Credit Education Page
At Fast Credit Repair Company, we welcome the opportunity to answer your questions about credit scoring, improving bad credit, and even reading your credit report. Contact our credit repair specialists today for a free consultation.
What is a Credit Score?
If you're like most people you understand the basics of how credit scores are developed. Paying your bills, including mortgage payments, auto loan payments, insurance payments on time help you to establish good credit. However, understanding what causes bad credit is a bit more challenging.
Why Good Credit Matters
Lenders use your credit report in order to judge your reliability as a loan candidate. Your credit report demonstrates your ability to handle debt responsibly and will help banks decide if you are a desirable loan customer. A high credit score can help you lock in low interest rates or secure special deals on loans. A bad credit report, on the other hand may prevent you from securing loans thus compromising your ability to buy a car, open a credit card or rent or buy a home. A history of inability to manage your credit successfully will make lenders uncomfortable about trusting you with additional funds in the future. If they do lend you money, you will almost certainly pay a higher interest rate than a borrower with good credit.
Checking Your Credit Score
You are entitled to a free copy of your credit report once a year through the three major credit bureaus. At Fast Credit Repair Company, we encourage all consumers to take advantage of the opportunity to review your credit for free each year. When reviewing your credit report be sure to confirm:
- Accuracy of debts
- Accuracy of personal details (address, name, social security, employment)
Credit Score Calculation
Your credit score is determined by an algorithm developed by the Fair Isaac Corporation (FICO). Three credit bureaus use this algorithm to report on consumers' personal financial histories. Those three companies are Equifax, Experian and TransUnion. While the exact formula used to calculate your credit score is a tightly guarded industry secret, these credit bureaus provide general guidelines about financial behavior that can affect your credit score. Items taken into consideration when determining your credit or FICO score include:
- Payment History
- Debt Ratio
- Credit History
- Inquiries into Credit
- Types of Credit
As much as thirty-five percent of your credit score is based on your payment history. This includes late payments, collections, and even bankruptcies and tax liens. Each type of account will stay on your credit report a specified period of time and every derogatory item will lower your score. The credit repair specialists at Fast Credit Repair Company will work to remove accounts that are not 100% accurate or not 100% verifiable. Our credit repair specialists boast an impressive removal rate of approximately 70%.
Your debt ratio is the amount of revolving credit (i.e. credit cards) you owe in relation to the amount of credit you have available. For instance, if your credit limit is $10,000 and your current balance is $2,000, your debt ratio would be 20%. Consumers who have good credit typically have a debt ratio of 30% or less.
The number of years that you've had credit has an impact on your credit score. Generally speaking, credit bureaus tend to favor consumers who have long established, stable credit history. That's why it's not always in your best interest to close old credit cards, even if you don't use them any longer. At Fast Credit Repair Company, we generally suggest that our clients who are looking to repair their credit quickly and affordable, do not close old credit accounts, even if they have a zero balance.
Types of Credit
Types of credit include revolving, installment and mortgage loans. These include credit cards by major lenders and banks, as well as credit issued by department and specialty stores. Other types of credit include school loans and auto loans. Consumers who successfully manage various types of credit accounts tend to have higher credit scores than those who do not. If you have multiple types of credit, but need to improve your credit score quickly and affordably, contact Fast Credit Repair Company to begin cleaning up your credit profile today.
Inquiries appear on your credit profile when you request new credit. For example, every time you go to the mall, and you apply for a new department store or specialty store credit card, an inquiry will be made. Multiple, ongoing inquiries will have a negative effect on your credit score, unless you are shopping for a car or a home. When you are looking for a home loan, or an auto loan, multiple inquiries within 45 days will not lower your score, as it is understood that you are rate/price shopping.
Read our Frequently Asked Credit Repair Questions and get answers to all of them!