Expert Debt Management
Expert Debt Management
Credit Scores

     People hear a lot about credit scores, but not everyone knows everything that goes in to the number. Everyone understands how important it is to pay bills on time, but that is just one component of your credit score. Your credit score, also called a FICO score, is essentially a number that tells a lender how much of a risk you are. The higher the credit score, the less the risk it is to extend credit. The credit score will vary depending on which bureau the credit report is pulled from. Additionally, credit scores constantly change over time. Here are the factors that go in to determining your credit score.

     About 35% of your credit score comes from your payment history. This includes payments on all of your credit cards and loans. A delinquent payment will lower your score. The more delinquent it gets, the greater the negative impact on your score. This scoring component also factors in the time since your delinquency, positive payments, amount past due, and amount of any charged off account or account in collections.  If you file bankruptcy or enrolled into a debt management program , it will affect this part of your score. 

     The next 30% of the credit score is based off of the amounts you owe. The biggest part of this is your debt to credit ratio. This is calculated based on the balances carried on your credit cards in relation to the credit limit. For example, if you have a card with a limit of $1,000 and a reported balance of $800, your credit score will be severely hit. By contrast, a reported balance of $100 will translate to a much better score. This scoring component also looks at the total balances owed on your loans as well as the original balances of your loans.  This is one area where a credit card consolidation can benefit your credit score.

     About 15% of your score comes from the age of your credit history. This generally looks at the overall age of your accounts. It also looks at the time since an account was used. Different types of accounts carry more weight. The longer your credit history, the better your score will be. This is why it is never a good idea to close an account in good standing. Even if you no longer use a credit card, keep it open so that your score will benefit from the aged account.

     The types of credit on your report account for about 10% of your score. You should have different types of accounts on your credit report. If you have all installment loans and no credit cards, your score will suffer. It is a good idea to have at least one credit card, installment loan, and retail account.

     The last 10% of your credit score comes from inquiries and new credit. Only credit inquiries initiated by you will affect your score. Every time you will out a credit application, it will show up as a small hit on your credit score. Inquiries remain your credit report for up to two years. In addition, the presence of new credit will lower your score a little bit until you establish payment history on the account.

     The impact of each item on your report depends on your overall credit profile. As negative items age, the scoring impact begins to lessen. That is why it is important to bring accounts current if they are past due. Most negatives can remain on your report for seven years. If you do not like what you see in your credit score, you should consider a credit repair service. There are a number of companies who can improve your score and get your credit back in line.

A Little Known Fact
     Creditors often take advantage of what we don't know, but when you are in the know you can save yourself hundreds if not thousands of dollars.  One of the most important little known facts is that creditors have a habit of subsidizing most, if not the majority of, debt consolidation services.  Why would they do this?  Because they know that if they don't lower interest rates and do away with some fees that they may not see any of the money that you owe them.  It is worth it to them to lower your interest rate or adjust fees so that they can see some of their money instead of receiving nothing if you declare bankruptcy! Knowing this, you'll be able to pursue debt reduction more confidently, because it works to your advantage and you know that the creditor will likely go along with it.

The Benefits of Debt Consolidation
     There are many benefits that you will want to consider.  Some of the most crucial of the benefits include but are in no way limited to:

1.Your interest payments will be lower.  This means that when you are making a payment you are reducing your overall principal balance due instead of paying interest. This also means that you will have more money in your pocket at the end of the day.  The result of the lower interest rate is that you can pay off your debts much more quickly and affordably than you would have been able to do otherwise.

2.Credit card interest rates will fall through the floor in comparison to what you were paying.  Again, this allows you to pay off the actual debt instead of paying the interest that is charged from month to month.  You'll pay off your debt much sooner!

3.You'll have just one monthly payment to worry about. No more need to try to organize the bills, no more allowing for one to slip through the cracks.  You'll have just one payment to worry about, making it so much easier and less of a hassle to pay your bills.

4.The harassment will stop.  If you have been afraid to answer the phone because you cannot stand one more intimidating call, debt consolidation is the answer!  Because the creditor is getting paid, they'll leave you alone!

5.You'll stop accruing late fees, which means all of your payment, or most of it, is going to the principal balance, allowing you to whittle away at it month after month.

6.You'll improve your credit score.  This will allow you to take back your buying power, and having learned a hard lesson you'll use your credit more wisely.

     As you can see, there are some very compelling reasons to consider professionals in helping you with your bills.  If you are tired of feeling boxed in by your debt, now is the time to take action.  You don't have to live one more day with the stress and worry that comes with being in debt, the harassing phone calls, the lack of buying power, and the poor credit rating.

     Browse around our site and educate yourself.  When you are ready, take the first step and fill out the quick form to get started!  A debt free life awaits you!  Why not take that first step in the right direction today?  Like the old saying goes, there is no time like the present, so take action now!

Disclaimer: This site is not , nor should it be taken to be, legal, financial or other professional advice. It merely provides a generalized guidance and generalized information only. Consult a financial advisor or an attorney to discuss any legal or financial issues involved with credit and debt decisions.
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