Credit information and credit education are two subjects that are often ignored by the average consumer, until good credit is needed. For some, maintaining good credit is a simple practice of keeping good habits. For others, the act of improving one’s credit only comes after some damage has been done.
Whether you have excellent or poor credit, learning more about how the system works is vital to maintaining or improving your overall credit score.
Spearhead Credit Solutions strives to provide you with the vital information and education you require to make your credit work for you. If you have bad credit, we can help you boost your score for a host of benefits and a better quality of life. If you have so-so credit and you plan to buy a home, start a business, or rid your life of debt, our credit account specialists can help.
Get the process started by calling us today for a free and private consultation and start on the path to achieving your credit repair goals.
What is a Credit Score and Why is it Important?
Banks, auto loan issuers, and even cell phone companies rely on your credit score to determine if you are creditworthy. A host of factors are taken into consideration to calculate this amount. The algorithms are quite complex and take into account a host of factors, including how long you have held credit, the amount of credit you hold in relation to how much you use, and how often you make late payments, for example.
Your credit score ranges from 300 to 850. Those with higher scores are more likely to be approved for cars, mortgages, and business loans.
Low credit scores can hinder your quality of life in a number of ways. That home you had your heart set on is no longer within your reach because no lenders will give you the time of day. You may be approved for a car loan, but the interest rate is sky high, leading to higher payments and potentially longer collection terms. You can see why having a high credit score is desired.
With a high credit score, more opportunities become available, and you will begin receiving offers for more attractive credit products, like low-interest home and car loans, for example, or credit cards with tons of perks and airline miles.
How is a Credit Score Calculated and What are the Most Important Credit Score Factors?
A credit score is by no means arbitrary. A lot of thought has gone into how to calculate this figure for the most accurate outcome. Lenders want to make money. Therefore, they only want to lend to those they know will pay the loans back. Thus, the score is calculated using sophisticated formulas that act as a prediction of trustworthiness. Whether that prediction is accurate or not is beside the point. Most lenders agree on the score. Therefore, your goal should be to try and raise your score any manner you can.
You can raise your credit score by improving each of the following credit factors.
Payment History – 35%
Lenders want to know if you are responsible with paying your bills on time, or if you are chronic with late payments, however. Your credit score factors in your on-time payments against delinquencies in a 24-month span. Keeping your payments on-time, therefore, is a great way to raise your credit score.
Capacity and Amount Owed – 30%
Having better credit gives you access to higher credit limits. Lenders want to know, of all the credit you are offered, how much you use. Maxing out all your credit cards will lower your credit score, as it shows a level of recklessness. Keeping healthy credit ratios from the balances you are given to the amounts you use, however, can raise your score.
Length of Credit – 15%
The length of time you have held each credit account is factored into your credit score. If an account is new, it won’t weigh as heavily on your score as a more mature credit account will. While this factor only comprises fifteen percent of your score, it still matters. That fact may make you think twice about closing accounts instead of fixing them and keeping them optimized and current. Doing so can raise your score with each year that passes.
Types of Credit Used – 10%
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You may think you are doing excellent with three credit cards in good standing, but you could be doing better by diversifying your credit accounts. Lenders like to see a healthy mix of credit, such as having an auto loan, mortgage, and credit card accounts. If you can juggle all those accounts and keep them healthy, lenders see you as more worthy of credit. By simply adding a different type of account to your report, you may effectively raise your score, as long as you are able to keep that account in good standing.
Get to Know the Three Credit Bureaus
There are three credit reporting agencies all consumers should know about: Equifax, Experian, and TransUnion. Because there are three bureaus, it is important to check all three credit reports when assessing your overall score. That is because the reporting may differ on one or more of the reports, and some information may be incorrect. We have seen some credit scores that differ by as much as sixty points from one credit report to the next.
In addition to incorrect data, some reports have been shown to list items that were not reported in compliance with credit law. In fact, a recent survey showed that 80% of credit reports contain errors of some kind. By checking all three reports and looking for mistakes that can be corrected, you may notice information that can help you raise your overall credit score.
We Can Help You Raise Your Credit Score
All of us at Spearhead Credit Solutions make you one promise. If we cannot remove at least 25% of all negative items listed on your reports from all three credit bureaus, we will refund your fee 100%. Contact us in Newport Beach, California, to learn more.
8 Tips by the Experts for Boosting Your Credit Score
1. Pay by the Due Date – No Exceptions!
Every bill you receive from a lender includes a due date. Use a calendar to keep track or automate the process to be on-time every time. The more on-time payments you make, the more your credit score will rise. Remember, timely payments account for 35% of your overall score!
2. Get a Copy of Your Credit Report Yearly
Every year you are entitled to one free copy of your credit report. Collect your report and go over it with a fine-toothed comb to check for mistakes, errors, and fraud. That information will give you the roadmap you need to raise your credit score.
3.Challenge Incorrect Items
For any errors you do catch, make sure you report them in a timely manner. Reporting a credit item puts into motion a thorough investigation. In many cases, you can have negative items removed to raise your score. At the very least, any data that is downright incorrect or that doesn’t belong to you can get taken off your report for a more accurate assessment of your creditworthiness in the eyes of lenders.
4. Keep the Charges on Your Credit Cards Lower than 30% of Your Available Balance
Lenders like to see that you are not frivolous with the credit amounts you are given. Maxing out your cards isn’t very good for your credit score. Rather, it is recommended that you never charge more than 30% of your available balance to keep your score as high as possible.
5. High Balance Cards Should Be Paid Down Below the 30% Threshold
To effectively raise your score, identify any credit cards with high balances, and begin paying those down so that the amounts are below the 30% threshold.
6. Keep Your Credit Cards in Use
A common mistake when attempting to improve credit is to stop using your credit cards altogether. However, letting your cards become dormant can actually harm your credit. A better strategy is to use your cards for small amounts, then pay the balances monthly. After a time of making this a habit, your credit score will continue to rise. Just make sure your balances don’t get out of hand. If you think you might be tempted to overspend, keep the cards locked in a safe or a drawer at home when not in use.
7. Keep Your Accounts Open for as Long as Possible
You may be tempted to close some of your accounts to make your credit more manageable. The longer you keep your accounts open, however, the better your credit score will be. Even if you are no longer actively using a particular credit card, keep your accounts open while making the occasional purchase. Then, pay those balances off each month to keep your credit score on the up-and-up.
8. When Actively Fixing Your Credit, You Must Have Patience
Repairing your credit can take time before results are achieved. By following the above steps month-to-month, you will soon see your credit score rising. You may also begin to receive offers for more attractive credit products, like better loans with super-low interest rates.
There are few quick fixes when it comes to credit repair, unfortunately. As long as you work on keeping better habits, your credit score is sure to rise. Don’t become frustrated when you don’t see an increase week-to-week. Instead of focusing on your scores, keep your mind on building and maintaining those good habits, and you will soon have your credit well under control.
How Long Does It Take Various Items to Fall Off Your Credit Report?
For some items on your credit report, fixing your credit becomes a waiting game. Here are the times you are required to wait before items begin falling off the report issued by the three credit bureaus.
Delinquencies (30 to 180 days)
It can take a month or around six months for late payments to fall off your reports. Delinquency items begin with the date of the first missed payment.
Collection Accounts (7 years)
Accounts that have gone into collection can show up on your credit report for up to seven years and begin with the date of the first missed payment. When you pay a collection account in full, the item doesn’t come off but is instead marked “paid collection.”
Charge-Off Accounts (7 years)
When an account is sent to a collections company, the original creditor will write the amount off. These charge-offs can remain on your credit report for seven years and begin with the date of the first missed payment. These items will remain, even if payments are later made on the charge-off balance.
Closed Accounts (7 to 10 years)
Closed accounts are no longer available for use. Closed credit card balances may have a zero balance and they may not. These accounts can remain on your credit report for a span of seven years and begin on the date the closed status was reported. This is the case whether the account was closed by you or a creditor.
If the account was closed on account of late payments, the delinquency notation will be removed after seven years. Even if the account becomes positive, closed accounts can continue to be reported for up to ten years from the date of closing.
Lost Credit Card (2 to 7 years)
If you lose a credit card, a notation can remain on your credit card for two years from the date you reported the card lost. If there are delinquencies on the lost card, these items can stay on your credit report for up to seven years.
Bankruptcy (7 to 10 years)
Filing for chapter 7, 11, and 12 bankruptcy can put a temporary mark on your credit report for up to ten years from the date you filed.
Filing for Chapter 13 bankruptcy can put a mark on your credit report for up to seven years from the filing date. The accounts listed in your court order will remain on your credit report for up to seven years from the date you filed.
Judgments (7 years)
Any judgments placed against you can remain on your credit report for up to seven years and begin on the date the judgment was filed.
Tax Liens (15 years)
Unpaid tax liens from city, state, county, and federal jurisdictions can remain on your credit report for up to fifteen years. Paid tax liens can remain for ten years and begin on the date the account was paid off.
Credit Inquiries (1 to 2 years)
Every time you apply for credit, you receive a credit inquiry notation on your credit report. Most of these inquiries will remain on your credit report for up to two years. All inquiries are required to remain for a period of one year from the date of the initial inquiry. Some, such as those from an employer or for pre-approved credit offers, will only show on a personal credit report that you obtain.
Is Anything Kept Private on a Credit Report?
Some information is off-limits to credit reporting agencies. Knowing what information cannot be listed on a credit report can keep you from becoming a victim of identity theft scams and fraud.
The three bureaus cannot list the following on your credit report.
Medical Data (unless you give permission)
Chapter 11 Bankruptcy notifications after 10 years
Debt accounts after seven years (including overdue child support)
Notations relating to age, race, and marital status (if requested from a current or prospective employer)
Schedule a Free Consultation & Credit Check
You don’t have to live with bad or poor credit. As credit professionals, we have helped many individuals just like you boost their credit scores for more savings and improved quality of life. Your credit score can rise. You only need to act to make that happen.
At Spearhead Credit Solutions, we offer the services of a dedicated credit consultant who can give you the tools and advice you need to repair your credit fast. As one of the few credit repair companies registered with the Department of Justice, when you work with us, your credit is always in good hands.
Schedule a free and private consultation now and start on the path to achieving your credit repair goals.