Credit Report Coach Blog

Credit Scoring

2006-11-01T09:24:00.000-08:00

Once again, I've hit upon a subject that there is a LOT of conflicting information about. That's how your credit score is determined. I see so much information out there, it's hard to know who's right. Well, here's the skinny on credit scoring, right here at the Credit Report Coach Blog!

Creditors apply a ‘Risk-based Pricing’ technique when dealing with low scorers. Customers and borrowers with low credit scores are charged higher rates of interest on loans by creditors. This forms the base of ‘Risk-based Pricing’.

How Your Credit Score Is Determined:

Your credit score is computed after obtaining vital information about you, including:

- Payment history
- Debts
- Credit inquiries
- Credit history
- Job and assets
- Bankruptcy, foreclosures and judgments

History of Payments

Generally 35% of your credit score depends on your payment record. It depends on the number of bank accounts, loans, credit cards and retail accounts you have.

Debts

30% of your credit score is the result of your debts. Untimely, late or no payments are detrimental to your score. The bureaus compare the ratio of revolving debts to your total available credit. That means, if you go over your credit limits, your score will likely get dinged.

Credit Inquiries

10% of your credit score depends on the kind of credit used in the past, like installment loans, consumer finance or revolving credit. Another 10% of your credit score is based on the kind and amount of credit obtained recently. An increase in the number of new credit accounts could result in a decrease in your credit score.

Credit History

15% of your credit score depends on your past credit record. The duration of repayment involved calculates your creditworthiness.

Your Job and Assets

Financial stability and having a steady job is another factor that helps in calculating the credit score.

Bankruptcy, foreclosures, and judgments affect your credit score significantly. However, credit scoring models do not include these factors while computing the actual score. But, these factors do affect your score negatively and credit scoring agencies may deduct around 160 to 220 points from the credit score of a consumer who has filed for bankruptcy.

Improving Your Credit Score After Bankruptcy

2006-10-31T07:53:00.000-08:00

Filing for bankruptcy, for most people can be embarassing at the least. Fortunately, bankruptcy does not hold the stigma that it once did, so you don't have to feel bad.

However, upgrading your credit score after bankruptcy can be a daunting task. This is due to the fact that your credit score will automatically be even lower than it once was. Bankruptcy may not leave a permanent scar on your credit rating and it is possible to improve your score after a bankruptcy filing.

Rebuild your credit score with a credit card

You need to apply for a credit card as soon as your bankruptcy is discharged. It will help you to prove your creditworthiness to the financial companies.

Check your credit report

It helps to check your credit report thoroughly and identify any negative entries. If any, it should be reported to the company in question immediately and copies of the relevant documents should be sent to the creditor.

Pay off debts

Before filing for bankruptcy, you should go through your credit report thoroughly to check for accuracy. Bankruptcy can be the result of high rates of interest. You should try to pay those debts as soon as possible (if you can), to increase your chances of improving your credit score.

Keep A Good Credit Score

2006-10-30T07:01:00.000-08:00

Hey..I was thinking about ways to keep my credit score in good standing; unfortunately this happened after I made several errors on my own. So, in the interest of helping you avoid my mistakes, I've compiled this handy-dandy list of how to raise your credit score:

Don’t open new credit cards that you don't need
Don't apply for credit cards too often. An inquiry is placed in your file every time you apply for credit. Too many new applications for credit can lower your score.

Closing an unused account does not make it go away

Don't discontinue unused credit cards. A closed account still shows up on your credit report and may be factored into the score. This strategy will not raise your credit score.

Own credit cards - but handle them responsibly

Generally, having credit cards and making payments on time raises your score. All you have to do is to manage them intelligently.

Don't have very few credit accounts

You are also considered a credit risk if you have no credit or loans accounts. A few credit cards in good standing and balances with reasonable limits can help improve your score. An individual with no credit cards is at a higher risk than one who manages them responsibly.

Keep away from Bankruptcy

Bankruptcy is a factor that can destroy your score. Any kind of loan you get will be more expensive. Bankruptcy stays on your credit record for nearly 10 years. To sort out your bill problems and to avoid bankruptcy at all costs it is advisable to consult a credit counselor. By opting for credit counseling instead of a bankruptcy declaration, you can raise your credit score in a comparatively much shorter period.

Dispute Old Negatives

You can dispute incorrect information on your credit report. Likewise, you can also argue over other negatives. Lenders and collection agencies very often move your information so many times that their records often mess up. If they seem least interested in collecting money, negative items can be erased from the report. This sometimes may turn out to be the quickest way to raise your credit score fast.

Credit Report Myths II

2006-10-29T14:16:00.000-08:00

Ok...here are more credit report myths dispelled:

Marrying someone with poor credit will hurt your credit score:

Marriage may lead to the combination of finances. Your credit report will be different from the credit report of your spouse if you do not have joint accounts. If either of you is added to an account with a negative history, the information will show up in both your reports. This affects your credit score.

Paying a debt will improve your credit score:

If you have not paid a debt or you make a late payment, this information will stay on your credit report for at least seven years. Even if you pay the debt later, the report of the ‘unpaid debt’ will not be removed from your report for seven years.

Credit card offers hurt your credit score:

Credit card offers cannot hurt your credit score unless you respond to them. Your response to every promotion will create several inquiries on your credit report and that will affect your credit score, i.e., make it go down.

You need to be aware of credit reporting myths, since common mistakes or not understanding them can cost you both time and money. Make sure you take the necessary steps to protect your credit!

Credit Report Myths

2006-10-27T14:45:00.000-07:00

Ok, so you think you've heard everything under the sun about credit reports and your credit score? Well, it looks like everyone and his mother has advice for you, some right, some wrong. If you're confused and looking for answers, you've come to the right place! Below are some common credit report/score myths demystified:

Closing of accounts and canceling of credit cards will not hurt your credit score:
People have this misconception that closing down some of the accounts can help in improving your credit score. The fact is that if you have opened too many accounts, the damage is already done and you cannot change it by closing the accounts. Instead you will only damage the score even further because your credit history will appear shorter. Around 15% of your credit score is based on how long you have the credit reported.

Checking your credit can lower your score:
The misconception that checking your credit score can have a negative impact is simply not true! You will be causing far more damage to your score if you do not check it regularly - you simply must know what is going on with your credit.

All three credit bureaus report the same credit score:
You do not get the same credit scores from each of the credit bureaus. Equifax, Trans Union and Experian calculate the scores on the basis of the information reported to them, and not all 5 bureaus have the same information!

Stay tuned to tommorrow's posting....we'll go deeper into more credit report/score myths!

Your College Bound Teen and Credit

2006-10-21T15:26:00.000-07:00

Ok..this one's for the parents...

If your teen will be attending college soon, you need to educate them on issues related to money and credit card management. College students are showered with offers from credit card companies, almost as soon as they set foot on campus. Credit card companies try to entice students to apply for their credit cards, by offering free movie passes, T-shirts and even school supplies! Did you know that they don't even have to ask your permission to apply for a credit card? Plus, if your kid gets over their heads, the credit card company is counting on the fact that YOU (the parent) is probably going to foot the bill!

If you must give your college bound teenager a credit card, here are two smart ways to make sure things don't get out of control:

1. Make your child an authorized user of any one of your credit cards. Your child will then obtain a credit card with his name printed on it. However, the card will be attached to your personal account. You will be held responsible for the purchases the child makes with the card. Nevertheless, this is a good learning experience. Make sure your child keeps track of all the expenses and takes responsibility for the amount.

2. If your child is mature enough and has demonstrated financial dependability, try co-signing a credit card. This credit card will be in his or her name, but you are responsible for the debts incurred. Nevertheless, this card permits your child to begin developing a self-sufficient credit history, since he will be the main user.

With both of these methods, you will have ultimate control over the account. And don't be afraid to cut them off if their spending gets out of control!

Leeia

Can Loans Help Raise Your Credit Score?

2006-10-19T16:35:00.000-07:00

Ok, let's clear up a few misconceptions. Certain debt has a negative impact on your credit score - but the truth is that there are some loans that can help improve it. Don't get too credit-happy, though, because too many mortgage or auto loans can have a negative effect on your score (I found that out the hard way so you don't have to!) I've listed a few loans that, used wisely, could actually help increase your credit score (who knew?):

Fixed Mortgage Loans - With a fixed rate mortgage, the interest is set for the entire life of the loan. This protects you from rising interest rates. It can also help you manage your monthly pauments better and will not in any way harm your credit score. When interest rates drop, you also have the choice of refinancing at a lower interest rate.

Home Equity Loans – You can use home equity loans can help to get rid of bad debt, like personal loans, high interest credit cards and overdue bills. A home equity loan combines your short-term debts and can then help improve your credit score!

As with any type of loan, be sure not to let the balances get too high and to Make all your payments on time!

Leeia

Credit Alerts

2006-09-14T14:09:00.000-07:00

Ok, so I know I advocate that everyone should have a credit monitoring product, and again it has saved me numerous headaches just this week.

I woke up and checked my email and I had a alert on my experian report, a majory delquent. It seems that I had a account turned over to a collection agency. The reality was it was paid in full, and it was a mistake on the collection agency, and the accounting department of the bill. If it would not have been for the alert, my credit would have taken a serious dive and next time I went in for a loan I would have been given a super high rate, or no credit at all.

Of course since it was wrong information I could have taken care of it after I was declined for credit, but that is a huge hassle. And who knows if what I was buying would still be availible!

Then like deja-vu it happend to me just today, another alert in the inbox. Again a accounting mistake, but geez two in a roll come on!

For the cost of a few mocha latte's a month you can rest assured that your credit is being watched, I highly recomend you sign up for the monitoring of all three of your credit reports!

Ken

Free Credit Report.com

2006-09-12T13:20:00.000-07:00

I ran accross this in the news today http://redtape.msnbc.com/2006/09/dont_fall_for_f.html
I think it is a great article, and I just want to spread the news as much as I can. It is unfortunate that there business model seems to be to mislead people and take there hard earned cash.

Ken

Quick note on credit inquires

2006-07-14T14:28:00.000-07:00

Hard Vs Soft.

There is alot of confusion on what can and cannot hurt your credit score. Does pulling your credit hurt your score? Yes and No.

How can it be both? Well there are to types of inquires used, hard and soft.

Hard inquires are what you get when you apply for credit, jobs, housing, etc. A hard inquiry will ding your credit. It will last about 6 months and then start to fade away. This is one reason to be careful when applying for credit, if you dont know your score going in and have bad credit, this is going to make it worse.

There are a few exceptions to the rules, when applying for a car or a home, you will get dinged but then have a grace period. About a two week period, in which you can shop around for the best rate, and hard inquires in that time period will not count against you, just the intial inquiry will. They do this because you will not be approved or assigned a rate until your credit score is known. Then another lender might be able to get you a better deal on the rate, so you can shop around a bit when applying for a home or a car.

When making a large purchase such as a home or car, you should know yoru score before you go apply for credit. That way you will have a very good idea of what rate you will get and it will help you determine how much you want to spend each month.

That leads me into soft inquirys. You yourself can pull you credit as often as you would like, thats called a soft inquiry. Soft inquirys do not harm your credit score, after all it is your credit file, you should be able to check it as often as you would like. And you should check it often!

If you are going to be purchasing a car or a home, you should be checking your credit often. If your credit is low, take a month or two and learn how you can raise your credit score. If your credit is good, then look around for the best rates that you can get.

A credit monitoring program is the best tool you can get to help you raise your credit, and to maintain the good credit you have!

Ken

Importance of knowing your credit score.

2006-06-27T13:51:00.000-07:00

If there is one thing that I try convince my friends to do, is sign up for credit monitoring. Its inexpensive, it gives you great insight into your finances, and keeps you safe from identity theft. And if you ever get kidnaped by a wierd credit worshiping cult, who gives you only one question for you freedom "What is your credit score". You will be released. Really what more can you ask for?

Many of my friends are getting to the point where they are buying there first homes. At it still amazes me how many of them have no clue what thier credit looks like. It is just a big mystery that is left to that of bankers, on mortagage brokers. They can spend hours with realators, contractors, etc checking out a potential home, but the one thing they can know to save the thousands of dollars over the course of the loan they have no idea. Knowing before you go for a loan what your credit score is invaluable. It will tell you what rate your going to get, and with that information how much house you can afford. And if your credit score is low, then you can take a few months to fix it then shop for a house.

My friends are not to blame for the lack of credit awarness. It is hard to find information regarding your credit, and many people still do not understand it completely. Just like anything though, read lots of articles, order your credit reports, and stay on top of your credit purchases and credit wont be as much of a mystery.

Check out the articles on Credit Report Coach for more indepth infromation on home buying and credit.

Credit Score rant of the week....

2006-06-21T10:12:00.000-07:00

Ok, like many of you I check my credit report on a Dailey basis. Its addicting I know. On of the negative factors on my report is "length of Credit History". Which is crazy, I have had credit for over 10 years. That to me seems to be long enough to see if I pay my bills on time. I have colleagues who are in there mid to late 40's and they also suffer from thin file syndrome. Which is another fancy term for lenght of credit history. Ok sure it also can mean little to know credit history, but in my rant I am sticking to lenght of credit history.

I had some friends over the other night, they had there frist child a little less than a year ago. I was joking with them that the should start a credit file on the little one. That way maybe, just myabe she will have enough credit history in her lifetime to avoide the dreaded lentgh of credit history...

Ken

My thoughts on Vantage Scoring

2006-06-02T13:37:00.000-07:00

Here is the cliff note version of Vantage scoring. Vantage scores are a new scoring system that uses the same algorithm across the three credit bureaus. For a detailed run down of Vantage scores check out this article. Vantage credit score.

The good news is now when you request a credit score along with your credit report, that same algorithm will be used on all three of your scores. Before each bureau used its one algorithm to calculate your credit score. So scores pulled from Equifax could be very different from those pulled from TU, or Experian. Before Vanatage score, FICO was the only scoring algorithm that used one algorithm on all the data sets.

Will the scores now be the same from all three bureaus, nope. Unfortunately they all collect and store different data sets. (that's why it is so important to check all 3 credit reports not just one) The advantage comes in that now at least they are putting they dats through the same set of numbers to pull a score. And they are using a alpa numeric system for the credit "grade" A-F, just like in school A is the best, F, well not so good.

On paper the new system sounds very good. It should be easy to read, and accurate in all 3 bureau's. That sounds better than a stick in the eye, right? Well yes, but I still have my concerns.

First is the alpa numeric system. Even though the apha part is very easy to understand, a lot of people want to know the exact score. FICO currently goes roughly 350-850 the higher the better. The Vantage score runs roughly 500-1000. So what if I am applying for a loan and I ask what my credit score is and the nice loan person says 840. I will jump up and down and bask in the glory of my high credit score, until I find out its actually just average and they used Vantage instead of FICO. Not a huge concern I know, but it could be confusing.

I know most of you will think I am crazy and say that never happens, but I think it will. When I went to purchase a new truck I asked the loan guy what my credit score was he told me X amount. It seemed higher to me, I had just pulled a FICO and credit bureau scores just the day before so I was certain I knew way my scores were. So being the credit geek I am I asked if he was sure it was a FICO score, and he said yes that's all we use. I asked if I could take a look at it, and it turned out it was not a FICO but a Experian credit score. So I really do think people can and will be confused by the new system for awhile.

Second. Call me old school, but I liked that FICO was a third party company with there one formula. I am not saying that I agree completely how FICO weights the algorithm I just like the idea of a third party.

Anyways as always I urge you to take an active roll in your personal credit education. And the best tool for that right now is a credit monitoring service. We have a few defend offers Appleby so check out Credit Report Coach

Ken

Credit Report Coach redesign...

2006-04-03T13:23:00.000-07:00

Hey,

We are in the process of re-working credit report coach. We are getting so much content, its getting lots to easy. So we are chaning things around, so you can find all the articles much easier. And if you are still lots, try using the search function on the page.

We also hired a new content writer, so lots of new credit news should be coming online very soon.

Ken

Welcome to Credit Report Coach site blog.

2006-04-02T11:16:00.000-07:00

Hey everyone, welcome to our blog. Credit Report Coach is dedicated to providing the largest data base of credit report information. Not only just credit report information, but healthy credit, and finance.

Let me give you a little background on myself. Most people assume I have a back ground, or formal education in finance, or credit. I don't. I am just an average Joe like yourself. I attended the University of Utah and received a BS in GIS/Remote Sensing. Which is about as far from credit reports as you can get. After college I started in internet marketing, and pursued kayaking, I am currently on the Riot Kayaks pro team. Which I like to tell everyone that is my fun job. My boring job is internet marketing. So ok this still has not tied into how or why I got involved with credit...

I was taught to if I did not have the money then don't buy it. That's how I lived most of my early 20's and it is a good philosophy, but unfortunately in today's world it is flawed. When I went to buy my first car, I could not get credit on my own, because I had no credit history. Lame. So from that point on I wanted to find everything I could about credit, credit reports, and credit scores. And through Credit Report Coach I want to be able to educate people so they do not have they same problems I did when I was younger.

My advice for today is, don't be afraid of credit! Don't abuse, don't over extend yourself, but don't be afraid to start building credit. And its really never to late or early to start building a good credit file.

More to come soon,

Ken