My Credit Report Info

A FICO score is computed based on many factors. The following table provides a approximate weight (in percentage) of the data factored into your FICO score.

35% Payment History
30% Amounts Owed
15% Length of Credit History
10% New Credit
10% Types of credit

Descriptions of the Data

Payment History
This category consists of your payment information on your credit cards, loans, mortgage accounts. It includes the severity of delinquency, if any, on each of the accounts and the amount that was delinquent.

Amounts Owed
Amounts owed, as the name implies, consists of the amounts that is owned on accounts and the number of accounts that have a balance or amount owed.

Length of Credit History
This includes the time since the accounts were opened and the last activity on the accounts. The more the time the better.

New Credit
New Credit includes the number of accounts that were opened recently. The number of recent credit inquires might also be factored into this category

Types of Credit
In this category they types of your credit account are analyzed. The type of accounts may range anywhere from credit cards to loans to mortgages.

Divorce is a really stressful event for most people and what most of the people forget or overlook is how their divorce will affect their credit. Although a divorce won’t directly affect your credit but if there were any joint credit cards they still have to paid.

If Josh and Mary have a joint credit card account and are getting divorced, Josh and Mary have to make sure that they are up to date on their credit card payments. If Josh and Mary both ignore the credit card payment after getting divorced (being under the impression that their spouse will make their payment or whatever), the non payments will be reported under both Josh and Mary thus hurting both their Credit Reports.

So it is important to resolve all credit accounts before a divorce process.

Your Credit Report is probably the most valuable document. Keeping it error free is your responsibility and a good Credit Report will reward by lowering your monthly loan/debt payments. And the only way you can keep your Credit Report error free is by checking it regularly. Most errors on a Credit Report are minor and can be resolved easily but some errors may be alarming.

Identity Theft
Identity Theft is a crime that you would not like to be a victim of. Identity Theft is when criminals gather your information and open new credit card accounts under your name and max out the credit cards leaving you liable for the debt. If you don’t find out about these new accounts they will be kept reported to the bureaus resulting in your Credit Report going down the drain. So it is very very important for you to make sure that no one is using your account but checking your Credit Report regularly.

Monthly Payments
All your monthly payments are reported to Credit Bureaus. What if one of your payment got delayed? I might be reported as a 30-day late payment. If it is just one payment that got delayed you could explain it to your lender and they might even take it back but it is important to contact them immediately. And the only way you can do that is by checking your Credit Report regularly.

So protect yourself and check your Credit Report regularly.

DTI or Debt to Income ratio is one sure way to analyze your financial health. Debt to Income ratio is calculated by dividing your monthly non-mortgage payments by your gross monthly income.

So for example a person making a gross income of $4000 and making $500 payments on credit cards and loans has a debt to income ratio of 12% ($500/$4000 = .12).

Although this is the standard way to calculate the debt to income ratio, many lenders usually have this formula tweaked a little bit. A debt to income ratio of 10% or less is excellent and a debt to income ratio greater than 20% is generally considered a risk.

If your Credit Report has any incorrect information report them to the credit agencies. Also contact the lenders who have reported the false information. If you believe someone else is using your information, let the credit agencies and lenders know about it immediately so that they may include a fraud alert on your report. Once your file your complaint, the Credit Bureaus and lenders must resolve it within 30 days. Don’t forget to keep a record of all your communications.

Credit scoring formulas keep changing regularly and it is hard to keep track of the changes and factors involved in credit scoring. Similarly all lenders look at different things on your Credit Report and almost all lenders have different policies. So it is really hard to guess if you will be accepted for a loan. But there are some things that might help you understand how to treat your Credit Report. Here are some myths and facts about Credit Reports.

Myth: A bad Credit Score will decline me from all sorts of credit/loans.
Fact: Your credit and Credit Score plays a major role in deciding whether or not you will get the loan/credit you need. But lenders also look at a number of factors such as your income, your work history and your current assets. After analyzing this information the lenders may lend you a loan even if you Credit Score is bad or sometimes even decline your loan if you have a good Credit Score.

Myth: Negative information on Credit Report stays forever.
Fact: Negative information (such as late payments) will affect your Credit Score but the effect declines over time. Usually negative information stays on your Credit Report for 7 years (bankruptcy for 10 years and criminal convictions stay on indefinitely). So information (other than bankruptcy and criminal convictions) older than 7 years should have no or very minute effect on your Credit Score.

Myth: Gender, race, nationality and marital status affect the Credit Score.
Fact: Credit score does not factor in any non-financial information. So gender, race, age, nationality and marital status do not affect the Credit Score. Moreover, the Equal Credit Opportunity Act prohibits lenders from factoring such information when issuing a loan or a credit.

Myth: Inaccurate entries on my Credit Report cannot be disputed.
Fact: Everyone has a legal right to dispute any information on their Credit Report that they feel in inaccurate. The credit bureau then has 30 days to resolve a dispute. If the credit bureau cannot prove the dispute to be incorrect they have to remove the information from your report. You can either dispute by the credit bureau’s website or by postal mail. Every credit bureau is different so check your report from all the three bureaus and dispute the information with the bureaus individually. It is recommended to keep a copy of you communications so it is best to use postal mail.

Myth: Getting a copy of my report will affect my Credit Score.
Fact: There are two types of inquiries. When you pull your Credit Report it is known as a soft inquiry. When a lender pulls out your Credit Report (for ex when you apply for credit card or buy a new car) it is known as a hard inquiry. Soft inquiries have no effect on your Credit Score. Hard inquiries can affect your Credit Score exponentially. Exponentially means that a few hard inquiries have little effect on your Credit Score. But if there are bunch of hard inquiries it will lower you score and any additional inquires will hit your score even harder. Many hard inquires in a limited time frame makes a person look desperate for a loan which is the reason it lowers your Credit Score.