- 0 - 6 Months - Very Bad
- 7 - 23 Months - Bad
- 24 Months - This is when the score will start to improve
- Considers balances on revolving accounts not installment loans.
- Revolving balances greater than 50% of the limit will affect the score adversely.
- Revolving balances greater than 75% of the limit will severely affect the score adversely.
- It is generally better to have some small balances than to have all zero balances.
- American Express has no high balance limit. They report the higher of last month's balance or the current month's balance as the high credit limit.
- Length of time someone has had credit.
- Age of oldest tradeline.
- Number of new tradelines.
The ideal number of tradelines is 3-5 depending on the length of time someone has had credit. Opening new accounts affects the calculation for how long someone has had credit.
- 1 card for 10 years = 10 year history
- 1 card 9 years, 1 card 1 year = 5 year history
(Total of 10 years / Total of 2 cards)
Type of Credit
Ideally, there should be a healthy mix of revolving and installment accounts. The credit score will reflect all accounts - open & closed. A home equity line will be treated as an installment account rather than a revolving account in some cases. The high credit limit is a factor. When a home equity line is treated as installment debt, the ratio of balance to limit will not have an adverse affect.
5 - 7 inquiries per year is an acceptable amount. Each inquiry will reduce score between 5 and 15 points, depending on overall credit profile. Some inquiries (such as finance company installment accounts) can reduce score by as much as 20 to 30 points.Promotional inquiries do not hurt score.
Myth: If you catch up on your late payments, it won't show up on your credit report.
False! Each time you make a payment late you run the risk of the creditor reporting the late payment to the credit bureau. If you catch up, your credit report must show that you are caught up-but it will also show that you were late. And as a result your credit will suffer.
Myth: If you pay a small amount by the due date, it will be counted as a full payment.
Fact: False! You must pay the minimum amount required by the due date. Otherwise you creditor may report the payment as late.
Myth: If you have a good reason for not paying, it will be overlooked.
Fact: False! Contact your creditor if you experience a crisis, like losing you job or becoming seriously ill. You may receive a grace period or a payment plan from the creditor but never assume such an agreement is automatic.
Myth: Bad debts go away after they are paid.
Fact: False! Because credit reports provide a history of your credit, bad debt charge-offs and late payments can stay on your credit report for seven to ten years. You can, however, provide your own explanation of the situation for inclusion in the report to be received by future creditors.
Myth: You're not responsible for debts on joint accounts or co-signed accounts if they are not your purchases.
Fact: False! Any time you are a joint account owner or co-signer, regardless of whether you've paid your share, both parties can be held completely responsible for the payment. It's important to refinance after a divorce since any late payments on a joint or co-signed account will show up on your credit report.
Myth: It's hard to get a copy of your credit report.
Fact: False! You have the right to see what is in your credit report. A copy of your credit report may be free or may cost you a small amount of money. Call us to find out how you can get a copy of your credit report.
Myth: If you have credit problems, your credit score will not improve for seven years.
Fact: False! You can improve your credit score over a shorter period of time because recent entries to your credit report carry more weight!