Credit Rating: How it works and How to improve it discussion area

sonuenjoys

Ignore the previous reply. Its not for this post

sonuenjoys

Extracted from experian website:

As many people may know, having a low credit score can prevent you from getting loans, renting or buying a home, purchasing a car, and possibly even opening a bank account. But knowledge is a great place to start when planning a brighter future for your credit. Your FICO® Score powered by Experian is a lender score, so when you consult it, you!!!8217;re seeing the same type of information that banks and lenders see. Understanding FICO Scores is easier once you know how they!!!8217;re calculated.

FICO Scores consider five types of information in their calculation:

-Your payment history (35 percent)
-Your debt usage ratio: how much you owe in relation to your credit limit (30 percent)
-How far back your credit history goes (15 percent)
-New credit (10 percent)
-Your mix of various types of credit (10 percent)

Your payment history includes recent payment record of car loans, mortgages, retail accounts, installment loans, credit cards and more. Making sure you pay your bills on time is critical, because recent late payments and accounts in collection can have a significant negative impact on your Score.

Your debt usage ratio calculates the total amount owed on revolving accounts in relation to the total credit limit. It!!!8217;s important to keep your balances low on credit cards and other revolving accounts. A general rule of thumb is to keep your balance below 30 percent of the total credit available. By this logic, you wouldn!!!8217;t want to spend more than $300 with a $1,000 credit limit.

Length of credit history looks at the age of your accounts, number of recently opened accounts, time since account activity, proportion of new credit vs. established credit, and the re-establishment of new credit following any adverse payment problems. If you!!!8217;re just establishing your credit history, carefully consider opening any new accounts. New accounts may bring down your Score temporarily, especially if you!!!8217;re just starting out.

Rapid account buildup can be seen as a risk to potential creditors. If you have past payment history problems, work to get back on track as soon as you can. Opening new accounts you can afford to pay off on time can positively impact your credit scores in the long term.

Additionally, new credit/inquiries are considered. The calculation considers the number of recent inquiries, the time since an inquiry, the number of recently opened accounts, and the time since opening an account. A credit inquiry appears on your report if your credit report was requested and delivered while you were seeking new credit. If you or your current lenders request your credit report, this is not usually considered in your credit score calculation.

Lastly, a balanced credit mix is important when managing your finances. Your credit mix refers to the different types of accounts !!!8211; credit cards, retail accounts, installment loans, mortgages and consumer finance accounts !!!8211; that can impact your credit scores. In general, a varied mix of credit types can have a more positive impact on your credit scores than a credit report that shows only one type of credit.

Ultimately, your understanding of how FICO Scores are calculated helps you identify the most important elements of your Experian credit report. Your credit report shows your credit behaviors. Now that you know how your behavior impacts the calculation of your credit score, you!!!8217;ll be able to see how your actions are reflected in the FICO Score powered by Experian data.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

FICO is a registered trademark of the Fair Isaac Corporation.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Experian.

[Deleted User]

That doesn!!!8217;t apply to the UK

PixelPound

sonuenjoys wrote: »

Under DD scheme, payments or refunds made atleast 3 working days prior to the due date will reduce the full amount DD as well as a minimum payment DD. Fixed amount DD continues until you have a balance on the account atleast 3 WD prior to PDD.

I know you said ignore this post, but as there is both an EDIT and DELETE options for you to use, and you have used neither (increasing post count?) but it does contain inaccuracies, so I will reply.

Nothing in the DD scheme states that payments made at least 3 days prior reduces anything! The DD scheme simply says you will be notified how much will be taken 10 days before hand and on what date (usually the credit card statement, in terms of fixed payment agreements it's when the DD is set up). How credit card deal with payments before the DD varies - some indeed will treat payments before hand as reducing the amount taken (my Santander card says 5 days before hand, so the number of days can vary too), others say the the DD amount stated on the statement will be taken irrespective of any additional payments made. It is very important to know which applies especially if you are paying around the minimum, as if you pay early you may end up paying twice if it does not affect the DD amount taken, or in the cases of making small extra payments to avoid minimum payment markers, if it simply reduces your DD you may still get the minimum marker.

Danitotheelle

Hi, after having a debt relief order in 2012 I’m finally in a position where I am on top of my finances , paying all my bills every month and living within my means . I really want to boost my credit rating and have applied for a capital one 39.9% apr credit card . I by no means want to use this frivolously . In fact I’m too scared to use it at all until I know the following ( which isn’t on the information given to me by capital one) . If I pay the balance off in full - will I still be charged an interest fee ? I wanted to use the card for my grocery shop and then literally pay the balance off straight away from
My visa debit card . If I am not able to do this I fail to see how I can boost my credit rating as I’m doing everything I can .

[Deleted User]

Use it and clear in full each month.

No interest, build credit history. Job done

The information is in the terms and conditions Capital One sent you. Make sure you read them.

fooddestroyer

One year after being declared bankrupt due to serious ill health, I am beginning to rebuild my credit. My score was 'Excellent' before, how frustrating!

I've began by printing off my credit file from Equifax and Noddle (having trouble registering with Experian) to see that one CC company has still got my status as defaulted and my delinquent balance down for two cards?? I contacted them by phone and letter many months ago as they were pestering me with letters.

- What's the most effective way of removing/correcting this entry? and,
- Can someone give me a link to a step-by-step guide of 'best practice' in rebuilding my credit report.

Thanks!
FD

[Deleted User]

The default date for the cards should be no later than your bankruptcy. The later defaults are just status updates.

To rebuild your credit history, you need to demonstrate responsible use of credit. . That may not be possible with such a recent bankruptcy, but in time, it will be.

fooddestroyer

Deleted_User wrote: »

The default date for the cards should be no later than your bankruptcy. The later defaults are just status updates.

To rebuild your credit history, you need to demonstrate responsible use of credit. . That may not be possible with such a recent bankruptcy, but in time, it will be.

So the default date is 3 months after I was declared bankrupt at the High Court of Justice (1 March 2018)?

Like I said, I wrote to them by first class recorded, and have called them. But I guess I need something more 'effective', that's why I thought a visit here would perhaps help me get some ideas.

[Deleted User]

It's being reported correctly then and the account will drop from your files 6 years from the date of default