What do the Credit Reporting Agencies actually know?
The answer is: Not that much.
Here is what they do know:
- When an account was Opened
- The Limit
- The Balance
- The Reported Payment
- The type of loan
- Payment History (reminder: payments are only late if they are 30 days late)
They DO NOT know:
- How much money you have in the bank
- If you have a 401k
- What your salary is
- How secure your employment is
- Or if you have a wealthy Uncle who can loan you money
With such limited information, Credit Agencies make a lot of assumptions. For this reason, a fico score can easily be manipulated in your favor.
The 1 thing to know:
A credit score reflects the risk to a NEW lender extending credit. An applicant with money in the bank is a lower risk borrower. Since credit scores do not reflect your reserves, they consider available credit on your credit cards as cash in the bank.
Buyer 1 has a credit limit of $10,000 and the balance is $2,000. Credit agencies see $8,000 in the bank and reward Buyer 1 with extra points. These extra points represent a lower risk to a new lender.
Buyer 2, pays cash for most things, has one credit card with a credit limit of $500 and the limit is $450. Credit agencies take away points for those with little available credit.
Credit Scores are a Game and you can win.
Doing this 1 thing WILL improve your score:
- Ask for a higher limit on your existing credit card accounts
- Apply for more credit cards
- Pay down your existing cards starting with smaller ones that are close to their limit
- Consolidate credit card accounts into a personal loan or installment loan.
For those with more difficult credit:
- Obtain a secured credit card, be sure that the account will report to the credit agencies
- Then get another one and once you have increased your scores you can request more non-prepaid accounts.
To see what you might qualify for and see how you can improve your score, even more, click here for an appointment with a Platinum Rated Mortgage & Credit expert.
Good Credit Scores = Having Available Credit and making your payments on time.
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Credit evaluations included a free credit simulator and can match you with potential loan options.