Your credit score is a number lenders use to help them decide if you are a good credit risk. If you have money problems and are in need of financial help, chances are your FICO score will be lower than someone who is debt free. Most credit bureau scores are computed from software developed by Fair Isaac Corporation (FICO). While you may have heard reference to "your score", each of the 3 main credit reporting agencies (Equifax, Experian and TransUnion) has their own strategy for using the FICO data to arrive at their decision.
Part of what US Debt Networks does is improve areas of your financial health that are part of your credit score.
Fair Isaac considers 5 areas when computing your FICO score. Each area is "weighted" in terms of its importance in computing your overall score. A number of these are potential targets for improving your score when engaging in debt negotiation. These areas are:
- Payment History - 35%.
- Clearly, your payment history is the most obvious factor in scoring your credit and is often a good indicator of someone who is overburdened with debt. Information taken into account includes payment information on credit cards such as Visa, MasterCard, American Express and Discover. Also included are retail accounts, car loans and mortgage loans. In addition, public record of bankruptcies, foreclosures, suits, wage attachments, liens and judgments are factored into your payment history.
- Amounts Owed - 30%.
- How much you owe, in total - is our primary target for debt relief and accounts for much of the financial help you will receive as we negotiate your credit card debt and lower your other financial obligations. Accounting for 30% of your credit score, FICO considers the amount owed on all accounts and the different types of accounts. Also included are whether you are showing a balance on certain types of accounts and how many accounts have balances. In addition, how much of the total credit line is being used on credit cards and other revolving credit accounts is a key factor and primary target for renegotiating your debt. How much of your installment loan accounts is still owed as compared with the original loan amount is factored into the "Amounts Owed" portion of the Isaac Score.
- Length of Credit History - 15%.
- The longer you've had good credit, the better - in general. Isaac will look at how long your credit accounts have been established in general as well as the length of time for specific credit accounts. Also factored in is how long it has been since you used certain accounts.
- Types of Credit in Use - 10%.
- This scoring segment takes into account what kinds of credit accounts you have and how many of each. In general, having credit cards and installment loans with a timely payment history will raise your score. Be careful though. Opening up a number of new accounts - as noted next - may negatively impact your credit score.
- New Credit - 10%.
- Broadly speaking, multiple credit requests in a short period of time will hurt your credit score. Your FICO score takes into consideration how many accounts you have, how long it has been since you opened a new account, how many recent requests for credit you have made, length of time since credit report inquiries were made by lenders and whether you have a good recent credit history following past payment problems.
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