What Portion of a FICO Score is Payment History?

19/05/10 0 COMMENTS

What Portion of a FICO Score is Payment History?

In the United States, credit scores are broken down into five categories. Each category represents a fixed percentage of your credit score.

35% Payment History
Late payments on bills reported by a lender. These debts usually include your mortgage, auto loan, credit cards, etc. Not all lenders report to credit bureaus.
30% Debt-to-Credit Limit Ratio
The ratio of current revolving debt balances (e.g., credit cards) to the total credit amount remaining (credit limit). Even if you pay your credit card on time and make larger than minimum payments, keeping your limit near the maximum will lower your FICO score.
15% Length of Credit History
All closed and open-ended accounts have an age history (how long they’ve been open). The longer a creditor has allowed credit to be extended has a positive impact on a FICO score.
10% Types of Credit Accounts
FICO scores take into consideration the type of credit load that a borrower maintains (revolving, installment, consumer finance). If a borrower’s entire credit report shows nothing but credit cards, a lender’s might shy away from providing a mortgage or auto loan.
10% Hard Inquires
Multiple credit inquires over a short period of time seeking to open new credit (credit cards, signature loans, etc.) can adversely affect an individual’s score for a long period of time. However, mortgage and auto loan inquires over a short period of time will most likely not result in a marked decrease in your FICO score.

Note that employment history and residence (rent or own) are not part of your FICO score. But, a lender can deny credit based on length of time on the job or the amount of jobs in a given period. Some creditors use your residence status in determining your credit worthiness.

CREDIT SCORE: What’s Your Number?

17/05/10 0 COMMENTS

CREDIT SCORE: What's Your Number?

Businesses of all kinds use your credit score to make decisions on the amount of risk they are willing to accept in extending credit. Most creditors don’t just use your three-digit Fair Isaac Corporation (FICO) credit score; they also review the details of your credit history listed on the credit report. FICO scores range from 300 (bad credit) to 850 (excellent credit) with 60 percent of the scores falling between 650 and 799. According to FICO, the median credit score is 723.

Each consumer’s FICO score is constructed from credit scores of the three national credit bureaus — Experian, TransUnion, and Equifax. The scoring model used by FICO combines the database of each of these three credit bureaus into one score that represents the same credit risk to lenders regardless of which bureau is accessed.

But, a good credit score doesn’t guarantee the borrower will pay back all funds on schedule just as a bad credit score doesn’t guarantee they creditor will never seen their money again. The credit score is simply an estimation of the credit worthiness of an individual.

More importantly, a credit score evaluates a borrower’s ability to repay debt (meaning even with a good credit score, a borrower might be denied credit). This can happen after the reviewing the borrower’s income, assets, and liabilities, the lender feels the borrower’s ability to repay the loan would be drastically reduced when compared to credit extended in the past.

Check your credit report once a year to ensure it is correct. Errors left ignored can cost your FICO score points and thousands of dollars in interest that you shouldn’t have had to pay. Also, your three-digit number is your protection against being denied credit when you really need it. What’s your score?

SOME OF THE FASTEST WAYS TO ZERO DEBT

10/05/10 0 COMMENTS

Some of the Fastest Ways to Zero Debt

There’s been a lot of hype hitting the media airwaves since the current economic crisis took hold. Most of the talk has been about getting out of debt. There are financial talk shows and organizations promising to cut your credit card debt. Evidently, all that talk isn’t helping because consumer-related debt continues to rise out of control into the trillions of dollars.

But, there’s still one program that does what it says it is going to do — show you some of the fastest ways to zero debt. Even better, they can do it with no change to your current income and no refinancing of your current mortgage! The company is called United First Financial ® and their amazing Web-based software is called the Money Merge Account ® program.

UFirst ™ starts with a simple strategy: eliminate debt and build wealth simultaneously by putting your money to work for you. From there, they assist you in achieving your financial goals through interest cancellation. Simply enter your debts: principal balance, interest, and term — then follow the program to become debt free!

When signing on the dotted line for your mortgage, was your biggest concern the interest rate? While many homeowners realize they can save money with lower interest rates, few think about the length of time they will be paying or the gross amount they will be paying, including interest, at the end of the loan’s term. This is one of the Money Merge Account program’s strong points — reducing your mortgage term and minimizing the amount of interest you’ll pay.

CREDIT REPORTS: Are They Accurate?

06/05/10 0 COMMENTS

CREDIT REPORTS: Are they Accurate

In reference to a consumer, a credit report is a detailed record of an individual’s past borrowing and repayment history. Key information on a credit report also includes information concerning late payments and bankruptcy. The three main credit bureaus — Equifax, TransUnion, and Experian — collect your payment information from lenders, merchants, and landlords, and then sell the report to business so they can decide your credit worthiness.

The statement also includes your Social Security Number (SSN), current and former residences, current and former employers, telephone number, and date of birth. When a consumer submits an application to extend credit, their information is forwarded to a credit bureau. This is why it is very important for creditors of all types to verify and then provide accurate data to credit bureaus.

There has been much discussion on both sides over the accuracy of the data in credit reports. However, the only scientific research studies that include data samples large enough to be tested have concluded that the data in consumer credit reports is very accurate. The Consumer Data Industry Association testified before Congress that less than two percent of those reports that resulted in a consumer disputes had data removed because it was found to be inaccurate.

If a consumer disputes any portion of information in a credit report, the credit bureau has 30 days to verify the data or it must be removed. On average, 70 percent of consumer disputes are resolved within 14 days and then the consumer is notified of the resolution. The Federal Trade Commission (FTC) states that one large credit bureau noted that 95 percent of those who formally dispute an item seem satisfied with the decision of the credit bureau whether the outcome was in their favor or not.