Your Credit Score Change

Many consumers do not realize what cause a change to occur on their credit report. It is paramount to having good credit. Good credit can be the difference between owning a home and not owning one. Some jobs will not hire people with delinquencies on their credit reports; the FDA is a prime example. The agency screens potential employees for many criteria and one of those requirements is delinquencies on credit reports. Therefore, it is very important for people to know what changes can affect their credit FICO score. The FICO scoring system is the method used by credit reporting agencies to calculate credit scores.

There are two primary consequences that can occur due to changes on a credit report. They are upward or positive, downward or negative changes. An upward or positive change occurs when an account is in good standings and payments are made on time. An account is paid on-time when the payment is made no later than 30 days past the due date of the account.

Creditors will always report a delinquency in 30-day increments. Never will one see a delinquency of 15 days or 10 days on a credit report. One will only see delinquencies of 30 days, 60 days, 90 days, 120 days, and so on.

A downward or negative change occurs when an account is in negative status. This means that the account has been delinquent for 30 days or more, in increments of 30 days. In such a circumstance, an individual is unable to make a payment on an outstanding account balance. However, the moment a payment is made, the credit report begins to change upward in a positive direction, say from 580 to 581 for instance.

The Overall FICO Score Ranges for the 3 Credit Reporting Agencies are as Follow...

• Experian FICO:       250 - 900

• Equifax FICO:         300 - 850

• TransUnion FICO:   336 - 843

Above, the lowest scores exemplify the poorest credit, and the highest scores exemplify the most excellent credit. Below, we will discuss ways in which we can maintain our scores closer to the top of the FICO score ranges.

Now that we have shown the different changes that can affect a credit score and the actual ranges that we should fall between, we will focus on ways that we can improve our credit scores.

1. Make payments on loans before they are 30 days past due: This shows creditors that one is able to pay his or her debt on time. Creditors will only send negative reporting to the credit reporting bureaus when an account is 30 days past due. So, one can be late without being reported so long as the lateness is less than 30 days. A credit report will have the phrase: "paid as agreed" as current status when a payment is made, even if a person was late on the previous payment.
2. Pay down debts: The less that is owed on a debt the higher the FICO score. For example, if one owes $100, it is advisable to pay 90% of it, meaning that 10% or $10 should be the remaining balance that is paid-on every month. The rule of thumb is always to keep loan balances to less than 35% of loan limit according to TransUnion; creditors will be happy to lend money to anyone whose credit report reflects these activities.
3. Do not pay off all debts: One should not necessarily pay off all debts because doing so will not build credit; building credit is the process of displaying to creditors that one is able to maintain in good standing, a loan that is revolving or continuous. However, one should not have too many open loan lines. This will display to creditors that one has too many loans and is therefore a great risk to take a chance on. Having too many open loan lines also lowers FICO scores. So, the less open loan accounts people have the higher their FICO scores, Experian Credit Reporting Agency.
4. Increase or raise credit limit: People can ask their creditors to raise their credit limits just for the purpose of improving their credit scores and not necessarily for borrowing more money. Doing so will induce the same effect as paying down a loan balance to less than 35% of the loan limit. For example, instead of using a credit card that already has a manageable balance it is advisable to use cash so that the credit card balance does not get too close to its limit.
5. Remove errors that are derogatory: To find out if information on a credit report is accurate, one should request a free credit report from anyone of the 3 major credit reporting agencies: Experian, Equifax, or TransUnion. By law, everyone is entitled to a free credit report annually. So, do not become a victim to misleading information that says otherwise. If errors are found on a credit report, these errors should be disputed immediately. This can be accomplished by calling the 3 credit bureaus. They will provide information of how to get the process started. Please note that a particular creditor may not use all 3 credit bureaus to report credit information. A creditor may only report to one or two of them. So, people should make sure that they review credit report information from all 3 credit bureaus.
6. Call creditors and tell them to report positive activities on credit report: For example, if a person has recently paid down a loan to an amount well-below the credit limit of the loan, that person can call his or her creditor and request that this new information be reported to the credit bureaus as soon as possible. Most creditors will do that right away or within a couple days while others will only report new information at a given time, say at the end of the month, for example.

By following the 6 credit-improving rules above, one can be assured that his or her credit report will be in good standing when it comes time to buying a home or getting that dream job.

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