Understanding Your Credit Score了解你的信用评分.docx

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1、UnderstandingYourCreditScoreWhatdoesyourscoremean?Thisratingsystemisasnapshotoftheriskyoucurrentlyrepresenttoalender.Severalparametersinyourcreditfile,includinglengthofcredithistory,numberofopenaccounts,loans,mortgages,publicrecords,andothersareformulatedtoproduceathree-digitscorebetweenabout300and9

2、50.ThereareotherscoresusedbylendersandinsurancecompaniessuchasApplicationandBehaviorscores.Theseotherscorestakeotherinformationintoaccount.Usuallyalenderwilluseacombinationofyourcreditscorewithotherfactorswhendeterminingyourrisk.Theyallhavethesameobjective,todeterminethepotentialriskoftheborrower.Re

3、gardlessofhowthescorewasgenerated,theyallyieldanindustrystandardthree-digitscore.Thisscoreplacestheborrowerinoneofthreemaincategories.Prime,Sub-Prime,andCautiousPrimeIfyourcreditscoreisabove680,youareconsideredaPrimeborrowerandW川havenoproblemgettingagoodinterestrateonyourhomeloan,carloan,orcreditcar

4、d.Sub-PrimeIfyourcreditscoreisbelow680,youareSubPrime*,andwilllikelypayamuchhigherinterestrateonyourloan.CaUtiOIISBelow560istheCautiousscore.Atleastthatishowmostlendersandcreditissuersperceiveit.Youcanstillgetacreditcardbutyouwilllikelybehitwithasecuritydepositorhighacquisitionfee.Inadditiontothatyo

5、urinterestratewilllikelybe22to23%.Youcanforgetaboutmosthomeloansandthemajorityofnewcarloansatthisscore.Below560isnoplacetobe.Youwillpaymuch,muchmoreinhigherinterestandunnecessaryfees.Youmayevenpaymoreforyourinsurancerates.Averylowscorecanevenpreventyoufromgettingajobwithmanycompanies.Howmuchdoesalow

6、scorecostyou?CreditCardSMostifnotallprimecreditcardsareentirelyoutofreachtoconsumerswithbadcredit.Andthefewcreditcardsthatareavailabletothem(knownasusub-primecards)typicallyrequireexorbitantsetupfeesorrecurringmonthlyfees,offerverylowcreditlines,oftenrequirecashdeposits,andinmostcasesdonotevenreport

7、yourpositivecreditactivitytothecreditbureaus.AUtOmObileFinanCinaIfyouaremakingpaymentsonacar,youareprobablypayingbetween$5,000and$9,000morejustforhavingbadcredit.Thisaddedinterestshowsupeverymonthinahigherpayment.Takealook.$20,000carpaidover5years:CREDITSTATUSRATEPAYMENTCOSTOFBADCREDITPerfect10%$424

8、.94$0.0()MildlyDamaged14%$465.37$4,722.54Damaged20%$529.88$8,593.30HOmeMOrtaaaeBadcreditinautofinancingcanreallyhurt,butitisnothingcomparedtothecostofbadcreditwhenahomeisinvolved.Atypicalhomecancostbetween$50,000and$130,000moreininterestifyouarebuyingthehomewithbadcredit.$100,000homepaidover30years:

9、CREDITSTATUSRATEPAYMENTCOSTOFBADCREDITPerfect7%$655.30$0.00MildlyDamaged9%$804.62$50,155.24Damaged12%$1,028.61$130,791.63Asyoucansee,alowscorecancostyouhundredsofdollarspermonth.Itisimportanttoobtainandmaintainashighacreditscoreaspossible.Howarecreditscorescalculated?Themethodsofcalculatingyourcredi

10、tscoremaydifferslightlydependingonthecreditbureau.Whenobtainingyourscoreitisadaptedtoeachbureauandisgivenitsownname:Equifaxuses“Beacon，TransUnionuses“Empirica,andExperianusesuExperianZFairlsaac.nThesescoresarealsoreferredtoasyourBureauScores.nSinceyourscoreisderivedfromyourbureaudata,itwillchangeeve

11、rytimeyourreportschange.Howeveryourscoreiscalculated,itwillalwaystakeintoconsiderationmanycategoriesofinformation.Noonepieceofinformationorfactordeterminesyourscore.Astheinformationinyourcreditreportchanges,theimportanceofoneorseveralfactorsmaychangeinyourcreditscore.Lenderslookatmanythingswhenmakin

12、gacreditdecision,includingyourincomeandthekindofcredityouareapplyingfor.However,yourcreditscoredoesnotreflectthesefactsasitonlyevaluatestheinformationretainedbythecreditreportingagency.Whatfactorsaffectyourcreditscore?Therearefivefactorswhichareusedincreditscoringcalculationsthatdetermineyouroverall

13、creditscore.PreViOUSCreditPerfOrrnanCe(PaVmemHiStOrV)35%Alenderwantstoknowwhatyourpaymenthistoryislike.Haveyoupaideverythingontime,areyoulateonanythingnow,etcEYourpaymenthistoryisjustonepieceofinformationusedincalculatingyourscore,althoughitcanbetheveryimportant. Paymenthistoryonyouraccounts.Thesein

14、cludecreditcards,retailaccounts(departmentstorecreditcards),installmentloans,financecompanyaccountsandmortgageloans. CollectionitemsandPublicrecords.Thisincludesjudgments,bankruptcies,suits,liens,collectionitemsandwageattachments.Mostoftheseareconsideredquiteserious,althougholderitemscoudlessthanrec

15、entones. Itsallinthedetails.Thisincludesspecificdetailsonlateandmissedpayments.Negativeinformation/latepaysaredeterminedusingthreefactors.oRecency-Howlongagowasthelastdelinquency?Howoldisthelatepay?A30-daylatepaymentmadejustamonthagowilleffectyourscoremuchmorethana90-daylatepaymentfromfiveyearsago.o

16、Severity-Whatlevelofdelinquencywasreached?Howlatewasthepaymentmade?30days,60days,90daysorworstofall,isthepaymentstilloutstanding.oPrevalence-Howmanycreditobligationshavebeendelinquent?Theamountofnegativeitemsascomparedtoyourtotalamountofavailablecredit.Forinstance,5accountsshowing3latepaymentsismuch

17、worsethan10accountsshowing4latepayments.Oneofthebiggestsubfactorsishowmanyaccountsshownolatepayments.Agoodtrackrecordonmostofyourcreditaccountswillincreaseyouroverallcreditscoresubstantially.CUrrentLeVelOflndebtedneSS(AmOUntOWed)30%Howmuchistoomuch?Cantheborrowerpaymeandstillaffordtopayhisotherbills

18、?Notnecessarily.Havingavailablecreditcanactuallyhelpyourratioofdebttoavailablecredit.Thesearethetypesofquestionsthatmostborrowerswanttoknowandtheanswersarealmostasimportantasyourpreviouscredithistory. Totalamountowedonallopenaccounts.Payingoffyourcreditcardsinfulleverymonth,doesnotmeanthattheywontsh

19、owabalanceonyourreport.Yourtotalbalanceonyourlaststatementisgenerallytheamountthatwillshowinyourcreditreport. Specifictypesofaccounts,suchascreditcardsandinstallmentloansarescoreddifferentlyandinconjunctionwiththeoverallamountowedonallopenaccounts.Thisalsofactorsintoyourbalanceoneachspecifictypeofac

20、count.Forinstance;youhaveacreditcardwithaverysmallbalanceandnolatepays.Eventhoughthebalanceislow,thisstilllooksverygoodasitshowsthatyouareabletomanageyourcreditresponsibly Howmanyaccountsdoyouhaveopenandhowmanyhavebalances?Alargenumberofopenaccounts,evenwithsmallbalances,canindicatehigherriskofover-

21、extension.Thisisweightedinyourcreditscorebutmostlendersleaveittotheirdiscretionastheyhaveaccesstoyourincomeamount.Forthemostpartthoughitisgoodnottohavetoomanycreditcardaccounts,threemaximum. Howmuchofthetotalcreditthatisavailabletoyouareyouusing?Inotherwords,Areyouclosetomaxingout?Forexample,ifyouha

22、veacreditcardwithanavailablecreditlineof$1000dollarsandyouhaveacurrentbalanceof$850.00ormore,thenyouarenearlyumaxedout.Severalcreditcardsorotherdebtswithbalancesapproachingthecreditlimitwilleffectyourscorenegatively.Evenifyouhavemadeyourpaymentsresponsibly.Yourcreditscorewillfactoryouroverallratioof

23、debttoyouroveralllimits.OverallRatioAccountAmountowedLimit/LoanamountPercentageVisa$500$100050%Mastercard$50$10005%Carloan$11,000$25,00044%Homeloan$95,000$145,00065%Total$106,550$172,00061%AmolIntOfTimeCreditHaSBeenInUSe(LenathOfCredit)15%Generallyspeaking,thelongerthecredithistorythebetteryourscore

24、.However,thisfactoronlymakesup15%ofyourtotalscoresoevenyoungpeople,studentsorotherswithshorthistoriescanstillscorehighoverallaslongastheotherfactorsshowgood.Ifyouarenewtocreditthanthereislittleyoucandotoimprovethispartofyourscore.Openanaccountandbepatient. Howlongyourcreditaccountshavebeenopenorthen

25、umberofmonthsyouhavebeeninthecreditbureau,sfile. Theageofyouroldestaccountandtheaverageageofallyouraccountsaretakenintoconsideration HowlongithasbeensinceyouusedcertainaccountsaswellasthemixofolderandnewtradelinesPUrSUitOfNeWCredit(10%)Creditismuchmorepopulartoday.Justlookatthenumberofcreditcardoffe

26、rsyougetviatheInternetandinthemail.Consumerscannowshopforcreditandfindthebesttermstomeettheirneeds.Eachtimesomeonerunsacreditcheckonyou,itcreatesaninquiry.FairIsaachaschangedsomeofitscalculationstoaccountforthesenewtrends.Specifically,theytreatagroupofinquirieswhichprobablyrepresentsasearchforthebes

27、trateonasingleloanasthoughitwasasingleinquiry(note:thisonlyappliestoautoormortgageloaninquiries.)Forexample,autoloaninquiresthatarewithin14daysofeachotheronlycountasoneinquiry.Yourcreditscoretakesintoaccount: Howmanynewcreditobligationshaverecentlybeenassumed?Openingseveralcreditcardaccountsatthesam

28、etimecanlookbad.Towhatextentisthisconsumertryingtoopennewcreditaccounts7 Howrecentweretheseefforts?Howlongithasbeensinceyouopenedanewaccount.Primaryconsiderationisgiventothefollowing:oNumberofinquiriesinlastsixmonthsoNumberoftradelinesopenedinlastyearoNumberofmonthssincemostrecentinquiry Therearenog

29、oodinquiries.Inquiriesortypicallyseenasarequestforcreditandthusarefactoredasifyouaresearchingforcredit.Everytimeyoufilloutoneofthosecreditcardapplicationstogetafreehat,youarealsogettingafreeinquiry.Everytimeyoufilloutanonlineapplicationforacreditcard,orothertypeofloan,youaregettinganinquiry.Toomanyi

30、nquirieslooksbad.Whiletherearenogoodinquiresthereareneutralinquiries.Theseinquiriesaremostoftenknownas:oConsumerinitiated.Arequestforyourcreditreportshowsasaconsumerinquiry.Whenyourunacreditcheckonyourself,(providedthatyoudontcallyourmortgagebrokerbuddytopullyourreport)oPre-Approval.Ifapotentiallend

31、erhasviewedyourcreditreportstodeterminewhethertheywanttoofferyoualoan,thesearenotfactoredintoyourscore.However,onceyoufilloutacreditapplication,yourfullreportW川bereviewedandaubadninquirywillappearonyourreports.oPeriodicReview.Manylenderswillperiodicallyreviewthecreditreportsoftheircurrentcustomersto

32、seeiftherehavebeenanymajorchangestotheircreditreports.Ifthelenderdiscoversthatyourcreditscoreisnowtoolowfortheirstandards,theymaycloseyouraccount.Theseinquiriescreatedasaresultoftheperiodicreviewsarenotsupposedtobefactoredintoyourcreditscore.#ofTypedays#ofinquiriesNotesagoDept.Store681Appliedforoned

33、ept,cardMortgage651Twomortgageappswithin30daysofeachothercountsasonlyMortgage56oneinquiryAuto251Auto9Notcountedatallifwithin30daysoffirstinquiry.ThesetwodontcountatallasAuto7theywerewithin30daysofthefirstappandwithin15daysofeachother.Bankcard51Howinquiriesarecomputedissomewhatcomplex.Theabovetableis

34、meantasabasicguidebutdoesnotcoverallthedifferentcalculations.Asareasonablemeasureyoushouldavoidunnecessaryinquiries.Thesystemisdesignedtotakeintoaccountrateshoppingbutthingslikeapplyingtocreditcardofferswilladdinquirestoyourfile.TVPeSOfCreditEXPerienCe(10%)Ahealthymixofdifferenttypesofcredit,install

35、mentloans,retailaccounts,creditcards,andmortgage.Thisscoreisnotnormallyakeyfactorindeterminingyourscorebutitcanhelpaclosescore.Itsnotagoodideatotryandopendifferenttypesofaccountsjusttotryandmakethisfactorbetter.Itwilllikelyreduceyourscoreinotherareas.Youshouldneveropenaccountsyoudon,tintendtouseanyw

36、ay.Whattypeofaccountsyouhave,andhowmany,canmakeabigdifference.Theoptimalratioofinstallmentversusrevolvingaccountsdependsonyourprofileanddiffersfrompersontoperson.Onefactorthatseemstohavesignificantinfluenceisyourpercentofopeninstallmentloans.Toomanycanlowerthisportionofyourscore.CrackingthecodeIfyou

37、aredeniedcredit,youwillreceivefourreasoncodeswhichindicatewhyyouweredenied.Thesecodesappearinorderofimportance,below.Thefirstcodehasthestrongestimpact,followedindecliningimpactbythesecond,thirdandforthreason.Atypicalreadoutyourlendermightviewfollows.Thisparticularreadoutpresentsinformationfromallthr

38、eecreditagencies.Intheexamplebelow,theindividualfailedtoqualifyforeachcreditagencyandthereasonsarelistedindescendingorder.*borrower：smith,JOEm.*TUScore:00623Reason1=f022Reason2=016Reason3=028Reason4=004ExperianScore:00629Reason1=022Reason2=016Reason3=028Reason4=032EQUIFAX:00617Reasonl=022Reason2=016

39、Reason3=028Reason4=032Allthreecreditagenciesdonotalwayshavetheexactsameinformationthereforeyourthreescoreswilldifferslightly.Asageneralrulethough,ifyoufailtoqualifyatoneagencyyouarelikelytostillbedeniedifoneoftheotherbureausischecked.Mostmortgageloanscompanieswillrunallthreecreditagenciesandtakethel

40、owestscore.ReasonExperianTUEquifaxAmountowedonaccountsistoohigh111DelinquencyonAccounts222Toofewbankrevolvingaccounts3N/A3Toomanybankornat,lrevolvingaccounts4N/A4Toomanyaccountswithbalances555Consumerfinanceaccounts666Accountpaymenthistorytoonewtorate777Toomanyrecentinquirieslast12months888Toomanyac

41、countsopenedinlast12months999Proportionofbalancestocreditlimittoohigh101010Amountowedonrevolvingaccountsistoohigh111111Lengthofrevolvingcredithistoryistooshort121212Timesincedelinquentistoorecentorunknown131313Lengthofcredithistoryistooshort141414Lackofrecentbankrevolvinginformation151515Lackofrecen

42、trevolvingaccountinfbnation161616Norecentnon-mortgagebalanceinformation171717Numberofaccountswithdelinquency181818Toofewaccountscurrentlypaidasagreed192719Timesincederogatorypublicrecordorcollection202020Amountpastdueonaccounts212121Seriousdelinq.,derog.publicrecordorcollection222222Toomanybankornat

43、lrevolvingacctsw/balancesN/AN/A23Norecentrevolvingbalances242424Proportionofloanbalancetoloanamt.toohigh33333Lackofrecentinstallmentloaninformation32432DateoflastinquirytoorecentN/A19N/ATimesincelastaccountopeningtooshort303030Numberofrevolvingaccounts26N/A26NumberofbankrevolvingorrevolvingaccountsN

44、/A26N/ANumberofestablishedaccounts282828NorecentbankcardbalancesN/A29N/AToofewaccountswithrecentpaymentinformation31N/A31Notethatthesecodeschangeoften,andmaynotrepresentthecurrentcodesasofthiswriting.ImprovingyourcreditscoreNowthatyouknowhowyourscoreiscalculated,youcanbeginmakingchangestoyourcurrent

45、financialplanning.Thebestthingsyoucandoaresimple. Payyourbillsontime.Soundssimple,butthisisthebiggestthingyoucandotokeepyourscorehigh.Delinquentpaymentsandcollectionshaveamajornegativeimpactonascore. Keepyourbalanceslowonunsecuredrevolvingdebtlikecreditcards.Highoutstandingbalancescanaffectascore. T

46、heamountofyourunusedcreditisanimportantfactorincalculatingyourscore.Youshouldonlyapplyforcreditthatyouneed. Makesuretheinformationinyourcreditreportiscorrect.Ifitsnot,disputeitwiththecreditagenciesand/orwiththecreditordirectly. Removingnegativeitemsonyourcreditreportshasthebiggestimpactonyourcredits

47、core.Generally,negativeitemsstayonyourreportsforsevenyearsbutyoucanhireaprofessionalcreditrepairservice.CreditScoringFacts Payyourbillsontime.Soundssimple,butthisisthebiggestthingyoucandotokeepyourscorehigh.Delinquentpaymentsandcollectionshaveamajornegativeimpactonascore. Keepyourbalanceslowonunsecuredrevolvingdebtlikecreditcards.Highoutstandingbalancescanaffectascore. Theamountofyourunusedcreditisanimportantfactorincalculatingyourscore.Youshouldonlyapplyforcreditthatyouneed. Makesuretheinformationinyourcreditreportiscorrect.Ifitsnot,