Lynn D'Avolio
Coldwell Banker Residential Brokerage | 801-597-2857 | lynn1@soldbylynn.com


Posted by Lynn D'Avolio on 1/17/2017

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 Lynn D'Avolio on 11/29/2016

Did you know that you could drastically improve your credit score in just a year? Or that there are things that you can actively be doing to keep up your good credit score and make it to excellent? Improving your credit score involves improving many pieces of what makes up a credit score. The tips here are twofold. If your score is low and you are looking to greatly improve it, then you must first figure out why. Review the tips below to see if any listed can help you deal with your credit pitfall(s). If you have an average to good score and just want to improve it as much as possible then each of the steps below can give you insight into how to do so. Balances: The amount of revolving credit you have compared to the credit that you are using is a large factor in your credit score. It’s best to keep your balances from all of your credit cards under 30% of your revolving credit. Even if you pay off your credit cards every month, the amount of credit you are utilizing is recorded. In short, keep balances low, but also keep paying them off each month so you do not end up with a balance than can’t be immediately paid off. Credit Inquiries: Hard credit inquiries show up on your report for 2 years, but only affecting your score for around a year. Hard inquiries show that you are looking to use additional credit and too many hard inquiries in a short amount of time can negatively affect your credit score. One or two within a year’s time will not significantly affect your score but as that number gets higher it will. One way around this is to make those couple of inquiries within a 30-day period. FICO will count those inquiries as one since oftentimes multiple inquiries in a short period of time results in one loan— meaning you are not in search of multiple lines of credit/loans. But it’s best to be cognizant of this and strategic in how you view your credit report or apply for loans and credit cards. Payment History/On-Time Payments: If you have struggled with paying your bills on time and have seen a suffering credit score then this then would be a main reason behind your low score. And it’s time to take action and change that. This is one of the main factors in your credit score and therefore significantly impacting your score, either negatively or positively. It’s important to do everything in your power to pay all bills on time. Even being just a couple days late on payments will have affect. Length of Credit History: Length of credit is not necessary something that you can completely control. But it does have an affect on your credit score. As the length of your credit increases, and given that you are responsible with your credit, your score will improve. The most important piece to remember here is to be responsible with your credit. So what are you waiting for? If you haven't already, sign up for a free credit score site or find out if one of your credit card companies offers it. Frequently checking and seeing your score rise will provide you with the gratification you need to keep on track.





Posted by Lynn D'Avolio on 7/14/2015

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 Lynn D'Avolio on 1/6/2015

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.





Posted by Lynn D'Avolio on 5/28/2013

One of the biggest things that can impact your ability to get a loan for a home is your credit score. Credit scores measure the risk a lender may take when deciding on a mortgage. If your credit score is not where you want it to be have no fear it's never too late to become credit worthy. Your credit score is also known as your FICO (Fair Isaac Corporation) score, it is one of the tools that lenders use to evaluate a borrower's ability or likelihood to repay a loan. Credit scores range from 300 to 850 points. Credit scores over 720 are often considered excellent.  Scores of 680 – 719 are considered good. Scores that fall between 620-679 are questionable and typically require more review by the lender. A score under 619 usually disqualifies you from getting the best rates or even a loan at all. Here are five ways to raise your credit score: 1. Obtain your credit score from the three major credit score reporting agencies. They are Equifax, Experian and Transunion. 2. Review your report and look for any discrepancies. Your report will also give you a good idea of why your score may be low. According to myFICO.com, credit score calculation is based on five key components: payment history, amounts owed, length of credit history, new credit and types of credit used. 3. Come up with a plan to improve the five key components. Payment history carries the most weight it makes up 35% of your score. So be sure to pay your bills on time. 30% of your score is determined by the use of your available credit. Only use 30% of your maximum credit limit for each credit card and revolving accounts, using anything over that hurts your credit score. 4. If you have any past-due bills, judgments or collection accounts make arrangements to pay them as soon as possible. Some creditors may accept a portion of an amount due as payment in full. 5. Minimize your requests for new credit. Credit inquiries make up 10% of your score and can ultimately bring it down.