You have decided to use Credit Law Center to help restore your credit, and during this process you watched your scores drop a little. The credit repair process takes time and works best if we work together as a team. Our credit analysts will give you goals and homework to do to help you reach your goals. Each situation is unique; it is possible at times while we are working on correcting and updating your credit report that your scores may drop.
Why are my scores going down?
There are a couple of different answers for this one.
First of all, you will want to determine if they are in the middle of a round. If they are, the best answer is to tell them that we are working diligently on their repair, it is not uncommon for the scores to fluctuate during this process. The things we need you to make sure you are doing along the way is to pay your credit cards down as close to zero as you can and pay all your bills on time!! Do not acquire any late payments on any accounts, and if they do not have four open trade lines, then they should work on obtaining those.
If we have finished around and their scores went down:
It could be some of the same answers, if their CC balances increased, they have a new late or collection account, or if we were able to get a judgment, bankruptcy, tax lien, or other negative item removed from their account, this could change the scorecard they are now on. Meaning that they are now being compared to members of the public with good credit and if their positive credit is not strong this could negatively affect their score. Either way more than likely they are not looking at the same score their lenders are or will be using. Most important thing is not to score watch during the repair process and focus on removing negative items and building the right mix of positive accounts.
Teeter Totter Analogies
Positive vs. Negative
On one side, you have your negative credit, and on the other, you have your positive credit. Right now your negative credit is outweighing your positive. What we want to achieve is to get rid of as much of the negative credit as possible while boosting up the positive side of your teeter totter. If you have one item on the positive side and 20 on the negative and I get rid of 10 does your teeter totter move. (Pause for dramatic effect) No. There is still not enough weight on the positive side to tilt the scales. The teeter-totter is your Fico Score. The more it Moves toward the positive side, the higher your score is going to be.
Length of History and Re-aging
New credit starts in the middle of the Teeter Totter. As you make your payments on time, it starts to move out toward the end of the teeter totter where it has more weight. So, at first good credit has virtually no weight then after a little time (6 months to a year) it starts moving out toward the edge. When it hits seven years, it is out there at the edge weighing a lot. Bad credit is the opposite. It starts on the full bad end of the Teeter Totter doing maximum damage. As time goes by it is moving to the center of the Teeter Totter. At 7 ½ years, it has hit the center where it virtually has no impact and therefore falls off the credit report. However, if you make a payment on that account, you essentially move it back to the end of the Teeter Totter letting it do maximum damage once again. It does not start your seven years all over again, but it maximizes its damage for the time it has left.
Credit Line Usage
Your debt to limit ratio on credit lines makes up 30% of your score. If you go over 50% of your credit line, it is on the downside of the teeter totter. The higher you go, the more it hurts. At 30-50% you are in the middle of the teeter-totter, virtually neutral. Under 30% of your credit line, you are on the positive side of the teeter totter. The lower you go, the better