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Credit Tips and Facts
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- The biggest mistake by borrowers is closing a bank credit card,
in good standing, which they have had for 5 or more years and
opening a new bank card with a much larger credit line and
transferring over the balance. People usually do this because of the
free interest offered by the new card.
What borrowers don't realize is that this lowers their credit score.
The credit reference from the new card doesn't carry as much weight
because it's new. (The longer the credit relationship,
the more heavily it's weighed.) The new card also shows a high
balance owed because the borrower has transferred over the entire
balance owed on the old card.
However there is a way for you to get the best of both worlds.
Say that your current card has a $4,000 balance with a $4,500 limit.
Apply for the new card, but instead of closing the old card and
transferring over the entire balance, keep the old card and leave
about $1,600 on it. Transfer $2,400 to the new card to take
advantage of the free interest. Your credit score will
actually improve! Plus, you'll save on interest charges.
- With collections the date reported is more important than the
open or close dates. If the date reported is on 04/07, then
leave it alone and pay it off after the loan is done. If you
pay off this collection now, it will report current and lower your
score.
A collection paid or unpaid is still a negative item on your credit
report. After it is paid, and time passes, your score will improved
since it is not being updated.
- If you have a low score to many inquires will lower it more. For
example, if one person's score is 620 and they shop different
lenders over a period of 2 months, their score will be lower
than someone with a 720 score who does the same shopping.
- 35% of your Score is how you pay your bills.
- 30% of your Score is judged by how much you owe.
- Open all mail and make sure some creditor doesn't show a $2.00
balance and you think it is paid. This could give you a current late
status and lower your score by 40 to 50 points. Its not what you owe
- its how you pay any balance.
- Did you know the Statute of Limitations ((SOL's) for Judgments
and Federal Tax Liens in Washington State is 10 years from the date
filed? However, like California, there is no real SOL for State Tax
Liens, and therefore must be settled in order for the debt to be
removed from the credit report.
- Adding a positively reporting installment loan payment provides
at least twice the positive impact to a FICO score as a revolving
account over a 12 month period.
- Did you know that Washington State has a six year Statute of
Limitations on contractual debt (i.e. Charge offs & Collections)?
This means that these types of obligations can be legally discharged
and removed from credit reports.
- The FICO scoring model takes into account up to 94 data points
or "traits" on each person that has ever applied for financing of
any type. In addition to the commonly known items such as number of
accounts, mix of credit, etc., these "traits" rate items such as
length of time at each job and residence, job titles, number of
employers and types of bank accounts open, etc. Of these 94 traits,
only six look for positive attributes, the remainder are looking for
neutral to negative.
Some tips and facts
are used by permission from Eukopia
Credit Solutions
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