mortagesandforeclosures

by Kurt Novak

Most people know that their repayment history has an effect on their credit scores, but there are several other factors that go into the calculation the credit reporting bureaus use to come up with your score.

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

1. Income: Your level of income has no bearing whatsoever on your credit score. A person that earns less than the minimum wage could have a great score while a millionaire that earns six figures each year might have a poor credit score. The scoring system is used to determine whether or not a person is responsible 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 Collection Agencies: When you pay of debts that are more than two years old you will not be helping your credit score. The score is calculated using the date of the last account activity. If the date is more than two years ago it starts to lose some of the negative impact.

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.

Remember that when you are in debt, the banks are profiting. It won't hurt to increase your credit limit it you are able to act responsibly and only use the amount that you can comfortably handle with your current income.

5. Frequency of Credit Applications: It may be hard to believe, but 10% of your score stems from the number of credit applications you have submitted. Each time a creditor pulls your credit history an inquiry shows up on your report. The more inquiries that show up, the lower your credit score will be.

If you've recently filled out a bunch of credit applications you should spend some time paying down your balances before applying for anything further. By not applying for new accounts you will be able to increase your score as the older applications drop off.

About the Author:

About the author: Kurt Novak is a full time real estate investor specializing in helping home owners avoid foreclosure. His blog shows how to find the best Columbus Loans and how to increase your Crdit Report.

Get all the information and photos:: http://mortgagewide.info/how-is-your-credit-score-calculated/