mortagesandforeclosures

by Kurt Novak

Most consumers are aware that their payment history has a direct effect on their credit rating, but there are a number of other factors that credit bureaus use to calculate your credit score.

Here are 5 facts about credit scores that might surprise you:

1. A persons income level has nothing to do with their credit score. You could easily see a millionaire that earns six figures a year with a very low credit score. You could just as easily see a person that earns minimum wage with a strong credit score. The scoring system is used to measure how responsible a person is with the money they have, not how much they earn.

2. Old Accounts: When the credit reporting bureaus consider your credit score, they look at the types of credit you have and how old your accounts are. An older account that is still operating shows a lender the next time you apply for credit that you haven't consolidated or negotiated your old debts, but have actively maintained them with a level of financial responsibility. If you intend to pay off some debts, pay off the newer ones first and leave the older ones open if you can.

3. Don't Pay the Collection Agencies: If you pay off collection agencies or any debts that are more than two years old your credit score will not be improved. The credit score is calculated using the last date of activity, so if that date is more than two years ago it starts to lose it negative power.

You should be aware though that if you negotiate some sort of payment plan with a collection agency, this will be considered an agreement and the date of activity can be shown as the date of the conversation.

4. Debt/Limit Ratio: The people that can show the reporting bureaus that they have their spending habits well controlled will be rewarded. When a person is able to keep their balances well below their allowed limit, the score will be increased. It is best to keep all card balances below 30% of the credit limit.

Banks will frequently raise your credit limit because when you are in debt they are making money. While it doesn't hurt to accept an increase in your credit limit, you must act responsibly and use just what you can handled with your income.

5. Frequency of Credit Applications: Did you know a full 10% of your total credit score comes from the number of times you've applied for credit? Every time someone pulls your credit, the enquiry is listed on your credit report. The more enquiries shown on your report, the lower your score will go.

If you've applied for a lot of credit you might want to spend the next couple of months and pay the balances down before applying for anything else. The act of not applying for new accounts will begin to increase your score as the older inquires drop off.

About the Author:

Author Kurt Novak is a full time real estate investor who helps home owners avoid foreclosure. His blog shows how to find the best Columbus Loans and successfully improve your Crdit Report.

Get all the information and photos:: http://mortgagewide.info/did-you-know-these-5-facts-about-credit-scores/