Tag Archives: top credit score questions
Answering the top-10 Google searches about credit and credit scores
Google is by far the world’s biggest search engine, with about 63% of all search traffic and 30 billion inquiries every month. In fact, type in “credit score” and you’ll get more than 69 million results! While we won’t try to answer all of those queries, here are the top 10 Google searches about credit and credit scoring:
- How is my credit score calculated?
There are several versions of your credit score, but the most common is issued by the Fair Isaac Corporation (FICO). While FICO keeps its credit scoring algorithms secret, we do know that the fundamental building blocks of any credit score are:
30% Credit utilization.
Your ratio of debt to available credit. It’s recommended you keep all of your debt balanced within 30% or less of your total available credit.
35% Payment history.
FICO and the other credit bureaus want to see that you’ve paid on time and in full every month, an important predictor of future payment behavior.
15% Length of credit history.
The longer your accounts have been open and in good standing, the better it reflects on your credit score.
10% Mix of credit.
A good mix of quality revolving accounts, mortgage debt, and installment debt, etc.
10% New credit.
Opening new accounts – or the wrong credit – is deemed risky and can lower your score.
- How much will a late payment hurt my credit score?
Since 35% of your credit score is based on your payment history, you always want to avoid paying any credit card or account late. Generally, if you do pay after the due date, your score will drop about 80-100 points. But you definitely don’t want to miss a payment for 60 days or even 90 days, which will cause serious damage to your credit score.
- What credit score do you need to buy a house?
If your goal is to buy a house, you’ll want to start with the mortgage process, and that means making sure your credit score is good enough to qualify for a loan, among other factors. While you’ll always have access to the best programs, terms, and the lowest interest rates with a great credit score (above 720, or even about 760 are considered “prime” scores), there are options for homebuyers with lower scores.
The Federal Housing Authority (FHA) has a great loan program that allows you to put only 3.5% down and qualify with a credit score in the 600’s, or possibly even lower in some circumstances. However, it’s always a good idea to come talk to us about six months before you plan on applying for a mortgage so we can increase your credit score and save you money.
- Will it hurt my score if my credit is pulled several times while I shop for a loan?
When you apply for new credit cards or loans with multiple creditors at the same time, it may signal to the credit bureaus that you’re recklessly taking on new credit – an indicator of future default. Therefore, your credit score may drop with these “hard” credit inquiries.
But the credit bureaus also understand they most consumers want to “shop around” for the best rates and terms when they’re making big purchases, like mortgage or auto loans, and that means having your credit pulled more than once.
To make allowances for this common consumer practice, the credit bureaus don’t ding you a batch of inquiries, as long as they’re within a 30-day period or less. Just don’t overdo it, or have your credit pulled from different kinds of debts (credit card, retail, etc.) or it will signal to them that you’re desperate to take on new debt, and your score will drop.
- Why is it important to check my credit report often?
The news these days is filled with reports of data leaks and hacks, such as the recent one of Equifax’s database that saw 235 million records compromised. Identity theft is the fastest growing crime, and most of that sensitive financial information is obtained online. For that reason, you should be checking your credit report often to screen for accounts that have been opened in your name. Likewise, the credit bureaus make a lot of mistakes when it comes to credit reporting – which could impact your score. In fact, it’s estimated that 50% of all credit reports contain errors, duplicates, or misreported information!
- How long will a bankruptcy/foreclosure/judgment stay on my credit?
Most delinquent items will report on your credit for 7 years before falling off, but there a few exceptions:
Charge-offs stay on your report for 7.5 years from the first missed payment.
Chapter 7 bankruptcies remain for 10 years from the date filed.
Chapter 13 bankruptcies remain for 7 years from the date discharged or a maximum of 10 years.
Student loans can remain on your credit until they’re paid.
Foreclosures and short sales will probably report for the full 7 years, but the negative impact will diminish over time. But changes in the industry now make it possible for some people to buy another home in as little as 1-2 years.
If you’ve experienced one of these negatives, contact Nationwide Credit Clearing.com so we can start repairing your credit and get you on the track!
- What happens if my husband/wife or cosigner on a loan and the other person defaults?
When it comes debt responsibility among married couples, different states have different laws. Community property states (include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) deem that you’re responsible for your partner’s debts if they were charged up during the marriage. Even if you get divorced, you’re both accountable for the debt, and it will show on both credit reports.
That’s also the case when you co-sign for a loan with someone else – the debt obligation is shared, but both parties are fully responsible. So if the other person fails to pay, or even misses a payment, your credit score will go down, and the creditor will pursue you, too.
- Why is a good credit score important?
A good credit score can save you thousands or tens of thousands of dollars on mortgage loans, credit card interest rates, car and student loans, and even insurance. Many employers are even now looking at credit reports when screening applicants!
- What is credit repair/How can credit repair help me?
Credit repair is a process where you try to clear up inaccurate, outdated, or other misreported negative items on your credit history so that your score will go up. Credit repair entails a formal procedure where we send dispute letters to the credit reporting agencies to challenge the validity of negative information. The credit bureaus are governed by the Fair Credit Reporting Act, which requires them to either fix the problem or respond with evidence that it’s true within a certain timeline. Either they will fix the inaccurate negative credit item, or, if they don’t have evidence or don’t respond in time, the item will be removed. Both outcomes help your credit score rise to where it should be.
Credit repair done through an experienced and trustworthy firm like Nationwide Credit Clearing can increase your score, remove incorrect information, and save you a lot of money in the long run.
- Do I have to pay to check my credit score?
According to the Fair and Accurate Credit Transactions Act (the FACT Act), you are eligible to receive a free copy of your credit report once each year from each of the three major credit bureaus by going to www.annualcreditreport.com. This will show your credit history, not your score, but at least you’ll be able to monitor your credit activity and make sure you’re on track.
For a more in-depth look at your credit score, credit report, and what you need to do to improve and save money, contact Nationwide Credit Clearing.com for a FREE credit report and consultation! We’re here to help you!