The mortgage industry is hurting from the collapse of the subprime lending, but the credit card companies are learning to take advantage of the situation. Be careful what you borrow, whether it is for a house or for personal expenses.
Credit card companies have found that those who have fallen prey of the subprime lending market are good candidates for credit cards. As these individuals fall behind on their mortgage payments, they try to make ends meet in another way. Many are turning to the new credit card offers they are getting in the mail to receive the help they need to get by.
The use of credit cards in this situation is becoming increasingly prevalent since most of these consumers cannot refinance their homes or receive home equity loans. Credit card debt becomes the only means of receiving further loans.
This is an unfortunate situation for those who are suffering from bad mortgage loans, as they are now adding to their debt rather than paying it down in an attempt to avoid foreclosure. Foreclosure is a very scary possibility, and it seems worth the extra credit card debt to avoid.
Defaulting on a credit card by not paying on it for 180 days puts the debt in the hands of some type of collection agency. The collection agency will pursue the debt from you and are known to pester those who owe them money. Add this to the risk of foreclosure, and you are in a very uncomfortable position.
If you are worrying about defaulting on your credit card bills, talk to a credit counselor about what options you have available. A counselor can review your situation and provide you the proper information and assistance to get headed in the right direction financially. Through credit counseling you may be able to lower your credit card interest rates and even become current on those accounts that are heading to delinquency by using a program set up with your credit card companies.
By getting on track to pay down your credit card debt, you increase the likelihood of having the funds necessary to avoid foreclosure on your home. Talk to a credit counselor to get the credit card debt help that you need.
.About the Author:
Ronnica Rothe is a graduate with honors from the University of Oklahoma and a current student at Southeastern Baptist Theological Seminary. She works with stopccdebt.com to help individuals get out of debt and reach their financial goals.
27th Dec 2007 | Comments (0) | Mortgage, Credit Card, Credit, Card, Company
The Benefits are Amazing
The content of your credit report can have an enormous impact on the quality of your life.
Your credit score will determine the cost of your mortgage, your automobile payments, and your credit cards. An improvement in your credit score could potentially save you thousands of dollars per year.
Overcoming Your Fear
It is normal to experience a degree of fear when the time comes to look at your credit report. Perhaps you have had some credit issues in the past. No one likes to be reminded of those times. I have spoken to thousands of people about their credit over the years. The majority of those people have felt some resistance to looking at their own reports. I understand! The credit bureaus can be intimidating. But like so many other things in life, once you get started it’s not so bad.
Getting Started
Reviewing, repairing, and maintaining your credit is not complicated. The key is to approach the project in an organized manner. You have three credit reports. They must each be examined in detail. Many people make the mistake of looking only for obvious derogatory information like late payments or collections. Every item on your credit report can have an impact on your credit score. You will be looking at everything. I suggest that you have a pen and paper nearby. You will also need to have your credit cards handy.
Step by Step
Everyone has his or her own way of organizing a task. You will develop a system of your own over time. Whatever works for you is fine as long as you cover all of the essential categories of information that can impact your credit scores. These essential categories are the account opening dates, current balances, high credit limits, and pay history. As you review these items keep any eye out for errors such as accounts that don’t belong to you, accounts referencing an incorrect Social Security number or address, and duplicate accounts.
The Essential Details
Account opening dates, current balance, and high credit limit need to be examined carefully. The FICO scoring formula places great importance on these items. Your account opening dates are used in the FICO formula to determine the age of your credit. The older the better. Simply look at your credit card. Most credit cards indicate the original opening date somewhere on the face of the card. The relationship between your current balance and your high credit limit has a major impact on your score. If you don’t know these numbers just call the toll free number on the back of your card. Please don’t ignore this step.
Write Down Every Single Error
Make notes. Credit repair is all about the details. Don’t let a thing slip by. And please don’t ever assume that the credit report is correct. If you find a discrepancy chances are that you are correct. Every one of the categories listed above can have an impact on your credit scores. No error should be ignored. You might think a small innocent looking error like a duplicate account will not have a negative impact as long as there are no late payments showing. You would be wrong. The extra account will overstate your debt and may very well factor into the FICO scoring method to your detriment.
Organizing Your Disputes
Each error that you find on your credit report will need to be disputed with the individual bureau that is reporting the item in question. Your credit report will come with instructions for submitting your dispute. You should follow those instructions carefully. And, whatever you do, keep it simple. It is important to limit your verbiage to the bare minimum. If you make the mistake of writing a nice letter to the credit bureau, as well meaning as you might be, your dispute is likely to be ignored. It does not sound friendly, but please try to understand that the credit bureaus have to process an amazing amount of mail.
Stay the Course
About thirty days after your initial disputes you will receive replies from the individual credit bureaus. It is not uncommon to get an unsatisfactory answer. They might respond by indicating that they contacted the creditor who verified the information to be correct. Don’t be discouraged. This initial response is built into the system. Simply send a second dispute telling the bureau that you are not satisfied with their response and that you would like them to provide documentation. It is very likely that you will get satisfaction on this second dispute. The credit repair process can take time, but with patience your efforts will produce real financial results as well as the satisfaction of knowing that you have done the right thing for yourself.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
.About the Author:
Jim Kemish is the president and founder of Power Mortgage, a Florida mortgage company based in Delray Beach, Florida. Power Mortgage Corp was established in 1989 and serves the states of Florida, Georgia, Massachusetts, and Virginia. Jim is also the President of Sky Blue Credit, a national credit repair business. For great credit and mortgage tips visit the Florida Mortgage Blog. You’ll be glad you did!
25th Dec 2007 | Comments (0) | Personal Finance, Finance, Money, Credit Scores, Debt, Credit Repair, Home Finance, Money Saving Tips, Self Improvement, Budget, Credit, Credit Score, Tips, Repair, Score
Let us face it. Most of us own at least one credit card if not more. Getting a bill every month is always an agonizing experience because that makes us realize how much we have spent.
Often we end up realizing that we didn’t need to spend that kind of amount or worse still, realize that we cannot afford to pay the entire amount due that month. So we end up making the credit card minimum payment, hoping to clear the balance next month. We repeat this exercise the next month too, and the next month and the next month…till we are caught up in a vicious circle where we pay only credit card minimum payment. This doesn’t bother many of us since making credit card minimum payment doesn’t affect our credit report. We seem to take it in our stride and let the to-be-paid amount to pile up till we have a huge credit card debt to pay off.
It’s not uncommon to pay credit card minimum payment. In fact a whooping thirty percent are paying only the credit card minimum payment. For the first time users credit card minimum payment means the lowest amount that we can pay to make our account stay in good standing. While credit card minimum payment helps us to pay our debts without getting a bad credit report, it somewhere down the line also makes us to take our debt for granted. Opinions are much divided on this issue.
However one thing that stays true is that if you are just paying minimum credit card payment you are being sucked into a circle of debt and possible bankruptcy! The credit card minimum payment is calculated as a percentage of your current balance. The credit card minimum payment drops as your balance is paid, but thanks to the magic of compounding, you’ll end up paying for a long, long time. This is something that most people are not aware of and end up paying minimum credit card payment only. So not only do we keep piling up huge debts to be paid but are unaware of the hidden cost that we also have to pay while paying minimum credit payment.
Earlier the credit card minimum payment used to be around 2- 2.5%. However some time ago US government has increased this percentage to 5%. This was because people would make only credit card minimum payment, thus increasing their debts. To make people pay up their debts faster the government took this step to increase the interest rate. And it seemed to have worked like a charm! Many people are now shelling out more than merely paying minimum credit card payment.
It is better to pay off full payment than paying credit card minimum payment if you wish to save your hard earned money.
.About the Author:
William King is the director of Wholesale Pages: http://www.wholesalepages.co.uk , Australia Wholesalers: http://www.australiawholesalers.com , Pakistan Real Estate & Pakistan Property: http://www.zameen.com , and Dubai Property & Dubai Real Estate in UAE: http://www.bayut.com . He has 18 years of experience in the marketing and trading industries and has been helping retailers, entrepreneurs and startups with their product sourcing, promotion, marketing and supply chain requirements.
21st Dec 2007 | Comments (0) | Debt, Credit Card, Credit, Card, Interest, Payment
More Than Meets the Eye
Unless you are independently wealthy and pay for everything with cash the content of your credit report has a profound effect on every single moment of your life.
Think about it. How many things in your immediate personal environment have been determined by your credit report? The impact may be greater than you are aware.
The Ripple Effect
Do you have a mortgage? If so, your monthly payment was determined by your credit score. The amount of money that you part with each month to pay for your home may be the biggest single financial obligation that you have, and its impact ripples through everything else in your financial life. Every dollar that you spend on your mortgage is one less dollar that you have available for the other expenses in your life.
Every Financial Decision is Effected
A larger mortgage payment may very well shape every single financial decision that you make. When you make decisions about your children’s school, your vacation options, that large screen television that you want, and even dining out, your choices are dictated by the money available after paying large bills like your mortgage.
Little Things Add Up
And as obvious an impact as your mortgage payment has on your life you should not overlook the myriad other items that are determined by your credit scores. Your automobile loan payment, like your mortgage payment, ripples through your lifestyle by limiting other purchase choices that you make. Credit cards, personal loans, debt consolidation loans, home equity loans; all count.
Tough Choices
In a perfect world every consumer would understand the relationship between the purchase decision that is right in front of them and the inevitable impact that it will have on every future decision that they make. In the credit repair business we see cases everyday where good judgment was absent at the exact moment that it was needed most.
Paying the Price
Have you every purchased a new car? Did you find yourself checking out the higher end models on the floor? Many people simply forget their budget and buy the car of their dreams. Nothing wrong with that! But when vacation time comes and that trip to Mexico is no longer possible, the relationship between that automobile and everything else in life becomes all too tangible.
Credit Repair
Given the major impact that your credit report can have on your life, from the smallest credit card to your mortgage, you should not take the content of your credit report for granted. Credit repair can pay tremendous dividends. Did you know that over seventy percent of all credit reports have errors? Did you know that even the neutral information on your credit report can play a major roll in your credit score?
A Thorough Checkup
When you examine your credit report, if you are like most consumers, you scan it quickly to see if there are any late payments that have been reported. You probably look for the obvious derogatory information on the report. In the credit repair business we discover an amazing number of harmless looking errors, such as account opening dates, high credit limits, current balances, and duplicate accounts. You might think that these items can not have much of an impact. This is not so; we regularly see credit score improvements of up to one hundred points simply by correcting things that the customer never thought to look for.
Your Credit, Your Life
Nothing can have as much of an impact on the quality of your life as your credit. You owe it to yourself to take a good look at your credit report. Don’t neglect anything. The Fair and Accurate Credit Reporting Act, in response to the tremendous number of errors that continue to impact consumer’s financial life, forced the three credit bureaus to provide a copy of your credit report once a year for free. Take advantage of this. If you feel daunted by the task, hire a reputable credit repair company to do it for you. You work hard for your money. Make sure that your credit works just as hard for you.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
.About the Author:
Jim Kemish is the president and founder of Power Mortgage, a Florida mortgage company based in Delray Beach, Florida. Power Mortgage Corp was established in 1989 and serves the states of Florida, Georgia, Massachusetts, and Virginia. Jim is also the President of Sky Blue Credit, a national credit repair business.
20th Dec 2007 | Comments (0) | Personal Finance, Finance, Money, Credit Scores, Debt, Credit Repair, Home Finance, Money Saving Tips, Self Improvement, Budget, Credit, Credit Score, Tips, Repair, Score
The Credit Repair Professional
The credit repair business requires a clear grasp of the interaction of many factors.
Credit bureaus, creditors, and collectors are each regulated under their own set of federal laws. There are state laws that may supercede the federal laws. In the background of all of this activity is Fair Isaac and Company that formulates your FICO Score based on the makeup of the information on your report. Credit repair professionals must have a working knowledge of all of these factors and more.
And the Not-So-Professional
True credit repair professionals provide an incredibly valuable service. But there are also those that misrepresent themselves and the services they offer. These deceptive practices will waste your money, and in some cases leave you worse off than ever. Here is our list of the top offences…
Authorized User Alert
Some so-called credit repair companies have been brokering “authorized user” status on credit card accounts. This involves making the customer an authorized user on someone else’s credit card to boost the customers FICO score. This is not illegal, but you should be aware that Fair Isaac and Company, in response to this practice, has eliminated authorized user benefits from the new FICO scoring model. According to Fair Isaac, one of the three credit bureaus will begin using the new scoring model in September 2007. The other two credit bureaus will adopt the new model by mid-2008.
The New Identity Trap
There is a busy little credit repair sub-culture that offers to help you establish a new identity by applying for an Employer Identification Number (EIN) which they suggest that you use in place of your Social Security Number. This amazes us! And it is a serious crime that could put you in prison. Steer clear.
Promises Promises
Watch out for companies that guarantee results such as a specific increase in your credit scores in a specific period of time. Professional, reputable credit repair companies can produce dramatic results! But given the fact that there is no way to predict the responsiveness of the credit bureaus, creditors, or collectors it is inappropriate to make such promises, and a sure sign of bad business.
The One-Dimensional Credit Repair Problem
Beware of credit repair companies that offer credit bureau disputes, and nothing more. They are most likely using software that simply pumps out dispute letters - repeatedly. This one dimensional approach to credit repair is certain to produce disappointment. Effective credit repair requires the skill to challenge the bureaus, creditors, and collectors alike; all with the knowledge and understanding of the legislation that governs them, and a grasp of how each change in your report can affect your FICO scores.
Power Corrupts
I’m going to stray a bit from the category of credit repair scams and touch on two of the more egregious offenders in the credit reporting industry. Many people mistake size for honesty. Power can corrupt, and the journey to the dark side is often led by corporate attorneys who constantly test the limits of consumer’s tolerance. Credit repair can be tricky enough, but getting hoodwinked by the credit bureaus can be downright discouraging. Here are offenders that we encounter on a daily basis.
False Credit
Every day untold numbers of consumers go to TransUnion’s “True Credit” website and pay for what they believe to be their credit scores. What they get are deceptively named “TrueCredit” scores which vary significantly from the FICO scores used by lenders. Here is the (almost impossible to find) small print from the TransUnion website. “TrueCredit is not connected in any way with Fair, Isaac and Company; the credit score provided here is not a so-called FICO score. The credit scores of TransUnion may not be identical in every respect to any consumer credit scores produced by any other company.”
Not Free Credit Report
Are you starting your credit repair effort? You can get all three of your credit reports for free, one time per year, from AnnualCreditReport.com. Don’t be fooled by Experian’s freecreditreport.com website! Here is the fine print: “When you order your free report here, you will begin your free trial membership in Triple AdvantageSM Credit Monitoring. If you don’t cancel your membership within the 30-day trial period, you will be billed $12.95 for each month that you continue your membership.” And it may not be so easy to cancel. The Office of the Attorney General of Florida lists the following issues in their investigation of Experian: “Deceptive advertising, misleading domain name, and failure to honor cancellations in violation of Chapter 501, Part II, Florida Statutes (Florida Deceptive and Unfair Trade Practices Act).”
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
.About the Author:
Jim Kemish is the president and founder of Power Mortgage, a Florida mortgage company based in Delray Beach, Florida. Power Mortgage Corp was established in 1989 and serves the states of Florida, Georgia, Massachusetts, and Virginia. Jim is also the President of Sky Blue Credit, a national credit repair business.
18th Dec 2007 | Comments (0) | Personal Finance, Finance, Money, Credit Scores, Debt, Credit Repair, Home Finance, Money Saving Tips, Self Improvement, Budget, Credit, Credit Score, Tips, Repair, Score
Although the summer holidays have only just finished, the UK is already preparing itself for the next big holiday of the year – Christmas.
It seems ludicrous that whilst the sun is still shining and the evenings are still light, the shops are already getting themselves prepared for Christmas – and it seems as though we could learn a thing or two from them, as early preparation means that you won’t get caught short when you suddenly realise that Christmas is almost here and you haven’t even written your Christmas list!
Christmas is a time of good cheer, goodwill to all men, and good organisation skills when it comes to ensuring that you can cover the cost of this season.
Many of us rely heavily on our credit cards when it comes to making purchases for Christmas, using them for everything from the turkey and tinsel to gift, cards, entertainment, and social events. Well, if you want to make sure that you get the best possible deal on your credit for Christmas then now is the time to start looking around for the best deal on credit cards.
One thing to remember is that, in the same way as the passport office receives far more applications as the summer holiday approach, credit card companies start receiving a far higher level of applications as Christmas approaches, with millions of customers all determined to put Christmas on the plastic and then think about the repayments once the holidays and chaos is done and dusted. This, of course, means longer processing times, and therefore you need to be prepared to make your application in plenty of time.
Some people decide to take a trip abroad to do their Christmas shopping in October or November, such as a few days shopping in fabulous New York or even a trip to France to take advantage of the duty free prices. If this is something that you are thinking about then now is the time to start looking for that perfect credit card – preferably one that offers a long 0% interest on purchases deal, so that you can take your time to repay the balance once you have made your purchases, and you won’t be hit by interest charges.
Even if you plan to leave your Christmas shopping until December it is still a good idea to keep your eyes peel and your ears pinned back so that you know which credit cards are offering the best deals when you do decide to make your application. This way you can make your application in plenty of time, enjoy a competitive deal and longer interest free periods on your borrowing, and be far more prepared for Christmas when it comes to your finances.
.About the Author:
Reno Charlton, award-winning writer, shares her financial expertise as a contributing columnist for www.credit-card-comparison-online.co.uk - where you can compare 0% purchase credit cards.
18th Dec 2007 | Comments (0) | Personal Finance, Finance, Money, Credit Card, Spending, Compare, Interest Rates, Apply Online, Christmas Shopping, Holiday Season, Uk, 0% Purchase Credit Card, Spread Repayments, Buy Now Pay Later, Credit, Card, Interest
Whether you are buying a pair of shoes, a coffee, a car or even an exotic holiday, you will be asked how you would like to pay. Conch shells, precious gems and rare metals have all been exchanged in the past for goods and services, but modern man uses money in the form of paper bank notes, non-precious metal coins and increasingly people are opting to pay with a credit-card, a conveniently small piece of plastic kept safe in their wallet or purse.
Today there are more credit-cards then ever before and the boom in the industry since its inception in the 1920s has revolutionised the way people pay for their purchases and gain credit.
Credit cards are developments of earlier credit schemes employed by merchants. During the early introduction of the automobile, an American petrol station owner realised that people needed a form of credit to pay for petrol for their cars. The company provided customers with a card credit system, allowing them to pay for their purchase over a period of time to suit their individual circumstances. This service is recognised as the first credit card scheme in the world.
Today credit cards give consumers access to monetary credit. The account holder is issued with a card with which they can make purchases. These purchases are paid for by the credit card company and recorded against the account holders account. The credit card account holder is then sent a balance of their account monthly and they must pay a minimum amount agreed with the lender each month and also have the option to pay more back if they desire. If the account holder does not pay the total balance, an interest payment is accrued and charged to the account.
The explosion in the use of credit cards throughout the UK has been dramatic and is unlikely to change in the future, there are however downsides to the service as credit card providers charge consumers higher rates of interest than many other credit suppliers. As consumers have increasingly used credit-cards, personal debt has risen dramatically in the UK. During the 1990s, credit card debt rose to its highest level in history and it keeps increasing annually. Alternative methods of credit that accrue lower rates of interest are available, such as secured loans which can be more cost effective for consumers making planned purchases.
Credit cards have been used by entrepreneurs to fund ventures including the development of the search engine Google and the filming of Battlestar Galatica: The Second Coming. Early cards were made from celluloid, metal and even paper, whilst today they are made from plastic. Designs vary enormously throughout the world and have portrayed wildlife, royalty, satellite images of the globe and even works of art from the grandmasters. The amazingly wide variety of materials and designs used to make credit cards has even given birth to a new field: Exonumia, the study of money-like objects.
.About the Author:
Adam Singleton is an online, freelance journalist and keen amateur photographer from Scotland. His interests include travelling and hiking.
15th Dec 2007 | Comments (0) | Loans, Credit Card, Secured Loans, Credit Cards, Credit Card History, Credit, Card, History, Cards
News on TV, in newspapers and on the radio about Britain’s credit card debt may have caused you to look differently at your credit cards, but it shouldn’t.
Credit cards enable consumers to make the most out of borrowed funds and if used optimally, could actually earn you money and brownie points on your credit score.
Shock value news has scared many consumers into relying more on their debit cards for making purchases. Spending on credit cards has actually decreased while spending on debit cards has swelled. In fact, 80% more money is spent using debit cards over that spent on credit. It is obvious that people see the advantages of using a debit card; it’s as easy to use as traditional plastic and takes the money straight out of your account so there are no bills to remember and no fees if you leave your overdraft untouched. If used advantageously however many more benefits can be obtained from using your credit card to pay bills.
Credit cards also can come with perks so consumers should shop around when looking for a card to find the offers which would benefit them most. One of the most popular perks is cashback. This means that the credit card company will give you a percentage of what you spend back to you. Some cards limit the kinds of purchases that they offer cashback on such as on petrol or on supermarket shopping but it still works in the consumers’ favour if they are paying their bills on time. This can be a fantastic added extra to a card and most obviously in the users favour.
A newer perk out on the market is the charity card. Many credit card companies are aware that Britons donate a huge amount of money to charity every year and have found a way to make giving even easier. People can use these cards and feel good knowing that they are giving back in some way to those who may be less fortunate.
Another less altruistic reason for running more miles on your cards is to increase your credit score. If you have yet to take out a mortgage or loan, using a credit card smartly can have a positive effect on your score making it much easier to buy your first house or apply for a loan.
Most credit card companies have made it super easy to apply for a credit card online. Simply fill out the online forms, wait, and in no time you will know whether or not you got the card you wanted.
Don’t be frightened of your card. It can be used to your advantage if you have the right one for you and treat it right. It will do the same for you in return.
.About the Author:
Elisha Burberry is an online, freelance journalist and keen movie-goer from Scotland. Her interests include travelling, cooking and photography.
13th Dec 2007 | Comments (0) | Cashback Credit Cards, Apply For A Credit Card, Charity Credit Cards, Credit Card Perks, Debit Cards, Apply Online Credit Card, Credit Card, Apply Online, Credit Cards, Credit, Card, Cards
Before you choose a credit card, do your research and be informed about the terms and conditions, no matter how magical the offer may appear. Remember, the credit card company is trying to sell you their product.
Use our checklist of features to help make the best decisions in selecting a credit card:
* The annual percentage rate (APR), which is the rate of interest you will be charged on unpaid balances and “cash advances”. Try to use your bank ATM card for cash withdrawals where there is no fee and no interest, vs. the credit card which will charge you interest on all cash withdrawals.
* Special promotional programs with introductory zero or low interest rates and enticements to transfer debt from other credit cards. Find out how long the special rates will be valid. This may sound like a great solution to your problems, but after the introductory period is over, you may get an even higher interest rate on unpaid balances. This is a great feature only IF you can use the limited time to pay off balances.
* Annual fees (some cards) or fee for late payments (most cards).
* Find out about your liability limits if your card is lost or stolen.
* Penalty charges if you exceed your credit limit.
* Grace Period: This is the time between the date you receive your bill and the time it must be paid. The average is 15 days. Remember that you will be charged interest on unpaid balances, even if you pay on time.
* Reward programs (airline miles, merchandise, cashbacks). You might as well get something back from them for using their card!
Most important: It’s a fact that credit card companies make most of their money from their clients’ finance charges. Make the credit card work for you by making payments in full and on time, earning rewards that are in your interest, and avoiding the payment of any interest or finance charge to your credit card company. Keep the money in your pocket and out of their pocket.
For more information, visit www.parkavecredit.com
.About the Author:
article publisher
12th Dec 2007 | Comments (0) | Bad Credit, Loans, Mortgage, Credit Card, Credit, Card
Who are the credit bureaus?
I have managed a mortgage company since 1989.
I also manage a national credit repair business. We speak to people about their credit all day long. There is a common misconception that the credit bureaus are in some way connected to the government. It’s not true – they are nothing but big business. There is no government charter or anything of the sort. And yet there may be nothing that has such a profound influence on your financial life.
There are three credit bureaus that matter. They are Experian, Equifax, and TransUnion. Their business is to gather credit data about you and sell it to potential creditors to determine your credit worthiness.
There is a fourth bureau called Innovis that you may hear of occasionally. Innovis is a major compiler of credit data which is used for pre-screening those unsolicited credit card offers we all get in the mail. Mortgage giants Fannie Mae and Freddie Mac contributed to the rise of Innovis in 2001 by demanding that all of their mortgage servicers report borrowers’ pay histories to Innovis. I suspect that we will all hear more about Innovis in the future, but for the moment it has no direct impact on your life.
What is a credit score?
At the moment all three bureaus use a single scoring model called the FICO score. FICO is an acronym for the developer of the score, Fair Isaac and Co. The three bureaus have branded the FICO model for their own marketing so you may hear it called different names. Equifax calls it a BEACON score, TransUnion calls it an EMPIRICA score, and Experian (who seems to lack imagination) calls it the EXPERIAN/Fair Isaac Risk Model.
Why are your three scores different?
Your scores with each bureau are different because each bureau gathers information from a slightly different mix of creditors. If you were to look carefully at your three reports you will notice that some accounts are missing on each bureau. Timing also plays a roll. A recent change in your credit may be picked up sooner at one bureau than another.
What’s included in your score?
As the manager of a Florida mortgage company serving the states of Florida, Georgia, Massachusetts and Virginia and a national credit repair company I spend a lot of time analyzing credit reports. Everyone wants to know what they should do to improve their credit scores. The exact method for calculating your credit score is a secret. But Fair Isaac offers a fair amount of information about the essentials. There is a lot of information on your report. And not all categories of information carry the same weight in the score calculation.
Your payment history is the big ingredient. This category includes the obvious installment and revolving debt payments. It also includes public records and collections. The age of any derogatory item in this category diminishes its impact on your score. Fair Isaac indicates that his category makes up 35% of your score.
The balances you owe make up the next category. Different weights are given to revolving versus installment balances. The relationship between the balance and the credit limit on your revolving accounts is a big factor. And the relationship between the current balance and the original balance on installment loans is taken into consideration as well. Fair Isaac indicates that this category makes up 30% of your score.
The length of your credit history is a factor as well. New credit will have a negative impact on your score, and those accounts that you have kept alive and healthy for years have a good impact. This category makes up 15% of your score.
Your new credit and your recent credit inquiries are a factor. If you have new credit or have had your credit run recently you have increased your debt load, or you are about to. Either way you will lose a few points on this one. Fair Isaac weighs this at 10% of your score.
The type of your credit is the last ingredient and the final 10% of the calculation. This is a bit more mysterious. There is some ideal mix of mortgage, installment, retail store cards, revolving accounts, and consumer debt that Fair Isaac will reward. Fair Isaac won’t say exactly what the perfect mix is, but in our experience the key is to build and maintain a well managed balance of accounts, make your payments on time, and try to keep those revolving balances down.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
.About the Author:
Jim Kemish is the president and founder of Power Mortgage, a Florida mortgage company based in Delray Beach, Florida. Power Mortgage Corp was established in 1989 and serves the states of Florida, Georgia, Massachusetts, and Virginia. Jim is also the President of Sky Blue Credit, a national credit repair business.
12th Dec 2007 | Comments (0) | Bad Credit, Personal Finance, Finance, Money, Credit Scores, Credit Report, Debt, Credit Repair, Home Finance, Money Saving Tips, Credit Report Repair, Credit, Credit Score, Tips, Repair, Score
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