Cory Burell

So normally I’d go on an explosion about how some woman cut me off in line at the Piggly Wiggly but I thought I’d write a few posts about something useful for once. Credit is a basic that everyone should know about but seems to be lost amongst the youth of America. I constantly run into those who can’t manage their money, run the credit cards, and fall into a trap of high interest cards, rate jackings, limit choppage, and terrible scores effecting their overall lives.

I plan on breaking into the basics and then posting on some issues such as current laws such as the new consumer protection acts, fha changes, and how to protect yourself in a tightening economic climate such as ours.

If anyone feels a particular subject is important to them please feel free to send me a message/email and I will address these problems especially if you have a specific problem. Don’t feel shy and I will never leak who/why/when/ or specifics of who the problem is for/about.

YOUR SCORE:

Your credit is worthiness is generally based off of your FICO scoring. This is not to be confused with those silly numbers you get from the 100 free sites you see on the tv. These are FAKO scores. They can be off 100 points in either direction and are a poor judgment of your credit worth.

Here is the basic calculations of a fico score. These differ between the 3 bureaus Experian, Equifax, and Transunion

Payment history – 35% (of Score)

Amounts owed – 30%

Length of credit history – 15%

New credit – 10%

Types of credit used – 10%

This may all seem like jiberesh but is a method to improve your score.

Your payment history is the most important. Think paying that credit cards 30 days late won’t hurt you? WRONG! A single 30 day late can drop your score 20+ points easy. The later the payment the worse off you look. After a certain time frame the account just goes to collections which I will discuss later.

Utilization is next at around 30%. What is utilization? It basically shows the percentage of credit being used. If you have $1500 of usable credit and have 1000 charged you are using 66% of your credit which is bad! Optimal scores are achieved by 10% or less utilization. The higher your limits the lower a base amount will hurt you. I always PIF (pay in full) to keep my scores high. Its not about how much you use but how much is reported. If you use 100% of your limits but pay them off in full before your cc company reports it you still have a 0% utilization. If they report before you pay it off you see 100% and your score drops like a rock!

Length of credit history is important more now more than ever! AA A or average age of accounts determines alot. Lets say you have 4 cards. One has been open for 4 years, 1 for 3 years, and 2 are 6 months old. That leaves you with an average account age of 2 years! New accounts will drop your score until they age. I’ve seen losses of 10+ points for opening a new account. This will depend based on how much your utilization changes also. Again it is a complex formula.

New credit – 10%- See above as they closely relate in explanation.

Types of credit used – 10%- What is your credit comprised of? Do you have a car loan (installment), credit cards (revolving), or a mortgage (installment)? These account types mix and that will help improve your score! Having installment loans actually can help your score with solid payments/completions and also help you get higher limits/more loans.