In Yesterday’s article “Credit Repair | Establishing and Maintaining Good Credit “, we talked at length in regards to what it takes to establish a respectable credit score as well as what needs to be done over time to maintain and increase your credit rating.
Today we will talk about the main characteristics the credit bureau’s themselves are looking at on your credit report before passing judgment on your credit worthiness. Knowing these criteria are essential to finding favor in the eyes of the those by who’s judgment in many respects, opens or closes doors of financial opportunity in your life.
When credit bureaus are determining your credit score, they tend to do so by looking at the following characteristics evidenced on your credit report.
1. Late Payments
Are you headed down the right road when it comes to your credit?
This is an obvious one but it cannot be stressed enough. If you have delinquent payments on your report, lenders of whom you wish to do business with will harbor some fear of you repeating this bad behavior. Remember, late payments will plague your report for three years before eventually getting cycled off.
Avoid late payments to your creditors any way that you can. As a last resort, you can always get a payday loan to avoid a late fee or delinquent payment from being reported to the credit bureaus. This is a far less costly solution to you in the long run as the interest rates that you will have to pay over the next three years with any new lenders will be higher due to the reported delinquency. DO NOT MAKE LATE PAYMENTS!
2. Spending Habits
How you tend to use your credit is also a criteria examined by the credit bureaus. When looking at your credit accounts and account balances they are able to determine just how conservative you are as a consumer spender. If your credit lines are maxed out or close to you available credit limit, you would be considered much more of a risk.
In contrast, avoiding a revolving credit balance by paying your consumer credit cards off at the end of each month or billing period will show you to be a far more conservative spender and therefore less of a risk to lenders.
Just because you make your payments on time does not mean you will have good credit. Your spending habits can byte you in more ways then one
3. Age of credit
There is know way to say exactly what model the credit bureau’s use to score your credit as this information is proprietary and confidential. However, the length of time over which you have established positive credit history is likely a key factor in your score as well. Establishing good credit is a lifestyle of financial responsibility as your score is factored over many criteria including your time of good standing.
4. Number And Frequency Of Creditor Inquiries
Every time you apply for a consumer credit card, car loan, home mortgage etc., you incur a credit inquiry on your report. A credit inquiry is a creditor obtaining your credit information via your consent and social security number. The more inquiries that you have over a give period of time can greatly effect your credit scored as new lenders see a barrage of financial responsibilities that you may be responsible. This makes you seem a little more risky as lenders may believe your overextending yourself.
5. Credit Variety.
There is different types of credit that you can be approved for. Credit bureaus look for a variety of installment loans and revolving loans. These would be as mixture of auto, credit cards, retail and etc. Installment loans are loans that a person borrows once and makes payments until the balance is payed in full. Revolving credit are credit loans that has a revolving balance where regular payments are made which each frees up more access to money.
Maintaining your credit is an area of your life that you cannot afford to disregard. On your mortgage alone you can save ten of thousands of dollars on a thirty year fixed mortgage by having a fair credit scored over a poor one or an exceptional credit score over a fair one.
Bad credit is a bleeding would in your financial affairs and because it takes time to heal your credit, now is the best time to apply the dressing.
Unfortunately with all your well doing, the credit bureau’s themselves can sometimes make a mistake on your credit report. Stay tuned to blog to find out how you can clean up discrepancies which have been made on your credit report as well as how you can combat your creditors judgments against you.
Credit repair and credit maintenance are very important these days. Your credit score is everything. There are some things you can do to improve your credit like not canceling accounts. Another option is you can have someone who trusts you put you down as an authorized user on their high limit credit card. Make sure they are not the type that run up balances.
Someone who maintains a low balance but makes payments every month is the best for this. If they do run up a balance and your debt to credit ratio is negatively affected, you can dispute the account with the credit bureaus as “not belonging to you” and they will take it off your record within a couple days usually.