This
month's News Update
The previous month's newsletters have been focusing
on your understanding of what a FICO score consists
of and why you need to improve it.
Review is the best way to learn. Everyone should
know the 5 most important factors that are
considered in the credit score formulas. I dare you
to ask any friends or coworkers if they know what
are the most important factors in their
credit....Bet You they won't know them all, even if
they have good credit. Here they are:
Your payment history
The amount of money that you owe
The length of time you have had credit
The type of credit that you have
How many credit Inquires
Well...Let's Dig In.......No better place to start
than #1
So, what do I mean by your payment history? This
includes ALL the past records or files on your
accounts. That means the file includes good and
bad! Your credit history consists of both negative
and positive payments.
Those things you paid on time and those that you
paid late or did not pay at all. Credit Reports
reflect payments and record your payments in the
follow ways:
On Time payments
Late payments and outlines 30days late, 60 days
late, and so on
Collections
Repossessions
Bankruptcies
Liens
Foreclosures
So, in the past if you owed any money to a creditor,
they report if you pay on time or if you pay late-
and when late how late.
FICO scores use this data and your payment history
accounts for a large portion of your score.
FICO scores either give you points or subtract
points for the following:
First, did you pay it back?
· Yes ...brings up your score. No brings
down your score most
· Yes but not on time brings your score down
slightly at 30 days late, more at 60 days late
· Multiple no payments or late payments
bring your score down even more!
Second did you pay it back on time
· Yes on time- brings your score up
· Early may bring your score even higher
· Not on time- brings your score down
slightly
· 30 days late brings your score down more
· 60 days late brings your score down more
· Multiple lates brings your score down even
more....and so on
Third if you did not pay it what was filed (like a
foreclosure, bankruptcy or collections)? Each of
these filings will affect your score by either
improving your score or worsening your score.
· Did it go to collections- brings your
score down
· Did it become a judgment- brings your
score down even more
Many people think they just have to pay it
back...that is not the case if you want to improve
your credit. You need to pay it back just as your
agreement specifies- the amount needs to be at least
the minimum payment and the date needs to be on the
date that it is due or before, otherwise it can hurt
your score.
The more recent activities have a greater impact on
your score. Therefore if you just went through a
foreclosure or a bankruptcy your score will be
affected in a negative way more now and less in 6
months and better after a year or more, especially
when you make payments on time after such a bump in
the road.
Ultimately the best way to improve your "Payment
History" score is to make your payments in full (the
amount due and preferably more than minimal payment)
and on time from now on.
And what if you do have collections??....
Then, let's deal with that possibility.
Transform the past mistakes into a future of
improvements! You should pay them. If it is your
debt....you should pay it back! And it is
recommended that when you pay them you do the
following:
Go to the establishment that you owe (the original
debtor, not the collection company that has been
calling). Go to their customer service/payment
department. Have your collections letter with
account number with you. Tell the person you want to
pay the collection in full but before you will do
that they need to give you a letter on the
establishment's letterhead (must be on their
letterhead). The letter should have your full name,
your account number as is on the collection and that
the account is closed and has been paid in full on
that date and signed by their representative.
You then bring this letter to your financial
specialist assigned to you and they will fax it to
the appropriate person and have it removed from your
credit report within 2-3 days. Keep the original for
your records as well. If you are not yet with a
finance specialist you can send in a copy to each
credit bureau and request the collections be removed
from your report as it has been satisfied and paid
in full.
Do not let the establishment tell you they will send
you a receipt. YOU MUST GET THE LETTER ON THEIR
LETTERHEAD AT THE TIME OF PAYMENT. Do not let them
tell you they will report it as paid, that may take
forever or get lost in the shuffle.
If the original establishment has closed your
account and will not reopen or assist you then call
the collections company and be prepared to strike a
deal. Look on your debt management module for
further instructions or email me and I will resend
you the link.
Plug away at your collections from the most recent
one to older ones. Because remember what I said
earlier- the more recent activities affect your
credit most.
The saying "history repeats itself" is very
appropriate here. That is what the credit bureaus
are reporting. So let's give them something positive
to put in your history...You Can Change Your
History!! You want your scores to reflect a positive
payment history. Your want future creditors to see
that you make your payments and you make them on
time.
You do not wait until the due date to mail your
payment, you mail ahead of time so that it arrives
and is processed by the due date. When you start
paying like this your scores WILL go UP!
