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10 Credit Commandments

June 4, 2018 by  
Filed under Blogs, Credit Score

 

10 commandments

Your credit scores are determined by the information reporting in your credit reports which is an overview and history of the decisions that you have made while maintaining your credit.

Every decision you make to apply for a new account, open a credit card, pay your bills, charge your credit card, etc… impacts your credit scores and determines your ability to acquire credit in the future. This is why developing healthy habits is to vital maintaining and growing your credit scores. Ultimately, you’re in control of your credit scores by managing your credit responsibly.

So, let’s take a look at some healthy habits that will ensure a higher credit score.

1. Pay your bills on-time
Paying your bills on time is the single most important factor in responsibly maintaining and improving your credit scores. One late payment can drop your credit score over 100 points so pay your bills on time – every time.

2. Maintain a low Credit Utilization
The percentage of balance that you maintain on your active credit accounts in proportion to your credit limit or high credit amount typically accounts for 30% of your credit scores. It’s difficult to quickly pay down installment loans like mortgages and auto loans but, you can manage your credit card utilization. Don’t max out your credit cards, keep your credit card balances below a 20% credit utilization rate (balance/credit limit) to get the most out of your credit scores. For example, if the credit limit on your credit card is $1,000 – keep your balance at $200 or less.

3. Don’t close your oldest accounts
Length of credit history is another important factor in determining your credit scores. The longer your credit history – the better your credit scores. Length of credit history is determined in 2 parts; the age of your oldest active account and the average age of all of your active accounts. Keep growing your credit history by maintaining activity on your accounts and by not closing your oldest accounts.

4. Maintain a Mix of Credit
Lenders want to see that can be responsible for managing more than just one type of account. Maintaining a healthy mix of installment accounts (mortgage, auto loan, student loan) and revolving accounts (credit cards and department store cards) will ensure a higher credit score.

5. Limit your Inquiries
Every time you apply for credit, whether it’s a credit card, department store account, auto loan, mortgage, or any other financial instrument, an inquiry is placed on your credit report as a record of your application. Having too many inquiries on your credit reports makes you look desperate for credit and throws up a red flag for lenders. Limit your applications for credit to a maximum of one inquiry every 6 months.

6. Check your credit reports
According to a study by the National Association of State Public Interest Research Groups, 79% of all credit reports contain errors. 54% contained inaccurate personal information such as misspelled names, incorrect social security numbers, wrong dates of birth, addresses, etc…. 30% listed closed accounts as opened, 22% had duplicate accounts, 8% were missing a major trade-line such as a mortgage or auto loan, and most alarming, 25% contained serious errors that could cause consumers to be denied credit. On top of all that, identity theft is now the fastest growing crime in America so, check your credit reports often to make sure that the information being reported about you is 100% accurate and won’t cause you issues when applying for credit.

7. Protect your personal information
As already mentioned above, Identity Theft is now the fastest growing crime in America. With recent breaches to Equifax, Saks Fifth Avenue, Orbitz, Yahoo, LinkedIn, AOL, among others – you can rest assured that your private information is out there on the dark web. Be diligent about checking your credit reports of any unauthorized inquiries or accounts, check your credit card statements for any suspicious charges, change your passwords every 6 months, don’t use the same password for all of your accounts, use 2 factor authentication when available, get a shredder and don’t open any suspicious emails, click any suspicious links, or download any suspicious files. Be safe, be diligent and protect your identity and personal information.

8. Don’t Co-Sign for anyone
This is a tough one because it’s human nature for us to help those close to us but, we have seen so many cases where credit scores were ruined because of a co-signed loan. If the person your co-signing for needs a co-signer it probably means that they have not done a good job of maintaining their credit responsibly. Unforeseen circumstances like a job loss, medical issue, or personal problems can derail not only your credit but, also your friendship. So unless you’re ready and willing to take over 100% of the payments and responsibility on the loan, if the personal you’re co-signing for can’t meet the financial obligation, don’t co-sign. Protect your credit for yourself and your family.

9. Maintain an Emergency Fund
Maintaining a 3-6 month emergency reserve can save your credit and help you overcome financial difficulties brought on by job loss, medical issues, natural disasters, or relationship problems. It’s easier said than done but, start by opening up a separate bank account and designating it as your emergency fund, then, put aside 5%-10% of your income into that fund every month until you have a 3-6 month reserve to live off in case of an emergency.

10. Work on Your Credit
If you have derogatory information reporting on your credit reports, work on removing it by leveraging consumer protection laws such as the FCRA, FDCPA, and FCBA. Investigate your information with the credit reporting agencies, validate your debt, request method of verification on verified accounts, try goodwill requests and permissible purpose verification, and everything allowable by law to remove as much derogatory information from your credit reports as possible.

If you need help, CreditFirm.net has helped thousands of consumers remove negative information such as late payments, collections, charge-offs, repossessions, judgments, tax liens, etc… from their credit reports and increase their credit scores.

 

Why Choose CreditFirm.net?

Assurance. Our Credit Repair process was developed by experienced attorneys.

Speed. Documents are typically processed and sent out for investigation within 3-5 days.

Support. Award winning customer service guarantees your satisfaction.

CreditFirm.net Review

FICO SCORE MYTHS — DEBUNKED

May 31, 2018 by  
Filed under Blogs, Credit Score

credit facts and myths

Myth: Checking your credit will lower your credit scores
FACT: Checking your credit via credit monitoring sites like Credit Karma, Credit Sesame, etc… will not lower your credit scores. Credit monitoring sites pull your credit information via a soft inquiry which does not impact your credit scores. Applying for credit (mortgage, auto loan, credit card, etc…) causes a hard inquiry which does impact your scores.

Myth: You need to have high income to have high credit scores
FACT: Income does not play any role in determining your credit Scores.

Myth: A credit score is the same thing as a FICO score
FACT: Credit score is a general term for a number which is meant to show your creditworthiness but, credit scores are not all the same. There are dozens of different credit scoring models which offer a snapshot of your creditworthiness like VantageScores, TransRisk Scores, Plus Scores, etc… but, 90% of lending decisions are based on your FICO credit scores.
Note: Learn more about different types of credit scores.

Myth: My credit score isn’t important
FACT: Your credit scores determine your ability to qualify for a mortgage, auto loan, credit cards, student loans, and just about any other financial instrument. They also help to determine loans terms like your interest rate and down payment. People with higher credit scores end up paying a lot less than those with lower scores.

Save money with good credit

Myth: A low score will stay low forever
FACT: Credit Scores are not static, they are dynamic and change over time as the information in your credit reports changes. Good credit habits like paying your bills on time, keeping your credit utilization low, and limiting your inquiries will have a positive impact on your credit scores and increase them over time. Working on removing the derogatory information reporting in your credit file will also help increase your credit scores.

 

Why Choose CreditFirm.net?

Assurance. Our Credit Repair process was developed by experienced attorneys.

Speed. Documents are typically processed and sent out for investigation within 3-5 days.

Support. Award-winning customer service guarantees your satisfaction.

CreditFirm.net Review

Why Your FICO Credit Scores Matter

May 28, 2018 by  
Filed under Blogs, Credit Score

FICO Credit Score

FICO scores are an important part of determining a person’s financial status and well-being. They determine your ability to obtain credit as well as loan terms like the interest rate, down payment, etc… which in turn dictate the overall amount of money that you pay on the loan.

Consumers with higher credit scores represent a lower credit risk to lenders and pay much less than borrowers with lower credit scores.

How much less?

Let’s look at an example;

2 different borrowers, one with a 620 FICO Score, the other with a 760 FICO Score are borrowing $280,000 on a 30-year fixed-rate mortgage.

Here’s how their payments would break down.

Save money with good credit

What would you do with an extra $93,000?

Now, extrapolate that out to auto loans which have much higher variations in interest rates where a consumer with a 760 score can finance a vehicle at 0% interest and a borrower with a poor credit score may end up paying 7%, 8%, 9% or even 25% in annual interest on a vehicle.

Credit cards interest rates also vary from 0% with no additional fees for consumers with good credit to 35% with a minefield of annual, monthly and even weekly fees for consumers with poor credit scores.

Ultimately, consumers with low FICO credit scores end up paying hundreds of thousands of dollars more for the same homes, cars, furniture, appliances, and other goods than those with good credit.

Bad credit can be very expensive

Credit scores matter, improve your credit scores and improve your financial health.

More Information
What are FICO Scores?
How your FICO credit scores are calculated
5 Components of your FICO credit scores
Why are your credit scores different

 

Why Choose CreditFirm.net?

Assurance. Our Credit Repair process was developed by experienced attorneys.

Speed. Documents are typically processed and sent out for investigation within 3-5 days.

Support. Award winning customer service guarantees your satisfaction.

CreditFirm.net Review

5 Components of Your Credit Scores

May 24, 2018 by  
Filed under Blogs, Credit Score

Credit Score FICO

Your FICO credit scores are aggregated from all of the data reporting in your credit reports but, there are 5 main components to your credit scores.

NOTE: The percentages may vary depending on the information in your credit reports. If you don’t have any open and active accounts from which to calculate a credit utilization, your payment history may have an even greater influence on your credit scores than just 35%.

Payment History – 35% of Your FICO Credit Score
The most important factor in calculating your credit score is your ability to repay your debt on time. Delinquencies such as late payments, charge-offs, collections, etc… will lower your credit scores. The more serious the delinquency, the more frequent and recent it is, the lower your scores.

FICO scores consider your payment history from credit cards, store cards, installment loans such as auto loans, mortgages and student loans as well as your public record information in the form of court judgments, tax liens, wage garnishments, and bankruptcy and third-party furnishers such as collection agencies.

Their impact your FICO score varies depending on
• the severity of the late payments (90 day late payments hurt your credit scores more than a 30 day late).
• The frequency of the late payments (2 late payments sporadically spread out over the course of a few years doesn’t hurt your credit scores as much as a string of 8 late payments reporting one right after the other).
• The recentness of the delinquency (A late payment from 2 months ago will hurt your credit score much more than a late payment from 5 years ago).

Credit Utilization – 30% of Your FICO Credit Score.
The amount of credit that you are using in relationship to the amount of available credit you have is a very important factor when calculating your credit score. Ideally, your balance should be at or below a credit utilization of 30%, which means that you would have 70% available credit. For example, if you had a credit card with a $1,000 credit limit, your balances should never exceed $300 (30%).

If you’re close to maxing out your accounts, lenders will view you as a high-risk borrower because you might have trouble making payments in the future.

Length of Credit History – 15% of Your FICO Credit Score.
The FICO credit algorithm, like most scientific formulas, believes that the more data they have, the more accurate the results will be. This is why the age of your oldest account, the average age of all your open accounts and the age of specific types of accounts (installment and revolving) has such a large impact on your credit scores. The longer your credit history and the older your average age of open accounts, the higher the scores. This is why it is so important to continue building and growing your credit history and not close your oldest accounts.

New Credit – 10% of Your FICO Credit Score.
The amount of new accounts that you have recently opened and your recent applications (inquiries) for multiple new credit lines accounts for 10% of your credit score. Opening or applying for several new accounts in a short period of time indicates greater credit risk which lowers your FICO score. Limit yourself to one inquiry every 6 months and don’t open too many accounts at once.

Mix of Credit – 10% of Your FICO Credit Score.
FICO considers the fact that most lenders want to make sure that you can manage different types of credit accounts simultaneously. These include both revolving and installment accounts such as credit cards, retail accounts, installment loans and mortgage loans. Having a varied mix of credit on your credit reports will increase your credit scores and conversely, having only one type of account or none at all will lower your scores.

Manage your credit correctly and your credit scores WILL increase. Just make sure that you check all 5 boxes and pay your bills on time, carry a low credit utilization rate, grow your credit history, limit your inquiries and have a good mix of credit.

What your credit scores are made of

More Information
What are FICO Scores?
How your FICO credit scores are calculated
Why are your credit scores different
Why your FICO credit scores matter

 

Why Choose CreditFirm.net?

Assurance. Our Credit Repair process was developed by experienced attorneys.

Speed. Documents are typically processed and sent out for investigation within 3-5 days.

Support. Award winning customer service guarantees your satisfaction.

CreditFirm.net Review

How your FICO Credit Scores are Calculated

May 21, 2018 by  
Filed under Blogs, Credit Score

Credit Score FICO

There are three major credit reporting agencies in the U.S. – Experian, Equifax, and TransUnion. These credit reporting agencies, sometimes referred to as credit bureaus, maintain records of your credit data as well as other personal information such as your name, aliases, addresses (both current and previous), phone numbers, employers, date of birth, social security number, etc…. This collective data gathered on you is referred to as your credit report. Each credit bureau maintains their own credit report which means that you have a separate credit report with Experian, Equifax, and TransUnion.

When you apply for a loan, open a new account, make a payment, miss a payment, etc…, that information is reported from your credit lender to the credit reporting agencies. Due to the fact that credit reporting is 100% voluntary, some lenders may only end up reporting the data to one or two of the three bureaus or reporting the data at different times/dates which may cause you to have differing information on your credit reports and in-turn cause variations in your credit scores.

Here’s more detail on why your credit scores differ.

Now, let’s take a look at the basic information reporting in your credit reports.

A. Personal Information
Credit reports display the personal information such as your name, aliases, address (both current and previous), social security number, date of birth, employer (both current and previous), phone numbers, etc…. It is important to note that personal information does not impact your FICO scores.

B. Account Information
Credit reports display your credit accounts (both active and closed). Each account is reported as a trade-line which contains approximately 40 data points of information such as the date the account was opened, date closed, balance, credit limit/high credit, status, payment history, ECOA code, comments/remarks, address identification code, etc…

C. Inquiry Information
Credit reports also display requests for your credit file from the past 2 years, also known as inquiries. There are 2 different types of inquiries, hard inquiries which impact your credit scores and are applications for credit initiated to obtain credit Soft inquiries do not impact your credit scores, they are “account review” inquiries initiated either by yourself when checking your own credit or by creditors to may wish to send you a pre-approved offer of some sort. Soft inquiries DO NOT impact your FICO scores.

D. Derogatory Information
Your credit report also displays any past delinquencies reported by your creditors or third party data furnishers such as collection agencies. This information includes late payments, past due balances, collections, charge-offs, repossessions, as well as public record information such as judgments, tax liens, and bankruptcy.

How to read a credit report

This data is then plugged into one of the FICO scoring algorithms which then calculates a score to determine your creditworthiness.

NOTE: The FICO score’s original goal was to determine a consumer’s likelihood of becoming 90 days or more past due on a loan within the next 2 years. This is why the payment history and account activity from the last 2 years has the most impact on your credit score.

As the information and data in your credit report change so do your FICO credit scores.

FICO scores are calculated on request and considering that data on your credit reports is constantly changing, your FICO credit score will reflect those changes.

More Information
What are FICO Scores?
5 Components of your FICO credit scores
Why are your credit scores different
Why your FICO credit scores matter

 

Why Choose CreditFirm.net?

Assurance. Our Credit Repair process was developed by experienced attorneys.

Speed. Documents are typically processed and sent out for investigation within 3-5 days.

Support. Award winning customer service guarantees your satisfaction.

CreditFirm.net Review

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