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Your credit makeup can be a conglomeration of every trade line, collection, judgment, bankruptcy, etc. that has been reported to the major bureaus by your creditors typically over the past 7 years. Although you may have had years and years of great credit, life happens and most people will go through a rough patch wherein it becomes impossible to pay on every obligation. This can result in derogatory information being reported to the bureaus by your creditors and potentially cause you to incur higher interest rates or to lose access to credit all together. On the other hand, in many cases that we see, collections can pop up seemingly out of nowhere, when you might have never seen any sort of correspondence from that particular creditor. In all cases, you as a consumer have RIGHTS, and we are here to help and be an advocate for you and your family. See our example below on what bad credit can cost you.
How Much is Bad Credit
|Credit Score||Interest Rate||Loan Costs|
|Below 600||NO LOAN||NO LOAN|
Wondering How your Credit Score is Calculated?
What is FICO and how is my score determined?
FICO stands for Fair Isaac Corporation, which is the company that created the industry standard scoring model used by most lenders in the nation today. FICO has been around since the 1950’s but began building the latest model in the mid 1980’s. A “FICO score” is simply a numeric summary of the information in your credit reports that represents, what the model determines to be, your potential credit risk. These scores are delivered to lenders when they purchase your credit reports and review your application. A higher FICO score means that you are a lower credit risk and you are more likely to be approved at better rates and terms than if your FICO score is lower. The FICO score scale goes from 300-850. The vast majority of the U.S. population scores between 500 and 799. It is fairly uncommon to have a credit score over 800. Anything over 740 is considered an excellent score.
What’s not in my FICO?
- Your race, color, religion, national origin, sex and marital status – US law prohibits credit scoring from considering these facts, as well as any receipt of public assistance, or the exercise of any consumer right under the Consumer Credit Protection Act.
- Your age – Other types of scores may consider your age, but FICO scores don’t.
- Your salary, occupation, title, employer, date employed or employment history – Lenders may consider this information, however, as may other types of scores.
- Where you live.
- Any interest rate being charged on a particular credit card or other account.
- Any items reported as child/family support obligations or rental agreements.
- Certain types of inquiries (requests for your credit report) – The score does not count “consumer-initiated” inquiries – requests you have made for your credit report, in order to check it. It also does not count “promotional inquiries” – requests made by lenders in order to make you a “pre-approved” credit offer – or “administrative inquiries” – requests made by lenders to review your account with them. Requests that are marked as coming from employers are not counted either.
- Any information not found in your credit report.
- Any information that is not proven to be predictive of future credit performance.
- Whether or not you are participating in a credit counseling of any kind.