http://www.randgsupply.com/Warehouse/mainindex.htm You can order parts for older homes thru this web site. They are the closest place to us here in Lewisville.
We sell manufactured home parts and supplies! Established in 1978, we operate from one location near Fort Worth/ Dallas, Texas, and we are here to serve you on the internet! Please bookmark our site if you own a mobile home! We sell to anyone, and we can help you with just about every mobile home need! Shop in our Warehouse today!
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Its the info about Champion!
HOME | OUR HOMES | RETAILERS | OPTIONS | FACTORY TOUR | SERVICE/INSTALLATION | ABOUT | CONTACT
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Credit may be a big part of most consumers’ lives, but that doesn’t mean everyone fully understands the industry.
“For many people, credit is a weird thing,” says Todd Albary, CEO of credit education site Quizzle.com. He believes many consumers are intimidated by the notion that there is a “secret system used to generate a score that follows you all over the place.”
In an attempt to help you become more credit savvy in 2012, we spoke to experts to clear up some common misconceptions about credit cards and credit scores.
Myth: Paying on Time Guarantees a Good Score
Paying your bills on time is an important component to your credit score, but it’s not a surefire way to a perfect score, especially if you’re prone to bumping up against your credit limits before making a payment.
In addition to payment history, “credit bureaus see the balance on your last statement,” says Adrian Nazari, CEO of Credit Sesame. If this balance is extremely high, it can negatively affect your credit utilization ratio – the amount of credit you are using versus the amount of credit you have available to you – and can cost you some points in that category.
This is why it’s a good idea to “pay [your issuer] a few days ahead of your credit card statement date,” Nazari says, which will ensure a low balance gets reported to the bureaus each month.
Myth: Carrying a Balance Helps Build Credit
The credit bureaus are privy to your payment history and the balance on your monthly credit card bill, “but they don’t know if you’re paying interest or not,” Nazari says. This means deciding to pay the minimum each month isn’t going to do much more than cost you money, especially if you’re carrying a particularly high annual percentage rate. The lesson? Don’t forgo payments just to carry a balance month to month.
Myth: All Credit Scores Are the Same
Most consumers are probably familiar with the FICO scoring model, which calculates your score on a scale of 300 to 850, but the truth is there are many other credit score models available to consumers and the lenders who service them. Pulling one or another isn’t going to guarantee that you’re going to see the same score that the lender does.
“Many of the scores calculated for and used by lenders are not available to consumers,” says Susan Papp, a spokeswoman for credit card comparison site Credit Donkey. “Consumers unaware of the variety of scores may purchase a score believing it is their ‘true’ score and when in reality the score that lenders are seeing is quite different.“
This is why it is important to pay more attention to the information on your credit report (as opposed to its accompanying score) and the risk level that the service you are using to view the information assigns you.
Myth: Your Income Affects Your Score
People tend to assume that the more money they make, the higher their credit score will be, but that’s not the case. While it’s true your income may affect your ability to pay your bills on time, it has no bearing on your credit score, Albary says.
Your income can, however, influence a lender’s decision to approve you for a loan. This is because lenders often compare the income you’ve listed on your application to the debts listed on your credit report in an attempt to judge your ability to make monthly payments.
Myth: You Should Cut Up the Cards You Don’t Use
Those who have accumulated significant debt may be inclined to close credit card accounts as they pay them down, but doing so may hurt your score – in a few ways.
“You risk lowering your credit utilization ratio,” Nazari says. Instead of cutting up unused cards if customers consistently bump up against their credit limits, Nazari adds, it is better to keep your cards open and restrict use to one or two small payments a year to keep your utilization ratio intact and your payment history stellar.
Myth: Using Only Cash Will Help Your Score
Sorry to break it to you, but consumers have to use credit to build credit. Credit scores are a way for lenders to predict whether you will pay back money you’ve borrowed, and one of the best ways to demonstrate your creditworthiness is to show you’ve paid off some type of debt before. Sticking to cash only may seem like the responsible thing to do, but it won’t help you establish a payment history with lenders. This can be problematic when you need to buy a big-ticket item such as a car or house.
“If you don’t have or use credit, you may have no credit history at all, and if you do, your credit score won’t be as good as someone who consistently demonstrates responsible use of credit over time,” Albary says.
Myth: A Store Card Will Boost Your Score
If you’re looking to build credit, you’re better off adding a card backed by a major credit card issuer than a store card being advertised at the point of purchase. While credit bureaus don’t award extra points for taking out a line of credit from a big bank, store cards typically have lower limits than traditional credit cards, Nazari says. This can lead to a higher utilization ratio if it’s among one of the only cards you have in your arsenal.
Myth: Paying Off Debt Will Instantly Change Your Score
Getting up to date on delinquent accounts is certainly a good idea, but a score of 580 isn’t going to turn into a 700 overnight no matter what you do.
“Negative information on your credit report that is accurate can only be removed over time,” Papp says. “For example, credit delinquencies will stay on your credit report for seven years and bankruptcy information will stay on your credit report for 10 years.”
Mobile home, mobile homes, manufactured homes, manufactured home, modular homes, modular home, singlewide, doublewide, triple wide, trailer, champion, cavco, karsten, clayton, clayton homes, athens park homes, redman, southern energy, pre fab, park model r/v, campers, 2005, 2006, 2007, 2008, 2009, 2010, 2011, pre-owned, preowned, pre owned, used, 32×80, 32×56, 32×44, 32×48, 28×48, 28×56, 28×80, 16×56, 16×70, 16×76, 16X80, owner financing, financing available, zero down, in house financing, clean, nice, dealer.
We have a few new faces around here. Jim Clark, he has been in the industry for several years. He is well know for taking quality care of his customers & giving them honest & strait answers. Clint Shipley, Jeff Lukenbaugh with Long Tide will be in our office to help pursue our land home department. We welcome them to our team in hopes to expand our land home options. As always you will general find our fearless leader Derral Riggle & my self Lessley Dooley at your service any given day. Mrs. Shelly Miller is our Office Manager & will be in the office till 5:30 during the week. This is such a great team no wonder we are your 1st Choice in Manufactured Housing!
Yes You Can! We have a new in house finance program that you could qualify for! The same guidelines are for everyone. 20% Down at 13.99% rate, terms can go 5 years, 7 years or 10 years. We can not finance anything over $50K, land of any kind or improvements of any kind. This program is for the Home only!
Metal vents have a tendency to rust after a short period of time on a roof. With the Ross 65 Roof Vent’s ingenious polypropylene design - there is no rusting - ever.
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This morning started off slow then all the sudden it was like a magnate was turned on & all these people just showed up out of no where! Poor Jim was trying to juggle 3 people at one time while I couldn’t open the doors fast enough! We even had Derrals wife Jamie out here showing houses! Let the flood gates open its HOUSE HUNTING SEASON!!!!!
Keeping Score
Credit scores range from 300 to 850. According to MyFICO.com, approximately 13% of FICO credit scores exceed 800, and only 1% of consumers achieve a perfect score of 850. In general, the higher the score, the lower the risk to any potential lenders. Five factors are included and weighted in calculating a person’s credit score:
1. 35 percent — Payment history
2. 30 percent — Credit utilization
3. 15 percent — Length of credit history
4. 10 percent — New credit
5. 10 percent — Types of credit used
The One Percent
While many people have excellent credit scores, what are 1% of Americans doing differently than the other 99%? Since a perfect score is so difficult to earn, those who do achieve it are often actively and consciously trying to do so. Whether you are gunning for a spot in the top or simply trying to improve your credit rating score, these tips can help.
• Pay bills on time — Even one late payment can hugely impact a person’s credit score. Paying every bill on time — from credit cards, mortgages and medical bills — is important to maintaining or achieving a high score. A perfect credit score will typically show no late payments in the last seven years.
• Use only a fraction of your available credit — In general, the less credit you are using, the better. The ideal number to aim for is to use only 10-20% or less of your available credit each month. Thirty-percent of your credit score is based on credit use — the ratio of your debt to your credit limit. The higher the number, the lower the credit score. People with perfect scores usually have a low utilization rate of less than 10%.
• Review your credit report — Looking at your own credit report will not negatively impact your credit score. Consumers are entitled to at least one free credit report each year from one of the three major credit bureaus, and should review the report for any errors such as incorrect credit limits or delinquencies.
• Manage your credit card quiver — Too many credit cards can make you appear desperate for credit. As such, it is better to have only a few credit cards, with the bulk of spending placed on one card since you can be penalized for having multiple large balances. Many issuers now automatically close inactive credit cards, so be sure to make small charges every few months on the lesser-used card(s) to keep the account open; otherwise, request that the account be closed.
• Diversify your credit — Having multiple types of credit is a plus when it comes to your credit score. A consumer who has a variety of debt types may be considered financially responsible (assuming the payments are being made on time). Credit cards, mortgages, automobile loans and retail accounts can increase your credit score — to a point. Too many accounts may reduce your score. A good number to aim for is six: this is the number of accounts that perfect credit holders typically have.
• Wait for it — It takes time to build credit and to get a perfect credit score. Ten years of positive account history is generally needed to score above 800; people with a perfect score opened their first account 20 years earlier.
Is 850 Worth the Effort?
Is getting a perfect credit score worth the effort? In general, no. Consumers with perfect scores probably will not have access to better loan rates than those with scores in the upper 700s to low 800s. In fact, when it comes to mortgage rates, the best APR rates are awarded to those in the 760 to 850 range, so there may be little financial reward for reaching 850. That said, like going for an Olympic Gold medal, or earning a 2400 on the SATs — some people simply want that perfect score.
The Bottom Line
Can you score a perfect 850? For most people, the answer is probably not. Those who do earn an 850 are committed to the cause, actively evaluating and controlling all aspects of their finances. A credit score in the high 700s is likely to land consumers the same advantages as a perfect score, but 1% of Americans will succeed in reaching the perfect 850.
Did you hear FHA now requires a 640? If so, I have some good news.
FHA New Credit Guidelines: Borrowers with a minimum decision credit score at or above 580 are eligible for maximum financing & Borrowers with a minimum decision credit score between 500 and 579 are limited to 90 percent LTV. SWF #951 is still lending down to 580 credit scores. These borrowers must be strong everywhere else in their file.
USDA Changes: Streamline Processing Credit Score Raised to 640 from 620.
640 is now the minimum credit score required for underwriters to utilize “streamlined documentation†for manually underwritten guaranteed loan files.
The term “streamlined†only refers to the amount of documentation to be submitted by the lender requesting a “Conditional Commitment for Loan Note Guarantee.†Streamlined documentation does NOT imply a no cost loan, no documentation, or limited underwriting.
Have you had a customer get denied for financing? Have them give us a call. We take the time to work with clients to help them meet their goals. While some lenders will only work with “easy†customers, Jaylee Baker and team strive to make every customer a borrower. We have closed many loans in the last six months for customers who had been turned down in the 30 days prior to applying with us!
We have 2 houses on the New Banner program. If your scores are 575 or higher you could get a great deal on financing with 21st Mortgage. We only have 2 houses but they are both 4 bedrooms, 2 bath.
4/2 $521.15 mo 2011 Clayton 28×56 priced 61,9000 with only $6,200 down 9.49% for 240 P&I a month
4/2 $546.30 mo 2011 Southern Energy 32×56 priced is $64,900 with $6,500 down 9.49% rate 240 mo for $546.30 P&I a month
This one is on our Owner Finance program,
2006 Fleetwood 14×66 with 3 bed $21,900 with $4,380 down 13.99 rate 60 months $412.00 P&I a month
What do folks who not only want to improve their credit score, but want to get it to the highest possible range need to do? Before you make a move, you first need to know the most important information used from your credit report in determining your score. Check out MyFico.com for more detail on what make up your credit score.
More from CBSMoneyWatch.com:
• 5 Biggest Myths About Your Credit Score
• How to Fix Credit Report Errors
• Can Employers Really See Your Credit Score?
Here are the two things that account for two-thirds of your credit score:
Your payment history: Having a long history of making payments on time on all types of credit accounts is one of the most important items lenders consider before approving you for a loan.
Owed versus available credit: This compares the amount you owe versus the total amount of credit available. Your credit score can be lower when you use more than 50 percent of your available credit for each account. That’s because when you are close to maxing out on all of your credit limits, lenders see you as a higher risk and more likely to make late payments in the near future.
There are three other factors that account for about a third of your credit score:
Length of credit history: In general, a credit report containing a list of accounts opened for at least 10 years or more will help your credit score. The score considers your oldest active account and the average age of all accounts.
New credit: Opening several new credit accounts in a short period of time can lower your credit score. Also multiple credit report inquiries may be seen as risky credit behavior on the near horizon, and can therefore lower your credit score. But “soft credit inquiries,” which include requests made by you, an employer or by a lender who “pre-screens” or “pre-approves,” have little or no impact. Also, multiple inquiries by automobile and mortgage lenders over a 30-day period count as just one inquiry, so shopping the lenders to get the best rate should not hurt your score.
Type of credit you use: Your mix of credit cards, retail accounts, finance company loans and mortgage loans is considered.
Your credit score ignores your age, salary and occupation. It also does not take into account financial gifts, support you receive, or your financial assets. For this reason, credit scores are less important for borrowers who seek loans that take these factors into account.
If you want to take action to increase your credit score, then take a look at folks with the highest credit scores. About 13 percent of folks have credit scores of 800 or higher. If you look at their credit profile, they have:
• four to six credit card accounts,
• no late payments in the past seven years,
• at least one installment loan — a mortgage or a car loan — with excellent payment history,
• an average of 10 years credit history per account and a few accounts with 20 years of good history,
• a low number of credit inquiries (fewer than three in the past six months),
• no bankruptcies, foreclosures, charge-offs or collections, and
• debt levels at no more than 35 percent of their overall credit limits per account.
The bottom line: Having a long history of making all payments on time, using the right mix of credit, and not maxing out on available credit are the keys to a having a great credit score.
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If you are a friend on my Blog then you would know I am the Sales Manager her at 1st Choice Home Centers in Lewisville. I know I have sold a lot of you guy homes or helped you in some way to make a home buying decision. Right now we are expanding our web page & I was hoping you could help me out. I am up dating my Bio page & would really like to put a few testimonials from People I have worked with in the past 11 years to express their experiences. If you could help me out I would appreciate it, if not its ok we will still be friends 
Millions of consumers have fallen out of favor with the credit scoring gods.
Some lost their jobs or were just overwhelmed by mounting debt. Others got caught up in the real estate bubble or had major medical bills. Whatever the reason, the rising number of foreclosures, short sales, late credit card payments and the ultimate credit sin — bankruptcies — have left black marks on credit reports most everywhere.
More from NYTimes.com:
• A Guide to Complaints That Get Results
• Retain Your Records No Longer Than You Must
• Take a Few Hours and Unlock Some Cash
So what can these people do to repair their credit?
The simple answer is to focus on the information that is used to generate the all-powerful FICO score — the measure used most frequently by traditional lenders to determine creditworthiness. Its scale runs from 300 points to 850 points; the higher the score, the better your credit standing. “FICO is still the 500-pound gorilla,” said John Ulzheimer, president of consumer education at SmartCredit.com. “In 2011, the best way to get credit from the mainstream lenders is to have a good FICO score.”
Consumers can hope that the banks will eventually consider alternatives to the traditional FICO score, which was developed by Fair Isaac Corporation and has been in wide use for about two decades. After all, as banks regain their appetite for lending, they will be looking for ways to differentiate between borrowers with the same scores, some of whom are temporarily struggling and others who chronically have trouble with money.
[Click here to check current credit card offers, including rates and terms.]
For now, though, the FICO score reigns. The best antidote to a poor score is time. Still, there are a half dozen ways to speed the process, or, at the least, avoid even more credit trouble.
What to Do
Assess Your Situation
Before you even start to think about rehabilitating your credit, make sure that you can pay your bills on time and not do any more harm. If keeping up with your credit card bills is still an issue, then call the issuer, explain your situation and try to negotiate payments you can afford. Ask the issuer how that will be reported to the major three credit bureaus: Not paid as agreed, which can hurt your score? Or will the new terms say that you are now paying as agreed?
“You have to get in writing that this is what they agreed to do,” said Mechel Glass, director of education at CredAbility, a nonprofit consumer credit counseling agency. Ditto for other providers, like utility companies.
Then, assess all the damage by getting a free copy of your credit report from each of the three major credit reporting bureaus through annualcreditreport.com. Each of the major credit bureaus — Equifax, Experian and TransUnion — generate their own FICO scores based on the data they collect. Two versions of your FICO score are also available for $19.95 each, through myFico.com.
How far your credit score has fallen will depend on where it started, as well as the frequency and severity of your credit mistakes. If you had almost perfect credit, but because of the loss of a job your credit card bills ended up at a collection agency, you can expect to lose anywhere from 80 to 150 points from your FICO score. A short sale or foreclosure? Both, Mr. Ulzheimer said, “would turn a FICO 790 into a FICO 590 overnight.”
Clean Up Your Score
Start with the low-hanging fruit. Let’s say you were late paying a bill from a company that no longer exists, or a bank that has since merged with a larger institution. If the credit reporting bureaus cannot verify the accuracy of that black mark, they are required to remove it. “Not only does it have to be correct, but it has to be verifiable,” Mr. Ulzheimer said.
Next, focus on paying off the loans — namely, credit cards — that will help give your score the most lift. Paying off a mortgage, a student loan or other installment debts, like car loans, feels good but that won’t necessarily do much for your credit score.
[Secrets of People With Great Credit Scores]
You also want to get your so-called debt utilization rate into good shape. FICO considers how the total amount of debt on each of your credit cards compares with your total available credit. The credit score “elite” — that is, people with FICO scores above 760 — typically don’t have debts that exceed 7 percent of their available credit. But if you are at 50 percent and can get the rate down to 30 percent, that will help.
Leave a Note
Because prospective employers may pull a copy of your credit report, consider adding the equivalent of a doctor’s note to each of your reports explaining your hardship, like a job loss. All three major credit bureaus allow you to add a brief statement through their Web sites. FICO doesn’t consider these statements when formulating scores, however, so don’t expect it to sway lenders.
Get Secured Cards
It will obviously be hard to get a traditional credit card when you have a poor credit history. Secured cards, if used strategically, can help nurse your credit back to health more quickly. These cards require you to put a set amount of money in a bank account, say $250 or $500, which is used as collateral. And the amount of available credit should be equivalent to the amount on deposit.
“What is the most predictive and powerful in your score are the things you’ve done most recently,” Mr. Ulzheimer said. “That cuts both ways. If you add a secured card and you pay it religiously and the balance is low, it will help your score a lot more quickly than if you do nothing.”
But read the fine print before signing up. Consumer advocates said some unscrupulous card issuers have charged the security deposit to the card. And be sure the issuer reports your payment information to the big three credit bureaus, since not all do.
Curtis Arnold, the founder of CardRatings.com, recommended two cards, both of which report payments to the big three: the Orchard Bank Secured MasterCard, which has an attractive interest rate of 7.9 percent, waives the annual fee in the first year and charges a moderate $35 annually thereafter. He also likes the Citi Secured MasterCard, largely because it offers an interest rate on the security deposit equivalent to an 18-month certificate of deposit, which he says is an industry first.
Talk to a Credit Union
These institutions may be more willing to work with members who have checkered histories. Their offerings vary, but they may be more likely to consider alternative credit scores, offer free credit counseling or have products tailored for people with poor credit histories. “Certainly, many credit unions have credit builder or rebuilder loans, often structured as a loan with a built-in savings component so that a person gradually builds up funds that can act as partial collateral,” said Clifford Rosenthal, the president of the National Federation of Community Development Credit Unions, a trade association representing credit unions in low- and moderate-income areas.
Alternative Verification
There are other credit reporting agencies and services that — for a monthly fee, and sometimes a hefty one — will collect your payment history from sources that aren’t included in your traditional credit report or FICO score. At this point, however, most mainstream lenders base their decisions on the big three bureaus’ reports and FICO scores. So you’re better off saving your money. “All of those companies say they will report your accounts to a credit bureau, and they may be doing that,” Mr. Ulzheimer said. “But if it is not the big three, then who cares?”
This could change, of course, as banks become more willing to lend and potentially open to using other means to identify promising borrowers. Lenders may begin to consider rental payment histories, for instance. Or they may be willing to look at alternative credit scores that incorporate payment information that doesn’t show up on traditional credit reports.
[Best Credit Cards For 2011]
Or perhaps one lender will permit so-called shoe box credit: Did you know that if you walk into a lender with a box stuffed with receipts proving that you paid your cable bill, for instance, that they are required to consider it? They aren’t obliged to give you a loan, but the regulation says they must consider the information.
What to Avoid
Credit Repair Offers
You may have seen the advertisements for credit repair companies on the Web. “We really tell our clients to stay away,” said Ms. Glass, of CredAbility. One re-emerging scam, she says, involves companies that claim they can clean up your credit. Some companies manage to do this for a limited time by disputing all of your accounts, sending letters to the bureaus claiming the accounts aren’t valid. But after the credit bureaus validate the accounts and debts, they reappear on your report and your score will plummet again.
Legitimate credit repair companies exist, and they can assist in disputes. But there’s nothing they can do that you can’t do yourself at little cost. Besides, these companies often besiege the bureaus with letters, and the bureaus are allowed to ignore what they believe are frivolous disputes. Be wary of companies that do not disclose in writing that you can do these tasks free on your own, that guarantee results or that try to charge you before they perform any services.
Certain Cards
Despite the tighter credit environment, Chi Chi Wu, a staff lawyer at the National Consumer Law Center, said the center was still receiving complaints about credit cards aimed at people with poor credit histories.
“These cards are pitched as a way to build credit, but with these kind of steep fees and high interest rates, there is a good chance they will hurt,” she said.
Buying a home can mean building significant value through the years.
Think carefully about how much you can afford to spend and consider borrowing guidelines like those used by Fannie Mae.
Prequalifying with your lender is a good way to determine how much house you can afford.
You will need cash for a down payment and closing costs. Generally speaking, the higher the down payment, the lower the interest rate and monthly mortgage payment.
In addition to your mortgage payments, you will also need to consider the other costs of home ownership.
Schools, taxes, services, crime rates, transportation, and zoning are important considerations when selecting a neighborhood.
Brokers usually represent the seller, but they can be valuable sources of information for buyers as well. A broker that belongs to the Multiple Listing Service will be able to offer a wider variety of homes to choose from.
Property Directions
1. Monterrey Estates From Ft. Worth: Head South on I-35W, Take Exit for for FM 917. Turn left (East)
Travel 3.7 miles, Monterrey Estates will be on your right
2. Highland Pointe From Ft. Worth: Head South on I-35W, Exit for 1187 and turn right (west). Travel 6.5 miles and
turn left (south) on 1902. Travel 3.8 miles for 2.3 miles. Highland Pointe is straight ahead.
3. Joshua Scattered Properties From Ft. Worth: Head South on I-35W, at Exit 37 take SR-174 and travel 7.9 miles to FM-917.
Travel 4 miles to desired address.
4. Godley Properties See #3. Travel 9 miles west on FM-917. Turn left onto SR-171 for 0.3 miles. Turn right onto
FM-2331 for 0.3 miles, turn left onto CR-1229A for 0.2 miles & turn left onto CR-1229. Addresses
on right.
5. Outback Acres From Northwest Loop 820: Travel West on SR-199 for 20.6 miles. Turn left (west) on Midway Road
and travel 1 mile. Turn right at “T”. Outback Acres is on left.
6. Oak Meadow Subdivision From Northwest Loop 820: Travel West on SR-199 for 23 miles. Turn left (west) on New Highland Rd.
Travel a half a mile and you can turn left onto Oak Meadows Drive.
7. Summerfield Addition From I-35: Take Exit 496B (California St.) east 3.3 mile. Turn left into Summerfield Addtion.
8. Sundown Ranch From Greenville: South on US-69 for 7.3 miles. Tur right on CR-3307 and take your first left.
9. The Plains in Bland From Farmersville: East on US-380 for 3.7 miles. Turn right on CR-698 for 1 mile. CR-2723 on right.
10. Lake View Farm From Princeton: Travel south on FM-982 for 6.5 miles. Turn left on Shady Hill Circle (2nd entrance).
11. 19-Acres in Springtown From intersection of FM-51 & SR-199: Travel west on SR-199 8.1 miles. Turn right on Big Salty and
travel 0.8 miles. Entrance to property is on left. Big red sign marking property.
12. 9.6 Acres in Poolville From Intersection of FM-51 & SR-199: Travel west on SR-199 9.7 miles. Property on right. Has large
red sign on property.
Is your low credit score preventing you from getting a good interest rate or from getting a credit card or a loan at all? Are you tired of waiting through the long and slow process of rebuilding your credit the conventional way? If so, you might be considering some extreme steps to improve your credit score. Let’s consider a few of the options available, whether they actually work and if they’re advisable.
More from Investopedia.com:
• 7 Tips To Bounce Back From A Credit Score Disaster
• 5 New Ways Credit Card Companies Are Wooing New Card Holders
• 5 Ways To Trick Yourself Into Saving Money
1. Rapid Rescoring
Rapid rescoring is a little-known strategy explained by credit guru Liz Pulliam Weston in her book, “Your Credit Score: Your Money and What’s at Stake”. Unlike credit repair services, which are almost always a scam, rapid rescoring is a legitimate way to improve your credit score in as little as a few hours - if there are verifiable inaccuracies on your credit report. For rapid rescoring to work, you must have proof that negative items on your credit report are incorrect.
Rapid rescoring is for people who are in the process of applying for a mortgage or other type of loan and, because of their low credit scores, are being denied credit or are being offered a high interest rate. Individuals cannot initiate rapid rescoring on their own, but a lender can do it on their behalf. The rapid rescoring service works with credit bureaus to quickly remove incorrect information from your report.
Because of the complicated way credit scores are calculated, even if you are successful in having the inaccurate, negative information removed, your score may not improve, may improve less than you’d hoped, or may even drop. But it’s worth a shot.
2. Take out a Loan for a Major Purchase
According to Ken Lin, CEO of Credit Karma, “if you are within your means and in the right credit range, a car loan or mortgage is actually a great thing for your credit. Though the initial hard inquiry will knock a few points off your score, adding to your mix of credit is an important component of your score.”
The credit scoring company FICO states that about 10% of your credit score is based on the mix of credit types you use. Its booklet, “Understanding Your FICO Score,” states, “The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. It is not necessary to have one of each, and it is not a good idea to open credit accounts you don’t intend to use. The credit mix usually won’t be a key factor in determining your FICO score - but it will be more important if your credit report does not have a lot of other information on which to base a score.”
Lin adds, “Obviously, an enormous financial decision like taking on the debt and responsibility of a car or home should not be taken lightly or done for the sake of raising your credit.”
3. Open Lots of New Credit Card Accounts
Obtaining additional credit cards increases your total available credit. Since credit utilization, or the percentage of your available credit that you have spent, is part of your score, it seems like lowering that percentage by increasing your total available credit would help your credit score. However, FICO states, “This approach could backfire and actually lower your credit score.”
For one, opening lots of new accounts shortens the average age of your accounts, and a lower average age will generally lower your credit score.
Another problem, Lin points out, is that “available credit in your reach may tempt to you to overspend into debt, or on the flip side, not using your open credit cards may cause your issuer to close your card due to inactivity. A better strategy is to add to your existing cards’ credit limits, and pay down existing debt while putting a freeze on credit card spending.”
4. Take Out a Small Loan You Don’t Need
If your credit score is preventing you from getting the interest rate you want, you may be able to improve your score by taking out a small loan and repaying it as promised - in other words, by adding some positive activity to your credit history. Also, because installment loans add to your mix of credit, if your credit history doesn’t already include this type of loan, obtaining one might improve your score.
One option is to use a peer-to-peer service like LendingClub, which facilitates lending between individuals. The company reports borrowers’ payment histories to credit bureaus, so if you can borrow money and repay it responsibly, using a service like this can help you rebuild your credit score. The minimum loan amount is $1,000 and you must have a credit score of at least 660 to apply.
Though this strategy may work, it’s not necessarily a good idea. Lin calls it “a risky and costly way to raise your credit score because you’ll have to pay for the loan’s interest.”
It also requires extreme diligence, because late payments will set you back in fees and interest and ding your credit score.
5. Use Retirement Accounts to Pay off Debts
Do you have piles of cash sitting around in a 401(k) or IRA that would wipe out your debt? It may be tempting to use these accounts for just such a purpose, and technically, you could.
But there are compelling reasons why you shouldn’t. If you ever have to declare bankruptcy, retirement accounts are often protected, so they’re a great source of long-term financial security. In the short term, you’re likely to be faced with early withdrawal penalties and taxes if you take money out of these accounts. Those expenses could get you into an even bigger debt mess.
Saving for retirement is a wise financial decision that you’ll thank yourself for later.
The Bottom Line
The credit repair strategies presented here might work for some people, some of the time, but they’re called “extreme” for a reason: they aren’t always effective and can even backfire. If you have a low credit score, the best remedy is to rebuild it the old-fashioned way by establishing a history of responsible financial behavior.
Your age often influences how you balance your budget, save for retirement and evaluate your investments. But it should also be a factor in managing your credit score.
The duration of your credit history heavily affects your FICO score, which lenders use to gauge a borrower’s ability to repay a loan. While it’s important to pay your bills on time and keep your balances low at every age, there’s more that most consumers can do to boost their scores so they can get the best loan terms.
Here are nine steps that will help you build excellent credit over your lifetime.
Your 20s
1. Apply for a credit card
John Ulzheimer, president of consumer education for SmartCredit.com, says consumers typically enter the credit game between the ages of 18 and 22, though the CARD Act’s restrictions are making increasingly difficult for people under 21 to get their first credit cards. Regulations aside, it’s better to get a credit card sooner rather than later because debit cards won’t boost your credit score.
Most credit newbies get their first credit card by getting a parent or guardian to co-sign their application or by applying for a secured card, which requires customers to put down money upfront that will match their line of credit and minimize default risks. Either strategy can be effective as long as you understand that the real trick is using these cards responsibly.
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2. Don’t apply for every credit card
“Building credit isn’t the same as building a large balance,” Ken Lin, CEO of Credit Karma.com, says. Don’t make the mistake many credit beginners make by opening a store credit card at every retailer visited during Christmastime, for example.
Tom Quinn, consumer credit expert for Credit.com, says consumers should only apply for credit when they need it. A large number of credit inquiries over a very short period of time can cause your score to go down, he says. It also can make it a whole lot easier to run a bunch of bills you can’t possibly pay.
In lieu of a wallet full of credit cards, Lin suggests adding a new credit card once a year to your arsenal until you’ve amassed three or four cards that you can consistently pay off on time.
He also suggests finding cards that don’t charge annual fees because any card you open at this stage should stay open for at least five years. These cards determine the duration of your credit history, which accounts for 15% of your total credit score, so choosing a card with a little-to-no annual fees makes it easy for beginners to keep fledging accounts open for the long haul.
3. Start watching your credit score
Credit beginners must be extremely diligent during these formative years. The FICO score attempts to predict whether you’ll pay a loan back on time and early indications that you won’t can be particularly damaging.
“Consumers in their 20s should be aware that their credit scores are more volatile and will react differently to late payments and excessive credit card debt than consumers with larger and older credit files,” Ulzheimer says.
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Your 30s & 40s
1. Maintain a variety of accounts
If your 20s were all about building credit, then your 30s and 40s will be all about leveraging it.
“Now is the time to diversify accounts,” Lin says, suggesting that those who managed to build a decent credit score in their 20s should consider adding revolving credits lines, like a mortgage or auto loan.
Credit lines fall into two major categories. Installment accounts require consumers to pay a fixed amount each month until the entire balance has been depleted, while revolving accounts can be reused as long as minimum payments are made and the limit isn’t reached. Having both on the books nets more points with FICO than having only one kind.
2. Take advantage of low rates
If you’ve achieved a strong score, you will probably qualify for the lowest interest rates on large loans. Consider whether it’s time to buy property, cars or upgrades for your home.
“People don’t realize the value of a good score,” Lin says, pointing out that once you’re in the 750 range, there’s no need to shoot much higher. “It’s meant to be spent.”
3. Don’t sweat short-term score swings
Quinn says it’s alright if your score dips into the lower 700s after you purchase a home, take out an auto loan or incur debts that are typical among those starting families. As long as you’re responsible with paying back debt, your score will likely rebound from the hit you take from credit inquiries.
“Credit reports belonging to people in their 30s and 40s are well-aged and generally large enough that taking on new debts and making small payment mistakes from time to time don’t spell credit score disaster,” Ulzheimer says.
Your 50s & Beyond
1. Curb your credit use
Once you’ve reached 50, it’s time to start weaning yourself off credit cards.
“If you’re 50 or 60 years old and you’re still paying down debts, you probably don’t have a lot of savings stored away for retirement,” Lin says.
To make sure that you’re not stuck in debt during your golden years, focus on paying off existing loans and avoid taking out large loans, such as a mortgages.
“At this point in your life if you’re not at or above FICO 780 then you’ve done or are doing something wrong,” Ulzheimer says. “Consumers with decades of credit experience not only have well-aged credit reports, a basis for excellent FICO scores, but should also be responsible enough to know how to manage all types of credit obligations.”
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2. Use credit cards strategically
Credit maintenance is not the same as credit abstinence. You should keep using your credit cards on small purchases because activity is a factor in setting your FICO score.
“Pay the check at a restaurant using your credit card, then pay the balance off in full,” Quinn suggests. “That way, if you do need to apply for credit in the future, your account looks active.”
Be careful when you close accounts. You don’t want to shorten your credit history and hurt your score by closing your oldest account.
3. Keep tabs on your credit score, even if you’re not applying for new accounts
Ulzheimer says people over 50 are more vulnerable to fraud because they often stop paying attention to their credit reports. That’s why people over 50 should check their scores, even if they’re not applying for new loans or incurring debt.
The Purpose of a Credit Score
According to the Consumer Federation of America, the primary purpose of a credit score is to help lenders assess individuals’ risk of not repaying a loan. It is not to assess borrowers’ knowledge of consumer credit, their attitude toward consumer credit, their amount of consumer debt or the financial resources they have to repay a loan.
Factors that Affect Your Credit Score
Your credit score is essentially based on five things:
1. Payment History
Do you pay your bills on time? If not, how late are you, and how often are you late?
2. Amounts Owed
How much total credit do you have available, and what percentage of it are you using?
3. Length of Credit History
When did you first start using credit, and what is the average age of all your credit and loan accounts?
4. New Credit
How much credit have you applied for and taken on recently?
5. Types of Credit in Use
Do you have a mix of different types of credit?
Factors That Don’t Affect Your Credit Score
Some people think that their credit score factors in their age, marital status, gender, race, nationality or state of residence, but none of these are included in your score. Most of this information doesn’t even appear on your report and is prohibited from being used for credit considerations under the Equal Credit Opportunity Act.
Who Checks Your Credit and Why
You probably know that anyone you want to borrow money from is going to check your credit — this includes mortgage lenders, credit card issuers and car dealerships. Creditors use your credit score to determine whether to lend you money and if so, what interest rate you will get. The higher your credit score, the lower the interest rate you will qualify for, and the less you will pay to borrow that money. It follows, of course, that the lower your credit score, the more interest you will pay, if you can even get a loan or a credit card at all.
But did you know that home insurers, landlords, cell phone companies and electric utilities may also use your credit score? It can be used to determine whether you can get insurance and at what cost, whether to rent you a living space and at what price and whether to require a deposit when you establish cell phone or utility service.
Your Credit Score is Really Three Scores
There are three major credit bureaus — Experian, Equifax and Transunion — and each one calculates your score somewhat differently, giving you three somewhat different credit scores. Ideally, you’d like each of those scores to be at least 720 — this is the score that will usually qualify you for the best interest rates in today’s market.
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When you’ve got it flaunt it — an excellent credit score, that is. You know all too well the importance of that three-digit number, which lenders use to assess the risk you represent. If your score is in the top tier — 750 or above out of 850 on the FICO scale — that alone qualifies you for membership in a fairly exclusive club: Only a third of Americans have achieved such a high number.
Obviously, being a member of the credit elite helps you nab the lowest rates on a home or auto loan. But it may surprise you to learn that a high score also entitles you to red-carpet treatment elsewhere. In the long wake of the credit crisis, “businesses are falling all over themselves to attract customers who are low risk,” says Gerri Detweiler of Credit.com. “And they’ll offer better rates, discounts, and rewards to do it.” Instead of waiting for companies to hunt you down, leverage your stellar standing to score deals on these four items.
Your Plastic
Credit cards, on average, are now charging a variable annual percentage rate of 14.46%. FICO superstars can slash that in half.
Simmons First Platinum Visa (simmonsfirst.com) is offering a 7.25% variable rate — but only to people whose scores are 740-plus, estimates Curtis Arnold of Card Ratings.com.
Citi Platinum Select MasterCard (creditcards.citi.com), meanwhile, is dangling 0% for 21 months to the best applicants. That’s great if you’re planning a big purchase: You can finance it with free money.
As a high scorer, you also have access to the holy grail of rewards cards: Pentagon Federal Credit Union’s Visa Platinum Cashback Rewards (penfed.org) pays 5% on gas, 1% on everything else. Credit approval rates at this national credit union — you must be in the military or a member of the National Military Family Association, which anyone can join for $20 — are notoriously low.
PenFed won’t disclose its requirements, but industry insiders estimate the credit union turns away anyone with a score below 740. That didn’t happen to Faheem Walji, of Lodi, N.J., who leveraged his 750 score to get this and other highly selective cards. “Banks compete for my business,” says Walji. “So I use my score to get the best possible rewards out there.”
Happy with your current card but wish it had a lower rate or no annual fee?
With industry competition so fierce, you may be able to work your high score to get your way, says John Ulzheimer of SmartCredit.com. Call customer service and say, “I’d love to stay, but with my 780 score I can get a no-fee card elsewhere. Could you waive the annual charge?”
A New Set of Wheels
Negotiation is the name of the game when buying a car — and your high credit score is one of your trump cards.
“Typically the dealer makes money on financing,” says Jack Nerad, executive market analyst for Kelley Blue Book. With that in mind, once you’ve agreed on a purchase price, show that you have the ability to take your loan business elsewhere. (Bring a printout of your score from myfico.com and preapprovals from other lenders.)
Many lending institutions lock dealers into preset rates, meaning they can’t match what you’ve been promised elsewhere, says Ulzheimer. So paint the dealer into a corner by asking for a further discount on the price of the car if you take his financing. That worked for Bay Area resident Leland Lim, who had an 811 FICO score. “I chopped an extra $400 off the price of my 2010 Toyota Sienna,” he says.
Your Auto Insurance
Studies show that low credit scores correlate with increased insurance claims. So, to calculate the premiums they’ll charge you, insurers in 46 states now factor your credit history into an “insurance score,” says Ulzheimer. (That score also takes into account factors such as claims history, age, location, and vehicle type.)
While insurers won’t disclose how heavily they weight credit history, there’s no question that good credit gets you lower premiums. So if FICO has raised you by 50 points or more since you last re-upped, ask your insurer to reevaluate your rate at renewal, or shop for a better deal, advises Tom Quinn of Credit.com. You could save $100 a year.
A Vacation Rental (or Kid’s Apartment)
If you plan to rent a vacation property for yourself or co-sign on an apartment for a child, remember that your score will be handy in haggling here too, says Christina Aragon, director of strategy at Rent.com.
Wave a pristine number in front of rental agencies and say, “You can see I’ll be a responsible tenant, so can you give me a better price or waive the security deposit?”
In tight rental markets, a great score may make the difference between landing a place at all or being left out in the cold. Secure that last beachfront property on the cape, and you’ll have proof positive that when it comes to your credit score, it pays to be immodest.
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When you’re thinking of tidying and reorganizing your linen closet or your garage, don’t forget about your credit report. Your credit history is the foundation to financial stability. The information in your credit report is what scoring companies such as FICO use to generate your credit score, which governs everything from how much you pay for a loan — or if you can get a loan at all — to your insurance rates.
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Paying attention to your credit report only when you’re about to make a big purchase such as a house or a car can backfire. According to a 2004 U.S. Public Interest Research Group study, nearly 80 percent of surveyed reports had inaccuracies. If there is any issue that takes some time to sort out, that can create a headache if you’re racing the clock to secure a loan. Get a head start by going over your credit report now, and check up on it periodically so you can catch and fix any issues right away.
Where to Find Your Credit Report
If it’s been years since you’ve given your credit report a good once-over, or if you never have, even figuring out where to start can be daunting. Luckily, federal law entitles you to a free copy of your credit report once every 12 months from the three major credit-reporting agencies: Equifax, Experian and TransUnion. You can get a free copy of all three bureaus’ versions of your credit report at AnnualCreditReport.com.
To check your credit report every few months, order one at a time and space them out over the course of the year. If you’re getting acquainted with your credit history for the first time, order all three at once. If you live in Colorado, Maine, Maryland, Massachusetts, New Jersey or Vermont, you’re entitled to a second copy of each report annually, says Steve Bucci, Bankrate’s Debt Adviser and author of the forthcoming book “Credit Management Kit for Dummies.” Georgia residents can get three a year from each bureau.
If you’re turned down for a job or credit, or you don’t get the best rate available, you also have a legal right to see your credit report at no charge. The paperwork you get notifying you of the decision will include a number for you to call.
Start With Your Identification Basics
It’s easy for people to forget the most important part of their credit report: checking their identifying information, including name, current address and Social Security number, says Natalie Lohrenz, director of counseling at the Consumer Credit Counseling Service of Orange County.
“People obsess over tiny fluctuations in their credit score, but what they should focus on is the question, ‘Is it accurate?’” she says.
Small discrepancies, such as an account that has your nickname listed instead of your given name, don’t impact your score, but if there’s a more serious discrepancy such as an incorrect Social Security number, you’ll want to get it straightened out, says Maxine Sweet, vice president of public education at Experian.
After checking all of the identifying information, look at the accounts and make sure they’re all yours. Keep in mind that some lenders, such as the financing companies that issue many store-brand credit cards and companies that handle medical billing, might have a different name than the one on the storefront or hospital.
Scan Your Reports for Discrepancies
“If you see an account you don’t recognize, you definitely want to call that to a credit bureau’s attention,” says Craig Watts, public affairs manager for FICO. “Definitely find out what’s going on. If you see any negative information like a collection account that you don’t think belongs there, it could be somebody else’s account that got into your report by mistake, or something you forgot about,” he says.
Watts says another red flag can be an account with a much higher balance than you carry. Since any of these items could indicate a case of mistaken identity or identity theft, these are issues to address right away.
Jessica Cecere, a regional president at credit counseling organization CredAbility, says one common — and more benign — credit report error she encounters is the inclusion of old negative information that should have come off the person’s record. Most negative information stays on for seven years, and Chapter 7 bankruptcies remain for 10. “A lot of times the information on your report doesn’t automatically fall off at that seven-year mark,” she says.
Watch Out for Phantom Money
Lohrenz says consumers with a history of collections in their past can have their outstanding balances appear larger than they actually are because of the booming secondary market for collections. Here’s how it happens: If a consumer has a credit card balance that becomes delinquent, the issuer will attempt to collect for a while, then give up and sell the account to a collection agency.
The card balance should then drop to zero, and a new account, this time with the collection agency, will appear on the report. Sometimes, though, the issuer won’t strike that balance from their records, so it will appear as if the consumer has two outstanding debts. If the debt is bought and sold numerous times, which is common, the problem can multiply.
Another instance of “phantom money” can occur when a consumer has a closed bank account that has an overdraft protection line of credit tied to it. In some instances, that line of credit will remain on a person’s report even after the account is shuttered, says Bucci.
How to Dispute a Mistake
If you do find a major mistake, order your credit report from all three bureaus. Doing so can help you figure out if the problem is limited to just one report. The next thing to determine is if you need to take your dispute up with the credit-reporting bureau or the lender.
If there’s a case of mistaken identity, such as someone else’s information on your report, or accounts listed that aren’t familiar to you, contact the bureau. All three bureaus have online dispute forms, which Sweet says is a faster method of resolution than snail mail.
“Taking things up with the bureau is easier because they have one set process,” points out Bucci. “There’s a dispute process in place so you can dispute any account with the same process, whereas when you contact the creditor, every one’s a little different. It’s not as neat and simple.”
In the case of negative information more than seven years old or a report of an outstanding balance that has actually been paid off, try contacting the lender directly.
Following Up
It would be great if you could just file a dispute and forget about it, but you may have to follow up. Especially if an item is very old, the creditor in question may have been bought, merged or gone out of business entirely, which makes documenting everything important.
Keep notes of the people you speak with at the bureau or lender, when you contacted them and the date by which any corrective action will be taken. Check your credit report again after that date to make sure they followed through. The three credit bureaus “talk” to each other electronically, so a correction made on one report should be reflected on the other versions, too.
What Not to Sweat
There are a couple of items pertaining to your credit report that might seem alarming but really aren’t a big deal. Closed accounts in good standing don’t need to be taken off your report, contrary to what many think. In fact, leaving them on your report can help.
Credit inquiries also aren’t as damaging as many people believe, says Sweet. “Honestly, a hard inquiry is very small impact on your credit score, and it’s short term. It stays on for two years but it has the most impact only within six months.” A “hard” inquiry will appear if you applied for a loan or credit card. It can also crop up if you enter into a service contract such as a cellphone or cable TV plan.
Lohrenz says not to stress about the actual credit score itself, the three-digit number lenders use as a baseline to gauge your level of risk. It’s what the report contains that dictates your score, so concentrate on making sure it’s accurate and up to date.
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I bought my new car with a 4.5% fixed seven-year loan and refinanced my home with a 5% fixed 30-year loan. And yet, six months earlier when my credit score was lower, these loans weren’t open to me. Instead, my car loan rate would have been 6% and my mortgage 6.5%. Raising my credit score saved me $450 a month. Here’s how I did it.
Total Available Credit
How much you owe creditors makes up 30% of your credit (FICO) score. Moreover, the ratio of this debt to your credit limit affects your score. To improve my debt-to-credit ratio, I called my credit card companies and asked if I could get a credit line increase, though I first made sure that this request will not trigger an inquiry on my credit (which would lower my FICO score). In addition, I reopened two closed credit card accounts, which increased my available credit even more.
Type of Loan
The type of loans on your credit report make up 10% of your FICO score. Revolving credit card loans, which are considered unsecured loans, are seen as a greater liability than installment loans. To raise my credit score despite being unable to pay off my credit cards, I took out a personal (installment) loan from my bank and paid off my highest-interest credit card with it.
New Inquires
Your recent credit applications comprise 10% of your FICO score. Known as Hard Inquiries (as opposed to Soft Inquires that don’t affect your credit score), any application you make for a new loan, credit card, even sports club membership may result in an inquiry that will remain on your credit report for two years. To protect my credit score, I avoided filling applications that required my social security number.
Payment History
My payment history, which makes up 35% of my credit (FICO) score, was good. I had never been late in making payments on my loans. If I had been, however, the best way to raise this portion of my credit score would be to bring past-due accounts up to date and avoid missing payments in the future.
Length of History
Your credit history makes up 15% of your FICO score. Negative information like late payments or defaults stays on the credit report for seven years and will lower your credit score. Conversely, positive information over the preceding two years will raise the score. In my case, I had only to continue paying on-time to keep my credit history positive.
Your history is complex and changing, but it’s all about paying bills on time.
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In the calculation of your FICO credit score, no factor is more important than your payment history.
That history’s comprised of many complex components, which can confuse consumers. But experts say that ultimately, there’s one main thing consumers need to know: Always make your payments on time and your FICO score will improve.
The primary objective of a credit score is to illustrate to lenders just how likely you are to repay your debts, and while many other types of credit scores are out there, FICO’s is, by far, the one lenders use most to make lending decisions. The higher your score, the more likely you are to get a low interest rate and a high credit limit.
To calculate that score, FICO considers five different factors:
1. How much new credit you have.
2. What types of credit you have.
3. How much total debt you have.
4. How long you’ve had credit.
5. How you’ve handled that credit (otherwise known as your payment history).
Courtesy CreditCards.com
Your Payment History
35% of a FICO Score
A record of on-time payments increases your credit score, while late payments, bankruptcies and other negative items can decrease your score.
How Much You Owe
30% of a FICO Score
How much available credit are you using, and on how many different accounts? FICO considers the number of accounts with balances you have and how much you owe on those accounts. Your score will decrease as what you owe increases compared to your credit limit.
Length of Credit History
15% of a FICO Score
A lengthy credit history will generally increase your score. Nonetheless, if you manage credit responsibly, you can get a high credit score with a short credit history.
Credit Mix
10% of a FICO Score
If you have a variety of credit types on your credit report (mortgage, credit cards, auto loans, etc.), your score can rise slightly.
New Credit
10% of a FICO Score
Have you opened or applied for a new account recently? This will generally bring down your credit score. When a lender checks your credit history as you apply for a new account, your score may drop by a few points — usually less than five. To avoid lowering your score when you need a loan, focus your rate shopping into a short amount of time (1 month, etc.).
– Source: FICO
They’re all weighted differently in the calculation, with payment history carrying the most heft.
Although FICO is secretive about many of the inner workings of its scoring model, the company’s website openly lays out the numerous components that make up a borrower’s payment history. Those components include everything from information on loan accounts that are being paid on time to accounts that have gone delinquent to any public records, such as bankruptcies and judgments.
While that may sound like a lot to understand, it’s not, experts say.
“It’s very simple,” says Howard Dvorkin, founder of Consolidated Credit Counseling Services. “Pay your bills on time!”
A Weighty Factor
FICO’s scoring system grades borrowers along a range from 300 to 850. If you’re looking to improve your score, focusing on payment history is a smart place to start.
Within the standard FICO scoring formula, payment history accounts for 35 percent of a borrower’s FICO score. (The second-most heavily weighted factor — amounts owed — accounts for 30 percent of a FICO score.). Although FICO has a slightly different scoring model for Equifax, Experian and TransUnion — the three major U.S. credit bureaus which maintain consumers’ credit reports — that payment history percentage is the same for each bureau’s FICO scoring model.
The scoring model’s creator says there’s a good reason for that. “FICO’s research has shown that a person’s payment track record tends to be the strongest predictor of the likelihood that the individual will pay all debts as agreed in the future,” says Barry Paperno, consumer operations manager for the company’s myFICO.com website. In other words, FICO has found that if you’ve handled credit well in the past, you’re more likely to do it in the future, too.
Payment History Components
So what goes into your payment history? The data can be broken down into seven components:
• Payment information on various types of accounts, including credit cards, retail accounts, installment loans and mortgages.
• The appearance of any adverse public records, such as bankruptcies, judgments, suits and liens, as well as collection items and delinquencies.
• How long overdue any delinquent payments have become.
• The amount of money still owed on delinquent accounts or collection items.
• How much time has passed since any delinquencies, adverse public records or collection items.
• The number of past due items listed on a credit report.
• How many accounts are being paid as agreed.
Simple, right? Not so much. The FICO score depends on the information in borrowers’ credit reports, which is provided by creditors. And not all creditors behave the same. For example, many creditors don’t report missed payments until they become at least 30 days late. Others may wait even longer, if they even report at all.
How long those blemishes remain on your credit report can also vary: Negative items generally stay on a credit report for seven years, but can remain for up to 10 years in the case of bankruptcies. Meanwhile, you can expect on-time credit card payments to appear, but payment information from other businesses, such as utility companies, isn’t necessarily listed on credit reports or included in your FICO score.
If you’re an authorized user on someone’s credit card, things can get tricky, too. While the payment history for a shared account can impact an authorized user’s FICO score, one of the bureaus (Experian) only includes positive information on the authorized user’s credit report, while the other two bureaus include both positive and negative data. And authorized users can even remove part of their histories if things go wrong with the authorized account — all they have to do is ask to removed from the card account, and over time, that card’s history will vanish from their payment history. Account holders, and even co-signers, don’t have that luxury.
Tips for a Good Credit History
Building a strong payment history is not only about what you do right, but also about what you do wrong. To get a great score, you’ll need to make consistent, on-time payments while simultaneously avoiding mistakes that cost you FICO points. What happens if you mess up your credit? Expect a 30-day late mortgage payment, for example, to drop your FICO score by as much as 110 points. After a mortgage delinquency occurs, expect to wait three years before your credit score fully recovers.
If you have a few accounts that are delinquent, “it’s going to hurt you a little,” Dvorkin says. “If you’ve got a lot of delinquents, it’s going to hurt you a lot.”
Mistakes can take years before they disappear entirely. Typically, negative items, such as missed payments, will remain on your credit reports for up to seven years.
That’s why it’s very important to be cautious about your payment history.
“Relative to all other types of credit report information being evaluated by the FICO scoring formula, payment history can always be expected to have the most impact, both positively and negatively, on a person’s FICO score,” Paperno say
Most people know that paying bills late can play havoc with your credit score. But not every move that shaves points from your credit score is so obvious.
More from Kiplinger.com:
• Quiz: Will It Sink Your Credit Score?
• 11 Credit Card Mistakes to Avoid
• 7 Little Known Credit Card Perks
1. Charging a Big Balance to a Store Card
You’re tempted to buy thousands of dollars’ worth of furniture or appliances and charge it all to a store credit card that doesn’t require payments for six months or even a year—and sometimes longer. But debt that sits untouched could drag down your score, especially if the balance is near the card’s limit, says John Ulzheimer, president of consumer education at SmartCredit.com. That’s because your credit-utilization ratio—the amount of debt you have relative to your credit limits—is calculated for balances on individual cards as well as overall. In addition, store cards tend to charge steep rates, so if you don’t pay the balance before the interest-free period is over, you will rack up big charges.
2. Trashing a Parking Ticket
Parking and speeding tickets, library fines, and other dues to the government left unpaid won’t go directly to your credit report. But if they are eventually reported to a collection agency, they could damage your score. That goes for anything that could go to collections, such as unpaid rent and medical bills. And even if you pay up, collections will appear on your report for seven years.
3. Stuffing Your Wallet With Cards
If you’ve had a handful of cards for years, they won’t hurt your score. But if you open several new accounts in a short period, your score is likely to take a hit, and you may not benefit immediately from expanded credit limits.
4. Transferring a Balance to a New Card
The inquiry on your report from the new lender may shave a few points from your score, but the real problem is what you do with the old account. If you close it, your overall credit limit could go down, and your credit-utilization ratio will increase if you have debt on any remaining cards. Your best bet: Leave the old account open but keep a zero balance.
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