FICO is used by all three Consumer Reporting Agencies; Experian, Equifax, and TransUnion use this programmed system to create your credit scores.
This system’s exact rating criteria is secret. It’s a “black box”. But there have been enough observations of what affects your credit scores to assist you with having some volitional control.
The reason that each of these Consumer Reporting Agencies, or CRAs, may have different scores is because all your credit histories are not necessarily reported to each one.
Timing is Everything
FICO scoring is based on your most current credit profileIt’s a snapshot that indicates the current risk factor.Even credit slightly dinged recently affects your scoring much more than serious credit crashes from years ago.
No matter how good your credit was up to around 3 months ago, very recent late payments can take your scores down considerably. And what if your past credit was really rotten, but lately it’s been very good? You've probably now salvaged your credit rating.
Just starting any credit history? It takes at least 6 months of reporting a credit line’s history before it is considered for scoring. Actually, it takes that long before it will even be regarded as positive credit.
A Little Overdue with Payments Does No Harm
Maybe you think you’ve hurt your credit rating because you are sometimes a little behind on payments? Credit cards and auto loans usually fine you when payments are posted 10 days or more after the due date. Mortgages lenders usually penalize you 15 days after the due date.
But the CRAs do not report a late payment until 30 days or more after the due date. So relax, your credit rating will not be adversely affected if your payments are posted with your creditor before 30 days past due.
Avoid Maxing out Your Credit Cards
If you have one or more cards that have been used to the limit, expect your scores to drop. There are two solutions. You can pay down your card or cards to around half the limit. Or, you can get a couple of more cards and shift some of the debt over to those other cards, distributing the amounts owed to around half the limit.
FICO considers that you have too much debt by how closely one or more of the cards approach the limit. It’s not your cumulative debt so much. It’s pushing credit lines to the limit that brings your score down. Distributing your debt service with more cards won't hurt.
Inquiries are Overrated
If you are shopping for a big ticket item, such as a new car or a mortgage, relax when those vendors run your credit. As long as your shopping is done within 15 days or less, several inquiries regarding vehicle or home loans has virtually no effect on your credit scores.
Credit inquiries for anything else should be minimized! Speaking of big and little ticket items, credit histories for big ticket installment loans affect your credit more than the little ticket revolving credit lines.
Resolving Credit Errors to Get Your Scores Up
To dispute errors yourself, you have to go online, get all three CRA consumer credit reports, and dispute them by mail or via the internet. This will take several weeks, maybe months.
If you use a mortgage broker to apply for a home loan, you can benefit from the broker’s access to a service the mortgage credit agency provides. This service is only available to mortgage brokers. Usually 72 hours is the turn around time. Your scores may improve dramatically.
 |
