Here are a couple of general rules for your consideration. Your minimum credit score should be at least 650. If your credit score is below 650, there are ways to fix it. Is that how it works …
FOR. You can dispute anything on your credit report. If the merchant cannot provide proof of their claim, then the item must be removed from their credit report. For example, if department store X says it did not pay off your $ 72 balance on your X card in 1997, and you say yes, then department store X has 30 days to provide documentation showing that the invoice is unpaid. If they can’t prove your claim, then the outstanding debt is eliminated and you move towards a higher credit score. If department store X is right and owes you $ 72, then now you know the problem and you have a chance to pay the $ 72 … again, you are moving towards a higher credit score.
B. Obtain and review copies of your top three credit reports annually, more often if you are approaching crucial times when your credit score is especially important.
vs. Between reports from the Federal Trade Commission (“FTC”) and CBS News, it is estimated that between five and eighty percent of credit reports contain errors. Some mistakes are really good for you and some are not so good. When I was in my 20s, I checked my credit reports and was very happy to learn that I had not only bought a new car, but had paid for it with a perfect payment history. It was great for my young credit history – I never found the car.
D. Your credit score contains five components. These are the five components and their degree of importance by percentage:
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Payment History (35%) – Here, credit bureaus (BC) are looking for mortgages, credit cards, installment loans, retail accounts, adverse public records like bankruptcies, lawsuits, judgments, bonds, liens, overdue payments .. . etc. . If you have late payments, CBs will consider (a) the amount in arrears, (b) the amount of time in arrears, (c) the number of accounts that are past due.
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Amounts Due (30%) – Central banks are reviewing the type of accounts you use and the amount of credit you are using relative to the credit available to you. For example, and all other things being equal, a person who has balances equal to 95% of the available credit on ten personal credit cards for a total of $ 50,000 of outstanding debt will have a lower credit score than a person who has balances of 50 % on three credit cards for a period of time. $ 10,000 total of outstanding debt.
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Length of credit history (15%) – Central banks are examining specific types of accounts, how long the accounts have been open, and the level and timing of activity within the account. Surprisingly, for credit rating purposes, it seems that it is actually better to have credit accounts with outstanding balances (within reason) than to have no open accounts or no credit history. Being debt free can lower your credit score. I have a friend who is a very astute and very successful former international banker. He has done business in more than 20 countries and has lived in nine countries. This is a person with exceptional success, wealth, and highly responsible money management practices. He was rejected when he applied for a credit card at the same bank where he worked. Reason: No US credit history.
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New credit history (10%) – In short, central banks are looking to see if you have been opening or trying to open a lot of new accounts recently. As you can imagine, someone who is thinking of lending you money becomes very nervous when they discover that they are borrowing money from everyone.
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Type of credit used (10%): central banks analyze the balance of the debt distributed among the various types of debt, from credit cards to mortgages and secured to unsecured.
Your credit score is based on all of the above items. It is not a pass or fail circumstance for each of the categories. Your score is produced together and that score is constantly changing. One person’s score and financial profile will differ from someone else’s. The information presented here is for the fat part of the bell curve, but provides solid guidelines.
ME. If you’re focused on an acquisition (or other type of loan) and your score is below the 650 mark, keep in mind that a business partner’s score of 700 or higher can help offset your score. When lenders are considering borrower qualifications, they look at the entire “borrower,” be it one person or a legion of people.
