members of the national board of credit education
Many of you reading this article might think you have a pretty good idea of how credit scores work. But do you really? You would be surprised to learn that much of what you think helps or hurts your credit score will actually do the contrary or have no effect at all. There are so many rumors, lies, exaggerations and urban myths, when it comes to how exactly credit scores are calculated. You will be shocked to know that only 35% of your credit score is affected by your payment history. So what about the other 65%? What else besides payment history is affecting my credit score?
Given the fact that credit plays a huge roll in our lives as American consumers, don’t you think that credit education would be a primary concern for our youths? But you don’t learn this stuff in schools. You don’t learn this stuff when you open a credit card.
According to Nellie Mae survey, “21% of undergraduates with credit cards carry balances between $3000 and $7000.”
Credit card solicitors pay colleges "admission fees" to come onto campus, set up tables, and sell credit cards to students.
WHAT ITEMS ARE IN YOUR CREDIT REPORT?
ITEMS THAT ARE NOT INCLUDED IN YOUR CREDIT SCORE
Although this information may be reflected elsewhere on your credit report, it is not taken into consideration for your credit score.
WHAT GOES INTO CALCULATING MY CREDIT SCORE???
What goes into your credit score can be grouped into 5 general categories
The impact of each factor can verify due to different credit scenarios
PAYMENT HISTORY (35% of your score)
AMOUNTS OWED (30% of your score)
LENGTH OF HISTORY (15% of your score)
TYPES OF CREDIT USED (10% of your score)
NEW CREDIT/INQUIRIES (10% of your score)
Your credit score takes into consideration all of these factors. In some situations, one factor can have a larger influence on one persons credit score. This depends on each individual credit situations and credit history. It is almost impossible to say exactly how much each factor will influence ones credit score due to the limitless possibilities.
ADVICE GIVEN BY CREDIT BUREAUS IN REGARDS TO HAVING AN IMPROVED CREDIT SCORE: “manage credit responsibly over time.”
PAYMENT HISTORY TIPS
AMOUNT OWED TIPS
LENGTH OF CREDIT HISTORY TIPS
TYPES OF CREDIT TIPS
A credit inquiry will appear on your credit report when your credit report is pulled. There are many types of credit inquiries. Inquiries must be made with Permissible Purpose. You do not necessarily need to give a creditor or party authorization for them to have permissible purpose.
HARD INQUIRIES (These inquiries affect your credit score. When you apply for a mortgage, auto loan, credit card or other type of account, you authorize the lender to obtain a copy of your credit report. These types of credit inquiries when prompted by your own actions appear on your credit report and will impact your credit score.)
ACCOUNT REVIEW INQUIRIES & CONSUMER BASED INQUIRIES
These types of inquiries do not affect your credit score. When you choose to pull your own credit report through an online resource such as TrueCredit.com or Myfico.com it is considered a consumer based inquiry and will not affect your credit score. Also, many of your creditors or collection agencies have the ability to pull your credit report to review your account activity. Credit reports pulled by a prospective employer when applying for employment will not affect your score.
In many cases a company will pull your credit report in order to send you pre-approved credit offers or other promotional offerings. These inquiries do not affect your credit score although there is much non-sense about an increase of credit scores upon prohibiting the ability of creditors to pull a promotional inquiry.
To prohibit the ability of creditors pulling your credit report for Promotional purposes you must OPT Out by calling 888-867-8688
AVERAGE CREDIT STATISTICS (From Fair Isaac)
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