Understand what affects your credit
The calculation of the FICO score is breakdown into many categories, but there are some general guidelines.
Approximately 35% of a credit score may be based upon payment history. A credit score is negatively impacted if bills are paid late or if there is a history of delinquent payments listed on the credit report, including matters of public record such as bankruptcy, collection accounts, etc.
Approximately 30% of a credit score may be based upon amounts owed or other outstanding debt. A credit score can be negatively impacted if the amount owed is close to the credit limit. A low balance on two credit cards may be better than a high balance on one credit card.
Length of Credit History:
Approximately 15% of a credit score may be based upon length of credit history. A credit score can be positively impacted the longer that accounts have been open, especially if they are with one financial institution.
Taking on More Debt:
Approximately 10% of a credit score may be based upon how much new debt a consumer is incurring. A credit score may be negatively impacted if someone has recently applied for a number of new credit accounts.
Promotional inquiries usually do not negatively impact a credit score.
Types of Credit in Use:
Approximately 10% of a credit score may be based upon the types of credit currently in use by a consumer. A credit score is usually negatively impacted by loans from finance companies.
Raise your score
Your overall FICO score is the culmination of years of credit experience, but even in the short run there are things you can do to raise it slightly. Always make your payments on time.
Don’t carry high balances on credit cards. Ideally you would never go over half the available amount on your credit card for any extended period of time.
Fix bad credit
Serious credit problems could range from a 30-day late payment to a , judgment or Despite what you may have read on some internet sites, there’s no quick fix to repair bad credit. There are, however, ways to remove inaccurate information and improve your credit over the long run.
If there is inaccurate negative information on your credit report, get it removed. Dispute the charge with the agencies by writing to them or going online to their websites. They have 30 days to respond to your dispute. If they cannot verify the negative information, they have to remove it.
If you have a 30-day late blemish on your credit you can dispute the negative information as above. If the credit bureaus can’t verify the 30-day late payment with your creditor, the information must be removed.
If you have more serious credit problems such as a judgment, bankruptcy or foreclosure, it may be in your interest to seek a non-profit credit counselor or an attorney specializing in credit repair. The latter can sometimes settle your debts for less than 35 cents on the dollar and may be able to get some of the information removed. If you simply pay off the judgment for example, it is still going to stain your credit for a minimum of 10 years. For a foreclosure the term is 7 years, for a bankruptcy, 10 years; and for tax liens, 5-7. Even after that amount of time goes by you will need to aggressively go after the agencies to get the information off your credit
HOW TO ESTABLISH CREDIT
Open a checking account
If you don’t have a checking account, potential lenders become very skeptical about the way you handle your financial affairs.
Open a savings account
When potential lenders see a savings account on your credit application, it gives them a good feeling, regardless of the amount you have in your account.
Open a charge account with a department store
These accounts are usually the easiest to get when you are new to credit.
Find a co-signer
Try to get your parent to co-sign a loan for you.
Building your credit using your current bills
PBRC connects people who lack a traditional credit history with lenders who want to reach them. They document and verify rental, utility, phone, and other recurring payment that aren't reported to other credit bureaus. Pay Rent, Build Credit, Inc. (PRBC) is an FCRA compliant repository that enables consumers and small business owners to build a credit file and score, based on their history of making rent and other reoccurring bill payments, which can be used to demonstrate creditworthiness when applying for housing, credit, insurance, and employment.
WHAT AFFECTS YOUR FICO SCORE
Find out your FICO Score
Your FICO score can be found on your credit report, so you first need to obtain a copy of that. There are three major reporting agencies in the US: Experian, Equifax, and Transunion.
You will want to get credit reports from all three, as they may all have slightly different information on them. All three credit bureaus use credit scores, but FICO is specific to Experian and Transunion. To get a free copy of your credit reports from all three credit bureaus, you can visit Annual Credit Report, FreeCreditReport.com (a website owned and operated by Experian), or you can call 1-877-322-8228. You can also write any of the agencies directly. Note that while the credit report is free, the companies charge $6-$8 each to give you your credit (FICO) score.
Evaluate your score
The point system used technically ranges from 0 - 999, but all or nearly all actual scores fall between 330 and 850.
330 - 619: Poor credit. In banker jargon a person with a score in this range is considered a "Credit Leper."
620 - 659: Sub-prime financing will be available to you.
660 - 720: Prime financing will be available to you.
721 - 750: Prime - x% may be available to you. That is, you may be able to get interest rates on loans that are even lower than the prime rate.
751+: Excellent credit. May enable you to get even lower prime -x% interest rates depending on the credit type youre utilizing.
( Jenka Group, DOES NOT provide any legal advice and you should consult with a lawyer for legal advice.)