The Truth About Debt Relief

There’s been a nasty trend where credit scores are becoming more and more involved in our business affairs. Credit scores determine if we qualify for a mortgage loan or car loan. If we do qualify, they determine what rates we’re going pay. If you get a student loan, your credit score is checked. If you go to apply for a job, they’re going to check your credit scores. Your insurance rates are contingent on credit scores. And our credit card offers are dependent on credit scores.

Credit scoring goes back to the 1920’s. They were primarily used for credit in stores, things like that. As they started to network and share information it grew into what it is today.

A credit score is comprised of many factors gathered over a period of time. In the current world, 45 percent of your score is based upon your payment history. This is what you’ve done over the years - if you paid your bills on time, did you pay late, did you have charge-offs, things like that. Another 30 percent of your score is based on outstanding debt – what kind of debt do you have now, are your credit cards maxed out, do have control. Another 15 percent of your score is based on the length of time you’ve had credit. The longer you’ve had credit, the more of a sample of how good you are with your credit and, therefore, the better the record that have on which to evaluate you.

A credit score is a report that shows your credit worthiness based on what you’re trying to purchase or what you’re trying to accomplish, credit wise. There are three primary reporting agencies: Experion, Transunion, and Equifax. They all have their own unique construction models – they’re all similar but not quite the same.

A credit score will range anywhere from a low of 300 to a high of 850. Technically, there’s actually a 900 and 920 score out there. In March of 2006, a new scoring system was tried, but the credit industry just didn’t take hold of it. So, for practical purposes the score ranges from 300 to 850. In today’s world, credit is being tightened. Anybody with a score of 690 or below will have a tough time refinancing their house right now whereas a year ago, somebody who had a 550 score could refinance. Now, you’re looking at needing at least a 690 and in many cases a 720 score.

In the next posting, I’ll be writing about what you can do to move your score up 60 to 100 points within a year.

Filed under: Credit Restoration