Credit Repair and Credit Scores
Credit repair is on everyone’s mind these days. And credit scores are for sale everywhere. There is only one problem. None of these advertised credit scores are the same as the credit scores that lenders use when making credit decisions. Whoa. That’s right. People spend huge amounts of money to buy credit scores which they mistakenly believe are relevant to their life. What the heck is the story? You want to know? Okay. I’ll tell you!
Lenders Use FICO Scores
Lenders use a type of credit score called the FICO score. FICO stands for Fair Isaac Corporation, the creator of this important score. The credit bureaus gather consumer credit data and run their data through the FICO credit score software to produce the scores that lenders use to make decisions.
Avoid Knockoff Scores
If you are starting a credit repair project or plan to get a loan in the near future and want to know where you stand you should purchase your FICO scores. But if you buy your scores from one of the credit bureaus websites you will get the bureaus own proprietary scores. And you will be no wiser than you were before because these knockoff scores can easily be 100 points different from your FICO scores; deceptive for your loan information, and useless for benchmarking your credit repair.
It’s About Money Honey
Alas, the credit bureaus realized they could make more money by creating their own version of a credit score and selling it to the public. If they sold genuine FICO scores to consumers they would have to pay fees to Fair Isaac. Lenders demand FICO scores; it’s a simple fact, they would never settle for less. Consumers on the other hand seem to be clueless. But there is a reason that consumers are clueless, the credit bureaus don’t offer any transparency, just a sales pitch.
Credit Repair and the Right Stuff
It’s all about your FICO scores. If you are going to benchmark your credit repair effort or plan to get a loan these are the only scores that matter. And you can get them online at the website for Fair Isaac Corporation, MyFico.com. The cost is about $50 for all three scores. Now are your ready to hear how these important scores work? Here is a mixture of the information published by Fair Isaac and some practical credit repair tips from yours truly, and I do know a bit about this, so listen up.
Major Credit Repair Weight
Fair Isaac is happy to tell you that the major part of your credit score is based on two categories. These are your payment history, weighing in at a hefty 35% of your score, and your account balances, tipping the scale at 30% of your total score. This is a bare bones fact, and much useful credit repair info is left unsaid, so I guess I’ll say it. If you care about your credit scores you need to focus on your revolving balances.
Revolving Account Bombs
Revolving balances are the lynchpin of your credit scores, and hence your credit repair effort. You can have a decade of perfect credit under your belt. You may have paid off a dozen cars and made every payment on time, but if you run up your credit card balances to the max and then check your credit scores you are in for a rude awakening. Maxed out credit cards will devastate your scores. Do you want some numbers? Okay. A maxed out card can erase 100 points from your score. An over-limit card can knock 150 points off; it’s a credit repair disaster. But wait, there is more.
Credit Repair Leverage
I don’t want you to feel like this is all bad news. Revolving debt is conversely the most powerful credit repair tool you have at your disposal for pumping up your scores. FICO recognizes 5 different balance tiers: 20, 40, 60, 80, and 100 percent usage. If you are getting a loan in the near future and have the resources to pay your balances under 20% of the limit your scores will be shining.
The Rest of the Story
The other ingredients relevant to your credit repair task include the age of your accounts, coming in at 15% of your score, new credit and inquiries at 10%, and the type, or mix of credit at the final 10%. These remaining ingredients are minor and for most people will take care of themselves as life goes on. I should, however, add that it is valuable credit repair advice to avoid opening new accounts before applying for a major loan, and to keep those inquiries to a minimum. Cheers!
Copyright © 2008 Ian Webber. All Content. All Rights Reserved.
By: Ian Webber
Archive for February, 2010
Credit Repair Shocking Insights
February 27th, 2010The Credit Repair Secrets to Credit Restoration
February 26th, 2010
Credit restoration is a long process for most people and it can be discouraging and frustrating. Most people think that in order to restore their creditworthiness, they have to pay off everything, pay bills on time, live within their means, and wait for their bad accounts to hit the point where they drop off of their credit report. Some people just give up because the process seems impossible. These people are not familiar with the credit repair secrets and they need credit counseling.
Bad credit is usually a result of one of two situations:
Income interruptions Getting too deep in debt
Unemployment and health issues that keep the breadwinner from working are usually income interruptions that you just can’t avoid and it may seem impossible to catch up. Even you previously had good credit, the missed or late payments, repossessions and so forth stay on your credit report haunting you day after day.
If you are one of those that got too deep in debt, rest assured, you are not alone. It is human nature to take advantage of credit without knowing how or when you will pay the debt off. Most people don’t realize the problem until the minimum payments exceed the income.
Credit counseling, along with the credit repair secrets that professional credit experts know, could be the resolution to your tribulations. To get the best results concerning credit restoration it is best to get credit counseling from a professional in the field. They can advise you the best way to get out of your current situation and take the steps necessary to restore your creditworthiness.
The services conducted by your credit counselor may include:
Negotiating with your creditors Advice on credit consolidation or restructuring of debt Correcting your credit report Credit repair Raising your credit score
There is a lot of well-intended advice about credit restoration and do-it-yourself procedures; however, many people who follow such advice end up in a worse condition than they were in to begin with. It is highly advisable that you get a professional to work on your case.
Through my years of experience in the field, I have found that every case is unique. The tips for credit restoration simply cannot be generalized. What worked for one person may not work well for you. Through credit counseling, your individual circumstances can be reviewed and a list of options that will be most beneficial to you for restoring your credit can be formulated. The stress, frustration and discouragement will be removed and you will be on the road of recovery concerning your financial health.
By: Laurence H. Michelson
