Sterling Credit Solutions

How your FICO Score is Calculated.

Credit scores are designed to measure the risk of default by taking into account various factors in a person's financial history. Although the exact formulas for calculating credit scores are closely-guarded secrets, FICO has disclosed the following components and the approximate weighted contribution of each:

Source: Fair Isaac Company (FICO) www.MYFICO.com

35% — Payment History – Late payments on bills, such as a mortgage, credit card or automobile loan, can cause a consumer’s FICO score to drop. Paying bills as agreed over time will improve a consumer’s FICO score.

30% — Credit Utilization - The ratio of current revolving debt (such as credit card balances) to the total available revolving credit (credit limits). Consumers can improve their FICO scores by paying off debt and lowering their utilization ratio. The closing of existing revolving accounts will typically adversely affect this ratio and therefore have a negative impact on their FICO score.

15% — Length of Credit History – As consumer’s credit history ages, assuming they pay their bills, it can have a positive impact on their FICO score.

10% — Types of Credit Used (installment, revolving, consumer finance) – Consumers can benefit by having a history of managing different types of credit.

10% — Recent search for credit and/or amount of credit obtained recently - Multiple credit inquiries for a consumer seeking to open new credit, such as credit cards, retail store accounts, and personal loans, can hurt an individual’s score. Applying for lots of new credit in a short period of time is also viewed as risky and can cause a drop in an individual’s score. However, individuals shopping for a mortgage or auto loan over a short period (6 weeks) will likely not experience a decrease in their scores as a result of these types of inquiries.

If you want to find what your true FICO® score is, visit www.MyFICO.com

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How will your change in credit card interest rates impact you?

September 1, 2011

If you happen to miss a payment on your credit card or any other loan it may impact your credit card interest rate. If you owe about $1,000 at 11% interest it will take you 73 months (6 years) to pay it off and $320 in interest. but when your credit card company increases your interest rate due to a late payment, even if the late payment is not that credit card, they can increase your rate to a penalty rate. Let's say that rate is 19.9% (some states allow up to 29.9%). It will now take you 100 months to pay off your balance (8.3 years) and $860 in interest.

It pays to pay your minimum payments on time.

FREE Credit Scores for Prospective Borrowers or NOT.

September 5, 2011

It has been just over a month since the new Federal credit score disclosure law went into effect. Lending institutions have already found loopholes to keep from disclosing your credit score when you are denied credit, loan, or if you received less desirable terms because of your score. According to SmartMoney.com there are time you may not get a credit score. These are usually when banks use their own in-house credit scoring system. There are other ways to get your credit score that will not impact your credit rating by going to MyFICO.com Click here for more information.

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