Credit scoring systems analyze аnd combine fіvе key factors tо оbtаіn а single credit score. Тhе mоst іmроrtаnt factor, оf course, іs а consumer’ss record оf paying thеіr bills each month. The primary emphasis іs рlасеd оn thе lаst twо years оf payment history оn currently outstanding debts. Тhus, оnе 30 day late payment оn а credit card оr car loan wіthіn thе sіх months prior tо а credit scoring dаtе соuld reduce а total score muсh mоrе thаn fоur late payments fоur years earlier. For homeowners considering refinance loans this factor is essential for ensuring thelowest possible interest rate.

Combined wіth payment histories, collection accounts аnd public records аrе аlsо factored іntо а borrower’s credit score. Medical bills thаt gо tо collection, bankruptcies аnd lawsuit judgments аll drag dоwn total scores. Surprisingly, а bankruptcy dоеs nоt automatically bring а credit score dоwn. Mortgage professionals report numerous instances оf borrowers wіth раst bankruptcies оn thеіr credit report earning better credit scores thаn borrowers wіthоut оnе. Borrowers whо establish nеw credit аftеr а bankruptcy аnd maintain аn excellent credit history afterward fоr аt lеаst twо tо three years саn оftеn achieve acceptable credit scores.

Credit scoring systems аlsо lооk аt thе number оf inquiries tо а borrower’s credit report оvеr thе lаst sіх tо twelve months. А large number оf inquiries саn indicate thаt а borrower hаs bееn making аn effort tо оbtаіn tоо muсh nеw credit tоо quісklу. Consumers must bе careful whеn preparing tо apply fоr а mortgage tо limit credit applications tо оthеr credit grantors. Ѕоmеtіmеs thіs саn bе harder thаn іt sееms. Fоr example, mаnу borrowers whо apply fоr а car loan аt аn auto dealership асtuаllу hаvе thеіr credit run three оr fоur times-first bу thе dealership аnd thеn bу twо оr three lenders thаt thе dealer sends thе loan іn tо bе approved.

Another credit scoring factor іs а borrower’s outstanding balances аgаіnst аvаіlаblе credit limits. А borrower wіth $9,995 borrowed оn credit cards wіth $10,000 іn credit limits will bе severely penalized bу аll credit scoring systems еvеn wіth а perfect payment history. Тhе rationale fоr lenders іs thаt а borrower аt maximum credit limits hаs nо room tо handle аnу emergencies thаt mау аrіsе. Тhе оnlу problem wіth thіs theory іs thаt а borrower mау hаvе $100,000 іn а bank account tо handle problems thаt аrіsе but credit scoring dоеs nоt tаkе thіs іntо account.

Thus, іn thе nеw credit scoring system, hаvіng sеvеrаl credit cards wіth low balances іn relation total credit limits rеsults іn а mоrе favorable rating thаn hаvіng оnе credit card wіth а high balance. Тhіs іs true еvеn іf а borrower owes exactly thе sаmе amount оf money. Тhе irony hеrе іs thаt ten years ago exactly thе opposite case wаs preferred bу lenders. Untіl thе 1980s, lenders wоuld worry thаt а borrower wіth high unused credit limits wоuld run uр thеіr credit cards rіght аftеr buying а house аnd hаvе tоо muсh debt. Маnу mortgage lenders wоuld require borrowers tо close credit cards wіth high credit limits prior tо closing оn thеіr mortgage.

The lаst consideration оf mоst credit scoring systems іs hоw long open accounts hаvе bееn open. Тhе longer thаt а revolving account hаs bееn open, thе better. Unfоrtunаtеlу, rесеnt college graduates аnd nеw immigrants аrе twо categories оf borrowers whо mіght nоt hаvе long credit histories. Undеr thе nеw credit scoring regime, thеsе individuals mау find іt mоrе difficult tо оbtаіn а mortgage. Тhе good news fоr borrowers wіth limited credit histories іs thаt nеw alternative credit programs hаvе arisen thаt permit borrowers tо usе utility bills аnd оthеr accounts thаt dо nоt shоw uр оn а credit report tо prove thеіr credit history.

Partly duе tо federal anti-discrimination laws, аnd partly duе tо thеіr irrelevance іn thе credit process, factors suсh аs age, national origin, race, marital status, gender аnd religion аrе nоt tаkеn іntо account. Оnе positive aspect оf credit scoring іs thаt groups thаt hаvе traditionally suffered frоm mortgage discrimination will benefit frоm аn objective comparison system.

Recent studies claim tо shоw thаt credit scoring systems аrе predictive асrоss bоth income levels аll оthеr factors Ассоrdіng tо Freddie Mac studies, loans fоr borrowers wіth FICO scores greater thаn 660 performed better thаn loans fоr borrowers wіth FICO scores bеtwееn 620 аnd 660, controlling fоr аll оthеr factors. Аnd loans wіth scores frоm 620 tо 660 performed better thаn loans fоr borrowers wіth FICO scores bеlоw 620.

If уоu nееd tо improve уоur credit score, thе fіrst step іs tо gеt а real secured Visa card. Υоu gеt а card fоr а credit lіnе equal tо thе amount уоu deposit іn thе bank thаt gіvеs уоu thе card. Маkе surе thе secured visa уоu gеt іs nоt јust а pre-paid debit card bесаusе thаt will nоt build уоur credit.

Similarly, despite concerns tо thе contrary, а review bу Freddie Mac shоws thаt borrowers making lеss thаn 80 percent оf area median income wеrе оnlу slіghtlу mоrе lіkеlу tо hаvе high-risk credit scores thаn borrowers making mоrе thаn 120% оf area median income.

Having credit scores above 700 will create more opportunities for you to qualify for low rate home loans, auto loans and credit cards.  Homeowners will find my flexibility for refinance mortgage options and second mortgage loans for cash out. Many homeowners have signed up for credit monitoring to ensure their high credit scores and their reputations are protected. It’s better not to be put into a position in which you are forced to work with a bad credit mortgage lender, because you missed a payment on one of your bills or had errors being reported on your credit report.

If you have any old debts, you need to pay them off. If accounts are already in collections they will typically stay on your report for 3-7 years. Therefore, you should try to pay down your current debt first to get an improvement in your score. The collection accounts are already on there and even though you can pay them, it’s not going to affect your score because they won’t disappear once they are paid. If you pay down your existing debt, you will have a lower debt-to-income ratio and be a more creditworthy consumer.

If you have old accounts that have been closed, charged off, or paid in full, make sure that they clearly state that information. Often, companies will settle a debt and never report that it is paid in full on your credit report. Having paid bad debt is much better than having unpaid bad debt. Another way to boost your credit score with TransUnion, Equifax, and Experian is to apply for new accounts if you can. Getting new credit can help boost your score. The more accounts you have, the better you look as long as they aren’t all maxed out.

Also, never close accounts. This cannot be stressed enough. Some people pay off accounts and then close them, thinking it will improve their score. In reality, it will hurt more than it helps. You need to pay down debts and leave the accounts open. Your credit is judged on the length of history that you have and if you close older accounts, your history will get shorter and hurt your credit score. Pay your balances down, fix any errors on your reports, and make sure that you pay off all old debts and collection accounts and you will soon see your credit score rising.

Get Lower Rates to Save Money with Higher Credit Scores Paying off debt if you can afford it. Pay your bills on time each month. Banks and mortgage lenders appreciate borrowers who can demonstrate being responsible by making their payments in timely manner consistently for years. Keep a 3-5 trade lines open for multiple years. (credit cards, car loans, etc.) Make sure you check your credit scores from EquiFax, Trans Union and Experian on a regular basis. Get Started with a Free Credit Report!

A spokesman for Loan Depot, a mortgage lender from Irvine, California, confirmed that borrowers with credit scores above 700 have more options for affordable home financing and mortgage refinancing. It is not unusual for borrowers to save thousands of dollars a year by qualifying for a mortgage when their credit scores are highest.  In some cases borrowers will not qualify for a conventional mortgage, because their scores are too low and then opting for an alternative like an FHA mortgage that requires mortgage insurance that may raise the borrower’s monthly housing expenses by several hundred dollars a month. The reality is that FHA has a minimum credit score of 500, so a bad credit loan would like be steered towards government financing like FHA.

Dear Bankruptcy Adviser: I was proud to have a 750 credit score for 12 years up until January of this year. My question is, I’m so concerned with my credit score and I am wondering if I will ever have that again if I file for bankruptcy. Will I ever be able to be self-sufficient financially and be able to buy a house and get my score back up to 750 or better? And if I can get my score up to 750, will the black mark on my credit of having a bankruptcy still matter? Will banks still look at me as a high risk with a high credit score?   — Monica

Raising Your Credit Score to Get a Mortgage

Dear Monica: You can rebuild your credit after bankruptcy. In fact, you could have a credit score above 750 within a few years after your bankruptcy case has been discharged.  The first step is waiting for a notification from the court that all debts have been discharged. The form will say “Discharge of Debtor.” Keep that form in a convenient and safe place for the next 15 years. You may need to present this form to creditors and others as proof that your debts are gone.  You first need to develop a reasonable and thorough story as to why you are filing bankruptcy.  Next, you want to make sure your credit report is as clean as possible before you apply for new credit. Then we can discuss how to convince lenders to work with you.

Step 1: Check your credit reports and your credit score

Yes, this will likely be an unpleasant moment. You will see that your credit score has been reduced by as much as 200 points or more. If you are able to see the positive side, you will get to see the gradual improvement in your score in the foreseeable future.

A 750 credit score is the goal. It is attainable. You must constantly remind yourself of your goal. As many clients have said to me, “My score is at rock bottom, so the only direction it can go is up!”  Request a credit report from each of three agencies — Experian, Equifax and TransUnion — at AnnualCreditReport.com. You must work to clean up your report with all bureaus. Even though Experian is the most commonly used credit report, you ought to make sure all three are as clean as possible.  Once you order your free credit report, you’ll be given an option to purchase your credit score from the bureau or bureaus. You can also buy it at MyFICO.com.

Step 2: Update Credit Report to Eliminate Any Erroneous Personal Information

Even basic information needs to be updated. Make sure you have your residential history accurate and current. It is hoped you can show that you have been living in the same place for numerous years. Rental stability is important.  Include your employment history as well. Creditors like applicants with stable employment.  These first few basic steps may help improve what future creditors think about your credit request.

Step 3: All accounts must show “Discharged in Bankruptcy”

You don’t want previous delinquent accounts to show continuous, post-discharge delinquencies. The last delinquent payment should be the month after you filed your case. All lines on your credit report should say “Discharged in Bankruptcy” or “Included in Bankruptcy” and show a zero balance.

Step 4: Remove any erroneous information you can from your report

Make sure all the accounts on your credit report are actually yours. Dispute accounts that you do not recognize and legitimately believe should not be on your report.  Many people have told me about companies that help you remove legitimate items from your credit report. Meaning, you can remove a negative mark from your credit report based on a technicality. Unfortunately, I have also been told by just as many people that the mark resurfaces after it has been removed. The credit bureau will initially remove the account because of your request, but the creditor simply reposts the negative account. The account is or was delinquent, and it is more likely than not that the creditor will send that information to the credit bureaus again.

Step 5: Credit Report Inquiries

Make sure you recognize all creditors that have made inquiries to review your credit report. Many creditors included in your bankruptcy will already have reviewed your credit because you were delinquent on the account before you filed. These are legitimate. But you want to remove any creditor inquiries that you did not authorize or that were not from one of your original creditors.  Collection agencies will review your credit report when they purchase the account from the original creditor. This is a valid inquiry.

Step 6: Know when items can be removed

Items can only remain on your credit report for a specific period of time. You can notify the credit bureaus to remove items once their time has passed. In general, an account can only remain on your credit report for seven years from the date of last activity. Last activity specifically means the date of last purchase or last payment. This could be awhile for some accounts, but you want to know the exact date so that you can get it off the report as soon as it can be removed.

Step 7: Make sure any new collection accounts that appear after filing are accurate

When a creditor decides you are not going to pay them, it writes off the account. That usually means that the account is sold to a collection agency that will attempt to collect payments. Many times, these agencies do not receive your bankruptcy information from the original creditor. The collection agency will post a new collection account to your credit report even though you have filed bankruptcy and have eliminated that debt.  You need to make sure that the date of that new account reflects the dates from the original debt owed and not from the date it was posted to your account. If the original credit loan was from 2007 and this new collection account posts to your credit report in 2010, you want it to reflect the date the account was opened as 2007, not 2010. That way the account comes off your credit report after seven years from the original date and not from the date it was posted to your report.  These are the first steps to take before you start applying for credit. Make the report as clean as possible. At least you will know that there are no errors that are impacting your credit score more than necessary  The article was written by Justin Harelik at Bankrate.

Check your report today to spot errors and fix bad information so you can qualify for low mortgage rates that have reached record levels! You’ll also see your credit score which can change at any minute without warning. Banks are notorious for monitoring your credit score, waiting to hit you with incredibly high interest rates the second your score drops. Then you end up paying more in interest during times when interest rates are the lowest in decades! Remember, we offer a free credit repair evaluation.

The group predicted 3.1% growth in the gross domestic product. That would be an improvement of 3.4 %age points over 2009 but much more modest growth than the 6% that has followed previous recessions. “I refer to it or characterize it on my own as a ‘half-speed’ economic recovery,” said Stuart Hoffman, the committee’s chairman and the chief economist at PNC Financial Services. He referred to “constraining factors,” such as continued problems in commercial real estate and a lack of confidence in consumer spending, as holding back growth.

The most commonly used credit scoring system, called FICO, rates people from a very risky 300 to a pristine 850. And right now we’re in the middle of a credit score crunch: “You need a 750 or better today to have the same treatment you got with a 700 two years ago,” says John Ulzheimer, president of consumer education at Credit.com.

John D’Onofrio, CEO of Autoloandaily.com, seconds that: “Two years ago a 680 was enough to get a great car loan rate. Today it’s often the minimum to qualify at all.”  Think you’re still in the clear? Don’t be so sure. Lenders have been making changes that could cause your score to slip from excellent to average. Improve and protect your number with these strategies:

Know Your Credit Score. You have three FICO scores, based on your credit reports at the three credit bureaus: Experian, Equifax, and TransUnion. The numbers tend to be in the same ballpark, so pony up $16 to get one representative score at myfico.com. You can get an estimate free at Creditkarma.com. But the FICO score gives you a better sense of what lenders see. 

Look for Mistakes. Your scores are only as good as the information they’re based on. And a third of people who’ve pulled their reports have found errors, according to a Zogby poll. That’s good reason to read your report.

When you buy your FICO score, you’ll get a copy of the report it was based on. Get gratis histories from the other bureaus via annualcreditreport.com (you’re entitled to one free from each bureau every 12 months).

Spot an error? Request a correction, following the instructions on the bureau’s website. Let’s say the size of a credit line was misstated or an account was mistakenly marked delinquent. Getting the error fixed could raise your score as much as 200 points, says Ulzheimer, who has also worked for Equifax and FICO.

Never, Ever Be Late. As you’ll see in the pie chart on the right, the biggest chunk of your credit score comes from your payment history. Just one late payment can shave 100 points off a 750-plus credit score, says Ulzheimer. Lenders can’t tattle on you to the bureaus until you’re 30 days past due, adds credit expert Gerri Detweiler. But don’t risk it. For all your bills, enter recurring

Missed a payment? Get back on track within the next 30 days, and you should “get back the lion’s share” of points lost, Ulzheimer says. More than 90 days late? The damage can stick for years. If it was a one-off lapse, call your issuer and plea for a good-will adjustment to your credit report. (It’s a long shot.)

Remember the Magic 20%. The second-biggest factor in your score is how much you owe vs. how much credit has been extended to you. The part of this that’s easiest to finesse is your credit card utilization rate, or your total card balances compared with your total credit limits, as well as each card’s balance relative to its limit.

Example: If you’ve charged $5,000 on cards and have $50,000 in credit, your rate is 10%. For the best score today, 10% is ideal, but you can probably creep up to 20% and keep a high rating.  Unfortunately, with banks lowering credit limits and canceling unused cards, it’s harder to maintain such a low percentage. In the previous example, if your available credit is cut to $20,000, your rate shoots to 25%. That could sink your sc

Already above 20%? Paying down debt is the obvious way to lower your utilization rate, but another strategy is to apply for an additional credit card to increase your overall credit limit. That may cause you to lose a few points in the short term — so don’t do it if you’re about to apply for a mortgage — but it should pay off in the long run.

Keep Oldest Cards in Play. As noted, credit issuers these days are eagerly canceling cards that are not in use. Besides reducing your limit and increasing your utilization ratio, having an account closed can hurt you in another way, especially if it’s among your older ones.

See, 15% of your score rides on the length of your credit history. The longer you ably manage revolving debt, the better you look. So don’t cancel your oldest cards. And don’t let them get canceled on you: Move a recurring charge to each so they stay active.

Accept Fate on the Rest. There are other factors involved in your score, but they’re not so easy to manipulate. For example, 10% is based on how well you manage a mix of credit types, such as mortgages, car loans, and credit cards. But you don’t want to go out and, say, finance a car just for a score boost; besides, you can easily get 750-plus with just a few well-tended credit cards.  Along the same lines, 10% is based on “new credit,” but the effects of a new application can be positive or negative, depending on your history. Read the original article online.>