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YOUR RESIDENTIAL PROPERTY MANAGEMENT EXPERTS |
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Removing The Mystery Behind Your Credit Score |
A credit score is a number based on a statistical analysis of a person's credit files, that in theory represents the creditworthiness of that person, which is the likelihood that people will pay their bills. A credit score is primarily based on credit report information, typically from one of the three major credit bureaus: Experian, TransUnion, and Equifax. Income is not considered by the major credit bureaus when calculating a credit score.
We are entitled to one free credit report within a 12-month period from each of the three credit bureaus, but are not entitled to receive a free credit score. The three credit bureaus run Annualcreditreport.com, where users can get their free credit reports. Credit scores are available as an add-on feature of the report for a fee. This fee is usually around $10, as the FTC regulates this charge, and the credit bureaus are not allowed to charge an exorbitant fee for their credit score. If the consumer disputes an item on a credit report obtained using the free system, under the Fair Credit Reporting Act (FCRA), the credit bureaus have 45 days to investigate, rather than 30 days for reports obtained otherwise
Under the FCRA, a consumer is entitled to a free credit report (but not a free credit score) within 60 days of any adverse action (e.g. being denied credit, or receiving substandard credit terms from a lender) taken as a result of their credit score. Under the Wall Street reform bill passed in 2010, a consumer is entitled to receive a free credit score if they are denied a loan or insurance due to their credit score. The FICO credit score ranges between 300 and 850, with 711 being the median FICO score in 2011.
Source: Wikipedia |
How Your Credit Score Is Calculated |
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Payment History = 35%
- Do you pay your credit on time?
- Length of positive credit history
- Severity & Quantity of delinquencies
Amount Owed = 30%
- Quantity of credit accounts, too many credit cards with balances can lower a score
Length of credit history = 15%
- The longer the history, the better
- How long have your credit accounts been established?
- How long has it been since you used certain accounts?
New credit = 10%
- Research shows that opening several credit accounts in a short period of time does represent greater risk, especially for people who do not have a long established credit history
Types of Credit in use (Healthy mix) = 10%
- 2 Installment loans
- 3 Revolving accounts with balances
- Balances on revolving debt below 30% of the high credit
- No collection accounts
- No public records
- No foreclosures
- No late payments
Source: About.com |
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Tipping the Credit Scales in Your Favor |
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Help yourself and increase your credit score by doing the following:
- Pay all your bills on time or early. Even a 30 day late on a small credit card can have a significant negative impact on your scores
- Don't co-sign loans- their late payments are yours!
- Don't close old revolving accounts no longer in use
- Don't open new accounts unless absolutely necessary. (Inquiries may or may not affect your score depending on the rest of your credit history)
- Report fraud immediately (If you find yourself the victim of fraud, immediately contact the credit bureaus, your credit card companies, banks, and the FTC)
- Monitor your credit. Order a copy of your credit report once a year from AnnualCreditReport.com
- If you are planning to refinance or buy a home, do not make any purchases or run up the balances on your credit cards prior to the transaction
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Will paying off a collection account remove it from my Credit Report?
- No, a paid collection will remain on your credit report for seven years from the original date of inception
If I have a collection, should I pay off the collection agency or the original creditor?
- Always pay the collection agency that is collecting for the original creditor.
How can I get accounts removed from my credit report that were awarded to my ex-spouse in the divorce decree?
- A divorce decree does not supersede an original contract with a creditor. You must contact each creditor individually and seek the legal binding release of your obligation.
I have no credit (or only negative credit) and I cannot get a finance company or credit card company to approve me- how can I start to establish credit?
- Apply for a secured credit card
How can I get inquires removed from my credit report that I did not authorize?
- You will need to contact the bureaus directly to dispute these items
Why do Experian, Equifax, and Trans Union sometimes have different information?
- Creditors voluntarily provide information to the credit bureaus and are not required to report to all three. Some companies do not report to the bureaus at all. The creditors all report information on a national basis, but not always to all of the bureaus
Generally, every 6-8 months the bureaus change their formulas |
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