COMMON CREDIT SCORE MYTHS

brought to you by

http://www.bestrepairmycredit.com

A lot of credit score myths about fico score ratings get spread around and some of them are just outdated information. Sometimes even lenders can give you the wrong advice and it can get confusing. But the bottom line is bad information can cost you money no matter who you get it from.
Fico score ratings are used for most mortgage lending, which means, you need to know what will hurt or help your credit score points. To make it clear, here are some of the most common credit score myths.
* Checking your credit report will hurt your credit score
Checking your own credit report and credit score counts as a soft inquiry and does not go against your score. However, if anyone else like a lender or credit card company is checking your credit report, this is considered a hard inquiry and will generally knock off about 5 credit score points.
The credit score rating system treats multiple inquiries in a 14-day period as just one inquiry. The system ignores all inquiries made within 30 days prior to the day the credit score is computed. So if you want to minimize the damage from credit inquiries, shop for a loan in that short period of time.
* Closing old accounts will improve your credit report score
Sometimes even lenders will tell you to close your old and inactive accounts as a way for improving your credit report score. In most cases, closing old accounts will actually have the opposite effect with the current credit score rating system.
Canceling old credit accounts can actually lower your credit score because it makes your credit history appear shorter. If you want to reduce your levels of available credit, it’s better to reduce or close new accounts instead. Applying for new credit is more likely to lower your score.
* You need to check more than just FICO score rating
If you ever hear this from anyone, consider it a red flag. All of the three major credit reporting bureaus offer FICO credit score ratings using the formula developed by Fair, Isaac. Even though each one gives the scores a different name you only need a fico score rating from the three major credit reporting bureaus.
At Equifax, the FICO score rating is called the Beacon credit score. At TransUnion, it’s called Empirica. At Experian, it’s known as the Experian/Fair, Isaac Risk Model.
The reason each of the three major credit reporting bureaus will have three different scores is because they don’t all share the same data. So when checking your credit report, just make sure it comes from the three major credit reporting bureaus: Experian, Trans Union and Equifax.
Examine your credit reports from all three major credit reporting bureaus before you apply for a big loan like a mortgage. Fix any errors in all three reports before you shop for a loan because it takes time to correct your credit report.
* Credit counseling will hurt your score
The current FICO credit score rating system ignores any reference to credit counseling that may be in your file. The researchers at Fair, Isaac, the company that created the FICO credit scoring rating system, found that people getting credit counseling didn’t default on their debts any more often than anyone else.
However, any late payments you’ve had with creditors will hurt your credit score. Credit counseling can hurt your ability to get a loan because you probably have had trouble paying creditors.
Some lenders will back away if you are in credit counseling. Others may see it differently, but usually will charge you higher interest rates than if you had perfect credit.
The best way to improve your credit report score is paying your bills on time and paying down credit card debt. Check your credit report regularly for any errors and make sure you don’t fall for these common credit score myths.

www.JustCardOffers.Com Fix credit score fast by paying down your credit cards. Paying off your installment loans can help your score, but not as dramatically as paying down revolving accounts.

If it isn’t, get in the know today at Quizzle, the only site on the Web that gives you BOTH a totally free credit report AND free credit score, no catches, no trial subscriptions, no credit card required. www.Quizzle.com

Credit Repair Ace Software Overview Video www.solutionssoftwarematrix.com

The factors on your credit report that are used to determine your credit score are broken down into 5 categories, each with it’s own weight on the equation.

1. payment history (35%)
2. amounts owed (30%)
3. length of credit history (15%)
4. new credit (10%)
5. types of credit used (10%)

Payment History

One of the primary reasons that the credit scoring system was developed and why lenders still use it is to determine the likelihood that they will be repaid the money you borrow. Therefore, it makes sense that your payment history would be a mjor factor in your credit score. This aspect is affected negatively by late payments, accounts sent to collections, and bankruptcies. The more recently any of these have occured, the larger the effect on your score.

Amounts Owed

Outstanding debt is the next most important measure of your ability to pay back your obligations. Having credit cards, owning a home or car, or going to college means you probably have some debt on your record, which is okay. However, this part of your score can be affected by maxing out credit cards, or leaving them open with no activity. To quickly raise your credit score, pay off credit cards with the highest interest rate or where you have late payments first. It is good practice to keep credit cards at 25% of less of their balance.

Length of Credit History

The length of your credit history is based on the oldest account in your credit file. For many people this is their first credit card, a student loan, or possibly a car loan or mortgage. The shorter your credit history, the bigger the risk you represent to lenders. You should also be aware, however, that as your credit history gets longer and you have more accounts opening and closing, you are also at a greater risk for having misinformation added to your report.

New Credit

10 percent of the score is based on new credit. Typically your score will go down for awhile after you have opened up a new line of credit. The major factor of this percentage comes from inquiries. There are two types of inquiries; soft and hard. A soft inquiry does not affect the credit score and usually involves a quick glance at your score. A hard inquiry does lower your credit score and typically is a result of actions initiated by you in an effort to obtain credit. If you open 2 new credit card accounts, take out a private bank loan, and attempt to buy a new car, your score will go down…the good thing is that your score will rebound from these inquiries.

New Credit

Hard inquiries do affect your score, and lower it by a number of points for each inquiry. Hard inquiries are generally the result of you pursuing new credit opportunities. This is mostly a defense against you obtaining a good credit score and opening 100 new credit accounts all at once. After 10 inquires or so your score would be significantly lowered to the point where lenders would begin to reconsider your credit. The good news is that hard inquiries do not affect your credit for very long, and your score will return to normal after they expire.

Types of Credit Used

The final part of your score is based on the types of credit accounts you have. These include:

1. Revolving (credit cards, lines of credit, HELOC)
2. Loans
3. Public Records (bankruptcy, liens)
4. Collections

Some types of accounts can really help you score as long as you are paying them on time such as a student loan, car loan, mortgage, and credit cards. If you have ever had a public records such as a bankruptcy, tax lien, or a collection, your credit score is going to be negatively affected. Beware of companies that claim that they can remove a bankruptcy or a collection off your credit report. These items will eventually not be detrimental to your credit score so time often is the best answer for dealing with these actions in your credit history.

Some of the account types can contribute positively to your credit score as long as they are paid on time. For instance, student loans, home mortgages, or credit cards, if paid on time, can create very healthy credit. However, accounts like tax liens, collections, or bankruptcy will affect your credit negatively. If you have any of this second type of account on your record and you know it is inaccurate or fraudulent it is a good idea to contact a credit repair specialist to have it removed.

The bottom line in understanding your score is that lenders want to loan to people who know how use credit responsibly. After all, lenders only make money when people use credit, and when they pay it back. Therefore, if your credit history reflects that you make proper use of credit and pay back your obligations, your score will reflect this to lenders.

A KUTV Channel 2 Salt Lake City news story, with Bill Gephardt about Al Bingham, his Credit Score Plus program and The Road to 850, his book. The report is given in a Price is Right style

www.ScoreMoreCredit.com – Credit expert, Brian Diez, reveals how the credit bureaus profit from keeping you in the dark.

“Turned down by one of those big car dealers? Get on board with DriveTime’s GoForApproval.com.” At DriveTime used cars, credit problems aren’t a problem. We can approve people other car dealers can’t, because we do all of our financing in house. You can get the process started at GoForApproval.com, where you can get approved in just minutes.

Don’t get excited guys, this is not that kind of score and its impact lasts much longer than 30 seconds. We are talking about credit scoring and credit score that is also known as FICO (Fair Isaac & Co.) score.

So what is credit scoring? You have heard of personality profile that dating services use to find the best match between people. Well, credit scoring is a mathematically calculated financial profile lenders use to match applicants with loans. Credit scoring is a way for lenders to determine how much risk is involved in lending money to you and based on that risk they may decide not to lend money to you at all or change the terms of the loans to match the risk.

Who uses credit scoring? Credit scoring has been around forever, that is since 1950s, and it was first used for issuing credit cards and auto loans. Now all sort of creditors including home mortgage lenders use it. But they also consider other factors such as your salary, your employment and your assets.

So what’s in a credit score? Pick a number, any number between 300 and 850. That would probably be someone’s credit score also known as FICO (Fair Isaac & Co.) score. In the eyes of potential creditors, scores closer to 850 indicate more credit worthiness, which in turn comforts these skittish creditors that you are more likely to pay your loan than a person with lower credit score.

The following are interpretations of what various FICO score ranges mean.

* Excellent: Over 750
* Very Good: 720 to 750
* Acceptable: 660 to 720
* Uncertain: 620 to 660
* Risky: less than 620

What impacts my FICO Score? This credit score number is a relative number and as much as possible objective. By relative, I mean that it compares your financial habits with others in similar situation. The first step is gathering information about how you treat money, do you pay your bills on time, how many credit accounts you have, what type, do you have any collection action against an account, how much total debt you have, and a bunch of other data.

Then the objective part kicks in by using mathematical calculation that do not care about how you look, what religion you have, etc. The lenders only want to know how likely you are to pay their money back in a timely manner and without hassling them.

The FICO score calculations consider the following factors:

Your payment history 35% : Do you pay your bills on time? Have you ever been delinquent, or are you consistently late? How about collection notices and bankruptcy? The answer to these questions account for about 35% of your credit score.

Total debt : How much do you owe lenders compared to the total amount you can borrow impacts about 30% of your credit score. If your credit cards are close to being maxed out, it may indicate looming financial problems and a possibility of default and it drops your credit score.

Length of credit history: Approximately 15% of your credit score calculation depends on how long you have had your accounts? Three days, six months, ten years? The longer credit history has a positive impact on your credit score.

Taking on more debt: Are you taking on more new debts? Even applying for too many new cards too quickly may be considered as financial difficulty and impacts your credit score in a negative way. This builds about 10% of your credit score.

Types of credit in use: About 10% of your credit score depends on the type of credit mix you have. High ratio of credit cards and installments loans in relationship to mortgages has a negative impact on your credit score.

Why do I need to check my credit report from each major credit bureau?

Despite normalization of credit scoring system that gives credit scores about the same value at all major credit bureaus, the information reported to these bureaus are not identical. So, one credit bureau may receive information that impacts your credit scoring one way and another credit bureau receives another set of information that impacts your credit scoring in another way.

The good news is that as of September 1, 2005, as an American, you can ask for a free credit report from each of the major nationwide consumer reporting companies once every 12 months.

Four simple tips to improve your credit score:

* Pay your bills on time, especially your mortgage and your installment loans.
* Borrow below your credit limits and do not max out your credit cards.
* Carry two or three credit cards only.
* Don’t apply for several credit cards at one time.

* DISCLAIMER: Vishy Dadsetan, http://MyPersonalFinance.com or My Favorite Shop, Inc. do not endorse any product or company. This article and website do not provide legal, insurance, or other professional services. If expert assistance is required, the services of a competent professional should be sought. Although Vishy Dadsetan has made every effort to ensure the accuracy and completeness of the information contained in this site, he assumes no responsibility for errors, omissions, inaccuracies, or inconsistencies.

© Vishy Dadsetan

No matter what you’ve been told, you CAN increase credit score – more here – www.thecreditprosintl.com.