Archive for the ‘Credit Score’ Category

Especially during the holidays, retailers offer a “No interest and no payments for 12 months!” type sales pitch as a way for you to purchase that must have flat-screen television, bedroom set, or mountain bike without having to put any money down. For those strapped for cash, this seems like a perfect way to get what they want today and then pay for it down the road when, hopefully, their finances are in better shape.

What many people do not realize is that no interest, no payment agreements are frequently not the ideal solutions they may seem. Depending on the retailer and your ability to make timely payments once they come due, these types of agreements may result in you having to pay much more than you intended and can cause serious damage to your credit score.

To start with, even the most financially responsible consumer can see their credit score drop because they took advantage of a no interest, no payment sale. This is because in many cases you are opening a new line of credit with the retailer that, depending on if and how it is reported to the credit bureaus, may increase your credit utilization ratio.

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Transcript from the video

Welcome back to Lexington Law and our credit webinar series. Today we’re going to talk about what makes up your credit score.

There are 5 different factors that we know of that build up your credit score. The largest and biggest one at 35% is your payment history. Next at 30% are your amounts owed. From there at 15% we’ll discuss your length of credit history. And then your 2 last components, at 10% each are: Types of credit in use and your new credit.

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In an interesting reversal of trends, some credit card issuers are now automatically lowering customers’ credit limits as a means to reduce risk. In the past, the industry had been known to increase the credit limits of customers who were using credit responsibly. Now these companies are starting to lower limits for customers in response to a drop in their credit score, a late payment, or the addition of new lines of credit.

Credit card issuers claim this practice is good for users because it helps prevent them from getting over their heads in debt and is a better system than raising the interest rates of higher risk customers which is the more traditional way to account for credit risk.

While lowering limits is a better mechanism for consumers in general, there are two potential effects of this method of risk management that credit card users need to be aware of.

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Transcript from the video

Hello and welcome to Lexington Law Firm. Today in this clip, we’re going to discuss the importance of credit scores and what builds up your credit score.

Some of you may be asking, “what is a credit score”, or “what builds a credit score”? That’s what we’re going to chat about today. Online you may find all sorts of different offers and advertisements about finding your credit score or better understanding your credit score, or what is your credit score versus your FICO score? Today we’re going to discuss the difference between the two and what builds up your credit score.

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