Knowing your credit secrets is a good idea for a variety of reasons.
Your credit score has a significant impact on your ability to qualify for a home loan, so understanding it is a crucial first step on the road to homeownership. Here are 8 credit secrets you should be aware of:
1. Each Bureau
The three bureaus (Experian, Equifax, and TransUnion) assign slightly different scores to consumer credit information. FICO scores typically include the following components:
- Payment background (35% of your total score): whether you’ve made timely payments on past credit accounts.
- The quantity of credit and loans you are utilizing accounts for 30% of your ratings.
- Credit history length (15 percent of your scores): the duration of your credit.
- New credit (10% of your scores): How frequently you open new accounts and how often you do credit checks.
- The combination of your credit, retail accounts, installment loans, finance business accounts, and home loans accounts for 10% of your credit ratings.
2. Score Development
- Know the truth.
- Pay your bills promptly.
- Maintain credit report balances at no more than 30%.
- Track credit inquiries for retail and finance.
- Ask the creditor to take the lattes out.
- Negotiate the removal of collections from your credit report by offering to pay.
- Take out loans from LOW RISK financial businesses instead.
- Keep revolving accounts open.
- Never settle past-due collection debts BEFORE applying for credit.
- Open no new credit while getting a loan.
3. Mistakes
Always look out for errors when reviewing your credit report. Reviewing and resolving these is crucial to preventing a negative influence on your credit secrets.
The following reasons are why errors can be found on a credit report:
- Obtain credit using various names.
- Errors made when entering data, such as misspellings of names or addresses.
- Social Security number that is incorrect.
- A file will be created with bureaus for any loan or credit card payments initiated in a nickname.
4. Mortgage Lending
Versions that Freddie Mac and Fannie Mae have approved:
Each file has its own unique DNA. What is effective for one consumer may not be effective for another. Years of expertise have allowed us to pinpoint certain distinctive characteristics among the bureaus.
- Versions 2 and 4 typically score negative accounts more harshly.
- When paying off negative accounts, they have a tendency to fall, and they usually recover between three to six months.
- Usually receives a FICO Score 5 that is a single late payment less harshly than that.
- After settling charged off and other bad accounts, especially charged off revolving ones, scores frequently improve right away.
- Usually counts several collections as a single account.
- Tends to penalize negatively rated utility customers more severely.
- Pay off charged-off revolving and utility accounts to earn back your points.
- Paying collections frequently has no positive effect.
5. Dispute Removals
Check your credit record for any disputes, then get in touch with the credit reporting agencies to ask that they be removed:
- Experian: To get the dispute language removed, contact the National Consumer Assistance Center.
- Equifax: You must speak with a representative of the Executive Consumer Service Department.
- TransUnion: Continue speaking and ask to speak to a live person. For immediate dispute resolution, you must communicate with someone in the Special Handling Department.
6. Credit Scoring Factors
Each score comes with a set of crucial elements. Look under each score to see what your factors suggest.
Proportion to Balance for revolving debt is the element that is the simplest to work with. Any ongoing collections and charge-offs are taken into account by bureaus.
- Payment history
- Negatively impacted by poor credit (such as recent late payments, collections, bankruptcy, or foreclosure)
- Ratio of revolving debt (amount owing in relation to total credit limit)
- Duration of credit history.
- Queries about credit and new accounts
7. Score Changes
- When a credit report is updated, the credit score may also change. In fact, depending on when a specific creditor reports, it can alter every day.
- Typically, these modifications are slight; however, in the following cases: The biggest effects are caused by bankruptcy, foreclosure, and late payments, which can drastically alter scores.
8. Collection Agencies
These organizations will DELETE collected payments. It never hurts to inquire. Any form of collection reported to PORTFOLIO will be removed. In many cases, this is all that is necessary to enhance a score.
- Wakefield
- Receivable Management
- QAR
- Portfolio
- PMAB
- Paramount
- Medicredit
- IC Systems
- ERC
- Debt Recovery Solutions
- CX
- Convergent
- Commonwealth
- CMRE
- Choice Recovery
- Capio
- Bull City
- Asset Care
- ARS
- AFS
- AFNI
