Mastering Credit Scores
We all know how
important credit as become. In this day in age where all that is used by lenders is credit score, an accompanying story and relationship has become a thing of the past. With the new instruments on Wall Street such as credit default swaps and other derivatives make it nearly a necessity to have a high credit score in order to even look at you as a candidate for financing.
The most frustrating part about this is that it takes years to build credit and just minutes to destroy it. Then after something happens it can take years to rebuild it. In many instances there are situations where credit inaccuracies, which are highly common, can prevent you from getting the financing you need whether it be for a business or personal usage. There have been laws put in place to help consumers like the FACT act and the FCRA act but without detailed knowledge of these acts, which most consumers don’t, trying to remove inaccuracies is time consuming, frustrating, and result in consumers just giving up.
The
FACT Act stands for the
Fair and Accurate Credit Transaction Act and
FCRA stands for the
Fair Credit Reporting Act, the FACT act was passed in 2003 and amended the FCRA act in order to provide more regulation that consumers can get one free copy of their credit report each year. With hundreds of provisions in each act it’s a stretch to require consumers to know these statutes inside and out. So how does a consumer become educated in this? With the internet you can find out just about anything but sometimes this comes with a price, some expensive some not.
You could always hire and attorney but this can be expensive as well. I know you’ve seen it, the many “credit repair companies” out there promising they can remove negative remarks some can help some not at all. Some of these companies are very expensive others are fairly cheap. The most important thing to remember, when dealing with credit, is to monitor your credit report and pay your bills on time.
I’m going to give you some resources that I’ve found online to be helpful in helping me “Master” my knowledge in the area of credit scores. The credit reporting companies provide you with information and also offer credit monitoring every month for a low fee and offer unlimited credit reports to help you take control of your credit.
The one thing that is frustrating is not
KNOWING the algorithm at which they calculate your score. I’m going to give you a guide below as to what your score is comprised of and what information the credit scoring companies use in order to calculate your score. However this does not give you the concrete formula to which they use. Really to maintain great credit keep revolving balances low, don’t get into too much debt, and pay things off as fast as possible.
We are all bombarded everyday with “specials” and “once in a lifetime offers”, this is just targeted marketing designed to make you believe you can’t live without it or you are lesser of a person if you don’t buy it NOW. Please don’t fall for this. Now that is not to say some of the books and products that are marketed to you are not valuable, I’m merely saying don’t run to “every” special once in a lifetime offer that is presented to you, use your better judgment. The key is to spend less than you make and I know sometimes this can hard when we “justify” it in our minds by thinking we can handle the payments. But when you have this payment and that payment and then you have to borrower money to make this payment, you know where I’m going with this.
We are in the age of
“automated underwriting systems” that help expedite credit decisions for lenders to improve time efficiency and lower costs. The problem with these systems is they are driven by score and your credit history, they cannot read your story. So for an example banks didn’t use these systems, they would evaluate your score based you and what you have to say. Keep in mind that underwriters looking at your application do not see you or know you therefore all they go by is what’s on paper. This is a huge disadvantage for the consumer but there are some advantages as well, including speed, efficiency, which improve customer service and the overall experience. KNOW your credit score and become educated in this area because its only going to get more complicated especially with the growing financial problems in the economy surrounding credit.
So lets get to some of information I have for you and resources you can use to help you with the “
Mastery of Your Credit Score”.
BCS Alliance offers a credit kit that is 101 pages total and gives you some of the information I’m going to share with you now. I paid $14.99 for it; a small price to pay for information that could save you tens of thousands of dollars in the future.
Credit Scores
750 or higher – considered excellent credit
660-749 – considered good credit
620-659 – considered fair credit
350-619 – considered poor credit
How Credit Scores are Determined?
- 35% - Past payment history - Late payments, charge offs, bankruptcies, etc.
- 30% - Outstanding debt – amounts owed on all accounts, number of accounts with balances, debt-to-credit limit ratio, etc.
- 15% - Length of credit history – Time since accounts were opened, time since last activity, time since last delinquency.
- 10% - Recent credit applications – Types of new accounts, recent inquiries, and how many inquiries.
- 10% - Account mix – Types of various accounts (car loans, credit cards, mortgages, etc.)
Factors that are NOT used are demographic information, salary, type of job, etc.
To purchase this credit kit go to
www.bcsalliance.com
Remember if you keep you expenses low and keep more than you spend, you can gradually increase your credit score overtime and when a need arises you will have no problem obtaining credit and you will pay substantially less in interest and finance charges because of your good credit history.
Thanks again!
“The key to life is accepting challenges. Once someone stops doing this, he’s dead.”
Bette Davis
