Credit 101
Credit 101 Your credit score is extremely important, because a variety of financial decisions are based on your credit score model, such as: Being approved or declined for a loan/credit card Whether you are required to put down a big deposit, small deposit or no deposit at all Whether you are required to put down a big down payment, small down payment or no down payment for that car or mortgage loan Whether you are offered a high or low interest rate for credit purchases Better rates, and offers for credit cards or loans Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 3 Different types of Bureaus There are three different types of credit scores and they are based upon the three different national credit bureaus. Each credit reporting agency has a different brand name for their main scoring model: For Equifax, it is called the Beacon Score For Experian, it is called the FICO Score For Trans Union, it is called the Emperica Score Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 How to Improve Your Score Payment History (about 35% of total score): How have you paid your debts in the past? Specifically, how late you payments were, how much was owed, how many late payments, and how recently they occurred are all taken into account. According to fair Isaacs, a 30-day late payment made just a month ago will count more than a 90-day late payment made 5 years ago. Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 How to Improve Your Score Amounts Owed (about 30% of total score) How much is too much? While owing a lot of money on many accounts might indicate that you are overextended, you score will not necessarily be harmed by large outstanding amounts. What is important is how many accounts have balances and how much of the total credit line is being used on credit cards and other "revolving accounts." Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 How to Improve Your Score Length of Credit History (about 15% of total score): How established is your credit? How long has your credit accounts been established? How long since you used certain accounts? Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 How to Improve Your Score New Credit (about 10% of total score) Even though this category makes up only about 10% of the total score, applying for too much new credit is probably one of the easiest ways for people to inadvertently harm their credit score. Here the scoring takes a look at how many new accounts you have established, how long has it been since you have opened a new account and how many recent requests have been made by credit reporting agencies Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 How to Improve Your Score Types of Credit (about 10% of total score) Is it a healthy mix? This factor takes into account your mix of installment loans, mortgages, retail accounts, credit cards and finance company accounts Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 7 Steps to Re-establishing Your Credit 1) 2) 3) 4) 5) 6) 7) Pay off your debts Design a plan to manage your money Pay with Cash Obtain your credit report Apply for secured credit Apply for unsecured credit Continue to educate yourself Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 Adding your own statement to the file If investigation does not resolve the dispute to your satisfaction, you may enter a statement of 100 words or less into your file explaining why you think the record is inaccurate. Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 Accurate negative Information When accurate negative information generally can stay on your report for seven years Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 What is considered in your score Current balances on accounts: Accounts showing all payments were on time are positive. Length of time accounts established: Long-established accounts are positive Bank revolving accounts: Lack of accounts, or too many can be negative. Reported delinquencies: Negative, especially if severe and recent. Number of accounts with balances: Too many credit card accounts may have a negative effect on your score. Number of finance company accounts: Loans from finance companies may negatively affect your credit score Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 What is considered in your score Recent payment history: An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances Proportion of balance to your credit limit: If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score Number of recent inquiries: Not all inquiries are counted. Inquiries by you, or creditors who are monitoring your account or looking at credit reports to make "pre-screened" credit offers are not counted. No recent (non-mortgage) account balance information: Can be negative when seeking mortgage loans Legal item filed or collection item reported: Negative, effect decreases with time. Accounts not paid as agreed and/or legal item filed. Your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy Employment and residency: Longer time in your job and at your residence can help your score. Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 How will the credit bureau respond to my dispute? “We have changed your credit file as requested.” Your credit file will not be changed because (reason). “The party involved did not respond, so the information is being removed by reason of default.” Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 Bankruptcy’s Bankruptcy will show up on your credit report as a public record and may remain on your report for up to 10 years. Each account included in the bankruptcy will show up on your credit report as wither a “charge off” or a “bankruptcy liquidation.” Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 Sample statement of dispute “This is not my account. I have never owned money to this creditor. Apparently a mistake was made in the reporting.” On (date), I moved to another address. I notified all creditors, including (name of creditor) promptly. (Name of creditor) was slow in changing my address in its file. Subsequently, I did not received my billing statement for (how long). Once I received the statement at my new address, I paid this creditor.” Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 Sample statement of dispute On (date), I was hospitalized at (facility). The medical bills were forwarded to my insurance company for payment. My insurance company delayed in paying and the hospital turned my account over for collection. Afterwards, my insurance company paid the hospital.” Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 Sample statement of dispute “Attention. Apparently someone has been using my identification to obtain credit. Please verify with me at (phone number) prior to the extension of new credit.” “During the period from” (beginning date) to (ending date), I was laid off work without advance notice. I have always paid my creditors promptly and satisfactorily prior to and since that period. I am now gainfully employed an have been with the same employer since (starting date). Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 What can I do to improve my score? Have you paid your bills on time? What is your outstanding debt? How long is your credit history? Have you applied for new credit recently? How many and what types of credit accounts do you have? Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177 For more information and to receive copies of the letters to dispute the errors on your credit report Email request to: Paul@PaulMirador.com Subject line: Please send me the Credit Letters Kit Mr. / Mrs. (Your First and Last Name) 123 Any Street City, State, Zip Code I’m also interested in the following: __ A FREE Comparative Market Analysis of my residential home __ I’m looking to sell / buy my residential property in the next ____ weeks / months __ Please contact me at ( ) ________ - ________ wk / home /mobile Paul Mirador Realtor Paul@PaulMirador www.PaulMirador.com DRE# 01839177
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