Credit Facts

A credit score is a 3-digit number used to predict a person's credit worthiness and their likeliness of paying the debt or obligation back. This number is calculated based on algorithms predicting various factors such as default, bankruptcy, revenue etc. and based on all information contained in a credit report. Credit scores range from 300-850. The higher a credit score is, the more likely a person will be approved for credit or a loan. The lower a credit score is, the less likely a person is to be approved for credit or a loan. If someone is approved with a lower credit score, they will most likely pay higher interest rates and fees and/or thousands of dollars more over the life of their loan compared to having higher credit scores. 

• 35% = Payment History - How you pay your bills. On-time payments versus delinquencies. 
• 30% = Capacity & Amount Owed - Your credit usage or your balances versus their credit limits on open revolving accounts (credit cards). 
• 15% = Length of Time Held - How long you've had your accounts for starting with the oldest account.  
• 10% = New Credit - Any new account you've acquired and number of inquiries reporting on your report. 
• 10% = Types of Accounts Held - Installment loans versus revolving accounts. Revolving accounts are credit cards and some furniture accounts. Installment loans include mortgages, auto, personal, student, and recreational (ATVs, RVs, boats, and jet skis). 

• Debt Consolidation - The process of combining all outstanding debts into one loan account to lower monthly repayments or lower the interest rates on a loan. 
• Credit Counseling - The advice given by counselors on how to use credit responsibly and to get out of serious debt. Participating in credit counseling will most likely be noted by your creditors on your credit report and is comparable to filing for a Chapter 13 Bankruptcy showing a huge red flag for prospective credit grantors and does not restore your credit, although it is a step in the right direction. 
• Debt Negotiation - When a third party negotiates with creditors and establishes a payment plan for the debtor or on behalf of them. 

1. Pay all bills/accounts on time! One missed payment could dramatically lower your credit scores. 
2. Pay down revolving account balances (credit cards) to 30% or below for credit usage. Don't go over 30% of their credit limits even if you pay off the balances every month. This will have a huge impact on your scores very quickly. 
3. Keep all revolving accounts open and active, using them every 3-6 months or making payments monthly to keep creditors from closing them due to "inactivity," which will lower your credit scores. The longer you have these accounts, the better it is for your scores. 
4. Dispute the negative items with the credit bureaus and/or creditors to challenge any inaccurate, incomplete, outdated, duplicated, or unverifiable information to get them removed. This will look favorable to potential lenders or employers and may increase your credit scores. 
5. Stop applying for too much credit, especially in a short time. Every time you apply for credit, a lender orders your report from the bureau(s) placing a hard inquiry onto your report and lowering your scores. Soft inquiries don't affect your scores and are when a potential lender orders your report for a promotional offer (ex: pre-approval of a credit card). Hard inquiries affect your scores for the first 12 months only. 
6. Having various types of credit accounts is beneficial to your scores it is recommended to have 1 - 2 revolving accounts and 1 installment account (loans such as mortgage, auto, student, personal, or recreational) by the bureaus. 

• Late payments (30-180 days delinquent): Remains for 7 years from the date of the first missed payment. The late payment marking will remain regardless if the account was paid in full after it went to collections and is still will report as a negative item on your report. 
• Collection accounts: Remains for 7 years from the date of the first missed payment. Paying collections will not remove the negative item, but the status will show "Paid Collection or Settled for less than full balance" which is still a negative item on your report. 
• Charge-offs: Remains on a credit report for 7 years from the date of the first missed payment leading to the charge-off or date of first missed payment. 
• Bankruptcies: Chapters 7, 11, and 12 will remain on a credit report for 10 years from the filing date. Chapter 13 will remain for 7 years from the filing date. Any accounts "included in the bankruptcy" will remain for 7 years from the date they were reported to be "included in bankruptcy", regardless of type filed. 
• Child support judgments: Remains on a credit report for 7 years after the date the judgment was filed. 
• Civil and small claim judgments: Remains on a credit report for 7 years from the date the judgment was filed. 
• City, county, state, and federal tax liens: Remains on a report for 7 years from the date they are satisfied not filed. Liens on a report unpaid will plague the report. 
• Inquiries: All inquiries will remain on a credit report for 2 years from the date they were reported. Hard inquiries will affect your credit scores for the first year and soft inquiries will not affect your scores. 
• Lost credit cards: If there are no delinquencies, the account will be removed 2 years after it was reported lost. If there are delinquencies, the account will remain for 7 years after the delinquency. 
• Closed accounts: Closed accounts without a balance will remain on a report for 7 years from the date account was closed. Closed accounts with balances will remain for 7 years from the date the balance gets paid off. 

• Medical information (unless you provide consent)
• Notice of bankruptcy (Chapter 11) more than ten years old
• Debts (including delinquent child support payments) more than seven years old
• Age, marital status, or race (if requested from a current or prospective employer)​