Watching: Lexington Insider: Credit score makers and breakers.

Hi, I'm Gavin the Credit Coach and this is the third in a series of videos called “Lexington 360” – a three-hundred and sixty degree look at the inside workings of the nation's largest and well-established credit correction law firm.

In this series we'll explore the three major components of the Lexington Law services, and we'll take a look behind the curtain to see how it's all done.

In previous episodes, we've discussed questionable negative credit listings – the credit breakers with which we're all too familiar. Today, we'll be going underground – taking a closer look into the credit scoremakers nobody else is talking about.

Uncovering the amazing complexity of the credit score algorithms can help you better understand how all of this works – and that's the first step to cultivating a sterling credit score. We'll also take a look at each score maker and we'll reveal the mystery behind how each component can be harnessed to raise your credit score.

Before we start analyzing the credit scoring process, let's take a moment to review the basics of the Lexington approach.

As you may already know, your creditworthiness is one hundred percent dependent on a three digit number – your credit score.

Generally speaking, a 700 credit score is the bottom-limit of traditional creditworthiness. Anything below that and getting credit is difficult and expensive.

Your score can be hammered down by bad marks such as:
Negative listings including late payments
Judgments, collections, bankruptcy
And even creditor inquiries.

Addressing a low credit score is more complex than most people think. Removing negative listings is important – but it's not the only component of credit improvement. Lexington Law employs a three-prong approach.

The first prong involves the credit bureaus – these companies collect and house your credit information. Contrary to popular misconception, they're not part of the government and they're definitely for-profit companies.

By sending a series of carefully written dispute letters to the three credit bureaus, the firm works to trigger an investigation into the questionable negatives on the client's report. If the information is found to be inaccurate, or if the information isn't verified, then the negative items are removed or improved.

At the same time, if you're a Concord-level client, the firm conducts phased interventions with the creditors who reported the questionable information to the credit bureaus in the first place.

Many of these communications result in the removal of more questionable negative listings from the credit report – either because the credit company decides to give you the benefit of the doubt or because they cannot backup the information they previously reported.

If you're a Concord Premier-level client, the firm also goes to work with you on improving the host of other factors that also impact your credit score. We call those factors “scoremakers”. Removing negatives isn't enough to get maximum score impact. We must go deeper into the credit report to touch all the factors that will make up that all-important three-digit credit score.

These scoremakers include your “maxed-out ratios,” the amount of good credit, your account balances, your types of credit and even your credit inquiries.

As you can see, the Lexington Law Concord Premier service takes on all three of the major areas of your credit report and, therefore, all of the major factors affecting your credit score.

Today, we'll focus on the piece of the pie LEAST understood – even by the companies claiming expertise in the area of credit repair. If there ever was a “secret sauce” to credit improvement, this list of “score makers” would be it. Let's dive in.

The attorneys and credit experts of Lexington Law Firm have worked tirelessly to achieve an insider's knowledge of not only the credit reporting system, but the credit scoring system as well.

By attending numerous exclusive courses on how credit scoring works, by investing countless hours doing research into the intricacies of the credit score and by studying how actual credit reports affect actual scores, the Lexington team has elevated it's methods and understanding into a cutting edge science: the science of credit score improvement.

It's easy to imagine that the credit score is a simple numeric thermometer that goes down when bad stuff appears on your credit report and goes up when good stuff shows up on your credit report. Ultimately, it's not that simple.

Instead, each person is assigned a “scorecard” by the credit score company and each scorecard has it's own, unique method of adding or subtracting from the credit score. We're going to place all the score makers in order of importance in a moment, but you should remember that that order changes depending on which scorecard you're in.

It's complicated, but the good news is that your Lexington attorneys will have a pretty good idea of which card you'll be in and which score makers should be a priority.

Don't worry about the complexity of the credit system. Let us worry about it for you.

Next, let's take a look at the credit makers – the methods that can drive up your credit score under any scorecard.

All the score makers have a significant impact on your score, but the largest score increase may come from your Maxxed Out Ratio.

Your credit score and your credit report do not take into consider your income, so that's not part of your score.

But, they do know what your credit limits are and they know how close you are to being “maxed out.” The closer you are to being maxed out, the more it hurts your score.

Your credit score totals up all your outstanding debt and compares it to your credit limits and then calculates your overall Maxxed-out ratio.

Ideally, you should have a maxxed-out ratio under fifty percent for optimal score performance. The closer you get to a zero, the better your score should be. But any lowering of this ratio helps a lot, even if you don't make it to fifty percent.

As a Premier client, our paralegals and attorneys will constantly be aware of which accounts could be impacting your score the most. We'll alert you to which accounts are the biggest concern, and provide you with methods of lowering your “utilization ratios”, or maxed-out ratios. Be sure to make it a top priority.

Another important score maker is your credit inquiries.

Each time you apply for credit, an inquiry appears on your report . . . A couple of inquiries a year is fairly normal. Recent inquiries can have a negative impact on your score. This is because to a credit-scoring model, it appears that you're actively searching for credit and may be positioning yourself to become overextended.

So, the fewer recent inquiries that appear on your credit report, the better.

Luckily, there's a lot you can do to remove questionable inquiries and our firm will walk you through all of the methods we provide.

Of course, your credit score needs good items in order to grow. Positive credit listings are a must – especially if your credit file is a “thin file”. That's credit scoring lingo for: “without a lot of positive accounts”.

Don't forget, as our credit correction efforts succeed, many of the questionable negative accounts may fall off your credit report, leaving it a lot “thinner” than it was before.

The trick is to begin to load your credit report with the right number of positive accounts at the same time as you're eliminating the “score breakers.”

There are numerous ways to build good credit: from secured cards, to “bad-credit-friendly” car dealerships, to department store cards.

Again, this is something your attorney or paralegal can help you figure out and the sooner, the better.

Last, but not least, your credit mix can have a big impact on your credit score as well.

Interestingly, the presence of certain types of installment loans, such as signature loans from finance companies, may actually detract from your credit score, even if you've paid them on time.

As a Concord Premier client, we'll let you know when the presence or lack of specific accounts may be impacting your credit score.

In short, that's what we're here for: to help you tailor your credit profile to achieve the best score possible.

So, you've come to right place for enduring score improvement. All three components of the Lexington service: credit bureau disputing, creditor interventions and optimizing your credit score makers – they all play a role in obtaining the goal of the best credit score possible.

Until next time, I'm Gavin, your Credit Coach. And, remember: together, we can do this.