Bad Credit Score - How Is Your Score Calculated?
If you have a bad credit score there are actions you can take to fix this. First let's discuss how your score is calculated.
1. Payment History - this accounts for approximately 30% of your score. This comes from your record of making on time or late payments. It also includes negative items such as charge offs, judgments, collections … The older a debt is the less it will impact your payment history.
2. Debt - this is roughly 30% of your score also. It accounts for how much debt you are currently carrying. For example do you have student loan debt, are your credit cards maxed, do you also have a car loan … The more available credit you have the better you will look.
This is also called your ratio of available credit to debt. In other words you will appear more financially responsible if you can show that you have available credit that you are not using.
3. Age of credit - this is about 20% of your score. This is exactly what it sounds like; how long you have been using credit? It also will factor in the age of different accounts and your overall amount of time. In general the older the credit file the better your score will be.
4. Diversity of accounts - this is about 10% and includes what types of accounts you have. For example; credit cards, mortgage, auto loan … If you have different types of accounts it will help, however this is only a minimal contributor to your overall score and shouldn't be a priority if you are trying to raise your score.
5. Inquiries - this is also about 10% and looks at how often your credit is being checked. The more often it is run the more it will appear that you are actively looking for credit. However if instead it is only run periodically roughly 3 or 4 times a year, you will appear more responsible and it should help.
The exact formulation for your FICO score is held under lock and key and is top secret. This is because they do not want consumers to know exactly what to do in order to trick the system. However it is pretty obvious.
If you are suffering from a bad score the most effective steps you can take to improve your score is to remove negative items from your report. This can be done by disputing each bureau with a dispute letter. Once the bureaus deem your dispute valid they will conduct an investigation into the item. If it is not verified by the lender then it must be removed from your report.
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For a free credit consultation call 1-800-232-2903 or visit us to learn more about bad credit and what you can do to fix it at http://www.707creditscore.com/deleting-bad-credit
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