Credit (FICO)

26 04 2015

Things to know to boost your credit score.


5 Components of a Credit Score

Payment history: 35%

Debt Ratio (utilization): 30%

Balance on cards vs. credit limit. Try to stay below 50%, but best to stay below 30%.

Average Age of Files: 15%

How long you’ve had your credit accounts. Best not to close accounts. Keep them open even if you’re not using them.

Mix of Credit: 10%

Should have a mortgage loan, auto loan, and at least 3 credit cards. Can have even more accounts if you manage them properly. Not always best to pay off loans early. Good to have credit cards.

Inquires: 10%


The Truth about the Credit Bureaus

They make hundreds of millions of dollars – big business – goal is to make money! How they make money: they collect and sell consumer information – usually to the big banks. Their clients are the banks, not you.

You can opt out of this: OptOutPreScreen.com (HIGHLY recommend doing this!)


Two Main Ways Your Credit Score Goes Up and Down

Your score is always moving (like a stock).

1) Have negative accounts removed.

2) Have positive accounts added. This is why it’s not always best to pay off loans early – you want positive accounts showing on your credit report.

Keep old accounts alive. Auto loans are good. Focus on adding positive accounts (not removing negative ones) – and have activity in the last 6 months. Keep credit card balances low (30% of your credit score).


Everyone Can Help Their Credit Score With This One Thing

Secured Credit Card: you put up the money that represents your credit limit. When you apply for the card, you submit the money, and the represents your credit limit. You are loaning yourself the money. It’s very low risk for the bank. Gives you ability to build your credit. Low risk for you as well.

Seen as a form of credit insurance. Helps protect your score if you have a few secured credit cards. The more of these you have (positive credit accounts), the less a negative account will affect your credit score. Mr Credit has over 40 secured credit cards! You should get AT LEAST 1-3 secured credit lines. (how to use secured credit cards – see article at the bottom of this post)


How Credit Cards Affect Your Credit Score

Almost as important as your payment history in regards to your credit score.

If you don’t have a credit card you’re basically missing 30% of your credit score.

Your utilization (debt) percentage/ratio: green zone/ideal is 0%-29% of your credit limit.

30%-49% is ok, but will have a bit of a negative effect on your credit score.

Over 70% is when your score really starts to drop.

“The Trick” – statement end date: 4/15/11. Reported to bureaus: 4/16/11. You get bill in the mail 4/20/11. SO MAKE PAYMENTS BEFORE YOUR STATEMENT END DATE


How Leases Affect Your Credit Score

Leases don’t show up on your credit report.


How Long Does it Take to Get a Credit Score

Public Savings Bank secured credit card (PSB Secured Credit Card – almost anyone will be approved for this card).

“The Rule” – Accounts need to have at least 6 months of age to generate a credit score.

“The Trick” – become an authorized user on account of immediate family member (parents or spouse). You can get a credit score immediately if that account is at least 6 months old.


Paying Credit Cards Off Monthly Isn’t Helping Your Credit Score

What they don’t want you to know: once you get your credit card bill, it’s already too late! By the time you get the bill, all the info has already been reported to the credit bureaus.

Example: Statement period 2/16 – 3/15. Statement ending date 3/15 (15th will be the same every month). On 3/16 the bill is sent to you AND the balance owed is sent to the credit bureaus. So it has been reported before you’ve even had a chance to make a payment. In this example he recommends submitting the payment on the 10th. When you get the bill in the mail now it will show you owe $0 and that’s what will be reported to the credit bureaus.

PAY THE BILL BEFORE THE STATEMENT ENDING DATE !!


How Student Loans Affect Your Credit Score

Doesn’t help to pay them off early. Start making payments ASAP. Don’t go back to school just so you can delay having to start making payments!



More YouTube videos (student loans, real estate, bankruptcy, credit score, etc.):

YouTube.com/MrCreditRatio – https://www.youtube.com/user/mrcreditradio/videos

MrCredit.orghttp://mrcredit.org


You can get a FREE copy of your credit report every 12 months (AnnualCreditReport.com):

http://www.consumer.ftc.gov/articles/0155-free-credit-reports


Your Free credit report does NOT include your FICO Score. To get your true FICO Score:

FICO Score (apparently this is the FICO Score that lenders usually use… most of the free sites give you a “FAKO” or “educational” score I guess) – myFICO.com

http://www.myfico.com/Products/FICOOne/
http://www.myfico.com/Products/FICO-Score-3-Report-View/


Equifax credit report (good report to get, it pulls all 3 reports – TransUnion, Equifax, Experian – and your FICO Score from each… Equifax uses their own FICO score model… they say it differs from what lenders might use):

http://www.equifax.com/all-products/


Get your ‘FICO Score 8’ (apparently the score model that is most used by lenders) from Experian:

http://www.experian.com/consumer-products/credit-score.html

“FICO® Scores are developed by Fair Isaac Corporation. The FICO Score provided by Experian is based on FICO Score 8. Many but not all lenders use FICO Score 8.

There are many different credit scoring models that can give a different assessment of your credit rating and relative risk (risk of default) for the same credit report. Your lender or insurer may use a different FICO Score than FICO Score 8, or another type of credit score altogether. Just remember that your credit rating is often the same even if the number is not. For some consumers, however, the credit rating of FICO Score 8 could vary from the score used by your lender. The statements that “90% of top lenders use FICO Scores” and “FICO Scores are used in 90% of credit decisions” are based on a third-party study of all versions of FICO Scores sold to lenders, including but not limited to scores based on FICO Score 8.

FICO Score 8 ranges from 300 to 850. Higher scores represent a greater likelihood that you’ll pay back your debts so you are viewed as being a lower credit risk to lenders. A lower FICO Score indicates to lenders that you may be a higher credit risk. There are three different major credit reporting agencies — Experian, TransUnion® and Equifax® — that maintain a record of your credit history known as your credit report. Your FICO Score is based on the information in your credit report at the time it is requested. Your credit report information can vary from agency to agency because some lenders report your credit history to only one or two of the agencies. So your FICO Score can vary if the information they have on file for you is different. Since the information in your report can change over time, your FICO Score may also change.”

http://www.experian.com/consumer-products/FICO-score-disclosure.html


How to use a Secured Credit Card

http://www.magnifymoney.com/blog/building-credit/#build-credit-with-10-a-month-on-a-secured-card714882391


Secured MasterCard from Capital One (no annual fee!)

http://www.capitalone.com/credit-cards/secured-mastercard/?Log=1&EventType=Link&ComponentType=T&LOB=MTS%3A%3ALCTMMQC4S&PageName=Credit+Cards+Compare+&PortletLocation=4%3B16-col%3B1-1&ComponentName=browseTable&ContentElement=54%3BCard+details&TargetLob=MTS%3A%3ALCTMMQC4S&TargetPageName=Secured+MasterCard+Details&referer=https%3A%2F%2Fwww.capitalone.com%2Fcredit-cards%2Fcompare&external_id=CJA_ZZ11412962_USCCJ_K7244582_24916_A2A006339876


First Progress Platinum Secured Credit Cards (no minimum FICO requirements for approval)

https://www.firstprogress.com/card_options




ChexSystems

The Chex Systems, Inc. network is comprised of member financial institutions that regularly contribute information on closed checking and savings accounts. ChexSystems shares this information among its member institutions to help them assess the risk of opening new accounts. ChexSystems does not make account opening decisions for its members. Account opening decisions are made by the member institutions based on their internal policies.

https://www.consumerdebit.com/consumerinfo/us/en/index.htm






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