Here are a couple of rules of thumb for your consideration. Your minimum credit score should be at least 650. If your credit score is below 650, there are ways to fix it. Is that how it works…
HAS. You can dispute anything on your credit report. If the merchant cannot provide proof of their claim, then the item must be removed from your credit report. For example, if Department Store X says that you did not pay off the $72 balance on your X Card in 1997, and you say you did, then Department Store X has 30 days to provide documentation showing that the bill is not correct. paid. . If they can’t prove your claim, the outstanding debt is eliminated and you move toward a higher credit score. If department store X is correct and you owe them $72, then you know the problem and have a chance to pay the $72…again, you’re moving toward a higher credit score.
b. Obtain and review copies of your top three credit reports annually, more often as you approach critical junctures where your credit score is especially important.
against Between reports from the Federal Trade Commission (“FTC”) and CBS News, an estimated five to eighty percent of credit reports contain errors. Some mistakes are good for you and some not so good. When I was twenty-five I checked my credit reports and was so happy to learn that I hadn’t just bought a new car, but had paid for it with a perfect payment history. It was great for my young credit history – I never found the car.
d. Your credit score contains five components. Here are the five components and their degree of importance by percentage:
- Payment history (35%) – Here, credit bureaus (CBs) look at mortgages, credit cards, installment loans, retail accounts, adverse public records like bankruptcies, judgments, judgments, liens, garnishments, late payments, etc. . If you are past due, CBs will look at (a) the amount past due, (b) the amount of time past due, (c) the number of accounts past due.
- Amounts Due (30%) – CBs are reviewing the type of accounts you use and the amount of credit you are using relative to the credit available to you. For example, all things being equal, a person with balances equal to 95% of available credit on ten personal credit cards totaling $50,000 of outstanding debt will have a lower credit score than a person with balances of 50% on three credit cards totaling $10,000 of outstanding debt.
- Length of credit history (15%): Central banks are looking at specific types of accounts, how long the accounts have been open, and the level and timing of activity within the account. Surprisingly, for credit scoring purposes, it seems that it is actually better to have credit accounts with outstanding balances (within reason) than to have no open accounts or no credit history at all. Being debt free can actually lower your credit score. I have a friend who is a very astute and very successful former international banker. He has done business in more than 20 countries and has lived in nine countries. This is a person with exceptional success, wealth, and highly responsible money management practices. He was turned down when he applied for a credit card at the same bank where he worked. Reason: No US credit history.
- New Credit History (10%) – In short, CBs look to see if you’ve been opening or trying to open a lot of new accounts recently. As you can imagine, someone who is thinking of lending you money gets very nervous when they discover that you are borrowing money from everyone.
- Type of credit used (10%): Central banks analyze the balance of debt distributed among different types of debt, from credit cards to mortgages and secured or unsecured.
Your credit score is based on all of the above items. It is not a pass-fail circumstance for each of the categories. Your score is produced in aggregate and that score is constantly changing. One person’s score and financial profile will be different than someone else’s. The information presented here is for the thick part of the Bell Curve, but it provides solid guidelines.
ME. If you’re focused on an acquisition (or other type of loan) and your score is below the 650 mark, keep in mind that a trading partner’s score of 700 or higher can help offset your score. When lenders are considering the qualifications of borrowers, they look at the entire “borrower,” whether it’s one person or a legion of people.