for the services to continue. This higher price put the person deeper into debt by a significant amount and may even make the method unaffordable for someone that has a bad credit repair report or financial situation, making the situation worse.
When dealing with companies that offer credit repair methods, it is best to be sure that the person is dealing with a company that is reputable. There are many scam artists and shady lenders out there just waiting for the unwary, which includes many people with a bad credit repair report.A number of companies providing repair methods include the heavy fees into the price of the program. These fees can total hundreds of dollars and is solely for the privilege of using the methods offered by the company. Individuals that submit their information to these companies can find themselves even deeper in debt because of the numerous fees that have been charged before the individual ever receives any assistance with their problem. Be sure to read the terms and conditions for the company carefully before giving them any personal or financial information about you to avoid becoming the victim of a scam or unscrupulous business practices.
My Fico Score Watch Makes Keeping Track of Your Credit Score Automatic
You have a very busy life. There are so many things you need to keep track of. Picking up your kids from school, going grocery shopping, paying your bills on time, getting enough exercise, are just a few examples of the complexities of life. How then are you supposed to do all that AND stay up-to-date with every aspect of your finances?
MyFico Score Watch helps you do just that by giving you one central and automated place to keep track of you FICO scores and your credit reports.
Score Watch Benefits:
- Score Watch automatically keeps track of your credit report on a daily basis and your FICO score weekly.
- Has the ability to alert you via email or even SMS when there is an unexpected change to your credit that would negatively affect your FICO score.
- You can set a target score you want to reach and MyFICO Score Watch will alert you when you’ve reached it. It will also alert you when you qualify for better interest rates
- Your membership with MyFico Score Watch® entitles you to two credit reports from Equifax yearly that you can review and save for future reference or to dispute incorrect data.
Why is it so important to keep track of your FICO Score?
Your FICO Score is how money lending agency like mortgage bankers and credit card companies rate you. Your FICO score is made up of a lot of different statistics and the score plays a major part on the interest rates you can qualify for. If your score raises you should be entitles to a better rate and if your score drops you many get penalized.
How is your FICO Score Calculated?
There are many different things your FICO score is made up of and that My Fico Score Watch® monitors but a few of the most influential ones are:
- Payment history for any previous debt
- Amounts owed on current loans and credit cards
- Length of credit history
- New credit received
- Types of Credit Used
With all these factors it’s clear that you need help keeping up with all this information. Wouldn’t it be nice if you could just put all this reporting and tracking on autopilot? Well now you can with MyFico Score Watch®!
by Trent Goldenblum