Admin

5 Elements of Your Credit Score

By
Mortgage and Lending with Diverse Solutions

Did you know that you could increase your credit score by as much as 50 to 100 points in as little as 45 days? And here's the kicker, you can do it without using a formal credit repair service (Uh oh, now I'd on gone done it...here comes the onslought...).

So what's the big secret Ricardo? What's the catch?

No secret(s). No catch.

Most people who have credit issues are mis-informed is all. So here's a little Credit Education 101...

THE 5 ELEMENTS OF YOUR CREDIT SCORE

[Note: Click on the image to enlarge.]

Past Dues & Bankruptcies make up 35% of your credit score...

The Amount Owed on ALL Accounts (how much available credit there is) constitutes 30% of your credit score...

New Credit, New Accounts make up 10% of your credit score...

Credit History makes up 15% of your credit score... And,

Type of Credit Used (car loan vs. a credit card at Victoria's Secret) makes up the final 10%.

Being selective about the type of credit accounts you use can make the difference in ranking a higher credit score. Spreading your credit across various accounts is better than maxing out two credit cards.

Where most people plunder is in monitoring their credit scores to begin with. Think about it, when's the last time you checked your own credit score? "My credit is fine..." so you say. But when's the last time you checked it?

Any credit report can contain minor erros that can adversely affect your credit score between 5 to 100 points; enough to deny someone credit. If you don't monitor your credit it can take a credit bureau up to 20+ weeks to fix their own mistake. And that's if they fix it at all! Whereas if you find an error (such as a late payment or two), report a claim to fix it with appropriate evidence...they have to respond otherwise the late payment is coming off.

Not convinced you should monitor your credit just yet?

How about a payment of $388 more a month because you're shy a few points on your credit report? That's $4,656 a year. $139,680 over the life of the mortgage.

THE HIGHER YOUR CREDIT, THE BETTER YOUR INTEREST RATE!

 

Contact me if you'd like to register for a FREE Annual Credit Review.

Show All Comments Sort:
Linda Scanlan
A Fan of AR - Burleson, TX

Morning Ricardo!  Your credit score is one of the vital things that can effect the enjoyment of your life. High interest severely changes the way you can save for the future..you can't. The thought of paying a high intrest rate is enough of an incentive to keep my score high.  What people need to know is that it can be fixed. Love this post! (do you ever sleep??)

Jun 10, 2008 10:27 PM
Ricardo Bueno
Diverse Solutions - Los Angeles, CA

"Your credit score is one of the vital things that can effect the enjoyment of your life." -- Linda Scanlan

It's amazing how true this little statement is. Our entire economy is built on credit! When you have a poor credit score it's tough to save for those leisure activities you'd like to enjoy on the weekend. But like you said, a credit score can be fixed. You just have to attack the issue...

Thanks for the positive comment... P.S. Sleep is over-rated!

Jun 10, 2008 10:37 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Good information. I did not know you could raise your score by upto 100 in 45 days.

Jun 10, 2008 10:39 PM
Jeannette Neerpat
CondoDomain.com - Coral Springs, FL
e-Pro Coral Springs/Parkland Real Estate

I need to look into this!!! Just by paying down you cards can raise it that much?

Jun 10, 2008 10:56 PM
Richard Byron Smith, NMLS #184479
Mortgage Loan Officer, Fairway Independent Mortgage Corporation NMLS #2289 - Chattanooga, TN
Mortgage Loan Officer

Credit is key in today's market. Buyers are well advised to be aware of their mortgage score, not just the consumer score that they can get by purchasing the monitoring programs with the 3 credit repositories.

Some actions taken to improve the score can actually have no impact or can lower a score. Paying down charge cards to 75%, 50%, or 25% of the high credit always helps.

Having a balance at the high credit causes a major drop in score.

Especially if they are department store cards.

Richard

Jun 10, 2008 11:04 PM
Steve Homer
The HBH Group (Keller Williams affiliate) - Round Rock, TX

Take it from a person who has an 823 credit score, this stuff works!  I have actively pursued bettering my score for years using similar information to what is in this post and it works!

Jun 10, 2008 11:31 PM
Ricardo Bueno
Diverse Solutions - Los Angeles, CA

Gita: one little late payment can knock the wind out of your credit score. It can cost you up to 40+ points. If you have evidence that you paid on-time, you can dispute the charge and earn some points back. The process might be a little tedious but it's worth the effort. Don't you think?

Jeannette: the amount of available credit plays a role in your credit report. For smaller amounts ($3,000 and less) the effect isn't so great...

Richard: a point I forgot to mention but thanks for referencing it. Remember that in applying for a mortgage lender's take your mid-score into account (from each of the 3 credit bureaus; Experian, Transunion and Equifax).

Steve: Awesome! 823! The best I've seen in a few months was 802...

Jun 10, 2008 11:51 PM
Cheryl Johnson
Highland Park, CA

Here's a question ..... If someone has a lump sum of money ... it sounds as if making partial payments across all debts would be better than paying one debt off in full?

And we all know paying one thing off in full just feels better than little partial payments.  :)

Jun 11, 2008 12:19 AM
Eleanor Thorne
Equity Resources - Cary, NC
Advantage Lending 919-649-5058

As rates continue to rise - this is great info!  We had a client who paid off a $400 Best Buy card and then qualified for a 1/4 percent better rate!  I don't think that would have happened if they'd simply paid that $400 on the BofA card!

Jun 17, 2008 02:27 AM
Joan Wexelbaum
Luxury Mortgage - Ridgefield, CT

I printed this info - I plan on really studying it and being better informed.  I always thought I was pretty well informed with credit stuff but I really learned a thing or two!  Many thanks!

Jun 17, 2008 05:09 AM
Joseph Kocaj
Keller Williams Realty Group (Eastchester/Scarsdale NY) - Yonkers, NY

Thank you for the great infomation on credit.  It is something that all of us in the businss should try to fully understand to help our clients to the fullest.

Jun 17, 2008 07:01 AM