Secrets of Credit Score Part 3

Consumers should do what a good broker does -- look for a lender that offers the best rate for a specific score. Consumers can typically keep their credit scores high by maintaining a long history of always paying their bills on time and not having too much debt. Consumer advocates recommend checking your report periodically. If you see inaccurate information on your report, inform the credit reporting company.

The FICO score is derived from a formula that was created in the 1950s by Fair Isaac and Company as a way to help lenders to more accurately and more consistently measure the credit risk associated with borrowers. Consumers with past (or present) credit problems need to educate themselves, learn how to fix past problems, establish new credit (the right kind of credit!), and to change their credit habits going forward.

Lenders generally like the amount of credit you’re using to be under 20% of what’s available to you. So if you have two credit cards, each with a limit of $5,000, you want a total debt of $2,000 (or 20% of $10,000) or less. Lenders look for trends. Lenders use your credit-use ratio as a key factor for determining your creditworthiness. If you keep this ratio at a maximum of 30% (meaning total outstanding balance divided by total credit limits), it will help your credit score.

Lenders report your activity every 30 days to the credit bureaus and that’s the information that is used to determine your score. Lenders request a current score when you submit a credit application, so they have the most recent information available. Therefore, by taking the time to improve your score, you can qualify for more favorable interest rates. Lenders have little or no patience for someone who's a credit risk.

Lenders like to see that you're spending within your means, which translates to using less of your credit limit — the lower percentage the better.

Check the reports and if you find mistakes, fill out the simple form to dispute them. Check your credit score online. Improve your credit score. Checking your credit report on a regular basis to ensure it is accurate and error free is recommended by Fair Isaac the inventor of the FICO Score. Maintaining an error free credit report is part of credit management which will improve your credit rating over time.

Creditors may also use a generic scoring model developed by a credit scoring company. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. Creditors often use third-party debt collectors to try to collect payment from you. Creditors might send your account to collections before or after charging it off.

Paid collection accounts hold just as harmful of a stain on your score as unpaid. The upside, though, is that they are less difficult to get removed. Paid off debts that are shown for the reason that first-rate aren’t doing you because much magnificent since they might if they were corrected. If there are any inaccuracies, you need to speak to the lender worried with the loan and necessitate that they correct the records on the credit reference file and confirm to you when this has been sorted.

Personally, I think keeping credit cards you don’t use open just for the sake of a couple points on your credit score silly. All those extra cards have too much potential for problems. Perhaps a bill was sent to a wrong address, or you have had a dispute with a vendor. It is likely that you have some issues on your report that should be disputed or corrected. Perhaps the clerks will always for your photo ID!

Financing has become a nightmare, especially when you can't get rid of your current home. Nonetheless, I am safe to assume I passed automated underwriting and am awaiting a manual double check of the file from the bank. Financial counsellors all agree about one thing: maintaining a good credit is important to conducting a healthy financial life.

Thank you for taking your time to read this article. Your comments on this article will be highly appreciated. Information shared here does not constitute financial, legal, or other professional advice. This article is intended to provide general information only and does not give advice which relates to your individual circumstances.

Gurmit is an insurance and mortgage expert. To get in touch with Gurmit Singh, please visit his website www.gurmitsingh.ca Thank you for taking your time to read this article. Your comments on this article will be highly appreciated. To access hundreds of Gurmit’s articles please visit http://gurmittoor.blogspot.com.

Information shared here does not constitute financial, legal, or other professional advice, and no attorney-client or confidential relationship is or should be formed by use of the site. This article is intended to provide general information only and does not give advice which relates to your specific individual circumstances. Information in this document is subject to change without notice. Any link-listing or ad-listing on this site does not constitute any type of endorsement.

Gurmit loves travelling; he has been over 70 countries. He speaks fluent Cantonese, Polish, Hindi, Punjabi and English. Gurmit is an author, writer, insurance and mortgage expert. He frequently writes on various topics of interest to his readers. Gurmit Singh is a licensed mortgage expert with Dominion Lending Centres Mortgage Villa.

Gurmit Singh, mba
Mortgage Expert
M08009905
Dominion Lending Centres Mortgage Villa (11574)
Email:gurmit@gurmitsingh.ca
Website: http://www.gurmitsingh.ca