So, what's really impacting my credit score? (read
all the way to the end today, there is a great announcement at the
bottom)
I continue to be amazed by the amount of misinformation that is
still circulating about what factors make up the strongest credit
scores. Factors that were important to creditors 30 years ago may
not be the exact same factors that influence credit scores today.
Let's take a look at a few of the criteria that are important to
build the strongest credit score in today's environment.
Good - Unused, but available and open and active, revolving
credit. The old way of thinking said that open, available revolving
credit was a bad thing, but the contrary is actually true today.
Old thinking believed that if you had large amounts of credit
available to use you were at high risk of running up so much debt
that you fall in to bankruptcy. Today, the thinking says that you
demonstrate responsibility by having credit available to you and
you use it responsibly. Thus, we often advise clients to keep a
reasonable amount of revolving credit available to them but use
just a small amount of it. In fact, on any given day, you will hear
me recommending that someone put a small amount of a purchase on to
their credit card (only a purchase that they have the cash for, and
only something that they actually needed) such as a tank of gas or
a pair of socks. Keep a low ratio of balance due proportionate to
limit allowed; that is, have a lot of credit available to you, but
use very little of it. Use it, but use very little.
Bad - Late payments. I know, sounds simple, right? But even
a 30 day late payment can weigh heavily on your credit score.
Occasionally I will hear a client tell me that they did not send in
their minimum payment on something because they couldn't pay as
much as they wanted to. A recent example is a client who had two
payments remaining on a student loan. This trade line had a perfect
payment history till the very end of this loan. She got down to the
last two payments and decided to send them in at the same time -
only she sent the two payments when the second one was due, making
the first payment late. This loan had a perfect history, till the
second to last payment. Darn - perfect history now gone.
Another one that I sometimes see is a client who has a dispute
with a creditor and refuses to pay them. "It's the principal of the
issue" is the reason I hear. Sadly, while they are arguing with the
creditor, it is their own credit that is taking a beating because
the payment due is not being paid.
Good - Old tax liens can now be deleted from a
credit profile, not simply update to show that they are paid. You
can read more here.
FAQ - there are many other questions that often come up
when we are having conversations with clients and others when in
comes to credit scores. Since FICO and other models are dynamic and
constantly changing, get the most current information by speaking
with us (we are trained professionals!) or you can find more info
here.
And we are thrilled to announce that we have a new service that
we've added to our website! By going in to my website using the
link below, you can now access your own credit report with
credit scores. Start on my homepage by clicking the button for
Credit Analysis and you can simply fill in the fields from there,
using your credit card for the payment. At the end, you will
receive a report that gives you guidance on steps you can take to
increase your score. Certainly we'd be delighted to review it with
you personally, coaching you through the actions we recommend to
give you the strongest score possible.