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Comprehensive Factors Behind Your Credit Score

In the world of credit, your repayment history reflected on your credit report impacts the likelihood of future loans and lines of credit. You might get a loan with a low credit score, calculated from entries on your credit report, but you’d pay a higher interest that reflects a higher risk than would someone with a high credit score that reflects a high probability of timely repayment.


A Simple Guide To How Credit Reporting Works

There are three credit reporting agencies (CRA) in the United States: Equifax, Experian and TransUnion. If you apply for loans of any kind, potential lenders obtain your credit report form the CRAs. At times, even potential employers may obtain your credit report. Here is a simple guide to how credit reporting works.

The beginning.

The first time you apply for any kind of credit or loan, whether for a credit card, mortgage, rental or revolving store account, a file is opened at the CRAs. It includes your name, birthdate, address and social security number. It includes your current and previous addresses and employers.

Type of information reported.

Companies report to the CRAs the following information concerning the type of credit they granted you.

  • Credit cards, including revolving store accounts.
  • Auto loans.
  • Rent payments.
  • Mortgage loans.
  • Loans that have been paid or are inactive.

Matters of public record are also reported, such as:

  • Any type of lien, including tax liens, that has been filed.
  • Court judgments.
  • Bankruptcy filings.
  • Unpaid child support.

For each loan, your creditors supply the CRAs with:

  • The date the loan was granted.
  • The amount of the loan if for a lump sum.
  • The credit limit for revolving credit cards.
  • Terms for repayment of the loan.
  • Interest rates on all loans, including credit cards.
  • The current balance of the loan.
  • Whether you have paid the loans according to the terms of the loan. This includes whether or not you have made your payments on time.
  • Whether or not any account has been turned over to a collection agency.
  • Any inquiries for your credit report are also noted.

How do the CRAs calculate my credit score?

Each CRA has its own method for mathematically computing the information reported to it and turning it into a number referred to as your “credit score.” They all consider the following factors, although they may each give a different weight to the individual factor.

  • The type of credit you have, whether mortgage or revolving credit cards.
  • The length of the loan. For example, the longer you have had a credit card and made timely payments, the better your credit will be. If you have recently taken out several credit cards, this may lower your credit score.
  • The total amount of money you owe.
  • Your payment history.

They all calculate a score between 300 and 850. It is the final number that is reported to the lender. The higher your score, the better credit risk you are and the more likely you are to get the loan you have applied for.

How does a lender use my credit report.

Lenders have different criteria for granting loans. Your credit score is only one factor they use in deciding whether or not to grant your credit request. The lender will also evaluate your current income in comparison to your overall debt. A recent history of timely payments may compensate for earlier years of credit problems.

If lenders consider your score low, they may still grant your credit request but charge a higher interest rate.

Reasons to check your own credit report.

You may not think you need to personally check your own credit report. In fact, experts recommend that you check it at least once a year for the following reasons.

  • Mistakes are made. Just one example is that information may be on your report that belongs to someone with a similar name. You can file a dispute with the CRA and ask them to fix it.
  • You may have paid a debt that was causing you to have a low score with the understanding that it would no longer be on your report. When you find it still there, you can contact the creditor and request them to remove it.
  • If you had a period of time when it was difficult to pay your bills on time due to illness or loss of a job, the CRA may allow you to write a letter of explanation that will be a permanent part of your credit report.

Typical Ranges

Most credit scores range from 350 to 850 points. The CRA does not determine what entries are displayed. They don’t contact your actual or potential creditors to update or add information. They only report what has been reported to them. Any errors in the report are corrected by the actual creditor. You can lodge a dispute or explanation against entries, but you should seek removal from the actual creditor for the best results.

Credit Score Influences

From those entries that are reflected, your credit score is computed from any or all of the following categories.

1. The number of accounts you have. Some entries are better than none, but none is better than bad or too many entries. If any entry on your credit report erroneously reflects an open balance, but it has actually been resolved, have the creditor note the entry as closed. The “open” annotation could indicate to potential creditors that you might be overextending your ability to repay.

If a negative entry is old, have it removed. Some entries must say on your report longer than others, but all have expiration times. Check with the agency whose report you drew for those expiration times.

If you have duplicate entries, for loans are often sold to other organizations, ensure the old entry notes the transfer. Otherwise, your credit report might reflect, for example, that you have two car loans when in actuality, the single loan was merely sold.

2. The types of accounts you have. Several credit card entries could indicate to potential creditors or lending agents that you are paying bills off credit cards, reflecting your ability to pay. These entries also include just the inquiries, noted at the bottom of the report in most cases. For instance, f you apply for several credit cards during the same 90-day period, that indicates over-extension as well.

3. Your available credit. If you consistently keep your balance-due low, you show responsible financial management. You are conscious of your financial obligations, and you don’t live beyond your means. Keep your available credit limit reasonable and favorable for the best influence on your credit score.

4. The duration of your credit history. The longer you have applied for gained and resolved credit matters favorably, the more reliable you are as a borrower. Build your credit slowly with a positive slant, and you will enjoy good credit transactions for many years.

5. Your payment history. This factor is extremely important. Paying at least the minimum due on outstanding debts maintains an excellent repayment history. “Robbing Peter to pay Paul” – borrowing or combining one debt’s payment with another payment – is not financially healthy. You have a category score for each debt that reflects whether you were late with payments or missed payments altogether. If all else is equal, it’s that repayment history that can determine higher or lower interest or the viability of a new loan or line of credit.

Check your credit regularly. Check the credit reports of every member of your family regularly, including your children’s: Child credit theft is on the rise. Errors are made but can be devastating if not corrected. Protect yourself, and protect your family.

Don’t Let the Credit Report Keep You from What You Want

credit reports

The credit report is one of the single most important documents that can affect an individual’s present life and future. This report can affect what type of car an individual can buy, the kind of job that the person obtains, the cost of their car insurance premiums, and the interest that is paid on a home.

Presently, there are at least three credit report bureaus and they all can report different information on the same person. This is one of the main reasons why people should review their reports for accuracy as often as they can. Listed below are some of the things that will cause an applicant to be denied. This can help to avoid land to eliminate loans being declined.

Car Repossessions

When an individual applies for a new or used car loan, the loan officer at the dealership or in a credit union will review the applicant’s credit report for the credit rating. In addition to the score, the loan officer will look for things on the report that can help the loan to be approved. In fact, the loan officer’s job is to see if they can get as many customers as they can be approved. The increase in approved loans normally equates to an increase in sales and profits. Even though the loan officer would like to approve as many loans as possible, there are some things on the credit report that will cause these loans to be declined. Unfortunately, car repositions is one of the things that will prevent approval, especially repossessions that happened recently.

Home Foreclosures

Due to the economy and a vast amount of foreclosures in the nation, people are losing their homes through foreclosure. Once the house has been foreclosed, this information is reported on the homeowner’s credit report. This information will adversely impact the owner’s ability to obtain another home as well as other things that they may need on credit.


Filing bankruptcy is another issue of concern for people who are concerned about maintaining a high credit score. This information stays on the report for a long timeframe (approximately 7 to 10 years). Bankruptcy can affect car loan approvals and other loan applications.

Late Payments

Some people are notorious for getting their bills out late. Even though they may have the money in the bank to pay all bills, they normally send them out after the due date. This practice, however, can eventually destroy the credit report, Business owners want their customers to pay their bills on time, Which means, to keep a good rating and credit score, the individual should make their payments either before the due date or on the due date.

Low Credit Rating

One of the most common comparisons for people who want to work in various places is looking at and comparing the credit ratings. Employees or people who normally get traditional loans are the ones who know how to maintain a good credit rating. Therefore, people who have limited knowledge must find out how to increase and maintain a good credit score.

Quick and Easy Ways To Get Rid Of A Bad Credit History

bad credit score

When an individual enters the credit culture using credit cards, he/she is not aware of the kind of vicious circle it could turn out to be. Bad credit history is inadvisable for various reasons. It is the type of damage, which once done could take several years to repair. But it surely is manageable, if one plans a little.

Why is it important to get rid of bad credit history?
Bad credit history not only hampers one’s present situation but also affects the future. How? Simple, the next time you are applying for a loan, the loan manager will check the credit history. A simple punch in of a few codes and scanning of documents like PAN card or passport details will make your credit history pop up in no time. And the loan manager will know how well you have handled finances in your past. For that matter, not just in terms of loans, many businesses to check credit history before signing a deal. Bad credit history is a reflection of a very dark monetary past.

Save and Pay
The easiest way to get rid of bad credit history is to save as much money as possible by decreasing spends and increasing savings. One must pay up all pending dues as quickly as possible. Get rid of old debts, and do not take new ones either. Credit ratings can only be improved in this manner. One may need to cut back for the time being, but this is the easiest way, after all.

Credit Reports
These are reports available with financial institutions, and consist of an individual’s credit history in greater detail. One must be aware of the kind of items on their credit history. If at all there are any inaccurate ones, they must file a report. Cancellations of negative items are very important. This too is an important element in getting rid of bad credit history, as false items can worsen the reputation. The report has to be filed in writing and must include copies of the documents where items have been wrongly included or accounted for.

Avoid plastic money
When checking credit history for any purpose, one also studies buying behavior and patterns. So the amount of money swiped off one’s card at a shopping mall can denote a lot of things about their personality. Thus, if someone is a spendthrift, the chances of him or her having a good credit history are rare. Someone with credit in his or her pocket is likely to splurge beyond expectation, as payment has to be made later. To get rid of this habit, one must carry as much hard cash as possible, to avoid usage of a credit card. Another trick could be to simply leave the credit card at home.

Repair it from all sides
Every single area from which one has a pending credit needs to be repaired, to create a good credit score. Apart from making payments on time, one must work towards reducing the percentage of the debt below 30. This helps in saving on additional charges like late payment but also builds a good positive history. The longer one manages a positive history, the greater the decrease in credit score. Overall, this helps in getting rid of bad credit history.

As stated earlier, it is not easy to get rid of bad credit history in a few weeks or days. One has to work extremely hard towards it. For a brighter and a better future, and for healthy relationships with financial institutions, it is necessary to have a good market reputation.

Insurance for your Gadgets: Get a Credit Report

Did you know that gadgets and technology like TV’s need to be insured? That is why Apple Inc. offers Apple Care and countless other companies, such as Hewlett-Packard, Dell, and Samsung offer insurance policies for their electronics.

But why do I need a credit report? And what else should I do when I buy a gadget?

Credit report: Monthly payments

Credit reports show your credit score, something that you usually use to buy houses, cars, get credit cards, and sometimes appliances. However, some large electronics might be paid for with a monthly payment plan, such as a large big screen HD television. But why would I need a credit report for a TV purchase, even if I have financing that I am paying back

Zombie apocalypse

Pretend for a second that there is a plague of mutant rabies that turns people into flesh-eating monsters, and each time someone is bitten they die and come back to life as one of these monsters. Now let’s say that a zombie breaks into your house. You bludgeon him with a cricket bat and he crashes into your TV, smashing it to pieces…

…Okay, hopefully, there won’t be a zombie apocalypse, but what if your living room floods and your TV gets ruined? Or what if you drop your iPad? If it is an expensive gadget with the financing you will need a credit report to get the financing, and then you will need insurance to insure your gadget.

Mortgages, Marriage and Your Credit Score Rating

Your credit score rating isn’t affected automatically when you get married, in fact, it needn’t be affected at all. There are particular circumstances however that could cause a drop in your credit score after tying the knot. Getting married is indeed truly wonderful; it would be a shame to see a union placed under unnecessary stress due to unforeseen financial circumstances. Make sure you and your spouse can get the credit you’ll need, when you need it, by protecting your credit score rating.

How to Make Sure Marriage Doesn’t Damage Your Credit Score Rating

Whenever you apply for a mortgage as a married person the credit histories of both parties will be considered by the lender. If either of the couples has any credit issues their ability to get a loan could suffer. Even if a loan is awarded they may be subject to higher interest rates. The lender will generally consult with a mortgage reporting company to find out the credit scores of those involved.

credit rating

Mortgage companies combine the credit score rating of each spouse into a merged report. Basically, they look for the average score of the two combined, and a bad score for one of the couples could result in a declined application. It is a good idea to contact a mortgage lender to first see if you even qualify. Even if you do qualify for a mortgage though, the amount you qualify for could be less, or you may be charged more interest if there is a bad credit score involved.

All is not lost if one of the married couples has a bad credit score rating. Mortgage lenders also consider such things as how much collateral you have (savings, investments, property), your job history and income, and your general character. It is best not to rely on these things alone, however, as a good credit score rating is the first thing they look at. If your spouse doesn’t have one, help them to establish one before applying for a major loan.

If Your Spouse Doesn’t Yet Have a Credit Score Rating

It is possible if you’re newly married that your spouse has no credit rating. To receive a credit rating you must have an account open and active for at least six months with each of the major credit reporting agencies. Adding your spouse as an authorized user is a good way to help them establish a credit history. Though the credit history of an authorized user is considered in the lending process, they are not responsible for the repayment of the debt to any extent.

If you need your spouse to establish a credit history rather quickly, it might be better to add them as a joint user. As a joint holder, your spouse will be equally responsible for any debt incurred on the accounts to which they are joined. The added responsibility will accelerate they are receiving a credit score rating. Keep in mind that if one person doesn’t pay, the other is as equally responsible for the debt. This is a two-edge sword that could make or break both credit scores.

In some states, there are community property laws that view any accounts entered into during marriage as joint accounts. It doesn’t matter if the additional person is a joint user or an authorized user. If that is the case in your state your spouse could be responsible for the debt even as an authorized user. If such is the case in your area, the only way to be removed as one of the parties responsible for the debt is by directly contacting the card issuer and negotiating to have your name removed. Failure to do so could seriously damage your credit score rating.

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