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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,
