How does the credit score point system actually work?
Question by tak3032: How does the credit score point system actually work?
I want to know how do they determine the credit score point system. I know what is credit and how it works. But I want to know the numbers part like if someone runs your credit report it takes off 2points from your score, another is what if your late on your payment how much does it take off then and if I have a loan for a certain amount does that mean I get a big score or a low score? I have some old accounts (5yrs old) that need to be paid off but if I do pay them off will it really make a difference on my score? Next thing you know I pay them off and then my score only goes up by 4 or 5 points or will I even get a point. What would be the purpose then? At the same time if creditors do look at my report yes it would show paid off but the history would still show that I was delinquent for 5yrs. Whose gonna want to give me a loan any ways? Basically what is the point system and how is it calculated? Let me know so I can start to repair my credit. Much thanks and I appreciate it!!!
Best answer:
Answer by Still reading
You will get a lot of answers about how to work on your credit score. The system is proprietary and held very closely by the company which owns the system–Fair Isaac. Many people with experience with a lot of borrowers have seen specific actions affect individual credit scores. And, they can give you recommendations. But, honestly, the only way to “fix your credit score” permanently is to pay off the bills you owe. Your score may not be immediately impacted, but this action will reflect your earnest attempt to deal fairly with those who have lent you money in good faith. There are no instant fixes, but you have a better story to tell if you can say that you had loans delinquent for 5 years, but when as soon as you were able, you began to pay them off and are now handling your credit responsibly. You’re right in the supposition that no matter how many delinquent accounts you pay off, you won’t see a quick improvement in your score. But, you might find individual lenders willing to take a chance on you. And, once you get some new credit (after paying the old bills) and handle the new credit well, you’ll build your score slowly and steadily back to where you need it to be. It took years to earn a low score; it will take considerable time to prove that you’re a worthy borrower.
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When you’re trying to rebuild your credit score it’s important to get a comprehensive view of what is actually effecting it…
Your Credit Score is calculated with the following breakdown:
35 – Payment History
30 – Credit to Debt Ratio
15 – Credit History
10 – New Credit
10 – Credit Types in Use
If you excel in one area and lack in another, only fixing the areas which you lack are going to improve your score.
I’ve got a lot of information on my blog about credit scores, and I get a lot of questions so feel free to check out any of my posts on millionster.com; I believe my articles here address many of your concerns but if they don’t and you still have any specific questions feel free to leave a comment and I’ll reply.
How Can I Increase My Credit Score
http://millionster.com/articles/debt/ask-1mil-how-can-i-increase-my-credit-score/
and
10-Ways to Boost Your MyFico Score
http://millionster.com/articles/debt/increase-fico-credit-score/
Also be sure to check out the Credit Score services I’ve listed here; the only way to know how to raise your credit score so that you can get cheap rate and qualify for great loans is to know what your credit score is and to see what’s in your credit history:
MyFico’s Full Credit Report
http://millionster.com/go/myfico
Suze Orman’s Credit Report Repair Kit
http://millionster.com/go/suzekit
30-day Trial of Credit Score Tracker with Free MyFico Score
http://millionster.com/go/fico30
Hope this helps!
Why would anyone give you a loan if you have old debts that have not been paid? I know because they are greedy.
The best thing to do for you is not the best thing for your credit. Draw a line in the sand not to borrow anymore money. Obviously it hasn’t been working to good for you. Start and follow a budget. Write down everybody that you owe starting from smallest to largest. If those old debts aren’t expecting anything just let them lie for a while till you can get to them. You don’t want to many monsters in the closet while your trying to walk out of bondage into freedom. Pay the small bills off first for those personal atta boys and the feeling that you have some traction. Don’t worry about the interest rate because the actual amount should be small. The important part is that you are coming out of debt. As each payment gets nocked off the list roll that onto the next one like a snowball till you have them all paid off and closed. Then wake the old ones up one at a time and kill them.
Your fico score may be ugly, but you will have peace in your heart that you are no longer bound by the credit system. If you don’t owe anybody then you have the warm blanket of securtiy that noone can ever come and take away what is yours. Then without ANY payments you can quickly save for what you need. 🙂