Helping Families Build Better Credit……..Better Options
Credit education is a very important part of our process. Credit reporting and credit scoring is very complicated and it can be even more difficult to understand due to the fact that there is so much misinformation on the Internet.
Many credit repair companies, lending institutions, and other financial companies, along with their websites, educate consumers with information on credit that is absolutely incorrect. The traditional credit scoring model designed by FICO is very complex and can be changed or modified by each individual lending institution based on their lending criteria. This means that you could pull a credit report from two different mortgage companies, two different auto finance companies, and a consumer report all in the same day and get completely different scores on each credit report. Many websites have also started using the Vantage scoring model designed by the credit reporting agencies, which can be very confusing to consumers as it has a completely different scoring system and isn’t used by most lenders.
A score in the 700’s on a FICO scoring model could be considered great while score in the 700’s on the Vantage scoring model could be considered poor. In addition to the difficulties in understanding how credit scoring works, trying to figure out how credit reporting works can make matters even worse. Creditors and collection companies pay the credit reporting agencies to report the items on your credit which can result in an overwhelming number of credit reports that contain errors on those items. These inaccuracies can occur at any time and without your knowledge. Inaccuracies can have a devastating impact on your credit scores and financing options. It is very important to understand your credit and monitor it regularly.
Our credit education services our currently being utilized by many fortune 500 companies, major universities, professional sports organizations, churches, schools, and charitable organizations.
Our mission as a company is to promote credit education and financial literacy in the country. We were recently in Washington D.C. where we met and consulted with members of congress and the financial committee as well as the FTC (Federal Trade Commission) and the CFPB (Consumer Financial Protection Bureau) in order to promote awareness of the lack of financial education. Our goal is to educate our clients so that they do not need a repeat of our services. We like to gain referrals from happy customers rather than see former customers come back with more credit problems.
Your Credit Score and How It’s Calculated
February 26, 2013
Whether you want to buy a car and take out an auto loan or borrow money from a lender to pay for school, a mortgage or any other big investment, one thing is for certain: your credit score determines your reliability. A decent credit score is the backbone to your financial wellness—it’s a reflection of your budgeting, spending and investing practices. Your credit score tells your bank or lender how big or little of a credit risk you are, but how exactly is a credit score calculated?
Credit Score Factors
There are several factors that go into your credits core. They are aptly called credit score factors. These include:
- Total debt
- Late payments
- Account types
- Age of accounts
The factors listed above combine together to make up your credit score. For example, if you have a lot of debt, it may not matter to some lenders as long as you’ve been repaying your debt responsibly. This is considered your payment history.
KEEP IN MIND: The higher balance you have in relation to your credit limit, the more this can affect your credit score. If you have $8,000 credit limit and you’re using $7,500 of it, this can negatively affect your credit score. Try to use at most 30% of your credit limit to keep your credit score in check.
In fact, more than 35% of your credit score is determined by how often you pay your bills on time and nothing else. If you need to improve your credit score, start with organizing all of your debt and paying a little more than the minimum payment, on time, every time.
How Your Credit Score is Calculated
Now, down to the formulaic nitty gritty. A credit score is a complex mathematical model that evaluates many types of information in a credit file to determine your financial reliability or credit risk; that is, how likely you are to repay a loan and make your loan payments on time.
The factors above influence your score, yet each factor affects your score differently.
- As we mentioned above, 35% of your score is payment history (this includes payment information, bankruptcy, overdue payments, etc.),
- 30% is amounts owned (amounts owned on accounts individually and totaled together as a whole, accounts with balances and ratio of credit line used to credit line available).
- 15% is length of credit history (time since accounts have opened and how long they’ve been active)
- 10% is new credit (number of and time since recently opened accounts and proportion to total accounts, number of and time since recent credit inquires, and the re-establishment of positive credit history following past payment problems)
- 10% type of credit used (number of various types of accounts, like credit cards, retail accounts, installment loans, mortgage, etc.).
Since your credit score is a “snapshot”, it’s unlikely that your credit score a month ago is the same as it is today. Stay on top of your credit score and be sure to actively monitor your credit score. Credit scores change over time to accurately reflect your current financial behavior and length of credit history so the better your financial behavior, the better your credit score!
Feel free to schedule a consultation with our team at any time. Let’s talk about your credit problems and find the best and most ideal solutions for them. Please contact us at 800-627-1376 and set an appointment. You may also send an email to firstname.lastname@example.org with your questions and inquiries.