Credit Repair Companies information about credit repair services

Credit Repair: Credit Score Secrets

FICO - More Than Meets the Eye

Fair Isaac and Company is the developer of the FICO score, the credit score used by most lenders today. The exact formula is not published, but Fair Isaac offers a breakdown of the categories of influence, and the relative importance of each. The breakdown is a helpful starting point for anyone in credit repair mode who wishes to optimize his or her scores, but it is only a starting point...

Credit Repair and the Logic of FICO

If you are in a credit repair program and aspire to optimize your credit scores it is handy to understand the logic behind the scenes. Fair Isaac is in the business of providing lenders with a measure of the risk they will incur in lending you money. Fair Isaac has spent years analyzing the implications of every measurable behavior and developed a formula to communicate risk with a single number. Here is a breakdown of the components of the FICO score along with some powerful tips you can apply to your own credit repair efforts.

Pay History

Your pay history makes up 35 percent of your score. Clear enough, but let's take a moment to understand the implications. A late payment is an indication of financial stress. Financial stress translates into risk of default, and FICO communicates this risk to lenders by reducing your credit score. A lower credit score says, "don't lend to this person." But there is more involved. FICO weighs recent late payments more heavily than older late payments. A brand new late payment can send your credit score to a level that no lender will consider. On the other hand, anyone in credit repair mode should be happy to hear that the impact of a late payment fades quickly as time goes by.

Balances - Installment

Your account balances make up 30 percent of your score. Both installment and revolving accounts are considered. Let's take a quick look at installment debt before discussing the far more important category of revolving debt. When installment debt, such as a car loan, appears on your credit report FICO sees it as an unknown and drops your score to warn lenders of the new risk. After a few months FICO acknowledges your ability to manage the payments and adjusts your score accordingly. Not a big credit repair concern.

Balances - Revolving

Revolving balances are tricky and may hinder or help your credit repair efforts more than you think. You can clean up your credit report, pay your bills on time, and still end up with a miserable credit score. FICO puts a huge emphasis on the relationship between your balance and your high credit limit. The latest FICO model acknowledges six balance-to-limit ratios: 20, 40, 60, 80, 100, and the deadly over-100 percent category. The two lower tiers will increase your scores, the middle tier is neutral, 80 percent is bad, 100 percent is awful, and as for the deadly over-100 percent category - I think you get the message.

Credit Repair and Your Balances

People often get a credit card, and quickly use it to the limit. Sounds like fun! Unfortunately, a new account with a high balance is credit repair suicide. The new account warns FICO about unknown stress on your budget, and the high balance says that you are out of control. This may not be the case, but big brother is watching and he doesn't like what he sees. But there is some good news too. If you take that same new account and keep the balance below 20 percent of your high credit limit for 6 months FICO will think you are fantastic and reward you accordingly. This is solid credit repair gold.

The Age of Accounts

This category makes up 15 percent of your score. There are a few credit repair angles here. There is nothing you can do about the age of installment debt; when it's paid, it's done. But revolving accounts are a different story. FICO loves old accounts as much as it worries about new ones. Many people start a credit repair effort and cut up their credit cards; a strategic error. Generally you would be advised to keep your accounts open. There are exceptions. If you have lots of established credit cards you should close the inactive ones. There is a bit of a balancing act; too many cards work against your score.

New Credit and Inquiries

This category weighs in at 10 percent of your score. If you are planning to apply for a mortgage or a car loan soon, or are in a credit repair program and watching your scores, you should minimize your credit activity. New accounts will reduce your score, and an inquiry is interpreted as the intent to open a new account, so FICO will downgrade you to warn prospective lenders that there may be trouble ahead.

Type and Mix of Credit

This is the final 10 percent of the calculation, and not much of a credit repair concern. FICO does not publish their idea of the optimal mix of credit, but if you really want to know what the perfect 850 credit score looks like, here you go! One mortgage over 5 years old, two car loans more than halfway through their life span, and five credit cards over five years old with balances under 20 percent of the high credit limit will take you to the summit!

Copyright 2007 James W. Kemish. All Content. All Rights Reserved.

Article Source: http://www.articlesbase.com/credit-articles/credit-repair-credit-score-secrets-425150.html

About the Author
Jim Kemish, a nationally recognized credit repair and restoration expert, is the president and founder of Sky Blue Credit, a leading credit repair service since 1989. Jim is also the president of Power Mortgage, a Florida mortgage company based in Delray Beach, Florida.

I Have a 560 Credit Score. Can I Fix It?

As is the case with everyone, you have three options when confronted with a bad credit score: you can take the time to learn how to fix your own credit, you can pay someone to do it for you, or you can do nothing and wait years for your credit to get better on its own.

Since you are reading this I'm going to assume you've decided to do something about your credit so option three really isn't an option. Good for you, most people don't even get that far. Most people with a bad credit score think their situation is hopeless.

So now your two choices are to try to fix your credit reports on your own or to get help. There are pros and cons to each.

Repairing your credit by yourself is probably the best way to really learn the credit system, how the credit bureaus work, and how your credit score is constructed. This is knowledge that, once acquired, will be useful for the rest of your life. And in addition, fixing your credit on your own is something you can do at very little cost. But repairing your credit on your own does have drawbacks. Credit repair is not always simple, especially when you have a long way to go. The credit bureaus make it seem like addressing negative information on your credit reports is as easy as submitting a form online, but make no mistake, those forms are for their benefit, not yours. For someone new to credit repair, successfully repairing a poor credit rating is going to take a lot of learning and a lot of time communicating with credit bureaus, creditors, collections agencies, etc. There is a reason why so many people who try repairing their own credit eventually turn to a credit repair company to finish the job.

Legitimate credit repair firms have already put forth the time and energy involved in learning the credit repair process and will be able to get started right away. will also be able to give you advice about other steps you can take to improve your credit score such as reorganizing credit accounts.

Ultimately, many people see better and faster results when using a credit repair company.This is not to say that there are no cons to using a credit repair company. Aside from the fact that a credit repair organization is going to require a fee that will likely total many hundreds of dollars and you will not be getting the first-hand knowledge of how your credit works, there are unfortunately certain risks when dealing with credit repair companies. All too many credit repair companies are fly-by-night shops in the business of taking people's money and not doing much in return. That's why on creditrepaircompare.com we have provided the article that talks about things to watch out for when dealing with a credit repair company.

How Debt Settlement Companies Affect Your Credit Rating

Many people start researching a debt settlement program thinking it will be the perfect way to settle their debts for pennies on the dollar and once they have gone through the program, they will be starting out again with a clean slate. The optimistic marketing of debt settlement companies helps reinforce this belief and while they do not claim that there is no downside to enrolling in a debt settlement service, they certainly don't mention how debt settlement will affect the relationships with your creditors and the harm it will do to your credit rating.

Debt settlement works by convincing your creditors there is a chance you will declare bankruptcy or otherwise never repay your loans. This is accomplished by completely stopping payments to your creditors. As your late payments start to build up, your creditors start to fear they will not get any money out of you and be more willing to negotiate a partial payment. As a result of this negotiation, you may be able to talk your creditors into accepting less than you actually owe.

Debt settlement providers manage the aging and negotiation for you. When signing up for a debt settlement company, you agree to stop making payments to your creditors and instead start sending what you would have paid to the debt settlement company. After allowing your account to fall behind, the debt settlement provider will start negotiating with your creditors and when they have successfully reduced the amount you owe, they pay the negotiated amount using the monthly payments you have been sending them since enrolling in the service. It is typically a lengthy process, and one in which there are no guarantees, but there are many people who have seen excellent results from debt settlement companies.

But, as mentioned earlier, there are downsides to using even the best debt settlement services. During the period of time where you are not making payments to your creditors, they will be hitting your credit record with late payments, collections, charge offs, etc. that will almost certainly result in you having a low credit score. Even after you lower the amounts you owe and pay off your debts, your credit rating will be so poor that you will face an uphill battle getting accepted for loans and credit cards. Your bad credit score could even prevent you from getting hired for some jobs.

It is the devastating effect that working with a debt settlement company will have on your credit reports that makes debt settlement a last resort, only to be pursued when being forced into bankruptcy is a serious possibility. At this point, your credit score is already so low that doing more damage pales in comparison to what having to file for bankruptcy will do to your financial future and overall quality of life.

Good debt settlement companies offer a valuable service that has helped many people get the upper hand on their finances and reverse their slide into bankruptcy. If your finances have gotten out of control and you have already done everything you can to reign them in, then debt settlement may be a good option for you.