A healthy mix of credit accounts, represents 10% of your credit score. The Credit Bureaus take into account the “mix” of credit items you have on your report. This part of your credit score is affected by what kinds of accounts you have and how many of each.
The Bureaus will score you higher if you have an open mortgage, 3 credit cards, 1 auto loan, and a small amount of other open accounts. This mix tells the Bureaus that you can handle any type of loan. If you have a ton of credit cards, your scores will be lowered. If you have several mortgages, your scores will be lower. Any, “unhealthy” account mixes lower your scores. The preferred number of credit cards is 3. This means you will actually have a higher credit score if you have 3 open credit cards than if you have two or less. BUT, don’t run out and cancel your cards just yet. REMEMBER, 30% of your score is comprised of your balances in relation to your maximum credit limit. So keep your cards open, but focus on having 3 LARGE balance cards for ultimate impact. Maintain a healthy mix of accounts and your credit score will be golden.
Length of credit history, or your “time in the bureau”, accounts for 15% of your credit score. The older you are, and the longer you have had credit accounts for, the higher the score. This is broken down into 3 sub categories:
Time since accounts opened.
Time since accounts opened, by specific type of account.
Time since account activity.
Your credit history length is important when it comes to understanding your score as a longer credit history is looked upon more favorably than a shorter one. Someone with a credit history of 6 months isn’t going to look as impressive as someone with a history of 6 years. It takes time to establish a payment history. Those with longer credit histories typically have higher incomes as well.
The second largest factor in your credit scores is the amount you owe in relation to your high credit limits termed Credit Utilization Ratio, or CUR. This accounts for 30% of your score calculation. If you are carrying high credit card balances, you can actually hurt your credit scores almost as much as paying the account late every month. This aspect of your credit score has several different factors. The first factor is your relation of balances you owe on all of your accounts in relation to the high credit limits on those accounts. Once again, this takes into consideration balances on ALL of your accounts combined. Your credit score also takes into account balances in relation to high credit limits on your individual accounts also.
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!
Everyone that follows me knows this blog is not about selling you anything. However I do promote what I think is the best and most reliable business credit building program in the country. Excellent BBB rating and a 100% money back guarantee. Anyway, for many the $2000+ up front has always been a push for a lot of people. The company now only requires $995 down and 6 payments of $200. If you are interested in this program, now is the time to enroll. You can contact me at: 303.513.8664
Well, after several years of research I’ve finally published my much anticipated E-book. The Midas Guide to Credit and Business Funding is now available by going to: www.bizfunding101.com. And yes I’m pretty excited. The hard launch was Monday and we’ve sold five books so far.
The book is broken into three sections. The first section talks about both business and personal credit and dispels all myths about each. Loaded with nothing but the facts and what you need to have to enjoy perfect personal and business credit. The second section reveals all loan products available to a small biz owner. In laymans terms, I describe each and every product so you can make an educated decision as to how and where you fit. The third section is about something no one has ever written. You all know I’m a loan broker. I charge fees! Those fees can sometimes be hard to swallow. With this guide I am providing the exact model I use to get people funded every day. I tell you everything you need in your funding package and I give you two hours of personal counseling on picking a product and getting funded. This sounds mundane but what if you could get the money you need and not have to pay thousands in broker fees?
As an adult almost everything you do revolves around your credit. Your ability to purchase a home, a car, a big screen TV. It also affects your insurance rates, renting your apartment and even getting a job. Heck, besides marrying my wife for her sheer inner and outer beauty, the next biggest thing that attracted me to her was her credit. YES, that’s right!!! It was that important she handled her finances how I did and was one of the first questions I asked her. We laugh about it now but it caused a definite stir in the beginning. So lets talk about credit.
First there are 5 things that are factored into the algorithm used to calculate credit. They are:
* Payment history
* Amounts owed
* Length of credit history
* New credit
* Type of credit used
A friend referred a new business client to me recently. I’ll call the corporation “Guys and Dolls.” Only problem is its legal name should be “Guys and Dolls, Inc.” or “Guys and Dolls Company” or something which indicates it is a corporation. Similarly, if Guys and Dolls was a limited liability company, it would need to include LLC or such in its legal name.
The owner of Guys and Dolls formed the corporation through the Colorado Secretary of State, which warns that corporate designators are required under state law but still allows a user to file without one. Guys and Dolls compounded that incorporation mistake by using the Inc-less name to refer to itself in all of its business dealings.
Unless you were daydreaming during history class, in high school you learned that the birth of modern limited liability business entities, namely corporations, was a key factor in the Industrial Revolution and America’s emergence as a world economic leader. An investment of capital that risks only that capital, not the investor’s other assets, has been at the heart of capitalism ever since. This is especially true, but often challenging, in human-owned businesses where the people who invest the capital are often investing blood, sweat and tears as business management, too.
Typically, the law splits management of a corporation into two functions: the officers (President, Secretary, Chief Cook and Bottle Washer, etc.), who run the day-to-day operations, and the Board of Directors, which supervises the officers and keeps a long term view in mind. Yes, I know that if public company Boards of Directors really did that, we wouldn’t be in our current economic pickle, but that’s not today’s subject; my concern is that people in private companies don’t keep track of the hats they wear (owner, officer and/or director) and the consequences that go with wearing them.
Hello everyone. After a long holiday week it’s time to get back to work. One of the things us business owners always seem to slack off on is the legal end of running our business. Therefore, I have asked my friend, Jim Thomas, of Minor and Brown, to write a few articles that I am going to portray on the blog this week.
Jim is one of the most knowledgeable business attorneys I know. He has helped hundreds of business owners get out of sticky situations, not to mention preventing them from being there in the first place. Stay tuned and read em all. They’ll save you tons of time and money in the future.