Archives for "Credit Score Facts"
Boost Your Credit Scores With Credit Repair
Credit Repair for Everyone
Everyone wants their credit score to be as high as possible. Not everyone is a candidate for credit repair, but most people can utilize these score raising techniques to one degree or another. For some it is a matter of recovering after a period of financial difficulty, others may only need a little tune-up. Here are the best ways to improve your credit scores, and keep them up!
Positive and Negative Issues
There are two areas that must be addressed as part of any credit repair effort, the positive and the negative. Without positive credit your scores will go nowhere regardless of any progress you make removing erroneous derogatory information. And unless you clean up the negative errors that are weighing down your scores you will be handicapped without the presence of positive credit on your report.
Open and Active Accounts
Building positive data on your report for credit repair purposes does not have to be difficult. Secured credit cards are the perfect way to develop positive history even if your current scores make it impossible for you to qualify for regular unsecured accounts. If your scores are not too bad you may be able to obtain regular cards. Either way, make sure that you have open active accounts showing on your report.
Managing Open Accounts
Before we discuss credit repair techniques for dealing with the negative issues on your report it is important to touch on the ways to manage your open active accounts. It is common sense that you must make your payments on time; a late payment can be a terrible setback. But if you really want the best scores it is critical that you maintain your balances properly.
Using Your Balances Properly
High revolving balances will hurt your credit scores. Conversely, low balances will help. The extent to which this factor can impact your results is very dramatic. There are certain percentage breakpoints that you can focus on: 20, 40, 60, and 80 percent limit usage. If you run a balance up over 80 percent your scores could fall by 100 points. The best credit repair results will come from bringing your balances under the 20 percent mark.
Finding the Errors Can Be Hard
The negative information on your report presents a different set of challenges. Most people these days are aware of the prevalence of reporting errors. What most people are not cognizant of is how subtle some of these issues can be. It is not always easy to find errors. It is not just a matter of looking for late payments you do not recognize. Many errors are hard-to-spot legal violations by collectors and other participants in the system.
Credit Repair Services
All of these matters must be tracked down and disputed through the credit bureaus. If there is a doubt in your mind as to your ability to find errors you should consider hiring a good credit repair service to do the work for you. They are trained to hunt down every issue that can harm your scores. In addition, for a small fee these services will manage the cumbersome and time consuming job of sending and managing your ongoing dispute letters.
Copyright © 2010 Sky Blue Credit Repair. All Content. All Rights Reserved.
Credit Repair Mysteries Unveiled
Your Credit Score is Not What You Think
Credit repair is not always clear-cut. You may be surprised to hear that you can pay your bills right on time for years on end and still have crummy credit scores. Your score is not a report card on your payment habits, it is a complex algorithm designed to predict the chance that you will default on a loan. There are numerous factors involved, many of which may seem to have no bearing on your willingness or ability to repay.
You Have Control Over Your Scores
Credit repair is about achieving an optimal balance of the factors that influence your scores. There are many dynamics involved, including the type of debt you use, number of accounts you have, utilization of credit lines, and age of accounts. The FICO scoring model may be a black box, inasmuch as the exact formula is not public knowledge, but the mechanics are not obscure. Credit repair is a science and you can control your scores.
The Credit Bureaus Make Mistakes
Before launching a credit repair effort it is important to know that the credit bureaus manage an unusually complex network of participants, all of which come together to create the credit reporting system. Creditors, collectors, and the service bureaus that catalog public records contribute the data. Massive software programs combine and sort it, and human operators supervise and guide the technology. Errors are commonplace and will not fix themselves.
Time Will Not Fix Your Credit
Errors will not fix themselves, nor will time. Credit repair is critical. Errors have a funny way of becoming entrenched and even multiplying as months and years go by. You cannot afford to imagine that a credit report left alone will shed reporting errors. Seven years will almost certainly leave you in even worse shape. You must look out for yourself and be as proactive as possible.
Deleting Errors is Only Half the Work
Everyone loves to see errors erased from their credit report, and it is indeed a wonderful thing. But error removal is not the only objective of credit repair. The ultimate goal is to have the kind of credit that will put a smile on the face of a lender. This involves more than a cleanup of your reports. You need to make sure you have the quality and quantity of accounts you need to get results.
Credit Repair Balloon
Your credit scores are calculated based on both the positive and the negative information on your reports. You can think of your scores as a hot air balloon. The negative accounts are the sandbags that keep the balloon from rising, and the positive accounts provide the hot air you need to ascend. You may cut off the sandbags, but without sufficient hot air your balloon will not go anywhere.
Building for Success
Many survivors of poor credit find themselves with no open accounts. The correct credit repair strategy for someone in this position is to simultaneously clean up the errors and rebuild positive credit. For most people attempting to rebuild, secured credit cards are the best alternative. They are inexpensive, and you will not be denied. Two cards will provide the lifting power you need. Just get them open, keep the balances down and watch your scores take off. Good luck!
Copyright © 2010 Sky Blue Credit Repair. All Content. All Rights Reserved.
Credit Repair and Credit Score Mastery
FICO is Not a Report Card
Your credit score is not a report card meant to grade you on your past payment history. Are you surprised to hear this? If you are in a credit repair program and are hoping for truly meaningful progress you should understand the true intent of the FICO scoring model; you must learn to think like the engineers that developed the algorithm.
Measuring Risk of Default
The FICO credit score is designed to measure the likelihood that you will default on your obligations. There are many subtle factors that FICO considers in its calculation. Each of these factors is utilized as a predictor of future behavior. Some of these factors make perfect sense, but others, less logical, are likely to take you by surprise and hinder your credit repair progress, so don’t let them catch you unawares.
Inquiries
When you apply for a new credit card, auto loan, or any new debt your credit scores will dip slightly. The reason that FICO lowers your scores for each inquiry is that it sees your shopping as a potential threat to your budget. Each inquiry will impact your scores by between 1 and 5 points depending on the extensiveness of your credit. The more established your credit the less impact an inquiry will have because you have demonstrated skill in opening and managing new accounts.
New Accounts
New accounts will put a significant, but temporary, dent in your credit repair progress. The reason is simple; FICO recognizes the new account as a threat to your budget. The impact on your credit repair progress will fade quickly as your demonstrate the ability to manage the new debt responsibly. And, as with inquiries, the impact of a new account will depend on the extensiveness of your credit. The more established your credit the less of an impact on your scores.
Revolving Balances and Credit Repair
Revolving balances are a big factor in any credit repair program. If you want to improve your scores you must reduce your balances. Buy why is this? The FICO engineers are aware that high revolving balances are likely to occur when money is tight. Conversely low balances occur when money is plentiful. FICO sees a tight budget as a forerunner of potential default and will lower your scores to warn potential lenders that it may not be the right time to lend you money.
Consumer Debt
Consumer debt is a contentious issue among those who are caught unawares by this little wrinkle in the credit scoring formula. FICO carries an automatic bias against this type of debt regardless of any of the potential benefits that may be built-in. Consumer debt includes store cards and store financing most commonly used for the purchase of furniture and electronics. This type of debt is usually pricey and frequently comes with no-payment deals that mature into precarious repayment plans after a fixed term. If you are in a credit repair program you should avoid this type of debt.
Active vs. Inactive Accounts
You know that it is important to keep your credit card balances low to optimize your credit repair results. But did you know that if you pay those cards off and let them sit unused the credit score value of that account will start to fade away? FICO recognizes that many credit cards get retired, both by consumers and creditors, and yet continue to report. Logically, an inactive card should not count towards your credit worthiness if it is not currently in use.
Credit Repair
If you would like your credit scores to reach their full potential and you don’t feel up to the task of evaluating every possible option, just contact a credit repair professional. You don’t have to manage the job alone. A credit repair professional will be happy examine your credit reports and identify all of the opportunities to boost your score. Good luck!
Copyright © 2008 Sky Blue Credit Repair. All Content. All Rights Reserved.
Credit Score Secrets Exposed
So Many Scores so Little Time
There are lots of different credit scores offered on the web. If you are starting a credit repair program you may want to benchmark your scores. So you are likely to go online, pick out a website and pay the price. Unfortunately, the odds are that the credit scores you purchase will have no resemblance to the scores a lender will use to underwrite a loan.
The Real Scores
There is only one website where you can purchase the same scores lenders use; this is MyFico.com, the website for Fair Isaac Corp the developer of the FICO scoring model. As a credit repair consultant it is a matter of daily consternation to me that the same credit bureaus that sell these important FICO scores directly to lenders will not sell FICO scores to consumers.
The Wrong Scores
You can purchase credit scores from Experian, Equifax, and TransUnion, but they are not FICO scores, and therefore of no real credit repair value. These credit bureau scores are of their own creation and exist solely for the purpose of cashing in on the ignorance of consumers. I cannot imagine any scenario where there would be no moral culpability on the part of the bureaus.
No Practical Application
I have heard it said that although these bureau scores are not the same as FICO scores they are a way for consumers to track changes in their reports. This is not so. The bureau scores just don’t behave the same way. In other words, changes in your credit affect your FICO scores differently that they do the bureau scores. These bureau scores have no practical application, for credit repair or otherwise.
The Equifax Exception
For the record, Equifax offers the only credit repair friendly credit score. In fact, they do offer a FICO score. They currently use a previous generation of the software, and they only apply it to their own data, but it will generate a close approximation of your real score and generally behaves the same and could be used to monitor credit repair progress.
Measuring Credit Repair Progress
Unfortunately, this one credit bureau nod to integrity does not provide an optimal credit repair solution. You should know that many lenders, and all mortgage lenders, purchase all three FICO scores and use the middle of the three scores. An accurate measure of your credit repair status requires all three scores
Ask Your Lender for Your Reports
Given that lenders are able to purchase FICO score from the credit bureaus, you may have a roundabout way of getting your hands on a real tri-merged report with all three FICO scores. If you recently applied for a mortgage you may consider contacting your lender and asking for a copy of your report. Tri-merged mortgage credit reports are usually quite detailed and ideal for credit repair purposes.
Bend the Rules Just a Bit
By the book, lenders are not supposed to provide copies of reports directly to consumers. This is standard boiler plate language included in lender agreements with their report provider. The Fair Credit Reporting Act includes an information sharing clause; in the case of credit denial consumers are entitled to a copy of their reports, but this is a hassle compared with calling your lender and asking for the small favor.
Credit Repair and Your Reports
If you want your credit scores to establish a starting point for your credit repair effort I should say a bit more. If you go to MyFico.com to purchase your credit scores they will come complete with your three credit reports. Unfortunately, as if happens, even though Fair Isaac is the only source for your scores, they do a terrible job on the credit reports.
Fair Isaac Report Problems
MyFico.com credit reports are edited to the point of being useless for credit repair purposes. This is especially true if you intend to investigate all the information that should be available on your reports. Fair Isaac reports are highly sterilized, and in many cases actually exclude your account numbers, which you may need for your credit repair effort. So, for credit repair purposes you should get your reports from the credit bureaus. Phew!
Making Do
If it all seems crazy and unfair remember that the credit bureaus have the credit data, and Fair Isaac owns the credit scoring software. Everyone wants to make money and until they figure out a better way to work together we just have to make do as best as we can. Good luck!
Copyright © 2008 Sky Blue Credit Repair. All Content. All Rights Reserved.
FICO Offers Credit Repair Tips
Credit Repair in the News
Credit repair is more important than ever. In a recent interview with MarketWatch, a Wall Street Journal website, the Consumer Operations manager for the MyFICO division of Fair Isaac spoke out about the importance of checking your credit reports. In the words of the article, “There may be some surprises waiting for you.”
A New Credit Repair Landscape
Creditors everywhere have tightened their guidelines. This new credit environment has made credit repair more important than ever before. And to make things even more difficult in these already challenging times, credit card issuers have begun to reduce cardholder’s credit limits in order to reduce their own risk.
The Limit Reduction Problem
This action is doubly hard for consumers. First, these limit reductions are happening unexpectedly, even to those who have never made a late payment. And second, and even more damaging, is the snowball effect that follows. A major part of your FICO credit score is based on the relationship between your current balance and your credit limit. When a creditor cuts your limit your balance-to-limit ratio increases and your credit score will fall, through no fault of your own.
The Snowball Effect
And the snowball starts rolling. Once the first creditor drops a limit and your scores fall, other creditors are likely to drop your limits as well. And the lower your scores the more prone you will be to this perfect storm of credit repair trouble. What to do?
Good Credit Repair Advice
The Consumer Operations Manager for MyFICO suggests that you do everything in your power to insure that your credit report is as clean as possible and your scores are optimized. And don’t make the mistake of thinking that paying your bills on time (as important as it is) is you need to do. Credit repair knowledge is power. Here is a summary of his credit repair tips, and our extrapolation.
Check Your Credit Reports
Look for changes in your account limits. And while you’re at it, check for errors. Errors come in many shapes. Derogatory information should cease reporting, generally, after seven years. You should know that the seven year reporting period clock starts on the date of the original default with the original creditor. The original default was the first reported late payment in the sequence that led to the charge off or collection status.
Collectors cannot reset the clock with subsequent reporting. And while we are on the subject of collectors, you should know that if a collector no longer owns the debt, he is supposed to remove the account entirely from your credit report. When in doubt, challenge the item with the credit bureaus or hire a credit repair professional to manage the process for you.
Don’t Get Close to Your Credit Card Limits
A significant percentage of your credit score is based on your balance-to-limit ratio. Reduce your balances as much as possible. Less than 20% of your limit is the optimal balance. Many people are blindsided by precipitous drops in the scores when they max out a card, even when they have never been late on a payment.
Keep Accounts Active
Use your cards to keep them alive. Dormant cards are in danger of being closed by creditors and unless you have plenty of open accounts this could cause a drop in your scores and send you in search of credit repair solutions.
Pay Your Bills on Time
This seems like a no-brainer, but it is so important. Make sure you understand the impact your purchases will have on your budget. Try not to let yourself get spread too thin. A single late payment can have a big effect on your scores, and may even trigger adverse action, such as limit reduction, by your creditors.
Don’t Apply for New Credit Cards
We have warned against store cards for years, and MyFICO agrees. Store cards can be credit repair suicide as they often present a triple threat. First, you will have an inquiry. Second, you will have a new account which will weigh down your credit scores for several months. And last, and worst, is the fact that most store cards offer a credit limit only marginally over the amount of your purchase. Put these together and you get credit repair trouble.
Call for Credit Repair Help
If you are confused by all of the components of credit report and score management, or don’t have the time to handle the task on your own, don’t give up. Call a credit repair professional for help. A credit repair professional will manage the process for you and insure that everything possible is done to optimize your credit. Good luck!
Copyright © 2008 Sky Blue Credit Repair. All Content. All Rights Reserved.