The three major Credit Bureaus: Equifax, Experian, and TransUnion, all work off of a similar scoring system. This system is based on a singular postulation: will you become 90 days late in the next 2 years? The scoring system they all use, (with minute variables) can be broken down into 5 categories; or 5 pieces of a pie. I will discuss the first part of that credit pie today.
Your payment history is the largest aspect of your credit score, as you might expect. In total, your pay history accounts for 35% of your total score. This portion of your total score calculation is based on your prior payment history with your creditors. Late payments, defaulted accounts, bankruptcies, and all other NEGATIVE information on your credit report have the greatest effect. The more recent the late payment, the greater the damage is to your credit score. If you go late on your mortgage this month, the Mortgage Industry Option scoring model could drop your scores over 120 points. That is with only one 30 day late payment!
It’s easy to ignore the problems that are created by a low credit rating. Thinking about your credit history isn’t something many people do every day. At some point it will become obvious that the poor credit score is stopping you from moving forward. For most, the moment of understanding comes when it is time to make a big purchase, like purchase a home or a car.
Having a bad credit score makes it very hard to obtain a loan. Even if your score is somewhat decent and you can get approved, your will likely pay much higher interest rates. It may not seem like an additional 2% in interest will result in much, until you do the math. A mere 2% higher interest rate will result in thousands of extra dollars spent.
The first thing that you need to do in order to begin raising your score is to pull copies of your credit files and scores. You can do that by visiting Credit Viper.
Every year more than 1.5 million Americans file for bankruptcy for a variety of reasons. While bankruptcy has many negative effects, it does offer people with devastated finances a fresh start. While most bankruptcies remain on your credit reports for 7-10 years, there are several things you can do to start re-establishing your credit after filing.
The first step in managing your credit is to clear your credit reports of errors. Check that your credit reports from TransUnion, Equifax and Experian have accurately recorded your pre-bankruptcy debts as “Included in BK.” Under the Fair Credit Reporting Act, you have the right to dispute inaccuracies.
After clearing out any errors in your credit reports it is best to keep a regular eye on your standing and use your credit conservatively. Keep your employment stable, be cautious with spending and pay all your bills on time.
It’s sad but it’s true. Every day across the United States a business owner, like yourself, is turned down for an Unsecured Business Line Of Credit, a Business Credit Card or a Business Loan because of a blemish on their credit -a blemish that might not even be your fault!
Most people with bad credit aren’t deadbeats trying to avoid their bills, so why are they suffering the same embarrassment as the people who are? It’s not fair. Sometimes things happen that we have absolutely no control over, but we still have to live with them. Fortunately, there’s hope. If you know how the credit system works you can learn how to make it work for you. Can you imagine being able to make what is unofficially the most powerful system in the country work for you? If you know the secrets, you can do precisely that.