Sunday, October 14, 2012

What Affects your Credit Score, Good and Bad



What Affects your Credit Score, Good and Bad

By Keith Bunn Jr.
October 14, 2012

It would seem that even with what happened with the Great Recession of 2008, people are still worried about their FICO scores. But if you have read anything I wrote, you know that I believe, and a lot of other financial gurus believe, that the FICO score is a false representation of your financial wellness. With so many new, and not so new, products, systems, and businesses sprouting up, there really isn't any need for FICO anymore. For those of you who are new to my blog, let me explain...

FICO

The FICO score, or credit score, is and always has been, a measure of what your debt history is, what your debt levels are, how long you've been in debt, the types of debt you have, and what kind of new debt you got. Did you see a pattern there? It was all bases on debt! Not how much money you had in savings, not how long you've been with your employer, and not even how much you make each year. Don't you think that would be something you'd like to know if you were going to lend someone money? I would!

How to get a Good to Great Credit Score

So with that being said, the only way you can have a good to great FICO score is if you borrow money all the time without borrowing too much or too little and pay the lenders back with interest your whole life. That's it! That's all you have to do to get an 800 credit score. Get yourself some credit cards, use them and pay them back every month without missing a single payment. Get yourself a car loan and pay that back every month without missing a single payment. Borrow as much as you can without borrowing too much, and pay those loans back every month without missing a single payment. I just told you the secret to getting that awesome credit score you always wanted. Can you hear the sarcasm?

What can give you a Bad Credit Score

Well for one, if you get too much debt or not enough debt, your credit score will either be harmed or start to go away. Your debt levels are 30% of your overall credit score. Interesting isn't it? If something goes to a collection agency like your credit cards, car loans, phone bill, utility bills, something over due at the library, traffic tickets, etc... those can all put a ding on your credit score. What I find funny is, is that all of those things that were just mentioned, with the exception of the credit cards and car loans (phone bill, utility bills, something over due at the library, traffic tickets, etc...) won't help you get a good credit score if you pay them on time, but they will hurt it if you don't. Errors on your credit report can also harm your credit score. 79% of the credit reports out there have some kind of errors on them and 25% of those errors are bad enough to deny you credit.

I was just like you all many years ago, thinking that I needed to have a good to great credit score to win with money, but I think it is clear to me now that FICO doesn't work anymore. I think it is more important to not use FICO any more and use cash for the things that I want. Getting out of debt, and building wealth is what our future consists of now. FICO can go jump in a creek!!

I hope my posts inspire you to look at what you’re doing financially and if needed, make some changes that will cause you to win financially. I also look forward to reading your views on any articles or postings that I may post. For more money news, facts and ideas, follow me on Facebook, or Twitter. Thanks you!


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