Category: Credit Report

What Affects My Credit Score?

What Affects Credit Score

The question of what affects a person’s credit score (the most common being the FICO score) isn’t as straightforward as it may seem. Even those that know their credit score may not understand all of the reasons why it is what it is. There are certainly many factors that go into determining that “magic” number, which impacts our ability to reach our financial and life goals. Some of these factors can dramatically affect your credit score, while others affect it less than you might think. Additionally, some things you may not even realize can have an impact.

Let’s first take a brief look at the basic 5 factors of your credit score:

  1. Payment history – Whether or not you make your payments on time is the largest factor in determining your credit score, accounting for 35 percent of it. Lenders place the most weight on this because they view it as the most accurate measure of risk. That means that the way you manage your monthly payments will have the largest positive or negative impact on your credit score.
  2. Debt and credit utilization – The amount of credit you’re using compared to the total limits on credit accounts makes up 30 percent of your credit score. The lower your credit utilization, the more positively it will impact your score. Ideally, your total credit utilization should not exceed 30 percent.
  3. Length of credit history – How long you’ve had your credit accounts makes up 15 percent of your credit score. If most of your credit is relatively new, it can reflect negatively on your credit score, while accounts older than seven years will boost a credit score as long as they’re in good standing.
  4. Inquiries and new credit – Applying for new credit accounts comprises 10 percent of your credit score as credit bureaus track “soft” and “hard” inquiries. Too many hard inquiries can negatively affect your score. But similar inquiries within a short amount of time are generally less harmful because credit bureaus understand they’re typically a reflection of a particular event, such as shopping for a mortgage refinance or a car loan.
  5. Mix of credit accounts – The types of credit accounts you hold make up the final 10 percent of your score. The more diversified your credit report, the better your credit score will be. Having a number of different accounts with varying terms and uses demonstrates your ability to successfully manage your credit.

Credit Score Help

FICO scores were developed by Fair Isaac & Co. in the 1960s and have become the most widely used credit scoring measure. In fact, 90 percent of the top lenders use the scores in determining creditworthiness. FICO scores can range from 300 to 850. A FICO score range between 720 and 850 is generally considered “excellent,” with good, fair and poor credit ratings going down from there.

Regardless of the scoring parameter used, it’s important to note that all of the factors going into your credit score are as clear cut as the five listed above. Even those with higher scores need credit score help sometimes. While you may already understand the significance of these basic components, there are a number of additional factors that can affect your credit report, and ultimately your credit score. Whether your score is where you want it to be, or you’re looking to repair your credit score, it’s important to understand which factors might be impacting your credit report and overall scores, and which do not.

Here are some lesser-known factors that can impact your credit, both positively and negatively:

Social security numbers – In a perfect world, the social security number that’s issued to you at birth is the one you’ll keep for life. If you are the unfortunate victim of identity theft, however, you may need to be issued a new number. If you are issued a new social security number, it’s important to understand how it will affect your credit score and your ability to borrow. Essentially starting over means an unestablished credit history. Not all of the negatives associated with the past number are automatically erased either, however, which can make a new social security number one of the more challenging scenarios when it comes to credit and credit repair.

New credit reporting standards – The three credit bureaus launched the National Consumer Assistance Plan in March 2015 to make consumers’ credit reports more accurate and to make it easier for them to correct errors on their reports. As part of this initiative, the bureaus changed the way they collect and report civil judgments and tax lien information in July 2017. These changes affect what appears on your credit reports, potentially giving your score a boost.

Evictions – If you rent your home it’s important to understand how an eviction can affect your credit. Evictions can be the result of several factors and, depending on how the issue is resolved, it may not necessarily end up on your credit report. The fact that you received a an eviction notice doesn’t mean it will end up on your credit report. Provided you heed the notice, or pay any deficiency or fine that caused the eviction, you can avoid court and a judgment potentially ending up on your report.

Medical bills – If you’ve dealt with any medical issues and been faced with numerous medical bills, you know how quickly they can mount. Unfortunately, if left unsettled, medical bills can drag your credit score down. In fact, medical bills account for 42 percent of the collection accounts on Americans’ credit reports. The kicker is that once they’ve been charged off to a collection agency, it can be increasingly difficult to erase them from your credit report, even after they’ve been paid.

Behaviors That Impact Your Credit Score

There are many behaviors and decisions that can either positively or negatively impact your credit as well — from your diligence in monitoring your credit accounts, to the methods you use to pay your bills on those accounts.

Monitoring your credit report regularly is one of the most important behaviors impacting your credit score. Research suggests that 80 percent of credit reports contain errors, which, once identified, can be successfully removed. The more frequently you check your credit report, the more likely you will be to identify an error.

If you are attempting to clean up your credit, it’s crucial to keep tabs on your report to make sure things are being reported correctly, and there are no duplicate or erroneous accounts bringing down your score. Working with a reputable credit repair services company is the best way to get faster and more effective action disputing and removing negative items from your credit.

Paying your bills on time is the most important behavior that will drastically affect your credit score. The negative impact of a late or missed payment grows in proportion to the size of the debt and how late it is paid. Establishing some “best practices” in managing your bills can help. By paying your bills on the same date each month, and setting up automatic bill payments on accounts, you can avoid overlooking or missing a payment. Consistent, timely payments will greatly benefit your score.

Thinking back to credit utilization as one of the five factors that comprise your credit score, it’s crucial that you never max out a credit card. Of course, emergencies and situations sometimes occur that require us to use more of our credit than usual. If this happens to you, it is imperative to pay down the balances on your credit cards as soon as possible to get them back to that under-30-percent ratio.

Opening and Closing Accounts

Closing credit accounts is often viewed as a positive by consumers, but doing this can actually have a negative impact on your credit score. When an account is closed, all of the good credit history that may have been established along with it is lost, therefore dragging your score down.

Opening a new account, on the other hand, can benefit your score. You should not open several new accounts at once, however. New accounts are a good way to establish credit, but opening too many in a short period of time can be an indication that you are in need of credit, and you may consequently be viewed as a higher credit risk.

How Do I Fix My Credit?

If you’ve fallen short on some of these behaviors and your credit score has slipped as a result, then you’ve probably begun considering options to begin to fix your credit score. There is a lot of mixed information out there when it comes to credit repair and the best ways to approach it. Complicating matters is the fact that many consumers automatically reject the notion of working with a specialist for fear that credit repair is a scam.

Credit repair has gotten a bad rap in recent years, thanks to disreputable individuals and organizations. Many consumers fear that companies might use their lack of credit repair knowledge against them to scam them out of money with promises of an overnight credit fix. While scammers exist in every industry, it’s important to understand that legitimate, quality credit repair ultimately comes down to the firm you choose to partner with.

Taking a legal approach to credit repair is one of the most effective methods to help you successfully repair your credit score and maintain a good credit score in the future. Working with legal experts is the best way to ensure that the information contained within your credit report is fair and accurate. When you opt to fix credit legally, you will get faster action and better overall results.

Benefits of a Relationship with the Credit Bureaus

When it comes to choosing a credit repair partner, you can also benefit greatly by choosing a firm that has relationships with all three of the credit bureaus. Credit bureaus are private companies that collect information about consumers from banks, creditors, and legal records in order to create a consumer credit report for use by lenders and other financial institutions.

Today, there are three primary credit bureaus: Equifax, Experian, and TransUnion. These bureaus collect information about the approximately 2 million adults who use credit in the United States. The process for doing so, however, is not a perfect one. Factors including human error, identity theft, or the rigid nature of the credit reporting system, often results in the bureaus storing and reporting information that is inaccurate, misleading, or biased.

Much like credit repair, the three credit bureaus often get a bad rap. Consumers think these organizations are out to get them, or that they’re unapproachable when it comes to a credit dispute and removing negative items on a credit report. In reality, the credit bureaus want to provide information that is fair, accurate and complete.

Working with a legal credit repair expert that has direct relationships with these bureaus is the best way to ensure this happens.

If you are seeking credit repair assistance, Lexington Law can help. With our stable of legal experts, we can help you get the quick action you need when it comes to removing unfair and inaccurate items from your credit report. Lexington Law also has established direct relationships with each of the three credit bureaus and understands how to get results during credit bureau disputes and resolution.

When you partner with Lexington Law, you will see how our process for credit repair sets us apart from other credit repair agencies. We will evaluate your specific case and work with you on a tailored plan to quickly and effectively repair your credit and restore your credit score to good standing. Contact us today.

Learn how you can start repairing your credit here, and carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

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What Information Do the Credit Bureaus Have on Consumers?

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Guest article from CreditRepairReview.com

Credit bureaus are companies that solicit, collect and maintain an individual’s credit information in order to sell it to creditors, lenders, and consumers. The credit bureaus sell the credit information of an individual in the form of credit reports that they compile. The credit information compiled consists of the individual’s borrowing and payment habits. Having good credit in your report means your re-payment on loans is generally timely while having bad credit means some or most of your payment is defaulted.

Credit bureaus also play a vital role in various sectors in providing solutions that contribute to better decision making. There are several credit bureaus across the US, but the ones that remain standing tall are three namely; TransUnion, Equifax, and Experian.

Where Do Credit Bureaus Find Their Information From?

It’s the question that you’ll keep on asking yourself, and still, you’ll wonder how every transaction you’ve done in the past is kept and can be used against you. Credit bureaus heavily rely on banks and other business enterprises to give them detailed information about consumers. I hope you can remember the numerous forms capturing your details that you fill in at the bank while opening an account.

Also, most of the business entities that you transact business with regularly send your activities to credit bureaus. There are bureaus that obtain information about the consumers and their credit activities. It’s at the courts where cases like bankruptcy are filed.

However, different bureaus employ different tactics to collect information regarding consumers’ financial operation. It’s for this reason, which makes credit reports to vary from one company to the next company.

The Kind Of Information That Credit Bureaus Strive To Obtain

As I had already mentioned in the definition that the role of the bureaus isn’t only restricted to collecting information, but also involve maintaining details of consumers. Most credit bureaus keep details regarding consumers and their credit history right from the time one opens their first credit account.

The information that credit bureaus collect includes: amount of credit available in the account, your repayment record, amount of credit you’re utilizing, and the outstanding debt collection. On top of such information, other details are related to your public record such as tax evasion, bankruptcy, foreclosure, and repossession.

Furthermore, a credit bureau will keep information that isn’t related to credit. The details include your address, the current and the previous employer, and salary details. You shouldn’t be scared that the non-credit information can affect the calculation of your credit score, but it can influence the choices of financial firms that want to conduct business with you.

Groups That Use Credit Bureaus Information

Credit card issuers and banks top the firms that subscribe and utilize the information from the credit bureaus. I know it worries you how banks are seeking information from the bureaus which obtain their (bureaus’) information from the banks. It’s important to understand that banks might have some details, but they may not meet the threshold of making financial decisions.

There are also host companies that rely on the bureaus to make a financial judgment concerning you. Employers aren’t left behind when it comes to digging for your details from the bureaus that provide them. Other groups that request your details from the credit bureaus are landlords, debt collectors, and insurance companies.

The pre-screening services that most credit firms provide help the banks and insurance firms to decide on the consumers that can qualify for their products. However, you can make yourself unavailable for pre-screening by logging into optoutprescreen.com.

Legislation Concerning Credit Bureaus  

There are federal laws that define and determine the limits at which credit bureaus need to operate. The Fair Credit Reporting Act (FCRA) functions to guarantee consumers fair and accurate credit report. It’s therefore important to find out your credit report information to check if there are any errors. In case there are some anomalies, you need to register your displeasure with the credit firm so that investigation can be necessitated. Since this is vital information, you need to make sure that it is accurate and correct or consult with a top credit repair service to help walk you through your reports and ensure accuracy.

Why You Need To Know Your Credit Report 

The Fair and Accurate, Credit Transaction Act, entitles you to an annual credit report from the three leading credit bureaus. The law permits you to obtain a free copy of your credit report every 12 months from each credit reporting company, or you can contact your local credit report repair company which can not only guide you through pulling a 3-bureau credit report, but also help identify erroneous, obsolete, inaccurate, and duplicate items that are adversely affecting your credit score.

Your credit report is important, especially when your credit request was rejected because of the credit score. The report is equally important when you’re planning to seek a job in the coming two months.

The report is vital for consumers who are on welfare. Besides, there have been incidences of identity theft that can damage your financial reputation and consequently affects your credit score. In truth, in every 20 consumers, there are high chances that you’ll find an error with one. The Federal Trade Commission made the report in its 2013 study.

How The Information The Credit Bureaus Provide Affect Both The Lenders And Consumers

It’s worth knowing your true credit information so that you aren’t victimized by creditors. The information that credit bureaus give can affect your credit score. This can lower your access to credit services from financial institutions.

The information from credit bureaus is helpful to the lenders in deciding who to give credit and which requests to reject. The report also helps in upgrading or lowering the consumers’ credit score.

Through the report from credit bureaus, employers can make an appropriate assessment regarding their potential employees. The information enables an employer to track the financial record of his/her would-be employees and the employees’ financial conduct with the previous employer.

Through public sources like the tax lien, bankruptcy, and public courts a consumer can be denied from taking part in social and political activities. For instance, a consumer who has been declared bankrupt by the public courts cannot vie for an elective seat.

The report helps the consumer to discover whether there have been cases of identity theft in their financial activities. There are various transactions that would require a consumer to enter details like their social security number and date of birth only to use the information in committing fraud.

Whether you’re a consumer or a creditor, you cannot go without appreciating the role that the credit bureaus conduct in harmonizing issues affecting both parties.

Learn how you can start repairing your credit here, and carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

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Why You Should Check All 3 of Your Credit Reports

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Guest post from BadCredit.org

Although the popular FICO credit score wasn’t introduced until 1989, consumer credit information has been collected and sold by various companies for over 100 years. These consumer reporting agencies are used by creditors large and small to make important lending decisions, including whether to approve a particular credit application.

Today, while your personal credit information is gathered, stored, and analyzed by a number of agencies, the landscape of consumer credit data is dominated by the three major bureaus: Equifax, Experian, and TransUnion. Your credit scores are calculated based on the information provided by one (or all) of these three agencies, including the FICO credit scores used by most major creditors.

So, why three bureaus instead of one? The same reason we have multiple brands in nearly every industry: capitalism.

While consumer credit agencies are heavily regulated by government and law, the major bureaus aren’t actually government entities; they are private companies. This means each agency operates in its own way, with separate structures and business goals. The existence of each bureau as an individual company is also the reason why every consumer should regularly check all three of his or her credit reports, rather than limiting credit check-ups to a single report.

Creditors May Report to All Bureaus — Or Only One

Essentially, since the three bureaus are independent bodies, the credit report generated by each bureau may contain different information. Part of this disparity is due to the fact that each agency will have its own methods and partners for collecting information, including the purchase of public record information, such as tax liens and judgements.

More important — and more diverse — than the information sought by the agencies is the information actively reported to each agency by outside parties. Rather than hounding thousands of creditors for updated information on its millions of consumer profiles, credit bureaus rely on each company to report that information.

In fact, the vast majority of the data collected by the credit bureaus is actually reported to them by debt collectors and creditors, including banks, credit unions, credit card issuers, auto lenders, mortgage providers, and retailers. However, creditors are under no real obligation to report that information to any of the credit bureaus, let alone all three of them. This means you may have accounts that show up on a single credit report, but not the others — or on all but one.

This can be particularly important to those attempting to rebuild credit, such as after completing the credit repair process or undergoing a bankruptcy discharge, as only information actually reported to the bureaus will help build your credit. For example, credit cards for bad credit can help rebuild your credit when payments are reported to the credit bureaus, but not every issuer will automatically report to all three bureaus.

Creditors May Check Only One Report — Or All Three

Furthermore, it’s not only accurate data that can show up on some, none, or all of your credit reports; erroneous, outdated, and unsubstantiated information reported to the credit bureaus will show up, as well. And if you only check one credit report each year, you could have all kinds of misinformation on the two you neglect.

To make matters more convoluted, future creditors could use any of the data from any one of the bureaus — or two, or all three — to determine your creditworthiness. This means you have a better chance of a creditor pulling the two reports you don’t check than the one you do.

Put simply, maintaining all three of your credit reports is the only way to ensure that the credit information used by future lenders is accurate. At the very least, all consumers should review all three of their credit reports once a year, which can be done for free online at annualcreditreport.com. Contrary to popular belief, checking your own credit won’t hurt your credit score.

Additionally, any mistakes, such as spelling errors or fraudulent accounts, should be dealt with immediately by disputing the account with the credit bureaus. You can do this yourself, or you can hire an experienced credit repair company to handle the process on your behalf. BadCredit.org has rated the best credit repair companies to help you get started with the process.

It’s especially important to perform regular checks of your own credit report while trying to rebuild credit, after credit repair or a bankruptcy discharge, or if you’ve been the victim of identity theft. Always double check that erroneous accounts have been properly removed and follow up with any necessary organizations to ensure the accuracy of your reports.

Learn how you can start repairing your credit here, and carry on the conversation on Lexington Law’s social media platforms. Like and follow on Facebook and leave a tweet on Twitter.

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What VantageScore 4.0 Means to You and Your Credit Report

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In early April, VantageScore Solutions, developer of VantageScore credit scores, announced that its new VantageScore 4.0 tri-bureau credit scoring model will be available to lenders in fall 2017. But this announcement doesn’t only impact lenders.

You can think of VantageScore as a competitor to the widely used FICO score used by the majority of lenders. Although FICO, created by Fair Isaac Corp., is the credit industry standard, the VantageScore model, which was created in 2006 by Equifax, Experian, and TransUnion, has grown significantly in the past several years. The number of VantageScores used increased 40 percent between July 2015 and June 2016, with more than 2,400 lenders and other credit industry participants using it — including 20 of the top 25 financial institutions.

So, what does VantageScore 4.0 mean to you?

VantageScore 4.0 is an update to version 3.0, and includes three important changes:

  1. Perhaps most notably, VantageScore 4.0 is the first tri-bureau credit scoring model designed to accommodate the National Consumer Assistance Plan initiative. The NCAP takes effect July 1 and, among other provisions, it will mark the end of the three reporting agencies collecting and reporting a significant amount of information pertaining to tax liens and civil judgments.

Furthermore, VantageScore 4.0 also distinguishes medical accounts that have been sent to collections from other types of collection accounts and ignores medical collections that are less than six months old in order to allow adequate time for insurance payment processing, according to VantageScore Solutions.

The new model “relies less on derogatory collections and public-records data to ensure that the model will not lose substantial predictive strength in the likely event that these records fail to meet enhanced data quality standards and are removed from consumer credit files under provisions of the NCAP program,” VantageScore Solutions said.

  1. VantageScore 4.0 will be the first credit scoring model used by Experian, Equifax, and TransUnion to include “trended credit data.” This essentially means the new model takes into consideration a consumer’s credit behavior over time vs. looking only at a current snapshot.
  2. The new version will accommodate consumers with limited credit histories through the use of data mining to create consumer scorecards. Through extensive data, VantageScore 4.0 identified thousands of consumer behavior combinations common to those who pay their bills on time.

Consumers and lenders stand to benefit from this new model, which promises more consistent credit scores from all three national credit reporting agencies.

If you’d like to learn more about how the new VantageScore 4.0 can impact you, or more about credit scoring and credit repair, contact Lexington Law today.

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Is Credit Repair a Scam?

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If you automatically think, “Scam!” every time you hear or see a commercial for a credit repair company, you’re not alone. Credit repair has certainly gotten a bad rap among many consumers — and it’s not difficult to understand why.

For many people, credit repair is synonymous with companies taking advantage of consumers who don’t know where to begin to clean up their credit report and improve their credit score. Unfortunately, it’s when consumers are at their most vulnerable that scam artists can swoop in.

But ultimately, whether or not credit repair is a scam comes down to the firm you select to help you.

With so many companies claiming to offer the best credit repair services, it’s important to understand how to determine which are legitimate and how to weed out potential scams.

Let’s take a look at three ways to help you differentiate legitimate credit repair from credit repair scams.

  1. Legitimate credit repair companies will only charge for credit repair services after they’ve been performed. Beware of any company that asks for money upfront.
  2. You should be able to speak to a person when you call your credit repair agency and you should steer clear of any company with a Web-only presence or one that doesn’t provide a phone number where you can reach a real, live person. The bottom line is your credit repair agency should want to talk with you directly so that they can fully understand your needs and situation in order to effectively assist.
  3. You’ll also want to beware of services that offer you nothing more than a credit report. By law you are already entitled to one free credit report each year, without paying anyone a dime. You can also request your scores from each of the three bureaus individually, for a fee. Whether or not you choose to pay for your credit score, it is still a good idea to check your report at least annually so that you can be diligent in disputing credit items that are erroneous or fraudulent.

Consider a Legal Approach to Credit Repair

Despite the negative perceptions, there are reputable, trustworthy credit repair services you can rely on.

When it comes to credit repair, a legal approach is the safest and most effective. Partnering with a consumer advocacy law firm means you’re always working with real, live, legal experts. It also empowers you with tools and education to maintain good credit for life and exposes you to other financial and legal services from which you can potentially benefit.

Many consumers are unaware that credit protection laws exist when it comes to ensuring your credit report is fair and accurate. Laws also exist pertaining to credit problems that have arisen as a result of life circumstances, such as divorce or military deployment. Partnering with a law firm that specializes in credit allows you to understand and leverage these laws.

Don’t Go it Alone

While do-it-yourself credit repair is possible in theory, it requires a significant amount of time and legal knowledge. Effective credit repair is complex, and is better left to a trustworthy firm that understands all of those complexities and legalities. The best advice when it comes to credit repair is to partner with a firm that can help you repair your credit and offer you the knowledge and services to maintain good credit going forward.

Learn how you can start repairing your credit here, and carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

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