Products: Credit Scoring
Credit reports and how credit reports work is almost a secret to most. There is not a set number of points for each credit inquiry, late payment, etc but there are known items that affect credit scores in a subtle way and sometimes a very drastic way. Knowing what affects a credit score will make you more aware of everyday things you do in the credit world. For instance, one may not open that department store credit account for an extra 10% off today because it is another credit bureau inquiry and the new credit account that is not necessary.
The goal of this page is to help educate you on how credit bureau scoring works and how you can improve on your credit bureau scores so you will qualify for better interest rates which in the end SAVES YOU MONEY.
Raise your credit scores by removing credit inquiries from all 3 credit bureaus
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Under the Fair Credit Reporting Act (FCRA), the Consumer Credit Reporting Companies are permitted to include your name on lists used by creditors or insurers to make firm offers of credit or insurance that are not initiated by you. You have a right to “Opt Out”. To “Opt Out” from receiving Firm offers from creditors for 5 years as a result of Consumer Credit Reporting Companies providing your credit file information, click here.
If you are someone you know is struggling to pay the mortgage and live in NC, there is help available:
NC Housing Finance Agency is a great source if you are struggling to pay your mortgage due to a job loss or temporary financial hardship, they have the
- NC Foreclosure Prevention Fund: This fund can provide an interest free loan of up to $36,000 to pay your mortgage and other related expenses for up to 36 months while you search or retrain for employment. If you are currently employed but have a second mortgage that is unaffordable because of a prior job loss or reduced income, the Fund offers an interest-free loan of up to $30,000 to pay off your second mortgage. The fund provides assistance at no cost to you. This is a great resource if you are facing trying times like this. Learn how the process works and you may also call toll free at 888-623-8631.
- State Home Foreclosure Prevention Project: This fund helps homeowners facing foreclosure for any reason. It offers free housing counseling, access to legal services for people with lower incomes, and help with your mortgage servicer.
To watch a video of how NC Housing's counselors can help, click here
Frequently Asked Questions about the foreclosure help
Get your free credit report here:
Order your completely free credit report from all 3 credit bureaus by going to www.annualcreditreport.com. AnnualCreditReport.com is the official site to help consumers to obtain their free credit report. This is a completely free service where you can get copies of your credit reports and dispute or correct errors with Equifax, Transunion, and Experian once per year. You do not have to sign up for a service or pay any kind of fee unless you want to get a credit score or sign up for a particular service. Other benefits of requesting your own credit report are inquiries will not count against the person checking credit and if there is a medical collection, one can see who is reporting it (sources of medical collections will not show on credit reports that businesses request because of HIPAA privacy rules). Everyone should go ahead and pull all 3 bureaus of credit up front now because the percentage of credit reports with errors is staggering. Then a good practice would be to pull one bureau after one year for free. After 4 months, check another bureau and another 4 months, pull the third bureau. By following this system you are able to keep a more constant look at your overall credit rather than once per year. Do keep in mind that bureaus can and will have different information though and if you have fears of fraud or errors, check all 3 or even pay for pulling the bureaus more often. For more information on credit, contact me.
Easiest way to get quick points added to your credit score:
30% of your credit score is based on the balance compared as a percentage to the credit limit on revolving lines or credit cards. Therefore paying down your balance(s) to under 10% of the credit limit should add points to your current scores. The worst situation you can have in this relationship equation is to be above your credit limit on cards as this will severely hurt a credit score. Paying down the balance to 70%, 50%, 30%, & 10% of the credit limit are the ways your accounts are scored with the lowest percentage range being the better for your scores. As a goal, balances on these accounts should be kept as low as possible for keeping scores high. If you are looking to qualify for a loan soon or need points now on your scores, pay down balances on the revolving accounts and keep them at that level and your scores should go up.
How to Fix a Credit Score & Maintain Good Credit
Payment History Tips
Contributing 35% to your score calculation, this category has the greatest effect on improving your score, but past problems like missed or late payments are not easily fixed.
- Pay your bills on time.
Delinquent payments, even if only a few days late, and collections can have a major negative impact on your FICO score. - If you have missed payments, get current and stay current.
The longer you pay your bills on time after being late, the more your FICO score should increase. Older credit problems count for less, so poor credit performance won't haunt you forever. The impact of past credit problems on your FICO score fades as time passes and as recent good payment patterns show up on your credit report. And good FICO scores weigh any credit problems against the positive information that says you're managing your credit well. - Be aware that paying off a collection account will not remove it from your credit report.
It will stay on your report for seven years. - If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
This won't rebuild your credit score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. And seeking assistance from a credit counseling service will not hurt your FICO score. Ask the counselor if the debts included are going to report you as late because the minimum payment may be negotiated.
Amounts Owed Tips
This category contributes 30% to your score's calculation and can be easier to clean up than payment history, but that requires financial discipline and understanding the tips below.
- Keep balances low on credit cards and other "revolving credit".
High outstanding debt can affect a credit score. - Pay off debt rather than moving it around.
The most effective way to improve your credit score in this area is by paying down your revolving (credit cards & lines of credit) debt. In fact, owing the same amount but having fewer open accounts may lower your score. - Don't close unused credit cards as a short-term strategy to raise your score.
- Don't open a number of new credit cards that you don't need, just to increase your available credit.
This approach could backfire and actually lower your credit score.
Length of Credit History Tips
- If you have been managing credit for a short time, don't open a lot of new accounts too rapidly.
New accounts will lower your average account age, which will have a larger effect on your score if you don't have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.
New Credit Tips
- Do your rate shopping for a given loan within a focused period of time.
FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur. - Re-establish your credit history if you have had problems.
Opening new accounts responsibly and paying them off on time will raise your credit score in the long term. - Note that it's OK to request and check your own credit report.
This won't affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.
Types of Credit Use Tips
- Apply for and open new credit accounts only as needed.
Don't open accounts just to have a better credit mix – it probably won't raise your credit score. - Have credit cards – but manage them responsibly.
In general, having credit cards and installment loans (and paying timely payments) will rebuild your credit score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly. - Note that closing an account doesn't make it go away.
A closed account will still show up on your credit report, and may be considered by the score.
To summarize, "fixing" a credit score is more about fixing errors in your credit history (if they exist) and then following the guidelines above to maintain consistent, good credit history. Raising your score after a poor mark on your report or building credit for the first time will take patience and discipline.
