Understanding Your Credit Score

How Much Does a Low Fico or Beacon Score Cost You?

Do You Have Credit Cards?

If you have a low Fico or Beacon score you will be in the Jilted category, getting a good rate on a credit card is simply out of the question.  If you do get a credit card, you may be hit with high interest rates, upfront set-up fees, reoccurring monthly fees and cash deposits.

Auto Loans

Your payments on an automobile will go through the roof with bad credit.  Here are examples.
$20,000 auto loan over 5 years

Mortgage

$100,000 home loan over 30 years

Having a low score can cost you thousands of dollars.

Do you need to raise your credit score?

What Affects Your Credit Score?

There are 5 things used in calculating your overall credit score.

Payment History is 35% of your score
History of payments is determined by if you pay your accounts on time.  
Your history of payments includes any loan that you have had to make monthly payments on.  For I.E, auto loans, home loans, credit cards, retail stores and finance companies. 
If you are late on an account it can eventually turn into a collection account or public record.  These include, but are not limited to bankruptcies, lawsuits, liens, collections, wage attachments and judgments.  These are very serious accounts and hurt your FICO score dramatically.
Security- How delinquent is the payment?  Have you been 30, 60, 90 or 120 days late? Is it still outstanding?  Paying on time will increase your Beacon or Fico Score greatly.
Recent history- How long have you been delinquent?  Are you still delinquent?  Recent late payments can hurt your score by 100 points.
Prevalence- Obligations, how many do you have?  What percentages of your accounts are late now?

How Much You Owe is 30% of Your Score

Does your income allow you to make your payments and pay your home bills on time and still have money to spend on every day activities? 
What type of account is it?  Different kinds of credit accounts are figured differently. Credit cards are different than home loans in factoring your score or determining if you apply for a loan.
It is important to look at how much you owe total.  A lot of accounts with low balances may hurt you because you could run up those balances If you run into finacial trouble. If you have not used a credit card in longtime, you should use it to make a small purchase. That way the credit card company won’t close the account. Paying off your credit cards every month is good.  Try to keep the amount of credit cards you keep down to a minimum.  Three or four open credit cards are a good amount to have.
If your credit cards are almost maxed out, it is affecting your score, even if you have made your payments on time.  Banks do not want to see high balances because it shows that you may not have the money to pay anymore than the minimum payment.

Amount of Time Credit Has Been In Use is Fifthteen Percent of your score

The longer you have credit history, the higher the score as long as the credit you have has been in great standings.  This means that older people that have always had good credit will probably have higher FICO scores than someone who is younger with good credit, but young people can still have a great credit score.
important to look at how long have you had an account and the length of time it has been in the credit report.  The average age of your accounts are taken into considerations when figuring your FICO score.  You must also use the accounts that you have.  If it has been long time since you have used an account, it may not hold much of a score.  Using the accounts you have will help your score.

Inquiries are ten percent of your

It is easier to obtain credit these days via mail, internet and many other ways.  Each time you let someone run your credit and you get an inquiry, and it can hurt your credit score.  Mortgage and auto loans are treated differently for example auto loans made within 14 days are counted as one There are no good inquiries.  Every time you fill out a credit application, you get one or more inquiries.  A lot of inquiries look bad.  Almost any inquiry is not good, there are neutral ones that don’t hurt your score.Pre-approval inquiries are when a potential lender has looked at your credit to determine whether they want to offer you a credit.  These are not factored in to your score, but once you fill out an application with the lender, it will show up to be a bad inquiry that does hurt your score.

Periodic Review inquiries are when lenders periodically review your credit to see if there are any major changes.  If they see a major change in your score they may close your account.  These are also not supposed to be computed into your FICO score. Inquiries can show a banker how often you are trying to open up new accounts and how recent those attempts were.
Primary consideration is given to the following:

• Number of inquiries in last 6 months
• Number of trade lines opened in the last year
• Number of months since most recent inquiry

How inquiries are computed is somewhat complex and they should be avoided if possible. 

Types of Credit Experience is 10% of your score

It’s good to have a diverse mix of accounts.  Having payment accounts, retail accounts, credit cards and a mortgage is good.  Since this is only worth 10% of your score, it is not a big factor but can help.  Do not go out a try to open different kinds of accounts because a bad mix may hurt you and lower your score.

Do you have questions about raising your Credit Score?

How to pay off credit cards enrolled in a debt management program?