Credit and What You Can Do About It

I'm about the farthest thing from a credit expert that you could find. So when I got a chance to learn more last week, I took a class - and am glad I did. Lenders know about credit and how to improve it - and the class instructor is a good resource. His name is Elvis Saloum and he is with Arizona Wholesale Mortgage. His phone is 480.797.1560 and his email is Elvis@AZWM.com. These notes may help me to remember - and if they can help you, good.

The three credit bureaus have a different range of scoring.

Experion - 330 to 850
TransUnion - 400 to 925
Equifax - 300 to 850

Don't ask me why - I didn't get that. But generally speaking, an 850 credit score is higher than you'll ever need and a 720 score is outstanding. A 680 score isn't bad, but borrowing money with a 680 score is likely to cost you more than a score that is higher. A 620 score is not good.

70% of credit reports contain errors. Depending on your score and what you need to do, getting rid of errors on your credit reports could be a smart thing to do.

A "hard" pull requires your social security number - and it will affect your credit score. A "soft" pull - one that does NOT require your social security number - does not.

There are five components that make up a credit score - and five things that you can do to increase your score by 50 points. Your credit history is 35% of your score, debt ratio is 30%, 15% is how long you've had credit (the longer, the better), the type of credit you have makes up 10% of your score (you want four to eight trade lines for 24 months or more), and the other 10% is credit inquiries.

You can improve your score by paying off your past due accounts, getting rid of late payments, increasing your credit limits, having late payments removed (in writing) by your creditors and - by NOT closing old accounts. Use them once every six months instead of removing them.

Derogatories stay on your credit report for seven years - for example, late payments, charge offs, student loans, foreclosures, judgments, bankruptcy, paid tax liens. Unpaid tax liens will show up for a minimum of 15 years.

Foreclosures and short sales may represent 85-105 points on a 680 credit score and 140-160 points on a 720 credit score.

A good lender knows all this stuff and can help you wade through it.