Credit Basics Part 4

Credit Basics Part 4 Experian offers some very simple but sound advice about credit scores.   This week we will be sharing some of their insights with you. 

Items that make scores better

Paying your bills on time is the single most important contributor to a good credit score. Even if the debt you owe is a small amount, it is crucial that you make payments on time. In addition, you should minimize outstanding debt, avoid overextending yourself and refrain from applying for credit needlessly.

Applications for credit show up as inquiries on your credit report, indicating to lenders that you may be taking on new debt. It may be to your advantage to use the credit you already have to prove your ongoing ability to manage credit responsibly.

If you do have negative information on your credit report, such as late payments, a public record item (e.g., bankruptcy), or too many inquiries, you may want to pay your bills and wait. Time is your ally in improving credit. There is no quick fix for bad credit.

One common question that many consumers have regarding their credit score involves understanding how very specific actions will affect their credit score. For example, someone might ask if closing two of his/her installment accounts would improve his/her credit score. While this question may appear to be easy to answer, there are many factors to consider. A credit score is based entirely on the information found on an individual’s credit report.

Any change to the credit report could affect the individual’s scores. Simply closing two accounts not only lowers the number of open installment accounts (which generally will improve your score) but it also lowers the total number of all open accounts (which generally lowers your score). Furthermore, such an action will affect the average age of all accounts that could either raise or lower your score. As you can see, one seemingly simple change actually affects a large number of items on the credit report. Therefore, it is impossible to provide a completely accurate assessment of how one specific action will affect a person’s credit score. This is why the score factors are important. They identify what elements from your credit history are having the greatest impact so that you can take appropriate action.

You can read more from the Experian website on this information at http://www.experian.com/credit-scores/basics.html

At HOPE we help educate clients every day on how to make wise financial decisions. If you would like to know more please call us at 704-503-3669. Our staff is waiting on your call.

Credit Basics Part 3

Credit Basics Part 3 Experian offers some very simple but sound advice about credit scores.   This week we will be sharing some of their insights with you. 

Credit score factors

Score factors are the elements from your credit report that drive credit scores. For example, your total debt, types of accounts, number of late payments and age of accounts affect credit scores. Score factors indicate what elements of your credit history most affected the credit score at the time it was calculated.

Score factors are the key to improving credit scores. They tell you what you must address in your credit history to become more creditworthy over time. Score factors are usually consistent from one score to another, so addressing the items identified by the score factors can help you improve other credit scores.

Lenders are required to provide consumers with the most significant score factors when they are declined credit.

Improve your credit score

Get suggestions on how to make your credit score better. Discover what items in your credit report raise and lower your score. Learn the most important contributor to a good credit score.

Some suggestions Scores reflect credit payment patterns over time with more emphasis on recent information. In general, a score may improve, if you:

• Pay your bills on time. Delinquent payments and collections can have a major negative impact on a score.
• Keep balances low on credit cards and other "revolving credit." High outstanding debt can affect a score.
• Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix – it probably won't raise your score.
• Pay off debt rather than moving it around. Also, don't close unused cards as a short-term strategy to raise your score. Owing the same amount but having fewer open accounts may lower your score.

Review your  credit report regularly so you know what is being reported. It won't affect your score to request and check your own credit report.

You can read more from the Experian website on this information at http://www.experian.com/credit-scores/basics.html

Check back tomorrow for more information on credit basics that will help you.

At HOPE we help educate clients every day on how to make wise financial decisions. If you would like to know more please call us at 704-503-3669. Our staff is waiting on your call.

Credit Basics Part 2

Credit Basics Part 2 Experian offers some very simple but sound advice about credit scores.   This week we will be sharing some of their insights with you.  Credit Score Facts

Learn more about score factors and why lenders use credit scores. Find out how your credit score rates before approaching lenders.

Types of credit scores

There are primarily two types of scores – generic scores and custom scores. Custom scores are generated by individual lenders, who rely on credit reports and other information, such as account history, from their own portfolios.

Vantage Score

Vantage Score is the first generic credit score developed cooperatively by Experian and the other national credit reporting companies. This score uses the same exact formula across all three credit reporting agencies.

Why lenders use credit scores

Before credit scores, lenders physically looked over each applicant's  credit report to determine whether to grant credit. A lender might deny credit based on a subjective judgment that a consumer already held too much debt, or had too many recent late payments. Not only was this time consuming, but also human judgment was prone to mistakes and bias. Lenders used personal opinion to make a decision about an applicant that may have had little bearing on the applicant's ability to repay debt.

Credit scores help lenders assess risk more fairly because they are consistent and objective. Consumers also benefit from this method. No matter who you are as a person, your credit score only reflects your likelihood to repay debt responsibly, based on your past credit history and current credit status.

You can read more from the Experian website on this information at http://www.experian.com/credit-scores/basics.html

Check back tomorrow for more information on credit basics that will help you.

At HOPE we help educate clients every day on how to make wise financial decisions. If you would like to know more please call us at 704-503-3669. Our staff is waiting on your call.

Credit Basics Part 1

Credit Basics Part 1 Experian offers some very simple but sound advice about credit scores.   This week we will be sharing some of their insights with you. 

1. Improve your credit by understanding the basics

What are credit scores and how are they calculated? Credit scores are fluid numbers that change as the elements in your credit report change.

What is a credit score? A credit score is a number lenders use to help them decide: "If I give this person a loan or credit card, how likely is it I will get paid back on time?" Credit scores are also called risk scores because they help lenders predict the risk that you will not be able to repay the debt as agreed. Scores are generated by statistical models using elements from your credit report however scores are not stored as part of your credit history. Rather, scores are generated at the time a lender requests your credit report and then included with the report.

Credit scores are fluid numbers that change as the elements in your credit report change. For example, payment updates or a new account could cause scores to fluctuate. There are many different credit scores used in the financial service industry. Scores may be different from lender to lender (or from car loan to mortgage loan) depending on the type of credit scoring model that was used.

How scores are calculated

How scores are calculated. Developers of credit scoring models review a set of consumers – often over a million. The historical credit profiles of the consumers are examined to identify common variables they exhibited. The developers then build statistical models by selecting the credit variables most predictive of future behavior and assigning appropriate weights to each variable.

Models for specific types of loans, such as auto or mortgage, more closely consider consumer payment statistics related to these loans. Model builders strive to identify the best set of variables from a consumer's past credit history that most effectively predict future credit behavior.

You can read more from the Experian website on this information at http://www.experian.com/credit-scores/basics.html

Check back tomorrow for more information on credit basics that will help you.

At HOPE we help educate clients every day on how to make wise financial decisions. If you would like to know more please call us at 704-503-3669. Our staff is waiting on your call.

How To Get A Low Mortgage Interest Rate.

How to get a low mortgage interest rate.

If you hope to get a mortgage, either for a new house or to refinance, the biggest factor will be your credit score. Your credit score will determine how good of a rate you get or whether you get a loan at all.

The credit score isn't magic; it's a mathematical formula. It’s important that you know your credit score.

Different reporting agencies may use slightly different percentages, but it boils down to roughly this:

35% Paying Bills On time 30% How Much You Owe and How Much Credit You Have 15% How Long You've Had the Accounts 10% No New Accounts 10% Variety of Accounts

Here are a couple of suggestion that might help you.

***Use automated bill payment. Lots of people have the money to pay their bills; they're just too disorganized to do it. Automated bill payment is usually free, and some banks will even send out paper checks automatically to people you owe who don't take electronic bill payment.

It's especially helpful for credit cards, which are now scrounging for every fee they can get. And, most importantly, you won't get a ding on your credit report for being late.

***Pay down your credit card debt. Lenders don't want you to use more than 30% of your overall credit limit. Just because someone is willing to lend you money, doesn't mean you should take it.

They'll allow you to charge 100% or more because they can add extra fees. For a credit card company, someone who keeps a high balance and barely pays the minimum is the ideal customer; they generate the most fees. But for a mortgage lender, that person is a higher risk.

You also don't want to concentrate all your balance on one card, no matter what miles or rewards you're soaking up. Creditors look at your overall available credit and whether you are at your limit in any one account.

At HOPE we help our clients everyday make wise decisions on getting the highest crdeit score they can achieve. If you would like to know more please call us at 704-503-3669. We are waiting on your call.