Kathy Foran - REALTY EXECUTIVES Boston West



Posted by Kathy Foran on 6/12/2016

Credit scores are complicated. There are numerous companies who calculate credit reports. What's more, those companies have different versions of their credit calculators, so any given person can have tens or even hundreds of different credit scores. In this way, credit reports can seem subjective or arbitrary. While that may be true, credit scores can play a role in which credit cards we receive and what loans we get approved for. And now some employers are even running credit checks on their potential new hires. Read on to learn all you need to know about what goes into your credit score.

Who's FICO?

The industry leader when it comes to credit scores is FICO. They set the standard and started releasing credit scores to lenders in 1989. Since then, however, a number of new names have entered the market like VantageScore and CE score.

How is my score calculated?

Your FICO score is broken down accordingly:
  • 35% - Payment history
  • 30% - Amounts owed (debt)
  • 15% - Length of credit history
  • 10% - Types of credit used
  • 10 % - New credit
  1. Payment history The most important aspect of your credit score is repayment history. It includes information on all of your payments (or lack thereof) and whether you were late or on time. It takes into account things like foreclosures, repossessions, and settlements.
  2. Amounts owed (debt) This section is complicated by the fact that having debt isn't necessarily a bad thing for your credit score. It includes your debt-to-limit ratio, the number of accounts with debt owed, and the total amount of debt across all accounts. If you're keeping up with payments and not hitting credit limits, this section can work to your advantage. Owning huge amounts and having poor repayment habits will certainly harm your score.
  3. Length of credit history Being consistent in paying off your debt over a long period of time can be reflected positively on your credit score. Similarly, if you have a very short credit history, lenders are less likely to approve you for what they see as potentially risky loans. This section also includes the amount of time you've had certain accounts and how long it has been since you used those accounts.
  4. Types of credit used If you have proven that you have successfully managed multiple types of credit (retail cards, credit cards, student loans, mortgages, etc.) this will reflect positively on your credit score. A lack of credit diversity won't win you any extra points.
  5. New credit Beware of opening several new cards or taking on multiple loans within a short span of time. It will raise red flags to lenders that you are having financial difficulties and are a risky borrower.

Build good credit habits

Credit scores are daunting and we often overlook them if we aren't in current need of loans. But like maintaining your health, it's important to take preemptive measures to nurture your credit score. Here are some good habits to build that will save you money and stress in the long run:
  • Check your free credit report annually
  • Set up auto-pay on credit cards and loans and keep an eye on your checking account to make sure it has sufficient funds
  • If you are in financial trouble contact your lenders and ask about your options. Going AWOL is the worst thing you can do on your credit debt
  • Keep credit card balances low and avoid opening several cards within a short period of time
  • Take advantage of free online tools like Credit Karma to calculate your debt repayment
 





Posted by Kathy Foran on 3/27/2016

Did you know your credit score is always changing? Your credit score could be one number on one day and a different figure the next and even vary from one credit reporting agency to the next. Your credit score also known as your FICO score is based on the information contained in your credit record. Since your credit file is always changing so is your score. Your credit record changes every time a company you have credit with reports an on-time payment — or more important, a missed payment that's now more than 30 days late. Your score changes each time your credit card balance changes or you apply for new credit. There are three main credit reporting agencies; Experian, TransUnion and Equifax. Another factor that could affect your score is that not all lenders report to all agencies. To know your credit score you can pull a free credit report from all three agencies once a year. Look for missing or incorrect information. It is important to get that resolved as soon a possible. Click here for more information on obtaining a free credit report.





Posted by Kathy Foran on 5/31/2015

You may think your credit is perfect because you pay your bills on time and never miss a payment. If you are having trouble getting a loan and don't know why, it could be that your credit habits are scaring away lenders. Here are some items that may be lurking in your credit report that are making lenders leery: Multiple Lines of Credit If you have a lot of open credit cards this can be a bad signal to lenders. Lenders see this as an indication that you might be having financial difficulty. Credit Inquiries Lenders also don't like it when you inquire about new lines of credit. Applying for credit can have a negative impact on your credit score. Every time you allow a potential lender to pull up your credit report, your score can take a small hit. Co-Signing a Loan When you co-sign for a loan that dept becomes your debt and shows up on your credit report. Potential lenders look at that debt as yours because you are ultimately responsible for it.  If the person you co-signed for stops paying, pays late, or misses payments, your credit report can be negatively impacted. Making Minimum Payments Lenders who view your credit report don't like to see that you are paying just the minimum payment. If you consistently pay the minimum payment due, it could indicate financial stress or confirm that you are unable to pay off the full balance.  





Posted by Kathy Foran on 1/27/2013

Credit cards can be a great source of safety and  convenience but they can also be trouble. Buy now and pay later can have serious consequences and lead to financial trouble. So in order to stay financially fit it is important to use your credit cards wisely. Here are a few tips to help you make the most of your credit cards: • This seems simple but pay off your balance every month in full.  Interest charges on your credit card purchases can add up fast. • If you do carry a balance, pay back as much as you can as quickly as possible. You don't have to wait until the payment due date. • Avoid using your credit card to withdraw cash or transfer money. Interest is charged on these transactions immediately. • If you are considering a card with an annual fee, be sure that whatever reward or benefit you're getting is worth the cost. Bottom line stay within your budget. Only use credit cards for things you can afford. If you can't afford it don't buy it. You will be much happier without the new sweater when you have enough money to buy a new home.