What Is Credit Age?
Credit age matters in terms of credit scoring purpose. Credit score models such as FICO and VantageScore will check the age of your oldest and newest credits to come up with the average age of all your accounts, and determine how it will impact your credit score.
What Is The Importance Of Credit Age?
Lenders review your credit and its history to determine your capabilities on paying the loan on time. A longer credit age will show that you are more experienced in using your credit especially it’s years older than most, which means the lenders are more likely to know an individual’s level of risk when they decide to approve the loan.
What Is A Good Average Age Of Account (AAOA?)
A credit’s average age is the number of months the accounts have been open. It is divided by the number of accounts then rounded down to the next lowest whole number. AAOA includes all of an individual’s account regardless if they’re closed or active. 8 years is considered perfect. An increase is expected as soon as AAOA has reached 5 years and a top FICO score (850) can be attained within points between 6-7 years.
What Other Factors Help In Determining My Score?
What Is The Difference Between Credit Age & Credit History?
A credit history determines your usage of your credit and it records the financial behavior and activities of an individual on using credit. Credit history affects your credit score more than a credit age. Credit age is basically how long you’ve had your accounts. That being said, this can still help in building good credit score but it’s not as significant as your payment history.
How Is Credit Age Broken Down?
FICO breaks down your age of credit history using these three factors:
FICO Score Vs Vantage Score
VantageScore® and FICO® are well-known credit scoring models. They use an individual’s information and determine your credit score. The information can affect the scores differently based on which model is being used.
What Are The Differences Between FICO And Vantage Score
What Is A Payment History?
It is a historical record of each installment or non-installment accounts. Payment history is a way for lenders to measure whether an individual is a risk because of a background marked by late or missed payments.
What Is Included In The Payment History?
What Is Not Included In Payment History?
Monthly office rentals or apartment rentals have monthly payment bills - these types of loans are not included in your payment history. Most utility bills like electric and water utilities or administrations like home and office upkeep are not included as well.
When you don’t pay these bills, they may be recorded on your payment history and will have a bad mark on your credit.
How Does It Affect Your Credit Score?
Oftentimes, lenders will check your credit history to measure whether you missed any payment at any point. Various late payments in your payment history can draw down your FICO assessment. It is one of the biggest factors that influence your credit score as this is a record for your paying behavior for loans and credit cards.
Installments made far after their due dates eventually weight all the more intensely on your score. This is because negative scores will in general increment while you take some time paying your bills.
How long does it take to get reported for late payments?
Most of the time, banks, lenders, and landlords give an ultimatum of 30 days to fulfill the payment. If you have a good relationship with your lender, you can negotiate with them about the date of payment that you can fulfill to give you ample time before they may file a 30 day late payment against you.
What Is A Credit Score?
Credit scores are provided by credit bureaus. Lenders and banks include credit scores on their background check process to determine if an individual will be approved of a loan. A credit score can be classified into five categories: excellent, good, fair, poor and very poor.
What Is A Good Credit?
Good credit is a way to classify the credit history of an individual. This indicates that the borrower is able to maintain good credit history and is a safe credit risk. Any credit score that is above 720 is considered a good credit score, and 800 being excellent. In order to achieve this, you can borrow prudently, pay your bills on time, and do not have a high balance of credit used.
What Is A Bad Credit?
Bad credit is a result of not repaying bills on time and in full. Many times individuals have bad credit because they do not pay their bills at all and the accounts end up being charged off and sent to collections. An individual's credit report gives an in depth view of how the individual handles every credit account.
What Makes A Bad Credit?
Factors That Affect Your Credit Score
Factors That Do Not Affect Your Credit Score
Many of your negative credit remarks like late or missed payments, foreclosures, collections, and charge offs will stay on your credit report for as long as seven years. These marks can significantly affect your credit score and ability to get financing in the future.
Hereâs how long different negative marks stay on your credit report:
What Can You Do To Fix These Immediately?
How Is Your Credit Calculated?
FICO evaluates several data points on your credit report to determine what your FICO Score is. This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).
Here is how they compute your score:
Credit History (35%)
Lenders check your credit history to determine whether you pay your bills on schedule. The best way to measure this is by depending on how you have paid your bills previously. Late payments, credit used, and collections all influence the recorded history of your FICO rating.
Outstanding Debt (30%)
The amount of debt you have divided by your credit limit is known as credit usage. When you have a higher credit usage, you are closer to your credit limit. This will create a lower credit score. Keep your credit usage balance around 30% of your credit limit or less.
Length of Credit History (15%)
Having a more established record as a consumer is another positive aspect because it gives more data about your history with handling money. From experience, I see that once your credit file is roughly 7 years old, you benefit greatly. Also, remember that every time you get a new account, it will decrease your credit length average.
Each time you make an application for credit, a request is added to your report. A huge amount of credit request implies that you are assuming various financial problems or that you are in a difficult situation with your finances.
Different Types of Credit (10%)
Having various types of credit is ideal since it shows your experience with dealing with a diversity of credit products. This is not a big factor in your FICO assessment unless you don not have a lot of data they can utilize to determine your score. You can open new accounts as you need them to improve this.
What Are The Factors That Decide Your Credit Score?
The most significant factors in deciding your score are 1) credit history, it is a record of whether you have paid your bills on schedule. 2) Sum of debt owed. This is where they check the amount you are using and see how much you have spent on the credit available. Lenders may deny cases of borrowers who are almost within their credit limit as they are more likely going to miss some payments. 3) Age of history, which is a factor determined by the normal age of your credit, just to know how long the account has been actively used.
Errors in Reports
What Are Errors In Reports?
Errors that show up in reports may vary from the incorrect spelling of names, addresses, or other individual data. Different types of errors, for example, mistaken installment history or the expansion of credit accounts that you were not part of.
Credit bureaus will examine your report when you contest and file a dispute regarding the errors. In case you are not checking your credit, inaccurate data can go unnoticed for a considerable time. Those credit detailing errors could be risky and hazardous on FICO assessments regardless of whether you understand they are on your reports or not.
How Do I Fix These Errors?
Make sure errors are fixed as early as possible. Inform creditors and credit bureaus about incorrect data or missing details in your report. The results of your report can highly affect your chances of getting a loan. It will also determine how much you will have to pay to borrow money.
To fix these errors, you may contact both the credit reporting company and the company that provided the information to the credit reporting company. You will file a dispute not only to the credit reporting company but also directly file a dispute with the credit furnishers as well with similar important documentation.
When you request for your record to get fixed, be sure to have these things included:
Advantages Of Good Credit
Good credit is a financial assessment that measures a buyer's reliability and credit card history usage. Having good credit helps you save more money. An individual's FICO rating ranges from 300 to 850, and the higher the score, the more reliable an individual is viewed as.
Here are some of the best advantages of having good credit:
Credit Card and Loan Approval
Credit card or loan approval can be difficult if you have a bad credit history. A good credit score does not ensure loan approval due to other factors being considered: income and debt. However, a good credit score gives you a higher chance of getting approved for new credit.
An interest rate is a cost of borrowing money, and often, interest rates are connected to your credit score.
Your credit score will determine whether youâre qualified for the best interest rates where you will pay lower fees. Lower interest rates let you pay off your debt faster and help you save money.
Depending on your credit score, you can utilize it to negotiate a lower interest rate on your loan or credit request. You can also take advantage of other offers youâve received from various companies depending on your credit score. Unfortunately, creditors are less likely to approve of your loan terms if you have bad credit.
Approval for House Rentals and Apartments
Landlords often check their credit scores as part of their screening process. An eviction mark of an outstanding rental balance can ruin your chances in getting the rent approval as this is in your credit history.
More landlords are using credit scores to screen tenants. Meanwhile, if you have a good credit score, you can save more time in finding a landlord who will approve your rent request.
Increase Credit Limit
The loan amount depends on your income and credit score. Having a good credit score gives you the opportunity to apply for a credit limit increase because banks are going to look into your payment history and once you consistently pay on time, they will be more willing to approve your request.
What Is A Good Credit Score?
A score of 720 or above in a similar range is viewed as good. Most credit score assessment falls somewhere in the range of 600 and 750. Higher scores speak to more credit choices and can make lenders certain that you are able to pay your dues.
For your reference, hereâs the FICO score assessment chart:
Need help with credit repair? Contact us now to get started.
What Is Credit Repair?
A credit repair is a process where a person or business improves their ability to borrow money and aims for a good score on their credit by correcting wrong information in their credit report, using their credit responsibly and repaying their amount of debt more quickly.
For the most effective credit repair it is good to hire a professional licensed and bonded credit repair company.
How To Fix Bad Credit
By utilizing credit fix strategies such as paying obligations on schedule, negotiating with loan specialists for improved loaning terms, or negotiating your payment obligation to make financing costs reasonable, a borrower can improve their FICO score, this will result in making it easier to pay debt and the possibility getting approved with better payment obligation terms in the future.
Also, removing inaccurate, unverifiable, erroneous, incomplete, non-compliant data from the credit reports will help fix bad credit.
35% of your credit score is paying all of your bills on time. That is the biggest step towards obtaining good credit. Paying your bills 30 days late destroys your credit. Try to pay for everything before the due date.
The average client stays with us for 3-6 months. Some cases require less, some require more. When we file a dispute, creditors and credit bureaus have to complete an investigation within 30 days âa couple of special cases can stretch this out to 45 days. This is done in rounds of disputes, some files may take 2-3 rounds to get cleaned up, some may take 4-5 rounds. â
When you are looking for credit repair services to help fix your bad credit, it is best to ask what the previous clients have experienced from the past but remember each credit file will be different.
Credit repair companies analyze your credit report line by line and examine every detail of each account that is on your credit report.
âThen we challenge any inaccurate, unverifiable, erroneous, incomplete, non-compliant data from the credit reports with the credit bureaus and creditors. They also provide advice and tips to boost your score such as adding new positive credit history, paying the revolving debt down, and etc.
Rachel Gibbs has perfected her craft in terms of credit and finances. She is an expert in credit restoration and financial education, leaving her clients satisfied with the results.