Fico Score: The Score Lenders Use
FICO scores were created in order to help lenders make faster, more efficient decisions when it comes to determining a consumer’s risk. Understanding how FICO scores work may seem difficult at first, but there are a couple of factors that end up determining the score you are given. If your number is higher on the 300-850 scale, then you are considered a less risky consumer. Typically, a score above the mid 700s is ideal for a lender.
If your credit score did not exist, then lenders would have to pull your credit report and spend hours looking it over to decide your lending risk. With a credit score, lenders can essentially see an accurate depiction of what is in your report by just analyzing a single number. To create that number, companies like FICO take the financial information from your credit score and use a mathematical model to forecast your lending risk. There are many factors that go into this model.
Your payment history makes up 35 percent of your credit score because it is so important. This is because the lender would expect you to continue the same payment habits you have exemplified in the past, preferably over many years. If you do not have a long payment history, then you are more likely to be judged by a single mistake.
If multiple years ago you accidentally paid a bill late, but your payment history has been of high quality since, then a lender most likely would not penalize you for that mistake. But, if you made a mistake more recently, then a lender would have to question what might have changed in your life to cause that mistake, and if it is possible that this mistake could turn into a trend. So, even one missed payment can drop your score for that reason, and if you pay late habitually, then your credit score would drop even lower and you would be considered extremely risky.
Your credit utilization ratio is the amount you owe in comparison to the total line of credit you have borrowed. This ratio accounts for 30 percent of your FICO score. This means that if you were to charge a lot of money every month, but also pay your balance completely, then your ratio would indicate that you are not a risky borrower as that information would show up on your credit report. But if you were to max out all of your credit cards, then your credit utilization rate would be much worse. Even if you made each payment on time, it would not be too difficult for a lender to worry about your ability to take on another line of credit and make those payments on top of your current payments. So, high debts can cause your FICO score to be lower.
The Length of Your Credit History
Making up 15 percent of your FICO score, the length of your credit history is also important. The longer your credit history, the more a lender can predict about your future behavior. So, if you have a payment history consisting of many years of on time payments and low debt, then a lender could assume that this good behavior will continue. On the other hand, if your credit history is short, meaning you just began building it, then lenders could be skeptical about your risk as a borrower. They cannot make a reliable decision without enough history to support that decision. The good news is that it often only takes one or two years of healthy credit use for lenders to begin trusting you.
The Types of Credit You Use
If you have proven that you can make payments on not only one type of credit loan, but many, then you will be considered more trustworthy to lenders. For example, if you responsibly handle all of your credit cards, student loan debt, mortgage, and car loans, then you have proven that you can most likely handle multiple lines of credit at once. This category is not as important as some of the others when determining your FICO score, but it still does effect it by 10 percent.
The more you ask for loans, the lower your score can drop. Even if you have a trustworthy history of paying your credit debt off, asking for loans often will still hurt you. Lenders see this as concerning because they assume something is wrong in your life and that it is what is causing you to need more money so often. While this may not be true, it is enough to deter lenders from loaning you money. Lenders can see how often you ask for credit because each time you do, the bank or lender notifies the credit reporting agencies and a hard inquiry gets put on your credit report. This category also makes up 10 percent of your FICO score, which, again is not a huge portion of your score, but it is enough to raise concern if something is wrong.
Believe it or not we live in an age where much of what goes on in our daily lives is monitored, collected and sold to interested parties. Our driving records, our medical history, our internet traffic and most importantly our credit information. Which can make you vulnerable to identity theft or a mistake on your credit report, that could cost you money. These mistakes can increase the interest you pay on your loans, prevent you from getting a mortgage, buy a car, landing a job or getting a security clearance. A government study indicates as many as 40 million Americans have a mistake on their credit report. Twenty million Americans have significant mistakes and the credit reporting industry shows that those mistakes can be nearly impossible to get removed from your record.
Consumer Credit Reporting
Consumer credit reporting is a four billion dollar a year industry dominated by three large companies Experian, TransUnion, Equifax. They keep files on 200 million Americans in traffic and our financial reputations. They make their money gathering information from people we do business with and sells it to banks, merchants, insurance companies and employers. These businesses use it to make judgments about our credit worthiness and reliability.
But now the reliability of the industry is being questioned by the Federal Trade Commission. John Liebowitz served as FTC chairman says “One out of five Americans has an error on their credit report and one out of ten has an error on their credit report and because of these mistakes Americans credit scores might be lower as a result”.
Close your eyes for a minute and trying to think of another industry where a 20 percent error rate would be acceptable. Maybe weather men and woman are the only ones that you were more than likely able to come up with. Even then, you want to make sure you remind them that they were wrong because they ruined your plans. The same applies to your credit report.
Errors On Your Credit Report
These errors are clear violations of the Fair Credit Reporting Act which performance based credit repair companies can take care of for you, that monthly credit repair companies just can’t. Performance based credit repair companies like Credit Law Center uses those mistakes as leverage to get their clients results faster, without dragging out the process to simply collect as much money as they can get.
These banks, merchants and debt collectors have a legal responsibility to make sure that the information is accurate. The federal law says that if you believe that there is a mistake you can go to them and they have an obligation to do a reasonable investigation. Let’s face it, they are not doing a reasonable investigation.
Disputing Your Credit Report
Eight million people a year file disputes about their credit report, which usually requires a visit to the Experian, TransUnion or Equifax websites. Those sites are primarily designed to sell you premium products, not resolve a dispute. There’s a toll free number you can call which is likely to connect you to someone on a faraway continent.
Besides the toll free number, they also give you a post office box address where you can send a letter and documents supporting your claim in each case. It’s extremely unlikely that anyone with the authority to resolve your dispute will ever actually see it. Usually if you challenge your credit report and mail your information to a post office box in the United States, the dispute will likely be investigated in India, Philippines or South America.
Then your dispute will be sent with a two or three line summary and no documentation back to the bank,merchant, or debt collector that furnished the original information. If there was a difference of opinion between the creditor and the person who was filing the complaint. The bureaus usually resolve it in favor of the creditor. You heard correctly, the creditor was always right.
The difference between monthly and performance based credit repair
Much of what’s known about the inner workings of the consumer credit agencies come out of lawsuits filed by performance based credit repair companies like Credit Law Center who have subpoenaed company records, deposed employees and executives and say under the current system there is no way for people to get these issues resolve.
Performance based companies like Credit Law Center can get a jury verdict for hundreds if not thousands of dollars for their clients.That’s chump change for these bureaus! They would rather pay a verdict in a hundreds to thousands of dollars, than to actually go in and change the policies and procedures that they have.
What most people don’t understand is that monthly credit repair companies are limited by what they can do. Basically you are paying $65 to $100 a month to send dispute letters that are going to India, Philippines, South America or filling out the dispute on the 3 big credit bureau sites on your behalf and keeping their fingers crossed. Very little if any fighting for consumers rights are going on.or people to get their problems solved. So clients who take the time to meticulously document their case that the bill isn’t theirs or the bill has been paid, have sometimes not only got the items deleted but also has received a check from the bank, merchant or collector for damages.
By- Credit Law Center
Good, Better, Best and Bad
The internet and cell phones have now made it easier than ever to check your credit score as often as you’d like. Millennials are starting to check their credit scores more frequently than any other generation. This could be due to the fact that credit has become vital in many aspects of life. Whether you want to buy a house, car, or take out a loan, you can expect that your credit report will be scrutinized. Do you know what you are looking at when it comes to those numbers?
A Numbers Game
Your credit score is ever changing. While you may not suspect that things are moving and shifting, they are. Often times people think of their scores as either really bad or good enough. When you are browsing the internet and you start to check your credit scores, please take note that you are looking at a consumer score.
What is a consumer score? This is the scores you have access to online that may show higher than what a lender or bank would pull for you. These are called vantage scores and are not your true FICO score. These scores show higher so that you will start shopping around for products, or continue to spend. Your score may be significantly lower when you apply for a home loan. Once you understand this, the frustration or mind game you feel that happens when your scores are so different won’t be so frustrating. You should pay closest attention to what a bank or lender tells you your score is. So, what are all these numbers really saying?
- Very Good : 740-799
- Good : 670-739
- Fair : 580-669
- Poor : 300-579
Having scores higher than 799 is possible to obtain but can be hard. A 670 and up is considered exceptional. The better the score, the better the interest rates, among other things. If you are below a 700, there is definitely some room for improvement!
Increasing Credit Scores
If you have a low FICO score, you can bet that is due to a combination of factors rather than just one culprit. A credit score is made up of many different factors. If you are thinking your credit is low due to just inquiries, you are probably incorrect. The chart below demonstrates the factors that come into play with your FICO.
Positive Payment History
The largest section of the pie chart is your payment history. If you have been behind on bills, have late payments or cannot keep up current credit cards, your score will be dramatically impacted.
One late payment can potentially drop your score 100 points.
If the creditor sends your card into collection or charge off, we can take a look at your report and discuss what the next options are for your credit report or how you can try to make up for those late pays in other ways to increase the scores. There is a method to the madness when it comes to your credit scores, you just have to know how to play the game.
Credit Scores and Savings
If you take a look at the numbers above and fall into the category of poor or fair credit, you may notice how much you are having to pay on your auto or home loan. When your credit score is low, you’ll notice how much higher your interest is on your payments. While it is great that you may be able to get approved for a car loan or auto loan with a lower score, you would be better off waiting until you can improve your credit scores. We want to help you save!
Financially speaking, if you can wait and try to get your scores back up you can be saving yourself a significant amount of money each month for your family.
Quick Ways To Improve
- Become an authorized user on family member or spouse’s card
- Look into a credit builder loan
- Apply for a secured credit card
- Invest in credit repair to get derogatory items removed
Your credit will be around for the rest of your days. While you may have made financial mistakes in the past, you can improve and learn from them. If you have found yourself in a huge hole, and have debt collectors and collection companies calling you daily, please get in touch with a company that can help you. At Credit Law Center we educate our clients on everything they may need to know, to continue to better their credit scores as well as represent them so that the calls can stop. We know the importance of great credit and what doors it can open when you reach that “very good” zone.
Open new doors today for your family, and invest in your financial future.
Do you have questions about your credit report? If you would like to speak with one of our attorneys or credit advisors and complete a free consultation please give us a call at 1-800-994-3070 we would be happy to help.
If you are hoping to dispute and work on your credit report on your own, here is a link that provides you with a few ideas on how to go about DIY Credit Repair.
A Note From The Author: The opinions you read here come from our editorial team. Our content is accurate to the best of our knowledge when we initially post it.
Article by Breana Washington
Why Consumers Hire a Law Firm For Credit Repair
There is a major difference between what a credit repair company can do versus what a law firm specializing in credit repair can. What you may find even more interesting is that a consumer can actually do more than what a credit repair company will. A Law Firm however, trumps all. We have been using the law since 2011 to help consumers every day and this is what makes us far superior to other “repair” companies.
Here is how we help our consumers and fight for their rights!
Harassing Phone Calls:
If you are constantly receiving phones calls and are tired of trying to dodge collectors, we can get these calls to stop. At Credit Law Center we notify all your creditors that you are now a client of our law firm. We also send out correspondence to them indicating that all communication to you should go through us. They must comply with this request! If they do not, it is a violation of the Fair Debt Collection Practices Act and they are liable to you and to us. If they continue calling after you’ve informed them you are represented by Credit Law Center, this could mean money in your pocket!
Violations with FCRA
The Fair Credit Reporting Act mandates that everything on a report must be verifiable, accurate and timely. A recent study indicated that 79% of credit reports contain errors! Many of these errors are easy for us to spot and we can give our consumers a great idea of what to expect on certain items that may in fact fall off due to a FCRA violation. At Credit Law Center we sue for those inaccuracies.
As a law firm we have the ability and power to negotiate judgments, repossessions, charge off, or any sort of debt that is still reporting on a report. We use the power of the law and our attorneys to negotiate these items in a way that’s favorable to you. While not Debt Consolidation or Bankruptcy, we do have significant tools available to us that help negotiate these debts and save you significant amounts of money! We have four attorneys in house that you can lean on for advice and guidance while working on negotiation. Their extensive negotiating experience with banks, collection companies, and collection attorneys has helped our clients save thousands. Our goal is to negotiate the debt as low as possible out of court and get your case dismissed.
At Credit Law Center we use federal statutes to assist our consumers. The first one is the FDCPA or the Fair Debt Collection Practices Act. This statute lays out a specific way in which debts can be collected both legal methods and illegal methods. The second is the FCRA or the Fair Credit Reporting Act. Lastly is TCPA (Telephone Consumer Protection Act) This act is specifically designed for text message, fax machine violations, pre recorded voicemails. Three of these federal guidelines provide for attorney’s fees if we are successful. What that means is if we take your case and pursue it and are successful, the other side pays our fees and as our client you would owe us nothing! Please contact us today if you think you might have a case in any of these areas of the law, we would happy to speak with you further 1-800-994-3070!
With Mother’s Day around the corner, it is time to start gathering some ideas on how we can really make the day special! It is no secret that everything is growing more expensive, and it is becoming increasingly difficulty to not break the bank when it comes to gift, but luckily Credit Law Center has you covered!
1.) Thrifty Flowers
One of the most traditional ways to tell someone you love them is to send them beautiful, vibrant flowers. Although this is a wonderful gesture, it can really add up once you consider everything that goes with a wonderful bouquet.
A terrific way to help cut back on the cost is to bring your own vase or pick out a beautiful vase at a craft store. Floral shops can also become quite expensive as the bouquet is normally priced per flower, consider visiting your local grocery store and make your own small bouquet for as little as $10-$15.
If you do decide you would like to go with a florist, be sure to ask when the flowers were delivered to make sure you get the freshest pick!
2.) Creative Piece
Hobby and craft stores are amazing places to find a Mother’s Day gift! You could find a beautiful piece of art or pick up a fun craft for you and your mother to complete together! Places like Potters Haven offer event days where parties can come in, have a glass of wine and paint together! Add that with a quick lunch and you have the better part of the day set aside to really make your mother feel special!
3.) Good Eats
After working in restaurants for several years, it is no question that Mother’s Day is one of the busiest days out of the year. Hour long waits and added stress is not something you or your mother need on her special day. Instead, why not fire up the grill and make a wonderful meal! In the time it would take to get into a restaurant, get seated and get your meal, you could be relaxing at home with cheaper drinks and better service!
When I was younger, we would have a big family BBQ where everyone would stop at our Aunt Cindy’s house and cook a amazing spread for everyone. Grab the radio, set up the yard game and sip on an ice-cold drink with some of the most important people in your life and have fun!
4.) Acts of Service
Sometimes, something as simple as help around the house can be a great gift! Finishing the laundry, completing some house chores, or just helping by going above and beyond during the day is a lovely display of appreciation! Even if it isn’t flashy, acts of service are still quite a viable gift!
From the Credit Law Center family to all those special ladies on Mother’s Day, we appreciate all you do!